Real Good Food Company, Inc. false 0001871149 --12-31 0001871149 2024-09-20 2024-09-20

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 8-K

 

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) September 20, 2024

 

 

THE REAL GOOD FOOD COMPANY, INC.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-41025   87-1280343

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(I.R.S. Employer

Identification Number)

3 Executive Campus, Suite 155

Cherry Hill, NJ 08002

(Address of Principal Executive Offices; Zip Code)

(856) 644-5624

(Registrant’s telephone number, including area code)

Not applicable

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

 

 

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

 

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

 

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

 

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

 

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

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

 

Title of Each Class

 

Trading

Symbol(s)

 

Name of Each Exchange

on which Registered

Class A common stock $0.0001 par value per share   RGF   Nasdaq Global Market

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 1.01

Entry into a Material Definitive Agreement.

PMC Amendment

On September 20, 2024, Real Good Foods, LLC (the “Borrower”), a wholly owned subsidiary of The Real Good Food Company, Inc. (“Holdings,” and together with the Borrower, the “Company”), entered into an Amended and Restated Super-Priority Loan and Security Agreement (“PMC Loan Agreement”) and the Amended and Restated Loan Agreement (“PMC Subordinated Loan Agreement”) with PMC Financial Services Group, LLC (“PMC”). The PMC Loan Agreement and PMC Subordinated Loan Agreement restate the original loan agreement with the Borrower dated June 30, 2016, as subsequently amended (the “Existing Facility”).

The PMC Loan Agreement consolidates the existing revolving and equipment loans the Company has with PMC under the Existing Facility into one new loan in an aggregate principal amount of $52,986,153 (the “PMC Consolidated Loan”) (subsequent to the paydown of approximately $8.0 million in connection with the Emblem Transaction described below). Additionally, the PMC Subordinated Loan Agreement combines the existing $90.0 million term loan between the Company and PMC under the Existing Facility, with all accrued and unpaid interest to date into one new term loan in an aggregate principal amount of $100,543,575 (“PMC Term Loan”).

Each of the PMC Consolidated Loan and the PMC Term Loan mature on December 31, 2026, provided that (i) if $50 million, as may be reduced from time to time in accordance with the terms of the PMC Loan Agreement, of the PMC Consolidated Loan is paid down prior to December 31, 2026, the maturity date of the PMC Consolidated Loan and the maturity date of the PMC Term Loan shall be automatically extended to September 20, 2029, or (ii) if, on or prior to March 20, 2025, Holdings’ board of directors and shareholders do not approve of the issuance of Holdings’ equity equal to at least 49.99% of its outstanding fully diluted equity (as described below under “A&R LLC Agreement and Exchange Agreement”), both the PMC Consolidated Loan and the PMC Term Loan will mature on March 20, 2025.

The PMC Consolidated Loan and PMC Term Loan are secured by substantially all the assets of the Company, including the equity of the Borrower, and are guaranteed by Holdings.

The PMC Consolidated Loan shall bear interest at an annual rate of 15%, to be paid in-kind, and the PMC Term Loan shall bear interest at an annual rate of 18%, to be paid in-kind.

Emblem Transaction

On September 20, 2024, the Borrower entered into a Super-Priority Loan and Security Agreement (the “Emblem Loan Agreement”) with affiliates of Emblem Investments Fund I, LP (“Emblem”). The Emblem Loan Agreement provides for a super-priority loan facility consisting of a term loan in a principal amount of $60.0 million (the “Emblem Term Loan”). The proceeds of the Emblem Term Loan will be used for working capital and other general corporate purposes, as well as the payment of fees and expenses of approximately $5.0 million incurred in connection with the Emblem Loan Agreement, in addition to the paydown of approximately $8.0 million under the Company’s existing revolving and equipment loans under the Existing Facility with PMC.

The Emblem Term Loan matures on September 20, 2029, subject to the following conditions: (i) the paydown of the PMC Consolidated Loan on or prior to December 31, 2026 (unless extended by PMC); and (ii) on or prior to March 20, 2025, Holdings’ board of directors and shareholders approve of the issuance of Holdings’ equity equal to at least 49.99% of its outstanding fully diluted equity (as described below under “A&R LLC Agreement and Exchange Agreement”). Should the condition in clause (i) not be achieved, the Emblem Term Loan will mature on December 31, 2026. Should the condition in clause (ii) not be achieved, the Emblem Term Loan will mature on March 20, 2025.

The Emblem Term Loan bears interest at an annual rate of 15%, to be paid in-kind. Should certain additional loans be made subsequent to the Emblem Term Loan, the Emblem Term Loan will then bear interest at an annual rate of 8%, to be paid in cash, and 7%, to be paid in-kind.

The Emblem Term Loan is secured by substantially all the assets of the Company, including the equity of the Borrower, and is guaranteed by Holdings.

In connection with the terms of the Emblem Term Loan, the Company must first receive Emblem’s approval before entering into additional any debt agreements with non-affiliates of Emblem. The consequences of non-compliance with this requirement would result in a dollar-for-dollar prepayment of the Emblem Term Loan. Additionally, both the acquisition of assets outside the ordinary course of business, as well as capital expenditures over $250,000, would require Emblem’s prior approval.

Any voluntary or mandatory prepayment of the Emblem Term Loan at any time will be the greater of (i) 2.0 times the initial $60.0 million or (ii) all accrued and unpaid interest at the date of repayment.


A&R LLC Agreement and Exchange Agreement

In connection with the PMC Loan Agreement, PMC Subordinated Loan Agreement and Emblem Loan Agreement, the Company entered into an Exchange Agreement, dated September 20, 2024, with Emblem and PMC (the “Exchange Agreement”). Pursuant to the Exchange Agreement, the Company agreed to issue to Emblem a new class of units of the Borrower, namely, Class C units (“Class C Units”), which are immediately exchangeable, subject to certain lock-up conditions, into shares of Class A common stock of Holdings equal to 19.99% of the outstanding fully diluted equity of Holdings. The Class C Units are governed by the Amended and Restated Limited Liability Company Agreement of the Borrower, dated September 20, 2024 (the “A&R LLC Agreement”), which was approved by Holdings’ board of directors on September 20, 2024. Additionally, upon approval of Holdings’ shareholders and the disbursement of an additional $50.0 million loan by Emblem at its option, the Company has agreed to issue to Emblem additional Class C Units and shares of Class B common stock of Holdings, which are exchangeable into shares of Class A common stock of Holdings that will make Emblem the owner of 49.99% of the outstanding fully diluted equity of Holdings. The Exchange Agreement requires the Company to file a proxy statement within 30 days of the date of the Exchange Agreement relating to a special meeting necessary to obtain the above-referenced approval of Holdings’ shareholders. Further, the Exchange Agreement provides that PMC has the right to require the Company issue to PMC Class C Units and shares Class B common stock equal to 25% of the outstanding fully diluted equity of Holdings, subject to any necessary shareholder approval. The Company will not be required to issue Class C Units and shares of Class B common stock to PMC to the extent such issuance would cause PMC to hold greater than 25% of the outstanding fully diluted equity of the Company.

The foregoing summaries of the A&R LLC Agreement, PMC Loan Agreement, PMC Subordinated Loan Agreement, Emblem Loan Agreement and Exchange Agreement are subject to, and qualified in their entirety by reference to, the full text thereof, which are filed as, as applicable, Exhibits 10.1 to 10.6 to this current report on Form 8-K and are incorporated herein by reference.

 

Item 2.03

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

The disclosure in Item 1.01 regarding the PMC Consolidated Loan, the PMC Term Loan and the Emblem Term Loan are incorporated herein by reference.

 

Item 3.02

Unregistered Sales of Equity Securities.

The disclosure in Item 1.01 regarding the issuance of the Class C Units is incorporated herein by reference. The Class C Units and underlying Class A common stock will be issued in reliance upon the exemption from the registration requirements in Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).

 

Item 5.03

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

The disclosure in Item 1.01 regarding the A&R LLC Agreement is incorporated herein by reference. Additionally, on September 20, 2024, the board of directors of Holdings approved the Amended and Restated Tax Receivable Agreement (“A&R Tax Receivable Agreement”), which modified the terms of the original Tax Receivable Agreement, dated as of November 4, 2021, to allow for the participating members to be extended to any Class C Unit holders and to replace Bryan Freeman as the representative with a designee of Emblem. The foregoing summary of the A&R Tax Receivable Agreement is subject to, and qualified in its entirety by reference to, the full text thereof, which is filed as Exhibit 10.7 to this current report on Form 8-K and is incorporated herein by reference.

 

Item 7.01

Regulation FD Disclosure.

On September 26, 2024, the Company issued a press release reporting the transactions reported in this current report on Form 8-K, a copy of which is attached hereto as Exhibit 99.1. The information in this Item 7.01, including Exhibit 99.1, is furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities under that section, and shall not be deemed to be incorporated by reference into the filings of the Company under the Securities Act, regardless of any general incorporation language in those filings.


Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit
Number

  

Description

10.1    Amended and Restated Limited Liability Company Agreement dated as of September 20, 2024.
10.2    Amended and Restated Super-Priority Loan and Security Agreement, dated as of September 20, 2024, by and between Real Good Foods, LLC, and PMC Financial Services Group, LLC.(1)
10.3    Amended and Restated Loan and Security Agreement dated as of September 20, 2024, by and between Real Good Foods, LLC, and PMC Financial Services Group, LLC.(1)
10.4    Super-Priority Loan and Security Agreement dated as of September 20, 2024, by and between Real Good Foods, LLC, and Emblem Investments Fund I, LP.(1)
10.5    Schedule to Loan and Security Agreement dated as of September 20, 2024, by and between Real Good Foods, LLC, and Emblem Investments Fund I, LP.
10.6    Exchange Agreement, dated as of September 20, 2024, between Real Good Foods, LLC, Emblem Investments Fund I, LP and PMC Financial Services Group, LLC.
10.7    Amended and Restated Tax Receivable Agreement dated as of September 20, 2024, between The Real Good Company, Inc. and each of the persons from time to time party thereto.
99.1    Press Release, dated September 26, 2024.
104    Cover Page Interactive Data File (embedded within the inline XRBL document).

 

(1)

Certain schedules (or other attachments) to this exhibit have been omitted pursuant to Item 601(a)(5) of Regulation S-K.


SIGNATURES

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

 

    THE REAL GOOD FOOD COMPANY, INC.
Date: September 26, 2024     By:  

/s/ Tim Zimmer

      Tim Zimmer
      Chief Executive Officer

Exhibit 10.1

Execution Version

REAL GOOD FOODS, LLC

AMENDED AND RESTATED

LIMITED LIABILITY COMPANY AGREEMENT

Dated as of September 20, 2024

THE UNITS ISSUED PURSUANT TO THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER ANY OTHER APPLICABLE SECURITIES LAWS. SUCH UNITS MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR OTHERWISE DISPOSED OF AT ANY TIME WITHOUT EFFECTIVE REGISTRATION UNDER SUCH ACT AND LAWS OR AN EXEMPTION THEREFROM.

CERTAIN UNITS MAY ALSO BE SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SET FORTH HEREIN AND/OR IN A SEPARATE AGREEMENT WITH THE INITIAL HOLDER OF SUCH UNITS. A COPY OF SUCH AGREEMENT MAY BE OBTAINED BY THE HOLDER OF SUCH UNITS UPON WRITTEN REQUEST TO THE COMPANY AND WITHOUT CHARGE.


TABLE OF CONTENTS

 

         Page  

ARTICLE I DEFINITIONS

     2  

ARTICLE II ORGANIZATIONAL MATTERS

     9  

Section 2.1

  Formation of LLC      9  

Section 2.2

  Limited Liability Company Agreement      10  

Section 2.3

  Name      10  

Section 2.4

  Purpose      10  

Section 2.5

  Principal Office; Registered Office      10  

Section 2.6

  Term      10  

Section 2.7

  No State-Law Partnership      10  

ARTICLE III UNITS, CAPITAL CONTRIBUTIONS AND ACCOUNTS

     11  

Section 3.1

  Units; Capitalization      11  

Section 3.2

  Authorization and Issuance of Additional Units      13  

Section 3.3

  [RESERVED]      16  

Section 3.4

  Changes in Common Stock      16  

Section 3.5

  Capital Accounts      17  

Section 3.6

  Negative Capital Accounts; No Interest Regarding Positive Capital Accounts      18  

Section 3.7

  No Withdrawal      18  

Section 3.8

  Loans From Unitholders      18  

Section 3.9

  Adjustments to Capital Accounts for Distributions In-Kind      18  

Section 3.10

  Transfer of Capital Accounts      18  

Section 3.11

  Adjustments to Book Value      19  

Section 3.12

  Compliance With Section 1.704-1(b)      19  

ARTICLE IV DISTRIBUTIONS AND ALLOCATIONS

     19  

Section 4.1

  Distributions      19  

Section 4.2

  Allocations      20  

Section 4.3

  Special Allocations      21  

Section 4.4

  Offsetting Allocations      22  

Section 4.5

  Tax Allocations      22  

Section 4.6

  Indemnification and Reimbursement for Payments on Behalf of a Unitholder      23  

ARTICLE V MANAGEMENT AND CONTROL OF BUSINESS

     24  

Section 5.1

  Management      24  

Section 5.2

  Investment Company Act      25  

Section 5.3

  Officers      25  

Section 5.4

  Fiduciary Duties      26  

ARTICLE VI EXCULPATION AND INDEMNIFICATION

     27  

Section 6.1

  Exculpation      27  

Section 6.2

  Indemnification      28  

 

i


Section 6.3

  Expenses      28  

Section 6.4

  Non-Exclusivity; Savings Clause      29  

Section 6.5

  Insurance      29  

ARTICLE VII ACCOUNTING AND RECORDS; TAX MATTERS

     29  

Section 7.1

  Accounting and Records      29  

Section 7.2

  Preparation of Tax Returns      29  

Section 7.3

  Tax Elections      29  

Section 7.4

  Tax Controversies      29  

Section 7.5

  Tax Cooperation      30  

Section 7.6

  Code § 83 Safe Harbor Election      31  

ARTICLE VIII TRANSFER OF UNITS; ADMISSION OF NEW MEMBERS

     32  

Section 8.1

  Transfer of Units      32  

Section 8.2

  Recognition of Transfer; Substituted and Additional Members      32  

Section 8.3

  Expense of Transfer; Indemnification      34  

Section 8.4

  2021 Exchange Agreement      34  

Section 8.5

  2024 Exchange Agreement      34  

Section 8.6

  Tax Corporation.      35  

ARTICLE IX WITHDRAWAL AND RESIGNATION OF UNITHOLDERS

     36  

Section 9.1

  Withdrawal and Resignation of Unitholders      36  

ARTICLE X DISSOLUTION AND LIQUIDATION

     36  

Section 10.1

  Dissolution      36  

Section 10.2

  Liquidation and Termination      36  

Section 10.3

  Securityholders Agreement      37  

Section 10.4

  Cancellation of Certificate      37  

Section 10.5

  Reasonable Time for Winding Up      37  

Section 10.6

  Return of Capital      38  

Section 10.7

  Hart-Scott-Rodino      38  

ARTICLE XI GENERAL PROVISIONS

     38  

Section 11.1

  Power of Attorney      38  

Section 11.2

  Amendments      38  

Section 11.3

  Title to the Company Assets      39  

Section 11.4

  Remedies      39  

Section 11.5

  Successors and Assigns      39  

Section 11.6

  Severability      39  

Section 11.7

  Counterparts; Binding Agreement      39  

Section 11.8

  Descriptive Headings; Interpretation      40  

Section 11.9

  Applicable Law      40  

Section 11.10

  Addresses and Notices      40  

Section 11.11

  Creditors      40  

Section 11.12

  No Waiver      41  

Section 11.13

  Further Action      41  

Section 11.14

  Entire Agreement      41  

 

ii


Section 11.15

  Delivery by Electronic Means      41  

Section 11.16

  Certain Acknowledgments      41  

Section 11.17

  Consent to Jurisdiction; Waiver of Trial by Jury      42  

Section 11.18

  Representations and Warranties      42  

Section 11.19

  Tax Receivable Agreement      43  

 

iii


REAL GOOD FOODS, LLC

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT of Real Good Foods, LLC, a Delaware limited liability company (the “Company”), is entered into as of September 20, 2024, by and among the Company, The Real Good Food Company, Inc., a Delaware corporation (the “Corporation”), as the Managing Member, and the Members set forth herein. Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to such terms in Article I.

WHEREAS, (i) the Certificate was filed with the Office of the Secretary of State of Delaware on November 4, 2021 pursuant to a conversion of The Real Good Food Company LLC, a California limited liability company, to the Company and (ii) the Managing Member, the Members and the Company entered into that certain Limited Liability Company Agreement, dated November 4, 2021 (the “Prior Agreement”);

WHEREAS, in connection with the Company entering into that certain Super Priority Loan and Security Agreement (the “Emblem Loan Agreement”), dated as of the date hereof, by and among the Company, Emblem-RGF Main LLC (“Emblem Main”), Emblem-RGF Blocker Inc. (“Emblem Blocker”) and Emblem-RGF Executive LLC (“Emblem Executive” and together with Emblem Main and Emblem Blocker, the “Emblem Parties”) and the initial funding of certain amounts in connection therewith (the “Emblem Loan Transaction”) and the amendment and restatement of certain loan documents by and between the Company and PMC Financial Services Group, LLC (“PMC”) and subject to the terms of that certain Exchange Agreement, dated as of September 20, 2024, by and between the Company, the Emblem Parties and PMC (the “2024 Exchange Agreement”), the Company and the Corporation shall from time to time issue the Emblem Parties Class C Units in the amounts set forth in Exhibit A (the “Initial Issuance”), which may be exchanged for Class A Common Stock of equivalent value, in each case, on the terms and conditions set forth in the 2024 Exchange Agreement;

WHEREAS, contingent upon the triggering of the second step of the Emblem Loan Transaction and the Emblem Parties funding additional amounts pursuant to the Emblem Loan Agreement, and subject to the terms of the 2024 Exchange Agreement and approval of the Corporation’s shareholders, the Company and the Corporation will issue the Emblem Parties a number of Class C Units which, when aggregated with the Class C Units issued to the Emblem Parties at the Initial Issuance, represent a total of 49.99% of the greater of (x) the Units of the Company, on fully diluted basis, as of the date hereof and (y) the Units of the Company, on a fully diluted basis, as of the date of the Second Step Issuance (as defined in the 2024 Exchange Agreement) which are exchangeable for Class A Common Stock of equivalent value, in each case, on the terms and conditions set forth in the 2024 Exchange Agreement;

WHEREAS, in the event that PMC exercises its right to require the Corporation to hold a vote of its stockholders approving the issuance of Class C Units to PMC, upon the Corporation receiving the approval of its stockholders, the Company will issue to PMC a number of Class C Units such that following such issuance, PMC will hold Class C Units which represent 25% of the Units of the Company, on a fully diluted basis, which are exchangeable for Class A Common Stock of equivalent value on the terms and conditions set forth in the 2024 Exchange Agreement (the “PMC Issuance”), and Exhibit A will be updated to reflect such PMC Issuance; and


WHEREAS, the Managing Member, the Members and the Company desire to amend and restate the Prior Agreement in its entirety to, among other things, authorize and provide for the issuance of the Class C Units and admit the Emblem Parties and PMC to the Company.

NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Members, intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

Capitalized terms used but not otherwise defined herein shall have the following meaning:

2021 Exchange Agreement” means the Exchange Agreement, dated as of November 4, 2021, by and among the Corporation, the Company and certain of the Members party thereto, as the same may be amended, amended and restated, or replaced from time to time.

2024 Exchange Agreement” has the meaning set forth in the Recitals.

Additional Member” means a Person admitted to the Company as a Member pursuant to Section 8.2.

Adjusted Capital Account Deficit” means, with respect to any Capital Account as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Person’s Capital Account balance shall be (i) reduced for any items described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6), and (ii) increased for any amount such Person is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Sections 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to Minimum Gain).

Affiliate” of any Person means any other Person controlled by, controlling or under common control with such Person, and in the case of any Unitholder that is a partnership, limited liability company, corporation or similar entity, any partner, member or stockholder of such Unitholder; provided, that the Company and its Subsidiaries shall not be deemed to be Affiliates of any Unitholder. As used in this definition, “control” (including, with its correlative meanings, “controlling,” “controlled by” and “under common control with”) shall mean possession, directly or indirectly, of power to direct or cause the direction of management or policies (whether through ownership of securities, by contract or otherwise).

Agreement” means this Amended and Restated Limited Liability Company Agreement, as it may be amended, modified and/or waived from time to time in accordance with the terms hereof.

 

2


Assumed Tax Liability” means, with respect to any Unitholder for any Fiscal Quarter or portion thereof beginning after the date hereof, an amount which, in the good faith estimation of the Managing Member, equals the product of (a) the amount of taxable income of the Company allocable to such Unitholder in respect of such Fiscal Quarter or portion thereof (which shall include gross or net income allocations of items of Profit or Loss), determined (x) by including adjustments to taxable income in respect of Section 704(c) of the Code, (y) excluding adjustments to taxable income in respect of Section 743(b) of the Code, and (z) reducing such taxable income by net taxable losses of the Company allocated to such Unitholder for prior taxable periods beginning after the date of the Prior Agreement to the extent that such losses are of a character (ordinary or capital) that would permit the losses to be deducted by such Unitholder against the current taxable income of the Company allocable to the Unitholder for such Fiscal Quarter and have not previously been taken into account in determining such Unitholder’s Assumed Tax Liability, multiplied by (b) the Assumed Tax Rate. Notwithstanding anything else contained herein, without the prior written consent of Emblem Main and PMC (to the extent PMC holds Class C Units at the relevant time), in no event will the Assumed Tax Liability of the Corporation (when aggregated with the Assumed Tax Liability of any entities included in the U.S. federal income tax consolidated group that includes the Corporation) be more than the amount required to pay the actual income Tax liabilities of such consolidated group.

Assumed Tax Rate” means the combined maximum U.S. federal, state, and local income tax rate applicable to a taxable individual or corporation in any jurisdiction in the United States (whichever is highest), including pursuant to Section 1411 of the Code, in each case taking into account all jurisdictions in which the Company is required to file income tax returns and the relevant apportionment information, in effect for the applicable Fiscal Quarter (making an appropriate adjustment for any rate changes that take place during such period and taking into account the character of the income).

Base Rate” means, as of any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the “prime rate” at large U.S. money center banks.

Book Value” means, with respect to any of the Company property, the Company’s adjusted basis for federal income Tax purposes, adjusted from time to time to reflect the adjustments required or permitted (in the case of permitted adjustments, to the extent the Company makes such permitted adjustments) by Treasury Regulation Sections 1.704-1(b)(2)(iv)(d)-(g).

Business Day” means any day other than a Saturday, Sunday or other day on which the banks in New York, New York or Cherry Hill, New Jersey are authorized by law to be closed.

Capital Account” means the capital account maintained for a Member pursuant to Section 3.5 and the other applicable provisions of this Agreement.

Capital Contributions” means any cash, cash equivalents, promissory obligations or the Fair Market Value of other property which a Unitholder contributes or is deemed by the Managing Member to have contributed to the Company with respect to any Unit pursuant to Section 3.1 or Section 3.10.

 

3


Cash Payment” means (1) with respect to the Class A Units, the meaning set forth in the 2021 Exchange Agreement, or (2) with respect to the Class C Units, the meaning set forth in the 2024 Exchange Agreement.

Certificate” means the Company’s Certificate of Conversion as filed with the Secretary of State of Delaware, as the same may be amended from time to time.

Class A Common Stock” means the Class A common stock, par value $0.0001 per share, of the Corporation.

Class A Common Stock Value” means (1) with respect to the Class A Units, the meaning set forth in the 2021 Exchange Agreement, or (2) with respect to the Class C Units, the meaning set forth in the 2024 Exchange Agreement.

Class B Common Stock” means the Class B common stock, par value $0.0001 per share, of the Corporation.

Code” means the United States Internal Revenue Code of 1986, as amended.

Class A Unit” means a Unit having the rights and obligations specified with respect to a Class A Unit in this Agreement.

Class B Unit” means a Unit having the rights and obligations specified with respect to a Class B Unit in this Agreement.

Class C Unit” means a Unit having the rights and obligations specified with respect to a Class C Unit in this Agreement.

Company” has the meaning set forth in the Preamble.

Conversion Agreement” has the meaning set forth in Exhibit A-2 attached hereto.

Convertible Notes” has the meaning set forth in Exhibit A-2 attached hereto.

Corporation” has the meaning set forth in the Preamble.

Delaware Act” means the Delaware Limited Liability Company Act, 6 Del. L. § 18-101, et seq., as it may be amended from time to time, and any successor thereto.

Distribution” means each distribution made by the Company to a Unitholder, with respect to such Person’s Units, whether in cash, property or securities and whether by liquidating distribution, redemption, repurchase or otherwise; provided that notwithstanding anything in the foregoing, none of the following shall be deemed to be a Distribution hereunder: (i) any recapitalization, exchange or conversion of securities of the Company, and any subdivision (by unit split or otherwise) or any combination (by reverse unit split or otherwise) of any outstanding Units; and (ii) any repurchase of Units pursuant to any right of first refusal or similar repurchase right in favor of the Company.

 

4


Emblem Blocker” has the meaning set forth in the Recitals.

Emblem Executive” has the meaning set forth in the Recitals.

Emblem Loan Agreement” has the meaning set forth in the Recitals.

Emblem Loan Transaction” has the meaning set forth in the Recitals.

Emblem Main” has the meaning set forth in the Recitals.

Emblem Parties” has the meaning set forth in the Recitals.

Equity Agreement” has the meaning set forth in Section 3.2(a).

Equity Securities” means (i) any Units, capital stock, partnership, membership or limited liability company interests or other equity interests (including other classes, groups or series thereof having such relative rights, powers and/or obligations as may from time to time be established by the Managing Member, including rights, powers and/or duties different from, senior to or more favorable than existing classes, groups and series of Units, capital stock, partnership, membership or limited liability company interests or other equity interests, and including any profits interests), (ii) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units, capital stock, partnership interests, membership or limited liability company interests or other equity interests, and (iii) warrants, options or other rights to purchase or otherwise acquire Units, capital stock, partnership interests, membership or limited liability company interests or other equity interests. Unless the context otherwise indicates, the term “Equity Securities” refers to Equity Securities of the Company.

Event of Withdrawal” means the death, retirement, resignation, expulsion, bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company.

Exchange” means, (i) with respect to a Class A Unit, the meaning set forth in the 2021 Exchange Agreement and (ii) with respect to a Class C Unit, the meaning set forth in the 2024 Exchange Agreement.

Exchange Act” means the Securities Exchange Act of 1934, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. Any reference herein to a specific section, rule or regulation of the Exchange Act shall be deemed to include any corresponding provisions of future law.

Exchange Rate” has, (1) with respect to the Class A Units and Class B Units, the meaning set forth in the 2021 Exchange Agreement and (2) with respect to the Class C Units, the meaning set forth in the 2024 Exchange Agreement.

Exchangeable Unit” has, (1) with respect to the Class A Units and Class B Units, the meaning set forth in the 2021 Exchange Agreement and (2) with respect to the Class C Units, the meaning set forth in the 2024 Exchange Agreement.

 

5


Exchanged Unit Amount” has (1) with respect to the Class A Units and Class B Units, the meaning set forth in the 2021 Exchange Agreement and (2) with respect to the Class C Units, the meaning set forth in the 2024 Exchange Agreement.

Fair Market Value” means, as of any date of determination, (i) with respect to a Unit, such Unit’s Pro Rata Share as of such date, (ii) with respect to a share of Class A Common Stock, the Class A Common Stock Value as of such date, and (iii) with respect to any other non-cash assets, the fair market value for such property as between a willing buyer under no compulsion to buy and a willing seller under no compulsion to sell in an arm’s-length transaction occurring on such date, taking into account all relevant factors determinative of value (including in the case of securities, any restrictions on transfer applicable thereto or, if such securities are traded on a securities exchange or automated or electronic quotation system, the quoted price for such securities as of the date of determination), as reasonably determined in good faith by the Managing Member.

Fidelity Class A Investors” has the meaning set forth in Exhibit A-2 attached hereto. “Fidelity Class B Members” has the meaning set forth in Exhibit A-2 attached hereto.

Fiscal Period” means any interim accounting period within a Taxable Year established by the Managing Member and which is permitted or required by Code Section 706.

Fiscal Quarter” means each calendar quarter ending March 31, June 30, September 30 and December 31, or such other quarterly accounting period as may be established by the Managing Member or as required by the Code.

Fiscal Year” means the 12-month period ending on December 31, or such other annual accounting period as may be established by the Managing Member or as may be required by the Code.

Forfeiture Allocations” has the meaning set forth in Section 4.2.

Governmental Entity” means the United States of America or any other nation, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

HSR Act” has the meaning set forth in Section 10.7.

Indemnitee” has the meaning set forth in Section 6.1(b).

Investment Company Act” means the Investment Company Act of 1940, as amended from time to time.

IRS Notice” has the meaning set forth in Section 7.5.

Liquidation Assets” has the meaning set forth in Section 10.2(b).

Liquidation FMV” has the meaning set forth in Section 10.2(b).

Liquidation Statement” has the meaning set forth in Section 10.2(b).

 

6


Losses” means items of the Company loss and deduction determined according to Section 3.5.

Managing Member” means (i) the Corporation so long as the Corporation has not withdrawn as the Managing Member pursuant to Section 5.1(c), and (ii) any successor thereof appointed as Managing Member in accordance with Section 5.1(c). Unless the context otherwise requires, references herein to the Managing Member shall refer to the Managing Member acting in its capacity as such.

Member” means each Person listed on the Unit Ownership Ledger and any Person admitted to the Company as a Substituted Member or Additional Member in accordance with the terms and conditions of this Agreement; but in each case only for so long as such Person is shown on the Company’s books and records as the owner of one or more Units.

Minimum Gain” means the partnership minimum gain determined pursuant to Treasury Regulation Section 1.704-2(d).

Notes” means any future non-convertible debt securities issued by the Corporation.

Note Payments” means payments of principal, interest or other premiums pursuant to any Notes.

Obligations” has the meaning set forth in Section 6.1(b).

Partnership Tax Audit Rules” means Code Sections 6221 through 6241, as amended by the Bipartisan Budget Act of 2015, together with any guidance issued thereunder or successor provisions and any similar provision of state or local Tax laws.

Permitted Transferee” means, with respect to any Person, (i) any of such Person’s Affiliates, and (ii) such Person’s spouse, any lineal ascendants or descendants or trusts or other entities in which such Member or Member’s spouse, lineal ascendants or descendants hold (and continue to hold while such trusts or other entities hold Class B Units or Class C Units) 50% or more of such entity’s beneficial interests.

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

PMC” has the meaning set forth in the Recitals.

PR” has the meaning set forth in Section 7.4(a).

Prior Agreement” has the meaning set forth in the Recitals.

Pro Rata Share” means with respect to each Unit, the proportionate amount such Unit would receive if an amount equal to the Total Equity Value were distributed to all Units in accordance with Section 4.1(b), as determined in good faith by the Managing Member.

 

7


Profits” means items of the Company income and gain determined according to Section 3.5.

Registration Rights Agreement” means that certain Registration Rights Agreement, dated as of November 4, 2021, by and among the Corporation and certain other parties thereto, as the same may be amended, amended and restated, or replaced from time to time.

Regulatory Allocations” has the meaning set forth in Section 4.3(e).

Reorganization” has the meaning set forth in the IPO Registration Statement.

Securities Act” means the Securities Act of 1933, as amended, and applicable rules and regulations thereunder, and any successor to such statute, rules or regulations. Any reference herein to a specific section, rule or regulation of the Securities Act shall be deemed to include any corresponding provisions of future law.

Subsidiary” means, with respect to any Person, any corporation, limited liability company, partnership, association or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association or other business entity (other than a corporation), a majority of partnership or other similar ownership interests thereof is at the time owned or controlled, directly or indirectly, by any Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof and without limitation, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control the manager, managing member, managing director (or a board comprised of any of the foregoing) or general partner of such limited liability company, partnership, association or other business entity. Without limiting the foregoing, the Company shall be deemed to be a Subsidiary of the Corporation. For purposes hereof, references to a “Subsidiary” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “Subsidiary” refers to a Subsidiary of the Company.

Substituted Member” means a Person that is admitted as a Member to the Company pursuant to Section 8.2.

Tax” or “Taxes” means any federal, state, local or foreign income, gross receipts, franchise, estimated, alternative minimum, add-on minimum, sales, use, transfer, registration, value added, excise, natural resources, severance, stamp, occupation, premium, windfall profit, environmental, customs, duties, real property, personal property, capital stock, social security, unemployment, disability, payroll, license, employee or other withholding, or other tax, of any kind whatsoever, including any transferee liability and any interest, penalties or additions to tax or additional amounts in respect of the foregoing.

Tax Distribution” has the meaning set forth in Section 4.1(a)(i).

 

8


Tax Distribution Conditions” has the meaning set forth in Section 4.1(a)(i).

Tax Receivable Agreement” means the Tax Receivable Agreement dated as of November 4, 2021, by and among the Corporation, the Company and the other parties thereto, as the same may be amended, amended and restated, or replaced from time to time.

Taxable Year” means the Company’s accounting period for federal income Tax purposes determined pursuant to Section 7.3.

Total Equity Value” means, as of any date of determination, the aggregate proceeds which would be received by the Unitholders if: (i) the assets of the Company were sold at their fair market value to an independent third-party on arm’s-length terms, with neither the seller nor the buyer being under compulsion to buy or sell such assets; (ii) the Company satisfied and paid in full all of its obligations and liabilities (including all Taxes, costs and expenses incurred in connection with such transaction and any amounts reserved by the Managing Member with respect to any contingent or other liabilities); and (iii) such net sale proceeds were then distributed in accordance with Section 4.1, all as determined by the Managing Member in good faith based upon the Class A Common Stock Value as of such date.

Transaction Documents” means, collectively, this Agreement, the 2021 Exchange Agreement, the Registration Rights Agreement and the Tax Receivable Agreement.

Transfer” has the meaning set forth in Section 8.1.

Treasury Regulations” means the income Tax regulations promulgated under the Code and effective as of the date of this Agreement, any future amendments to such regulations, and any corresponding provisions of succeeding regulations.

Unit” means a limited liability company interest in the Company of a Member or representing a fractional part of the interests in Profits, Losses and Distributions of the Company held by all Members and shall include Class A Units, Class B Units and Class C Units.

Unit Ownership Ledger” has the meaning set forth in Section 3.1(b).

Unitholder” means any owner of one or more Units as reflected on the Company’s books and records.

ARTICLE II

ORGANIZATIONAL MATTERS

Section 2.1 Formation of LLC. The Company was formed in the State of Delaware on November 4, 2021 pursuant to the provisions of the Delaware Act as a result of the conversion effected by the Certificate.

 

9


Section 2.2 Limited Liability Company Agreement. The Members hereby execute this Agreement for the purpose of establishing the affairs of the Company and the conduct of its business in accordance with the provisions of the Delaware Act. The Members hereby agree that during the term of the Company set forth in Section 2.6, the rights, powers and obligations of the Unitholders with respect to the Company will be determined in accordance with the terms and conditions of this Agreement and, except where the Delaware Act provides that such rights, powers and obligations specified in the Delaware Act shall apply “unless otherwise provided in a limited liability company agreement” or words of similar effect and such rights, powers and obligations are set forth in this Agreement, the Delaware Act; provided that, notwithstanding the foregoing and anything else to the contrary, Section 18-210 of the Delaware Act (entitled “Contractual Appraisal Rights”) and Section 18-305(a) of the Delaware Act (entitled “Access to and Confidentiality of Information; Records”) shall not apply to or be incorporated into this Agreement and each Unitholder hereby expressly waives any and all rights under such Sections of the Delaware Act.

Section 2.3 Name. The name of the Company shall be “Real Good Foods, LLC”. The Managing Member may change the name of the Company at any time and from time to time. Notification of any such name change shall be given to all Unitholders. The Company’s business may be conducted under its name and/or any other name or names deemed advisable by the Managing Member.

Section 2.4 Purpose. The purpose and business of the Company shall be to manage and direct the business operations and affairs of the Company and its Subsidiaries and to engage in any other lawful acts or activities for which limited liability companies may be organized under the Delaware Act.

Section 2.5 Principal Office; Registered Office. The principal office of the Company shall be located at 3 Executive Campus, Suite 155, Cherry Hill, NJ 08002, or at such other place inside or outside the state of Delaware as the Managing Member may from time to time designate, and all business and activities of the Company shall be deemed to have occurred at its principal office. The Company may maintain offices at such other place or places as the Managing Member deems advisable. The address of the registered office of the Company in the State of Delaware shall be the office of the initial registered agent named in the Certificate or such other office (which need not be a place of business of the Company) as the Managing Member may designate from time to time in the manner provided by applicable law, and the registered agent for service of process on the Company in the State of Delaware at such registered office shall be the registered agent named in the Certificate or such Person or Persons as the Managing Member may designate from time to time in the manner provided by applicable law.

Section 2.6 Term. The term of the Company commenced upon the filing of the Certificate with the office of the Secretary of State of the State of Delaware in accordance with the Delaware Act and shall continue in existence until the Company shall be terminated and dissolved in accordance with the provisions of Article X.

Section 2.7 No State-Law Partnership. The Unitholders intend that the Company not be a partnership (including, without limitation, a limited partnership) or joint venture, and that no Unitholder be a partner or joint venturer of any other Unitholder by virtue of this Agreement, for any purposes other than as set forth in the last sentence of this Section 2.7, and neither this Agreement nor any other document entered into by the Company or any Unitholder relating to the subject matter hereof shall be construed to suggest otherwise. The Unitholders intend that the Company shall be treated as a partnership for federal and, if applicable, state and local income Tax purposes, and that each Unitholder and the Company shall file all Tax returns and shall otherwise take all Tax and financial reporting positions in a manner consistent with such treatment.

 

10


ARTICLE III

UNITS, CAPITAL CONTRIBUTIONS AND ACCOUNTS

Section 3.1 Units; Capitalization.

(a) Units; Capitalization. The Company shall have the authority to issue an unlimited number of Class A Units in connection with the issuance of capital stock by the Corporation or as otherwise contemplated by this Agreement. The Company shall not issue Class B Units other than the Class B Units set forth on Exhibit A-1 except for (i) Class B Units issued to the Fidelity Class B Members contemplated by Exhibit A-2, and (ii) issuances to reflect a pro rata adjustment pursuant to Section 3.1(e) hereof. The Company shall not issue Class C Units without the consent of Emblem Main and PMC (to the extent PMC holds Class C Units at the relevant time) other than the Class C Units set forth on Exhibit A-1 except for issuances to reflect a pro rata adjustment pursuant to Section 3.1(e) hereof; provided that the PMC Issuance shall not require the consent of Emblem Main. The ownership by a Member of Units shall entitle such Member to allocations of Profits and Losses and other items and Distributions of cash and other property as set forth in Article IV hereof. Any provision to the contrary contained in this Agreement notwithstanding, the Units issued hereunder or covered hereby shall not (a) be deemed to constitute a “security” governed by Article 8 of the Uniform Commercial Code of the State of Delaware (and the Uniform Commercial Code of any other applicable jurisdiction) that now or hereafter substantially includes the 1994 revisions to Article 8 thereof as adopted by the American Law Institute or (b) become certificated. Any certificate issued by the Company shall be void. This sentence and the prior sentence of Section 3.1(a) shall not be amended or otherwise modified without the prior written consent of the lenders (or agent) (or any representative thereof) to which all or any portion of the limited liability company interests have been pledged as collateral for so long as such indebtedness is outstanding.

(b) Unit Ownership Ledger. The Managing Member shall create and maintain a ledger attached hereto as Exhibit A (the “Unit Ownership Ledger”) setting forth the name of each Unitholder and the number of each class of Units held of record by each such Unitholder. Upon any change in the number or ownership of outstanding Units (whether upon an issuance of Units, a Transfer of Units, a cancellation of Units or otherwise), the Managing Member shall amend and update the Unit Ownership Ledger. Absent manifest error, the ownership interests recorded on the Unit Ownership Ledger shall be conclusive record of the Units that have been issued and are outstanding. Any reference in this Agreement to the Unit Ownership Ledger shall be deemed a reference to the Unit Ownership Ledger as amended and in effect from time to time. The Unit Ownership Ledger shall initially be set forth as Exhibit A-1.

 

11


(c) Certificates; Legends. Units shall be issued in uncertificated form; provided that, at the request of any Member, the Managing Member may cause the Company to issue one or more certificates to any such Member holding Units representing in the aggregate the Units held by such Member. If any certificate representing Units is issued, then such certificate shall bear a legend substantially in the following form:

THIS CERTIFICATE EVIDENCES UNITS REPRESENTING A MEMBERSHIP INTEREST IN REAL GOOD FOODS, LLC. THE MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH. THE MEMBERSHIP INTEREST REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN THE AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF REAL GOOD FOODS, LLC, DATED AS OF SEPTEMBER 20, 2024, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH SHALL BE FURNISHED BY THE COMPANY TO THE RECORD HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.

(d) Class B Units. The Class B Units shall have no voting rights or any other rights with respect to the governance and operations of the Company, without limiting each such Member’s rights to distributions and allocations as set forth in Article IV, and such rights set forth in the 2021 Exchange Agreement, Tax Receivable Agreement and Registration Rights Agreement.

(e) Class C Units. The Class C Units shall have no voting rights or any other rights with respect to the governance and operations of the Company, without limiting each such Member’s rights to distributions and allocations as set forth in Article IV, and such rights set forth in the 2024 Exchange Agreement.

(f) Capitalization. The Managing Member shall have the authority, without further agreement or action by any other Member, to increase or decrease the Units issued to the Members set forth on the Unit Ownership Ledger, on a pro rata basis, subject to this Article III.

(g) Pledgee’s Rights; Units to be General Intangibles.

(i) Notwithstanding anything contained herein to the contrary, each Member shall be permitted to pledge or hypothecate any or all of its Units, including, without limitation, all economic rights and privileges, all control rights, authority, and powers, and all status rights as a Member, to any lender to the Company or any affiliate of the Company, or to any agent acting on such lender’s behalf, and any transfer of such Units pursuant to any such lender’s (or agent’s) exercise of remedies in connection with any such pledge or hypothecation shall be permitted under this Agreement with no further action or approval required hereunder. Notwithstanding anything contained herein to the contrary, subject to the terms of the financing giving rise to any pledge or hypothecation of Units, the lender (or agent) shall have the right, to the extent set forth in the applicable pledge or hypothecation agreement, and without further approval of any Member and without becoming a Member (unless such lender (or agent) expressly elects in writing to become a Member), to exercise the membership voting rights of the Member granting such pledge or hypothecation. Notwithstanding anything contained herein to the contrary, and without complying with any other procedures set forth in this Agreement, upon the exercise of remedies in connection with a pledge or hypothecation, to the extent set forth in the applicable pledge or hypothecation agreement, (a) the lender (or agent) or transferee of such lender (or agent), as the case may be, shall, if it so elects, become a Member under this Agreement and shall succeed to all of the rights and powers, including the right to participate in the management of the business and affairs of the Company, and shall be bound by all of the obligations, of a Member under this Agreement without taking any further action on the part of such lender (or agent) or transferee, as the case may be, and (b) following such exercise of remedies, the pledging Member shall cease to be a Member and shall have no further rights or powers under this Agreement. Notwithstanding anything contained herein to the contrary, no legal opinion shall be required in connection with any pledge or hypothecation of Common Units, or any transfer or exercise of rights or remedies pursuant hereto. The execution and delivery of this Agreement by a Member shall constitute any necessary approval of such Member under the Act to the foregoing provisions of this Section 3.1(g) and any of the actions permitted pursuant to this Section 3.1(g).

 

12


(ii) So long as any pledge or hypothecation of any Units is in effect, the Company shall not elect that its Units become governed by Article 8 of the Uniform Commercial Code as in effect in any relevant jurisdiction without the prior written consent of all pledgees of such Units or the delivery of any applicable limited liability company certificate or control agreement necessary to perfect each such pledgee’s interests in the applicable Units.

(iii) This Section 3.1(g) may not be amended or modified so long as any of the Units are subject to a pledge or hypothecation without the pledgee’s (or the transferee of such pledgee’s) prior written consent. Each recipient of a pledge or hypothecation of the Units shall be a third party beneficiary of the provisions of this Section 3.1(g).

Section 3.2 Authorization and Issuance of Additional Units.

(a) The Managing Member shall have the right to cause the Company to issue and/or create and issue at any time after the date hereof, and for such amount and form of consideration as the Managing Member may determine, additional Units or other Equity Securities of the Company (including creating classes or series thereof having such powers, designations, preferences and rights as may be determined by the Managing Member). The Managing Member shall have the power to make such amendments to this Agreement in order to provide for such powers, designations, preferences and rights as the Managing Member in its discretion deems necessary or appropriate to give effect to such additional authorization or issuance in accordance with the provisions of this Section 3.2(a). In connection with any issuance of Units (whether on or after the date of this Agreement), the Person who acquires such Units shall execute a counterpart to this Agreement accepting and agreeing to be bound by all terms and conditions hereof, and shall enter into such other documents, instruments and agreements to effect such purchase as are required by the Managing Member (including such documents, instruments and agreements entered into on or prior to the date of this Agreement by the Members, each, an “Equity Agreement”). The Company shall not, and the Managing Member shall not cause the Company to, issue any Units if such issuance would result in the Company having more than 100 partners, within the meaning of Treasury Regulations Section 1.7704-1(h) (determined taking into account the rules of Treasury Regulations Section 1.7704-1(h)(3)).

 

13


(b) At any time the Corporation issues one or more shares of Class A Common Stock (other than an issuance of the type covered by Section 3.2(d) or an issuance to a holder of Exchangeable Units pursuant to the 2021 Exchange Agreement or the 2024 Exchange Agreement, as described in Section 3.2(c)), the Corporation shall contribute (directly or indirectly) to the Company all of the net proceeds (if any) received by the Corporation with respect to such share or shares of Class A Common Stock. Upon the contribution (directly or indirectly) by the Corporation to the Company of all of such net proceeds so received by the Corporation, the Managing Member shall cause the Company to issue a number of Class A Units determined based upon the Exchange Rate then in effect, registered (directly or indirectly) in the name of the Corporation; provided, however, that if the Corporation issues any shares of Class A Common Stock in order to purchase or fund the purchase of Class B Units from a Member (other than a Subsidiary of the Corporation), then the Company shall not issue any new Class A Units and the Corporation shall not be required to transfer such net proceeds to the Company (it being understood that such net proceeds shall instead be transferred by the Corporation to such other Member as consideration for such purchase). Notwithstanding the foregoing, this Section 3.2(b) shall not apply to the issuance and distribution to holders of shares of Class A Common Stock of rights to purchase Equity Securities of the Corporation under a “poison pill” or similar shareholder’s rights plan (it being understood that (i) upon exchange of Exchangeable Units for Class A Common Stock pursuant to the 2021 Exchange Agreement or the 2024 Exchange Agreement, such Class A Common Stock would be issued together with any such corresponding right and (ii) in the event such rights to purchase Equity Securities of the Corporation are triggered, the Corporation will ensure that the holders of Class B Units and Class C Units that have not been Exchanged prior to such time will be treated equitably vis-à-vis the holders of Class A Common Stock under such plan).

(c) At any time a holder of Exchangeable Units exchanges such Class B Units or Class C Units for shares of Class A Common Stock or a Cash Payment, as the case may be, the Company shall cancel such Exchangeable Units. Upon the cancellation by the Company of the Exchangeable Units exchanged for shares of Class A Common Stock, the Managing Member shall cause the Company to issue a number of Class A Units equal to the Exchanged Unit Amount, registered (directly or indirectly) in the name of the Corporation in accordance with Section 2.6 of the 2021 Exchange Agreement or Section 2.6 of the 2024 Exchange Agreement, as applicable.

(d) At any time the Corporation issues one or more shares of Class A Common Stock, including but not limited to in connection with an equity incentive program, whether such share or shares are issued upon exercise (including cashless exercise) of an option, settlement of a restricted stock unit, as restricted stock or otherwise, the Managing Member shall cause the Company to issue a corresponding number of Class A Units, registered (directly or indirectly) in the name of the Corporation (determined based upon the Exchange Rate then in effect); provided that the Corporation shall be required to contribute (directly or indirectly) all (but not less than all) of the net proceeds (if any) received by the Corporation from or otherwise in connection with such issuance of one or more shares of Class A Common Stock, including the exercise price of any option exercised, to the Company. If any such shares of Class A Common Stock so issued by the Corporation in connection with an equity incentive program are subject to vesting or forfeiture provisions, then the Class A Units that are issued (directly or indirectly) by the Company to the Corporation in connection therewith in accordance with the preceding provisions of this Section 3.2(d) shall be subject to vesting or forfeiture on the same basis; if any of such shares of Class A Common Stock vest or are forfeited, then a corresponding number of the Class A Units (determined based upon the Exchange Rate then in effect) in accordance with the preceding provisions of this Section 3.2(d) shall automatically vest or be forfeited. Any cash or property held by the Corporation or the Company or on any of such Person’s behalf in respect of dividends paid on restricted shares of Class A Common Stock that fail to vest shall be returned to the Company upon the forfeiture of such restricted shares of Class A Common Stock.

 

14


(e) The Corporation shall at all times reserve and keep available out of its authorized but unissued Class A Common Stock, solely for the purpose of issuance upon an Exchange, the maximum number of shares of Class A Common Stock as shall be issuable upon Exchange of all outstanding Class B Units and Class C Units and shares of Class A Common Stock and Class B Common Stock to satisfy its obligations under the 2021 Exchange Agreement and 2024 Exchange Agreement, as and when applicable; provided that nothing contained herein shall be construed to preclude the Corporation from satisfying its obligations in respect of any such Exchange by delivery of purchased shares of Class A Common Stock (which may or may not be held in the treasury of the Corporation). If any shares of Class A Common Stock require registration with or approval of any Governmental Entity under any federal or state law before such shares may be issued upon an Exchange, the Corporation shall use reasonable efforts to cause the exchange of such shares of Class A Common Stock to be duly registered or approved, as the case may be. The Corporation shall list and use its reasonable efforts to maintain the listing of the Class A Common Stock required to be delivered upon any such Exchange prior to such delivery upon the national securities exchange upon which the outstanding shares of Class A Common Stock are listed at the time of such Exchange (it being understood that any such shares may be subject to transfer restrictions under applicable securities laws). The Corporation covenants that all shares of Class A Common Stock issued upon an Exchange will, upon issuance, be validly issued, fully paid and non-assessable.

(f) For purposes of this Section 3.2, “net proceeds” means gross proceeds to the Corporation from the issuance of Class A Common Stock or other securities less all reasonable bona fide out-of-pocket fees and expenses of the Corporation, the Company and their respective Subsidiaries actually incurred in connection with such issuance.

(g) If, at any time, any shares of Class A Common Stock or other shares of capital stock of the Corporation are repurchased (whether by exercise of a put or call, pursuant to an open market purchase, automatically or by means of another arrangement) by the Corporation for cash or other consideration, then the Managing Member shall cause the Company, immediately prior to such repurchase of such capital stock, to redeem an equal number of equivalent Class A Units held (directly or indirectly) by the Corporation, at an aggregate redemption price equal to the aggregate purchase price of the capital stock being repurchased by the Corporation (plus any expenses related thereto) and upon such other terms as are the same for the capital stock being cancelled or retired by the Corporation.

(h) Subject to Section 3.2(j), the Company shall be liable for, and shall reimburse the Corporation on an after-tax basis at such intervals as the Corporation may reasonably determine, for all (i) overhead, administrative expenses, insurance and reasonable legal, accounting and other professional fees and expenses of the Corporation and its Subsidiaries relating to the management of the Company and its Subsidiaries, (ii) franchise and similar taxes of the Corporation and its Subsidiaries and other fees and expenses in connection with the maintenance of the existence of the Corporation and its Subsidiaries, and (iii) reasonable expenses paid by the Corporation and its Subsidiaries on behalf of the Company. Such reimbursements shall be in addition to any reimbursement of the Corporation and its Subsidiaries as a result of indemnification otherwise provided for under this Agreement.

 

15


(i) Subject to Section 3.2(j) and without duplication of any amounts paid pursuant to Section 3.2(h), the Company shall be liable for, and shall reimburse the Corporation on an after-tax basis at such intervals as the Managing Member may reasonably determine, for all (i) overhead, administrative expenses, insurance and reasonable legal, accounting and other professional fees and expenses of the Corporation, (ii) expenses of the Corporation incidental to being a public reporting company, (iii) reasonable fees and expenses related to the IPO (other than the payment obligations of the Corporation under the Tax Receivable Agreements) or any subsequent public offering of equity securities of the Corporation or private placement of equity securities of the Corporation, whether or not consummated, (iv) franchise and similar taxes of the Corporation and other fees and expenses in connection with the maintenance of the existence of the Corporation, (v) customary compensation and benefits payable by the Corporation; provided, that the Board of Directors of the Corporation may in its discretion (but shall not be required to) determine that the Corporation, rather than the Company, shall bear any specific items of the foregoing to the extent such items relate exclusively to the business and affairs of the Corporation and should not be borne by the Company. Such reimbursements shall be in addition to any reimbursement of the Corporation otherwise provided for under this Agreement. If the Corporation issues shares of Class A Common Stock and contributes (directly or indirectly) the net proceeds of such issuance to the Company, the reasonable expenses incurred by the Corporation in such issuance will be assumed by the Company.

(j) To the extent practicable, Company expenses shall be billed directly to and paid by the Company. Unless otherwise determined by the Managing Member, no reimbursement or indemnification payment made pursuant to Section 3.2(h), (i) or (j) shall be considered a distribution to the payee.

Section 3.3 [RESERVED]

Section 3.4 Changes in Common Stock. In addition to any other adjustments required hereby, any subdivision (by stock split, stock dividend, reclassification, recapitalization or otherwise) or combination (by reverse stock split, reclassification, recapitalization or otherwise) of Class A Common Stock, Class B Common Stock or other capital stock of the Corporation shall be accompanied by an identical subdivision or combination, as applicable, of the Class A Units, Class B Units, Class C Units or other Equity Securities, as applicable. In the implementation and administration of this Section 3.4, the Managing Member shall have authority to make such adjustments as it determines in good faith to be appropriate to reflect the economic equivalency intended hereby.

 

16


Section 3.5 Capital Accounts.

(a) Maintenance of Capital Accounts. The Company shall maintain a separate Capital Account for each Unitholder according to the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). For this purpose, the Company may (in the sole discretion of the Managing Member), upon the occurrence of the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of the Company property. Without limiting the foregoing, each Unitholder’s Capital Account shall be adjusted:

(i) by adding any additional Capital Contributions made by such Unitholder in consideration for the issuance of Units;

(ii) by deducting any amounts paid to such Unitholder in connection with the redemption or other repurchase by the Company of Units;

(iii) by adding any Profits allocated in favor of such Unitholder and subtracting any Losses allocated in favor of such Unitholder; and

(iv) by deducting any distributions paid in cash or other assets to such Unitholder by the Company.

(b) Computation of Income, Gain, Loss and Deduction Items. For purposes of computing the amount of any item of the Company income, gain, loss or deduction to be allocated pursuant to Article IV and to be reflected in the Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income Tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose); provided that:

(i) the computation of all items of income, gain, loss and deduction shall include those items described in Code Section 705(a)(1)(B), Code Section 705(a)(2)(B) and Treasury Regulation Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not includable in gross income or are not deductible for federal income Tax purposes;

(ii) if the Book Value of any Company property is adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property;

(iii) items of income, gain, loss or deduction attributable to the disposition of the Company property having a Book Value that differs from its adjusted basis for Tax purposes shall be computed by reference to the Book Value of such property;

(iv) items of depreciation, amortization and other cost recovery deductions with respect to the Company property having a Book Value that differs from its adjusted basis for Tax purposes shall be computed by reference to the property’s Book Value in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g);

(v) to the extent an adjustment to the adjusted Tax basis of any of the Company’s asset pursuant to Code Sections 732(d), 734(b) or 743(b) is required pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m) to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis); and

 

17


(vi) this Section 3.5 shall be applied in a manner consistent with the principles of Prop. Reg. Sections 1.704-1(b)(2)(iv)(d), (f)(1), (h)(2) and (s).

Section 3.6 Negative Capital Accounts; No Interest Regarding Positive Capital Accounts. No Unitholder shall be required to pay to any other Unitholder or the Company any deficit or negative balance which may exist from time to time in such Unitholder’s Capital Account (including upon and after dissolution of the Company). Except as otherwise expressly provided herein, no Unitholder shall be entitled to receive interest from the Company in respect of any positive balance in its Capital Account, and no Unitholder shall be liable to pay interest to the Company or any Unitholder in respect of any negative balance in its Capital Account.

Section 3.7 No Withdrawal. No Person shall be entitled to withdraw any part of such Person’s Capital Contributions or Capital Account or to receive any Distribution from the Company, except as expressly provided herein.

Section 3.8 Loans From Unitholders. Loans by Unitholders to the Company shall not be considered Capital Contributions. If any Unitholder shall loan funds to the Company in excess of the amounts required hereunder to be contributed by such Unitholder to the capital of the Company, the making of such loans shall not result in any increase in the amount of the Capital Account of such Unitholder. The amount of any such loans shall be a debt of the Company to such Unitholder and shall be payable or collectible in accordance with the terms and conditions upon which such loans are made.

Section 3.9 Adjustments to Capital Accounts for Distributions In-Kind. To the extent that the Company distributes property in-kind to the Members, the Company shall be treated as making a distribution equal to the Fair Market Value of such property (as of the date of such distribution) for purposes of Section 4.1 and such property shall be treated as if it were sold for an amount equal to its Fair Market Value and any resulting gain or loss shall be allocated to the Members’ Capital Accounts in accordance with Section 4.2 through Section 4.4.

Section 3.10 Transfer of Capital Accounts. The original Capital Account established for each Substituted Member shall be in the same amount as the Capital Account of the Member (or portion thereof) to which such Substituted Member succeeds at the time such Substituted Member is admitted to as a Member of the Company. The Capital Account of any Member whose interest in the Company shall be increased or decreased by means of (a) the Transfer to it of all or part of the Units of another Member or (b) the repurchase or forfeiture of Units pursuant to any Equity Agreement shall be appropriately adjusted to reflect such Transfer or repurchase. Any reference in this Agreement to a Capital Contribution of or Distribution to a Member that has succeeded any other Member shall include any Capital Contributions or Distributions previously made by or to the former Member on account of the Units of such former Member Transferred to such Member.

 

18


Section 3.11 Adjustments to Book Value. The Company shall adjust the Book Value of its assets to Fair Market Value in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(f) as of the following times: (a) at the Managing Member’s discretion in connection with the issuance of Units in the Company or a more than de minimis Capital Contribution to the Company; (b) at the Managing Member’s discretion in connection with the Distribution by the Company to a Member of more than a de minimis amount of the Company’s assets, including money; (c) the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g). Any such increase or decrease in Book Value of an asset shall be allocated as a Profit or Loss to the Capital Accounts of the Members under Section 4.2 (determined immediately prior to the event giving rise to the revaluation); and (d) at such other times as the Managing Member shall reasonably determine necessary or advisable in order to comply with Treasury Regulations Sections 1.704-1(b) and 1.7042.

Section 3.12 Compliance With Section 1.704-1(b). The provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations Section 1.704-1(b), and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the Managing Member shall determine that it is prudent to modify the manner in which the Capital Accounts are computed in order to comply with such Treasury Regulations, the Managing Member may make such modification, notwithstanding anything in Section 11.2 to the contrary. The Managing Member also shall (a) make any adjustments that are necessary or appropriate to maintain equality between the Capital Accounts of the Members and the amount of the Company capital reflected on the Company’s balance sheet, as computed for book purposes, in accordance with Treasury Regulations Section 1.704-1(b)(2)(iv)(g), and (b) make any appropriate modifications in the event unanticipated events might otherwise cause this Agreement not to comply with Treasury Regulations Section 1.704-1(b).

ARTICLE IV

DISTRIBUTIONS AND ALLOCATIONS

Section 4.1 Distributions.

(a) Tax Distributions.

(i) Tax Distributions. To the extent funds of the Company are legally available for distribution by the Company and such distribution would not be prohibited under any credit facility to which the Company or any of its Subsidiaries is a party (the “Tax Distribution Conditions”), with respect to each Fiscal Quarter, the Company shall distribute to each Unitholder, an amount of cash (each a “Tax Distribution”) equal to such Unitholder’s Assumed Tax Liability for such Fiscal Quarter. To the extent a Unitholder would receive for any Fiscal Quarter less than its Pro Rata Share of the aggregate Tax Distributions to be paid pursuant to the preceding sentence (determined for this purpose by taking into account only Units and Tax Distributions with respect to Units), the Tax Distributions to such Unitholder shall be increased to ensure that all Tax Distributions to Unitholders are made in accordance with their Pro Rata Share (determined for this purpose by taking into account only Units and Tax Distributions with respect to Units). The Managing Member shall be entitled to adjust subsequent Tax Distributions (in accordance with each Unitholder’s Pro Rata Share) up or down to reflect any variation between its prior estimation of quarterly Tax Distributions and the Tax Distributions that would have been computed under this Section 4.1(a)(i) based on subsequent information. In the event that due to the Tax Distribution Conditions the funds available for any Tax Distribution to be made hereunder are insufficient to pay the full amount of the Tax Distribution that would otherwise be required under this Section 4.1(a)(i), the Company shall use its reasonable best efforts to distribute to the Unitholders the amount of funds that are available after application of the Tax Distribution Conditions on a pro rata basis (according to the amounts that would have been distributed to each Unitholder pursuant to this Section 4.1(a)(i) if available funds (after application of the Tax Distribution Conditions) existed in a sufficient amount to make such Distribution in full, including application of the requirement that Tax Distributions with respect to Units be made pro rata). At any time thereafter when additional funds of the Company are available for Distribution after application of the Tax Distribution Conditions, the Company shall use its reasonable best efforts to immediately distribute such funds to the Unitholders on a pro rata basis (according to the amounts that would have been distributed to each Unitholder pursuant to this Section 4.1(a)(i) if available funds (after application of the Tax Distribution Conditions) would have existed in a sufficient amount to make such Tax Distribution in full). Tax Distributions shall be treated as advanced distributions under the other provisions of this Section 4.1. The Company shall use its reasonable best efforts to cause Subsidiaries of the Company to make distributions to the Company sufficient to permit it to pay Tax Distributions.

 

19


(ii) Additional Tax Distributions. In the event of any audit by, or similar event with, a taxing authority that affects the calculation of any Unitholder’s Assumed Tax Liability for any Taxable Year (other than an audit conducted pursuant to the Partnership Tax Audit Rules for which no election is made pursuant to Code Section 6226 (or any similar provision of state or local law)), or in the event the Company files an amended tax return, each Unitholder’s Assumed Tax Liability with respect to such year shall be recalculated by giving effect to such event (for the avoidance of doubt, taking into account interest and penalties). Any shortfall in the amount of Tax Distributions the Unitholders and former Unitholders received for the relevant Taxable Years based on such recalculated Assumed Tax Liability shall be promptly distributed to such Unitholders and the successors of such former Unitholders, except, for the avoidance of doubt, to the extent Distributions were made to such Unitholders and former Unitholders pursuant to Section 4.1 in the relevant Taxable Years sufficient to cover such shortfall. For the avoidance of doubt, the additional distributions provided for in this Section 4.1(a)(ii) shall be made with respect Units pro rata among them.

(b) Other Distributions. Except as otherwise set forth in Section 4.1(a), the Managing Member may (but shall not be obligated to) make Distributions at such time, in such amounts and in such form (including in-kind property) as determined by the Managing Member in its sole discretion, in each case to the holders of Units immediately prior to such Distribution on a pro rata basis.

Section 4.2 Allocations. Profits or Losses (including, if necessary, items thereof) for any Fiscal Year shall be allocated among the Unitholders in such a manner as to reduce or eliminate, to the extent possible, any difference, as of the end of such Fiscal Year, between (a) the sum of (i) the Capital Account of each Unitholder, (ii) such Unitholder’s share of Minimum Gain (as determined according to Treasury Regulation Section 1.704-2(g)) and (iii) such Unitholder’s partner nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(2)) and (b) the respective net amounts, positive or negative, which would be distributed to them or for which they would be liable to the Company under this Agreement and the Delaware Act, determined as if the Company were to (i) liquidate the assets of the Company for an amount equal to their Book Value and (ii) distribute the proceeds of such liquidation pursuant to Section 10.2. Notwithstanding the foregoing, allocations to holders of Class C Units shall be made in good faith consultation with Emblem Main and PMC (to the extent PMC holds Class C Units at the relevant time).

 

20


Section 4.3 Special Allocations.

(a) Minimum Gain Chargeback. Losses attributable to partner nonrecourse debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner required by Treasury Regulation Section 1.704-2(i). If there is a net decrease during a Taxable Year in partner nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(2)), Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the Unitholders in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(i)(4).

(b) Unitholder Nonrecourse Debt Minimum Chargeback. Nonrecourse deductions (as determined according to Treasury Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated to each holder of Units ratably among such Unitholders based upon their ownership of Units. Except as otherwise provided in Section 4.3(a), if there is a net decrease in the Minimum Gain during any Taxable Year, each Unitholder shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(f). This Section 4.3(b) is intended to be a Minimum Gain chargeback provision that complies with the requirements of Treasury Regulation Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.

(c) Qualified Income Offset. If any Unitholder that unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the end of any Taxable Year, computed after the application of Section 4.3(a) and Section 4.3(b),but before the application of any other provision of this Article IV, then Profits for such Taxable Year shall be allocated to such Unitholder in proportion to, and to the extent of, such Adjusted Capital Account Deficit. This Section 4.3(c) is intended to be a qualified income offset provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.

(d) Allocation of Certain Profits and Losses. Profits and Losses described in Section 3.5(b)(v) shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(j), (k) and (m).

(e) Regulatory Allocations. The allocations set forth in Sections 4.3(a)-(d) (the “Regulatory Allocations”) are intended to comply with certain requirements of Sections 1.704-1(b) and 1.704-2 of the Treasury Regulations. The Regulatory Allocations may not be consistent with the manner in which the Unitholders intend to allocate Profit and Loss of the Company or make the Company distributions. Accordingly, notwithstanding the other provisions of this Article IV, but subject to the Regulatory Allocations, income, gain, deduction, and loss shall be reallocated among the Unitholders so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Accounts of the Unitholders to be in the amounts (or as close thereto as possible) they would have been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without reference to the Regulatory Allocations. In general, the Unitholders anticipate that this will be accomplished by specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the Unitholders so that the net amount of the Regulatory Allocations and such special allocations to each such Unitholder is zero. In addition, if in any Fiscal Year or Fiscal Period there is a decrease in partnership Minimum Gain, or in partner nonrecourse debt Minimum Gain, and application of the Minimum Gain chargeback requirements set forth in Section 4.3(a) or Section 4.3(b) would cause a distortion in the economic arrangement among the Unitholders, the Unitholders may, if they do not expect that the Company will have sufficient other income to correct such distortion, request the Internal Revenue Service to waive either or both of such Minimum Gain chargeback requirements. If such request is granted, this Agreement shall be applied in such instance as if it did not contain such Minimum Gain chargeback requirement.

 

21


(f) The Unitholders acknowledge that allocations like those described in Proposed Treasury Regulations Section 1.704-1(b)(4)(xii)(c) (“Forfeiture Allocations”) may result from the allocations of Profits and Losses provided for in this Agreement. For the avoidance of doubt, the Company is entitled to make Forfeiture Allocations and, once required by applicable final or temporary guidance, allocations of Profits and Losses will be made in accordance with Proposed Treasury Regulations Section 1.704-1(b)(4)(xii)(c) or any successor provision or guidance.

(g) Any item of deduction with respect to a Tax that is offset for a Unitholder under Section 4.6 shall be allocated to the Unitholder in which such payment is to be offset. For the avoidance of doubt, all tax deductions described in this Section 4.3(g) shall be taken into account in determining the amount of Tax Distribution made under the provisions of Section 4.1(a)(i).

Section 4.4 Offsetting Allocations. If, and to the extent that, any Member is deemed to recognize any item of income, gain, deduction or loss as a result of any transaction between such Member and the Company pursuant to Sections 83, 482, or 7872 of the Code or any similar provision now or hereafter in effect, the Managing Member shall use its commercially reasonable efforts to allocate any corresponding Profit or Loss to the Member who recognizes such item in order to reflect the Members’ economic interest in the Company.

Section 4.5 Tax Allocations.

(a) Allocations Generally. Except as provided in Section 4.5(b) below, for federal, state and local income Tax purposes, each item of income, gain, loss or deduction shall be allocated among the Unitholders in the same manner and in the same proportion that the corresponding book items have been allocated among the Unitholders’ respective Capital Accounts; provided that, if any such allocation is not permitted by the Code or other applicable law, then each subsequent item of income, gains, losses, deductions and credits will be allocated among the Unitholders so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.

 

22


(b) Code Section 704(c) Allocations. Items of Company taxable income, gain, loss and deduction with respect to any property contributed to the capital of the Company shall, solely for Tax purposes, be allocated among the Unitholders in accordance with Code Section 704(c) so as to take account of any variation between the adjusted basis of such asset for federal income Tax purposes and its initial Book Value. Such allocations shall be made using a reasonable method specified in Treasury Regulations Section 1.704-3. In addition, if the Book Value of any Company asset is adjusted pursuant to the requirements of Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), then subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income Tax purposes and its Book Value in the same manner as under Code Section 704(c). Notwithstanding the foregoing, the Managing Member shall determine all allocations pursuant to this Section 4.5(b) using any method selected by the Managing Member that is permitted under Section 704(c) of the Code and the Treasury Regulations thereunder; provided that the “traditional method” pursuant to Treasury Regulation Section 1.704-3(b) shall be used with respect to any assets contributed or deemed contributed to the Company in conjunction with the IPO Transactions or any other transactions related thereto.

(c) Section 754 Election. The Company will have in effect (and will cause each Subsidiary that is classified as a partnership for U.S. federal income tax purposes to have in effect) an election under Section 754 of the Code for its Taxable Year that includes or begins on the date of this Agreement and each Fiscal Year in which a sale, exchange, or redemption (whether partial or complete) occurs to adjust the basis of the Company property as permitted and provided in Sections 734 and 743 of the Code. Such election shall be effective solely for federal (and, if applicable, state and local) income Tax purposes and shall not result in any adjustment to the Book Value of any Company asset or to the Member’s Capital Accounts (except as provided in Treasury Regulations Section 1.704- 1(b)(2)(iv)(m)).

(d) Allocation of Tax Credits, Tax Credit Recapture, Etc. Allocations of Tax credits, Tax credit recapture, and any items related thereto shall be allocated to the Unitholders according to their interests in such items as determined by the Managing Member taking into account the principles of Treasury Regulation Section 1.704-1(b)(4)(ii) and (viii).

(e) Corrective Allocations. If necessary, the Company will make corrective allocations as set forth in Treasury Regulation Section 1.704-1(b)(4)(x).

(f) Effect of Allocations. Allocations pursuant to this Section 4.5 are solely for purposes of federal, state and local Taxes and shall not affect, or in any way be taken into account in computing, any Unitholder’s Capital Account or share of Profits, Losses, Distributions (other than Tax Distributions) or other items pursuant to any provision of this Agreement.

Section 4.6 Indemnification and Reimbursement for Payments on Behalf of a Unitholder. Except as otherwise provided in Article VI, if the Company is required by law to make any payment to a Governmental Entity that is specifically attributable to a Unitholder or a Unitholder’s status as such (including federal withholding Taxes, state personal property Taxes, and state unincorporated business Taxes), then such Unitholder shall indemnify and contribute to the Company in full for the entire amount paid (including interest, penalties and related expenses). The Managing Member may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company under this Section 4.6 or with respect to any other amounts owed by the Unitholder to the Company or any of its Subsidiaries. A Unitholder’s obligation to indemnify and make contributions to the Company under this Section 4.6 shall survive such Unitholder ceasing to be a Unitholder of the LLC and/or the termination, dissolution, liquidation and winding up of the Company, and for purposes of this Section 4.6, the Company shall be treated as continuing in existence. The Company may pursue and enforce all rights and remedies it may have against each Unitholder under this Section 4.6, including instituting a lawsuit to collect such indemnification and contribution, with interest calculated at a rate equal to the Base Rate plus three percentage points per annum (but not in excess of the highest rate per annum permitted by law), compounded on the last day of each Fiscal Quarter.

 

23


ARTICLE V

MANAGEMENT AND CONTROL OF BUSINESS

Section 5.1 Management.

(a) Except as otherwise specifically provided in this Agreement or the Delaware Act, the business, property and affairs of the Company shall be managed, operated and controlled at the sole, absolute and exclusive direction of the Managing Member in accordance with the terms of this Agreement. No Member or Unitholder other than the Managing Member shall have management authority or voting or other rights over, or any other ability to take part in the conduct or control of the business of, the Company. The Managing Member is, to the extent of its rights and powers set forth in this Agreement, an agent of the Company for the purpose of the Company’s business, and the actions of the Managing Member taken in accordance with such rights and powers shall bind the Company (and no other Member shall have such right). The Managing Member shall have all necessary powers to carry out the purposes, business and objectives of the Company. The Managing Member may delegate in its discretion the authority to sign agreements and other documents and take other actions on behalf of the Company to any Person (including any Member, officer or employee of the Company) to enter into and perform any document on behalf of the Company.

(b) Without limiting Section 5.1(a), the Managing Member shall have the sole power and authority to effect any of the following by the Company or any of its Subsidiaries in one or a series of related transaction, in each case without the vote, consent or approval of any Unitholder: (i) any sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company); (ii) any merger, consolidation, reorganization or other combination of the Company with or into another entity, (iii) any acquisition; (iv) any issuance of debt or equity securities; (v) any incurrence of indebtedness; or (vi) any dissolution. If a vote, consent or approval of the Unitholders is required by the Delaware Act or other applicable law with respect to any action to be taken by the Company or matter considered by the Managing Member, each Unitholder will be deemed to have consented to or approved such action or voted on such matter in accordance with the consent or approval of the Managing Member on such action or matter.

 

24


(c) The Corporation may appoint any of the following as a successor Managing Member at any time upon written notice to the Company: (a) any wholly-owned Subsidiary of the Corporation, (b) any Person of which the Corporation is a wholly-owned Subsidiary, (c) any Person into which the Corporation is merged or consolidated or (d) any transferee of all or substantially all of the assets of the Corporation, which withdrawal and replacement as Managing Member shall be effective upon the delivery of such notice.

Section 5.2 Investment Company Act. The Managing Member shall use reasonable best efforts to ensure that the Company shall not be subject to registration as an investment company pursuant to the Investment Company Act.

Section 5.3 Officers.

(a) Officers. Unless determined otherwise by the Managing Member, the officers of the Company shall be a Chief Executive Officer, a President, a Chief Financial Officer, a Treasurer and a Secretary and each other officer of the Corporation shall also be an officer of the Company, with the same title. All officers shall be appointed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) and shall hold office until their successors are appointed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer). Two or more offices may be held by the same individual. The officers of the Company may be removed by the Managing Member (or by the Chief Executive Officer to the extent the Managing Member delegates such authority to the Chief Executive Officer) at any time for any reason or no reason.

(b) Other Officers and Agents. The Managing Member may appoint such other officers and agents as it may deem necessary or advisable, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Managing Member.

(c) Chief Executive Officer. The Chief Executive Officer shall be the chief executive officer of the Company and shall have the general powers and duties of supervision and management usually vested in the office of a chief executive officer of a company. He or she shall preside at all meetings of Members if present thereat, unless the Managing Member delegates such authority to another officer, Member or other individual.

(d) President. The President shall be the chief executive officer of the Company in the absence of the Chief Executive Officer. In general, the President shall perform all duties incident to the office of President and such other duties as may be prescribed from time to time by the Managing Member.

(e) Chief Financial Officer. The Chief Financial Officer shall be the chief financial officer of the Company and shall keep and maintain or cause to be kept and maintained adequate and correct books and records of accounts of the properties and business transactions of the Company. The books of account shall at all times be open to inspection by the Managing Member. The Chief Financial Officer shall deposit all monies and other valuables in the name of, and to the credit of, the Company with such depositaries as may be designated by the Managing Member.

 

25


(f) Treasurer. The Treasurer shall have the custody of Company funds and securities and shall keep full and accurate account of receipts and disbursements. He or she shall deposit all moneys and other valuables in the name and to the credit of the Company in such depositaries as may be designated by the Managing Member or the Chief Executive Officer. The Treasurer shall disburse the funds of the Company as may be ordered by the Managing Member or the Chief Executive Officer, taking proper vouchers for such disbursements. He or she shall render to the Managing Member and the Chief Executive Officer whenever either of them may request it, an account of all his or her transactions as Treasurer and of the financial condition of the Company. If required by the Managing Member, the Treasurer shall give the Company a bond for the faithful discharge of his or her duties in such amount and with such surety as the Managing Member shall prescribe.

(g) Secretary. The Secretary shall give, or cause to be given, notice of all meetings of Members and all other notices required by applicable law or by this Agreement, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chief Executive Officer, or by the Managing Member. He or she shall record all the proceedings of the meetings of the Company, and shall perform such other duties as may be assigned to him or her by the Managing Member or by the Chief Executive Officer.

(h) Other Officers. Other officers, if any, shall have such powers and shall perform such duties as shall be assigned to them, respectively, by the Managing Member or by the Chief Executive Officer.

Section 5.4 Fiduciary Duties.

(a) Members and Unitholders. To the fullest extent permitted by law and notwithstanding any duty otherwise existing at law or in equity, no Member or Unitholder, solely in its capacity as such, shall owe any fiduciary duty to the Company, the Managing Member, any Member, any Unitholder or any other Person bound by this Agreement, provided that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. Nothing in this Section 5.4(a) shall limit the liabilities, duties or obligations of any Member or Unitholder acting in his or her capacity as an officer or manager pursuant to any other provision of this Agreement.

(b) Managing Member and Officers. Notwithstanding any other provision to the contrary in this Agreement, except as set forth in Section 5.4(c), (i) the Managing Member shall, in its capacity as Managing Member, and not in any other capacity, have the same fiduciary duties to the Company and the Unitholders and Members as a member of the board of directors of a Delaware corporation; and (ii) each officer of the Company shall, in his or her capacity as such, and not in any other capacity, have the same fiduciary duties to the Company and the Unitholders and Members as an officer of a Delaware corporation. For the avoidance of doubt, the fiduciary duties described in clause (i) above shall not be limited by the fact that the Managing Member shall be permitted to take certain actions in its sole or reasonable discretion pursuant to the terms of this Agreement or any agreement entered into in connection herewith.

 

26


(c) Managing Member Conflicts. The parties hereto acknowledge that the members of the Corporation’s board of directors will owe fiduciary duties to the Corporation and its stockholders. The Managing Member will use commercially reasonable and appropriate efforts and means, as determined in good faith by the Managing Member, to minimize any conflict of interest between the Members, on the one hand, and the stockholders of the Corporation, on the other hand, and to effectuate any transaction that involves or affects any of the Company, the Managing Member, the Members and/or the stockholders of the Corporation in a manner that does not (i) disadvantage the Members of their interests relative to the stockholders of the Corporation or (ii) advantage the stockholders of the Corporation relative to the Members or (iii) treat the Members and the stockholders of the Corporation differently; provided that in the event of a conflict between the interests of the stockholders of the Corporation and the interests of the Members, such Members agree that the Managing Member shall discharge its fiduciary duties to such Members by acting in the best interests of the Corporation’s stockholders.

(d) Waiver. Any duties and liabilities set forth in this Agreement shall replace those existing at law or in equity and each of the Company, each Member and Unitholder and any other Person bound by this Agreement hereby, to the fullest extent permitted by applicable law, including Section 18-1101(e) of the Delaware Act, waives the right to make any claim, bring any action or seek any recovery based on any duties or liabilities existing at law or in equity other than any such duties and liabilities set forth in this Agreement.

(e) Survival. The provisions of this Section 5.4 shall survive any amendment, repeal or termination of this Agreement.

ARTICLE VI

EXCULPATION AND INDEMNIFICATION

Section 6.1 Exculpation.

(a) Actions in Capacity as a Member or Unitholder. To the fullest extent permitted by applicable law, and except as otherwise expressly provided herein, no Member, Unitholder (other than the Managing Member, acting in its capacity as such) or its respective Indemnitees shall be liable to the Company, any Member, any Unitholder or any other Person bound by this Agreement as a result of or arising out any action of or omission by such Member or Unitholder solely in its capacity as a Member or Unitholder, except to the extent such Obligations arise out of such Member’s (1) material breach of this Agreement or any other Transaction Document or (2) bad faith violation of the implied contractual covenant of good faith and fair dealing, in each case as determined by a final judgment, order or decree of an arbitrator or a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected).

(b) Other Actions. To the fullest extent permitted by applicable law, and except as otherwise expressly provided herein, including Section 6.5, no Indemnitee shall be liable to the Company, any Member, any Unitholder or any other Person bound by this Agreement as a result of or arising out of the activities of the Indemnitee on behalf of the Company to the extent within the scope of the authority reasonably believed by such Indemnitee to be conferred on such Indemnitee, except to the extent such Indemnitee would not be entitled to exculpation or indemnification pursuant to the certification of incorporation and bylaws of the Corporation (as the same may be amended from time to time).

 

27


Section 6.2 Indemnification. To the fullest extent permitted by applicable law, each of (a) the Managing Member, (b) the Unitholders and Members (and their respective Affiliates), (c) the stockholders, members, managers, directors, officers, partners, employees and agents of the Unitholders and Members (and their respective Affiliates), and (d) the officers and directors of the Corporation, the Managing Member, the Company and each of their Subsidiaries (each, an “Indemnitee”) shall be indemnified and held harmless by the Company from and against any and all losses, claims, damages, liabilities, expenses (including legal fees and expenses), judgments, fines, settlements and other amounts arising from any and all claims, demands, actions, suits or proceedings, civil, criminal, administrative or investigative (collectively, “Obligations”), which at any time may be imposed on, incurred by, or asserted against, the Indemnitee as a result of, or arising out of, this Agreement, the Corporation, the Company, their respective assets, businesses or affairs, or the activities of the Indemnitee on behalf of the Corporation, the Company or any of their Subsidiaries, to the extent within the scope of the authority reasonably believed to be conferred on such Indemnitee; provided, however, that, to the extent such Indemnitee is not entitled to exculpation with respect to such Obligations pursuant to Section 6.5, the Indemnitee shall not be entitled to indemnification for any such Obligations to the extent such Indemnitee would not be entitled to exculpation or indemnification pursuant to the certification of incorporation and bylaws of the Corporation (as the same may be amended from time to time); provided further, that, to the extent such Indemnitee is entitled to exculpation with respect to such Obligations pursuant to Section 6.5, the Indemnitee shall not be entitled to indemnification for any such Obligations to the extent they arise out of such Indemnitee’s (1) material breach of this Agreement or any other Transaction Document, or (2) bad faith violation of the implied contractual covenant of good faith and fair dealing. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nobo contendere, or its equivalent, shall not, of itself, create a presumption that the Indemnitee was not entitled to indemnification hereunder. Any indemnification pursuant to this Section 6.1(b) shall be made only out of the assets of the Company and no Member shall have any personal liability on account thereof.

Section 6.3 Expenses. Expenses (including reasonable legal fees and expenses) incurred by an Indemnitee in defending any claim, demand, action, suit or proceeding described in Section 6.1(b) shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding, upon receipt by the Company of an undertaking by or on behalf of the Indemnitee to repay such amount if it shall be determined that the Indemnitee is not entitled to be indemnified as provided in Section 6.1(b); provided that such undertaking shall be unsecured and interest free and shall be accepted without regard to an Indemnitee’s ability to repay amounts advanced and without regard to an Indemnitee’s entitlement to indemnification.

 

28


Section 6.4 Non-Exclusivity; Savings Clause. The indemnification and advancement of expenses set forth in Section 6.1(b) and Section 6.3 shall not be exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any other agreement, policy of insurance or otherwise. The indemnification and advancement of expenses set forth in Section 6.1(b) and Section 6.3 shall continue as to an Indemnitee who has ceased to be a named Indemnitee and shall inure to the benefit of the heirs, executors, administrators, successors and permitted assigns of such a Person. If Article VI, Section 6.2 or Section 6.3 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless exculpate, indemnify and advance expenses to each Indemnitee to the fullest extent permitted by any applicable portion of such sections not so invalidated and to the fullest extent permitted by applicable law. The exculpation, indemnification and advancement of expenses provisions set forth in Article VI, Section 6.2 and Section 6.3 shall be deemed to be a contract between the Company and each of the persons constituting Indemnitees at any time while such provisions remain in effect, whether or not such Person continues to serve in such capacity and whether or not such Person is a party hereto. In addition, neither Article VI, Section 6.2 nor Section 6.3 may be retroactively amended to adversely affect the rights of any Indemnitee arising in connection with any acts, omissions, facts or circumstances occurring prior to such amendment.

Section 6.5 Insurance. The Company may purchase and maintain insurance on behalf of the Indemnitees against any liability asserted against them and incurred by them in such capacity, or arising out of their status as Indemnitees, whether or not the Company would have the power to indemnify them against such liability under this Section 6.5.

ARTICLE VII

ACCOUNTING AND RECORDS; TAX MATTERS

Section 7.1 Accounting and Records. The books and records of the Company shall be made and maintained, and the financial position and the results of its operations recorded, at the expense of the Company, in accordance with such method of accounting as is determined by the Managing Member. The books and records of the Company shall reflect all Company transactions and shall be made and maintained in a manner that is appropriate and adequate for the Company’s business.

Section 7.2 Preparation of Tax Returns. The Company shall arrange for the preparation and timely filing of all Tax returns required to be filed by the Company, including making the elections described in Section 4.5(c) and Section 7.3. Each Unitholder shall furnish to the Company all pertinent information in its possession relating to the Company’s operations that is necessary to enable the Company’s income Tax returns to be prepared and filed.

Section 7.3 Tax Elections. The Taxable Year shall be the Fiscal Year unless the Managing Member shall determine otherwise. Except as provided in Section 4.5(c), the Managing Member shall determine whether to make or revoke any available election pursuant to the Code. Each Unitholder will upon request supply any information necessary to give proper effect to such election.

Section 7.4 Tax Controversies.

(a) The Managing Member shall be the “partnership representative” (or “PR”) of the Company for purposes of the Partnership Tax Audit Rules, and, as such, (i) shall be authorized to designate any other Person selected by the Managing Member as the partnership representative and (ii) shall be authorized and required to represent the Company (at the Company’s expense) in connection with all examinations of the Company’s affairs by Tax authorities, including resulting administrative and judicial proceedings, and to expend the Company’s funds for professional services and reasonably incurred in connection therewith. Each Unitholder agrees to reasonably cooperate with the Company and to do or refrain from doing any or all things reasonably requested by the Company with respect to the conduct of such proceedings.

 

29


(b) In the event of an audit by the Internal Revenue Service, unless otherwise approved by all of the Members, the PR shall make on a timely basis, to the extent permissible under applicable law, the election provided by Section 6226(a) of the Partnership Tax Audit Rules to treat a “partnership adjustment” as an adjustment to be taken into account by each Member in accordance with Section 6226(b) of the Partnership Tax Audit Rules. If the election under Section 6226(a) of the of the Partnership Tax Audit Rules is made, the PR shall furnish to each Member for the year under audit a statement reflecting the Member’s share of the adjusted items as determined in the notice of final partnership adjustment, and each such Member shall take such adjustment into account as required under Section 6226(b) of the Partnership Tax Audit Rules and shall be liable for any related tax, interest, penalty, addition to tax, or additional amounts.

(c) In the event of an audit by the Internal Revenue Service, if the PR does not make the election provided by Section 6226(a) of the Partnership Tax Audit Rules as noted above, the PR shall allocate the burden of any taxes (including, for the avoidance of doubt, any “imputed underpayment” within the meaning of Section 6225 of the Partnership Tax Audit Rules), penalties, interest and related expenses imposed on the Company pursuant to the Partnership Tax Audit Rules among the Members to whom such amounts are attributable (whether as a result of their status, actions, inactions or otherwise), as reasonably determined by the PR and each Member shall promptly reimburse the Company in full for the entire amount the PR determines to be attributable to such Member; provided that the Company will also be allowed to recover any amount due from such Member pursuant to this sentence from any distribution otherwise payable to such Member pursuant to this Agreement. Solely for purposes of determining the Member(s) to which any taxes or other amounts are attributable under this provision, references to any Member in this Section 7.4(c) shall include a reference to each Person that previously held the Units currently held by such Member (but only to the extent of such Person’s interest in such Units).

(d) The PR is authorized to (and shall) follow principles (to the extent available) similar to those set forth in Section 7.4(b) and Section 7.4(c) with respect to any audits by state, local, or foreign tax authorities and any tax liabilities that result therefrom.

Section 7.5 Tax Cooperation. Without the prior written consent of Emblem Main, the Company shall not take any more than ministerial act with respect to (i) the computation of the Capital Accounts of the Company, (ii) making adjustments to the Book Value of any asset of the Company, (iii) allocations of items of Company income, gain, expense or loss for Capital Account purposes or for tax purposes, (iv) the allocation of liabilities of the partnership under Section 752, or (v) the tax reporting or tax positions of the Company, including any such actions taken by the PR, or change the Company’s independent accounting firm or amend, terminate or modify the retention arrangement with such firm. If requested by Emblem Main, the Company shall adjust the Capital Accounts in accordance with the rules of Treasury Regulations Section 1.704 1(b)(2)(iv)(g) to reflect a revaluation of Company property in connection with the issuance of Class C Units to the Emblem Parties.

 

30


Section 7.6 Code § 83 Safe Harbor Election.

(a) By executing this Agreement, each Unitholder authorizes and directs the Company to elect to have the “Safe Harbor” described in the proposed Revenue Procedure set forth in the Internal Revenue Service Notice 2005-43 (the “IRS Notice”) or in any successor, guidance or provision apply to any interest in the Company transferred to a service provider by the Company on or after the effective date of such Revenue Procedure in connection with services provided to the Company. For purposes of making such Safe Harbor election, the PR is hereby designated as the “partner who has responsibility for federal income Tax reporting” by the Company and, accordingly, that execution of such Safe Harbor election by the PR constitutes execution of a “Safe Harbor Election” in accordance with Section 3.03(1) of the IRS Notice. Each Unitholder hereby agrees to comply with all requirements of the Safe Harbor described in the IRS Notice, including, the requirement that each Unitholder shall prepare and file all federal income Tax returns reporting the income Tax effects of each Unit issued by the Company that qualifies for the Safe Harbor in a manner consistent with the requirements of the IRS Notice.

(b) Any Unitholder or former Unitholder that fails to comply with requirements set forth in Section 7.5(a) shall indemnify and hold harmless the Company and each adversely affected Unitholder and former Unitholder from and against any and all losses, liabilities, Taxes, damages, judgments, fines, costs, penalties, amounts paid in settlement and reasonable out-of-pocket costs and expenses incurred in connection therewith (including, costs and expenses of suits and proceedings, and reasonable fees and disbursements of counsel), in each case resulting from such Unitholder’s or former Unitholder’s failure to comply with such requirements. The Managing Member may offset Distributions to which a Person is otherwise entitled under this Agreement against such Person’s obligation to indemnify the Company and any other Person under this Section 7.5(b) (and any amount so offset with respect to such Person’s obligation to indemnify a Person other than the Company shall be paid over to such other Person by the Company). A Unitholder’s obligations to comply with the requirements of Section 7.5(a) and to indemnify the Company and any Unitholder or former Unitholder under this Section 7.5(b) shall survive such Unitholder’s ceasing to be a Unitholder of the Company and/or the termination, dissolution, liquidation and winding up of the Company, and, for purposes of this Section 7.5, the Company shall be treated as continuing in existence. The Company and any Unitholder or former Unitholder may pursue and enforce all rights and remedies it may have against each Unitholder or former Unitholder under this Section 7.5(b), including (i) instituting a lawsuit to collect such indemnification and contribution, with interest calculated at a rate equal to the Base Rate plus three percentage points per annum (but not in excess of the highest rate per annum permitted by law), compounded on the last day of each Fiscal Quarter and (ii) specific performance and/or immediate injunctive or other equitable relief from any court of competent jurisdiction (without the necessity of showing actual money damages, or posting any bond or other security) in order to enforce or prevent any violation of the provisions of Section 7.5(a).

(c) Each Unitholder authorizes the Managing Member to amend paragraphs (a) and (b) of this Section 7.5 to the extent necessary to achieve substantially the same Tax treatment with respect to any interest in the Company Transferred to a service provider by the Company in connection with services provided to the Company as set forth in Section 4 of the IRS Notice (e.g., to reflect changes from the rules set forth in the IRS Notice in subsequent Internal Revenue Service guidance); provided that such amendment is not materially adverse to any Unitholder (as compared with the after-Tax consequences that would result if the provisions of the IRS Notice applied to all interests in the Company Transferred to a service provider by the Company in connection with services provided to the Company).

 

31


ARTICLE VIII

TRANSFER OF UNITS; ADMISSION OF NEW MEMBERS

Section 8.1 Transfer of Units. Other than as provided for below in this Section 8.1, no Member may sell, assign, transfer, grant a participation in, pledge, hypothecate, encumber or otherwise dispose of (such transaction being herein collectively called a “Transfer”) all or any portion of its Units except with the approval of the Managing Member, which may be granted or withheld in its sole discretion. Without the approval of the Managing Member (but otherwise in compliance with Section 8.1), a Member may, at any time, (a) Transfer any portion of such Member’s Units pursuant to the 2021 Exchange Agreement or the 2024 Exchange Agreement, (b) Transfer any portion of such Member’s Units to a Permitted Transferee of such Member, and (c) consummate a transaction that terminates the existence of a Member for income tax purposes but does not terminate the existence of such Member under applicable state law; provided, however, that (i) such transfer restrictions will continue to apply to such Units after any such permitted Transfer, (ii) transferees must agree in writing to be bound by the provisions of the 2021 Exchange Agreement (with respect to Class A Units and Class B Units) or the 2024 Exchange Agreement (with respect to the Class C Units), as applicable, and this Agreement (as in effect at such time, together with any amendments hereto), and (iii) any Transfer of Units to a Permitted Transferee of such Member by a Member which also holds Class B Common Stock must be accompanied by the transfer of a corresponding number of shares of Class B Common Stock (determined based upon the Exchange Rate then in effect) to such Permitted Transferee. Any purported Transfer of all or a portion of a Member’s Units not complying with this Section 8.1 shall be void ab initio and shall not create any obligation on the part of the Company or the other Members to recognize that purported Transfer or to recognize the Person to which the Transfer purportedly was made as a Member. A Person acquiring a Member’s Units pursuant to this Section 8.1 shall not be admitted as a substituted or Additional Member except in accordance with the requirements of Section 8.2, but such Person shall, to the extent of the Units transferred to it, be entitled to such Member’s (i) share of Distributions, (ii) share of Profits and Losses and (iii) Capital Account in accordance with Section 3.5. Notwithstanding anything in this Section 8.1 or elsewhere in this Agreement to the contrary, if a Member Transfers all or any portion of its Units after the designation of a record date and declaration of a Distribution pursuant to Section 4.1 and before the payment date of such distribution, the transferring Member (and not the Person acquiring all or any portion of its Units) shall be entitled to receive such Distribution in respect of such transferred Units.

Section 8.2 Recognition of Transfer; Substituted and Additional Members.

(a) No direct or indirect Transfer of all or any portion of a Member’s Units may be made, and no purchaser, assignee, transferee or other recipient of all or any part of such Units shall be admitted to the Company as a substituted or Additional Member hereunder, unless:

(i) the provisions of Section 8.1 shall have been complied with;

 

32


(ii) in the case of a proposed substituted or Additional Member that is (A) a competitor or potential competitor of the Corporation or the Company or their respective Subsidiaries, (B) a Person with whom the Corporation or the Company or their respective Subsidiaries has had or is expected to have a material commercial or financial relationship or (C) likely to subject the Corporation or the Company or their respective Subsidiaries to any material legal or regulatory requirement or obligation, or materially increase the burden thereof, in each case as determined by the Managing Member in its sole discretion, the admission of the purchaser, assignee, transferee or other recipient as a substituted or Additional Member shall have been approved by the Managing Member;

(iii) the Managing Member shall have been furnished with the documents effecting such Transfer, in form and substance reasonably satisfactory to the Managing Member, executed and acknowledged by both the seller, assignor or transferor and the purchaser, assignee, transferee or other recipient, and the Managing Member shall have executed (and the Managing Member hereby agrees to execute) any other documents on behalf of itself and the Members required to effect the Transfer;

(iv) the provisions of Section 8.2(b) shall have been complied with;

(v) the Managing Member shall be reasonably satisfied that such Transfer will not (A) result in a violation of the Securities Act or any other applicable law; or (B) cause an assignment under the Investment Company Act;

(vi) such Transfer would (A) not create a material risk that the Company will be treated as a “publicly traded partnership” within the meaning of Section 7704 of the Code or any other association taxable as a corporation for federal income tax purposes and, without limiting the generality of the foregoing, such Transfer shall not be effected on or through an “established securities market” or a “secondary market or the substantial equivalent thereof,” as such terms are used in Treas. Reg. § 1.7704-1 and (B) not otherwise result in the Company having more than 100 partners, within the meaning of Treasury Regulations Section 1.7704-1(h) (determined taking into account the rules of Treasury Regulations Section 1.7704-1(h)(3));

(vii) the Managing Member shall have received the opinion of counsel, if any, required by Section 8.2(c) in connection with such Transfer; and

(viii) all necessary instruments reflecting such Transfer and/or admission shall have been filed in each jurisdiction in which such filing is necessary in order to qualify the Company to conduct business or to preserve the limited liability of the Members.

(b) Each Substituted Member and Additional Member shall be bound by all of the provisions of this Agreement. Each Substituted Member and Additional Member, as a condition to its admission as a Member, shall execute and acknowledge such instruments (including a counterpart of this Agreement and the 2021 Exchange Agreement or a joinder agreement in customary form), in form and substance reasonably satisfactory to the Managing Member, as the Managing Member reasonably deems necessary or desirable to effectuate such admission and to confirm the agreement of such substituted or Additional Member to be bound by all the terms and provisions of this Agreement with respect to the Units acquired by such substituted or Additional Member. The admission of a substituted or Additional Member shall not require the consent of any Member (but shall require the consent of the Managing Member, if and to the extent such consent of the Managing Member is expressly required by this Article VIII). As promptly as practicable after the admission of a substituted or Additional Member, the Unit Ownership Ledger and other books and records of the Company and Exhibit A shall be changed to reflect such admission.

 

33


(c) As a further condition to any Transfer of all or any part of a Member’s Units, the Managing Member may, in its discretion, require a written opinion of counsel to the transferring Member, obtained at the sole expense of the transferring Member, reasonably satisfactory in form and substance to the Managing Member, as to such matters as are customary and appropriate in transactions of this type, including, without limitation (or, in the case of any Transfer made to a Permitted Transferee, limited to an opinion) to the effect that such Transfer will not result in a violation of the registration or other requirements of the Securities Act or any other federal or state securities laws. No such opinion, however, shall be required in connection with a Transfer made pursuant to the 2021 Exchange Agreement.

(d) The transferor, unless otherwise reasonably determined by the Managing Member, shall deliver to the Company an affidavit of non-foreign status with respect to such transferor that satisfies the requirements of Section 1446(f)(2) of the Code or other documentation establishing a valid exemption from withholding pursuant to Section 1446(f) of the Code or shall ensure that, contemporaneously with the Transfer, the transferee of such interest properly withholds and remits to the IRS the amount of tax required to be withheld upon the Transfer by Section 1446(f) of the Code (and promptly provide evidence to the Company of such withholding and remittance). The transferor and transferee of such interest shall agree to jointly and severally indemnify and hold harmless the Corporation, the Company and any Subsidiary of the Company against any loss (including taxes, interest, penalties, and any related expenses) arising out of any failure to comply with the provisions of this Section 8.2(d).

Section 8.3 Expense of Transfer; Indemnification. All reasonable costs and expenses incurred by the Managing Member and the Company in connection with any Transfer of a Member’s Units, including any filing and recording costs and the reasonable fees and disbursements of counsel for the Company, shall be paid by the transferring Member. In addition, the transferring Member hereby indemnifies the Managing Member and the Company against any losses, claims, damages or liabilities to which the Managing Member, the Company, or any of their Affiliates may become subject arising out of or based upon any false representation or warranty made by, or breach or failure to comply with any covenant or agreement of, such transferring Member or such transferee in connection with such Transfer.

Section 8.4 2021 Exchange Agreement. In connection with any Transfer of any portion of a Member’s Units pursuant to the 2021 Exchange Agreement, the Managing Member shall cause the Company to take any action as may be required under the 2021 Exchange Agreement or requested by any party thereto to effect such Transfer promptly.

Section 8.5 2024 Exchange Agreement. In connection with any Transfer of any portion of a Member’s Units pursuant to the 2024 Exchange Agreement, the Managing Member shall take or shall cause the Company to take any action as may be required under the 2024 Exchange Agreement or requested by any party thereto to effect such Transfer promptly.

 

34


Section 8.6 Tax Corporation.

(a) Notwithstanding anything to the contrary in this Agreement, in connection with any contemplated Transfer of Units, the following provisions shall apply with respect to any direct or indirect owner of the Emblem Parties or PMC (to the extent PMC holds Class C Units at the relevant time) that is treated as a corporation for U.S. federal income tax purposes (any such direct or indirect owner, a “Tax Corporation”): (i) the Emblem Parties or PMC (to the extent PMC holds Class C Units at the relevant time) may assign, in whole or in part, its rights in connection with such Transfer to the owner(s) of the Tax Corporation (the “Tax Corporation Securityholder”); (ii) the Company and each holder of Units shall allow the Tax Corporation’s Tax Corporation Securityholder(s) to Transfer securities of the Tax Corporation (corresponding to the Units that otherwise would be transferred by the Emblem Parties or PMC (to the extent PMC holds Class C Units at the relevant time)) in lieu of such the Emblem Parties or PMC (to the extent PMC holds Class C Units at the relevant time) transferring such Units; and (iii) any Tax Corporation Securityholder that so Transfers securities of the Tax Corporation shall be entitled to receive the same amount and type of consideration as the Emblem Parties or PMC (to the extent PMC holds Class C Units at the relevant time) would have received had it Transferred its Units corresponding to the securities of the Tax Corporation so transferred.

(b) At the request of Emblem Main or PMC (to the extent PMC holds Class C Units at the relevant time), in their respective discretion, with respect to Tax Corporation, (i) the Tax Corporation shall be merged with and into the Corporation or (ii) the Tax Corporation Security Holders shall contribute their securities of the Tax Corporation to the Corporation, in each case, in exchange for corresponding securities of the Corporation in a transaction that is intended to be tax-free for U.S. federal income tax purposes in exchange for a corresponding securities of the Corporation having equivalent value.

The Company, the Members and the Board shall reasonably cooperate with the Emblem Parties and/or PMC (to the extent PMC holds Class C Units at the relevant time), as applicable, and the Tax Corporation Securityholders, and shall otherwise take all necessary or reasonably desirable actions (including executing applicable documents or agreements), as determined by the Emblem Parties and/or PMC (to the extent PMC holds Class C Units at the relevant time), as applicable, in order to (i) facilitate the consummation of any transaction contemplated by Section 8.6(a) or Section 8.6(b) or (ii) otherwise give effect to the principles contemplated by this Section 8.6.

 

35


ARTICLE IX

WITHDRAWAL AND RESIGNATION OF UNITHOLDERS

Section 9.1 Withdrawal and Resignation of Unitholders. No Unitholder shall have the power or right to withdraw or otherwise resign from the Company prior to the dissolution and winding up of the Company pursuant to Article X, without the prior written consent of the Managing Member (which consent may be withheld by the Managing Member in its sole discretion), except as otherwise expressly permitted by this Agreement. Upon a Transfer of all of a Unitholder’s Units in a Transfer permitted by this Agreement, and (if applicable) the Equity Agreements, such Unitholder shall cease to be a Unitholder. Notwithstanding that payment on account of a withdrawal may be made after the effective time of such withdrawal, any completely withdrawing Unitholder will not be considered a Unitholder for any purpose after the effective time of such complete withdrawal, and, in the case of a partial withdrawal, such Unitholder’s Capital Account (and corresponding voting and other rights) shall be reduced for all other purposes hereunder upon the effective time of such partial withdrawal.

ARTICLE X

DISSOLUTION AND LIQUIDATION

Section 10.1 Dissolution. The Company shall not be dissolved by the admission of Additional Members or Substituted Members. The Company shall dissolve, and its affairs shall be wound up upon the first of the following to occur:

(a) at the election of the Managing Member; and

(b) the entry of a decree of judicial dissolution of the Company under Section 33.5 of the Delaware Act or an administrative dissolution under Section 18-802 of the Delaware Act.

Except as otherwise set forth in this Article X the Company is intended to have perpetual existence. An Event of Withdrawal shall not cause a dissolution of the Company and the Company shall continue in existence subject to the terms and conditions of this Agreement.

Section 10.2 Liquidation and Termination. On the dissolution of the Company, the Managing Member shall act as liquidator or may appoint one or more representatives, Members or other Persons as liquidator(s). The liquidators shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Delaware Act. The costs of liquidation shall be borne as the Company’s expense. Until final distribution, the liquidators shall continue to operate the Company properties with all of the power and authority of the Managing Member. The steps to be accomplished by the liquidators are as follows:

(a) The liquidators shall pay, satisfy or discharge from the Company’s funds all of the debts, liabilities and obligations of the Company (including all expenses incurred in liquidation) or otherwise make adequate provision for payment and discharge thereof (including the establishment of a cash fund for contingent liabilities in such amount and for such term as the liquidators may reasonably determine).

(b) As promptly as practicable after dissolution, the liquidators shall (i) determine the Fair Market Value (the “Liquidation FMV”) of the Company’s remaining assets (the “Liquidation Assets”) in accordance with Article X hereof, (ii) determine the amounts to be distributed to each Unitholder in accordance with Section 4.1, and (iii) deliver to each Unitholder a statement (the “Liquidation Statement”) setting forth the Liquidation FMV and the amounts and recipients of such Distributions, which Liquidation Statement shall be final and binding on all Unitholders.

 

36


(c) As soon as the Liquidation FMV and the proper amounts of Distributions have been determined in accordance with Section 10.2(b) above, the liquidators shall promptly distribute the Company’s Liquidation Assets to the holders of Units in accordance with Section 4.1(b) above. In making such distributions, the liquidators shall allocate each type of Liquidation Assets (i.e., cash or cash equivalents, preferred or common equity securities, etc.) among the Unitholders ratably based upon the aggregate amounts to be distributed with respect to the Units held by each such holder; provided that the liquidators may allocate each type of Liquidation Assets so as to give effect to and take into account the relative priorities of the different Units; provided further that, in the event that any securities are part of the Liquidation Assets, each Unitholder that is not an “accredited investor” as such term is defined under the Securities Act may, in the sole discretion of the Managing Member, receive, and hereby agrees to accept, in lieu of such securities, cash consideration with an equivalent value to such securities as determined by the Managing Member. Any non-cash Liquidation Assets will first be written up or down to their Fair Market Value, thus creating Profit or Loss (if any), which shall be allocated in accordance with Section 4.2 and Section 4.3. If any Unitholder’s Capital Account is not equal to the amount to be distributed to such Unitholder pursuant to Section 10.2(b), Profits and Losses for the Fiscal Year in which the Company is dissolved shall be allocated among the Unitholders in such a manner as to cause, to the extent possible, each Unitholder’s Capital Account to be equal to the amount to be distributed to such Unitholder pursuant to Section 10.2(b). The distribution of cash and/or property to a Unitholder in accordance with the provisions of this Section 10.2(b) constitutes a complete return to the Unitholder of its Capital Contributions and a complete distribution to the Unitholder of its interest in the Company and all the Company property and constitutes a compromise to which all Unitholders have consented within the meaning of the Delaware Act. To the extent that a Unitholder returns funds to the Company, it has no claim against any other Unitholder for those funds.

Section 10.3 Securityholders Agreement. To the extent that units or other equity securities of any Subsidiary are distributed to any Unitholders and unless otherwise agreed to by the Managing Member, such Unitholders hereby agree to enter into a securityholders agreement with such Subsidiary and each other Unitholder which contains rights and restrictions in form and substance similar to the provisions and restrictions set forth herein (including in Article VIII).

Section 10.4 Cancellation of Certificate. On completion of the distribution of the Company’s assets as provided herein, the Company shall be terminated (and the Company shall not be terminated prior to such time), and the Managing Member (or such other Person or Persons as the Delaware Act may require or permit) shall file a certificate of cancellation with the Secretary of State of Delaware, cancel any other filings made pursuant to this Agreement that are or should be canceled and take such other actions as may be necessary to terminate the Company. The Company shall be deemed to continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section 10.4.

Section 10.5 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Section 10.2 in order to minimize any losses otherwise attendant upon such winding up.

 

37


Section 10.6 Return of Capital. The liquidators shall not be personally liable for the return of Capital Contributions or any portion thereof to the Unitholders (it being understood that any such return shall be made solely from the Company assets).

Section 10.7 Hart-Scott-Rodino. In the event the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”) is applicable to any Unitholder, the dissolution of the Company shall not be consummated until such time as the applicable waiting period (and extensions thereof) under the HSR Act have expired or otherwise been terminated with respect to each such Unitholder.

ARTICLE XI

GENERAL PROVISIONS

Section 11.1 Power of Attorney. Each Unitholder hereby constitutes and appoints the Managing Member and the liquidators, if any and as applicable, and their respective designees, with full power of substitution, as his, her or its true and lawful agent and attorney-in-fact, with full power and authority in his, her or its name, place and stead, to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (to the same extent such Person could take such action): (a) this Agreement, all certificates and other instruments and all amendments hereof or thereof in accordance with the terms hereof which the Managing Member deems appropriate or necessary to form, qualify, or continue the qualification of, the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property or as otherwise permitted herein; (b) all instruments, agreements, amendments or other documents which the Managing Member deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (c) all conveyances and other instruments or documents which the Managing Member and/or the liquidators deems appropriate or necessary to reflect the dissolution and liquidation of the Company pursuant to the terms of this Agreement, including a certificate of cancellation; and (d) all instruments relating to the admission, withdrawal or substitution of any Unitholder pursuant to Article VIII or Article IX. The foregoing power of attorney is irrevocable and coupled with an interest, and shall survive the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Unitholder and the Transfer of all or any portion of his, her or its Units and shall extend to such Unitholder’s heirs, successors, permitted assigns and personal representatives.

Section 11.2 Amendments. This Agreement may be amended (including, for purposes of this Section 11.2, any amendment effected directly or indirectly by way of a merger or consolidation of the Company) or waived, in whole or in part, by the Managing Member; provided that no amendment shall be effective until written notice has been provided to the Members, and any Unitholder shall have the right to give notice of an Exchange, as applicable, prior to the effectiveness of such amendment; provided, further, that to the extent any amendment or waiver, including any amendment or waiver of the Exhibits attached hereto, would disproportionately and adversely affect the rights of any Member of a class compared with the rights of any other Member of such class, such amendment or waiver may only be made by the Managing Member upon the prior written consent of such disproportionately and adversely affected Member; provided, further, that notwithstanding anything to the contrary set forth herein, no amendment, supplement, waiver or modification, including any amendment, supplement, waiver or modification effected by way of merger, consolidation or transfer of all or substantially all of the assets of the Company, may without the prior written consent of each such affected Member modify the limited liability of any Member, or increase the liabilities of any Member, in each case, without the prior written consent of each such affected Member.

 

38


Section 11.3 Title to the Company Assets. The Company’s assets shall be deemed to be owned by the Company as an entity, and no Unitholder, individually or collectively, shall have any ownership interest in such assets or any portion thereof. Legal title to any or all of such assets may be held in the name of the Company or one or more nominees, as the Managing Member may determine. The Managing Member hereby declares and warrants that any Company assets for which legal title is held in the name of any nominee shall be held in trust by such nominee for the use and benefit of the Company in accordance with the provisions of this Agreement. All the Company assets shall be recorded as the property of the Company on its books and records, irrespective of the name in which legal title to such assets is held.

Section 11.4 Remedies. Each Unitholder and the Company shall have all rights and remedies set forth in this Agreement and all rights and remedies which such Person has been granted at any time under any other agreement or contract and all of the rights which such Person has under any law. Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by law.

Section 11.5 Successors and Assigns. All covenants and agreements contained in this Agreement shall bind and inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors, legal representatives and permitted assigns, whether so expressed or not.

Section 11.6 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein or if such term or provision could be drawn more narrowly so as not to be illegal, invalid, prohibited or unenforceable in such jurisdiction, it shall be so narrowly drawn, as to such jurisdiction, without invalidating the remaining terms and provisions of this Agreement or affecting the legality, validity or enforceability of such term or provision in any other jurisdiction.

Section 11.7 Counterparts; Binding Agreement. This Agreement may be executed simultaneously in two or more separate counterparts, any one of which need not contain the signatures of more than one party, but each of which will be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto. This Agreement and all of the provisions hereof shall be binding upon and effective as to each Person who (a) executes this Agreement in the appropriate space provided in the signature pages hereto notwithstanding the fact that other Persons who have not executed this Agreement may be listed on the signature pages hereto and (b) may from time to time become a party to this Agreement by executing a counterpart of or joinder to this Agreement.

 

39


Section 11.8 Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. Whenever required by the context, references to a Fiscal Year shall refer to a portion thereof. The use of the words “or,” “either” and “any” shall not be exclusive. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. Wherever a conflict exists between this Agreement and any other agreement, this Agreement shall control but solely to the extent of such conflict.

Section 11.9 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.

Section 11.10 Addresses and Notices. All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given or made when (a) delivered personally to the recipient, (b) telecopied to the recipient, or delivered by means of electronic mail (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied/emailed before 5:00 p.m. New York, New York time on a Business Day, and otherwise on the next Business Day, or (c) one (1) Business Day after being sent to the recipient by reputable overnight courier service (charges prepaid). Such notices, demands and other communications shall be sent to the address for such recipient set forth in the Company’s books and records, or to such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party.

Section 11.11 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in the Company’s Profits, Losses, Distributions, capital or property other than as a secured creditor. Notwithstanding the foregoing, each of the Indemnitees are intended third party beneficiaries of Section 6.1(b) and shall be entitled to enforce such provision (as it may be in effect from time to time).

 

40


Section 11.12 No Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.

Section 11.13 Further Action. The parties agree to execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.

Section 11.14 Entire Agreement. This Agreement and the other Transaction Documents embody the complete agreement and understanding among the parties with respect to the subject matter herein and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

Section 11.15 Delivery by Electronic Means. This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine or electronic transmission in portable document format (pdf) or comparable electronic transmission, shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or pdf electronic transmission or comparable electronic transmission to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.

Section 11.16 Certain Acknowledgments. This Agreement shall be considered for all purposes as having been prepared through the joint efforts of the parties. No presumption shall apply in favor of any party in the interpretation of this Agreement or in the resolution of any ambiguity of any provision hereof based on the preparation, substitution, submission or other event of negotiation, drafting or execution hereof. Each Member and Unitholder acknowledges that it/he/she is entitled to and has been afforded the opportunity to consult legal counsel of its choice regarding the terms, conditions and legal effects of this Agreement, as well as the advisability and propriety thereof. Each Member and Unitholder further acknowledges that having so consulted with legal counsel of its choosing, such Member or Unitholder hereby waives any right to raise or rely upon the lack of representation or effective representation in any future proceedings or in connection with any future claim resulting from this Agreement or the formation of the Company.

 

41


Section 11.17 Consent to Jurisdiction; Waiver of Trial by Jury.

(a) Consent to Jurisdiction. Each Unitholder irrevocably submits to the exclusive jurisdiction of the United States District Court for the State of Delaware and the state courts of the State of Delaware for the purposes of any suit, action or other proceeding arising out of this Agreement or any transaction contemplated hereby. Each Unitholder further agrees that service of any process, summons, notice or document by United States certified or registered mail (in each such case, prepaid return receipt requested) to such Unitholder’s respective address set forth in the Company’s books and records or such other address or to the attention of such other person as the recipient party has specified by prior written notice to the sending party shall be effective service of process in any action, suit or proceeding in Delaware with respect to any matters to which it has submitted to jurisdiction as set forth above in the immediately preceding sentence. Each Unitholder irrevocably and unconditionally waives any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the United States District Court for the State of Delaware or the state courts of the State of Delaware and hereby irrevocably and unconditionally waives and agrees not to plead or claim in any such court that any such action, suit or proceeding brought in such court has been brought in an inconvenient forum.

(b) WAIVER OF TRIAL BY JURY. BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH PARTY TO THIS AGREEMENT (INCLUDING THE COMPANY) HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIPS ESTABLISHED AMONG THE PARTIES HEREUNDER.

Section 11.18 Representations and Warranties. By execution of this Agreement (including a Joinder hereto), each Member severally represents and warrants as follows:

(a) Such Member has full legal right, power, and authority to deliver this Agreement and the other Transaction Documents and to perform such Member’s obligations hereunder and thereunder;

(b) This Agreement and the other Transaction Documents constitute the legal, valid, and binding obligation of such Member enforceable in accordance with its respective terms, except as the enforcement thereof may be limited by bankruptcy and other laws of general application relating to creditors’ rights or general principles of equity;

(c) Neither this Agreement nor the other Transaction Documents violate, conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default or an event of default under any other agreement of which such Member is a party; and

 

42


(d) Such Member’s investment in Units in the Company is made for such Member’s own account for investment purposes only and not with a view to the resale or distribution of such Units.

(e) To the extent that such Member is a partnership, grantor trust or S corporation, Treasury Regulations Sections 1.7704-1(h)(3)(i) and (ii) are not applicable to the interest of such Member and their beneficial owners.

Section 11.19 Tax Receivable Agreement. The Tax Receivable Agreement, the 2021 Exchange Agreement and the 2024 Exchange Agreement shall each be treated as part of this Agreement as described in Section 761(c) of the Code, and Treas. Reg. § 1.704-1(b)(2)(ii)(h) and § 1.761-1(c) with respect to payments to a Member with respect to an Exchange (as defined in the Tax Receivable Agreement) by such Member.

[Remainder of the Page Intentionally Left Blank; Signatures on the Following Page]

 

43


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Amended and Restated Limited Liability Company Agreement as of the date first written above.

 

REAL GOOD FOODS, LLC
By:  

The Real Good Food Company, Inc., a

Delaware corporation, as its Managing

Member

By:  

/s/ Timothy S. Zimmer

Name:   Timothy S. Zimmer
Title:   Chief Executive Officer

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

THE REAL GOOD FOOD COMPANY, INC., as a Member
By:  

/s/ Timothy S. Zimmer

Name:   Timothy S. Zimmer
Title:   Chief Executive Officer

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

MEMBERS:
PPZ, LLC, a Wyoming limited liability company
By:  

 

Name:   Rhea Lamia
Title:   Manager
SLINGSHOT CONSUMER, LLC, a Wyoming limited liability company
By:  

 

Name:   Bryan Freeman
Title:   Manager
DIVARIO VENTURES, LLC, a Delaware limited liability company
By:  

 

Name:   Jim Foltz
Title:   Vice President — Business Ventures
STRAND EQUITY PARTNERS III, LLC, a Delaware limited liability company
By:  

 

Name:  
Title:  

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

MEMBERS:
CPG SOLUTIONS, LLC
By:  

 

Name:   Andrew Stiffelman
Title:   Manager

 

Gerard Law

 

Akshay Jagdale

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

MEMBERS:
EMBLEM-RGF MAIN LLC, a Delaware limited liability company
By:  

/s/ Patrick Cook

Name:   Patrick Cook
Title:   President and Chief Executive Officer
EMBLEM-RGF EXECUTIVE LLC, a Delaware limited liability company
By:  

/s/ Patrick Cook

Name:   Patrick Cook
Title:   President and Chief Executive Officer
EMBLEM-RGF BLOCKER INC., a Delaware corporation
By:  

/s/ Patrick Cook

Name:   Patrick Cook
Title:   President and Chief Executive Officer

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

MEMBERS:
Fidelity Mt. Vernon Street Trust: Fidelity Series Growth Company Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Mt. Vernon Street Trust: Growth Company Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Mt. Vernon Street Trust: Fidelity Growth Company K6 Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Securities Fund: Fidelity Blue Chip Growth Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Securities Fund: Fidelity Blue Chip K6 Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


IN WITNESS WHEREOF, the undersigned have executed or caused to be executed on their behalf this Limited Liability Company Agreement as of the date first written above.

 

MEMBERS:
Fidelity Select Portfolios: Consumer Staples Portfolio
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Central Investment Portfolios LLC: Fidelity U.S. Equity Central Fund – Consumer Staples Sub
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Securities Fund: Small Cap Growth Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory
Fidelity Securities Fund: Small Cap Growth K6 Fund
By:  

 

Name:   Chris Maher
Title:   Authorized Signatory

 

[Signature Page to Amended and Restated Limited Liability Company Agreement]


LIMITED LIABILITY COMPANY AGREEMENT

Joinder

The undersigned hereby agrees to become a party to the Limited Liability Company Agreement of Real Good Foods, LLC, a Delaware limited liability company, dated as of ____________, 2024 (the “Agreement”), and agrees to be bound by the terms and conditions of the Agreement as a Member.

 

MEMBER:
[__________]
By:  

 

Name:  

 

Title:  

 

Address for Notices:  

 

 

Exhibit 10.2

THE DEBT OBLIGATIONS GOVERNED BY THIS AGREEMENT HAVE BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, THE AMOUNT OF OID, THE ISSUE DATE AND THE YIELD TO MATURITY OF THESE DEBT OBLIGATIONS MAY BE OBTAINED BY CONTACTING THE BORROWER PURSUANT TO SECTION 9.6 OF THIS AGREEMENT.

PMC Financial Services Group, LLC

Amended and Restated Super-Priority Loan and Security Agreement

 

Borrower:   Real Good Foods, LLC
Holdings:   The Real Good Food Company, Inc.
Address:   3 Executive Campus, Suite 155 Cherry Hill, New Jersey 08002
Date:   September 20, 2024

WHEREAS, PMC Financial Services Group, LLC (the “Lender”) and Real Good Foods, LLC (f.k.a. The Real Good Food Company LLC), a Delaware limited liability company (the “Borrower”), whose chief executive office is located at the above address, are party to that certain Loan and Security Agreement, dated as of June 30, 2016 (as amended, supplemented, or otherwise modified prior to the Restatement Date, the “Existing Loan Agreement”), pursuant to which Lender made (a) Revolving Loans (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $49,995,514.17 and unpaid interest and expenses in the amount of $1,654,120.87 (the “Existing Revolving Loan”), (b) the COI Equipment Term Loan (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $9,194,249.20 and unpaid interest and expenses in the amount of $137,783.17 (the “Existing COI Equipment Term Loan”) and (c) the Term Loan B (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $96,206,741.20 and unpaid interest and expenses in the amount of $4,336,833.75 (which amount is reflective of treating the accrued but unpaid 9.00% cash pay interest during the period from April 1, 2024 through September 20, 2024 as paid in kind) (the “Existing Term Loan B”).

WHEREAS, the Borrower and Lender desire to amend and restate the Existing Loan Agreement with respect to (a) the Existing Revolving Loans and the Existing COI Equipment Loan with this Amended and Restated Super-Priority Loan and Security Agreement (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) and (b) the Existing Term Loan B with that certain Amended and Restated Loan and Security Agreement, dated as of the Restatement Date, between Borrower and Lender (as amended, supplemented, or otherwise modified, the “Amended and Restated Term Loan B Agreement”).

WHEREAS, the Borrower and the Lender desire to consolidate the Existing Revolving Loan and the Existing COI Equipment Loan into one term loan (the “Loan”).


THIS AGREEMENT is entered into on the above date between Lender, whose address is 3816 E. La Palma Avenue, Anaheim, CA 92807, and the Borrower. The Schedule to this Agreement (the “Schedule”) referred herein shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

 

1. LOAN.

1.1 Loans. Lender hereby consolidates the Existing Revolving Loan and the Existing COI Equipment Loan into the Loan in the aggregate principal amount equal to $52,986,153.25.

1.2 Interest. The Loan and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Accrued interest shall be payable monthly, on the last day of the month, and shall be charged to Borrower’s loan account (and the same shall thereafter bear interest at the same rate as the Loan).

1.3 Fees. Borrower shall pay Lender the fees shown on the Schedule, which are in addition to all interest and other sums payable to Lender and are not refundable.

1.3 Loan Requests(a) . To obtain the Loan, Borrower shall make a request to Lender by facsimile or telephone, such request to provide Lender with at least one Business Day’s notice. Loan requests received after 3:00 PM (California time) will not be considered by Lender until the second Business Day after such request. Lender may rely on any telephone request for the Loan given by a person whom Lender believes is an authorized representative of Borrower, and Borrower will indemnify Lender for any loss Lender suffers as a result of that reliance.

2. SECURITY INTEREST. Subject to the Intercreditor Agreements, to secure the payment and performance of all of the Obligations when due, each of Borrower and Holdings hereby grants to Lender a security interest in all of the following (collectively, the “Collateral”): all right, title and interest of Borrower and Holdings, respectively, in and to all of the following, whether now owned or hereafter arising or acquired and wherever located: all Accounts; all Inventory; all Equipment; all assets constituting Capital Expenditures; all Deposit Accounts (including, without limitation, the Designated Account and all funds maintained therein); all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower’s books relating to any and all of the above; provided, that in no event shall the “Collateral” include any Excluded Assets; provided, however, that the security interest of Lender shall immediately attach to, and the Collateral shall immediately include, any such asset (or portion thereof) upon such asset (or such portion) ceasing to be an Excluded Asset.

Subject to the Intercreditor Agreements, notwithstanding anything in any Loan Document to the contrary, during an Event of Default, monies to be applied to the Obligations, whether arising from payments by Borrower, realization on the Collateral, setoff or otherwise, shall be allocated as follows:

(i) FIRST, to all costs and expenses owing to Lender in connection with the Loan Documents;

(ii) SECOND, to premium (including without limitation, Applicable Premium) and fees incurred in connection with the Loans;

(iii) THIRD, to accrued and unpaid interest on the Loan;

(iv) FOURTH, to all unpaid principal owing on the Loan; and

(v) FIFTH, to all remaining Obligations.

 

 

2


3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDINGS AND BORROWER.

In order to induce Lender to enter into this Agreement and to continue to make the Loans, each of Holdings and Borrower represents and warrants to Lender as follows, and each of Holdings and Borrower covenants that the following representations will continue to be true, and that Holdings (as applicable) and Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in full:

3.1 Corporate Existence and Authority. Each of Holdings and Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. Each of Holdings and Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Holdings and Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Holdings and Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do not violate Holdings’ or Borrower’s articles or certificate of incorporation, or Holdings’ or Borrower’s by-laws, Holdings’ or Borrower’s partnership agreement or operating agreement (as the case may be), or any law or any material agreement or instrument which is binding upon Holdings or Borrower or their applicable property, and (iv) do not constitute grounds for acceleration of any indebtedness or obligation under any agreement or instrument which is binding upon Holdings or Borrower or their applicable property.

3.2 Name; Trade Names and Styles. The name of Holdings and Borrower set forth in the heading to this Agreement is its correct name. Listed in the Perfection Certificate are all prior names of Holdings and Borrower used in the last 5 years and all of Holdings’ and Borrower’s present and prior trade names. Each of Holdings and Borrower shall give Lender 30 days’ prior written notice (or such shorter period as agreed by Lender) before changing its name or doing business under any other name. Each of Holdings and Borrower has complied, and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name.

3.3 Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower’s chief executive office. In addition, each of Holdings and Borrower has places of business and Collateral is located only at the locations set forth in the Perfection Certificate. Each of Holdings and Borrower will give Lender at least 30 days prior written notice (or such shorter period as agreed by Lender) before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower’s Address or one of the locations set forth in the Perfection Certificate.

3.4 Title to Collateral; Perfection; Permitted Liens.

(a) Except as set forth on the Perfection Certificate, each of Holdings and Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and will remain free and clear of any and all Liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Lender now has, and will continue to have, subject to the Intercreditor Agreements, a super-priority perfected and enforceable security interest in all of the Collateral, subject only to Permitted Liens, and Holdings and Borrower will at all times defend Lender and the Collateral against all claims of others.

(b) Each of Holdings and Borrower has set forth in the Perfection Certificate all of Holdings’ and Borrower’s Deposit Accounts, and each of Holdings and Borrower will give Lender five Business Days advance written notice before establishing any new Deposit Accounts and, subject to the Intercreditor Agreements, will cause the institution where any such new Deposit Account is maintained to execute and deliver to Lender a control agreement in form sufficient to perfect Lender’s security interest in the Deposit Account and otherwise satisfactory to Lender in its sole and absolute discretion.

 

 

3


(c) In the event that Holdings or Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in which the potential recovery exceeds $250,000 (as determined by Borrower in good faith), Holdings or Borrower shall promptly notify Lender thereof in writing and provide Lender with such information regarding the same as Lender shall request. Such notification to Lender shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to Lender, and Holdings and Borrower shall execute and deliver all such documents and take all such actions as Lender shall request in connection therewith.

(d) None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Holdings and Borrower are not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Holdings’ and Borrower’s rights to remove any Collateral from the leased premises. Whenever any Collateral is located upon real property in which any third party has an interest, Holdings and Borrower shall, whenever reasonably requested by Lender, cause such third party to execute and deliver to Lender, in form acceptable to Lender, such waivers and subordinations as Lender shall specify.

3.5 Maintenance of Collateral. Each of Holdings and Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Holdings and Borrower will not use the Collateral for any unlawful purpose. Holdings and Borrower will immediately advise Lender in writing of any material loss or material damage to the Collateral.

3.6 Books and Records. Holdings and Borrower has maintained and will maintain at Borrower’s Address complete and accurate, in all material respects, books and records, comprising an accounting system in accordance with GAAP.

3.7 Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Lender have been, and will be, prepared in conformity with GAAP and, except as set forth in the Perfection Certificate, now and in the future will fairly present, in all material respects, the results of operations and financial condition of Holdings and Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Lender and the date hereof, there has been no Material Adverse Change.

3.8 Tax Returns and Payments; Pension Contributions. Each of Holdings and Borrower has timely filed all required tax returns and reports, and each of Holdings and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions required to be paid by Holdings and Borrower, as applicable. Borrower is unaware of any claims or adjustments proposed for any of Holdings’ or Borrower’s prior tax years which could result in additional taxes becoming due and payable by Holdings or Borrower. Each of Holdings and Borrower has paid all amounts necessary to fund all pension, profit sharing and deferred compensation plans in accordance with their terms, and each of Holdings and Borrower has not withdrawn from participation in or permitted partial or complete termination of any such plan which could reasonably be expected to result in any liability of Holdings or Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

3.9 Compliance with Law. Borrower has complied, and will comply, in all material respects, with all material provisions of all foreign, federal, state and local laws and regulations applicable to Borrower, including, but not limited to, those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and all environmental matters.

 

 

4


3.10 Litigation. Except as set forth on the Litigation Annex, there is no material claim, suit, litigation, proceeding or investigation pending or, to the knowledge of Borrower, threatened against or affecting Holdings or Borrower in any court or before any governmental agency (or any basis therefor known to Borrower). Borrower will promptly inform Lender in writing of any material claim, proceeding, litigation or investigation in the future threatened or instituted against Holdings or Borrower (in each case, if known to Borrower).

3.11 Use of Proceeds(a) . All proceeds of the Loan shall be used solely for Borrower’s working capital. Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation G of the Board of Governors of the Federal Reserve System) and no part of the proceeds of the Loan will be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of purchasing or carrying any “margin stock,” or for any other purpose, in any such case, that would violate or be inconsistent with Regulations U or X.

3.12 Budget and Variance Reports. Each Budget delivered was prepared in good faith based on assumptions believed by the Loan Parties to be reasonable at the time made and upon information believed by the management of the Borrower to have been accurate based upon the information available to the management of the Borrower at the time such Budget was furnished. On and after the delivery of any Variance Report in accordance with this Agreement, such Variance Report shall be complete and correct and fairly represent in all respects the results of operations of the Loan Parties and their Subsidiaries for the period covered thereby and in the detail to be covered thereby.

3.13 Overdue Accounts Payable. Annex B sets forth a complete and correct list of all Outstanding Accounts Payable (including, without limitation the applicable vendor and outstanding balance in respect thereof) known to Borrower on the Restatement Date.

4. PREPAYMENTS OF THE LOAN.

4.1 Voluntary Prepayments.

In each case under this Section 4.1, subject to the Intercreditor Agreements:

Borrower shall have the right at any time and from time to time to prepay the Loan in whole or in part, subject to the concurrent payment of amounts owing pursuant to Section 4.3, in an aggregate principal amount not less than $1,000,000.00 (or, if less, in the amount of the Loan outstanding), by providing an irrevocable written notice to Lender by 3:00 PM (New York time) at least one Business Day in advance of the date of such proposed prepayment; provided that any repayment or prepayment in full of the Loans and other Obligations hereunder shall be subject to the consent of Emblem.

4.2 Mandatory Prepayments.

In each case under this Section 4.2, subject to the Intercreditor Agreements:

(a) Non COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale (excluding any sales of COI Equipment), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loans, the Emblem Facility and, solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated Term Loan B Agreement, on a pro rata basis.

(b) COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale of COI Equipment, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loan.

(c) Insurance/Condemnation Proceeds. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds of the type described in clause (b) of the definition thereof in excess of $100,000, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to prepayment of the Loans, the Emblem Facility and, solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated Term Loan B Agreement, on a pro rata basis.

 

 

5


(d) Non-Permitted Debt. On the date of receipt by Borrower of any Net Cash Proceeds from the issuance or incurrence of any Indebtedness of Borrower (other than with respect to any Permitted Indebtedness), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loans, the Emblem Facility and, solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated Term Loan B Agreement, on a pro rata basis.

4.3 Applicable Premium. If any Applicable Premium Event occurs, then Borrower shall pay to Lender, the Applicable Premium. In any such case, the Applicable Premium shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loan, which Obligations are guaranteed by the Guarantors and secured by the Collateral, and constitutes liquidated damages, not unmatured interest or a penalty, as the actual amount of damages to Lender as a result of the relevant Applicable Premium Event would be impracticable and extremely difficult to ascertain. The Applicable Premium is provided by mutual agreement of Borrower and the Guarantors and Lender as a reasonable estimation and calculation of such actual lost profits and other actual damages of Lender. Without limiting the generality of the foregoing, it is understood and agreed that upon the occurrence of any Applicable Premium Event, the Applicable Premium shall be automatically and immediately due and payable and shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loan which Obligations are secured by the Collateral. The Applicable Premium shall also be automatically and immediately due and payable if the Obligations are satisfied, released or discharged by foreclosure (whether by power of judicial proceeding or otherwise), deed in lieu of foreclosure or by any other means. BORROWER, FOR ITSELF AND ON BEHALF OF THE GUARANTORS, HEREBY EXPRESSLY WAIVES (TO THE FULLEST EXTENT THEY MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR OTHER LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING APPLICABLE PREMIUM IN CONNECTION WITH ANY SUCH EVENTS, ANY RESCISSION OF SUCH ACCELERATION OR THE COMMENCEMENT OF ANY BANKRUPTCY OR INSOLVENCY EVENT. Borrower, for itself and on behalf of the Guarantors, expressly agrees (to the fullest extent it and they may lawfully do so) that with respect to the Applicable Premium payable under the terms of this Agreement: (i) the Applicable Premium is reasonable and is the product of an arm’s length transaction between sophisticated business parties, ably represented by counsel; (ii) the Applicable Premium shall be payable notwithstanding the then-prevailing market rates at the time payment is made; (iii) there has been a course of conduct between Lender and Borrower and the Guarantors giving specific consideration in this transaction for such agreement to pay the Applicable Premium; and (iv) Borrower and the Guarantors shall be estopped hereafter from claiming differently than as agreed to in this paragraph. Borrower, for itself and on behalf of and the Guarantors, expressly acknowledges that their agreement to pay the Applicable Premium as herein described is a material inducement to Lender’s agreement to enter into this Agreement and to extend the Loan to Borrower.

5. ADDITIONAL DUTIES OF BORROWER.

5.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2 Insurance. Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Lender, in such form and amounts as Lender may require in its sole and absolute discretion, and Borrower shall provide evidence of such insurance to Lender. All such insurance policies shall name Lender as loss or co-loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Lender. If Borrower fails to provide or pay for any insurance, Lender may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to Lender copies of all material reports made to insurance companies.

 

 

6


5.3 Reports. Borrower, at its expense, shall provide Lender with the written reports set forth in the Schedule, and such other written reports with respect to Borrower as Lender shall from time to time specify in its sole and absolute discretion.

5.4 Access to Collateral, Books and Records. At reasonable times, and on two (2) Business Day’s notice, Lender, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower’s books and records. Such inspections or audits shall be conducted no more often than four times during each calendar year, but nothing herein restricts Lender’s right to conduct such audits more frequently if an Event of Default has occurred and is continuing. The foregoing inspections and audits shall be at Borrower’s expense and the charge therefor shall be $900 per person per day (or such higher amount as shall represent Lender’s then current standard charge for the same), plus reasonable out-of-pocket expenses.

5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without Lender’s prior written consent (in its sole and absolute discretion), do any of the following:

(a) merge or consolidate with another corporation or entity unless Borrower is the surviving entity and the security interest of Lender in the Collateral is unimpaired;

(b) acquire any assets except (i) assets acquired in the ordinary course of business and (ii) other asset acquisitions (including without limitation, any assets constituting Capital Expenditures) so long as the purchase consideration for all such assets in the aggregate does not at any time exceed $250,000;

(c) enter into any transaction with any of its Affiliates (other than Holdings and its Subsidiaries or any Person that becomes a Subsidiary as a result of such transaction) in a transaction (or series of related transactions) involving aggregate consideration in excess of $250,000, unless such transaction is upon terms that are not materially favorable to Borrower than would be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate;

(d) sell or transfer any Collateral, except for Permitted Dispositions;

(e) store any Inventory or other Collateral with any warehouseman or other third party unless approved by Lender;

(f) make any loans of any money or other assets or make any other Investments, other than Permitted Investments;

(g) (x) create, incur, assume or permit to be outstanding any Indebtedness other than Permitted Indebtedness, (y) create incur, assume or permit to be outstanding any operating leases or finance leases or amend, restate, amend and restate or otherwise modify any existing operating leases or financing leases (including, without limitation, the master lease agreements with Lender as in effect on the Restatement Date) and (z) guarantee or otherwise become liable with respect to the obligations of another Person, provided, that the aggregate amount of all such Permitted Indebtedness (other than clauses (a) and (b) of the definition thereof), operating leases, financing leases, obligations, guarantees and liabilities shall not at any time exceed $1,000,000;

(h) [reserved];

(i) create, incur, assume or permit to be outstanding any Liens other than Permitted Liens;

(j) pay or declare any dividends on, or distributions or tax distributions with respect to Borrower’s equity interests, or make any other distributions, directly or indirectly, with respect to any equity interest in Borrower;

(k) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock or other equity securities, other than, (i) as required by the 2024 Exchange Agreement, (ii) as required by the 2021 Exchange Agreement or (iii) at any time on or after the Additional Loans Funding Date, and subject to the sole and absolute discretion of Lender, the Specified Use;

 

 

7


(l) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower and any complementary, ancillary, incidental, corollary or synergistic businesses and any reasonable extensions thereof;

(m) dissolve or elect to dissolve;

(n) enter into, amend, restate, amend and restate or otherwise modify any procurement or vendor contract (x) with a term longer than one (1) month and/or (y) (i) with contract consideration in excess of $2,000,000 for chicken purchases and (ii) with contract consideration in excess of $250,000 for all other goods and services;

(o) enter into any new co-manufacturing contract or amend, restate, amend and restate or otherwise modify any co-manufacturing contract whether existing on the Restatement Date or entered into thereafter;

(p) amend, restate, amend and restate or otherwise modify any third-party labor contract whether existing on the Restatement Date or entered into thereafter;

(q) amend, restate, amend and restate or otherwise modify, or take any action or allow to be taken any action that would reasonably be expected to constitute or cause there to be a “Change of Control” under the Tax Receivables Agreement as in effect on the Restatement Date;

(r) make, change or rescind any material tax election, change any tax accounting method, take any more than ministerial act with respect to (i) the computation of the tax “capital accounts” of the Borrower, (ii) allocations of items of Borrower income, gain, expense or loss for tax “capital account” purposes or for tax purposes, (iii) the allocation of liabilities of the partnership under Section 752, or (iv) the tax reporting or tax positions of the Borrower, or change the Borrower’s independent accounting firm or amend, terminate or modify the retention arrangement with such firm;

(s) amend, restate, amend and restate or otherwise modify the Emblem Facility or any Loan Document (as defined in the Emblem Facility), in either case, in violation of the Intercreditor Agreements;

(t) enter into, amend, restate, amend and restate or otherwise modify any Specified Agreement without the prior written approval of Lender;

(u) agree to or make the Specified Payments; or

(v) make any payments or expenditures that are not in compliance with the Approved Budget (subject to Permitted Variances); or

(w) form, incorporate or acquire any Subsidiary after the Restatement Date unless such Subsidiary (x) becomes a Guarantor by executing and delivering a supplement to the Guarantee Agreement and (y) grants to Lender a perfected, super-priority security interest (subject to Permitted Liens) in all of its assets (other than Excluded Assets) by executing and delivering such security documentation requested by Lender, in each case, in form and substance reasonably acceptable to Lender and within thirty (30) days (or such longer period as Lender may agree) after the formation, incorporation or acquisition of such Subsidiary.

5.6 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or against Lender with respect to any Collateral or relating to Holdings or Borrower, each of Holdings and Borrower shall, without expense to Lender, make available Holdings, Borrower and their respective officers, employees and agents and Holdings’ and Borrower’s respective books and records, to the extent that Lender may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7 Notification of Changes. Borrower will promptly, after becoming aware thereof, notify Lender in writing of (i) (x) any Default or Event of Default, (y) any “Default” or “Event of Default” under the Emblem Facility and the Amended and Restated PMC Term Loan and Security Agreement (in each case, as such terms are defined therein) (unless also constituting a Default or Event of Default hereunder) and (z) any “Default” or “Event of Default” shall have occurred and be continuing under any agreement of the Borrower evidencing Indebtedness for borrowed money (in each case, as such terms are defined in, or such similar terms used in, the applicable definitive documentation for such Indebtedness), and in each case, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto and (ii) any Material Adverse Change.

 

 

8


5.8 Further Assurances. Each of Holdings and Borrower agrees, at its expense, on request by Lender, to execute all documents and take all actions, as Lender, may, in its sole and absolute discretion, deem necessary or useful in order to perfect and maintain Lender’s super-priority perfected security interest in the Collateral (subject only to Permitted Liens and the Intercreditor Agreements), and in order to fully consummate the transactions contemplated by this Agreement.

5.9 Right to Appoint Observer. Holdings agrees that: (a) the Lender shall have the option and right to appoint one (1) representative (the “Observer”) to attend all meetings of the Board or any committee thereof in a non-voting, non-participating observer capacity; (b) any Observer appointed pursuant to this Section 5.9 may observe discussions of all matters brought to the Board or any committee thereof for consideration, but in no event shall the Observer (i) be deemed to be member of the Board or any committee thereof, (ii) have or be deemed to have, or otherwise be subject to, any duties (fiduciary or otherwise) to Holdings, the Borrower or any other Guarantors or their respective Affiliates or investors, or (iii) have the right to participate in any discussions, vote on, propose or offer any motions or resolutions to the Board or any committee thereof, or in any manner give instructions or directions to the Board, any committee thereof or any member thereof or determine Holdings’, the Borrower’s or any of the other Guarantors’ policies or business decisions; (c) Holdings shall provide to the Observer copies of any notices, minutes and consents, including draft versions, proposed written consents and exhibits and annexes to any such materials, in each case, to the extent provided to the Board members in their capacity as such (collectively, “Board Materials”), at substantially the same time and in the same manner as such information is delivered to the members of the Board; (d) the presence of the Observer shall not be taken into account or required for purposes of establishing a quorum; and (e) Holdings shall reimburse Lender for reasonable out of pocket expenses of the Observer (including, without limitation, expenses relating to attending board meetings or other events pertaining to the Borrower that such Observer attends); provided, however, that Holdings may withhold information and exclude the Observer from any meeting or portion thereof if the Board determines in good faith and upon the advice of counsel that such exclusion is necessary to preserve the attorney-client privilege or to avoid a conflict of interest. Holdings shall indemnify and provide for the advancement of expenses to the Observer to the same extent provided by Holdings to its directors. Holdings acknowledges and agrees that the foregoing rights to indemnification and advancement of expenses constitute third-party rights extended to the Observer by Holdings and do not constitute rights to indemnification or advancement as a result of the Observer serving as a director, officer, employee or agent of Holdings or its Affiliates.

6. REPAYMENT OF THE LOAN.

6.1 Amortization. Borrower shall repay the outstanding Loan on the last Business Day of each January, April, July and October of each year (commencing January 31, 2025) and on the Maturity Date, in an amount equal to (i) in the case of such quarterly payments, 0.25% of the aggregate principal of the Loan outstanding immediately after the Restatement Date and (ii) in the case of such payment due on the Maturity Date, an amount equal to the then unpaid principal amount of the Loan outstanding.

6.2 Maturity. To the extent not previously paid, all outstanding principal, together with all accrued and unpaid interest, fees, premium (including, without limitation, the Applicable Premium (if any)) and other Obligations, shall be due and payable in full on the Maturity Date.

 

 

9


7. EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement:

(a) any warranty, representation, statement, report or certificate made or delivered to Lender by Holdings, Borrower or any of their respective officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made or deemed to be made; or

(b) Borrower shall fail to pay (i) when due, any principal of any Loan or any Applicable Premium or (ii) within five (5) Business Days after the date due, any interest on any Loan or any fees, premium or other amount due hereunder; or

(c) there occurs a Budget Event; or

(d) (i) default shall be made in the due observance or performance by Holdings (as applicable) or Borrower of any covenant, condition or agreement contained in Section 5.1, Section 5.5, any of the Financial Covenants set forth in the Schedule or Section 5 of the Schedule, (ii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 6(a) of the Schedule and such default shall have continued unremedied for ten (10) Business Days or (iii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 8(e) of the Schedule and such default shall have continued unremedied for fifteen (15) days; or

(e) default shall be made in the due observance or performance by Holdings or Borrower of any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (d) of this Section 7.1) and such default shall have continued unremedied for fifteen (15) days; or

(f) any levy, assessment, attachment, seizure, Lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or

(g) any event or condition occurs that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to any secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or

(h) any event or condition occurs that (i) results in the Emblem Facility becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired and that is not otherwise waived by Emblem) the holder or holders of any the Emblem Facility or any trustee or agent on its or their behalf to cause the Emblem Facility to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; or

(i) the Specified Event of Default occurs; or

(j) dissolution, termination of existence, insolvency or business failure of Borrower or any Guarantor; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or

 

 

10


(k) the commencement of any proceeding against Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or

(l) revocation or termination of, or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing; or

(m) revocation or termination of, or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged to secure any or all of the Obligations, or any attempt to do any of the foregoing; or

(n) Borrower makes any payment on account of any indebtedness or obligation, excluding trade payables and other ordinary course purchases, which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits such subordination agreement; or

(o) the occurrence of a Change of Control; or

(p) there shall be a change in the President, Chief Executive Officer, or Chief Financial Officer, and such person is not replaced with another person acceptable to Lender in its good faith business judgment within 30 days thereafter; or

(q) Holdings or the Borrower shall generally not pay its debts as they become due, or Holdings or the Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law.

Notwithstanding anything to the contrary contained in this Section 7.1, once an Event of Default has occurred, it shall be deemed continuing regardless if later remedied or cured (unless Lender waives such Event of Default in its sole and absolute discretion).

7.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, Lender, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Holdings and the Borrower), may do any one or more of the following, in each case, subject to the Intercreditor Agreements:

(a) cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document;

(b) accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument or agreement evidencing or relating to any Obligation;

(c) subject to applicable laws, take possession of any or all of the Collateral wherever it may be found, and for that purpose each of Holdings and Borrower hereby authorizes Lender without judicial process to enter onto any of Holdings’ or the Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Lender deems it necessary, in its sole and absolute discretion, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Lender seek to take possession of any of the Collateral by court process, each of Holdings and Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Lender retain possession of, and not dispose of, any such Collateral until after trial or final judgment;

(d) require Holdings and Borrower to assemble any or all of the Collateral and make it available to Lender at places designated by Lender which are reasonably convenient to Lender and Holdings or Borrower, as applicable, and to remove the Collateral to such locations as Lender may deem advisable;

(e) complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Lender shall have the right to use Holdings’ and Borrower’s premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge;

 

 

11


(f) sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Lender obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Lender shall have the right to conduct such disposition on Holdings’ and Borrower’s premises without charge, for such time or times as Lender deems reasonable, or on Lender’s premises, or elsewhere and the Collateral need not be located at the place of disposition. Lender may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Holdings or Borrower of any liability Holding or Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale;

(g) demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, each of Holdings and Borrower irrevocably authorizes Lender to endorse or sign Holdings’ or Borrower’s (as applicable) name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Holdings or Borrower (as applicable) and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Lender’s sole and absolute discretion, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; and

(h) demand and receive possession of any of Holdings’ and Borrower’s federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto.

All reasonable attorneys’ fees, expenses, costs, liabilities and obligations incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Lender’s rights and remedies, from and after the occurrence and during the continuance of any Event of Default, the Obligations shall automatically bear interest at the Default Rate.

7.3 Standards for Determining Commercial Reasonableness. Each of Holdings, Borrower and Lender agree that a sale or other disposition (collectively, “sale”) of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable:

(a) notice of the sale is given to Holdings or Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted;

(b) notice of the sale describes the collateral in general, non-specific terms;

(c) the sale is conducted at a place designated by Lender, with or without the Collateral being present;

(d) the sale commences at any time between 8:00 a.m. and 6:00 p.m. (local time);

(e) payment of the purchase price in cash or by cashier’s check or wire transfer, or by deferred payment obligation acceptable to Lender in its discretion, is required;

(f) with respect to any sale of any of the Collateral, Lender may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower or Holdings (as applicable) any and all information concerning the same.

Lender shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

 

 

12


7.4 Power of Attorney. Upon the occurrence and during the continuance of any Event of Default, without limiting Lender’s other rights and remedies, each of Holdings and Borrower grants to Lender an irrevocable power of attorney coupled with an interest, authorizing and permitting Lender (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Holdings or Borrower, and at Borrower’s expense, to do any or all of the following, in Holdings’ and Borrower’s name (as applicable) or otherwise, but Lender agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner:

(a) execute on behalf of Holdings and Borrower any documents that Lender may, in its sole and absolute discretion, deem advisable in order to perfect and maintain Lender’s security interest in the Collateral, or in order to exercise a right of Holdings, Borrower or Lender, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents;

(b) execute on behalf of Holdings or Borrower (as applicable), any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other Lien, or assignment or satisfaction of mechanic’s, materialman’s or other Lien;

(c) take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Holdings or Borrower (as applicable) upon any instruments, or documents, evidence of payment or Collateral that may come into Lender’s possession;

(d) endorse all checks and other forms of remittances received by Lender;

(e) pay, contest or settle any Lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same;

(f) grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith;

(g) pay any sums required on account of Holdings’ and Borrower’s taxes or to secure the release of any Liens therefor, or both;

(h) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor;

(i) instruct any third party having custody or control of any books or records belonging to, or relating to, Holdings or Borrower (as applicable) to give Lender the same rights of access and other rights with respect thereto as Lender has under this Agreement; and

(j) take any action or pay any sum required of Holdings or Borrower (as applicable) pursuant to this Agreement and any other Loan Documents.

Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Lender’s rights under the foregoing power of attorney or any of Lender’s other rights under this Agreement be deemed to indicate that Lender is in control of the business, management or properties of Borrower or Holdings (as applicable).

7.5 Application of Proceeds. Subject to the Intercreditor Agreements, and except as otherwise expressly set forth in this Agreement, all proceeds realized as the result of any sale of the Collateral shall be applied by Lender to the Obligations, in such order as Lender shall determine in its sole and absolute discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Lender for any deficiency. Subject to the Intercreditor Agreements, if, Lender, in its sole and absolute discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lender shall have the option, exercisable at any time, in its sole and absolute discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Lender of the cash therefor.

 

 

13


7.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Lender shall have all the other rights and remedies accorded a secured party under the Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Lender, Holdings and/or Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Lender of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Lender to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

8. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:

1L/1L Intercreditor Agreement” means that certain Pari Passu Intercreditor Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted thereunder) among Emblem and Lender, as lender under this Agreement, Borrower and the Guarantors and the other parties from time to time party thereto.

1L/2L Intercreditor Agreement” means that certain Junior Lien Intercreditor Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted thereunder) among Emblem, Lender, as lender under this Agreement, Lender, as lender under the Amended and Restated Term Loan Agreement, Borrower and the Guarantors and the other parties from time to time party thereto.

2024 Exchange Agreement” means the Exchange Agreement, dated as of the Restatement Date, by and among Holdings, Borrower, Emblem and Lender.

Account Control Agreement” means an agreement in form and substance satisfactory to Lender that provides for Lender to have “control” (as defined in Section 9-104 of the Uniform Commercial Code or Section 8-106 of the Uniform Commercial Code).

Account Debtor” means the obligor on an Account.

Accounts” means all present and future “accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower.

Adjusted EBITDA” means, for any period, with respect to Holdings and its Subsidiaries on a consolidated basis, the Net Income for such period, plus

(i) without duplication and solely to the extent already deducted in arriving at Net Income, the sum of the following amounts for such period:

(a) consolidated interest expense,

(b) provisions for taxes based on income, profits or capital,

(c) total depreciation and depletion expense,

(d) total amortization expense,

(e) costs, fees and expenses incurred in connection with the Transactions;

(f) all extraordinary losses and unusual or non-recurring charges and expenses and restructuring costs (in each case, not associated with the Transactions); provided that all amounts which are added back to increase Adjusted EBITDA pursuant to this sub-clause (f) shall not be greater than 15.0% of Adjusted EBITDA for any applicable period; provided further that all reasonable and documented fees and out-of-pocket expenses of the institutions and consultants set forth on Annex E added back pursuant to this clause (f) shall not be subject to the foregoing 15.0% cap;

 

 

14


(g) other non-cash charges that occurred in such period that reduce Net Income in such period (excluding (I) charges that occurred in a prior or other period, (II) inventory write downs or write offs for materials or goods sold or for accounts receivable in such period, and (III) the difference between cash rent and straight-line rent);

(h) stock option, restricted or performance stock unit and other equity-based compensation expenses, to the extent the same was deducted (and not added back) in calculating Net Income; minus

(ii) without duplication, and solely to the extent included in arriving at Net Income in such period: all extraordinary gains and non-recurring gains increasing Net Income for such period (including any such non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash gain in any prior period) and any recognized income from the cancelation of accounts payable or other liabilities included in Net Income, subject to the Specified Deductions.

Affiliate” means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

Agreement” has the meaning set forth in the Preamble hereto.

Applicable Premium” shall mean as of the date of the occurrence of an Applicable Premium Event (as calculated by Lender) the premium required for Lender to realize a MOIC of at least 2.00x on the Loans made on the Restatement Date. For purposes of this definition, “MOIC” shall mean the multiple on invested capital realized by Lender in respect of its Loan calculated, in respect of any Loans repaid, prepaid or accelerated as of a date certain, as the principal amount of Loans repaid, prepaid or accelerated on such date plus all interest paid in cash on such Loans from the date of initial funding thereof through such repayment, prepayment or acceleration date (exclusive, for the avoidance of doubt, of any default interest, interest paid in kind, fees (including original issue discount and/or upfront fees), expense reimbursements and indemnity payments and any return on Class B Common Stock and Class C Units, or any Class A Units exercisable therefor) divided by the initial principal amount of the Loans so repaid, prepaid or accelerated as of such date (calculated exclusive of any original issue discount and/or upfront fees); provided that in no event shall (i) the MOIC be negative or (ii) Lender be required to make any payment to Borrower in connection with the MOIC.

Applicable Premium Event” means (a) any voluntary prepayment of all, or any part, of the principal amount of the Loans and any mandatory prepayment of the Loans, in each case, after the commencement of any proceeding with respect to any Loan Party under any Debtor Relief Law; (b) the acceleration of the Loans as a result of the commencement of a proceeding under any Debtor Relief Law; (c) the satisfaction, release, payment, redemption, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of any of the Loans in any proceeding under any Debtor Relief Law, foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the making of a distribution of any kind in any proceeding under any Debtor Relief Law to Lender (whether directly or indirectly), in full or partial satisfaction of the Loans; (d) the substantial consummation of any plan of reorganization with respect to any Loan Party under any Debtor Relief Law; and (e) the termination of any proceeding with respect to any Loan Party under any Debtor Relief Law.

If an Applicable Premium Event occurs under clause (b), (c), (d) or (e) above, the entire outstanding principal amount of the Loans shall be deemed to be subject to the Applicable Premium Event on the date on which such Applicable Premium Event occurs.

Approved Budget” has the meaning set forth in Section 6(iii) of the Schedule.

Asset Sales” means any sale, lease, outbound Intellectual Property license, outbound Intellectual Property sublicense, transfer or other disposition by Borrower to any Person (including by way of redemption by such Person) of any asset (including, without limitation, any capital stock or other securities of, or equity interests in, another Person).

 

 

15


Available Cash” means all cash held in Deposit Accounts of the Borrower subject to an Account Control Agreement in favor of Lender, or, subject to the Intercreditor Agreements, Emblem, net of Overdue Accounts Payable and all other outstanding liabilities of Borrower. For the avoidance of doubt, Available Cash shall not include unused availability under this Agreement or any other revolving credit facility.

Average Monthly Cash” means for any calendar month ending after the Restatement Date (commencing with the calendar month ending September 30, 2024), the amount equal to the quotient of (i) the sum of Available Cash as calculated for each calendar day during such calendar month divided by (ii) the number of calendar days occurring during such calendar month.

Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto.

Beneficial Ownership Certification” means a certification regarding beneficial ownership of Borrower as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” means 31 C.F.R. §1010.230.

Board” means the board of directors (or equivalent governing body) of Holdings.

Board Materials” has the meaning specified in Section 5.9.

Borrower” has the meaning set forth in the Preamble hereto.

Borrower’s Address” has the meaning specified in Section 9.6.

Borrowing Notice” has the meaning set forth in Section 1.4(a).

Budget” means the 13-week statement of Borrower’s anticipated cash receipts and cash disbursements (including, without limitation, cash outflows pursuant to the Overdue Accounts Payable Schedule) for the 13 weeks ending after the Restatement Date (commencing Friday, October 4, 2024 (for the 13-week period commencing Sunday, October 6, 2024)), as set forth on a weekly basis, as may be updated from time to time by an Approved Updated Budget.

Budget Event” means (i) the actual amount of aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) during any Budget Testing Period exceeding the projected aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) in the Budget for such Budget Testing Period by more than a Permitted Variance and/or (ii) the actual amount of aggregate operating receipts during any Budget Testing Period being less than the projected aggregate operating receipts in the Budget for such Budget Testing Period by more than a Permitted Variance.

Budget Testing Date” means, with respect to the Budget, each Wednesday of each calendar week occurring after the Restatement Date (commencing on October 16, 2024) and each Wednesday thereafter.

Budget Testing Period” means, the week period ending immediately prior to the Budget Testing Date (i.e., Sunday to Saturday).

Business Day” means for all purposes any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close.

Capital Expenditures” means all expenditures made and liabilities incurred for the acquisition of any fixed asset or improvement, replacement, substitution or addition thereto which has a useful life of more than one year and including, without limitation, those arising in connection with any lease of property by Borrower that, in accordance with GAAP, should be capitalized for financial reporting purposes and reflected as a liability on the balance sheet of Borrower.

 

 

16


Capitalized Lease Obligations” means, with respect to any Person, all rental obligations of such Person which, under GAAP, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with GAAP.

Change of Control” means the occurrence of any of the following after the Restatement Date:

(x) there shall be a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of, or equity ownership interest in, Holdings, in one or more transactions, compared to the ownership of the same in effect on the date hereof, without the prior written consent of the Lenders (excluding any change in ownership from (i) the issuance of Class B Common Stock and/or Class C Units to Lender or Emblem representing up to 49.99% of the greater of (x) the equity ownership interests in the Borrower and the voting power in Holdings as of the date hereof and (y) the equity ownership interests in Borrower and voting power in Holdings as of the Additional Loans Funding Date to Emblem and up to 25% of the equity ownership interests in Borrower and voting power in Holdings to the Lenders, (ii) the exchange of Class B Common Stock and/or Class C Units pursuant to the 2024 Exchange Agreement or (iii) any acquisition of shares of stock or equity interests in Holdings or Borrower by Lender or Emblem or any of their respective Affiliates) or (y) Holdings ceases to own, directly, beneficially, 100.0% of the issued and outstanding Class A equity interests of Borrower.

Class A Common Stock” means the Class A common stock, par value $0.0001 per share, of Holdings. “Class C Unit” means a Class C Unit of Borrower.

COI Equipment” means assets currently stored at 1820 Yeager Ave, LaVerne CA 91750 as set forth on Annex H.

Collateral” has the meaning set forth in Section 2 above.

Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

Default” means any event which with notice or passage of time or both, would constitute an Event of Default.

Default Rate” has the meaning set forth in the Schedule.

Deposit Accounts” means all present and future “deposit accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit.

Designated Account” has the meaning set assigned to such term in the Emblem Facility.

Dollars” or “$” shall mean lawful money of the United States.

Emblem” or “Emblem Lenders” means, collectively, Emblem-RGF Main LLC, Emblem-RGF Executive LLC, and Emblem-RGF Blocker Inc. (and their successors and permitted assigns).

Emblem Facility” means the credit facility provided to the Borrower pursuant to the Emblem Loan Agreement.

Emblem Loan Agreement” means that certain Super-Priority Loan and Security Agreement, dated as of the Restatement Date, by and among Holdings, Borrower, Emblem-RGF Main LLC, as administrative agent and collateral agent and the Emblem Lenders from time to time party thereto, as amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms of the Intercreditor Agreements.

Equipment” means all present and future “equipment” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

 

17


Event of Default” has the meaning set forth in Section 7.1.

Excluded Assets” means (i) any account exclusively used for funding payroll or segregating payroll taxes or funding other employee wage or benefit for the then current payroll period, (ii) zero balance accounts the balance of which is swept each Business Day to a Deposit Account subject to an Account Control Agreement in favor of Lender, (iii) trust, fiduciary or other escrow accounts established for the benefit of third parties in the ordinary course of business or in connection with Permitted Acquisitions and other permitted Investments; (iv) any account that is not located in the United States or (v) the Designated Account.

Financial Covenants” means the financial covenants set forth in Section 5 of the Schedule.

GAAP” means generally accepted accounting principles in the United States of America consistently applied.

General Intangibles” means all present and future “general intangibles” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

Governmental Authority” shall mean any U.S. or foreign federal, state, provincial, territorial, municipal, local or other governmental or regulatory authority, agency, instrumentality or body, court, arbitrator or self-regulatory organization.

Guarantee Agreement” means that certain Guarantee Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) among Holdings, the other Guarantors from time to time party thereto and Lender.

Guarantors” means, collectively, (i) Holdings and (ii) each other Person who has guaranteed, or in the future guarantees, any of the Obligations.

Holdings” has the meaning set forth in the Preamble hereto.

“including” means including (but not limited to).

Indebtedness” of any Person means:

(a) all obligations of such Person for borrowed money,

(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments,

(c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person,

(d) all obligations of such Person issued or assumed as the deferred purchase price of property or services, including earnouts (other than trade payables accrued in the ordinary course of business and that are not outstanding for a period of more than 180 days),

(e) all purchased money indebtedness and Capitalized Lease Obligations of such Person,

(f) all net payments that such Person would have to make in the event of an early termination, on the date indebtedness of such person is being determined, in respect of outstanding hedging agreements,

(g) the maximum amount available to be drawn under all letters of credit, bankers’ acceptances and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations, all non-contingent obligations of such person in respect of letters of credit, and

 

 

18


(h) all guarantees by such Person of Indebtedness described in clauses (a) to (g) above.

Inside Debt” has the meaning set forth in Section 8(a) of the Schedule.

Intellectual Property” means, collectively, all present and future intellectual property and proprietary rights in any jurisdiction throughout the word, including (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) Internet domain names, social media account identifiers, trade secret rights, including all rights to unpatented inventions and know-how, processes, production methods and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisionals, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, service marks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected or associated with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all causes of action, claims for damages by way of past, present and future infringement, dilution, misappropriation, or other violation or impairment of any of the rights included above and all income, royalties, license fees damages and payments now or hereafter due and/or payable under or with respect thereto; and (j) all licenses or user or other agreements granted to or by Borrower with respect to any of the foregoing.

Intercreditor Agreements” means, collectively, the 1L/1L Intercreditor Agreement and the 1L/2L Intercreditor Agreement.

Inventory” means all present and future “inventory” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

Investment” means any beneficial ownership interest in any Person (including stock, securities, partnership interest, limited liability company interest, or other interests), any acquisition by Borrower, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the equity interests of or a business line or unit or a division of, any Person, and any loan, advance or capital contribution to any Person, including the creation or capital contribution to any wholly-owned or partially-owned subsidiary).

Investment Property” means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

Lender” has the meaning set forth in the Preamble hereto.

Lien” shall mean, with respect to any asset, (a) any mortgage, charge, hypothec, deed of trust, Lien, hypothecation, pledge, charge, security interest or similar monetary encumbrance in or on such asset; and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.

 

 

19


Litigation Annex” means the litigation schedule attached hereto as Annex F on the Restatement Date (as such Annex F may be supplemented from time to time after the Restatement Date by Lender for any outstanding claims, suits, litigation and other proceedings not disclosed to Lender that existed prior to the Restatement Date).

Loan” has the meaning set forth in the Preamble hereto.

Loan Documents” means, collectively, this Agreement, the Guarantee Agreement, any Security Documents, the Intercreditor Agreements, the Perfection Certificate, the Budgets, the Variance Reports, and all other present and future documents, instruments and agreements between Lender and Borrower (or Guarantor, if applicable), including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

Loan Parties” means Borrower and the Guarantors. As of the Restatement Date, the Loan Parties are Borrower and Holdings.

Material Adverse Change” means any of the following: (a) a material adverse change in the business, operations, or financial or other condition of Borrower, (b) a material impairment of the prospect of repayment of any portion of the Obligations; or (c) a material impairment of the value or priority of Lender’s security interests in the Collateral.

Material Indebtedness” shall mean Indebtedness (other than (i) the Obligations and (ii) the Obligations under the Emblem Facility) of Borrower in an aggregate principal amount exceeding $500,000 (excluding ordinary course trade payables).

Maturity Date” has the meaning set forth in the Schedule.

Maximum Legal Rate” has the meaning set forth in Section 2A of the Schedule.

Net Cash Proceeds” means (a) with respect to any Asset Sale, an amount equal to: (i) cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Borrower from such Asset Sale, minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (1) income or gains taxes (but excluding any tax distributions) payable by the Borrower as a result of any gain recognized in connection with such Asset Sale, (2) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans or the loans under the Emblem Facility) that, in the case of a Loan Party, is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (3) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Borrower in connection with such Asset Sale or for any other liabilities retained by Borrower associated with such Asset Sale, (4) bona fide selling fees, costs, commissions and expenses (including reasonable brokers’ fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes) and (5) Borrower’s good faith estimate of payments required to be made with respect to unassumed liabilities relating to the properties sold within 180 days of such Asset Sale; provided that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 180 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds; (b) (i) any cash payments or proceeds received by Borrower (1) under any casualty insurance policy in respect of a covered loss thereunder arising after the Restatement Date or (2) as a result of the taking of any assets of Borrower by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (1) any actual and reasonable costs incurred by Borrower in connection with the collection, adjustment or settlement of any claims of Borrower in respect thereof, and (2) any bona fide direct costs incurred in connection with any sale of such assets as referred to in preceding clause (i)(2)) including income taxes (but excluding tax distributions) paid or imminently payable by Borrower as a result of any gain recognized in connection therewith and the costs and expenses incurred in connection with the preparation of assets for transfer upon a taking or condemnation; and (c) with respect to any issuance or incurrence of Indebtedness, the cash proceeds thereof, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses.

 

 

20


Net Income” means, as calculated on a consolidated basis for Holdings and its consolidated Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Holdings and its consolidated Subsidiaries for such period taken as a single accounting period.

Obligations” means the Loan and all present and future loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Lender, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, whether arising from an extension of credit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Lender in Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without limitation, all principal, interest, charges, expenses, fees, premium (including, without limitation, the Applicable Premium), attorney’s fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, auction fees, liquidation fees, appraisal fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other Loan Documents.

Observer” has the meaning specified in Section 5.9.

Other Property” means the following as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto: all present and future “commercial tort claims” (including without limitation any commercial tort claims identified in the Perfection Certificate), “documents”, “instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and all other goods and personal property of every kind, tangible and intangible, whether or not governed by the Uniform Commercial Code.

Outstanding Accounts Payable” means the accounts payable balances (including the vendors in respect thereof) of Borrower as of the Restatement Date as set forth on Annex B (as such Annex B may be supplemented from time to time after the Restatement Date by Lender for any Understated Accounts Payable Amount).

Overdue Accounts Payable Schedule” means the payment plan and milestone dates for overdue accounts payable of Borrower as set forth on Annex C (as such Annex C may be supplemented from time to time after the Restatement Date by Lender for any Understated Accounts Payable Amount).

Paydown Date” means the date on which Lender receives an amount equal to the Additional Commitment (under and as defined in the Emblem Facility) (which, for the avoidance of doubt, is an amount equal to $50,000,000 as of the Restatement Date as reduced from time to time by the amount of any Subsequent Understated AP Loans (under and as defined in the Emblem Facility) and any Subsequent Litigation Settlement Loans (under and as defined in the Emblem Facility)), in each case funded under the Emblem Facility with the consent of the Lender, minus all fees and expenses required to be paid pursuant to Section 11 of the Schedule to the Emblem Facility, in each case, in accordance with the Approved Budget (as defined in the Emblem Facility) (such amount, the “PMC Minimum Paydown Amount”) consisting of direct or indirect proceeds from the Emblem Lenders (either by way of assignment of all or any portion of the Loans to any of the Emblem Lenders or by way of funding by any of the Emblem Lenders of loan proceeds to Borrower and repayment or prepayment by Borrower.

 

 

21


Payment” means all checks, wire transfers and other items of payment received by Lender (including proceeds of Accounts and payment of the Obligations in full) for credit to Borrower’s outstanding Loan.

Perfection Certificate” has the meaning set forth in Section 9(i) of the Schedule.

Permitted Dispositions” means:

(i) the sale of finished Inventory and all other goods and services in the ordinary course of Borrower’s business;

(ii) ordinary course uses and transfers of cash and cash equivalents;

(iii) intercompany sales or dispositions of assets between Borrower and any Subsidiaries of Borrower in the ordinary course of business or consistent with past practice;

(iv) subject to the prior written consent of Lender in its sole and absolute discretion, disposals of damaged, obsolete, used, worn out or surplus assets (including, without limitation, equipment and fixtures) no longer used or useful to the business of Borrower or economically impracticable to maintain;

(v) sales of property (including like-kind exchanges) to the extent that (x) such property is exchanged for credit (on a fair market value basis) against the purchase price of similar replacement property or (y) such property is sold or otherwise disposed of for fair market value and the proceeds of such sale or disposition are promptly applied to the purchase price of similar replacement property;

(vi) leases, subleases, non-exclusive licenses or sublicenses of property or Intellectual Property in the ordinary course of business which do not materially interfere with the business of Borrower or any of the other Loan Parties;

(vii) Asset Sales with a fair market value less than or equal to $250,000 in the aggregate per fiscal year;

(viii) Asset Sales of COI Equipment for fair market value and for consideration less than or equal to $5,000,000.00; and

(viii) subject to the prior written consent of Lender in its sole and absolute discretion, Asset Sales so long as (1) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by Borrower), (2) no less than 75% of the consideration for such Asset Sale shall be paid in cash or cash equivalents, (3) no Event of Default is continuing or would exist after giving effect thereto and (4) the Net Cash Proceeds thereof shall be applied as required by Section 4.2(a), provided, that the fair market value of all such Asset Sales in any fiscal year shall not exceed $5,000,000 in the aggregate.

Permitted Indebtedness” means:

 

  (a)

[reserved];

(b) (i) the Obligations under this Agreement in an aggregate principal amount not to exceed $52,986,153.25, (ii) the obligations under the Emblem Facility in an aggregate principal amount not to exceed the sum of (x) $110,000,000.00 plus (y) the amount of any Subsequent Litigation Settlement Loans (as defined in the Emblem Facility) and any Subsequent Understated AP Loans (as defined in the Emblem Facility) from time to time made thereunder, and (iii) the obligations under the Amended and Restated Term Loan B Agreement in an aggregate principal amount not to exceed $100,543,574.95, (in each case, plus any increases to principal as a result of any interest or fees paid in kind, as applicable and any Applicable Premium as defined herein or in the Emblem Facility or in the Amended and Restated Term Loan B Agreement); and

(c) trade payables and other contractual obligations to suppliers and customers incurred in the ordinary course of business.

Permitted Investments” means:

(a) Investments in Subsidiaries shown on the Perfection Certificate and existing on the date hereof;

(b) cash and cash equivalents;

 

 

22


(c) Investments consisting of Deposit Accounts in which Lender has a super-priority perfected security interest (subject to the Intercreditor Agreements);

(d) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and

(e) other Investments in an aggregate amount not to exceed $50,000.

Permitted Liens” means the following:

(a) Liens securing the Obligations;

(b) Liens on the Collateral, which may rank pari passu in right of security with the Liens securing the Obligations (other than the Liens on the Designated Account and all funds maintained therein), securing the Emblem Facility, and at all times subject to the 1L/1L Intercreditor Agreement;

(c) Liens on the Collateral, which must rank junior in right of security to the Liens securing the Obligations, securing the Amended and Restated Term Loan B Agreement, and at all times subject to the 1L/2L Intercreditor Agreement;

(d) any leases of specific items of Equipment listed in the Perfection Certificate;

(e) [Reserved];

(f) Liens for taxes not yet payable or contested in good faith by Borrower in accordance with Section 3.8; and

(g) additional security interests and Liens which are subordinate to the security interest of Lender and are consented to in writing by Lender, which consent may be withheld in its sole and absolute discretion.

Permitted Disbursements Variance” means actual disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) for the most recently ended Budget Testing Period are no greater than 115% (or such greater percentage determined by Lender in its sole and absolute discretion if requested by management of the Borrower) of the projected disbursements in the then in-effect Approved Budget (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule).

Permitted Receipts Variance” means actual cash receipts for the most recently ended Budget Testing Period are no less than 85% (or such lesser percentage determined by Lender in its sole and absolute discretion if requested by management of the Borrower) of the projected cash receipts in the then in-effect Approved Budget.

Permitted Variance” means, collectively, the Permitted Receipts Variance and the Permitted Disbursements Variance.

Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, government, or any agency or political division thereof; or any other entity.

Pledge Agreement” means that certain Pledge Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) by Holdings in favor of Lender.

PMC” means PMC Financial Services Group, LLC.

Restatement Date” means the first date on which all of the conditions precedent in Section 9 of Schedule are satisfied or waived by Lender in its sole and absolute discretion, which date was September 20, 2024.

SEC” means the Securities and Exchange Commission or any successor thereto.

Security Documents” means the Pledge Agreement, the Account Control Agreements, and each of the security agreements, pledge agreements, mortgages and other instruments and documents executed and delivered from time to time entered into by the Loan Parties.

Specified Agreement” has the meaning set forth in Section Annex G.

 

 

23


Specified Amounts” has the meaning assigned to such term in Annex G.

Specified Conditions” has the meaning assigned to such term in Annex G.

Specified Deductions” has the meaning assigned to such term in Annex G.

Specified Dispute” has the meaning assigned to such term in Annex G.

Specified Event of Default” has the meaning assigned to such term in Annex G.

Specified Payments” has the meaning assigned to such term in Annex G.

Specified Post-Closing Requirements” has the meaning assigned to such term in Annex G.

Specified Use” has the meaning assigned to such term in Annex G. “Subsidiary” means, with respect to any Person, a Person of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by such Person or one or more Affiliates of such Person.

Tax Receivables Agreement” means Amended and Restated Tax Receivables Agreement, dated as of the Restatement Date, by and among the corporation, Lender, the TRA Holders (as defined therein), and Bryan Freeman, in his capacity as TRA Holder Representative (s defined therein) (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted herein.)

Transactions” means the transactions to occur pursuant to the Loan Documents, including (a) the execution, delivery and performance of the Loan Documents, the creation of the super-priority Liens pursuant to the Security Documents and the extension of credit hereunder and the use of proceeds thereof, (b) the payment of all fees and expenses to be paid and owing in connection with the foregoing, (c) the amendment and restatement of certain warrants issued by Holdings to Lender, (d) the issuance of the Class B Common Stock and Class C Units to Emblem, and at Lender’s option and subject to certain conditions, (e) the exchange of Class B Common Stock and Class C Units for Class A Common Stock pursuant to the 2024 Exchange Agreement.

Uniform Commercial Code” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction in the United States, to the extent it may be required to apply to any item or items of Collateral.

United States” means the United States of America (including any State or territory thereof and the District of Columbia).

Variance Report” has the meaning set forth in Section 6 of the Schedule.

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Uniform Commercial Code, to the extent such terms are defined therein.

9.GENERAL PROVISIONS.

9.1 Computations. In computing interest on the Obligations, all Payments received after 12:00 Noon Pacific Time on any day shall be deemed received on the next Business Day, and Payments received by Lender (including proceeds of Receivables and payment of the Obligations in full) shall be deemed applied by Lender on account of the Obligations two (2) Business Days after receipt by Lender of immediately available funds. Lender shall not be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Lender in its good faith business judgment, and Lender may charge Borrower’s loan account for the amount of any item of payment which is returned to Lender unpaid.

9.2 Application of Payments. Subject to the Intercreditor Agreements, all payments with respect to the Obligations may be applied, and in Lender’s sole and absolute discretion reversed and re-applied, to the Obligations, in such order and manner as Lender shall determine in its sole and absolute discretion.

 

 

24


9.3 Increased Costs and Reduced Return. If Lender shall have determined that the adoption or implementation of, or any change in, any law, rule, treaty or regulation, or any policy, guideline or directive of, or any change in, the interpretation or administration thereof by, any court, central bank or other administrative or governmental authority, or compliance by Lender with any directive of, or guideline from, any central bank or other Governmental Authority or the introduction of, or change in, any accounting principles applicable to Lender (whether or not having the force of law) shall (i) subject Lender to any tax, duty or other charge with respect to this Agreement or any Loan made hereunder, or change the basis of taxation of payments to Lender of any amounts payable hereunder (except for taxes on the overall net income of Lender), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement against any Loan, or against assets of or held by, or deposits with or for the account of, or credit extended by, Lender, or (iii) impose on Lender any other condition regarding this Agreement or any Loan, and the result of any event referred to in clauses (i), (ii) or (iii) above shall be to increase the cost to Lender of making any Loan, or agreeing to make any Loan or to reduce any amount received or receivable by Lender, then, upon demand by Lender, Borrower shall pay to Lender such additional amounts as will compensate Lender for such increased costs or reductions in amount. All amounts payable under this Section shall bear interest from the date of demand by Lender until payment in full to Lender at the highest interest rate applicable to the Obligations. A certificate of Lender claiming compensation under this Section, specifying the event herein above described and the nature of such event shall be submitted by Lender to Borrower, setting forth the additional amount due and an explanation of the calculation thereof, and Lender’s reasons for invoking the provisions of this Section, and the same shall be final and conclusive absent manifest error.

9.4 [Reserved].

9.5 Monthly Accountings. Lender may provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement if requested by Borrower. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Lender), unless Borrower notifies Lender in writing to the contrary within 60 days after such account is rendered, describing the nature of any alleged errors or omissions.

9.6 Notices. All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed or by electronic transmission pursuant to procedures approved by Lender (i) to the Loan Parties at the address shown in the heading to this Agreement, 3 Executive Campus, Suite 155 Cherry Hill, New Jersey 080023, attention: Jim Behling, Chief Financial Officer, mobile: 312.656.5810 (the “Borrower’s Address”), or (ii) to Lender at the address shown in the heading to this Agreement with a copy to Lender at 12243 Branford Street, Sun Valley, CA 91352, Attention: T.C. Cheong with a further copy (which shall not constitute notice) to: Winston & Strawn LLP, 800 Capitol Street, Suite 2400, Houston, TX 77002-2924: Attention: Ryan Hunsaker, Email: rhunsaker@winston.com, or (iii) for either party at any other address designated in writing by one party to the other party. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid.

9.7 Severability. Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

9.8 Integration. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Lender and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings. representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

 

 

25


9.9 Waivers; Indemnity. The failure of Lender at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Lender later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Lender or its agents or employees, but only by a specific written waiver signed by an authorized officer of Lender and delivered to Borrower. Each of Holdings and Borrower waives the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or any other Loan Document, and each of Holdings and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Lender on which Holdings and Borrower is or may in any way be liable, and notice of any action taken by Lender, unless expressly required by this Agreement. Each of Holdings and Borrower hereby agrees to indemnify Lender and its Affiliates, Subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable attorneys’ fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between Lender, Holdings or Borrower, or any other matter, relating to Holdings, Borrower or the Obligations; provided that this indemnity shall not extend to damages proximately caused by the indemnitee’s own gross negligence or willful misconduct. Notwithstanding any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue in full force and effect.

 

9.10 Liability. NEITHER LENDER NOR ITS PARENT, NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE LIABLE FOR ANY CLAIMS, DEMANDS, LOSSES OR DAMAGES, OF ANY KIND WHATSOEVER, MADE, CLAIMED, INCURRED OR SUFFERED BY HOLDINGS, BORROWER OR ANY OTHER PARTY THROUGH THE ORDINARY NEGLIGENCE OF LENDER, OR ITS PARENT OR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS, BUT NOTHING HEREIN SHALL RELIEVE LENDER FROM LIABILITY FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NEITHER LENDER NOR ITS PARENT, NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE RESPONSIBLE OR LIABLE TO HOLDINGS, BORROWER OR TO ANY OTHER PARTY FOR ANY INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF ANY FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER ACT, OMISSION OR TRANSACTION.

9.11 Amendment. The terms and provisions of this Agreement may not be waived, amended or otherwise modified, except in a writing executed by Borrower and Lender.

9.12 Time of Essence. Time is of the essence in the performance by Holdings and Borrower of each and every obligation under this Agreement.

 

 

26


9.13 Attorneys Fees and Costs. Borrower shall reimburse Lender for all reasonable attorneys’ fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Lender, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys’ fees and costs Lender incurs in order to do the following: prepare and negotiate this Agreement and all present and future documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower’s books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Lender’s security interest in, the Collateral; and otherwise represent Lender in any litigation relating to Borrower. If either Lender or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys’ fees and costs to which Lender may be entitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

9.14 Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Holdings, Borrower and Lender; provided, however, that Holdings and Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Lender, and any prohibited assignment shall be void. No consent by Lender to any assignment shall release Holdings or Borrower from its liability for the Obligations.

9.15 [Reserved].

9.16 Limitation of Actions. Any claim or cause of action by Holdings or Borrower against Lender, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Agreement, or any other Loan Document, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Lender, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Holdings or Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within one year after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an officer of Lender, or on any other person authorized to accept service on behalf of Lender, within thirty (30) days thereafter. Each of Holdings and Borrower agrees that such one-year period is a reasonable and sufficient time for Holdings and Borrower, as applicable, to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended except by the written consent of Lender in its sole and absolute discretion. This provision shall survive any termination of this Agreement or any other Loan Document.

9.17 Paragraph Headings; Construction. Paragraph headings are only used in this Agreement for convenience. Holdings, Borrower and Lender acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Lender, Holdings or Borrower under any rule of construction or otherwise.

 

 

27


9.18 Public Announcement. Borrower hereby agrees that Lender may make a public announcement of the transactions contemplated by this Agreement, and may publicize the same in marketing materials, newspapers and other publications, and otherwise, and in connection therewith may use Borrower’s name, tradenames and logos. Lender understands and acknowledges that Borrower may be required pursuant to applicable securities laws to publicly announce the transactions contemplated by this Agreement, provided that Borrower shall not make any such public announcement unless Lender has provided its prior written approval of the form and substance of such public announcement (in its reasonable discretion).

9.19 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

9.20 Jurisdiction; Consent to Service of Process.

(a) Each of Holdings, Borrower and Lender irrevocably and unconditionally agree that they will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York sitting in New York County, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Notwithstanding the foregoing, each party hereto agrees that Lender retains the right to bring proceedings against any Loan Party in the courts of any other jurisdiction solely in connection with the exercise of any rights or remedies to enforce its security interest in the Collateral created hereunder or under any other Security Document or as otherwise provided in the Guarantee Agreement.

(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.6. Nothing in this Agreement will affect the right of any party to this Agreement or any other Loan Document to serve process in any other manner permitted by law.

9.21 Mutual Waiver of Jury Trial. HOLDINGS, BORROWER AND LENDER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN LENDER, HOLDINGS AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER, HOLDINGS OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDER, HOLDINGS OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

 

 

28


9.22 Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by Lender and shall survive the making by Lender of the Loans and the execution and delivery of the Loan Documents, regardless of any investigation made by such person or on its behalf, and shall continue in full force and effect until the Termination Date. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein shall survive the Termination Date.

9.23 Withholding Taxes. Prior to Borrower making any payments to Lender, Lender shall have delivered to Borrower a duly completed and executed IRS Form W-9 of Lender. Borrower and Lender each hereby agree that each payment by Borrower under this Agreement shall, except as required by law, be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes. In the event that Borrower is required to withhold any amounts in respect of taxes under applicable law, Borrower shall (i) withhold or deduct any taxes required to be withheld or deducted from any payment due hereunder and (ii) pay such additional amounts to Lender so that after taking into account all taxes withheld or deducted from payments to Lender (including on any additional amounts payable pursuant to this clause) Lender receives the amount that it would have received had no such deduction or withholding been made. Borrower shall pay to the appropriate Governmental Authority any such taxes withheld or deducted before penalties are payable thereon, and if any such penalties are payable, Borrower shall also make payment thereof when due to the appropriate Governmental Authority. Within thirty (30) days after each such payment of taxes or penalties, Borrower shall deliver to Lender a receipt evidencing such payment.

9.24 [Reserved.]

10. Amendment and Restatement. Each of the parties hereto agrees as follows:

10.1 this Agreement (including all Exhibits and Schedules) shall amend, restate and replace in its entirety the Existing Loan Agreement (including all exhibits and schedules attached thereto) with respect to the Existing COI Equipment Term Loan and the Existing Revolving Loan on the Restatement Date;

10.2 from and after the date first set forth above, all references to the “Loan Agreement” contained in the Loan Documents shall be deemed to refer to this Agreement and all references to any Article or Section (or subsection) of this Agreement in any other Loan Document shall be amended to become references to the corresponding provisions of this Agreement;

10.3 this Agreement shall not constitute a novation of the obligations and liabilities of the parties under the Existing Loan Agreement or the other Loan Documents as in effect prior to the date first set forth above and that remain outstanding as of the date first set forth above and all obligations under the Existing Loan Agreement (as such obligations may be amended, supplemented, replaced, expanded, extended or otherwise modified hereby on the date first set forth above) shall constitute obligations hereunder and shall continue to be valid, enforceable and in full force and effect and not to be impaired, in any respect, by the effectiveness of this Agreement; and

10.4 this amendment and restatement of the Existing Loan Agreement shall be limited as written and not be a consent to any other amendment, restatement, supplement, waiver or other modification of any other provisions under any Loan Documents, without regard to whether similar, and, except as expressly provided herein or in any other Loan Document, all terms and conditions of the Loan Documents remain in full force and effect unless otherwise specifically amended hereby.

 

 

29


11. Counterparts; Execution. This Agreement may be executed in counterparts (and by different parties hereto on 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 by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement. For the avoidance of doubt, the words “execution,” “signed,” “signature,” and words of like import in this Agreement or any other Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

12. Additional Loans Funding Date under Emblem Facility. Each of Lender, Holdings and the Borrower agree that Lender shall have no consent rights over the funding of the Additional Loans (under and as defined in the Emblem Facility) on the Additional Loans Funding Date (as defined in the Emblem Facility).

 

 

30


Borrower:

REAL GOOD FOODS, LLC

 

By  

/s/ Timothy S. Zimmer

Name:   Timothy S. Zimmer
Title:   Chief Executive Officer

Holdings:

THE REAL GOOD FOOD COMPANY, INC.

 

By  

/s/ Timothy S. Zimmer

Name:   Timothy S. Zimmer
Title:   Chief Executive Officer

Lender:

PMC Financial Services Group, LLC

 

By  

/s/ Walter E. Buttkus, III

Name:   Walter E. Buttkus, III
Title:   President

 

31


PMC Financial Services Group, LLC

Schedule to

Amended and Restated Super-Priority Loan and Security Agreement

 

Borrower:    Real Good Foods, LLC
Holdings:      The Real Good Food Company, Inc.
Address:   

3 Executive Campus, Suite 155

Cherry Hill, New Jersey 08002

Date:    September 20, 2024

This Schedule forms an integral part of the Amended and Restated Super-Priority Loan and Security Agreement dated as of September 20, 2024 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, this “Agreement”) by and among PMC Financial Services Group, LLC (the “Lender”), The Real Good Food Company, Inc., a Delaware corporation (“Holdings”), and Real Good Foods, LLC (f.k.a. The Real Good Food Company LLC), a Delaware limited liability company (the “Borrower”).

 

 

 

13. COMMITMENT

 

(Section 1.1):

 

As used herein, the term “Loan” means the loan made as a continuation of, and consolidation of, the Existing Revolving Loans and the Existing COI Equipment Loans in a principal amount equal to $52,986,153.25.

 

Any portion of the Loan that is repaid may not be reborrowed.

 

All payments by Borrower to Lender in respect of the COI Equipment Term Loan shall be made via ACH banking transfer to Lender’s bank account per written instructions that

14. INTEREST.

 

Interest Rate (Section 1.2):

 

The Loan outstanding from time to time shall bear interest at an annual rate equal to 15.00% which shall be paid in-kind, as further set forth in Section 1.2 of this Agreement.

 

Upon the occurrence and during the continuance of an Event of Default, the Loan and all other monetary Obligations shall bear interest (including post-petition interest in any proceeding under any applicable Debtor Relief Laws) at a rate (the “Default Rate”) that is 5.00% per annum in excess of the interest rate otherwise payable hereunder which shall be payable in cash in immediately available funds on demand.


2A. USURY SAVINGS CLAUSE

 

Provisions Relating to Interest

 

Notwithstanding the provisions of this Agreement regarding the rates of interest applicable to the Initial Loans, if at any time the amount of such interest computed on the basis of the interest rate set forth herein (the “Applicable Interest Rate”) would exceed the amount of such interest computed upon the basis of the maximum rate of interest permitted by applicable state or federal law in effect from time to time hereafter, after taking into account, to the extent required by applicable law, any and all fees and charges in connection therewith deemed in the nature of interest under applicable law provided for in this Agreement or in any other agreement between Borrower and Lender (the “Maximum Legal Rate”), the interest payable under this Agreement shall be computed upon the basis of the Maximum Legal Rate, but any subsequent reduction in the Applicable Interest Rate shall not reduce such interest thereafter payable hereunder below the amount computed on the basis of the Maximum Legal Rate until the aggregate amount of such interest accrued and payable under this Agreement equals the total amount of interest which would have accrued if such interest had been at all times computed solely on the basis of the Applicable Interest Rate.

 

No agreements, conditions, provisions or stipulations contained in this Agreement or any other instrument, document or agreement between Borrower and Lender or default of Borrower, or the exercise by Lender of the right to accelerate the payment of the maturity of principal and interest, or to exercise any option whatsoever contained in this Agreement or any other agreement between Borrower and Lender, or the arising of any contingency whatsoever, shall entitle Lender to collect, in any event, interest exceeding the Maximum Legal Rate and in no event shall Borrower be obligated to pay interest exceeding such Maximum Legal Rate and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of interest over such Maximum Legal Rate. In the event any interest is charged in excess of the Maximum Legal Rate (“Excess”), Borrower acknowledges and stipulates that any such charge shall be the result of an accidental and bona fide error, and such Excess shall be, first, applied to reduce the principal then unpaid hereunder; second, applied to reduce the remaining Obligations; and third, returned to Borrower, it being the intention of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship. Borrower recognizes that, with fluctuations in the Applicable Interest Rate and the Maximum Legal Rate, such an unintentional result could inadvertently occur. By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon the charging or receiving of any interest in excess of the maximum authorized by applicable law. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all interest at any time contracted for, charged or received by Lender in connection with this Agreement shall be amortized, prorated, allocated and spread in equal parts during the entire term of this Agreement.

 

33


 

The provisions of this Section 2A of this Schedule shall be deemed to be incorporated into every document or communication relating to the Obligations which sets forth or prescribes any account, right or claim or alleged account, right or claim of Lender with respect to Borrower (or any other obligor in respect of Obligations), whether or not any provision of this Section 2A of this Schedule is referred to therein. All such documents and communications and all figures set forth therein shall, for the sole purpose of computing the extent of the liabilities and obligations of Borrower (or other obligor) asserted by Lender thereunder, be automatically recomputed by any Borrower or obligor, and by any court considering the same, to give effect to the adjustments or credits required by this Section 2A of this Schedule.

 

If the applicable state or federal law is amended in the future to allow a greater rate of interest to be charged under this Agreement or any other Loan Documents than is presently allowed by applicable state or federal law, then the limitation of interest under this Section 2A of this Schedule shall be increased to the maximum rate of interest allowed by applicable state or federal law as amended, which increase shall be effective hereunder on the effective date of such amendment, and all interest charges owing to Lender by reason thereof shall be payable upon demand.

15. RESERVED  

16. MATURITY DATE

 

(Section 6.1):

  As used herein, the term “Maturity Date” means (a) if the Paydown Date has not occurred, December 31, 2026 and (b) if the Paydown Date has occurred, the fifth anniversary of the Restatement Date; provided, that if the board of directors and stockholders of Holdings do not each approve the issuance of up to 49.9% of the outstanding Class B Common Stock and Class A Common Stock (and corresponding Class C Units of RGF, LLC, if applicable) on or prior to the six-month anniversary of the Restatement Date, the Maturity Date shall mean the six-month anniversary of the Restatement Date.

 

34


17. FINANCIAL COVENANTS

 

(Section 5.1):

 

(a) Minimum Adjusted EBITDA.

 

Prior to the Paydown Date, Borrower shall not permit Adjusted EBITDA (i) for the calendar months ending September 30, 2024, October 31, 2024, November 30, 2024 and December 31, 2024, to be less than $1,000,000 for such calendar month and (ii) for any calendar month ending thereafter, to be less than $1,500,000 for such calendar month.

 

From and after the Paydown Date, Borrower shall not permit Adjusted EBITDA for any fiscal quarter ending thereafter, to be less than $6,000,000 for such fiscal quarter.

 

(b) Minimum Daily Cash. Borrower shall not permit Available Cash as of 5:00 PM New York time on each Business Day ending after the Restatement Date to be less than $12,500,000.

 

(c) Minimum Average Monthly Cash. Borrower shall not permit Average Monthly Cash for any calendar month ending after the Restatement Date (commencing with the calendar month ending September 30, 2024) to be less than $15,000,000 for such calendar month.

18. REPORTING.

(Section 5.3):

 

(a) Borrower shall provide Lender with the following:

 

(i) by 5:00 PM New York time on each Business Day occurring after the Restatement Date, reporting on (x) daily production for the immediately preceding Business Day and (y) minimum daily Available Cash for the immediately preceding Business Day, in a form and substance satisfactory to Lender;

 

(ii) by 5:00 PM New York time on Wednesday of each week ending after the Restatement Date (commencing September 25, 2024), a report on weekly sales for the prior calendar week in form and substance satisfactory to Lender;

 

(iii) by 5:00 PM New York time on Friday of each week ending after the Restatement Date (commencing October 4, 2024 (for the 13-week period commencing Sunday, October 6, 2024)), an updated 13-week statement for the subsequent 13-week period (a “Proposed Budget”), which Proposed Budget shall modify and supersede any prior Budget upon the approval by Lender in its sole and absolute discretion (such Proposed Budget upon such approval by Lender, an “Approved Budget”);

 

(iv) by 5:00 PM New York time on each Budget Testing Date, (x) a report (each, a “Variance Report”) in form and substance satisfactory to Lender describing in reasonable detail Borrower’s aggregate cash receipts and aggregate cash disbursements during the relevant Budget Testing Period as compared to the projected aggregate cash receipts and aggregate cash disbursements provided by the then-current Budget for the same period (including breakdown by vendor and category) and (y) an analysis, certified by a senior financial officer of Borrower, demonstrating that a Budget Event shall not have occurred for such Budget Testing Period;

 

(v) by 5:00 PM New York time on each Friday of each week ending after the Restatement Date (commencing September 27, 2024), an updated Overdue Accounts Payable Schedule in the same format as set forth on Annex C, which shall modify and supersede any prior Overdue Accounts Payable Schedule upon the approval by Lender in its sole and absolute discretion;

 

35


 

(vi) as soon as available, within five (5) Business Days after the end of each calendar month, a report on minimum Average Available Cash for the prior calendar month in form and substance satisfactory to Lender;

 

(vii) as soon as available, and in any event, within fifteen (15) days after the end of each month, (x) monthly unaudited financial statements of Holdings and its consolidated Subsidiaries, (y) reporting on operating KPIs and (z) complete month-end physical inventory counts, in each case, for the prior calendar month in form and substance satisfactory to Lender;

 

(viii) as soon as available, and in any event within forty-five (45) days following the end of each fiscal quarter of Holdings, quarterly financial statements of Holdings and its consolidated Subsidiaries, which shall be consistent with the quarterly financial statements filed on form 10-Q with the SEC and accompanied by customary management’s discussion and analysis and which shall be certified by a financial officer of Holdings as fairly presenting, in all material respects, the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes);

 

(ix) as soon as available, and in any event within one hundred twenty (120) days following the end of Holdings’ fiscal year, annual audited financial statements of Holdings and its consolidated Subsidiaries, which shall be consistent with the annual audited financial statements filed on form 10-K with the SEC, which shall be audited by a “big-four” accounting firm or another nationally recognized accounting firm reasonably acceptable to Lender (and accompanied by an opinion of such accountants (which opinion shall not be qualified as to scope of audit or as to the status of Holdings, Borrower or any Subsidiary as a going concern, other than solely with respect to, or resulting solely from, an upcoming maturity date under any series of Indebtedness or any breach of a financial maintenance covenant or any potential inability to satisfy a financial maintenance covenant on a future date or in a future period) to the effect that such consolidated financial statements fairly reviewed or audited by independent certified public accountants acceptable to Lender;

 

(x) no later than seventy-five (75) days prior to the end of each fiscal year of Borrower, annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower;

 

36


 

(xi) concurrently with any delivery of financial statements under clauses (vii), (viii) or (ix) above, a duly executed and completed compliance certificate in form and substance satisfactory to Lender and duly executed by a senior financial officer of Borrower (i) certifying that no Event of Default or Default has occurred since the date of the last certificate delivered pursuant to this clause (xi) or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail demonstrating compliance with the Financial Covenants; and

 

(xii) any material report, certificate or other document provided to the Lender pursuant to the Amended and Restated PMC Facilities from time to time reasonably requested by Lender.

 

(b) Borrower will, on a date following the end of each calendar week (commencing with the first full calendar week ending after the Restatement Date), hold a weekly conference call at a time mutually agreed upon by Borrower and Lender), to discuss cash flows of Borrower and such other matters requested by Lender related the affairs, finances and accounts of Borrower.

19. BORROWER INFORMATION:   Borrower represents and warrants that the information set forth in the Perfection Certificate is true and correct as of the date hereof.
20. ADDITIONAL PROVISIONS  

(a) Subordination of Inside Debt. All present and future indebtedness of Borrower to its officers, directors, shareholders and Affiliates (collectively, “Inside Debt”) shall, at all times, be subordinated to the Obligations pursuant to a subordination agreement satisfactory to Lender. Borrower represents and warrants that as of the Restatement Date there is no Inside Debt presently outstanding.

 

Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Lender a subordination agreement on satisfactory to Lender.

 

(b) Copyrights, Patents, and Trademarks.

 

(a) Borrower hereby represents and warrants that, as of the date of this Agreement, Borrower does not have any maskworks, computer software, or other copyrights, that are registered (or are the subject of any application for registration) with the United States Copyright Office. Borrower hereby covenants and agrees that Borrower will NOT register with the United States Copyright Office (or apply for such registration of) any of Borrower’s maskworks, computer software, or other copyrights, unless Borrower has provided Lender not less than 30 days prior written notice of the commencement of such registration/application and Borrower has executed and delivered to Lender such security agreement(s) and other documentation (in form and substance reasonably satisfactory to Lender) which Lender in its sole and absolute discretion may require for filing with the United States Copyright Office with respect to such registration or application.

 

37


 

(b) Annex 1 sets forth under the name of Borrower a complete and correct list of all patents and trademarks of Borrower that are registered (or the subject of any application for registration) with the United States Patent and Trademark Office and, upon Lender’s request therefor, promptly execute and deliver to Lender such security agreement(s) and other documentation (in form and substance reasonably satisfactory to Lender) which Lender in its sole and absolute discretion may require for filing with the United States Patent and Trademark Office with respect to such registration or application.

 

(c) Borrower will: (x) protect, defend and maintain the validity and enforceability of Borrower’s copyrights, patents, and trademarks; (y) promptly advise Lender in writing of material infringements, misappropriations or violations of Borrower’s copyrights, patents, or trademarks of which Borrower is or becomes aware; and (z) not allow any material item of Borrower’s copyrights, patents, or trademarks to be abandoned, forfeited or dedicated to the public without Lender’s written consent.

 

(c) Control Agreements. Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule, as to any Deposit Accounts (including any lockbox or blocked account) and Investment Property (including securities accounts) maintained with any institution as of the date of this Agreement (in each case, other than Excluded Accounts), Borrower shall cause such institution, concurrently herewith, to enter into an Account Control Agreement in form acceptable to Lender in its sole and absolute discretion in order to perfect Lender’s first-priority security interest, subject to the Intercreditor Agreement, in such Deposit Accounts (including any lockbox or blocked account) and grant Lender “control” (within the meaning of Articles 8 and 9 of the Uniform Commercial Code) over such Deposit Accounts (including any lockbox or blocked account) and Investment Property (including securities accounts). Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule, from and after the date of this Agreement, Borrower shall not maintain any Deposit Accounts (including any lockbox or blocked account) or Investment Property (including securities accounts) with any bank, securities intermediary, or other institution unless Lender has received an Account Control Agreement duly executed by such party in favor of Lender covering such Deposit Account (including any lockbox or blocked account) or Investment Property (including securities accounts), as the case may be.

 

38


 

(d) Manufacturing Facility Standards. Borrower shall maintain and comply in all material respects with all applicable manufacturing facility standards, policies, laws and regulations, including, without limitation, such standards published from time to time by United States Department of Agriculture.

 

(e) Overdue Accounts Payable. Borrower shall pay (or cause to be paid) in full and settle all overdue accounts payable, in each case, as set forth on, and on or prior to the dates applicable thereto on, the Overdue Accounts Payable Schedule.

21. CONDITIONS PRECEDENT TO RESTATEMENT DATE  

The obligation of Lender to continue making the Loans on the Restatement Date is subject to the satisfaction (or waiver) of the following conditions on or prior to the Restatement Date:

 

(a) Loan Documents. Lender shall have received this Agreement, the Pledge Agreement, the Guaranty Agreement, the 1L/1L Intercreditor Agreement, the 1L/2L Intercreditor Agreement, and each other Loan Document identified by it to be delivered on the Restatement Date, in each case, in form and substance satisfactory to Lender and duly executed and delivered by each party thereto.

 

(b) Emblem Facility. Lender shall have received true, correct and complete copies of the Emblem Loan Agreement and Security Documents (as defined in the Emblem Loan Agreement), in each case, in form and substance satisfactory to Lender and which shall have been executed by the parties thereto and in full force and effect.

 

(c) Amendment to Master Lease Agreement. The Lender shall have received a true, correct and complete copy of that certain First Amendment to Master Lease Agreement, dated as of the Restatement Date between the Lender and the Borrower, in form and substance satisfactory to the Lender and which shall have been executed by the parties thereto and in full force and effect..

 

(d) Opinions. Lender and its counsel shall have received a written opinion of White & Case, LLP, as New York counsel for the Loan Parties, in form and substance satisfactory to Lender covering such matters relating to the Loan Documents as Lender shall reasonably request.

 

(e) Secretary’s Certificate. Lender shall have received (1) copies of the organizational documents of each Loan Party and certified as of a recent date by the appropriate governmental official, each dated the Restatement Date or a recent date prior thereto; (2) signature and incumbency certificates of each such Person of each Loan Party executing the Loan Documents to which it is a party; (3) resolutions of the board of directors or similar governing body of each Loan Party approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, certified as of the Restatement Date by its secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (4) a good standing certificate (or equivalent certificate) from the applicable Governmental Authority of each Loan Party’s jurisdiction of incorporation, organization or formation, each dated the Restatement Date or a recent date prior thereto.

 

39


 

(f) Solvency Certificate. Lender shall have received a solvency certificate in form and substance satisfactory to Lender and duly executed by a senior financial officer of Holdings confirming the solvency of Holdings and its consolidated Subsidiaries on a consolidated basis after giving effect to the Transactions on the Restatement Date.

 

(g) Closing Certificate. Lender shall have received a closing certificate in form and substance satisfactory to Lender duly executed by an executive officer of Borrower which shall include certifications to the effect that the conditions precedent set forth in clause (o) hereof have been satisfied on the Restatement Date.

 

(h) Perfection Certificate; Searches. Lender shall have received (i) a completed perfection certificate in form and substance satisfactory to Lender (the “Perfection Certificate”), duly executed by an executive officer of Borrower, together with all attachments contemplated thereby and (ii) the results of a search of the Uniform Commercial Code (or equivalent), tax and judgment, United States Patent and Trademark Office and United States Copyright Office filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to Lender that the Liens indicated by such financing statements (or similar documents) are Permitted Liens or have been released (or arrangements reasonably satisfactory to Lender for such release shall have been made.

 

(i) Perfection of Security Interests. Lender shall have received proper financing statements (Form UCC-1 or equivalent) authorized for filing under the UCC or other appropriate filing offices of each jurisdiction as may be reasonably necessary or desirable to perfect the security interests purported to be created hereunder or under any other Security Document and short-form intellectual property security agreements in proper form and authorized for filing under the United States Patent and Trademark Office and United States Copyright Office, or other appropriate filing offices of each jurisdiction as may be reasonably necessary or desirable to perfect the security interests purported to be created hereunder or under any other Security Document.

 

40


 

(j) Springing Account Control Agreements. Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule, the Lender shall have received Account Control Agreements, duly executed by each applicable account bank or securities intermediary, Lender and Borrower in respect of each Deposit Account and securities account (other than Excluded Accounts) in accordance with the requirements set forth in Section 8(c) of this Schedule.

 

(k) Cash Control. The Borrower and Lender shall have terminated all existing account control agreements or other cash control arrangements in place over the Loan Parties’ Deposit Accounts.

 

(l) Overdue Accounts Payable. Borrower shall have paid in full and settled all overdue accounts payable required to be paid in full and settled on the Restatement Date as set forth on the Overdue Accounts Payable Schedule.

 

(m) Payment of Fees and Expenses. Lender shall have received all fees payable thereto on or prior to the Restatement Date and, to the extent invoiced prior to the Restatement Date, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of Winston & Strawn LLP).

 

(n) Approvals. All material approvals and material consents of any Governmental Authority required in connection with the execution, delivery and performance of this Agreement and the other Loan Documents by the Loan Parties party thereto and the consummation of the Transactions shall have been obtained.

 

(o) General Conditions. The following:

 

(i) no Material Adverse Change has occurred since the Restatement Date,

 

(ii) at the time of and immediately after giving effect to the Transactions and the making of the Initial Loans on the Restatement Date, no Event of Default or Default shall have occurred and be continuing, and

 

(iii) the representations and warranties set forth herein and the other Loan Documents (including, without limitation, the Perfection Certificate) shall be true and correct in all material respects as of the Restatement Date, in each case, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and except to the extent such representations and warranties are qualified by materiality or similar language (in which case such representations and warranties shall be true and correct in all respects).

 

41


 

(p) 2024 Exchange Agreement. Borrower shall issue Class C Units to Emblem representing 19.99% of the equity ownership interests in Borrower and agree to take all necessary actions, including scheduling a meeting to obtain a vote of Holdings’ stockholders, to approve the issuance of additional Class C Units and Class B Common Stock to Emblem cumulatively representing 49.99% of the greater of (x) the equity ownership interests in Borrower as of the date hereof or (y) the equity ownership interest in Borrower as of the date of the Additional Loans Funding Date and voting power in Holdings, approving the issuance of Class A Common Stock representing 25% of the voting power and equity interests of Holdings to Lender upon exercise of that certain Amended and Restated Warrant, dated as of the date hereof, issued by Holdings to Lender, and, at Lender’s option, approving the issuance of Class C Units and Class B Common Stock to Lender representing 25% of the equity ownership interests in Borrower and voting power in Holdings.

22. POST-CLOSING OBLIGATIONS  

The Loan Parties shall comply with their obligations described in the following clauses (a) through (g), in each case, within the applicable periods of time specified therein (or such longer periods as the Lender) may agree in its sole and absolute discretion):

 

(a) Termination of UCC Filings. By not later than the fifth (5th) Business Day following the Restatement Date, Borrower shall have terminated (or caused the termination) of the UCC-1 financing statements identified on Annex I.

 

(b) Springing Account Control Agreements. By no later than the fifteenth (15th) day following the Restatement Date, the Lender shall have received Account Control Agreements, duly executed by each applicable account bank or securities intermediary, Emblem, the Lender and Borrower in respect of each Deposit Account and securities account (other than Excluded Accounts) in accordance with the requirements set forth in Section 8(c) of this Schedule, subject to the Intercreditor Agreements.

 

(c) Insurance Certificates and Endorsements. By no later than the fifteenth (15th) day following the Restatement Date, the Lender shall have received customary liability insurance and property insurance endorsements naming Lender, as additional insured or loss payee, as applicable, and such other endorsements to the extent required by this Agreement in each case, with respect to the general liability and casualty insurance policies maintained by the Loan Parties and their Subsidiaries, subject to the Intercreditor Agreements.

 

(d) SKU. By no later than the fifteenth (15th) day following the Restatement Date, Borrower shall have (i) established (and shall thereafter maintain at all times until the Maturity Date) co-manufacturing capacity for all stock keeping units and (ii) delivered to Lender a certificate signed by a senior financial officer of Borrower certifying the foregoing in form and substance satisfactory to Lender.

 

42


 

(e) Engagements. The Borrower shall have engaged each of the companies set forth on Annex E (or such other companies acceptable to Emblem) for the purposes set forth on Annex E applicable thereto, in each case by the Additional Loans Funding Date or such other date as set forth on Annex E.

 

(f) Required Hedges. By no later than (i) the seventh (7th) day following the Restatement Date, Borrower shall have established (and shall thereafter maintain subject to clause (iii) below) chicken price hedging arrangements pursuant to which 40% of chicken purchases over the forward looking four-month period are contracted at a fixed price reasonably acceptable to Lender, (ii) the fourteenth (14th) day following the Restatement Date, the Borrower shall have established (and shall thereafter maintain and shall thereafter maintain subject to clause (iii) below) chicken price hedging arrangements pursuant to which 60% of chicken purchases over the forward looking four-month period are contracted at a fixed price reasonably acceptable to Lender and (iii) January 1, 2025, the Borrower shall have established (and shall thereafter maintain until the Maturity Date) chicken price hedging arrangements pursuant to which 70% of chicken purchases over the forward looking twelve-month period are contracted at a fixed price reasonably acceptable to Lender.

 

(g) Specified Post-Closing Requirement. The Borrower shall comply with the Specified Post-Closing Requirements in all respects.

[remainder of page intentionally left blank; signature page immediately follows]

 

43


Borrower:     Lender:
REAL GOOD FOODS, LLC     PMC FINANCIAL SERVICES GROUP, LLC
By  

/s/ Timothy S. Zimmer

    By  

/s/ Walter E. Buttkus, III

Name:   Timothy S. Zimmer     Name:   Walter E. Buttkus, III
Title:   Chief Executive Officer     Title:   President
Holdings:      
THE REAL GOOD FOOD COMPANY, INC.      
By  

/s/ Timothy S. Zimmer

     
Name:   Timothy S. Zimmer      
Title:   Chief Executive Officer      

 

44

Exhibit 10.3

Execution Version

NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, (I) THE LIENS AND SECURITY INTERESTS GRANTED TO THE APPLICABLE SECOND PRIORITY REPRESENTATIVE (AS DEFINED IN THE JUNIOR LIEN INTERCREDITOR AGREEMENT) PURSUANT TO THIS AGREEMENT ARE EXPRESSLY SUBJECT AND SUBORDINATE TO THE LIENS AND SECURITY INTERESTS GRANTED TO EMBLEM-RGF MAIN LLC, AS ADMINISTRATIVE AGENT AND COLLATERAL AGENT UNDER AND PURSUANT TO THE SUPER-PRIORITY LOAN AND SECURITY AGREEMENT, DATED AS OF SEPTEMBER 20, 2024 (AS AMENDED, RESTATED, AMENDED AND RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME), AND THE OTHER SENIOR PRIORITY REPRESENTATIVES (AS DEFINED IN THE JUNIOR LIEN INTERCREDITOR AGREEMENT), IF ANY, FROM THE BORROWER AND THE OTHER “GRANTORS” REFERRED TO THEREIN, IN FAVOR OF SUCH OTHER SENIOR PRIORITY REPRESENTATIVES (AS DEFINED IN THE JUNIOR LIEN INTERCREDITOR AGREEMENT), IF ANY, PURSUANT TO THE BELOW-DEFINED JUNIOR LIEN INTERCREDITOR AGREEMENT, AND (II) THE EXERCISE OF ANY RIGHT OR REMEDY BY THE SECOND PRIORITY REPRESENTATIVE (AS DEFINED IN THE JUNIOR LIEN INTERCREDITOR AGREEMENT) UNDER THE JUNIOR LIEN INTERCREDITOR AGREEMENT ARE SUBJECT TO THE LIMITATIONS AND PROVISIONS OF THAT CERTAIN JUNIOR LIEN INTERCREDITOR AGREEMENT, DATED AS OF SEPTEMBER 20, 2024 (AS AMENDED, RESTATED, SUPPLEMENTED OR OTHERWISE MODIFIED FROM TIME TO TIME, THE “JUNIOR LIEN INTERCREDITOR AGREEMENT”) AMONG EMBLEM-RGF MAIN LLC, AS FIRST LIEN COLLATERAL AGENT, PMC FINANCIAL SERVICES GROUP, LLC, AS INITIAL ADDITIONAL SENIOR PRIORITY COLLATERAL AGENT AND PMC FINANCIAL SERVICES GROUP, LLC, AS INITIAL SECOND PRIORITY COLLATERAL AGENT, AND CERTAIN OTHER PERSONS PARTY, OR THAT MAY BECOME PARTY, THERETO FROM TIME TO TIME. IN THE EVENT OF ANY CONFLICT BETWEEN THE TERMS OF THE JUNIOR LIEN INTERCREDITOR AGREEMENT AND THE TERMS OF THIS AGREEMENT GOVERNING THE EXERCISE OF ANY RIGHT OR REMEDY BY THE SECOND PRIORITY REPRESENTATIVE (AS DEFINED IN THE JUNIOR LIEN INTERCREDITOR AGREEMENT), THE TERMS OF THE JUNIOR LIEN INTERCREDITOR AGREEMENT SHALL GOVERN AND CONTROL.

THE DEBT OBLIGATIONS GOVERNED BY THIS AGREEMENT HAVE BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, THE AMOUNT OF OID, THE ISSUE DATE AND THE YIELD TO MATURITY OF THESE DEBT OBLIGATIONS MAY BE OBTAINED BY CONTACTING THE BORROWER PURSUANT TO SECTION 9.6 OF THIS AGREEMENT.

PMC Financial Services Group, LLC

Amended and Restated Loan and Security Agreement

 

Borrower:    Real Good Foods, LLC
Holdings:    The Real Good Food Company, Inc.
Address:    3 Executive Campus, Suite 155
   Cherry Hill, New Jersey 080023
Date:    September 20, 2024


WHEREAS, PMC Financial Services Group, LLC (“Lender”) and Real Good Foods, LLC (f.k.a. The Real Good Food Company LLC), a Delaware limited liability company ( “Borrower”) are party to that certain Loan and Security Agreement, dated as of June 30, 2016 (as amended, supplemented, or otherwise modified prior to the Restatement Date, the “Existing Loan Agreement”), pursuant to which Lender made (a) Revolving Loans (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $49,995,514.17 and unpaid interest and expenses in the amount of $1,654,120.87 (the “Existing Revolving Loan”), (b) the COI Equipment Term Loan (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $9,194,249.20 and unpaid interest and expenses in the amount of $137,783.17 (the “Existing COI Equipment Term Loan”) and (c) the Term Loan B (as defined in the Existing Loan Agreement) in a principal amount as of the Restatement Date equal to $96,206,741.20 and unpaid interest and expenses in the amount of $4,336,833.75 (which amount is reflective of treating the accrued but unpaid 9.00% cash pay interest during the period from April 1, 2024 through September 20, 2024 as paid in kind) (the “Existing Term Loan B”).

WHEREAS, the Borrower and Lender desire to amend and restate the Existing Loan Agreement with respect to (a) the Existing Revolving Loans and the Existing COI Equipment Term Loan with that certain Amended and Restated Super-Priority Loan and Security Agreement, dated as of the Restatement Date, by and among the Borrower, the Lender, and the other parties thereto (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the “Amended and Restated Super-Priority PMC Loan Agreement”) and (b) the Existing Term Loan B with this Agreement, dated as of the Restatement Date, between Borrower and Lender (as amended, supplemented, or otherwise modified, this “Agreement”).

WHEREAS, the Borrower and the Lender desire to convert the Existing Term Loan B into one term loan (the “Loan”).

THIS AGREEMENT is entered into on the above date between Lender, whose address is 3816 E. La Palma Avenue, Anaheim, CA 92807, and the Borrower. The Schedule to this Agreement (the “Schedule”) referred herein shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

 

1. LOAN.

1.1 Loans. Lender hereby converts the Existing Term Loan B into the Loan in the aggregate principal amount equal to $100,543,574.95.

1.2 Interest. The Loan and all other monetary Obligations shall bear interest at the rate shown on the Schedule, except where expressly set forth to the contrary in this Agreement. Accrued interest shall be payable monthly, on the last day of the month, and shall be charged to Borrower’s loan account (and the same shall thereafter bear interest at the same rate as the Loan).

1.3 Fees. Borrower shall pay Lender the fees shown on the Schedule, which are in addition to all interest and other sums payable to Lender and are not refundable.

1.3 Loan Requests(a) . To obtain the Loan, Borrower shall make a request to Lender by facsimile or telephone, such request to provide Lender with at least one Business Day’s notice. Loan requests received after 3:00 PM (California time) will not be considered by Lender until the second Business Day after such request. Lender may rely on any telephone request for the Loan given by a person whom Lender believes is an authorized representative of Borrower, and Borrower will indemnify Lender for any loss Lender suffers as a result of that reliance.

 

 

2


2. SECURITY INTEREST. Subject to the Intercreditor Agreements, to secure the payment and performance of all of the Obligations when due, each of Borrower and Holdings hereby grants to Lender a security interest in all of the following (collectively, the “Collateral”): all right, title and interest of Borrower and Holdings, respectively, in and to all of the following, whether now owned or hereafter arising or acquired and wherever located: all Accounts; all Inventory; all Equipment; all assets constituting Capital Expenditures; all Deposit Accounts (including, without limitation, the Designated Account and all funds maintained therein); all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower’s books relating to any and all of the above; provided, that in no event shall the “Collateral” include any Excluded Assets; provided, however, that the security interest of Lender shall immediately attach to, and the Collateral shall immediately include, any such asset (or portion thereof) upon such asset (or such portion) ceasing to be an Excluded Asset.

Subject to the Intercreditor Agreements, notwithstanding anything in any Loan Document to the contrary, during an Event of Default, monies to be applied to the Obligations, whether arising from payments by Borrower, realization on the Collateral, setoff or otherwise, shall be allocated as follows:

(i) FIRST, to all costs and expenses owing to Lender in connection with the Loan Documents;

(ii) SECOND, to premium (including without limitation, Applicable Premium) and fees incurred in connection with the Loans;

(iii) THIRD, to accrued and unpaid interest on the Loan;

(iv) FOURTH, to all unpaid principal owing on the Loan; and

(v) FIFTH, to all remaining Obligations.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDINGS AND BORROWER.

In order to induce Lender to enter into this Agreement and to continue to make the Loan, each of Holdings and Borrower represents and warrants to Lender as follows, and each of Holdings and Borrower covenants that the following representations will continue to be true, and that Holdings (as applicable) and Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in full:

3.1 Corporate Existence and Authority. Each of Holdings and Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. Each of Holdings and Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Holdings and Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Holdings and Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do not violate Holdings’ or Borrower’s articles or certificate of incorporation, or Holdings’ or Borrower’s by-laws, Holdings’ or Borrower’s partnership agreement or operating agreement (as the case may be), or any law or any material agreement or instrument which is binding upon Holdings or Borrower or their applicable property, and (iv) do not constitute grounds for acceleration of any indebtedness or obligation under any agreement or instrument which is binding upon Holdings or Borrower or their applicable property.

3.2 Name; Trade Names and Styles. The name of Holdings and Borrower set forth in the heading to this Agreement is its correct name. Listed in the Perfection Certificate are all prior names of Holdings and Borrower used in the last 5 years and all of Holdings’ and Borrower’s present and prior trade names. Each of Holdings and Borrower shall give Lender 30 days’ prior written notice (or such shorter period as agreed by Lender) before changing its name or doing business under any other name. Each of Holdings and Borrower has complied, and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name.

 

 

3


3.3 Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower’s chief executive office. In addition, each of Holdings and Borrower has places of business and Collateral is located only at the locations set forth in the Perfection Certificate. Each of Holdings and Borrower will give Lender at least 30 days prior written notice (or such shorter period as agreed by Lender) before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower’s Address or one of the locations set forth in the Perfection Certificate.

3.4 Title to Collateral; Perfection; Permitted Liens.

(a) Except as set forth on the Perfection Certificate, each of Holdings and Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and will remain free and clear of any and all Liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Lender now has, and will continue to have, subject to the Intercreditor Agreements, a perfected and enforceable security interest in all of the Collateral, subject only to Permitted Liens, and Holdings and Borrower will at all times defend Lender and the Collateral against all claims of others.

(b) Each of Holdings and Borrower has set forth in the Perfection Certificate all of Holdings’ and Borrower’s Deposit Accounts, and each of Holdings and Borrower will give Lender five Business Days advance written notice before establishing any new Deposit Accounts and, subject to the Intercreditor Agreements, will cause the institution where any such new Deposit Account is maintained to execute and deliver to Lender a control agreement in form sufficient to perfect Lender’s security interest in the Deposit Account and otherwise satisfactory to Lender in its sole and absolute discretion.

(c) In the event that Holdings or Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in which the potential recovery exceeds $250,000 (as determined by Borrower in good faith), Holdings or Borrower shall promptly notify Lender thereof in writing and provide Lender with such information regarding the same as Lender shall request. Such notification to Lender shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to Lender, and Holdings and Borrower shall execute and deliver all such documents and take all such actions as Lender shall request in connection therewith.

(d) None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Holdings and Borrower are not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Holdings’ and Borrower’s rights to remove any Collateral from the leased premises. Whenever any Collateral is located upon real property in which any third party has an interest, Holdings and Borrower shall, whenever reasonably requested by Lender, cause such third party to execute and deliver to Lender, in form acceptable to Lender, such waivers and subordinations as Lender shall specify.

3.5 Maintenance of Collateral. Each of Holdings and Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Holdings and Borrower will not use the Collateral for any unlawful purpose. Holdings and Borrower will immediately advise Lender in writing of any material loss or material damage to the Collateral.

3.6 Books and Records. Holdings and Borrower has maintained and will maintain at Borrower’s Address complete and accurate, in all material respects, books and records, comprising an accounting system in accordance with GAAP.

 

 

4


3.7 Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Lender have been, and will be, prepared in conformity with GAAP, and, except as set forth in the Perfection Certificate, now and in the future will fairly present, in all material respects, the results of operations and financial condition of Holdings and Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Lender and the date hereof, there has been no Material Adverse Change.

3.8 Tax Returns and Payments; Pension Contributions. Each of Holdings and Borrower has timely filed all required tax returns and reports, and each of Holdings and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions required to be paid by Holdings and Borrower, as applicable. Borrower is unaware of any claims or adjustments proposed for any of Holdings’ or Borrower’s prior tax years which could result in additional taxes becoming due and payable by Holdings or Borrower. Each of Holdings and Borrower has paid all amounts necessary to fund all pension, profit sharing and deferred compensation plans in accordance with their terms, and each of Holdings and Borrower has not withdrawn from participation in or permitted partial or complete termination of any such plan which could reasonably be expected to result in any liability of Holdings or Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

3.9 Compliance with Law. Borrower has complied, and will comply, in all material respects, with all material provisions of all foreign, federal, state and local laws and regulations applicable to Borrower, including, but not limited to, those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and all environmental matters.

3.10 Litigation. Except as set forth on the Litigation Annex, there is no material claim, suit, litigation, proceeding or investigation pending or, to the knowledge of Borrower, threatened against or affecting Holdings or Borrower in any court or before any governmental agency (or any basis therefor known to Borrower). Borrower will promptly inform Lender in writing of any material claim, proceeding, litigation or investigation in the future threatened or instituted against Holdings or Borrower (in each case, if known to Borrower).

3.11 Use of Proceeds. All proceeds of the Loan shall be used solely for Borrower’s working capital. Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation G of the Board of Governors of the Federal Reserve System) and no part of the proceeds of the Loan will be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of purchasing or carrying any “margin stock” or for any other purpose in any such case, that would violate or be inconsistent with Regulations U or X.

3.12 Budget and Variance Reports. Each Budget delivered was prepared in good faith based on assumptions believed by the Loan Parties to be reasonable at the time made and upon information believed by the management of the Borrower to have been accurate based upon the information available to the management of the Borrower at the time such Budget was furnished. On and after the delivery of any Variance Report in accordance with this Agreement, such Variance Report shall be complete and correct and fairly represent in all respects the results of operations of the Loan Parties and their Subsidiaries for the period covered thereby and in the detail to be covered thereby.

3.13 Overdue Accounts Payable. Annex B sets forth a complete and correct list of all Outstanding Accounts Payable (including, without limitation the applicable vendor and outstanding balance in respect thereof) known to Borrower on the Restatement Date.

 

 

5


4. PREPAYMENTS OF THE LOAN.

4.1 Voluntary Prepayments.

In each case under this Section 4.1, subject to the Intercreditor Agreements:

Borrower shall have the right at any time and from time to time to prepay the Loan in whole or in part, subject to the concurrent payment of amounts owing pursuant to Section 4.3, in an aggregate principal amount not less than $1,000,000.00 (or, if less, in the amount of the Loan outstanding), by providing an irrevocable written notice to Lender by 3:00 PM (New York time) at least one Business Day in advance of the date of such proposed prepayment; provided that any repayment or prepayment in full of the Loans and other Obligations hereunder shall be subject to the consent of Emblem.

4.2 Mandatory Prepayments.

In each case under this Section 4.2, subject to the Intercreditor Agreements:

(a) Non COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale (excluding any sales of COI Equipment), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the PMC Super-Priority Facility, the Emblem Facility and solely after the occurrence of the Additional Loan Funding Date (as defined in the Emblem Facility), the Loan, on a pro rata basis.

(b) COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale of COI Equipment, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the PMC Super-Priority Facility.

(c) Insurance/Condemnation Proceeds. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds of the type described in clause (b) of the definition thereof in excess of $100,000, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the PMC Super-Priority Facility, the Emblem Facility and solely after the occurrence of the Additional Loan Funding Date (as defined in the Emblem Facility), the Loan, on a pro rata basis.

(d) Non-Permitted Debt. On the date of receipt by Borrower of any Net Cash Proceeds from the issuance or incurrence of any Indebtedness of Borrower (other than with respect to any Permitted Indebtedness), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the PMC Super-Priority Facility, the Emblem Facility and solely after the occurrence of the Additional Loan Funding Date (as defined in the Emblem Facility), the Loan, on a pro rata basis.

4.3 Applicable Premium. If any Applicable Premium Event occurs, then Borrower shall pay to Lender, the Applicable Premium. In any such case, the Applicable Premium shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loan, which Obligations are guaranteed by the Guarantors and secured by the Collateral, and constitutes liquidated damages, not unmatured interest or a penalty, as the actual amount of damages to Lender as a result of the relevant Applicable Premium Event would be impracticable and extremely difficult to ascertain. The Applicable Premium is provided by mutual agreement of Borrower and the Guarantors and Lender as a reasonable estimation and calculation of such actual lost profits and other actual damages of Lender. Without limiting the generality of the foregoing, it is understood and agreed that upon the occurrence of any Applicable Premium Event, the Applicable Premium shall be automatically and immediately due and payable and shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loan which Obligations are secured by the Collateral. The Applicable Premium shall also be automatically and immediately due and payable if the Obligations are satisfied, released or discharged by foreclosure (whether by power of judicial proceeding or otherwise), deed in lieu of foreclosure or by any other means. BORROWER, FOR ITSELF AND ON BEHALF OF THE GUARANTORS, HEREBY EXPRESSLY WAIVES (TO THE FULLEST EXTENT THEY MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR OTHER LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING APPLICABLE PREMIUM IN CONNECTION WITH ANY SUCH EVENTS, ANY RESCISSION OF SUCH ACCELERATION OR THE COMMENCEMENT OF ANY BANKRUPTCY OR INSOLVENCY EVENT. Borrower, for itself and on behalf of the Guarantors, expressly agrees (to the fullest extent it and they may lawfully do so) that with respect to the Applicable Premium payable under the terms of this Agreement: (i) the Applicable Premium is reasonable and is the product of an arm’s length transaction between sophisticated business parties, ably represented by counsel; (ii) the Applicable Premium shall be payable notwithstanding the then-prevailing market rates at the time payment is made; (iii) there has been a course of conduct between Lender and Borrower and the Guarantors giving specific consideration in this transaction for such agreement to pay the Applicable Premium; and (iv) Borrower and the Guarantors shall be estopped hereafter from claiming differently than as agreed to in this paragraph. Borrower, for itself and on behalf of and the Guarantors, expressly acknowledges that their agreement to pay the Applicable Premium as herein described is a material inducement to Lender’s agreement to enter into this Agreement and to extend the Loan to Borrower.

 

 

6


5. ADDITIONAL DUTIES OF BORROWER.

5.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2 Insurance. Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to Lender, in such form and amounts as Lender may require in its sole and absolute discretion, and Borrower shall provide evidence of such insurance to Lender. All such insurance policies shall name Lender as loss or co-loss payee, and shall contain a lenders loss payee endorsement in form reasonably acceptable to Lender. If Borrower fails to provide or pay for any insurance, Lender may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to Lender copies of all material reports made to insurance companies.

5.3 Reports. Borrower, at its expense, shall provide Lender with the written reports set forth in the Schedule, and such other written reports with respect to Borrower as Lender shall from time to time specify in its sole and absolute discretion.

5.4 Access to Collateral, Books and Records. At reasonable times, and on two (2) Business Days’ notice, Lender, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower’s books and records. Such inspections or audits shall be conducted no more often than four times during each calendar year, but nothing herein restricts Lender’s right to conduct such audits more frequently if an Event of Default has occurred and is continuing. The foregoing inspections and audits shall be at Borrower’s expense and the charge therefor shall be $900 per person per day (or such higher amount as shall represent Lender’s then current standard charge for the same), plus reasonable out-of-pocket expenses.

 

5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without Lender’s prior written consent (in its sole and absolute discretion), do any of the following:

(a) merge or consolidate with another corporation or entity unless Borrower is the surviving entity and the security interest of Lender in the Collateral is unimpaired;

(b) acquire any assets except (i) assets acquired in the ordinary course of business and (ii) other asset acquisitions (including without limitation, any assets constituting Capital Expenditures) so long as the purchase consideration for all such assets in the aggregate does not at any time exceed $250,000;

(c) enter into any transaction with any of its Affiliates (other than Holdings and its Subsidiaries or any Person that becomes a Subsidiary as a result of such transaction) in a transaction (or series of related transactions) involving aggregate consideration in excess of $250,000, unless such transaction is upon terms that are not materially favorable to Borrower than would be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate;

 

 

7


(d) sell or transfer any Collateral, except for Permitted Dispositions;

(e) store any Inventory or other Collateral with any warehouseman or other third party unless approved by Lender;

(f) make any loans of any money or other assets or make any other Investments, other than Permitted Investments;

(g) (x) create, incur, assume or permit to be outstanding any Indebtedness other than Permitted Indebtedness, (y) create incur, assume or permit to be outstanding any operating leases or finance leases or amend, restate, amend and restate or otherwise modify any existing operating leases or financing leases (including without limitation, the master lease agreements with Lender as in effect on the Restatement Date) and (z) guarantee or otherwise become liable with respect to the obligations of another Person, provided, that the aggregate amount of all such Permitted Indebtedness (other than clauses (a) and (b) of the definition thereof), operating leases, financing leases, obligations, guarantees and liabilities shall not at any time exceed $1,000,000;

(h) [reserved];

(i) create, incur, assume or permit to be outstanding any Liens other than Permitted Liens;

(j) pay or declare any dividends on, or distributions or tax distributions with respect to Borrower’s equity interests, or make any other distributions, directly or indirectly, with respect to any equity interest in Borrower;

(k) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock or other equity securities, other than, (i) as required by the 2024 Exchange Agreement, (ii) as required by the 2021 Exchange Agreement or (iii) at any time on or after the Additional Loans Funding Date, and subject to the sole and absolute discretion of Lender, the Specified Use;

(l) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower and any complementary, ancillary, incidental, corollary or synergistic businesses and any reasonable extensions thereof;

(m) dissolve or elect to dissolve;

(n) enter into, amend, restate, amend and restate or otherwise modify any procurement or vendor contract (x) with a term longer than one (1) month and/or (y) (i) with contract consideration in excess of $2,000,000 for chicken purchases and (ii) with contract consideration in excess of $250,000 for all other goods and services;

(o) enter into any new co-manufacturing contract or amend, restate, amend and restate or otherwise modify any co-manufacturing contract whether existing on the Restatement Date or entered into thereafter;

(p) amend, restate, amend and restate or otherwise modify any third-party labor contract whether existing on the Restatement Date or entered into thereafter;

(q) amend, restate, amend and restate or otherwise modify, or take any action or allow to be taken any action that would reasonably be expected to constitute or cause there to be a “Change of Control” under the Tax Receivables Agreement as in effect on the Restatement Date;

(r) make, change or rescind any material tax election, change any tax accounting method, take any more than ministerial act with respect to (i) the computation of the tax “capital accounts” of the Borrower, (ii) allocations of items of Borrower income, gain, expense or loss for tax “capital account” purposes or for tax purposes, (iii) the allocation of liabilities of the partnership under Section 752, or (iv) the tax reporting or tax positions of the Borrower, or change the Borrower’s independent accounting firm or amend, terminate or modify the retention arrangement with such firm;

(s) amend, restate, amend and restate or otherwise modify the Emblem Facility or any Loan Document (as defined in the Emblem Facility), in either case, in violation of the Intercreditor Agreements;

 

 

8


(t) enter into, amend, restate, amend and restate or otherwise modify any Specified Agreement without the prior written approval of Lender;

(u) agree to or make the Specified Payments; or

(v) make any payments or expenditures that are not in compliance with the Approved Budget (subject to Permitted Variances); or

(w) form, incorporate or acquire any Subsidiary after the Restatement Date unless such Subsidiary (x) becomes a Guarantor by executing and delivering a supplement to the Guarantee Agreement and (y) grants to Lender a perfected, security interest (subject to Permitted Liens) in all of its assets (other than Excluded Assets) by executing and delivering such security documentation requested by Lender, in each case, in form and substance reasonably acceptable to Lender and within thirty (30) days (or such longer period as Lender may agree) after the formation, incorporation or acquisition of such Subsidiary.

5.6 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or against Lender with respect to any Collateral or relating to Holdings or Borrower, each of Holdings and Borrower shall, without expense to Lender, make available Holdings, Borrower and their respective officers, employees and agents and Holdings’ and Borrower’s respective books and records, to the extent that Lender may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7 Notification of Changes. Borrower will promptly, after becoming aware thereof, notify Lender in writing of (i) (x) any Default or Event of Default, (y) any “Default” or “Event of Default” under the Emblem Facility and the Amended and Restated Super-Priority PMC Loan Agreement (in each case, as such terms are defined therein) (unless also constituting a Default or Event of Default hereunder) and (z) any “Default” or “Event of Default” shall have occurred and be continuing under any agreement of the Borrower evidencing Indebtedness for borrowed money (in each case, as such terms are defined in, or such similar terms used in, the applicable definitive documentation for such Indebtedness), and in each case, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto and (ii) any Material Adverse Change.

5.8 Further Assurances. Each of Holdings and Borrower agrees, at its expense, on request by Lender, to execute all documents and take all actions, as Lender, may, in its sole and absolute discretion, deem necessary or useful in order to perfect and maintain Lender’s perfected security interest in the Collateral (subject only to Permitted Liens and the Intercreditor Agreements), and in order to fully consummate the transactions contemplated by this Agreement.

5.9 Right to Appoint Observer. Holdings agrees that: (a) the Lender shall have the option and right to appoint one (1) representative (the “Observer”) to attend all meetings of the Board or any committee thereof in a non-voting, non-participating observer capacity; (b) any Observer appointed pursuant to this Section 5.9 may observe discussions of all matters brought to the Board or any committee thereof for consideration, but in no event shall the Observer (i) be deemed to be member of the Board or any committee thereof, (ii) have or be deemed to have, or otherwise be subject to, any duties (fiduciary or otherwise) to Holdings, the Borrower or any other Guarantors or their respective Affiliates or investors, or (iii) have the right to participate in any discussions, vote on, propose or offer any motions or resolutions to the Board or any committee thereof, or in any manner give instructions or directions to the Board, any committee thereof or any member thereof or determine Holdings’, the Borrower’s or any of the other Guarantors’ policies or business decisions; (c) Holdings shall provide to the Observer copies of any notices, minutes and consents, including draft versions, proposed written consents and exhibits and annexes to any such materials, in each case, to the extent provided to the Board members in their capacity as such (collectively, “Board Materials”), at substantially the same time and in the same manner as such information is delivered to the members of the Board; (d) the presence of the Observer shall not be taken into account or required for purposes of establishing a quorum; and (e) Holdings shall reimburse Lender for reasonable out of pocket expenses of the Observer (including, without limitation, expenses relating to attending board meetings or other events pertaining to the Borrower that such Observer attends); provided, however, that Holdings may withhold information and exclude the Observer from any meeting or portion thereof if the Board determines in good faith and upon the advice of counsel that such exclusion is necessary to preserve the attorney-client privilege or to avoid a conflict of interest. Holdings shall indemnify and provide for the advancement of expenses to the Observer to the same extent provided by Holdings to its directors. Holdings acknowledges and agrees that the foregoing rights to indemnification and advancement of expenses constitute third-party rights extended to the Observer by Holdings and do not constitute rights to indemnification or advancement as a result of the Observer serving as a director, officer, employee or agent of Holdings or its Affiliates.

 

 

9


6. REPAYMENT OF THE LOAN.

6.1 [Reserved.]

6.2 Maturity. To the extent not previously paid, all outstanding principal, together with all accrued and unpaid interest, fees, premium (including, without limitation, the Applicable Premium (if any)) and other Obligations, shall be due and payable in full on the Maturity Date.

7. EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement:

(a) any warranty, representation, statement, report or certificate made or delivered to Lender by Holdings, Borrower or any of their respective officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made or deemed to be made; or

(b) Borrower shall fail to pay (i) when due, any principal of any Loan or any Applicable Premium or (ii) within five (5) Business Days after the date due, any interest on any Loan or any fees, premium or other amount due hereunder; or

(c) there occurs a Budget Event; or

(d) (i) default shall be made in the due observance or performance by Holdings (as applicable) or Borrower of any covenant, condition or agreement contained in Section 5.1, Section 5.5, any of the Financial Covenants set forth in the Schedule or Section 5 of the Schedule, (ii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 6(a) of the Schedule and such default shall have continued unremedied for ten (10) Business Days or (iii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 8(e) of the Schedule and such default shall have continued unremedied for fifteen (15) days; or

(e) default shall be made in the due observance or performance by Holdings or Borrower of any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (d) of this Section 7.1) and such default shall have continued unremedied for fifteen (15) days; or

(f) any levy, assessment, attachment, seizure, Lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or

(g) any event or condition occurs that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to any secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or

 

 

10


(h) any event or condition occurs that (i) results in the Emblem Facility becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired and that is not otherwise waived by Emblem) the holder or holders of any the Emblem Facility or any trustee or agent on its or their behalf to cause the Emblem Facility to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; or

(i) the Specified Event of Default occurs; or

(j) dissolution, termination of existence, insolvency or business failure of Borrower or any Guarantor; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or

(k) the commencement of any proceeding against Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or

(l) revocation or termination of, or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing; or

(m) revocation or termination of, or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged to secure any or all of the Obligations, or any attempt to do any of the foregoing; or

(n) Borrower makes any payment on account of any indebtedness or obligation, excluding trade payables and other ordinary course purchases, which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits such subordination agreement; or

(o) the occurrence of a Change of Control; or

(p) there shall be a change in the President, Chief Executive Officer, or Chief Financial Officer, and such person is not replaced with another person acceptable to Lender in its good faith business judgment within 30 days thereafter; or

(q) Holdings or Borrower shall generally not pay its debts as they become due, or Holdings or Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law.

Notwithstanding anything to the contrary contained in this Section 7.1, once an Event of Default has occurred, it shall be deemed continuing regardless if later remedied or cured (unless Lender waives such Event of Default in its sole and absolute discretion).

7.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, Lender, at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Holdings and the Borrower), may do any one or more of the following, in each case, subject to the Intercreditor Agreements:

(a) cease making the Loan or otherwise extending credit to Borrower under this Agreement or any other Loan Document;

(b) accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument or agreement evidencing or relating to any Obligation;

 

 

11


(c) subject to applicable laws, take possession of any or all of the Collateral wherever it may be found, and for that purpose each of Holdings and Borrower hereby authorizes Lender without judicial process to enter onto any of Holdings’ or the Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Lender deems it necessary, in its sole and absolute discretion, in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Lender seek to take possession of any of the Collateral by court process, each of Holdings and Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Lender retain possession of, and not dispose of, any such Collateral until after trial or final judgment;

(d) require Holdings and Borrower to assemble any or all of the Collateral and make it available to Lender at places designated by Lender which are reasonably convenient to Lender and Holdings or Borrower, as applicable, and to remove the Collateral to such locations as Lender may deem advisable;

(e) complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Lender shall have the right to use Holdings’ and Borrower’s premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge;

(f) sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Lender obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Lender shall have the right to conduct such disposition on Holdings’ and Borrower’s premises without charge, for such time or times as Lender deems reasonable, or on Lender’s premises, or elsewhere and the Collateral need not be located at the place of disposition. Lender may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Holdings or Borrower of any liability Holding or Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale;

(g) demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, each of Holdings and Borrower irrevocably authorizes Lender to endorse or sign Holdings’ or Borrower’s (as applicable) name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Holdings or Borrower (as applicable) and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in Lender’s sole and absolute discretion, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; and

(h) demand and receive possession of any of Holdings’ and Borrower’s federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto.

All reasonable attorneys’ fees, expenses, costs, liabilities and obligations incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any of Lender’s rights and remedies, from and after the occurrence and during the continuance of any Event of Default, the Obligations shall automatically bear interest at the Default Rate.

 

 

12


7.3 Standards for Determining Commercial Reasonableness. Each of Holdings, Borrower and Lender agree that a sale or other disposition (collectively, “sale”) of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable:

(a) notice of the sale is given to Holdings or Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted;

(b) notice of the sale describes the collateral in general, non-specific terms;

(c) the sale is conducted at a place designated by Lender, with or without the Collateral being present;

(d) the sale commences at any time between 8:00 a.m. and 6:00 p.m. (local time);

(e) payment of the purchase price in cash or by cashier’s check or wire transfer, or by deferred payment obligation acceptable to Lender in its discretion, is required;

(f) with respect to any sale of any of the Collateral, Lender may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower or Holdings (as applicable) any and all information concerning the same.

Lender shall be free to employ other methods of noticing and selling the Collateral, in its discretion, if they are commercially reasonable.

7.4 Power of Attorney. Upon the occurrence and during the continuance of any Event of Default, without limiting Lender’s other rights and remedies, each of Holdings and Borrower grants to Lender an irrevocable power of attorney coupled with an interest, authorizing and permitting Lender (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Holdings or Borrower, and at Borrower’s expense, to do any or all of the following, in Holdings’ and Borrower’s name (as applicable) or otherwise, but Lender agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner:

(a) execute on behalf of Holdings and Borrower any documents that Lender may, in its sole and absolute discretion, deem advisable in order to perfect and maintain Lender’s security interest in the Collateral, or in order to exercise a right of Holdings, Borrower or Lender, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents;

(b) execute on behalf of Holdings or Borrower (as applicable), any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other Lien, or assignment or satisfaction of mechanic’s, materialman’s or other Lien;

(c) take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Holdings or Borrower (as applicable) upon any instruments, or documents, evidence of payment or Collateral that may come into Lender’s possession;

(d) endorse all checks and other forms of remittances received by Lender;

(e) pay, contest or settle any Lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same;

(f) grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith;

(g) pay any sums required on account of Holdings’ and Borrower’s taxes or to secure the release of any Liens therefor, or both;

(h) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor;

 

 

13


(i) instruct any third party having custody or control of any books or records belonging to, or relating to, Holdings or Borrower (as applicable) to give Lender the same rights of access and other rights with respect thereto as Lender has under this Agreement; and

(j) take any action or pay any sum required of Holdings or Borrower (as applicable) pursuant to this Agreement and any other Loan Documents.

Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall Lender’s rights under the foregoing power of attorney or any of Lender’s other rights under this Agreement be deemed to indicate that Lender is in control of the business, management or properties of Borrower or Holdings (as applicable).

7.5 Application of Proceeds. Subject to the Intercreditor Agreements, and except as otherwise expressly set forth in this Agreement, all proceeds realized as the result of any sale of the Collateral shall be applied by Lender to the Obligations, in such order as Lender shall determine in its sole and absolute discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Lender for any deficiency. Subject to the Intercreditor Agreements, if, Lender, in its sole and absolute discretion, directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, Lender shall have the option, exercisable at any time, in its sole and absolute discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by Lender of the cash therefor.

7.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Lender shall have all the other rights and remedies accorded a secured party under the Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between Lender, Holdings and/or Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Lender of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Lender to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

8. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:

1L/1L Intercreditor Agreement” means that certain Pari Passu Intercreditor Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted thereunder) among Emblem and Lender, as lender under the Amended and Restated Super-Priority PMC Loan Agreement, Borrower and the Guarantors and the other parties from time to time party thereto.

Junior Lien Intercreditor Agreement” has the meaning set forth in the legend hereto.

2024 Exchange Agreement” means the Exchange Agreement, dated as of the Restatement Date, by and among Holdings, Borrower, Emblem and Lender.

Account Control Agreement” means an agreement in form and substance satisfactory to Lender that provides for Lender to have “control” (as defined in Section 9-104 of the Uniform Commercial Code or Section 8-106 of the Uniform Commercial Code).

Account Debtor” means the obligor on an Account.

Accounts” means all present and future “accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower.

 

 

14


Adjusted EBITDA” means, for any period, with respect to Holdings and its Subsidiaries on a consolidated basis, the Net Income for such period, plus

(i) without duplication and solely to the extent already deducted in arriving at Net Income, the sum of the following amounts for such period:

(a) consolidated interest expense,

(b) provisions for taxes based on income, profits or capital,

(c) total depreciation and depletion expense,

(d) total amortization expense,

(e) costs, fees and expenses incurred in connection with the Transactions;

(f) all extraordinary losses and unusual or non-recurring charges and expenses and restructuring costs (in each case, not associated with the Transactions); provided that all amounts which are added back to increase Adjusted EBITDA pursuant to this sub-clause (f) shall not be greater than 15.0% of Adjusted EBITDA for any applicable period; provided further that all reasonable and documented fees and out-of-pocket expenses of the institutions and consultants set forth on Annex E added back pursuant to this clause (f) shall not be subject to the foregoing 15.0% cap;

(g) other non-cash charges that occurred in such period that reduce Net Income in such period (excluding (I) charges that occurred in a prior or other period, (II) inventory write downs or write offs for materials or goods sold or for accounts receivable in such period and (III) the difference between cash rent and straight-line rent);

(h) stock option, restricted or performance stock unit and other equity-based compensation expenses, to the extent the same was deducted (and not added back) in calculating Net Income; minus

(ii) without duplication, and solely to the extent included in arriving at Net Income in such period: all extraordinary gains and non-recurring gains increasing Net Income for such period (including any such non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash gain in any prior period) and any recognized income from the cancelation of accounts payable or other liabilities included in Net Income, subject to the Specified Deductions.

Affiliate” means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

Agreement” has the meaning set forth in the Preamble hereto.

Amended and Restated Super-Priority PMC Loan Agreement” has the meaning set forth in the Preamble hereto.

Applicable Premium” shall mean as of the date of the occurrence of an Applicable Premium Event (as calculated by Lender) the premium required for Lender to realize a MOIC of at least 2.00x on the Loan outstanding on the Restatement Date. For purposes of this definition, “MOIC” shall mean the multiple on invested capital realized by Lender in respect of its Loan calculated, in respect of any Loan repaid, prepaid or accelerated as of a date certain, as the principal amount of Loan repaid, prepaid or accelerated on such date plus all interest paid in cash on such Loans from the date of initial funding thereof through such repayment, prepayment or acceleration date (exclusive, for the avoidance of doubt, of any default interest, interest paid in kind, fees (including original issue discount and/or upfront fees), expense reimbursements and indemnity payments and any return on Class B Common Stock and Class C Units, or any Class A Units exercisable therefor) divided by the initial principal amount of the Loans so repaid, prepaid or accelerated as of such date (calculated exclusive of any original issue discount and/or upfront fees); provided that in no event shall (i) the MOIC be negative or (ii) Lender be required to make any payment to Borrower in connection with the MOIC.

 

 

15


Applicable Premium Event” means (a) any voluntary prepayment of all, or any part, of the principal amount of the Loan and any mandatory prepayment of the Loan, in each case, after the commencement of any proceeding with respect to any Loan Party under any Debtor Relief Law; (b) the acceleration of the Loan as a result of the commencement of a proceeding under any Debtor Relief Law; (c) the satisfaction, release, payment, redemption, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of any of the Loan in any proceeding under any Debtor Relief Law, foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the making of a distribution of any kind in any proceeding under any Debtor Relief Law to Lender (whether directly or indirectly), in full or partial satisfaction of the Loan; (d) the substantial consummation of any plan of reorganization with respect to any Loan Party under any Debtor Relief Law; and (e) the termination of any proceeding with respect to any Loan Party under any Debtor Relief Law.

If an Applicable Premium Event occurs under clause (b), (c) or (e) above, the entire outstanding principal amount of the Loan shall be deemed to be subject to the Applicable Premium Event on the date on which such Applicable Premium Event occurs.

Approved Budget” has the meaning set forth in Section 6(iii) of the Schedule.

Asset Sales” means any sale, lease, outbound Intellectual Property license, outbound Intellectual Property sublicense, transfer or other disposition by Borrower to any Person (including by way of redemption by such Person) of any asset (including, without limitation, any capital stock or other securities of, or equity interests in, another Person).

Available Cash” means all cash held in Deposit Accounts of the Borrower subject to an Account Control Agreement in favor of Lender, or, subject to the Intercreditor Agreements, Emblem, net of Overdue Accounts Payable and all other outstanding liabilities of Borrower. For the avoidance of doubt, Available Cash shall not include unused availability under the Amended and Restated PMC Super Priority Facility or any other revolving credit facility.

Average Monthly Cash” means for any calendar month ending after the Restatement Date (commencing with the calendar month ending September 30, 2024), the amount equal to the quotient of (i) the sum of Available Cash as calculated for each calendar day during such calendar month divided by (ii) the number of calendar days occurring during such calendar month.

Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto.

Beneficial Ownership Certification” means a certification regarding beneficial ownership of Borrower as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” means 31 C.F.R. §1010.230.

Board” means the board of directors (or equivalent governing body) of Holdings.

Board Materials” has the meaning specified in Section 5.9.

Borrower” has the meaning set forth in the Preamble hereto.

Borrower’s Address” has the meaning specified in Section 9.4.

Borrowing Notice” has the meaning set forth in Section 1.4(a).

Budget” means the 13-week statement of Borrower’s anticipated cash receipts and cash disbursements (including, without limitation, cash outflows pursuant to the Overdue Accounts Payable Schedule) for the 13 weeks ending after the Restatement Date (commencing Friday, October 4, 2024 (for the 13-week period commencing Sunday, October 6, 2024)), as set forth on a weekly basis, as may be updated from time to time by an Approved Updated Budget.

 

 

16


Budget Event” means (i) the actual amount of aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) during any Budget Testing Period exceeding the projected aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) in the Budget for such Budget Testing Period by more than a Permitted Variance and/or (ii) the actual amount of aggregate operating receipts during any Budget Testing Period being less than the projected aggregate operating receipts in the Budget for such Budget Testing Period by more than a Permitted Variance..

Budget Testing Date” means, with respect to the Budget, each Wednesday of each calendar week occurring after the Restatement Date (commencing on October 16, 2024 and each Wednesday thereafter.

Budget Testing Period” means, the week period ending immediately prior to the Budget Testing Date (i.e., Sunday to Saturday).

Business Day” means for all purposes any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close.

Capital Expenditures” means all expenditures made and liabilities incurred for the acquisition of any fixed asset or improvement, replacement, substitution or addition thereto which has a useful life of more than one year and including, without limitation, those arising in connection with any lease of property by Borrower that, in accordance with GAAP, should be capitalized for financial reporting purposes and reflected as a liability on the balance sheet of Borrower.

Capitalized Lease Obligations” means, with respect to any Person, all rental obligations of such Person which, under GAAP, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with GAAP.

Change of Control” means the occurrence of any of the following after the Restatement Date:

(x) there shall be a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of, or equity ownership interest in, Holdings, in one or more transactions, compared to the ownership of the same in effect on the date hereof, without the prior written consent of the Lenders (excluding any change in ownership from (i) the issuance of Class B Common Stock and/or Class C Units to Lender or Emblem representing up to 49.99% of the greater of (x) the equity ownership interests in the Borrower and the voting power in Holdings as of the date hereof and (y) the equity ownership interests in Borrower and voting power in Holdings as of the Additional Loans Funding Date to Emblem and up to 25% of the equity ownership interests in Borrower and voting power in Holdings to the Lenders, (ii) the exchange of Class B Common Stock and/or Class C Units pursuant to the 2024 Exchange Agreement or (iii) any acquisition of shares of stock or equity interests in Holdings or Borrower by Lender or Emblem or any of their respective Affiliates) or

(y) Holdings ceases to own, directly, beneficially, 100.0% of the issued and outstanding Class A equity interests of Borrower.

Class A Common Stock” means the Class A common stock, par value $0.0001 per share, of Holdings.

Class C Unit” means a Class C Unit of Borrower.

COI Equipment” means assets currently stored at 1820 Yeager Ave, LaVerne CA 91750 as set forth on Annex H.

Collateral” has the meaning set forth in Section 2 above.

Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

 

 

17


Default” means any event which with notice or passage of time or both, would constitute an Event of Default.

Default Rate” has the meaning set forth in the Schedule.

Deposit Accounts” means all present and future “deposit accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit.

Designated Account” has the meaning set assigned to such term in the Emblem Facility.

Dollars” or “$” shall mean lawful money of the United States.

Emblem” or “Emblem Lenders” means, collectively, Emblem-RGF Main LLC, Emblem-RGF Executive LLC and Emblem-RGF Blocker Inc. (and their successors and permitted assigns).

Emblem Facility” means the credit facility provided to the Borrower pursuant to the Emblem Loan Agreement.

Emblem Loan Agreement” means that certain Super-Priority Loan and Security Agreement, dated as of the Restatement Date, by and among Holdings, Borrower, Emblem-RGF Main LLC, as administrative agent and collateral agent and the Emblem Lenders from time to time party thereto, as amended, restated, amended and restated, supplemented or otherwise modified from time to time in accordance with the terms of the Intercreditor Agreements.

Equipment” means all present and future “equipment” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

Event of Default” has the meaning set forth in Section 7.1.

Excluded Assets” means (i) any account exclusively used for funding payroll or segregating payroll taxes or funding other employee wage or benefit for the then current payroll period, (ii) zero balance accounts the balance of which is swept each Business Day to a Deposit Account subject to an Account Control Agreement in favor of Lender, (iii) trust, fiduciary or other escrow accounts established for the benefit of third parties in the ordinary course of business or in connection with Permitted Acquisitions and other permitted Investments, (iv) any account that is not located in the United States or (v) the Designated Account.

Financial Covenants” means the financial covenants set forth in Section 5 of the Schedule.

GAAP” means generally accepted accounting principles in the United States of America consistently applied.

General Intangibles” means all present and future “general intangibles” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

Governmental Authority” shall mean any U.S. or foreign federal, state, provincial, territorial, municipal, local or other governmental or regulatory authority, agency, instrumentality or body, court, arbitrator or self-regulatory organization.

 

 

18


Guarantee Agreement” means that certain Guarantee Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) among Holdings, the other Guarantors from time to time party thereto and Lender.

Guarantors” means, collectively, (i) Holdings and (ii) each other Person who has guaranteed, or in the future guarantees, any of the Obligations.

Holdings” has the meaning set forth in the Preamble hereto.

“including” means including (but not limited to).

Indebtedness” of any Person means:

(a) all obligations of such Person for borrowed money,

(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments,

(c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person,

(d) all obligations of such Person issued or assumed as the deferred purchase price of property or services, including earnouts (other than trade payables accrued in the ordinary course of business and that are not outstanding for a period of more than 180 days),

(e) all purchased money indebtedness and Capitalized Lease Obligations of such Person,

(f) all net payments that such Person would have to make in the event of an early termination, on the date indebtedness of such person is being determined, in respect of outstanding hedging agreements,

(g) the maximum amount available to be drawn under all letters of credit, bankers’ acceptances and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations, all non-contingent obligations of such person in respect of letters of credit, and

(h) all guarantees by such Person of Indebtedness described in clauses (a) to (g) above.

Inside Debt” has the meaning set forth in Section 8(a) of the Schedule.

Intellectual Property” means, collectively, all present and future intellectual property and proprietary rights in any jurisdiction throughout the word, including (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) Internet domain names, social media account identifiers, trade secret rights, including all rights to unpatented inventions and know-how, processes, production methods and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisionals, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, service marks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected or associated with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all causes of action, claims for damages by way of past, present and future infringement, dilution, misappropriation, or other violation or impairment of any of the rights included above and all income, royalties, license fees damages and payments now or hereafter due and/or payable under or with respect thereto; and (j) all licenses or user or other agreements granted to or by Borrower with respect to any of the foregoing.

Intercreditor Agreements” means, collectively, the 1L/1L Intercreditor Agreement and the Junior Lien Intercreditor Agreement.

 

 

19


Inventory” means all present and future “inventory” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

Investment” means any beneficial ownership interest in any Person (including stock, securities, partnership interest, limited liability company interest, or other interests), any acquisition by Borrower, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the equity interests of or a business line or unit or a division of, any Person, and any loan, advance or capital contribution to any Person, including the creation or capital contribution to any wholly-owned or partially-owned subsidiary).

Investment Property” means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

Lender” has the meaning set forth in the Preamble hereto.

Lien” shall mean, with respect to any asset, (a) any mortgage, charge, hypothec, deed of trust, Lien, hypothecation, pledge, charge, security interest or similar monetary encumbrance in or on such asset; and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.

Litigation Annex” means the litigation schedule attached hereto as Annex F on the Restatement Date (as such Annex F may be supplemented from time to time after the Restatement Date by Lender for any outstanding claims, suits, litigation and other proceedings not disclosed to Lender that existed prior to the Restatement Date).

Loan” has the meaning set forth in the Preamble hereto.

Loan Documents” means, collectively, this Agreement, the Guarantee Agreement, any Security Documents, the Intercreditor Agreements, the Perfection Certificate, the Budgets, the Variance Reports, and all other present and future documents, instruments and agreements between Lender and Borrower (or Guarantor, if applicable), including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

Loan Parties” means Borrower and the Guarantors. As of the Restatement Date, the Loan Parties are Borrower and Holdings.

Material Adverse Change” means any of the following: (a) a material adverse change in the business, operations, or financial or other condition of Borrower, (b) a material impairment of the prospect of repayment of any portion of the Obligations; or (c) a material impairment of the value or priority of Lender’s security interests in the Collateral.

Material Indebtedness” shall mean Indebtedness (other than (i) the Obligations, (ii) the Obligations under the Emblem Facility) of Borrower in an aggregate principal amount exceeding $500,000 (excluding ordinary course trade payables).

Maturity Date” has the meaning set forth in the Schedule.

Maximum Legal Rate” has the meaning set forth in Section 2A of the Schedule.

 

 

20


Net Cash Proceeds” means (a) with respect to any Asset Sale, an amount equal to: (i) cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Borrower from such Asset Sale, minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (1) income or gains taxes (but excluding any tax distributions) payable by the Borrower as a result of any gain recognized in connection with such Asset Sale, (2) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the loans under the PMC Super-Priority Facility or loans under the Emblem Facility or, after the Additional Loans Funding Date, the Loans hereunder) that, in the case of a Loan Party, is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (3) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Borrower in connection with such Asset Sale or for any other liabilities retained by Borrower associated with such Asset Sale, (4) bona fide selling fees, costs, commissions and expenses (including reasonable brokers’ fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes) and (5) Borrower’s good faith estimate of payments required to be made with respect to unassumed liabilities relating to the properties sold within 180 days of such Asset Sale; provided that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 180 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds; (b) (i) any cash payments or proceeds received by Borrower (1) under any casualty insurance policy in respect of a covered loss thereunder arising after the Restatement Date or (2) as a result of the taking of any assets of Borrower by any Person pursuant to the power of eminent domain, condemnation or otherwise, or pursuant to a sale of any such assets to a purchaser with such power under threat of such a taking, minus (ii) (1) any actual and reasonable costs incurred by Borrower in connection with the collection, adjustment or settlement of any claims of Borrower in respect thereof, and (2) any bona fide direct costs incurred in connection with any sale of such assets as referred to in preceding clause (i)(2)) including income taxes (but excluding tax distributions) paid or imminently payable by Borrower as a result of any gain recognized in connection therewith and the costs and expenses incurred in connection with the preparation of assets for transfer upon a taking or condemnation; and (c) with respect to any issuance or incurrence of Indebtedness, the cash proceeds thereof, net of underwriting discounts and commissions and other reasonable costs and expenses associated therewith, including reasonable legal fees and expenses.

Net Income” means, as calculated on a consolidated basis for Holdings and its consolidated Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Holdings and its consolidated Subsidiaries for such period taken as a single accounting period.

Obligations” means the Loan and all present and future loans, advances, debts, liabilities, obligations, guaranties, covenants, duties and indebtedness at any time owing by Borrower to Lender, whether evidenced by this Agreement or any note or other instrument or document, or otherwise, whether arising from an extension of credit, opening of a letter of credit, banker’s acceptance, loan, guaranty, indemnification or otherwise, whether direct or indirect (including, without limitation, those acquired by assignment and any participation by Lender in Borrower’s debts owing to others), absolute or contingent, due or to become due, including, without limitation, all principal, interest, charges, expenses, fees, premium (including, without limitation, the Applicable Premium), attorney’s fees, expert witness fees, audit fees, letter of credit fees, collateral monitoring fees, closing fees, facility fees, auction fees, liquidation fees, appraisal fees, termination fees, minimum interest charges and any other sums chargeable to Borrower under this Agreement or under any other Loan Documents.

Observer” has the meaning specified in Section 5.9.

 

 

21


Other Property” means the following as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and all rights relating thereto: all present and future “commercial tort claims” (including without limitation any commercial tort claims identified in the Perfection Certificate), “documents”, “instruments”, “promissory notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and all other goods and personal property of every kind, tangible and intangible, whether or not governed by the Uniform Commercial Code.

Outstanding Accounts Payable” means the accounts payable balances (including the vendors in respect thereof) of Borrower as of the Restatement Date as set forth on Annex B (as such Annex B may be supplemented from time to time after the Restatement Date by Lender for any Understated Accounts Payable Amount).

Overdue Accounts Payable Schedule” means the payment plan and milestone dates for overdue accounts payable of Borrower as set forth on Annex C (as such Annex C may be supplemented from time to time after the Restatement Date by Lender for any Understated Accounts Payable Amount).

Paydown Date” means the date on which Lender (as defined in the Amended and Restated Super-Priority PMC Loan Agreement) receives an amount equal to the Additional Commitment (under and as defined in the Emblem Facility) (which, for the avoidance of doubt, is an amount equal to $50,000,000 as of the Restatement Date as reduced from time to time by the amount of any Subsequent Understated AP Loans (under and as defined in the Emblem Facility) and any Subsequent Litigation Settlement Loans (under and as defined in the Emblem Facility), in each case funded under the Emblem Facility with the consent of the Lender (as defined in the Amended and Restated Super-Priority PMC Loan Agreement) as further set forth in the Emblem Facility) (such amount, the “PMC Minimum Paydown Amount”) consisting of direct or indirect proceeds from the Emblem Lenders (either by way of assignment of all or any portion of the Loans (as defined in the Amended and Restated Super-Priority PMC Loan Agreement) to any of the Emblem Lenders or by way of funding by any of the Emblem Lenders of loan proceeds to Borrower and repayment or prepayment by Borrower.

Payment” means all checks, wire transfers and other items of payment received by Lender (including proceeds of Accounts and payment of the Obligations in full) for credit to Borrower’s outstanding Loan.

Perfection Certificate” has the meaning set forth in Section 9(i) of the Schedule.

Permitted Dispositions” means:

(i) the sale of finished Inventory and all other goods and services in the ordinary course of Borrower’s business;

(ii) ordinary course uses and transfers of cash and cash equivalents;

(iii) intercompany sales or dispositions of assets between Borrower and any Subsidiaries of Borrower in the ordinary course of business or consistent with past practice;

(iv) subject to the prior written consent of Lender in its sole and absolute discretion, disposals of damaged, obsolete, used, worn out or surplus assets (including, without limitation, equipment and fixtures) no longer used or useful to the business of Borrower or economically impracticable to maintain;

(v) sales of property (including like-kind exchanges) to the extent that (x) such property is exchanged for credit (on a fair market value basis) against the purchase price of similar replacement property or (y) such property is sold or otherwise disposed of for fair market value and the proceeds of such sale or disposition are promptly applied to the purchase price of similar replacement property;

(vi) leases, subleases, non-exclusive licenses or sublicenses of property or Intellectual Property in the ordinary course of business which do not materially interfere with the business of Borrower or any of the other Loan Parties;

(vii) Asset Sales with a fair market value less than or equal to $250,000 in the aggregate per fiscal year;

 

 

22


(viii) Asset Sales of COI Equipment for fair market value and for consideration less than or equal to $5,000,000; and

(viii) subject to the prior written consent of Lender in its sole and absolute discretion, Asset Sales so long as (1) the consideration received for such assets shall be in an amount at least equal to the fair market value thereof (determined in good faith by Borrower), (2) no less than 75% of the consideration for such Asset Sale shall be paid in cash or cash equivalents, (3) no Event of Default is continuing or would exist after giving effect thereto and (4) the Net Cash Proceeds thereof shall be applied as required by Section 4.2(a), provided, that the fair market value of all such Asset Sales in any fiscal year shall not exceed $5,000,000 in the aggregate.

Permitted Indebtedness” means:

 

  (a)

[reserved];

(b) (i) the Obligations under this Agreement in an aggregate principal amount not to exceed $100,543,574.95, (ii) the obligations under the Emblem Facility in an aggregate principal amount not to exceed the sum of (x) $110,000,000.00 plus (y) the amount of any Subsequent Litigation Settlement Loans (as defined in the Emblem Facility) and any Subsequent Understated AP Loans (as defined in the Emblem Facility) from time to time made thereunder and (iii) the obligations under the PMC Super-Priority Facility in an aggregate principal amount not to exceed $52,986,153.25, (in each case, plus any increases to principal as a result of any interest or fees paid in kind, as applicable and any Applicable Premium (as defined in the Emblem Facility and the PMC Super-Priority Facility, as applicable); and

(c) trade payables and other contractual obligations to suppliers and customers incurred in the ordinary course of business.

Permitted Investments” means:

(a) Investments in Subsidiaries shown on the Perfection Certificate and existing on the date hereof;

(b) cash and cash equivalents;

(c) Investments consisting of Deposit Accounts in which Lender or Emblem has a perfected security interest (subject to the Intercreditor Agreements);

 

(d) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and

(e) other Investments in an aggregate amount not to exceed $50,000.

Permitted Liens” means the following:

(a) Liens securing the Obligations;

(b) Liens on the Collateral, which may rank senior or, after the occurrence of the Additional Loans Funding Date, pari passu in right of security with the Liens securing the Obligations, securing the Emblem Facility, and at all times subject to the Intercreditor Agreements;

(c) Liens on the Collateral, which must rank senior in right of security to the Liens securing the Obligations, securing the PMC Super-Priority Facility, and at all times subject to the Intercreditor Agreements (as applicable);

(d) any leases of specific items of Equipment listed in the Perfection Certificate;

(e) [Reserved];

(f) Liens for taxes not yet payable or contested in good faith by Borrower in accordance with Section 3.8; and

(g) additional security interests and Liens which are subordinate to the security interest of Lender and are consented to in writing by Lender, which consent may be withheld in its sole and absolute discretion.

Permitted Disbursements Variance” means actual disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) for the most recently ended Budget Testing Period are no greater than 115% (or such greater percentage determined by Lender in its sole and absolute discretion if requested by management of the Borrower) of the projected disbursements in the then in-effect Approved Budget (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule).

 

 

23


Permitted Receipts Variance” means actual cash receipts for the most recently ended Budget Testing Period are no less than 85% (or such lesser percentage determined by Lender in its sole and absolute discretion if requested by management of the Borrower) of the projected cash receipts in the then in-effect Approved Budget.

Permitted Variance” means, collectively, the Permitted Receipts Variance and the Permitted Disbursements Variance. “Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, government, or any agency or political division thereof; or any other entity.

Pledge Agreement” means that certain Pledge Agreement, dated as of the Restatement Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) by Holdings in favor of Lender.

PMC” means PMC Financial Services Group, LLC.

PMC Super-Priority Facility” means the credit facility provided to the Borrower pursuant to the Amended and Restated Super-Priority PMC Loan Agreement.

Restatement Date” means the first date on which all of the conditions precedent in Section 9 of Schedule are satisfied or waived by Lender in its sole and absolute discretion, which date was September 20, 2024.

SEC” means the Securities and Exchange Commission or any successor thereto.

Security Documents” means the Pledge Agreement, the Account Control Agreements, and each of the security agreements, pledge agreements, mortgages and other instruments and documents executed and delivered from time to time entered into by the Loan Parties.

Specified Agreement” has the meaning set forth in Section Annex G.

Specified Amounts” has the meaning assigned to such term in Annex G.

Specified Conditions” has the meaning assigned to such term in Annex G.

Specified Deductions” has the meaning assigned to such term in Annex G.

Specified Dispute” has the meaning assigned to such term in Annex G.

Specified Event of Default” has the meaning assigned to such term in Annex G.

Specified Payments” has the meaning assigned to such term in Annex G.

Specified Post-Closing Requirements” has the meaning assigned to such term in Annex G.

Specified Use” has the meaning assigned to such term in Annex G. “Subsidiary” means, with respect to any Person, a Person of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by such Person or one or more Affiliates of such Person.

Tax Receivables Agreement” means Amended and Restated Tax Receivables Agreement, dated as of the Restatement Date, by and among the corporation, Lender, the TRA Holders (as defined therein), and Bryan Freeman, in his capacity as TRA Holder Representative (s defined therein) (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted herein.)

Transactions” means the transactions to occur pursuant to the Loan Documents, including (a) the execution, delivery and performance of the Loan Documents, the creation of the Liens pursuant to the Security Documents and the extension of credit hereunder and the use of proceeds thereof, (b) the payment of all fees and expenses to be paid and owing in connection with the foregoing, (c) the amendment and restatement of certain warrants issued by Holdings to Lender, (d) the issuance of the Class B Common Stock and Class C Units to Emblem, and at Lender’s option and subject to certain conditions, (e) the exchange of Class B Common Stock and Class C Units for Class A Common Stock pursuant to the 2024 Exchange Agreement.

 

 

 

24


Uniform Commercial Code” means the Uniform Commercial Code as the same may from time to time be in effect in the State of New York or the Uniform Commercial Code (or similar code or statute) of another jurisdiction in the United States, to the extent it may be required to apply to any item or items of Collateral.

United States” means the United States of America (including any State or territory thereof and the District of Columbia).

Variance Report” has the meaning set forth in Section 6 of the Schedule.

Other Terms. All accounting terms used in this Agreement, unless otherwise indicated, shall have the meanings given to such terms in accordance with GAAP, consistently applied. All other terms contained in this Agreement, unless otherwise indicated, shall have the meanings provided by the Uniform Commercial Code, to the extent such terms are defined therein.

9. GENERAL PROVISIONS.

9.1 Computations. In computing interest on the Obligations, all Payments received after 12:00 Noon Pacific Time on any day shall be deemed received on the next Business Day, and Payments received by Lender (including proceeds of Receivables and payment of the Obligations in full) shall be deemed applied by Lender on account of the Obligations two (2) Business Days after receipt by Lender of immediately available funds. Lender shall not be required to credit Borrower’s account for the amount of any item of payment which is unsatisfactory to Lender in its good faith business judgment, and Lender may charge Borrower’s loan account for the amount of any item of payment which is returned to Lender unpaid.

9.2 Application of Payments. Subject to the Intercreditor Agreements, all payments with respect to the Obligations may be applied, and in Lender’s sole and absolute discretion reversed and re-applied, to the Obligations, in such order and manner as Lender shall determine in its sole and absolute discretion.

9.3 Increased Costs and Reduced Return. If Lender shall have determined that the adoption or implementation of, or any change in, any law, rule, treaty or regulation, or any policy, guideline or directive of, or any change in, the interpretation or administration thereof by, any court, central bank or other administrative or governmental authority, or compliance by Lender with any directive of, or guideline from, any central bank or other Governmental Authority or the introduction of, or change in, any accounting principles applicable to Lender (whether or not having the force of law) shall (i) subject Lender to any tax, duty or other charge with respect to this Agreement or any Loan made hereunder, or change the basis of taxation of payments to Lender of any amounts payable hereunder (except for taxes on the overall net income of Lender), (ii) impose, modify or deem applicable any reserve, special deposit or similar requirement against any Loan, or against assets of or held by, or deposits with or for the account of, or credit extended by, Lender, or (iii) impose on Lender any other condition regarding this Agreement or any Loan, and the result of any event referred to in clauses (i), (ii) or (iii) above shall be to increase the cost to Lender of making any Loan, or agreeing to make any Loan or to reduce any amount received or receivable by Lender, then, upon demand by Lender, Borrower shall pay to Lender such additional amounts as will compensate Lender for such increased costs or reductions in amount. All amounts payable under this Section shall bear interest from the date of demand by Lender until payment in full to Lender at the highest interest rate applicable to the Obligations. A certificate of Lender claiming compensation under this Section, specifying the event herein above described and the nature of such event shall be submitted by Lender to Borrower, setting forth the additional amount due and an explanation of the calculation thereof, and Lender’s reasons for invoking the provisions of this Section, and the same shall be final and conclusive absent manifest error.

9.4 [Reserved].

 

 

25


9.5 Monthly Accountings. Lender may provide Borrower monthly with an account of advances, charges, expenses and payments made pursuant to this Agreement if requested by Borrower. Such account shall be deemed correct, accurate and binding on Borrower and an account stated (except for reverses and reapplications of payments made and corrections of errors discovered by Lender), unless Borrower notifies Lender in writing to the contrary within 60 days after such account is rendered, describing the nature of any alleged errors or omissions.

9.6 Notices. All notices to be given under this Agreement shall be in writing and shall be given either personally or by reputable private delivery service or by regular first-class mail, or certified mail return receipt requested, addressed or by electronic transmission pursuant to procedures approved by Lender (i) to the Loan Parties at the address shown in the heading to this Agreement, 3 Executive Campus, Suite 155 Cherry Hill, New Jersey 080023, attention: Jim Behling, Chief Financial Officer, mobile: 312.656.5810 (the “Borrower’s Address”), or (ii) to Lender at the address shown in the heading to this Agreement with a copy to Lender at 12243 Branford Street, Sun Valley, CA 91352, Attention: T.C. Cheong with a further copy (which shall not constitute notice) to: Winston & Strawn LLP, 800 Capitol Street, Suite 2400, Houston, TX 77002-2924: Attention: Ryan Hunsaker, Email: rhunsaker@winston.com , or (iii) for either party at any other address designated in writing by one party to the other party. All notices shall be deemed to have been given upon delivery in the case of notices personally delivered, or at the expiration of one Business Day following delivery to the private delivery service, or two Business Days following the deposit thereof in the United States mail, with postage prepaid.

9.7 Severability. Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable, such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

9.8 Integration. This Agreement and such other written agreements, documents and instruments as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Lender and supersede all prior and contemporaneous negotiations and oral representations and agreements, all of which are merged and integrated in this Agreement. There are no oral understandings. representations or agreements between the parties which are not set forth in this Agreement or in other written agreements signed by the parties in connection herewith.

9.9 Waivers; Indemnity. The failure of Lender at any time or times to require Borrower to strictly comply with any of the provisions of this Agreement or any other Loan Document shall not waive or diminish any right of Lender later to demand and receive strict compliance therewith. Any waiver of any default shall not waive or affect any other default, whether prior or subsequent, and whether or not similar. None of the provisions of this Agreement or any other Loan Document shall be deemed to have been waived by any act or knowledge of Lender or its agents or employees, but only by a specific written waiver signed by an authorized officer of Lender and delivered to Borrower. Each of Holdings and Borrower waives the benefit of all statutes of limitations relating to any of the Obligations or this Agreement or any other Loan Document, and each of Holdings and Borrower waives demand, protest, notice of protest and notice of default or dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Lender on which Holdings and Borrower is or may in any way be liable, and notice of any action taken by Lender, unless expressly required by this Agreement. Each of Holdings and Borrower hereby agrees to indemnify Lender and its Affiliates, Subsidiaries, parent, directors, officers, employees, agents, and attorneys, and to hold them harmless from and against any and all claims, debts, liabilities, demands, obligations, actions, causes of action, penalties, costs and expenses (including reasonable attorneys’ fees), of every kind, which they may sustain or incur based upon or arising out of any of the Obligations, or any relationship or agreement between Lender, Holdings or Borrower, or any other matter, relating to Holdings, Borrower or the Obligations; provided that this indemnity shall not extend to damages proximately caused by the indemnitee’s own gross negligence or willful misconduct. Notwithstanding any provision in this Agreement to the contrary, the indemnity agreement set forth in this Section shall survive any termination of this Agreement and shall for all purposes continue in full force and effect.

 

 

26


9.10 Liability. NEITHER LENDER NOR ITS PARENT, NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE LIABLE FOR ANY CLAIMS, DEMANDS, LOSSES OR DAMAGES, OF ANY KIND WHATSOEVER, MADE, CLAIMED, INCURRED OR SUFFERED BY HOLDINGS, BORROWER OR ANY OTHER PARTY THROUGH THE ORDINARY NEGLIGENCE OF LENDER, OR ITS PARENT OR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS, BUT NOTHING HEREIN SHALL RELIEVE LENDER FROM LIABILITY FOR ITS OWN GROSS NEGLIGENCE OR WILLFUL MISCONDUCT. NEITHER LENDER NOR ITS PARENT, NOR ANY OF ITS AFFILIATES, SUBSIDIARIES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR ATTORNEYS SHALL BE RESPONSIBLE OR LIABLE TO HOLDINGS, BORROWER OR TO ANY OTHER PARTY FOR ANY INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF ANY FINANCIAL ACCOMMODATION HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER ACT, OMISSION OR TRANSACTION.

9.11 Amendment. The terms and provisions of this Agreement may not be waived, amended or otherwise modified, except in a writing executed by Borrower and Lender; provided that, notwithstanding the foregoing, Lender may amend this Agreement without the consent or signature of Borrower or any Loan Party solely to effectuate the amendment to this Agreement required to be delivered pursuant to Section 11(i) of the Schedule attached to the Emblem Loan Agreement.

9.12 Time of Essence. Time is of the essence in the performance by Holdings and Borrower of each and every obligation under this Agreement.

9.13 Attorneys Fees and Costs. Borrower shall reimburse Lender for all reasonable attorneys’ fees and all filing, recording, search, title insurance, appraisal, audit, and other reasonable costs incurred by Lender, pursuant to, or in connection with, or relating to this Agreement (whether or not a lawsuit is filed), including, but not limited to, any reasonable attorneys’ fees and costs Lender incurs in order to do the following: prepare and negotiate this Agreement and all present and future documents relating to this Agreement; obtain legal advice in connection with this Agreement or Borrower; enforce, or seek to enforce, any of its rights; prosecute actions against, or defend actions by, Account Debtors; commence, intervene in, or defend any action or proceeding; initiate any complaint to be relieved of the automatic stay in bankruptcy; file or prosecute any probate claim, bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and inspect any of the Collateral or any of Borrower’s books and records; protect, obtain possession of, lease, dispose of, or otherwise enforce Lender’s security interest in, the Collateral; and otherwise represent Lender in any litigation relating to Borrower. If either Lender or Borrower files any lawsuit against the other predicated on a breach of this Agreement, the prevailing party in such action shall be entitled to recover its reasonable costs and attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and costs incurred in the enforcement of, execution upon or defense of any order, decree, award or judgment. All attorneys’ fees and costs to which Lender may be entitled pursuant to this Paragraph shall immediately become part of Borrower’s Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations.

 

 

27


9.14 Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries and representatives of Holdings, Borrower and Lender; provided, however, that Holdings and Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Lender, and any prohibited assignment shall be void. No consent by Lender to any assignment shall release Holdings or Borrower from its liability for the Obligations.

9.15 [Reserved].

9.16 Limitation of Actions. Any claim or cause of action by Holdings or Borrower against Lender, its directors, officers, employees, agents, accountants or attorneys, based upon, arising from, or relating to this Agreement, or any other Loan Document, or any other transaction contemplated hereby or thereby or relating hereto or thereto, or any other matter, cause or thing whatsoever, occurred, done, omitted or suffered to be done by Lender, its directors, officers, employees, agents, accountants or attorneys, shall be barred unless asserted by Holdings or Borrower by the commencement of an action or proceeding in a court of competent jurisdiction by the filing of a complaint within one year after the first act, occurrence or omission upon which such claim or cause of action, or any part thereof, is based, and the service of a summons and complaint on an officer of Lender, or on any other person authorized to accept service on behalf of Lender, within thirty (30) days thereafter. Each of Holdings and Borrower agrees that such one-year period is a reasonable and sufficient time for Holdings and Borrower, as applicable, to investigate and act upon any such claim or cause of action. The one-year period provided herein shall not be waived, tolled, or extended except by the written consent of Lender in its sole and absolute discretion. This provision shall survive any termination of this Agreement or any other Loan Document.

9.17 Paragraph Headings; Construction. Paragraph headings are only used in this Agreement for convenience. Holdings, Borrower and Lender acknowledge that the headings may not describe completely the subject matter of the applicable paragraph, and the headings shall not be used in any manner to construe, limit, define or interpret any term or provision of this Agreement. This Agreement has been fully reviewed and negotiated between the parties and no uncertainty or ambiguity in any term or provision of this Agreement shall be construed strictly against Lender, Holdings or Borrower under any rule of construction or otherwise.

9.18 Public Announcement. Borrower hereby agrees that Lender may make a public announcement of the transactions contemplated by this Agreement, and may publicize the same in marketing materials, newspapers and other publications, and otherwise, and in connection therewith may use Borrower’s name, tradenames and logos. Lender understands and acknowledges that Borrower may be required pursuant to applicable securities laws to publicly announce the transactions contemplated by this Agreement, provided that Borrower shall not make any such public announcement unless Lender has provided its prior written approval of the form and substance of such public announcement (in its reasonable discretion).

9.19 Governing Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND ANY CLAIMS, CONTROVERSY, DISPUTE OR CAUSES OF ACTION (WHETHER IN CONTRACT OR TORT OR OTHERWISE) BASED UPON, ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT (OTHER THAN AS EXPRESSLY SET FORTH IN THE OTHER LOAN DOCUMENTS) SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

 

28


9.20 Jurisdiction; Consent to Service of Process.

(a) Each of Holdings, Borrower and Lender irrevocably and unconditionally agree that they will not commence any action, litigation or proceeding of any kind or description, whether in law or equity, whether in contract or in tort or otherwise, in any way relating to this Agreement or any other Loan Document or the transactions relating hereto or thereto, in any forum other than the courts of the State of New York sitting in New York County, and of the United States District Court of the Southern District of New York sitting in New York County, and any appellate court from any thereof, and each of the parties hereto irrevocably and unconditionally submits to the jurisdiction of such courts and agrees that all claims in respect of any such action, litigation or proceeding may be heard and determined in such New York State court or, to the fullest extent permitted by applicable law, in such federal court. Each of the parties hereto agrees that a final judgment in any such action, litigation or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Notwithstanding the foregoing, each party hereto agrees that Lender retains the right to bring proceedings against any Loan Party in the courts of any other jurisdiction solely in connection with the exercise of any rights or remedies to enforce its security interest in the Collateral created hereunder or under any other Security Document or as otherwise provided in the Guarantee Agreement.

(b) Each of the parties hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement or the other Loan Documents in any New York State or federal court. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

(c) Each party to this Agreement irrevocably consents to service of process in the manner provided for notices in Section 9.6. Nothing in this Agreement will affect the right of any party to this Agreement or any other Loan Document to serve process in any other manner permitted by law.

9.21 Mutual Waiver of Jury Trial. HOLDINGS, BORROWER AND LENDER EACH HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN LENDER, HOLDINGS AND BORROWER, OR ANY CONDUCT, ACTS OR OMISSIONS OF LENDER, HOLDINGS OR BORROWER OR ANY OF THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH LENDER, HOLDINGS OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE.

9.22 Survival of Agreement. All covenants, agreements, representations and warranties made by the Loan Parties herein, in the other Loan Documents and in the certificates or other instruments prepared or delivered in connection with or pursuant to this Agreement or any other Loan Document shall be considered to have been relied upon by Lender and shall survive the making by Lender of the Loans and the execution and delivery of the Loan Documents, regardless of any investigation made by such person or on its behalf, and shall continue in full force and effect until the Termination Date. Without prejudice to the survival of any other agreements contained herein, indemnification and reimbursement obligations contained herein shall survive the Termination Date.

 

 

29


9.23 Withholding Taxes. Prior to Borrower making any payments to Lender, Lender shall have delivered to Borrower a duly completed and executed IRS Form W-9 of Lender. Borrower and Lender each hereby agree that each payment by Borrower under this Agreement shall, except as required by law, be made free and clear of, and without withholding or deduction for or on account of, any present or future taxes. In the event that Borrower is required to withhold any amounts in respect of taxes under applicable law, Borrower shall (i) withhold or deduct any taxes required to be withheld or deducted from any payment due hereunder and (ii) pay such additional amounts to Lender so that after taking into account all taxes withheld or deducted from payments to Lender (including on any additional amounts payable pursuant to this clause) Lender receives the amount that it would have received had no such deduction or withholding been made. Borrower shall pay to the appropriate Governmental Authority any such taxes withheld or deducted before penalties are payable thereon, and if any such penalties are payable, Borrower shall also make payment thereof when due to the appropriate Governmental Authority. Within thirty (30) days after each such payment of taxes or penalties, Borrower shall deliver to Lender a receipt evidencing such payment.

9.24 [Reserved.]

10. Amendment and Restatement. Each of the parties hereto agrees as follows:

10.1 this Agreement (including all Exhibits and Schedules) shall amend, restate and replace in its entirety the Existing Loan Agreement (including all exhibits and schedules attached thereto) with respect to the Existing Term Loan B on the Restatement Date;

10.2 from and after the date first set forth above, all references to the “Loan Agreement” solely with respect to the Existing Term Loan B contained in the Loan Documents shall be deemed to refer to this Agreement and all references to any Article or Section (or subsection) of this Agreement in any other Loan Document shall be amended to become references to the corresponding provisions of this Agreement;

 

10.3 this Agreement shall not constitute a novation of the obligations and liabilities of the parties under the Existing Loan Agreement or the other Loan Documents as in effect prior to the date first set forth above and that remain outstanding as of the date first set forth above and all obligations under the Existing Loan Agreement solely with respect to the Existing Term Loan B s(as such obligations may be amended, supplemented, replaced, expanded, extended or otherwise modified hereby on the date first set forth above) shall constitute obligations hereunder and shall continue to be valid, enforceable and in full force and effect and not to be impaired, in any respect, by the effectiveness of this Agreement; and

10.4 this amendment and restatement of the Existing Loan Agreement solely with respect to the Existing Term Loan B shall be limited as written and not be a consent to any other amendment, restatement, supplement, waiver or other modification of any other provisions under any Loan Documents, without regard to whether similar, and, except as expressly provided herein or in any other Loan Document, all terms and conditions of the Loan Documents remain in full force and effect unless otherwise specifically amended hereby.

11. Counterparts; Execution. This Agreement may be executed in counterparts (and by different parties hereto on 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 by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Agreement. For the avoidance of doubt, the words “execution,” “signed,” “signature,” and words of like import in this Agreement or any other Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

 

 

30


12. Additional Loans Funding Date under Emblem Facility. Each of Lender, Holdings and the Borrower agree that Lender shall have no consent rights over the funding of the Additional Loans (under and as defined in the Emblem Facility) on the Additional Loans Funding Date (as defined in the Emblem Facility).

 

 

31


Borrower:
REAL GOOD FOODS, LLC
By   /s/ Timothy S. Zimmer
Name:   Timothy S. Zimmer
Title:   Chief Executive Officer
Holdings:
THE REAL GOOD FOOD COMPANY, INC.
By   /s/ Timothy S. Zimmer
Name:   Timothy S. Zimmer
Title:   Chief Executive Officer
Lender:
PMC Financial Services Group, LLC
By   /s/ Walter E. Buttkus, III
Name:   Walter E. Buttkus, III
Title:   President

 

32


Execution Version

PMC Financial Services Group, LLC

Schedule to

Amended and Restated Loan and Security Agreement

 

Borrower:    Real Good Foods, LLC
Holdings:    The Real Good Food Company, Inc.
Address:   

3 Executive Campus, Suite 155

Cherry Hill, New Jersey 08002

Date:    September 20, 2024

This Schedule forms an integral part of the Amended and Restated Loan and Security Agreement dated as of September 20, 2024 (as amended, restated, amended and restated, supplemented, or otherwise modified from time to time, this “Agreement”) by and among PMC Financial Services Group, LLC (the “Lender”), The Real Good Food Company, Inc., a Delaware corporation (“Holdings”), and Real Good Foods, LLC (f.k.a. The Real Good Food Company LLC), a Delaware limited liability company (“Borrower”).

 

13. COMMITMENT

(Section 1.1):

  

As used herein, the term “Loan” means the loan made as a continuation of, and consolidation of, the Existing Term Loan B in an amount equal to $ 100,543,574.95.

 

Any portion of the Loan that is repaid may not be reborrowed.

 

All payments by Borrower to Lender in respect of the Loan shall be made via ACH banking transfer to Lender’s bank account per written instructions.

14. INTEREST.

Interest Rate

(Section 1.2):

  

The Loan outstanding from time to time shall bear interest at an annual rate equal to 18.00% which shall be paid in-kind, and as further set forth in Section 1.2 of this Agreement.

 

Upon the occurrence and during the continuance of an Event of Default, the Loan and all other monetary Obligations shall bear interest (including post-petition interest in any proceeding under any applicable Debtor Relief Laws) at a rate (the “Default Rate”) that is 5.00% per annum in excess of the interest rate otherwise payable hereunder which shall be payable in cash in immediately available funds on demand.

2A. USURY SAVINGS CLAUSE

Provisions Relating to Interest

   Notwithstanding the provisions of this Agreement regarding the rates of interest applicable to the Initial Loans, if at any time the amount of such interest computed on the basis of the interest rate set forth herein (the “Applicable Interest Rate”) would exceed the amount of such interest computed upon the basis of the maximum rate of interest permitted by applicable state or federal law in effect from time to time hereafter, after taking into account, to the extent required by applicable law, any and all fees and charges in connection therewith deemed in the nature of interest under applicable law provided for in this Agreement or in any other agreement between Borrower and Lender (the “Maximum Legal Rate”), the interest payable under this Agreement shall be computed upon the basis of the Maximum Legal Rate, but any subsequent reduction in the Applicable Interest Rate shall not reduce such interest thereafter payable hereunder below the amount computed on the basis of the Maximum Legal Rate until the aggregate amount of such interest accrued and payable under this Agreement equals the total amount of interest which would have accrued if such interest had been at all times computed solely on the basis of the Applicable Interest Rate.

 

33


  No agreements, conditions, provisions or stipulations contained in this Agreement or any other instrument, document or agreement between Borrower and Lender or default of Borrower, or the exercise by Lender of the right to accelerate the payment of the maturity of principal and interest, or to exercise any option whatsoever contained in this Agreement or any other agreement between Borrower and Lender, or the arising of any contingency whatsoever, shall entitle Lender to collect, in any event, interest exceeding the Maximum Legal Rate and in no event shall Borrower be obligated to pay interest exceeding such Maximum Legal Rate and all agreements, conditions or stipulations, if any, which may in any event or contingency whatsoever operate to bind, obligate or compel Borrower to pay a rate of interest exceeding the Maximum Legal Rate, shall be without binding force or effect, at law or in equity, to the extent only of the excess of interest over such Maximum Legal Rate. In the event any interest is charged in excess of the Maximum Legal Rate (“Excess”), Borrower acknowledges and stipulates that any such charge shall be the result of an accidental and bona fide error, and such Excess shall be, first, applied to reduce the principal then unpaid hereunder; second, applied to reduce the remaining Obligations; and third, returned to Borrower, it being the intention of the parties hereto not to enter at any time into a usurious or otherwise illegal relationship. Borrower recognizes that, with fluctuations in the Applicable Interest Rate and the Maximum Legal Rate, such an unintentional result could inadvertently occur. By the execution of this Agreement, Borrower covenants that (i) the credit or return of any Excess shall constitute the acceptance by Borrower of such Excess, and (ii) Borrower shall not seek or pursue any other remedy, legal or equitable, against Lender, based in whole or in part upon the charging or receiving of any interest in excess of the maximum authorized by applicable law. For the purpose of determining whether or not any Excess has been contracted for, charged or received by Lender, all interest at any time contracted for, charged or received by Lender in connection with this Agreement shall be amortized, prorated, allocated and spread in equal parts during the entire term of this Agreement.

 

34


  

The provisions of this Section 2A of this Schedule shall be deemed to be incorporated into every document or communication relating to the Obligations which sets forth or prescribes any account, right or claim or alleged account, right or claim of Lender with respect to Borrower (or any other obligor in respect of Obligations), whether or not any provision of this Section 2A of this Schedule is referred to therein. All such documents and communications and all figures set forth therein shall, for the sole purpose of computing the extent of the liabilities and obligations of Borrower (or other obligor) asserted by Lender thereunder, be automatically recomputed by any Borrower or obligor, and by any court considering the same, to give effect to the adjustments or credits required by this Section 2A of this Schedule.

 

If the applicable state or federal law is amended in the future to allow a greater rate of interest to be charged under this Agreement or any other Loan Documents than is presently allowed by applicable state or federal law, then the limitation of interest under this Section 2A of this Schedule shall be increased to the maximum rate of interest allowed by applicable state or federal law as amended, which increase shall be effective hereunder on the effective date of such amendment, and all interest charges owing to Lender by reason thereof shall be payable upon demand.

15. RESERVED   

16. MATURITY DATE

(Section 6.1):

   As used herein, the term “Maturity Date” means (a) if the Paydown Date has not occurred, December 31, 2026 and (b) if the Paydown Date has occurred, the fifth anniversary of the Restatement Date, provided, that if the board of directors and stockholders of Holdings do not each approve the issuance of up to 49.9% of the outstanding Class B Common Stock and Class A Common Stock (and corresponding Class C Units of RGF, LLC, if applicable) on or prior to the six-month anniversary of the Restatement Date, the Maturity Date shall mean the six-month anniversary of the Restatement Date.

17. FINANCIAL COVENANTS

(Section 5.1):

  

(a) Minimum Adjusted EBITDA. Prior to the Paydown Date, Borrower shall not permit Adjusted EBITDA (i) for the calendar months ending September 30, 2024, October 31, 2024, November 30, 2024 and December 31, 2024, to be less than $1,000,000 for such calendar month and (ii) for any calendar month ending thereafter, to be less than $1,500,000 for such calendar month.

 

35


  

From and after the Paydown Date, Borrower shall not permit Adjusted EBITDA for any fiscal quarter ending thereafter, to be less than $6,000,000 for such fiscal quarter.

 

(b) Minimum Daily Cash. Borrower shall not permit Available Cash as of 5:00 PM New York time on each Business Day ending after the Restatement Date to be less than $12,500,000.

 

(c) Minimum Average Monthly Cash. Borrower shall not permit Average Monthly Cash for any calendar month ending after the Restatement Date (commencing with the calendar month ending September 30, 2024) to be less than $15,000,000 for such calendar month.

18. REPORTING.

(Section 5.3):

  

(a) Borrower shall provide Lender with the following:

 

(a) by 5:00 PM New York time on each Business Day occurring after the Restatement Date, reporting on (x) daily production for the immediately preceding Business Day and (y) minimum daily Available Cash for the immediately preceding Business Day, in a form and substance satisfactory to Lender;

 

(b) by 5:00 PM New York time on Wednesday of each week ending after the Restatement Date (commencing September 25, 2024), a report on weekly sales for the prior calendar week in form and substance satisfactory to Lender;

 

(c) by 5:00 PM New York time on Friday of each week ending after the Restatement Date (commencing October 4, 2024 (for the 13-week period commencing Sunday, October 6, 2024)), an updated 13-week statement for the subsequent 13-week period (a “Proposed Budget”), which Proposed Budget shall modify and supersede any prior Budget upon the approval by Lender in its sole and absolute discretion (such Proposed Budget upon such approval by Lender, an “Approved Budget”);

 

(d) by 5:00 PM New York time on each Budget Testing Date, (x) a report (each, a “Variance Report”) in form and substance satisfactory to Lender describing in reasonable detail Borrower’s aggregate cash receipts and aggregate cash disbursements during the relevant Budget Testing Period as compared to the projected aggregate cash receipts and aggregate cash disbursements provided by the then-current Budget for the same period (including breakdown by vendor and category) and (y) an analysis, certified by a senior financial officer of Borrower, demonstrating that a Budget Event shall not have occurred for such Budget Testing Period;

 

(e) by 5:00 PM New York time on each Friday of each week ending after the Restatement Date (commencing September 27, 2024), an updated Overdue Accounts Payable Schedule in the same format as set forth on Annex C, which shall modify and supersede any prior Overdue Accounts Payable Schedule upon the approval by Lender in its sole and absolute discretion;

 

36


 

(f) as soon as available, within five (5) Business Days after the end of each calendar month, a report on minimum Average Available Cash for the prior calendar month in form and substance satisfactory to Lender;

 

(g) as soon as available, and in any event, within fifteen (15) days after the end of each month, (x) monthly unaudited financial statements of Holdings and its consolidated Subsidiaries, (y) reporting on operating KPIs and (z) complete month-end physical inventory counts, in each case, for the prior calendar month in form and substance satisfactory to Lender;

 

(h) as soon as available, and in any event within forty-five (45) days following the end of each fiscal quarter of Holdings, quarterly financial statements of Holdings and its consolidated Subsidiaries, which shall be consistent with the quarterly financial statements filed on form 10-Q with the SEC and accompanied by customary management’s discussion and analysis and which shall be certified by a financial officer of Holdings as fairly presenting, in all material respects, the financial position and results of operations of Holdings and its consolidated Subsidiaries on a consolidated basis in accordance with GAAP (subject to normal year-end audit adjustments and the absence of footnotes);

 

(i) as soon as available, and in any event within one hundred twenty (120) days following the end of Holdings’ fiscal year, annual audited financial statements of Holdings and its consolidated Subsidiaries, which shall be consistent with the annual audited financial statements filed on form 10-K with the SEC, which shall be audited by a “big-four” accounting firm or another nationally recognized accounting firm reasonably acceptable to Lender (and accompanied by an opinion of such accountants (which opinion shall not be qualified as to scope of audit or as to the status of Holdings, Borrower or any Subsidiary as a going concern, other than solely with respect to, or resulting solely from, an upcoming maturity date under any series of Indebtedness or any breach of a financial maintenance covenant or any potential inability to satisfy a financial maintenance covenant on a future date or in a future period) to the effect that such consolidated financial statements fairly reviewed or audited by independent certified public accountants acceptable to Lender;

 

(j) no later than seventy-five (75) days prior to the end of each fiscal year of Borrower, annual operating budgets (including income statements, balance sheets and cash flow statements, by month) for the upcoming fiscal year of Borrower;

 

37


  

(k) concurrently with any delivery of financial statements under clauses (vi), (vii), (viii) or (ix) above, a duly executed and completed compliance certificate in form and substance satisfactory to Lender and duly executed by a senior financial officer of Borrower (i) certifying that no Event of Default or Default has occurred since the date of the last certificate delivered pursuant to this clause (xi) or, if such an Event of Default or Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed to be taken with respect thereto and (ii) setting forth computations in reasonable detail demonstrating compliance with the Financial Covenants; and

 

(l) any material report, certificate or other document provided to PMC pursuant to the Amended and Restated PMC Facilities from time to time reasonably requested by Lender.

 

(b) Borrower will, on a date following the end of each calendar week (commencing with the first full calendar week ending after the Restatement Date), hold a weekly conference call at a time mutually agreed upon by Borrower and Lender), to discuss cash flows of Borrower and such other matters requested by Lender related the affairs, finances and accounts of Borrower.

19. BORROWER INFORMATION:    Borrower represents and warrants that the information set forth in the Perfection Certificate is true and correct as of the date hereof.
20. ADDITIONAL PROVISIONS   

(a) Subordination of Inside Debt. All present and future indebtedness of Borrower to its officers, directors, shareholders and Affiliates (collectively, “Inside Debt”) shall, at all times, be subordinated to the Obligations pursuant to a subordination agreement satisfactory to Lender. Borrower represents and warrants that as of the Restatement Date there is no Inside Debt presently outstanding.

 

Prior to incurring any Inside Debt in the future, Borrower shall cause the person to whom such Inside Debt will be owed to execute and deliver to Lender a subordination agreement on satisfactory to Lender.

 

(b) Copyrights, Patents, and Trademarks.

 

(a) Borrower hereby represents and warrants that, as of the date of this Agreement, Borrower does not have any maskworks, computer software, or other copyrights, that are registered (or are the subject of any application for registration) with the United States Copyright Office. Borrower hereby covenants and agrees that Borrower will NOT register with the United States Copyright Office (or apply for such registration of) any of Borrower’s maskworks, computer software, or other copyrights, unless Borrower has provided Lender not less than 30 days prior written notice of the commencement of such registration/application and Borrower has executed and delivered to Lender such security agreement(s) and other documentation (in form and substance reasonably satisfactory to Lender) which Lender in its sole and absolute discretion may require for filing with the United States Copyright Office with respect to such registration or application.

 

38


 

(b) Annex 1 sets forth under the name of Borrower a complete and correct list of all patents and trademarks of Borrower that are registered (or the subject of any application for registration) with the United States Patent and Trademark Office and, upon Lender’s request therefor, promptly execute and deliver to Lender such security agreement(s) and other documentation (in form and substance reasonably satisfactory to Lender) which Lender in its sole and absolute discretion may require for filing with the United States Patent and Trademark Office with respect to such registration or application.

 

(c) Borrower will: (x) protect, defend and maintain the validity and enforceability of Borrower’s copyrights, patents, and trademarks; (y) promptly advise Lender in writing of material infringements, misappropriations or violations of Borrower’s copyrights, patents, or trademarks of which Borrower is or becomes aware; and (z) not allow any material item of Borrower’s copyrights, patents, or trademarks to be abandoned, forfeited or dedicated to the public without Lender’s written consent.

 

(c) Control Agreements. Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule and subject to the Junior Lien Intercreditor Agreement, as to any Deposit Accounts (including any lockbox or blocked account) and Investment Property (including securities accounts) maintained with any institution as of the date of this Agreement (in each case, other than Excluded Accounts), Borrower shall cause such institution, concurrently herewith, to enter into an Account Control Agreement in form acceptable to Lender in its sole and absolute discretion in order to perfect Lender’s security interest, subject to the Intercreditor Agreements, in such Deposit Accounts (including any lockbox or blocked account) and grant Lender “control” (within the meaning of Articles 8 and 9 of the Uniform Commercial Code) over such Deposit Accounts (including any lockbox or blocked account) and Investment Property (including securities accounts). Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule, from and after the date of this Agreement, Borrower shall not maintain any Deposit Accounts (including any lockbox or blocked account) or Investment Property (including securities accounts) with any bank, securities intermediary, or other institution unless Lender has received an Account Control Agreement duly executed by such party in favor of Lender covering such Deposit Account (including any lockbox or blocked account) or Investment Property (including securities accounts), as the case may be.

 

39


  

(d) Manufacturing Facility Standards. Borrower shall maintain and comply in all material respects with all applicable manufacturing facility standards, policies, laws and regulations, including, without limitation, such standards published from time to time by United States Department of Agriculture.

 

(e) Overdue Accounts Payable. Borrower shall pay (or cause to be paid) in full and settle all overdue accounts payable, in each case, as set forth on, and on or prior to the dates applicable thereto on, the Overdue Accounts Payable Schedule.

 

(f) So long as the Junior Lien Intercreditor Agreement is outstanding, any requirement of this Agreement to deliver Collateral to the Lender shall be deemed satisfied by delivery of such Collateral to Emblem-RGF Main LLC, in its capacity as collateral agent under the Emblem Facility as bailee of the Lender, pursuant to the Junior Lien Intercreditor Agreement; provided, that, notwithstanding the foregoing, nothing contained herein shall limit or otherwise adversely affect the grant of a Lien on or a security interest in any Collateral under this Agreement.

21. CONDITIONS PRECEDENT TO RESTATEMENT DATE   

The obligation of Lender to continue making the Loans on the Restatement Date is subject to the satisfaction (or waiver) of the following conditions on or prior to the Restatement Date:

 

(a) Loan Documents. Lender shall have received this Agreement, the Pledge Agreement, the Guaranty Agreement, the Junior Lien Intercreditor Agreement, and each other Loan Document identified by it to be delivered on the Restatement Date, in each case, in form and substance satisfactory to Lender and duly executed and delivered by each party thereto.

 

(b) Emblem Facility. Lender shall have received true, correct and complete copies of the Emblem Loan Agreement and Security Documents (as defined in the Emblem Loan Agreement), in each case, in form and substance satisfactory to Lender and which shall have been executed by the parties thereto and in full force and effect.

 

(c) Amendment to Master Lease Agreement. The Lender shall have received a true, correct and complete copy of that certain First Amendment to Master Lease Agreement, dated as of the Restatement Date between Lender and the Borrower, in form and substance satisfactory to the Lender and which shall have been executed by the parties thereto and in full force and effect.

 

(d) Opinions. Lender and its counsel shall have received a written opinion of White & Case, LLP, as New York counsel for the Loan Parties, in form and substance satisfactory to Lender covering such matters relating to the Loan Documents as Lender shall reasonably request.

 

40


 

(e) Secretary’s Certificate. Lender shall have received (1) copies of the organizational documents of each Loan Party and certified as of a recent date by the appropriate governmental official, each dated the Restatement Date or a recent date prior thereto; (2) signature and incumbency certificates of each such Person of each Loan Party executing the Loan Documents to which it is a party; (3) resolutions of the board of directors or similar governing body of each Loan Party approving and authorizing the execution, delivery and performance of this Agreement and the other Loan Documents to which it is a party, certified as of the Restatement Date by its secretary or an assistant secretary of such Person as being in full force and effect without modification or amendment; (4) a good standing certificate (or equivalent certificate) from the applicable Governmental Authority of each Loan Party’s jurisdiction of incorporation, organization or formation, each dated the Restatement Date or a recent date prior thereto.

 

(f) Solvency Certificate. Lender shall have received a solvency certificate in form and substance satisfactory to Lender and duly executed by a senior financial officer of Holdings confirming the solvency of Holdings and its consolidated Subsidiaries on a consolidated basis after giving effect to the Transactions on the Restatement Date.

 

(g) Closing Certificate. Lender shall have received a closing certificate in form and substance satisfactory to Lender duly executed by an executive officer of Borrower which shall include certifications to the effect that the conditions precedent set forth in clause (o) hereof have been satisfied on the Restatement Date.

 

(h) Perfection Certificate; Searches. Lender shall have received (i) a completed perfection certificate in form and substance satisfactory to Lender (the “Perfection Certificate”), duly executed by an executive officer of Borrower, together with all attachments contemplated thereby and (ii) the results of a search of the Uniform Commercial Code (or equivalent), tax and judgment, United States Patent and Trademark Office and United States Copyright Office filings made with respect to the Loan Parties in the jurisdictions contemplated by the Perfection Certificate and copies of the financing statements (or similar documents) disclosed by such search and evidence reasonably satisfactory to Lender that the Liens indicated by such financing statements (or similar documents) are Permitted Liens or have been released (or arrangements reasonably satisfactory to Lender for such release shall have been made.

 

41


 

(i) Perfection of Security Interests. Lender shall have received proper financing statements (Form UCC-1 or equivalent) authorized for filing under the UCC or other appropriate filing offices of each jurisdiction as may be reasonably necessary or desirable to perfect the security interests purported to be created hereunder or under any other Security Document and short-form intellectual property security agreements in proper form and authorized for filing under the United States Patent and Trademark Office and United States Copyright Office, or other appropriate filing offices of each jurisdiction as may be reasonably necessary or desirable to perfect the security interests purported to be created hereunder or under any other Security Document.

 

(j) Springing Account Control Agreements. Subject to the post-closing deadlines set forth in Section 10(b) of this Schedule and subject to the Junior Lien Intercreditor Agreement, the Lender shall have received Account Control Agreements, duly executed by each applicable account bank or securities intermediary, Emblem, Lender and Borrower in respect of each Deposit Account and securities account (other than Excluded Accounts) in accordance with the requirements set forth in Section 8(c) of this Schedule.

 

(k) Cash Control. The Borrower and Lender shall have terminated all existing account control agreements or other cash control arrangements in place over the Loan Parties’ Deposit Accounts.

 

(l) Overdue Accounts Payable. Borrower shall have paid in full and settled all overdue accounts payable required to be paid in full and settled on the Restatement Date as set forth on the Overdue Accounts Payable Schedule.

 

(m) Payment of Fees and Expenses. Lender shall have received all fees payable thereto on or prior to the Restatement Date and, to the extent invoiced prior to the Restatement Date, reimbursement or payment of all out-of-pocket expenses (including fees, charges and disbursements of Winston & Strawn LLP).

 

(n) Approvals. All material approvals and material consents of any Governmental Authority required in connection with the execution, delivery and performance of this Agreement and the other Loan Documents by the Loan Parties party thereto and the consummation of the Transactions shall have been obtained.

 

(o) General Conditions. The following:

 

(a) no Material Adverse Change has occurred since August 31, 2024,

 

(b) at the time of and immediately after giving effect to the Transactions and the making of the Initial Loans on the Restatement Date, no Event of Default or Default shall have occurred and be continuing, and

 

42


  

(c) the representations and warranties set forth herein and the other Loan Documents (including, without limitation, the Perfection Certificate) shall be true and correct in all material respects as of the Restatement Date, in each case, with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date (in which case such representations and warranties shall be true and correct in all material respects as of such earlier date) and except to the extent such representations and warranties are qualified by materiality or similar language (in which case such representations and warranties shall be true and correct in all respects).

 

(p) 2024 Exchange Agreement. Borrower shall issue Class C Units to Emblem representing 19.99% of the equity ownership interests in Borrower and agree to take all necessary actions, including scheduling a meeting to obtain a vote of Holdings’ stockholders, to approve the issuance of additional Class C Units and Class B Common Stock to Emblem cumulatively representing 49.99% of the equity ownership interests in Borrower and voting power in Holdings, approving the issuance of Class A Common Stock representing 25% of the voting power and equity interests of Holdings to Lender upon exercise of that certain Amended and Restated Warrant, dated as of the date hereof, issued by Holdings to Lender, and, at Lender’s option, approving the issuance of Class C Units and Class B Common Stock to Lender representing 25% of the equity ownership interests in Borrower and voting power in Holdings.

22. POST-CLOSING OBLIGATIONS   

The Loan Parties shall comply with their obligations described in the following clauses (a) through (g), in each case, within the applicable periods of time specified therein (or such longer periods as the Lender) may agree in its sole and absolute discretion):

 

(a) Termination of UCC Filings. By not later than the fifth (5th) Business Day following the Restatement Date, Borrower shall have terminated (or caused the termination) of the UCC-1 financing statements identified on Annex I.

 

(b) Springing Account Control Agreements. By no later than the fifteenth (15th) day following the Restatement Date, the Lender shall have received Account Control Agreements, duly executed by each applicable account bank or securities intermediary, the Lender, Emblem and Borrower in respect of each Deposit Account and securities account (other than Excluded Accounts) in accordance with the requirements set forth in Section 8(c) of this Schedule.

 

(c) Insurance Certificates and Endorsements. By no later than the fifteenth (15th) day following the Restatement Date, the Lender shall have received customary liability insurance and property insurance endorsements naming the Lender as additional insured or loss payee, as applicable, and such other endorsements to the extent required by this Agreement in each case, with respect to the general liability and casualty insurance policies maintained by the Loan Parties and their Subsidiaries.

 

43


 

(d) SKU. By no later than the fifteenth (15th) day following the Restatement Date, Borrower shall have (i) established (and shall thereafter maintain at all times until the Maturity Date) co-manufacturing capacity for all stock keeping units and (ii) delivered to Lender a certificate signed by a senior financial officer of Borrower certifying the foregoing in form and substance satisfactory to Lender.

 

(e) Engagements. The Borrower shall have engaged each of the companies set forth on Annex E (or such other companies acceptable to Emblem) for the purposes set forth on Annex E applicable thereto, in each case by the Additional Loans Funding Date or such other date as set forth on Annex E.

 

(f) Required Hedges. By no later than (i) the seventh (7th) day following the Restatement Date, Borrower shall have established (and shall thereafter maintain subject to clause (iii) below) chicken price hedging arrangements pursuant to which 40% of chicken purchases over the forward looking four-month period are contracted at a fixed price reasonably acceptable to Lender, (ii) the fourteenth (14th) day following the Restatement Date, the Borrower shall have established (and shall thereafter maintain and shall thereafter maintain subject to clause (iii) below) chicken price hedging arrangements pursuant to which 60% of chicken purchases over the forward looking four-month period are contracted at a fixed price reasonably acceptable to Lender and (iii) January 1, 2025, the Borrower shall have established (and shall thereafter maintain until the Maturity Date) chicken price hedging arrangements pursuant to which 70% of chicken purchases over the forward looking twelve-month period are contracted at a fixed price reasonably acceptable to Lender.

 

(g) Specified Post-Closing Requirement. The Borrower shall comply with the Specified Post-Closing Requirements in all respects.

[remainder of page intentionally left blank; signature page immediately follows]

 

44


Borrower:     Lender:
REAL GOOD FOODS, LLC     PMC FINANCIAL SERVICES GROUP, LLC
By   /s/ Timothy S. Zimmer     By   /s/ Walter E. Buttkus, III
Name:   Timothy S. Zimmer     Name:   Walter E. Buttkus, III
Title:   Chief Executive Officer     Title:   President
Holdings:      
THE REAL GOOD FOOD COMPANY, INC.      
By   /s/ Timothy S. Zimmer      
Name:   Timothy S. Zimmer      
Title:   Chief Executive Officer      

Exhibit 10.4

THE DEBT OBLIGATIONS GOVERNED BY THIS AGREEMENT HAVE BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (“OID”) FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. THE ISSUE PRICE, THE AMOUNT OF OID, THE ISSUE DATE AND THE YIELD TO MATURITY OF THESE DEBT OBLIGATIONS MAY BE OBTAINED BY CONTACTING THE BORROWER PURSUANT TO SECTION 9.6 OF THIS AGREEMENT.

Emblem-RGF Main LLC

Super-Priority Loan and Security Agreement

 

Borrower:   Real Good Foods, LLC
Holdings:   The Real Good Food Company, Inc.
Address:   3 Executive Campus, Suite 155
  Cherry Hill, New Jersey 08002
Date:   September 20, 2024

THIS SUPER-PRIORITY LOAN AND SECURITY AGREEMENT (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, this “Agreement”) is entered into on the above date by and among The Real Good Food Company, Inc., a Delaware corporation (“Holdings”), Real Good Foods, LLC (f.k.a. The Real Good Food Company LLC), a Delaware limited liability company ( “Borrower”), the Lenders from time to time party hereto and Emblem-RGF Main LLC, in its capacity as administrative agent for the Lenders ( “Administrative Agent”) and as collateral agent for the Secured Parties ( “Collateral Agent”). The Schedule to this Agreement (the “Schedule”) and each of the Annexes referred herein shall for all purposes be deemed to be a part of this Agreement, and the same is an integral part of this Agreement. (Definitions of certain terms used in this Agreement are set forth in Section 8 below.)

 

1. LOANS.

1.1 Initial Loans. Subject to the terms and conditions set forth in Section 9 of the Schedule, each Lender agrees, severally and not jointly, to make super-priority senior secured terms loans to Borrower (the “Initial Loans”) on the Initial Closing Date denominated in Dollars in an aggregate principal amount not to exceed such Lender’s Initial Commitment. Once prepaid or repaid, the Initial Loans may not be reborrowed. On the Initial Closing Date, the proceeds of the Initial Loans shall be deposited into the Designated Account (or as otherwise set forth in the flow of funds mutually agreed between Borrower and the Lenders).

1.2 Subsequent Understated AP Loans. At any time from and after the Initial Closing Date, if the Understated Accounts Payable Amount exceeds $3,000,000, each Lender may, at its election and in its sole and absolute discretion (and subject to the consent of PMC not to be unreasonably withheld, conditioned or delayed), on a several and not joint basis, make additional super-priority senior secured term loans to Borrower (the “Subsequent Understated AP Loans”) on a date, or such dates, chosen by each the Lenders in their sole and absolute discretion, in each case, denominated in Dollars, in an aggregate principal amount for all such Subsequent Understated AP Loans not to exceed the Understated Accounts Payable Amount; provided that, any additional super-priority senior secured loan made pursuant to this Section 1.2 without the consent of PMC shall be null and void. Once prepaid or repaid, the Subsequent Understated AP Loans may not be reborrowed. On the date, or dates, any such Subsequent Understated AP Loans are made by any Lenders, the proceeds thereof shall be deposited into the Designated Account (unless otherwise agreed by the Lenders in their sole and absolute discretion).

 


1.3 Subsequent Litigation Settlement Loans. At any time from and after the Initial Closing Date, each Lender may, at its election and in its sole and absolute discretion (and subject to the consent of PMC not to be unreasonably withheld, conditioned or delayed), on a several and not joint basis, make additional super-priority senior secured term loans to Borrower (the “Subsequent Litigation Settlement Loans”) on a date, or such dates, chosen by the Lenders in their sole and absolute discretion, in each case, denominated in Dollars, in an aggregate principal amount for all such Subsequent Litigation Settlement Loans not to exceed the aggregate amount of all settlement amounts for the claims, suits, litigation and other proceedings set forth on the Litigation Annex (including, without limitation, the Specified Amounts (such aggregate amount, “Total Litigation Settlement Amount”); provided that, any additional super-priority senior secured loan made pursuant to this Section 1.3 without the consent of PMC shall be null and void. Once prepaid or repaid, the Subsequent Litigation Settlement Loans may not be reborrowed. On the date, or dates, any such Subsequent Litigation Settlement Loans are made by the Lenders, the proceeds thereof shall be deposited into the Designated Account (unless otherwise agreed by the Lenders in their sole and absolute discretion).

1.4 Additional Loans. Subject to the terms and conditions set forth in Section 11 of the Schedule, each Lender agrees, severally and not jointly, to make super-priority senior secured terms loans to Borrower (the “Additional Loans”) on the Additional Loan Funding Date denominated in Dollars in an aggregate principal amount not to exceed such Lender’s Additional Commitment. Once prepaid or repaid, the Additional Loans may not be reborrowed. On the Additional Loan Funding Date, the proceeds of the Initial Loans shall be used by Borrower in accordance with Section 3.11.

1.5 Interest. The Loans shall bear interest at the rates shown on, and subject to the terms set forth on, the Schedule. Interest on the Loans shall be due and payable in arrears on each Interest Payment Date and at such other times as may be specified herein. All Interest shall be paid in cash in immediately available funds except for interest payable in-kind (as further set forth in Section 2 of the Schedule), which such payments-in-kind shall be capitalized so that such interest is automatically added to the outstanding principal balance of the Loans and thereafter bear interest as Loans. Interest hereunder shall be due and payable in accordance with the terms hereof before and after judgment, and before and after the commencement of any proceeding under any Debtor Relief Law.

1.6 Fees. Borrower shall pay Administrative Agent and the Lenders the fees shown on the Schedule, which are in addition to all interest and other sums payable to Administrative Agent and the Lenders and are not refundable. For U.S. federal income tax purposes, such fees shall be treated as an adjustment to the issue price of the applicable Loans.

1.7 Initial Loan Requests(a) .

(a) To request the Initial Loans on the Initial Closing Date, Borrower shall notify Administrative Agent of such request by irrevocable written notice in the form of a borrowing notice, in form and substance satisfactory to Administrative Agent (a “Borrowing Notice”), signed by Borrower by hand delivery or electronic means not later than 3:00 PM (New York time) at least seven (7) days in advance of the date of such proposed borrowing. Any loan request received after 3:00 PM (New York time) will not be considered by Administrative Agent until the second Business Day after such request. The proceeds of the Initial Loans (after giving effect to the payment of any fees, expenses and other payments required to be made on the Initial Closing Date as set forth in Section 3.11) shall be required to be deposited into a segregated account of Borrower subject to an Account Control Agreement in favor of Administrative Agent (such account, the “Designated Account”).

 

 

2


(b) Administrative Agent may require Borrower to submit a Borrowing Request in respect of each funding of Subsequent Understated AP Loans and Subsequent Litigation Settlement Loans (it being understood and agreed that such Loans shall only be funded at the election of and in the sole and absolute discretion of the Lenders) (and subject to the consent of PMC not to be unreasonably withheld, conditioned or delayed).

(c) To request the Additional Loans on the Additional Loans Funding Date, Borrower shall notify Administrative Agent of such request by submitting a Borrowing Notice, signed by Borrower by hand delivery or electronic means not later than 3:00 PM (New York time) at least seven (7) days in advance of the date of such proposed borrowing. Any loan request received after 3:00 PM (New York time) will not be considered by Administrative Agent until the second Business Day after such request. The proceeds of the Additional Loans (after giving effect to the payment of any fees, expenses and other payments required to be made on the Additional Loans Funding Date as set forth in Section 3.11) shall be required to be deposited into the Designated Account.

2. SECURITY INTEREST. Subject to the Intercreditor Agreement, to secure the payment and performance of all of the Obligations when due, each of Borrower and Holdings hereby grants to Collateral Agent (for the benefit of the Secured Parties) a security interest in all of the following (collectively, the “Collateral”): all right, title and interest of Borrower and Holdings, respectively, in and to all of the following, whether now owned or hereafter arising or acquired and wherever located: all Accounts; all Inventory; all Equipment; all assets constituting Capital Expenditures; all Deposit Accounts (including, without limitation, the Designated Account and all funds maintained therein); all General Intangibles (including without limitation all Intellectual Property); all Investment Property; all Other Property; and any and all claims, rights and interests in any of the above, and all guaranties and security for any of the above, and all substitutions and replacements for, additions, accessions, attachments, accessories, and improvements to, and proceeds (including proceeds of any insurance policies, proceeds of proceeds and claims against third parties) of, any and all of the above, and all Borrower’s books relating to any and all of the above; provided, that in no event shall the “Collateral” include any Excluded Assets; provided, however, that the security interest of Collateral Agent (for the benefit of the Secured Parties) shall immediately attach to, and the Collateral shall immediately include, any such asset (or portion thereof) upon such asset (or such portion) ceasing to be an Excluded Asset.

Subject to the Intercreditor Agreements, notwithstanding anything in any Loan Document to the contrary, during an Event of Default, monies to be applied to the Obligations, whether arising from payments by Borrower, realization on the Collateral, setoff or otherwise, shall be allocated as follows:

(i) FIRST, to all costs and expenses owing to Administrative Agent and the Lenders in connection with the Loan Documents;

(ii) SECOND, to premium (including without, limitation, Applicable Premium) and fees incurred in connection with the Loans;

(iii) THIRD, to accrued and unpaid interest on the Loan;

(iv) FOURTH, to all unpaid principal owing on the Loan; and

(v) FIFTH, to all remaining Obligations.

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF HOLDINGS AND BORROWER.

In order to induce the Lenders to enter into this Agreement and to make the Loans, each of Holdings and Borrower represents and warrants to the Lenders and the Agents as follows, and each of Holdings and Borrower covenants that the following representations will continue to be true, and that Holdings (as applicable) and Borrower will at all times comply with all of the following covenants, throughout the term of this Agreement and until all Obligations have been paid and performed in full:

 

 

3


3.1 Corporate Existence and Authority. Each of Holdings and Borrower is and will continue to be, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization. Each of Holdings and Borrower is and will continue to be qualified and licensed to do business in all jurisdictions in which any failure to do so would result in a Material Adverse Change. The execution, delivery and performance by Holdings and Borrower of this Agreement, and all other documents contemplated hereby (i) have been duly and validly authorized, (ii) are enforceable against Holdings and Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy, insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), and (iii) do not violate Holdings’ or Borrower’s articles or certificate of incorporation, or Holdings’ or Borrower’s by-laws, Holdings’ or Borrower’s partnership agreement or operating agreement (as the case may be), or any law or any material agreement or instrument which is binding upon Holdings or Borrower or its property, and (iv) do not constitute grounds for acceleration of any indebtedness or obligation under any agreement or instrument which is binding upon Holdings and Borrower or its property.

3.2 Name; Trade Names and Styles. The name of Holdings and Borrower set forth in the heading to this Agreement is its correct name. Listed in the Perfection Certificate are all prior names of Borrower used in the last 5 years and all of Borrower’s present and prior trade names. Borrower shall give Administrative Agent 30 days’ prior written notice (or such shorter period as agreed by Administrative Agent (at the direction of the Lenders)) before changing its name or doing business under any other name. Borrower has complied, and will in the future comply, in all material respects, with all laws relating to the conduct of business under a fictitious business name.

3.3 Place of Business; Location of Collateral. The address set forth in the heading to this Agreement is Borrower’s chief executive office. In addition, each of Holdings and Borrower has places of business and Collateral is located only at the locations set forth in the Perfection Certificate. Each of Holdings and Borrower will give Administrative Agent at least 30 days prior written notice (or such shorter period as agreed by Administrative Agent (at the direction of the Lenders)) before opening any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower’s Address or one of the locations set forth in the Perfection Certificate.

3.4 Title to Collateral; Perfection; Permitted Liens.

(a) Except as set forth on the Perfection Certificate, each of Holdings and Borrower is now, and will at all times in the future be, the sole owner of all the Collateral, except for items of Equipment which are leased to Borrower. The Collateral now is and will remain free and clear of any and all Liens, charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Collateral Agent (for the benefit of the Secured Parties) now has, and will continue to have, subject to the Intercreditor Agreements, a super-priority perfected and enforceable security interest in all of the Collateral, subject only to Permitted Liens, and Holdings and Borrower will at all times defend the Secured Parties and the Collateral against all claims of others.

(b) Each of Holdings and Borrower has set forth in the Perfection Certificate all of Holdings’ and Borrower’s Deposit Accounts, and each of Holdings and Borrower will give Administrative Agent five Business Days advance written notice before establishing any new Deposit Accounts and will cause the institution where any such new Deposit Account is maintained to execute and deliver to Administrative Agent a control agreement in form sufficient to perfect the security interest of Collateral Agent (for the benefit of the Secured Parties) in the Deposit Account and otherwise satisfactory to Administrative Agent (at the direction of the Lenders in their sole and absolute discretion).

 

 

4


(c) In the event that Holdings or Borrower shall at any time after the date hereof have any commercial tort claims against others, which it is asserting or intends to assert, and in which the potential recovery exceeds $250,000 (as determined by Borrower in good faith), Holdings or Borrower shall promptly notify Administrative Agent thereof in writing and provide Administrative Agent with such information regarding the same as Administrative Agent (at the direction of the Lenders) shall request. Such notification to Administrative Agent shall constitute a grant of a security interest in the commercial tort claim and all proceeds thereof to Collateral Agent (for the benefit of the Secured Parties), and Holdings and Borrower shall execute and deliver all such documents and take all such actions as Administrative Agent (at the direction of the Lenders) shall request in connection therewith.

(d) None of the Collateral now is or will be affixed to any real property in such a manner, or with such intent, as to become a fixture. Holdings and Borrower are not and will not become a lessee under any real property lease pursuant to which the lessor may obtain any rights in any of the Collateral and no such lease now prohibits, restrains, impairs or will prohibit, restrain or impair Holdings’ and Borrower’s rights to remove any Collateral from the leased premises. Whenever any Collateral is located upon real property in which any third party has an interest, Holdings and Borrower shall, whenever reasonably requested by Administrative Agent (at the direction of the Lenders), cause such third party to execute and deliver to Administrative Agent, in form acceptable to Administrative Agent (at the direction of the Lenders), such waivers and subordinations as Administrative Agent (at the direction of the Lenders) shall specify.

3.5 Maintenance of Collateral. Each of Holdings and Borrower will maintain the Collateral in good working condition (ordinary wear and tear excepted), and Holdings and Borrower will not use the Collateral for any unlawful purpose. Holdings and Borrower will immediately advise Administrative Agent in writing of any material loss or material damage to the Collateral.

3.6 Books and Records. Holdings and Borrower has maintained and will maintain at Borrower’s Address complete and accurate, in all material respects, books and records, comprising an accounting system in accordance with GAAP.

3.7 Financial Condition, Statements and Reports. All financial statements now or in the future delivered to Administrative Agent and the Lenders have been, and will be, prepared in conformity with GAAP, except as set forth in the Perfection Certificate, and now and in the future will fairly present, in all material respects, the results of operations and financial condition of Holdings and Borrower, in accordance with GAAP, at the times and for the periods therein stated. Between the last date covered by any such statement provided to Administrative Agent and the date hereof, there has been no Material Adverse Change.

3.8 Tax Returns and Payments; Pension Contributions. Each of Holdings and Borrower has timely filed all required tax returns and reports, and each of Holdings and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions required to be paid by Holdings and Borrower, as applicable. Borrower is unaware of any claims or adjustments proposed for any of Holdings’ or Borrower’s prior tax years which could result in additional taxes becoming due and payable by Holdings or Borrower. Each of Holdings and Borrower has paid all amounts necessary to fund all pension, profit sharing and deferred compensation plans in accordance with their terms, and each of Holdings and Borrower has not withdrawn from participation in or permitted partial or complete termination of any such plan which could reasonably be expected to result in any liability of Holdings or Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.

 

 

5


3.9 Compliance with Law. Borrower has complied, and will comply, in all material respects, with all material provisions of all foreign, federal, state and local laws and regulations applicable to Borrower, including, but not limited to, those relating to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and all environmental matters.

3.10 Litigation. Except as set forth on the Litigation Annex, there is no material claim, suit, litigation, proceeding or investigation pending or, to the knowledge of Borrower, threatened against or affecting Holdings or Borrower in any court or before any governmental agency (or any basis therefor known to Borrower). Borrower will promptly inform Administrative Agent in writing of any material claim, proceeding, litigation or investigation in the future threatened or instituted against Holdings or Borrower (in each case, if known to Borrower).

3.11 Use of Proceeds.

(a) Borrower will use the proceeds of the Initial Loans to (i) pay overdue accounts payable on the Initial Closing Date and at any time thereafter, in each case, in accordance with the Overdue Accounts Payable Schedule, (ii) repay revolving loans under the Existing PMC Loan and Security Agreement in an amount not exceed $7,995,514.17, (iii) pay the Upfront Fee and all other fees and expenses incurred in connection with the Transactions and (iv) fund balance sheet cash with any amounts remaining after making the foregoing payments, in each case, in accordance with the uses approved by the Lenders on the Initial Closing Date and thereafter with the Approved Budget.

(b) Borrower will use the proceeds of any Subsequent Understated AP Loans and any Subsequent Litigation Settlement Loans for the purposes approved by the Lenders in their sole and absolute discretion (subject to the consent of PMC not to be unreasonably withheld, conditioned or delayed).

(c) Borrower will use the proceeds of the Additional Loans on the Additional Loans Funding Date to repay obligations under the Amended and Restated PMC Equipment and Revolving Facility in an amount equal to the Additional Commitment (minus the aggregate amount of any amounts referred to in the previous clause (b) and (ii) to pay all fees and expenses required to be paid pursuant to Section 11 of the Schedule, in each case, in accordance with the Approved Budget.

(d) Borrower is not purchasing or carrying any “margin stock” (as defined in Regulation G of the Board of Governors of the Federal Reserve System) and no part of the proceeds of any Loan will be used to purchase or carry any “margin stock” or to extend credit to others for the purpose of purchasing or carrying any “margin stock,” or for any other purpose, in any such case, that would violate or be inconsistent with Regulations U or X.

3.12 Budget and Variance Reports. Each Budget delivered was prepared in good faith based on assumptions believed by the Loan Parties to be reasonable at the time made and upon information believed by the management of the Borrower to have been accurate based upon the information available to the management of the Borrower at the time such Budget was furnished. On and after the delivery of any Variance Report in accordance with this Agreement, such Variance Report shall be complete and correct and fairly represent in all respects the results of operations of the Loan Parties and their Subsidiaries for the period covered thereby and in the detail to be covered thereby.

3.13 Outstanding Accounts Payable. Annex B sets forth a complete and correct list of all Outstanding Accounts Payable (including, without limitation the applicable vendor and outstanding balance in respect thereof) known to Borrower on the Initial Closing Date.

4. PREPAYMENTS OF LOANS.

4.1 Voluntary Prepayments.

In each case under this Section 4.1, subject to the Intercreditor Agreements:

Borrower shall have the right at any time and from time to time to prepay the Loans in whole or in part, subject to the concurrent payment of amounts owing pursuant to Section 4.3, in an aggregate principal amount not less than $1,000,000 (or, if less, in the amount of Loans outstanding), by providing an irrevocable written notice to Administrative Agent by 3:00 PM (New York time) at least one Business Day in advance of the date of such proposed prepayment.

 

 

6


4.3 Mandatory Prepayments.

In each case under this Section 4.2, subject to the Intercreditor Agreements:

(a) Non COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale (excluding any sales of COI Equipment), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loans, the loans outstanding under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated PMC Term Loan and Security Agreement, on a pro rata basis.

(b) COI Equipment Asset Sales. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds in respect of any non-ordinary course Asset Sale of COI Equipment, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the loans outstanding under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement.

(c) Insurance/Condemnation Proceeds. No later than the fifth (5th) Business Day following the date of receipt by Borrower of any Net Cash Proceeds of the type described in clause (b) of the definition thereof in excess of $100,000, Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loans, the loans outstanding under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated PMC Term Loan and Security Agreement, on a pro rata basis.

(d) Non-Permitted Debt. On the date of receipt by Borrower of any Net Cash Proceeds from the issuance or incurrence of any Indebtedness of Borrower (other than with respect to any Permitted Indebtedness), Borrower shall apply an amount equal to 100% of such Net Cash Proceeds to the prepayment of the Loans, the loans outstanding under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and solely after the occurrence of the Additional Loan Funding Date, the loans outstanding under the Amended and Restated PMC Term Loan and Security Agreement, on a pro rata basis.

4.4 Applicable Premium. If any Applicable Premium Event occurs, then Borrower shall pay to each Lender, the Applicable Premium. In any such case, the Applicable Premium shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loans, which Obligations are guaranteed by the Guarantors and secured by the Collateral, and constitutes liquidated damages, not unmatured interest or a penalty, as the actual amount of damages to the Lenders as a result of the relevant Applicable Premium Event would be impracticable and extremely difficult to ascertain. The Applicable Premium is provided by mutual agreement of Borrower and the Guarantors and each Lender as a reasonable estimation and calculation of such actual lost profits and other actual damages of the Lenders. Without limiting the generality of the foregoing, it is understood and agreed that upon the occurrence of any Applicable Premium Event, the Applicable Premium shall be automatically and immediately due and payable and shall constitute part of the Obligations payable by Borrower (and guaranteed by the Guarantors) in respect of the Loans which Obligations are secured by the Collateral. The Applicable Premium shall also be automatically and immediately due and payable if the Obligations are satisfied, released or discharged by foreclosure (whether by power of judicial proceeding or otherwise), deed in lieu of foreclosure or by any other means. BORROWER, FOR ITSELF AND ON BEHALF OF THE GUARANTORS, HEREBY EXPRESSLY WAIVES (TO THE FULLEST EXTENT THEY MAY LAWFULLY DO SO) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR OTHER LAW THAT PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING APPLICABLE PREMIUM IN CONNECTION WITH ANY SUCH EVENTS, ANY RESCISSION OF SUCH ACCELERATION OR THE COMMENCEMENT OF ANY BANKRUPTCY OR INSOLVENCY EVENT. Borrower, for itself and on behalf of the Guarantors, expressly agrees (to the fullest extent it and they may lawfully do so) that with respect to the Applicable Premium payable under the terms of this Agreement: (i) the Applicable Premium is reasonable and is the product of an arm’s length transaction between sophisticated business parties, ably represented by counsel; (ii) the Applicable Premium shall be payable notwithstanding the then-prevailing market rates at the time payment is made; (iii) there has been a course of conduct between each Lender and Borrower and the Guarantors giving specific consideration in this transaction for such agreement to pay the Applicable Premium; and (iv) Borrower and the Guarantors shall be estopped hereafter from claiming differently than as agreed to in this paragraph. Borrower, for itself and on behalf of and the Guarantors, expressly acknowledges that their agreement to pay the Applicable Premium as herein described is a material inducement to each Lender’s agreement to enter into this Agreement and to extend Loans to Borrower.

 

 

7


5. ADDITIONAL DUTIES OF BORROWER.

5.1 Financial and Other Covenants. Borrower shall at all times comply with the financial and other covenants set forth in the Schedule.

5.2 Insurance. Borrower shall, at all times insure all of the tangible personal property Collateral and carry such other business insurance, with insurers reasonably acceptable to the Lenders, in such form and amounts as Administrative Agent may require (at the direction of the Lenders in their sole and absolute discretion), and Borrower shall provide evidence of such insurance to Administrative Agent. All such insurance policies shall name Collateral Agent as loss or co-loss payee, and shall contain a Lenders loss payee endorsement in form reasonably acceptable to Administrative Agent (at the direction of the Lenders). If Borrower fails to provide or pay for any insurance, Administrative Agent may, but is not obligated to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to Administrative Agent copies of all material reports made to insurance companies.

5.3 Reports. Borrower, at its expense, shall provide Administrative Agent (for distribution to the Lenders) with the written reports set forth in the Schedule, and such other written reports with respect to Borrower as Administrative Agent shall from time to time specify (at the direction of the Lenders in their sole and absolute discretion).

 

5.4 Access to Collateral, Books and Records. At reasonable times, and on two (2) Business Days’ notice, Administrative Agent, or its agents, shall have the right to inspect the Collateral, and the right to audit and copy Borrower’s books and records. Such inspections or audits shall be conducted no more often than four times during each calendar year, but nothing herein restricts Administrative Agent’s right to conduct such audits more frequently if an Event of Default has occurred and is continuing. The foregoing inspections and audits shall be at Borrower’s expense and the charge therefor shall be $900 per person per day (or such higher amount as shall represent Administrative Agent’s then current standard charge for the same), plus reasonable out-of-pocket expenses.

5.5 Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without Administrative Agent’s prior written consent (at the direction of the Lenders in their sole and absolute discretion), do any of the following:

(a) merge or consolidate with another corporation or entity unless Borrower is the surviving entity and the security interest of Collateral Agent in the Collateral is unimpaired;

(b) acquire any assets except (i) assets acquired in the ordinary course of business and (ii) other asset acquisitions (including without limitation, any assets constituting Capital Expenditures) so long as the purchase consideration for all such assets in the aggregate does not at any time exceed $250,000;

 

 

8


(c) enter into any transaction with any of its Affiliates (other than Holdings and its Subsidiaries or any Person that becomes a Subsidiary as a result of such transaction) in a transaction (or series of related transactions) involving aggregate consideration in excess of $250,000, unless such transaction is upon terms that are not materially favorable to Borrower than would be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate;

(d) sell or transfer any Collateral, except for Permitted Dispositions;

(e) store any Inventory or other Collateral with any warehouseman or other third party, unless approved by Administrative Agent;

(f) make any loans of any money or other assets or make any other Investments, other than Permitted Investments;

(g) (x) create, incur, assume or permit to be outstanding any Indebtedness other than Permitted Indebtedness, (y) create incur, assume or permit to be outstanding any operating leases or finance leases or amend, restate, amend and restate or otherwise modify any existing operating leases or financing leases (including without limitation, the master lease agreements with PMC as in effect on the Initial Closing Date) and (z) guarantee or otherwise become liable with respect to the obligations of another Person, provided, that the aggregate amount of all such Permitted Indebtedness (other than clauses (a) and (b) of the definition thereof), operating leases, financing leases, obligations, guarantees and liabilities shall not at any time exceed $1,000,000;

(h) [reserved];

(i) create, incur, assume or permit to be outstanding any Liens other than Permitted Liens;

(j) pay or declare any dividends on, or distributions or tax distributions with respect to Borrower’s equity interests, or make any other distributions, directly or indirectly, with respect to any equity interest in Borrower;

(k) redeem, retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s stock or other equity securities, other than, (i) as required by the 2024 Exchange Agreement, (ii) as required by the 2021 Exchange Agreement or (iii) at any time on or after the Additional Loans Funding Date, and subject to the sole and absolute discretion of the Lenders, the Specified Use;

(l) engage, directly or indirectly, in any business other than the businesses currently engaged in by Borrower and any complementary, ancillary, incidental, corollary or synergistic businesses and any reasonable extensions thereof;

(m) dissolve or elect to dissolve;

(n) enter into, amend, restate, amend and restate or otherwise modify any procurement or vendor contract (x) with a term longer than one (1) month and/or (y) (i) with contract consideration in excess of $2,000,000 for chicken purchases and (ii) with contract consideration in excess of $250,000 for all other goods and services;

(o) enter into any new co-manufacturing contract or amend, restate, amend and restate or otherwise modify any co-manufacturing contract whether existing on the Initial Closing Date or entered into thereafter;

(p) amend, restate, amend and restate or otherwise modify any third-party labor contract whether existing on the Initial Closing Date or entered into thereafter;

(q) amend, restate, amend and restate or otherwise modify, or take any action or allow to be taken any action that would reasonably be expected to constitute or cause there to be a “Change of Control” under the Tax Receivables Agreement as in effect on the Initial Closing Date;

 

 

9


(r) make, change or rescind any material tax election, change any tax accounting method, take any more than ministerial act with respect to (i) the computation of the tax “capital accounts” of the Borrower, (ii) allocations of items of Borrower income, gain, expense or loss for tax “capital account” purposes or for tax purposes, (iii) the allocation of liabilities of the partnership under Section 752, or (iv) the tax reporting or tax positions of the Borrower, or change the Borrower’s independent accounting firm or amend, terminate or modify the retention arrangement with such firm;

(s) amend, restate, amend and restate or otherwise modify the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and the Amended and Restated PMC Term Loan and Security Agreement, in each case, in violation of the Intercreditor Agreements;

(t) enter into, amend, restate, amend and restate or otherwise modify any Specified Agreement without the prior written approval of Administrative Agent (at the direction of the Lenders);

(u) agree to or make the Specified Payments;

(v) make any payments or expenditures that are not in compliance with the Approved Budget (subject to Permitted Variances);

(w) form, incorporate or acquire any Subsidiary after the Initial Closing Date unless such Subsidiary (x) becomes a Guarantor by executing and delivering a supplement to the Guarantee Agreement and (y) grants to Collateral Agent (for the benefit of the Secured Parties) a perfected, super-priority security interest (subject to Permitted Liens) in all of its assets (other than Excluded Assets) by executing and delivering such security documentation requested by Administrative Agent (at the direction of the Lenders), in each case, in form and substance reasonably acceptable to Administrative Agent (at the direction of the Lenders), and within thirty (30) days (or such longer period as Administrative Agent may agree) after the formation, incorporation or acquisition of such Subsidiary.

5.6 Litigation Cooperation. Should any third-party suit or proceeding be instituted by or against any Agent or any Lender with respect to any Collateral or relating to Holdings or Borrower, each of Holdings and Borrower shall, without expense to any Agent or any Lender, make available Holdings, Borrower and their respective officers, employees and agents and Holdings’ and Borrower’s respective books and records, to the extent that Administrative Agent (at the direction of the Lenders) may deem them reasonably necessary in order to prosecute or defend any such suit or proceeding.

5.7 Notification of Changes. Borrower will promptly, after becoming aware thereof, notify Administrative Agent in writing of (i) (x) any Default or Event of Default, (y) any “Default” or “Event of Default” under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement] and the Amended and Restated PMC Term Loan and Security Agreement (in each case, as such terms are defined therein) (unless also constituting a Default or Event of Default hereunder) and (z) any “Default” or “Event of Default” shall have occurred and be continuing under any agreement of the Borrower evidencing Indebtedness for borrowed money (in each case, as such terms are defined in, or such similar terms used in, the applicable definitive documentation for such Indebtedness), and in each case, specifying the nature and extent thereof and the corrective action (if any) proposed to be taken with respect thereto and (ii) any Material Adverse Change.

5.8 Further Assurances. Each of Holdings and Borrower agrees, at its expense, on request by Administrative Agent (at the direction of the Lenders), to execute all documents and take all actions, as Administrative Agent (at the direction of the Lenders in their sole and absolute discretion), deem necessary or useful in order to perfect and maintain Collateral Agent’s super-priority perfected security interest in the Collateral (subject only to Permitted Liens and the Intercreditor Agreements), and in order to fully consummate the transactions contemplated by this Agreement.

 

 

10


5.9 Right to Appoint Observer. Holdings agrees that: (a) the Lenders shall have the option and right to appoint one (1) representative (the “Observer”) to attend all meetings of the Board or any committee thereof in a non-voting, non-participating observer capacity; (b) any Observer appointed pursuant to this Section 5.9 may observe discussions of all matters brought to the Board or any committee thereof for consideration, but in no event shall the Observer (i) be deemed to be member of the Board or any committee thereof, (ii) have or be deemed to have, or otherwise be subject to, any duties (fiduciary or otherwise) to Holdings, the Borrower or any other Guarantors or their respective Affiliates or investors, or (iii) have the right to participate in any discussions, vote on, propose or offer any motions or resolutions to the Board or any committee thereof, or in any manner give instructions or directions to the Board, any committee thereof or any member thereof or determine Holdings’, the Borrower’s or any of the other Guarantors’ policies or business decisions; (c) Holdings shall provide to the Observer copies of any notices, minutes and consents, including draft versions, proposed written consents and exhibits and annexes to any such materials, in each case, to the extent provided to the Board members in their capacity as such (collectively, “Board Materials”), at substantially the same time and in the same manner as such information is delivered to the members of the Board; (d) the presence of the Observer shall not be taken into account or required for purposes of establishing a quorum; and (e) Holdings shall reimburse Administrative Agent for reasonable out of pocket expenses of the Observer (including, without limitation, expenses relating to attending board meetings or other events pertaining to the Borrower that such Observer attends); provided, however, that Holdings may withhold information and exclude the Observer from any meeting or portion thereof if the Board determines in good faith and upon the advice of counsel that such exclusion is necessary to preserve the attorney-client privilege or to avoid a conflict of interest. Holdings shall indemnify and provide for the advancement of expenses to the Observer to the same extent provided by Holdings to its directors. Holdings acknowledges and agrees that the foregoing rights to indemnification and advancement of expenses constitute third-party rights extended to the Observer by Holdings and do not constitute rights to indemnification or advancement as a result of the Observer serving as a director, officer, employee or agent of Holdings or its Affiliates.

6. REPAYMENT OF LOANS.

6.1 Amortization.

(a) Borrower shall repay the outstanding Initial Loans on the last Business Day of each January, April, July and October of each year (commencing January 31, 2025) and on the Maturity Date, in an amount equal to (i) in the case of such quarterly payments, 0.25% of the aggregate principal of the Initial Loans outstanding immediately after the Initial Closing Date and (ii) in the case of such payment due on the Maturity Date, an amount equal to the then unpaid principal amount of the Initial Loans outstanding.

(b) Borrower shall repay the outstanding Subsequent Understated AP Loans on the last Business Day of each January, April, July and October of each year (commencing January 31, 2025) and on the Maturity Date, in an amount equal to (i) in the case of such quarterly payments, 0.25% of the aggregate principal of the Subsequent Understated AP Loans outstanding immediately after the funding thereof and (ii) in the case of such payment due on the Maturity Date, an amount equal to the then unpaid principal amount of the Subsequent Understated AP Loans outstanding.

(c) Borrower shall repay the outstanding Subsequent Litigation Settlement Loans on the last Business Day of each January, April, July and October of each year (commencing January 31, 2025) and on the Maturity Date, in an amount equal to (i) in the case of such quarterly payments, 0.25% of the aggregate principal of the Subsequent Litigation Settlement Loans outstanding immediately after the funding thereof and (ii) in the case of such payment due on the Maturity Date, an amount equal to the then unpaid principal amount of the Subsequent Litigation Settlement Loans outstanding.

(d) Borrower shall repay the outstanding Additional Loans on the last Business Day of each January, April, July and October of each year (commencing January 31, 2025) and on the Maturity Date, in an amount equal to (i) in the case of such quarterly payments, 0.25% of the aggregate principal of the Additional Loans outstanding immediately after the Additional Loans Funding Date and (ii) in the case of such payment due on the Maturity Date, an amount equal to the then unpaid principal amount of the Additional Loans outstanding.

 

 

11


6.2 Maturity. To the extent not previously paid, all outstanding principal, together with all accrued and unpaid interest, fees, premium (including, without limitation, the Applicable Premium) and other Obligations, shall be due and payable in full on the Maturity Date.

7. EVENTS OF DEFAULT AND REMEDIES.

7.1 Events of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement:

(a) any warranty, representation, statement, report or certificate made or delivered to any Agent or any Lender by Holdings, Borrower or any of their respective officers, employees or agents, now or in the future, shall be untrue or misleading in a material respect when made or deemed to be made; or

(b) Borrower shall fail to pay (i) when due, any principal of any Loan or any Applicable Premium or (ii) within five (5) Business Days after the date due, any interest on any Loan or any fees, premium or other amount due hereunder; or

(c) there occurs a Budget Event; or

(d) (i) default shall be made in the due observance or performance by Holdings (as applicable) or Borrower of any covenant, condition or agreement contained in Section 5.1, Section 5.5, any of the Financial Covenants set forth in the Schedule or Section 5 of the Schedule, (ii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 6(a) of the Schedule and such default shall have continued unremedied for ten (10) Business Days or (iii) default shall be made in the due observance or performance by Borrower of any covenant, condition or agreement contained in Section 8(e) of the Schedule and such default shall have continued unremedied for fifteen (15) days.

(e) default shall be made in the due observance or performance by Holdings or Borrower of any covenant, condition or agreement contained in any Loan Document (other than those specified in clause (d) of this Section 7.1) and such default shall have continued unremedied for fifteen (15) days; or

(f) any levy, assessment, attachment, seizure, Lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral which is not cured within 10 days after the occurrence of the same; or

(g) any event or condition occurs that (i) results in any Material Indebtedness becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired) the holder or holders of any such Material Indebtedness or any trustee or agent on its or their behalf to cause such Material Indebtedness to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided that this clause (f) shall not apply to any secured Indebtedness that becomes due as a result of the voluntary sale or transfer of the property or assets securing such Indebtedness if such sale or transfer is permitted hereunder and under the documents providing for such Indebtedness; or

(h) any event or condition occurs that (i) results in any Amended and Restated PMC Facility becoming due prior to its scheduled maturity or (ii) enables or permits (with all applicable grace periods having expired and that is not otherwise waived by PMC) the holder or holders of any such Amended and Restated PMC Facility or any trustee or agent on its or their behalf to cause such Amended and Restated PMC Facility to become due, or to require the prepayment, repurchase, redemption or defeasance thereof, prior to its scheduled maturity; provided, that no PMC Refinancing shall constitute an Event of Default; or

(i) the Specified Event of Default occurs; or

(j) dissolution, termination of existence, insolvency or business failure of Borrower or any Guarantor; or appointment of a receiver, trustee or custodian, for all or any part of the property of, assignment for the benefit of creditors by, or the commencement of any proceeding by Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect; or

 

 

12


(k) the commencement of any proceeding against Borrower or any Guarantor under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, now or in the future in effect, which is not cured by the dismissal thereof within 30 days after the date commenced; or

(l) revocation or termination of, or denial of liability upon, any guaranty of the Obligations or any attempt to do any of the foregoing; or

(m) revocation or termination of, or denial of liability upon, any pledge of any certificate of deposit, securities or other property or asset of any kind pledged to secure any or all of the Obligations, or any attempt to do any of the foregoing; or

(n) Borrower makes any payment on account of any indebtedness or obligation, excluding trade payables and other ordinary course purchases, which has been subordinated to the Obligations other than as permitted in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any way limits such subordination agreement; or

(o) the occurrence of a Change of Control; or

(p) there shall be a change in the President, Chief Executive Officer, or Chief Financial Officer, and such person is not replaced with another person acceptable to Administrative Agent (at the direction of the Lenders in their good faith business judgment) within 30 days thereafter; or

(q) Holdings or the Borrower shall generally not pay its debts as they become due, or Holdings or the Borrower shall conceal, remove or transfer any part of its property, with intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar law.

Notwithstanding anything to the contrary contained in this Section 7.1, once an Event of Default has occurred, it shall be deemed continuing regardless if later remedied or cured (unless Administrative Agent waives such Event of Default (at the direction of the Lenders in their sole and absolute discretion).

7.2 Remedies. Upon the occurrence and during the continuance of any Event of Default, Administrative Agent (at the direction of the Lenders), at its option, and without notice or demand of any kind (all of which are hereby expressly waived by Holdings and the Borrower), may do any one or more of the following, in each case, subject to the Intercreditor Agreements:

(a) cease making Loans or otherwise extending credit to Borrower under this Agreement or any other Loan Document;

(b) accelerate and declare all or any part of the Obligations to be immediately due, payable, and performable, notwithstanding any deferred or installment payments allowed by any instrument or agreement evidencing or relating to any Obligation;

(c) subject to applicable laws, take possession of any or all of the Collateral wherever it may be found, and for that purpose each of Holdings and Borrower hereby authorizes Collateral Agent (at the direction of the Lenders) without judicial process to enter onto any of Holdings’ or the Borrower’s premises without interference to search for, take possession of, keep, store, or remove any of the Collateral, and remain on the premises or cause a custodian to remain on the premises in exclusive control thereof, without charge for so long as Collateral Agent deems it necessary (at the direction of the Lenders in their sole and absolute discretion), in order to complete the enforcement of its rights under this Agreement or any other agreement; provided, however, that should Collateral Agent seek to take possession of any of the Collateral by court process, each of Holdings and Borrower hereby irrevocably waives: (i) any bond and any surety or security relating thereto required by any statute, court rule or otherwise as an incident to such possession; (ii) any demand for possession prior to the commencement of any suit or action to recover possession thereof; and (iii) any requirement that Collateral Agent retain possession of, and not dispose of, any such Collateral until after trial or final judgment;

 

 

13


(d) require Holdings and Borrower to assemble any or all of the Collateral and make it available to Collateral Agent at places designated by Collateral Agent (at the direction of the Lenders) which are reasonably convenient to Administrative Agent and Holdings or Borrower, as applicable, and to remove the Collateral to such locations as Collateral Agent may deem advisable (at the direction of the Lenders);

(e) complete the processing, manufacturing or repair of any Collateral prior to a disposition thereof and, for such purpose and for the purpose of removal, Collateral Agent shall have the right to use Holdings’ and Borrower’s premises, vehicles, hoists, lifts, cranes, and other Equipment and all other property without charge;

(f) sell, lease or otherwise dispose of any of the Collateral, in its condition at the time Collateral Agent obtains possession of it or after further manufacturing, processing or repair, at one or more public and/or private sales, in lots or in bulk, for cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement at the time scheduled for sale. Collateral Agent shall have the right to conduct such disposition on Holdings’ and Borrower’s premises without charge, for such time or times as Collateral Agent (at the direction of the Lenders) deems reasonable, or on Collateral Agent’s premises, or elsewhere and the Collateral need not be located at the place of disposition. Collateral Agent may directly or through any affiliated company purchase or lease any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale or other disposition of Collateral shall not relieve Holdings or Borrower of any liability Holding or Borrower may have if any Collateral is defective as to title or physical condition or otherwise at the time of sale;

(g) demand payment of, and collect any Accounts and General Intangibles comprising Collateral and, in connection therewith, each of Holdings and Borrower irrevocably authorizes any Agent to endorse or sign Holdings’ or Borrower’s (as applicable) name on all collections, receipts, instruments and other documents, to take possession of and open mail addressed to Holdings or Borrower (as applicable) and remove therefrom payments made with respect to any item of the Collateral or proceeds thereof, and, in the Lenders’ sole and absolute discretion, to grant extensions of time to pay, compromise claims and settle Accounts and the like for less than face value; and

(h) demand and receive possession of any of Holdings’ and Borrower’s federal and state income tax returns and the books and records utilized in the preparation thereof or referring thereto.

All reasonable attorneys’ fees, expenses, costs, liabilities and obligations incurred by any Agent or any Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be due on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. Without limiting any rights and remedies of any Agent or any Lender, from and after the occurrence and during the continuance of any Event of Default, the Obligations shall automatically bear interest at the Default Rate.

7.3 Standards for Determining Commercial Reasonableness. Each of Holdings, Borrower, the Agents and the Lenders agree that a sale or other disposition (collectively, “sale”) of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable:

(a) notice of the sale is given to Holdings or Borrower at least ten days prior to the sale, and, in the case of a public sale, notice of the sale is published at least five days before the sale in a newspaper of general circulation in the county where the sale is to be conducted;

(b) notice of the sale describes the collateral in general, non-specific terms;

 

 

14


(c) the sale is conducted at a place designated by Collateral Agent (at the direction of the Lenders), with or without the Collateral being present;

(d) the sale commences at any time between 8:00 a.m. and 6:00 p.m. (local time);

(e) payment of the purchase price in cash or by cashier’s check or wire transfer, or by deferred payment obligation acceptable to Collateral Agent (at the direction of the Lenders in their discretion), is required;

(f) with respect to any sale of any of the Collateral, Collateral Agent may (but is not obligated to) direct any prospective purchaser to ascertain directly from Borrower or Holdings (as applicable) any and all information concerning the same.

Collateral Agent shall be free to employ other methods of noticing and selling the Collateral (at the direction of the Lenders in their discretion) if they are commercially reasonable.

7.4 Power of Attorney. Upon the occurrence and during the continuance of any Event of Default, without limiting Collateral Agent’s other rights and remedies, each of Holdings and Borrower grants to Collateral Agent an irrevocable power of attorney coupled with an interest, authorizing and permitting Collateral Agent (acting through any of its employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Holdings or Borrower, and at Borrower’s expense, to do any or all of the following, in Holdings’ and Borrower’s name (as applicable) or otherwise, but Collateral Agent agrees that if it exercises any right hereunder, it will do so in good faith and in a commercially reasonable manner (at the direction of the Lenders):

(a) execute on behalf of Holdings and Borrower any documents that any Agent may (at the direction of the Lenders in their sole and absolute discretion), deem advisable in order to perfect and maintain Collateral Agent’s security interest in the Collateral, or in order to exercise a right of Holdings, Borrower, any Agent or any Lender, or in order to fully consummate all the transactions contemplated under this Agreement, and all other Loan Documents;

(b) execute on behalf of Holdings or Borrower (as applicable), any invoices relating to any Account, any draft against any Account Debtor and any notice to any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim of mechanic’s, materialman’s or other Lien, or assignment or satisfaction of mechanic’s, materialman’s or other Lien;

(c) take control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Holdings or Borrower (as applicable) upon any instruments, or documents, evidence of payment or Collateral that may come into any Agent’s possession;

(d) endorse all checks and other forms of remittances received by any Agent;

(e) pay, contest or settle any Lien, charge, encumbrance, security interest and adverse claim in or to any of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same;

(f) grant extensions of time to pay, compromise claims and settle Accounts and General Intangibles for less than face value and execute all releases and other documents in connection therewith;

(g) pay any sums required on account of Holdings’ and Borrower’s taxes or to secure the release of any Liens therefor, or both;

(h) settle and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor;

(i) instruct any third party having custody or control of any books or records belonging to, or relating to, Holdings or Borrower (as applicable) to give Collateral Agent the same rights of access and other rights with respect thereto as any Agent or Lender has under this Agreement; and

(j) take any action or pay any sum required of Holdings or Borrower (as applicable) pursuant to this Agreement and any other Loan Documents.

 

 

15


Any and all reasonable sums paid and any and all reasonable costs, expenses, liabilities, obligations and attorneys’ fees incurred by any Agent and any Lender with respect to the foregoing shall be added to and become part of the Obligations, shall be payable on demand, and shall bear interest at a rate equal to the highest interest rate applicable to any of the Obligations. In no event shall any Agent’s or any Lender’s rights under the foregoing power of attorney or any of any Agent’s or any Lender’s other rights under this Agreement be deemed to indicate that any Agent or any Lender is in control of the business, management or properties of Borrower or Holdings (as applicable).

7.5 Application of Proceeds. Subject to the Intercreditor Agreements, and except as otherwise expressly set forth in this Agreement, all proceeds realized as the result of any sale of the Collateral shall be applied by Administrative Agent to the Obligations, in such order as Administrative Agent shall determine (at the direction of the Lenders in their sole and absolute discretion). Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to the Lenders and the Agent for any deficiency. Subject to the Intercreditor Agreements, if, any Agent (at the direction of the Lenders in their sole and absolute discretion), directly or indirectly enters into a deferred payment or other credit transaction with any purchaser at any sale of Collateral, such Agent shall have the option, exercisable at any time, in its sole and absolute discretion, of either reducing the Obligations by the principal amount of purchase price or deferring the reduction of the Obligations until the actual receipt by such Agent of the cash therefor.

7.6 Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement, Collateral Agent shall have all the other rights and remedies accorded a secured party under the Uniform Commercial Code and under all other applicable laws, and under any other instrument or agreement now or in the future entered into between any Agent, any Lender, Holdings and/or Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial exercise by Collateral Agent of one or more of its rights or remedies shall not be deemed an election, nor bar Collateral Agent from subsequent exercise or partial exercise of any other rights or remedies. The failure or delay of Collateral Agent to exercise any rights or remedies shall not operate as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been fully paid and performed.

8. DEFINITIONS. As used in this Agreement, the following terms have the following meanings:

1L/1L Intercreditor Agreement” means that certain Pari Passu Intercreditor Agreement, dated as of the Initial Closing Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted hereunder) among Collateral Agent, PMC, as collateral agent under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and Borrower, the Guarantors and the other parties from time to time party thereto.

1L/2L Intercreditor Agreement” means that certain Junior Lien Intercreditor Agreement, dated as of the Initial Closing Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time as permitted hereunder) among Collateral Agent, PMC, as collateral agent under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and PMC, as collateral agent under the Amended and Restated PMC Term Loan and Security Agreement, Borrower, the Guarantors and the other parties from time to time party thereto.

2024 Exchange Agreement” means that certain Exchange Agreement, dated as of the Initial Closing Date, by and among Holdings, Borrower, Administrative Agent and the other parties from time to time party thereto.

Account Control Agreement” means an agreement in form and substance satisfactory to Administrative Agent that provides for Administrative Agent to have “control” (as defined in Section 9-104 of the Uniform Commercial Code or Section 8-106 of the Uniform Commercial Code).

 

 

16


Account Debtor” means the obligor on an Account.

Accounts” means all present and future “accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all accounts receivable and other sums owing to Borrower and/or Holdings.

Additional Loans Funding Date” means the first date on which all of the conditions precedent in Section 11 of the Schedule are satisfied or waived by Administrative Agent (at the direction of the Lenders their sole and absolute discretion).

Additional Loans Funding Expiration Date” means March 31, 2026.

Additional Loans Use of Proceeds Budget” has the meaning set forth in the Schedule.

Additional Commitment” has the meaning set forth in Section 1 of the Schedule.

Additional Loans” has the meaning set forth in Section 1.4.

Adjusted EBITDA” means, for any period, with respect to Holdings and its Subsidiaries on a consolidated basis, the Net Income for such period, plus

(i) without duplication and solely to the extent already deducted in arriving at Net Income, the sum of the following amounts for such period:

(a) consolidated interest expense,

(b) provisions for taxes based on income, profits or capital,

(c) total depreciation and depletion expense,

(d) total amortization expense,

(e) costs, fees and expenses incurred in connection with the Transactions;

(f) all extraordinary losses and unusual or non-recurring charges and expenses and restructuring costs (in each case, not associated with the Transactions); provided that all amounts which are added back to increase Adjusted EBITDA pursuant to this sub-clause (f) shall not be greater than 15.0% of Adjusted EBITDA for any applicable period, provided, further, that all reasonable and documented fees and out-of-pocket expenses of the institutions and consultants set forth on Annex E added back pursuant to this clause (f) shall not be subject to the foregoing 15.0% cap;

(g) other non-cash charges that occurred in such period that reduce Net Income in such period (excluding (I) charges that occurred in a prior or other period, (II) inventory write downs or write offs for materials or goods sold or for accounts receivable in such period) and (III) the difference between cash rent and straight-line rent);

(h) stock option, restricted or performance stock unit and other equity-based compensation expenses, to the extent the same was deducted (and not added back) in calculating Net Income; minus

(ii) without duplication, and solely to the extent included in arriving at Net Income in such period: all extraordinary gains and non-recurring gains increasing Net Income for such period (including any such non-cash gain to the extent it represents the reversal of an accrual or reserve for potential cash gain in any prior period) and any recognized income from the cancelation of accounts payable or other liabilities included in Net Income, subject to the Specified Deductions.

Adjusted EBITDA Determination Date” means the later of (i) eight (8) days after the Houlihan Lokey Validation Date and (ii) thirty (30) days after any Challenge Date.

Administrative Agent” has the meaning set forth in the Preamble hereto.

Affiliate” means, with respect to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any parent or subsidiary of such Person, or any Person controlling, controlled by or under common control with such Person.

Agents” means, collectively, Administrative Agent and Collateral Agent.

 

 

17


Agreement” has the meaning set forth in the Preamble hereto.

Amended and Restated PMC Facilities” means (i) the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement and (ii) the Amended and Restated PMC Term Loan and Security Agreement.

Amended and Restated PMC Equipment and Revolving Loan and Security Agreement” means that certain Amended and Restated Super-Priority Loan and Security Agreement, dated as of the Initial Closing Date, among PMC, as lender, Holdings and Borrower (as in effect on the Initial Closing Date).

Amended and Restated PMC Term Loan and Security Agreement” means that certain Amended and Restated Loan and Security Agreement, dated as of the Initial Closing Date, among PMC, as lender, Holdings and Borrower (as in effect on the Initial Closing Date).

Applicable Interest Rate” has the meaning set forth in Section 2A of the Schedule.

Applicable Premium” shall mean as of the date of the occurrence of an Applicable Premium Event (as calculated by the Lenders) the premium required for the Lenders to realize a MOIC of at least 2.00x on the Loans made on the Initial Closing Date. For purposes of this definition, “MOIC” shall mean the multiple on invested capital realized by Administrative Agent in respect of its Loan calculated, in respect of any Loans repaid, prepaid or accelerated as of a date certain, as the principal amount of Loans repaid, prepaid or accelerated on such date plus all interest paid in cash on such Loans from the date of initial funding thereof through such repayment, prepayment or acceleration date (exclusive, for the avoidance of doubt, of any default interest, interest paid in kind, fees (including original issue discount and/or upfront fees), expense reimbursements and indemnity payments and any return on Class B Common Stock and Class C Units, or any Class A Units exercisable therefor) divided by the initial principal amount of the Loans so repaid, prepaid or accelerated as of such date (calculated exclusive of any original issue discount and/or upfront fees); provided that in no event shall (i) the MOIC be negative or (ii) the Lenders be required to make any payment to Borrower in connection with the MOIC.

Applicable Premium Event” means (a) any voluntary prepayment of all, or any part, of the principal amount of the Loans and any mandatory prepayment of the Loans, in each case, whether before or after (i) the occurrence of a Default or an Event of Default, (ii) the commencement of any proceeding with respect to any Loan Party under any Debtor Relief Law or (iii) any acceleration (for any reason) of the Loans; (b) the Maturity Date if upon the full repayment of the Obligations, the return on the Loans is less than the MOIC; (c) the acceleration of the Loans for any reason, including, without limitation, acceleration following or pursuant to an Event of Default, including as a result of the commencement of a proceeding under any Debtor Relief Law; (d) the satisfaction, release, payment, redemption, restructuring, reorganization, replacement, reinstatement, defeasance or compromise of any of the Loans in any proceeding under any Debtor Relief Law, foreclosure (whether by power of judicial proceeding or otherwise) or deed in lieu of foreclosure or the making of a distribution of any kind in any proceeding under any Debtor Relief Law to the Lenders (whether directly or indirectly), in full or partial satisfaction of the Loans; (e) the substantial consummation of any plan of reorganization with respect to any Loan Party under any Debtor Relief Law; and (f) the termination of any proceeding with respect to any Loan Party under any Debtor Relief Law.

If an Applicable Premium Event occurs under clause (c), (d), (e) or (f) above, the entire outstanding principal amount of the Loans shall be deemed to be subject to the Applicable Premium Event on the date on which such Applicable Premium Event occurs.

Approved Budget” has the meaning set forth in Section 6(iii) of the Schedule.

Asset Sales” means any sale, lease, outbound Intellectual Property license, outbound Intellectual Property sublicense, transfer or other disposition by Borrower to any Person (including by way of redemption by such Person) of any asset (including, without limitation, any capital stock or other securities of, or equity interests in, another Person).

 

 

18


Available Cash” means all cash held in Deposit Accounts of the Borrower subject to an Account Control Agreement in favor of Collateral Agent (for the benefit of the Secured Parties) net of Overdue Accounts Payable and all other outstanding liabilities of Borrower. For the avoidance of doubt, Available Cash shall not include unused availability for revolving borrowings under the Amended and Restated PMC Equipment and Revolving Loan and Security Agreement or any other revolving credit facility.

Average Monthly Cash” means for any calendar month ending after the Initial Closing Date (commencing with the calendar month ending September 30, 2024), the amount equal to the quotient of (i) the sum of Available Cash as calculated for each calendar day during such calendar month divided by (ii) the number of calendar days occurring during such calendar month.

Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now or hereafter in effect, or any successor thereto.

Beneficial Ownership Certification” means a certification regarding beneficial ownership of Borrower as required by the Beneficial Ownership Regulation.

Beneficial Ownership Regulation” means 31 C.F.R. §1010.230.

Board” means the board of directors (or equivalent governing body) of Holdings.

Board Materials” has the meaning specified in Section 5.9.

Borrower” has the meaning set forth in the Preamble hereto.

Borrower’s Address” has the meaning specified in Section 9.4.

Borrowing Notice” has the meaning set forth in Section 1.7(a).

Budget” means the 13-week statement of Borrower’s anticipated cash receipts and cash disbursements (including, without limitation, cash outflows pursuant to the Overdue Accounts Payable Schedule) for the 13 weeks ending after the Initial Closing Date (commencing Friday, October 4, 2024 (for the 13-week period commencing Sunday, October 6, 2024)), as set forth on a weekly basis, as may be updated from time to time by an Approved Updated Budget.

Budget Event” means (i) the actual amount of aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) during any Budget Testing Period exceeding the projected aggregate operating disbursements (excluding cash outflows pursuant to the Overdue Accounts Payable Schedule) in the Budget for such Budget Testing Period by more than a Permitted Variance and/or (ii) the actual amount of aggregate operating receipts during any Budget Testing Period being less than the projected aggregate operating receipts in the Budget for such Budget Testing Period by more than a Permitted Variance.

Budget Testing Date” means, with respect to the Budget, each Wednesday of each calendar week occurring after the Initial Closing Date (commencing on October 16, 2024) and each Wednesday thereafter.

Budget Testing Period” means, the week period ending immediately prior to the Budget Testing Date (i.e., Sunday to Saturday).

Business Day” means for all purposes any day except Saturday, Sunday and any day which shall be in New York City a legal holiday or a day on which banking institutions are authorized or required by law or other government action to close.

Capital Expenditures” means all expenditures made and liabilities incurred for the acquisition of any fixed asset or improvement, replacement, substitution or addition thereto which has a useful life of more than one year and including, without limitation, those arising in connection with any lease of property by Borrower that, in accordance with GAAP, should be capitalized for financial reporting purposes and reflected as a liability on the balance sheet of Borrower.

 

 

19


Capitalized Lease Obligations” means, with respect to any Person, all rental obligations of such Person which, under GAAP, are or will be required to be capitalized on the books of such Person, in each case taken at the amount thereof accounted for as indebtedness in accordance with GAAP.

Challenge Date” has the meaning set forth in Section 11(c) of the Schedule.

Change of Control” means the occurrence of any of the following after the Initial Closing Date:

(x) there shall be a change in the record or beneficial ownership of an aggregate of more than 20% of the outstanding shares of stock of, or equity ownership interest in, Holdings, in one or more transactions, compared to the ownership of the same in effect on the date hereof, without the prior written consent of the Lenders (excluding any change in ownership from (i) the issuance of Class B Common Stock and/or Class C Units to PMC or the Lenders representing up to 49.99% of the greater of (x) the equity ownership interests in the Borrower and the voting power in Holdings as of the date hereof and (y) the equity ownership interests in Borrower and voting power in Holdings as of the Additional Loans Funding Date to the Lenders and up to 25% of the equity ownership interests in Borrower and voting power in Holdings to the Lenders, (ii) the exchange of Class B Common Stock and/or Class C Units pursuant to the 2024 Exchange Agreement or (iii) any acquisition of shares of stock or equity interests in Holdings or Borrower by PMC or the Lenders or any of their respective Affiliates) or

(y) Holdings ceases to own, directly, beneficially, 100.0% of the issued and outstanding Class A equity interests of Borrower.

Class A Common Stock” means the Class A common stock, par value $0.0001 per share, of Holdings.

Class B Common Stock” means the Class B common stock, par value $0.0001 per share, of Holdings.

Class C Unit” means a Class C Unit of Borrower.

COI Equipment” means assets currently stored at 1820 Yeager Ave, LaVerne CA 91750 as set forth on Annex H.

Collateral” has the meaning set forth in Section 2 above.

Collateral Agent” has the meaning set forth in the Preamble hereto.

Commitments” has the meaning set forth in Section 1 of the Schedule.

Debtor Relief Laws” means the Bankruptcy Code, and all other liquidation, conservatorship, bankruptcy, assignment for the benefit of creditors, moratorium, rearrangement, receivership, insolvency, reorganization, or similar debtor relief laws of the United States or other applicable jurisdictions from time to time in effect.

Default” means any event which with notice or passage of time or both, would constitute an Event of Default.

Default Rate” has the meaning set forth in set forth in Section 2 of the Schedule.

Deposit Accounts” means all present and future “deposit accounts” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all general and special bank accounts, demand accounts, checking accounts, savings accounts and certificates of deposit.

Designated Account” has the meaning set forth in Section 1.7(a).

Dollars” or “$” shall mean lawful money of the United States.

Equipment” means all present and future “equipment” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.

 

 

20


Event of Default” has the meaning set forth in Section 7.1.

Excess” has the meaning set forth in Section 2A of the Schedule.

Excluded Assets” means (i) any account exclusively used for funding payroll or segregating payroll taxes or funding other employee wage or benefit for the then current payroll period, (ii) zero balance accounts the balance of which is swept each Business Day to a Deposit Account subject to an Account Control Agreement in favor of Collateral Agent (for the benefit of the Secured Parties), (iii) trust, fiduciary or other escrow accounts established for the benefit of third parties in the ordinary course of business or in connection with Permitted Acquisitions and other permitted Investments, or (iv) any account that is not located in the United States.

Existing PMC Loan and Security Agreement” means that certain Loan and Security Agreement, dated as of June 30, 2016 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) between PMC and the Borrower.

Financial Covenants” means the financial covenants set forth in Section 5 of the Schedule.

GAAP” means generally accepted accounting principles in the United States of America consistently applied.

General Intangibles” means all present and future “general intangibles” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all Intellectual Property, payment intangibles, royalties, contract rights, goodwill, franchise agreements, purchase orders, customer lists, route lists, telephone numbers, domain names, claims, income tax refunds, security and other deposits, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.

Governmental Authority” shall mean any U.S. or foreign federal, state, provincial, territorial, municipal, local or other governmental or regulatory authority, agency, instrumentality or body, court, arbitrator or self-regulatory organization.

Guarantee Agreement” means that certain Guarantee Agreement, dated as of the Initial Closing Date (as amended, restated, amended and restated, supplemented or otherwise modified from time to time) among Holdings, the other Guarantors from time to time party thereto and Administrative Agent.

Guarantors” means, collectively, (i) Holdings and (ii) each other Person who has guaranteed, or in the future guarantees, any of the Obligations.

Holdings” has the meaning set forth in the Preamble hereto.

Houlihan Lokey Validation” has the meaning set forth in Section 11(b) of the Schedule.

Houlihan Lokey Validation Date” has the meaning set forth in Section 11(b) of the Schedule.

including” means including (but not limited to).

Indebtedness” of any Person means:

(a) all obligations of such Person for borrowed money,

(b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments,

(c) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person,

(d) all obligations of such Person issued or assumed as the deferred purchase price of property or services, including earnouts (other than trade payables accrued in the ordinary course of business and that are not outstanding for a period of more than 180 days),

 

 

21


(e) all purchased money indebtedness and Capitalized Lease Obligations of such Person,

(f) all net payments that such Person would have to make in the event of an early termination, on the date indebtedness of such person is being determined, in respect of outstanding hedging agreements,

(g) the maximum amount available to be drawn under all letters of credit, bankers’ acceptances and similar obligations issued for the account of such Person and all unpaid drawings in respect of such letters of credit, bankers’ acceptances and similar obligations, all non-contingent obligations of such person in respect of letters of credit, and

(h) all guarantees by such Person of Indebtedness described in clauses (a) to (g) above.

Initial Closing Date” means the first date on which all of the conditions precedent in Section 9 of Schedule are satisfied or waived by Administrative Agent (at the direction of the Lenders in their sole and absolute discretion), which date was September 20, 2024.

Initial Commitment” has the meaning set forth in Section 1 of the Schedule.

Initial Loans” has the meaning set forth in Section 1.1.

Inside Debt” has the meaning set forth in Section 8(a) of the Schedule.

Intellectual Property” means, collectively, all present and future intellectual property and proprietary rights in any jurisdiction throughout the word, including (a) copyrights, copyright rights, copyright applications, copyright registrations and like protections in each work of authorship and derivative work thereof, whether published or unpublished, (b) Internet domain names, social media account identifiers, trade secret rights, including all rights to unpatented inventions and know-how, processes, production methods and confidential information; (c) mask work or similar rights available for the protection of semiconductor chips; (d) patents, patent applications and like protections including without limitation improvements, divisionals, continuations, renewals, reissues, extensions and continuations-in-part of the same; (e) trademarks, service marks, trade styles, and trade names, whether or not any of the foregoing are registered, and all applications to register and registrations of the same and like protections, and the entire goodwill of the business of Borrower connected or associated with and symbolized by any such trademarks; (f) computer software and computer software products; (g) designs and design rights; (h) technology; (i) all causes of action, claims for damages by way of past, present and future infringement, dilution, misappropriation, or other violation or impairment of any of the rights included above and all income, royalties, license fees damages and payments now or hereafter due and/or payable under or with respect thereto; and (j) all licenses or user or other agreements granted to or by Borrower with respect to any of the foregoing.

Intercreditor Agreements” means, collectively, the 1L/1L Intercreditor Agreement and the 1L/2L Intercreditor Agreement.

Interest Payment Date” means the last Business Day of each calendar month (commencing on September 30, 2024) and the Maturity Date.

Inventory” means all present and future “inventory” as defined in the Uniform Commercial Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.

Investment” means any beneficial ownership interest in any Person (including stock, securities, partnership interest, limited liability company interest, or other interests), any acquisition by Borrower, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the equity interests of or a business line or unit or a division of, any Person, and any loan, advance or capital contribution to any Person, including the creation or capital contribution to any wholly-owned or partially-owned subsidiary).

 

 

22


Investment Property” means all present and future investment property, securities, stocks, bonds, debentures, debt securities, partnership interests, limited liability company interests, options, security entitlements, securities accounts, commodity contracts, commodity accounts, and all financial assets held in any securities account or otherwise, and all options and warrants to purchase any of the foregoing, wherever located, and all other securities of every kind, whether certificated or uncertificated.

Lender” means each lender holding an Initial Commitment or any outstanding Initial Loans, each lender holding an Additional Commitment or any outstanding Additional Loans, each lender holding any outstanding Subsequent Litigation Settlement Loans, each lender holding any outstanding Subsequent Understated AP Loans, as well as any Person that becomes a “Lender” hereunder from time to time pursuant to Section 9.14.

Lien” shall mean, with respect to any asset, (a) any mortgage, charge, hypothec, deed of trust, Lien, hypothecation, pledge, charge, security interest or similar monetary encumbrance in or on such asset; and (b) the interest of a vendor or a lessor under any conditional sale agreement, capital lease or title retention agreement (or any financing lease having substantially the same economic effect as any of the foregoing) relating to such asset; provided that in no event shall an operating lease or an agreement to sell be deemed to constitute a Lien.

Litigation Annex” means the litigation schedule attached hereto as Annex F on the Initial Closing Date (as such Annex F may be supplemented from time to time after the Initial Closing Date by Administrative Agent (at the direction of the Lenders) for any outstanding claims, suits, litigation and other proceedings not disclosed to any Agent or any Lender that existed prior to the Initial Closing Date).

Loans” means, collectively, the Initial Loans, the Subsequent Understated AP Loans (if any) and the Subsequent Litigation Settlement Loans (if any) and the Additional Loans (if any).

Loan Documents” means, collectively, this Agreement, the Guarantee Agreement, any Security Documents, the Intercreditor Agreements, the Perfection Certificate, the Budgets, the Variance Reports, and all other present and future documents, instruments and agreements between any Lender, any Agent and Borrower (or Guarantor, if applicable), including, but not limited to those relating to this Agreement, and all amendments and modifications thereto and replacements therefor.

Loan Parties” means Borrower and the Guarantors. As of the Initial Closing Date, the Loan Parties are Borrower and Holdings.

Material Adverse Change” means any of the following: (a) a material adverse change in the business, operations, or financial or other condition of Borrower; (b) a material impairment of the prospect of repayment of any portion of the Obligations; or (c) a material impairment of the value or priority of Collateral Agent’s security interests in the Collateral.

Material Indebtedness” shall mean Indebtedness (other than (i) the Obligations and (ii) the obligations under the Amended and Restated PMC Facilities) of Borrower in an aggregate principal amount exceeding $500,000 (excluding ordinary course trade payables).

Maturity Date” has the meaning set forth in the Schedule.

Maximum Legal Rate” has the meaning set forth in Section 2A of the Schedule.

 

 

23


Net Cash Proceeds” means (a) with respect to any Asset Sale, an amount equal to: (i) cash payments (including any cash received by way of deferred payment pursuant to, or by monetization of, a note receivable or otherwise, but only as and when so received) received by Borrower from such Asset Sale, minus (ii) any bona fide direct costs incurred in connection with such Asset Sale, including (1) income or gains taxes (but excluding any tax distributions) payable by the Borrower as a result of any gain recognized in connection with such Asset Sale, (2) payment of the outstanding principal amount of, premium or penalty, if any, and interest on any Indebtedness (other than the Loans) that, in the case of a Loan Party, is secured by a Lien on the stock or assets in question and that is required to be repaid under the terms thereof as a result of such Asset Sale, (3) a reasonable reserve for any indemnification payments (fixed or contingent) attributable to seller’s indemnities and representations and warranties to purchaser in respect of such Asset Sale undertaken by Borrower in connection with such Asset Sale or for any other liabilities retained by Borrower associated with such Asset Sale, (4) bona fide selling fees, costs, commissions and expenses (including reasonable brokers’ fees or commissions, legal, accounting and other professional and transactional fees, transfer and similar taxes) and (5) Borrower’s good faith estimate of payments required to be made with respect to unassumed liabilities relating to the properties sold within 180 days of such Asset Sale; provided that, to the extent such cash proceeds are not used to make payments in respect of such unassumed liabilities within 180 days of such Asset Sale, such cash proceeds shall constitute Net Cash Proceeds; (b) (i) any cash payments or proceeds received by Borrower (1) under any casualty insurance policy in respect of a covered loss thereunder arising after the Initial Closing Date or (2) as a result of the taking of any assets of Borrower by an