Blueprint

0001654954-16-001418.txt : 20160811 0001654954-16-001418.hdr.sgml : 20160811 20160811160952 ACCESSION NUMBER: 0001654954-16-001418 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 63 CONFORMED PERIOD OF REPORT: 20160630 FILED AS OF DATE: 20160811 DATE AS OF CHANGE: 20160811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NOBLE ROMANS INC CENTRAL INDEX KEY: 0000709005 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 351281154 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-11104 FILM NUMBER: 161824669 BUSINESS ADDRESS: STREET 1: ONE VIRGINIA AVE STREET 2: STE 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 BUSINESS PHONE: 3176343377 MAIL ADDRESS: STREET 1: ONE VIRGINIA AVENUE STREET 2: SUITE 800 CITY: INDIANAPOLIS STATE: IN ZIP: 46204 10-Q 1 nrom_10q.htm PRIMARY DOCUMENT Blueprint

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2016

Commission file number: 0-11104

NOBLE ROMAN’S, INC.

(Exact name of registrant as specified in its charter)

Indiana		35-1281154
(State or other jurisdiction of organization)		(I.R.S. Employer Identification No.)

One Virginia Avenue, Suite 300
Indianapolis, Indiana		46204
(Address of principal executive offices)		(Zip Code)

(317) 634-3377

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes _X_ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer __ Accelerated Filer __

Non-Accelerated Filer __ (do not check if smaller reporting company) Smaller Reporting Company X

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes___ No _X

As of August 1, 2016, there were 20,783,032 shares of Common Stock, no par value, outstanding.

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

The following unaudited condensed consolidated financial statements are included herein:

Condensed consolidated balance sheets as of December 31, 2015 and June 30, 2016 (unaudited)	Page 3

Condensed consolidated statements of operations for the three-month and six-month periods ended June 30, 2015 and 2016 (unaudited)	Page 4

Condensed consolidated statements of changes in stockholders' equity for the six-month period ended June 30, 2016 (unaudited)	Page 5

Condensed consolidated statements of cash flows for the six-month period ended June 30, 2015 and 2016 (unaudited)	Page 6

Notes to condensed consolidated financial statements (unaudited)	Page 8

Noble Roman's, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited)

Assets	December 31, 2015	June 30, 2016
Current assets:
Cash	$194,021	$625,522
Accounts receivable - net	2,007,751	2,222,841
Inventories	492,222	640,150
Prepaid expenses	634,016	831,155
Deferred tax asset - current portion	925,000	925,000
Total current assets	4,253,010	5,244,668

Property and equipment:
Equipment	1,376,190	1,825,392
Leasehold improvements	88,718	88,718
	1,464,908	1,914,110
Less accumulated depreciation and amortization	1,092,785	1,124,832
Net property and equipment	372,123	789,278
Deferred tax asset (net of current portion)	8,158,523	8,126,616
Other assets including long-term portion of receivables - net	5,681,272	5,561,600
Total assets	$18,464,928	$19,722,162

Liabilities and Stockholders' Equity
Current liabilities:
Current portion of term loan payable to bank	$601,081	$1,694,316
Current portion of loan payable to Super G Funding, LLC	-	950,000
Accounts payable and accrued expenses	847,418	195,687
Total current liabilities	1,448,499	2,840,003

Long-term obligations:
Term loans payable to bank ñ net of current portion	1,366,454	-
Loan payable to Super G Funding, LLC (net of current portion)	-	923,918
Notes payable to officers	175,000	310,000
Note payable to Kingsway America	600,000	600,000
Total long-term liabilities	2,141,454	1,833,918

Stockholders' equity:
Common stock - no par value (25,000,000 shares authorized, 20,775,921 issued and outstanding as of December 31, 2015 and 20,783,032 issued and outstanding as of June 30, 2016)	24,294,002	24,299,420
Accumulated deficit	(9,419,027)	(9,251,179)
Total stockholders' equity	14,874,975	15,048,241
Total liabilities and stockholdersí equity	$18,464,928	$19,722,162

See accompanying notes to condensed consolidated financial statements (unaudited).

Noble Roman's, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited)

	Three-Months Ended June 30,		Six-Months Ended June 30,
	2015	2016	2015	2016
Revenue:
Royalties and fees	$2,026,510	$1,874,235	$3,799,082	$3,590,546
Administrative fees and other	14,885	10,635	26,633	21,709
Restaurant revenue	54,390	55,554	97,076	107,047
Total revenue	2,095,785	1,940,424	3,922,791	3,719,302
Operating expenses:
Salaries and wages	292,357	232,601	571,874	483,909
Trade show expenses	136,470	130,441	262,585	258,877
Travel expenses	58,407	34,407	114,553	95,674
Broker commissions	-	21,821	-	21,821
Other operating expenses	193,964	179,971	401,590	375,284
Restaurant expenses	49,665	44,173	101,435	89,905
Depreciation and amortization	26,354	31,675	52,708	61,087
General and administrative	407,669	384,666	809,827	790,475
Total expenses	1,164,886	1,059,755	2,314,572	2,177,032
Operating income	930,899	880,669	1,608,219	1,542,270

Interest	42,193	82,735	88,229	137,941
Loss on restaurant closed	47,331	-	93,672	36,776
Adjust valuation of receivables	600,000	-	600,000	-
Income before income taxes from continuing operations	241,375	797,934	826,318	1,367,553

Income tax expense	106,154	302,686	343,647	522,508
Net income from continuing operations	135,221	495,248	482,671	845,045

Loss from discontinued operations net of tax benefit of $418,725 for 2016	-	677,197	-	677,197

Net income	$135,221	$(181,949)	$482,671	$167,848

Earnings per share ñ basic:
Net income from continuing operations	.01	.02	.02	.04
Net loss from discontinued operations net of tax benefit	-	(.03)	-	(.03)
Net income	.01	(.01)	.02	.01
Weighted average number of common shares outstanding	20,483,091	20,783,032	20,291,653	20,780,727

Diluted earnings per share:
Net income from continuing operations	.01	.02	.02	.04
Net loss from discontinued operations net of tax benefit	-	(.03)	-	(.03)
Net income	.01	(.01)	.02	.01
Weighted average number of common shares outstanding	21,844,981	20,974,419	21,653,543	20,972,114

See accompanying notes to condensed consolidated financial statements (unaudited).

Noble Roman's, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in

Stockholders' Equity

(Unaudited)

	Common Stock Shares Amount		Accumulated Deficit	Total


Balance at December 31, 2015	20,775,921	$24,294,002	$(9,419,027)	$14,874,975

Net income for six months ended June 30, 2016			167,848	167,848

Cashless exercise of employee stock option	7,111

Amortization of value of employee stock options		5,418		5,418

Balance at June 30, 2016	20,783,032	$24,299,420	$(9,251,179)	$15,048,241

See accompanying notes to condensed consolidated financial statements (unaudited).

Noble Roman's, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Six Months Ended June 30,
OPERATING ACTIVITIES	2016	2015
Net income	$482,671	$167,848
Adjustments to reconcile net income to net cash provided (used) by operating activities:
Depreciation and amortization	68,365	37,466
Deferred income taxes	343,647	31,907
Changes in operating assets and liabilities:
Increase in:
Accounts receivable	(75,764)	(215,090)
Inventories	(763)	(147,928)
Prepaid expenses	(191,881)	(197,139)
Other assets	(276,655)	(324,176)
Increase (decrease) in:
Accounts payable and accrued expenses	453,880	(593,128)
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES	803,500	(1,240,240)

INVESTING ACTIVITIES
Purchase of property and equipment	(7,757)	(5,354)
NET CASH USED IN INVESTING ACTIVITIES	(7,757)	(5,354)

FINANCING ACTIVITIES
Payment of principal on bank term loans	(744,236)	(273,219)
Payment of principal on Super G Funding, LLC loan	-	(29,000)
Proceeds from the exercise of employee stock options	171,867	-
Proceeds from Super G Funding, LLC	-	1,902,917
Proceeds from officers loan	-	135,000
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES	(572,369)	1,735,698

DISCONTINUED OPERATIONS
Payment of obligations from discontinued operations	(143,026)	(58,603)

Increase in cash	80,348	431,501
Cash at beginning of period	200,349	194,021
Cash at end of period	$280,697	$625,522

Supplemental schedule of investing and financing activities

In 2016, moved leased equipment from other assets to equipment account in the amount of $443,848.

In 2016, wrote off the Heyser receivable of $677,197 net of tax benefit of $418,725.

In the first six months of 2015, an option to purchase 100,000 shares at an exercise price of $.95 per share was exercised pursuant to the cashless exercise provision of the option and the holder received 58,696 shares of common stock, options to purchase 300,000 shares at an exercise price of $1.05 per share were exercised pursuant to the cashless exercise provision of the options and the holders received 163,043 shares, an option to purchase 66,666 shares at an exercise price of $.58 per share was exercised pursuant to the cashless exercise provision of the option and the holder received 49,855 shares, options to purchase 30,000 shares at an exercise price of $.90 per share were exercised pursuant to the cashless exercise provision of the options and the holders received 18,412 shares, and an option to purchase 45,000 shares at an exercise price of $.36 per share was exercised pursuant to the cashless exercise provision of the option and the holder received 36,900 shares. In the first six months of 2015 the Company issued 50,000 shares of common stock in exchange for $95,000 in payables.

In the first six months of 2016, an option to purchase 20,000 shares at an exercise price of $.58 per share was exercised pursuant to the cashless exercise provision of the option and the holder received 7,111 shares of common stock.

Cash paid for interest $ 74,376 $ 129,013

See accompanying notes to condensed consolidated financial statements (unaudited).

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1 - The accompanying unaudited interim condensed consolidated financial statements, included herein, have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated statements have been prepared in accordance with the Company’s accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015 and should be read in conjunction with the audited consolidated financial statements and the notes thereto included in that report. Unless the context indicates otherwise, references to the “Company” mean Noble Roman’s, Inc. and its subsidiaries.

In the opinion of the management of the Company, the information contained herein reflects all adjustments necessary for a fair presentation of the results of operations and cash flows for the interim periods presented and the financial condition as of the dates indicated, which adjustments are of a normal recurring nature. The results for the three-month and six-month periods ended June 30, 2016, respectively, are not necessarily indicative of the results to be expected for the full year ending December 31, 2016.

Note 2 – Royalties and fees include initial franchise fees of $29,000 and $66,000 for the three-month and six-month periods ended June 30, 2015, and $77,000 and $129,000 for the three-month and six-month periods ended June 30, 2016, respectively. Royalties and fees included equipment commissions of $8,000 and $37,000 for the three-month and six-month periods ended June 30, 2015, and $6,000 and $10,000 for the three-month and six-month periods ended June 30, 2016, respectively. Royalties and fees including interest per franchise agreements, less initial franchise fees and equipment commissions, were $2.0 million and $3.7 million for the respective three-month and six-month periods ended June 30, 2015, and $1.8 million and $3.5 million for the respective three-month and six-month periods ended June 30, 2016. Most of the cost for the services required to be performed by the Company are incurred prior to the franchise fee income being recorded, which is based on a contractual liability of the franchisee. Generally, the Company’s royalty income is paid by the Company initiating a draft on the franchisee’s account by electronic withdrawal.

There were 2,562 franchises/licenses in operation on December 31, 2015 and 2,678 franchises/licenses in operation on June 30, 2016. During the six-month period ended June 30, 2016, there were 137 new outlets opened and 21 outlets closed. In the ordinary course, grocery stores from time to time add our licensed products, remove them and may subsequently re-offer them. Therefore, it is unknown how many licensed grocery store units included in the count above have left the system.

Note 3 - The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2015:

	Three Months Ended June 30, 2015
	Income (Numerator)	Shares (Denominator)	Per-Share Amount
Net income	$135,221	20,483,091	$.01

Effect of dilutive securities
Options	-	1,361,890

Diluted earnings per share
Net income	$135,221	21,844,981	$.01

	Six Months Ended June 30, 2015
	Income (Numerator)	Shares (Denominator)	Per-Share Amount
Net income	$482,671	20,291,653	$.02

Effect of dilutive securities
Options	-	1,361,890

Diluted earnings per share
Net income	$482,671	21,653,543	$.02

The following table sets forth the calculation of basic and diluted earnings per share for the three-month and six-month periods ended June 30, 2016:

	Three Months Ended June 30, 2016
	Income (Numerator)	Shares (Denominator)	Per-Share Amount
Net income (loss)	$(181,949)	20,783,032	$(.01)

Effect of dilutive securities
Options	-	191,387	-

Diluted earnings per share
Net income per share with assumed conversions	$(181,949)	20,974,419	$( .01)

	Six Months Ended June 30, 2016
	Income (Numerator)	Shares (Denominator)	Per-Share Amount
Net income	$167,848	20,780,727	$.01

Effect of dilutive securities
Options	-	191,387

Diluted earnings per share
Net income	$167,848	21,972,114	$.01

Note 4 - At the end of December 2015, the Company determined to close a restaurant that had previously been used for demonstration and training purposes. This restaurant was a part of the discontinued operations in 2008, but the Company decided to continue operating this location until the lease expired. Since the restaurant was closed, the related revenue and expense were taken out of the 2015,operating income at the end of the year for the full year and the net expense shown as a loss on restaurant closed separate from the ongoing operations. The results for the three-month and six-month periods ended June 30, 2015 have been reclassified to remove those operations from ongoing operations consistent with the full year 2015 for comparison purposes to the three-month and six-month periods ended June 30, 2016.

Note 5 - In June 2016, the Company borrowed $2.0 million from Super G Funding, LLC ("Super G") and used those funds: (1) to repay the $500,000 revolving loan with the Bank, (2) for working capital purposes, and (3) to provide for construction of two new prototype locations to be used as a basis for additional franchising. This loan is to be repaid in the total amount of $2.7 million in regular bi-monthly payments over a two year period.

Note 6 - The Company evaluated subsequent events through the date the financial statements were issued and filed with SEC. There were no subsequent events that required recognition or disclosure beyond what is disclosed in this report.

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

General Information

Noble Roman’s, Inc., an Indiana corporation incorporated in 1972 with two wholly-owned subsidiaries, Pizzaco, Inc. and N.R. Realty, Inc., sells, services or operates franchises and licenses for non-traditional foodservice operations and stand-alone locations under the trade names “Noble Roman’s Pizza”, “Noble Roman’s Take-N-Bake”, "Noble Roman's Craft Pizza & Pub" and “Tuscano’s Italian Style Subs”. The concepts’ hallmarks include high quality pizza and sub sandwiches, along with other related menu items, simple operating systems, fast service times, labor-minimizing operations, attractive food costs and overall affordability. Since 1997, the Company has concentrated its efforts and resources primarily on franchising and licensing for non-traditional locations and now has awarded franchise and/or license agreements in 50 states plus Washington, D.C., Puerto Rico, the Bahamas, Italy, the Dominican Republic and Canada. The Company currently focuses all of its sales efforts on (1) franchises/licenses for non-traditional locations primarily in convenience stores and entertainment facilities, (2) franchises for stand-alone Noble Roman’s Pizza retail outlets and (3) license agreements for grocery stores to sell Noble Roman’s Take-N-Bake Pizza and related products. Pizzaco, Inc. owns and operates a Company location used for testing and demonstration purposes. References in this report to the “Company” are to Noble Roman’s, Inc. and its subsidiaries, unless the context requires otherwise.

Noble Roman’s Pizza

The hallmark of Noble Roman’s Pizza is “Superior quality that our customers can taste.” Every ingredient and process has been designed with a view to produce superior results.

●

A fully-prepared pizza crust that captures the made-from-scratch pizzeria flavor which gets delivered to non-traditional and grocery locations shelf-stable so that dough handling is no longer an impediment to a consistent product in those types of operations.

●

In-store fresh made crust with only specially milled flour with above average protein and yeast for use in its stand-alone retail outlets.

●

Fresh packed, uncondensed and never cooked sauce made with secret spices, parmesan cheese and vine-ripened tomatoes.

●

100% real cheese blended from mozzarella and Muenster, with no soy additives or extenders.

●

100% real meat toppings, with no additives or extenders – a distinction compared to many pizza concepts.

●

Vegetable and mushroom toppings that are sliced and delivered fresh, never canned.

●

An extended product line that includes breadsticks and cheesy stix with dip, pasta, baked sandwiches, salads, wings and a line of breakfast products.

Noble Roman’s Take-N-Bake

The Company developed a take-n-bake version of its pizza as an addition to its menu offerings. The take-n-bake pizza is designed as an add-on component for new and existing convenience stores, as a stand-alone offering for grocery stores and as a stand-alone retail outlet concept. The Company offers the take-n-bake program in grocery stores under a license agreement rather than a franchise agreement. The stand-alone units are offered under a franchise agreement. In convenience stores, take-n-bake is an available menu offering under the existing franchise/license agreement. The Company uses the same high quality pizza ingredients for its take-n-bake pizza as with its baked pizza, with slight modifications to portioning for enhanced home baking performance.

Tuscano’s Italian Style Subs

Tuscano’s Italian Style Subs is a separate non-traditional location concept that focuses on sub sandwich menu items. Tuscano’s was designed to be comfortably familiar from a customer’s perspective but with many distinctive features that include an Italian-themed menu. The ongoing royalty for a Tuscano’s franchise is identical to that charged for a Noble Roman’s Pizza franchise. The Company awards Tuscano’s franchises in the same facilities as Noble Roman’s Pizza franchises. The Company has developed a grab-n-go service system for a selected portion of the Tuscano’s menu. The grab-n-go system is designed to add sales opportunities at existing non-traditional Noble Roman’s Pizza locations.

Business Strategy

The Company’s business strategy includes the following principal elements:

1. Focus on revenue expansion through three primary growth vehicles:

Sales of Non-Traditional Franchises and Licenses. The Company believes it has an opportunity for increasing unit growth and revenue within its non-traditional venues, particularly with convenience stores, travel plazas and entertainment facilities. The Company’s franchises/licenses in non-traditional locations are foodservice providers within a host business and usually require a substantially lower investment compared to a stand-alone traditional location. Non-traditional franchises/licenses are most often sold into pre-existing facilities as a service and/or revenue enhancer for the underlying business.

Licensing and Franchising the Company’s Take-N-Bake Program. Noble Roman's take-n-bake pizza is designed as a unique product offering for grocery stores, an add-on component for new or existing convenience store franchisees/licensees and stand-alone franchise locations. The Company believes there is a significant growth opportunity to license additional supermarkets to sell its take-n-bake pizzas in their deli departments.

Franchising the Company’s Stand-Alone Locations. The Company has developed the next generation stand-alone prototype, which features the chain’s popular traditional Hand-Tossed Style pizza except with thinner crust that has a crispy exterior and a flavorful and chewy interior, Deep-Dish Sicilian pizza, SuperThin pizza, and Noble Roman’s famous breadsticks with spicy cheese sauce. All crust styles feature traditional toppings plus several fun new toppings and new specialty pizzas. The menu also includes an assortment of fun new specialty salads and traditional pastas with a choice of three noodles and three sauces plus specialty add-ons. The new prototype utilizes new oven technology which reduces traditional pizza bake time to two minutes and 30 seconds. The prototype dining room will be country Italian decor with seating for 100 plus guests, featuring a glass enclosed room in the dining room where all dough and breadsticks are made fresh daily in view of the customers which highlights the hand crafted and fresh nature of the products as well as entertainment for our guests.

2. Leverage the results of research and development advances.

The Company has invested significant time and effort to create what it considers to be competitive advantages in its products and systems for non-traditional and take-n-bake locations. The Company will continue to make these investments the focal point in its marketing process. The Company believes that the quality of its products, their cost-effectiveness, relatively simple production and service systems, and its diverse, modularized menu offerings all contribute to the Company’s strategic attributes and growth potential. Every ingredient and process was designed to produce superior results. The menu items in most venues were developed to be delivered in a ready-to-use format requiring only on-site assembly and baking except for take-n-bake pizza, which is sold to bake at home, and certain other complementary menu items which require no assembly. The Company believes this process results in products that are great tasting, quality consistent, easy to assemble, relatively low in food cost, and require minimal labor, which allow for a significant competitive advantage due to the speed at which the products can be prepared, baked and served to customers.

3. Aggressively communicate the Company’s competitive advantages to its target market of potential franchisees and licensees.

The Company utilizes the following methods of reaching potential franchisees and licensees and to communicate its product and system advantages: (1) calling from both acquired and in-house prospect lists; (2) frequent direct mail campaigns to targeted prospects; (3) web-based lead capturing; (4) live demonstrations at trade and food shows; and (5) in the case of prospects for the stand-alone outlets, requiring visits to the Company headquarters to meet management and to sample the products. In particular, the Company has found that conducting live demonstrations of its systems and products at selected trade and food shows across the country allows it to demonstrate advantages that can otherwise be difficult for a potential prospect to visualize. There is no substitute for actually tasting the difference in a product’s quality to demonstrate the advantages of the Company’s products. The Company carefully selects the national and regional trade and food shows where it either has an existing relationship or considerable previous experience to expect that such shows offer opportunities for fruitful lead generation.

Business Operations

Distribution

The Company’s proprietary products are manufactured pursuant to the Company’s recipes and formulas by third-party manufacturers under contracts between the Company and its various manufacturers. These contracts require the manufacturers to produce products meeting the Company’s specifications and to sell them to Company-approved distributors at prices negotiated between the Company and the manufacturer.

At present, the Company has distribution agreements with its primary distributors strategically located throughout the United States. The distribution agreements require the primary distributors to maintain adequate inventories of all products necessary to meet the needs of the Company’s franchisees and licensees in their distribution areas for weekly deliveries to the franchisee/licensee locations and to its grocery store distributors in their respective territories. Each of the primary distributors purchases the products from the manufacturer at prices negotiated between the Company and the manufacturers, but under payment terms agreed upon by the manufacturer and the distributor, and distributes the products to the franchisee/licensee at a price determined by the distribution agreement. Payment terms to the distributor are agreed upon between each franchisee/licensee and the respective distributor. In addition, the Company has agreements with numerous grocery store distributors located in various parts of the country which agree to buy the Company’s products from one of its primary distributors and to distribute those products only to their grocery store customers who have signed license agreements with the Company.

Franchising

The Company sells franchises into various non-traditional and traditional venues.

The initial franchise fees are as follows:

Franchise Format	Non-Traditional, Except Hospitals	Hospitals	Traditional Stand-Alone
Noble Roman’s Pizza	$7,500	$10,000	$25,000(1)
Tuscano’s Subs	$6,000	$10,000	-
Noble Roman’s & Tuscano’s	$11,500	$18,000	-

(1) With the sale of multiple traditional stand-alone franchises to a single franchisee, the franchise fee for the first unit is $25,000, the franchise fee for the second unit is $20,000 and the franchise fee for the third unit and more is $15,000.

The franchise fees are paid upon signing the franchise agreement and, when paid, are deemed fully earned and non-refundable in consideration of the administration and other expenses incurred by the Company in granting the franchises and for the lost and/or deferred opportunities to grant such franchises to any other party.

Licensing

Noble Roman’s Take-n-Bake Pizza licenses for grocery stores are governed by a supply agreement. The supply agreement generally requires the licensee to: (1) purchase proprietary ingredients only from a Noble Roman’s-approved distributor; (2) assemble the products using only Noble Roman’s approved ingredients and recipes; and (3) display products in a manner approved by Noble Roman’s using Noble Roman’s point-of-sale marketing materials. Pursuant to the distribution agreements, the distributors place an additional mark-up, as determined by the Company, above their normal selling price on the key ingredients as a fee to the Company in lieu of a royalty. The distributors agree to segregate this additional mark-up upon invoicing the licensee, to hold the fees in trust for the Company and to remit them to the Company within ten days after the end of each month

Financial Summary

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates. The Company periodically evaluates the carrying values of its assets, including property, equipment and related costs, accounts receivable and deferred tax assets, to assess whether any impairment indications are present due to (among other factors) recurring operating losses, significant adverse legal developments, competition, changes in demand for the Company’s products or changes in the business climate which affect the recovery of recorded value. If any impairment of an individual asset is evident, a charge will be provided to reduce the carrying value to its estimated fair value.

The following table sets forth the percentage relationship to total revenue of the listed items included in Noble Roman’s consolidated statements of operations for the three-month and six-month periods ended June 30, 2015 and 2016, respectively.

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2015	2016	2015	2016
Royalties and fees	96.7%	96.6%	96.8%	96.6%
Administrative fees and other	.7	.5	.7	.6
Restaurant revenue	2.6	2.9	2.5	2.8
Total revenue	100.0	100.0	100.0	100.0
Operating expenses:
Salaries and wages	13.9	12.0	14.6	13.0
Trade show expense	6.5	6.7	6.7	7.0
Travel expense	2.8	1.8	2.9	2.6
Broker commissions	-	1.1	-	.6
Other operating expense	9.3	9.3	10.2	10.1
Restaurant expenses	2.3	2.3	2.7	2.4
Depreciation and amortization	1.3	1.6	1.3	1.6
General and administrative	19.5	19.8	20.6	21.3
Total expenses	55.6	54.6	59.0	58.6
Operating income	44.4	45.4	41.0	41.4
Interest and other expense	2.0	4.3	2.2	3.7
Loss on restaurant discontinued	2.3	-	2.4	1.0
Adjustment for valuation of receivables	28.6	-	15.3	-
Income before income taxes from continuing operations	11.5	41.1	21.1	36.7
Income tax expense	5.1	15.6	8.8	14.0
Net income from continuing operations	6.4%	25.5%	12.3%	22.7%

Results of Operations

Total revenue decreased from $2.1 million and $3.9 million to $1.9 million and $3.7 million during the respective three-month and six-month periods ended June 30, 2016 compared to the corresponding periods in 2015. Franchise fees and equipment commissions (“upfront fees”) increased from $37,000 and $103,000 to $83,000 and $139,000 during the respective three-month and six-month periods ended June 30, 2016 compared to the corresponding periods in 2015. Royalties and fees including interest per franchise agreements, less upfront fees, decreased from $2.0 million and $3.7 million to $1.8 million and $3.5 million for the respective three-month and six-month periods ended June 30, 2016 compared to the corresponding periods in 2015. The breakdown of royalties and fees less upfront fees, for the respective three-month and six-month periods ended June 30, 2016 and 2015 was: royalties and fees from non-traditional franchises other than grocery stores, including interest on receivables, were $1.11 million compared to $1.25 million and $2.11 million compared to $2.25 million; royalties and fees from the grocery store take-n-bake were $530,000 compared to $487,000 and $1.01 million compared to $888,000; royalties and fees from stand-alone take-n-bake franchises were $88,000 compared to $189,000 and $211,000 compared to $425,000; and royalties and fees from traditional locations were $60,000 compared to $68,000 and $120,000 compared to $134,000.

During 2014 and continuing in 2015 and 2016, the Company began auditing the reporting of sales for computing royalties by each non-traditional franchise and plans to continue to do so on an ongoing basis, the effect of which is unknown. The Company estimates franchise sales based on product purchases as reflected on distributor reports and, where under-reporting is identified, the Company has invoiced franchisees on the unreported amounts.

Restaurant revenue was $56,000 and $107,000 for the three-month and six-month periods ended June 30, 2016 compared to $54,000 and $97,000 for the three-month and six-month periods ended June 30, 2015, respectively. The increases in both periods were the result of same store sales increases. The Company currently operates only one location used primarily for testing and demonstration purposes.

As a percentage of total revenue, salaries and wages decreased from 13.9% to 12.0% and from 14.6% to 13.0% for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. Salaries and wages decreased from $292,000 to $233,000 and from $572,000 and $484,000 for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. The decreases were a result of tightly controlling expenses.

As a percentage of revenue trade show expenses increased from 6.5% to 6.7% and from 6.7% to 7.0% for the three-month and six-month periods ended June 30, 2016 compared to the corresponding periods in 2015. Trade show expenses were $130,000 compared to $136,000 and $259,000 compared to $263,000 for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015.

As a percentage of revenue, travel expenses decreased from 2.8% to 1.8% and from 2.9% to 2.6% for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. Travel expense decreased from $58,000 to $34,000 and from $115,000 to $96,000 for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. This was the result of more efficient scheduling of training to minimize travel.

In an attempt to more closely monitor the grocery store's take-n-bake displays, the Company engaged a network of food brokers on commission to assist in monitoring grocery store displays and to assist in verifying that take-n-bake products are prepared properly. The Company incurred a cost of $22,000 in both the three-month and six-month periods ended June 30, 2016 compared to none in 2015. Generally, this has not proven to be productive and most of the foodservice brokers' services will not be continued in the future.

As a percentage of total revenue, other operating expenses remained the same at 9.3% of total revenue for the three-month period ended June 30, 2016 compared to 2015 and decreased from 10.2% to 10.1% for the six-month period ended June 30, 216 compared to the corresponding period in 2015. Operating expenses decreased from $194,000 to $180,000 and from $402,000 to $375,000 for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. This was the result of tightly controlling expenses.

As a percentage of total revenue, restaurant expenses remained the same at 2.3% of total revenue for the three-month period ended June 30, 2016 compared to 2015, and decreased from 2.7% to 2.4% for the six-month period ended June 30, 2016 compared to the corresponding period in 2015. Restaurant revenue increased, however with tighter controls on operating expenses the expenses decreased. The Company currently operates only one restaurant which it uses for demonstration, training and testing purposes.

As a percentage of total revenue, general and administrative expenses increased from 19.5% to 19.8% and from 20.6% to 21.3% for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. General and administrative expenses decreased from $408,000 to $385,000 and from $810,000 to $790,000 for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015.

As a percentage of total revenue, total expenses decreased from 55.6% to 54.6% and from 59.0% to 58.6% for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding period in 2015.

As a percentage of total revenue, operating income increased from 44.4% to 45.4% and from 41.0% to 41.4% for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015.

For the three-month and six-month periods ended June 30, 2016 compared to the corresponding periods in 2015, interest expense increased from $42,000 to $83,000 and from $88,000 to $138,000, respectively, compared to the corresponding periods in 2015. This increase was the result of additional short-term borrowing for working capital and a higher interest rate on the additional borrowing.

Net income before taxes from continuing operations increased from $241,000 to $798,000 and from $826,000 to $1.37 million for the three-month and six-month periods ended June 30, 2016, respectively, compared to the corresponding periods in 2015. This was primarily the result of valuation of receivables in 2015 Net income before taxes from continuing operations is significant since the Company will pay no income taxes on approximately the next $21 million in net income before taxes due to its deferred tax assets.

Net loss on discontinued operations was $677,197 net of tax benefit of $418,725 for both the three-month and six-month periods ended June 30, 2016 compared to none for the corresponding periods in 2015. This loss reflected the charge off of certain receivables from the operations discontinued in 2008 and was the remaining receivable from the various plaintiffs in the Heyser lawsuit which was won by the Company in summary judgment dismissing the Company from any liability after numerous appeals including an appeal to the Indiana Supreme Court by the Heyser plaintiffs. The Company also won summary judgment on its counterclaims against the various plaintiffs and was later awarded a judgment against the plaintiffs in excess of $2 million, which included damages and attorney fees. The Company has been pursuing collection ever since and the plaintiffs have been avoiding those efforts. During the most recent quarter the Company made the decision that it was in its best interest to cease incurring additional legal fees and settle for a small amount of the claim, or $375,000, which is evidenced by a promissory note secured by a mortgage on two pieces of real estate. The note is to be paid over the next two years.

Liquidity and Capital Resources

The Company’s strategy in recent years has been to grow its business by concentrating on franchising/licensing new non-traditional locations, licensing grocery stores to sell take-n-bake pizza and franchising stand-alone locations. This strategy was intended to not require significant increase in expenses. Generally this will continue to be the Company's strategy, however over the last year the Company has been re-designing and re-positioning its stand-alone franchise. As a result, the Company plans to open and operate two locations with the re-designed and re-positioned stand-alone format and, once open which is expected in the fourth quarter 2016, will launch a major franchising effort based on those two locations. The Company currently operates one restaurant location which it current uses for testing and demonstration purposes.

The Company’s current ratio was 1.83-to-1 as of June 30, 2016 compared to 2.9-to-1 as of December 31, 2015. A significant portion of the Company's outstanding debt is due in the first quarter 2017, therefore that debt was reclassified from long-term debt at December 31, 2015 to short-term debt at June 30, 2016.

In 2012, the Company entered into a Credit Agreement with BMO Harris Bank, N.A. (the “Bank”) for a term loan in the amount of $5.0 million which was repayable in 48 equal monthly principal installments of approximately $104,000 plus interest with a final payment due in May, 2016. In October, 2013, the Company entered into a First Amendment to the Credit Agreement (the “First Amendment”). The First Amendment maintained the terms of the term loan except for reducing the monthly principal payments from $104,000 to approximately $80,700 and extending the loan’s maturity to February, 2017. All other terms and conditions of the term loan remained the same including interest on the unpaid principal at a rate per annum of LIBOR plus 4%. The First Amendment also provided for a new term loan in the original amount of $825,000 requiring monthly principal payments of approximately $20,600 per month commencing in November, 2013 and continuing thereafter until the final payment in February, 2017. The term loan provided for interest on the unpaid principal balance to be paid monthly at a rate per annum of LIBOR plus 6.08% per annum. Proceeds from the new term loan were used to redeem the Company's Series B Preferred Stock.

In October, 2014, the Company entered into a Second Amendment to its Credit Agreement (the “Second Amendment”). Pursuant to the Second Amendment, the Company borrowed $700,000 in the form of a term loan repayable in 36 equal monthly installments of principal in the amount of $19,444 plus interest on the unpaid balance of LIBOR plus 6% per annum. The terms and conditions of the Credit Agreement were otherwise unchanged. The Company used the proceeds from the loan for additional working capital and open air display coolers for grocery stores, as a result of the then recent growth in the grocery store take-n-bake venue.

In July, 2015, the Company borrowed $600,000 from a third-party lender, evidenced by a promissory note which matures in July, 2017. Interest on the note is payable at the rate of 8% per annum quarterly in arrears and this loan is subordinate to borrowings under the Company's bank loan. In connection with the loan, the Company issued, to the holder of the promissory note, a warrant entitling the holder to purchase up to 300,000 shares of the Company's common stock at an exercise price per share of $2.00. The warrant expires in July 2020. Proceeds were used to increase working capital in anticipation of expected growth due to the Company hiring two new sales people, a Vice President of Supermarket Development, and entering into an agreement with a franchise broker.

In December 2015, the Company borrowed $100,000 from Paul Mobley and $75,000 from A. Scott Mobley, two officers of the Company, which are evidenced by promissory notes that were originally to mature in January 2017. In January 2016, $25,000 of the previous borrowing from A. Scott Mobley was repaid. In February 2016, A. Scott Mobley loaned the Company another $10,000, evidenced by a promissory note. In April 2016, the Company borrowed an additional $150,000 from Paul Mobley, evidenced by a promissory note. In conjunction with the Super G loan, both Paul Mobley and A. Scott Mobley signed a subordination letter regarding the three notes agreeing to extend the maturity of each to June 10, 2018. Interest on the notes are payable at the rate of 10% per annum quarterly in arrears and the loans are unsecured. Proceeds were used for working capital.

In January, 2016, the Company entered into a Third Amendment to its Credit Agreement (the “Third Amendment”). Pursuant to the Third Amendment, the Company consolidated its three term loans with the Bank into a new term loan of $1,967,000 repayable in monthly payments of principal in the amount of $54,654 plus interest on the unpaid balance of LIBOR plus 6% per annum. The new term loan matures March 31, 2017 when all remaining principal balance becomes due. In addition, the Third Amendment provided for a revolving loan in the maximum amount of $500,000 with a maturity of March 31, 2017. In conjunction with a new loan in June 2016 from Super G Funding, LLC ("Super G"), the $500,000 revolving loan to the bank was repaid.

In June 2016, the Company borrowed $2.0 million from Super G and used those funds: (i) to repay the $500,000 revolving loan with the Bank, (ii) for working capital purposes, and (iii) provide for construction of two new prototype locations to be used as a basis for additional franchising. This loan is to be repaid in the total amount of $2.7 million in regular bi-monthly payments over a two year period.

As a result of the financial arrangements described above and the Company’s cash flow projections, the Company believes it will have sufficient cash flow to meet its obligations and to carry out its current business plan until March 31, 2017. The Company will need to refinance its $1.2 million remaining bank debt as of March 31, 2017. The Company’s cash flow projections for the next two years are primarily based on the Company’s strategy of focusing on growth in non-traditional venues and growth in the number of grocery store locations licensed to sell the take-n-bake pizza.

The Company does not anticipate that any of the recently issued Statement of Financial Accounting Standards will have a material impact on its Statement of Operations or its Balance Sheet except:

The Financial Accounting Standards Board (the "FASB") recently issued Accounting Standards Update ("ASU") 2015-17 as part of its Simplification Initiative. The amendments eliminate the guidance in Topic 740, Income Taxes, that required an entity to separate deferred tax liabilities and assets between current and noncurrent amounts in a classified balance sheet. Rather, deferred taxes will be presented as noncurrent under the new standard. It takes effect in 2017 for public companies and early adoption is permitted.

In February 2016, the FASB issued ASU 2016-02, its leasing standard for both lessees and lessors. Under its core principle, a lessee will recognize lease assets and liabilities on the balance sheet for all arrangements with terms longer than 12 months. The new standard takes effect in 2019 for public business entities.

The Company does not believe these accounting pronouncements will have a material adverse effect on its financial condition or results of operations.

Forward-Looking Statements

The statements contained above in Management’s Discussion and Analysis concerning the Company’s future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the Company that are based on the beliefs of the management of the Company, as well as assumptions and estimates made by and information currently available to the Company’s management. The Company’s actual results in the future may differ materially from those indicated by the forward-looking statements due to risks and uncertainties that exist in the Company’s operations and business environment, including, but not limited to its need to refinance its indebtedness that matures in March 2017, competitive factors and pricing pressures, non-renewal of franchise agreements, shifts in market demand, the success of new franchise programs, general economic conditions, changes in demand for the Company’s products or franchises, the impact of franchise regulation, the success or failure of individual franchisees and changes in prices or supplies of food ingredients and labor as well as the factors discussed under “Risk Factors” contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2015. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected or intended.

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s exposure to interest rate risk relates primarily to its variable-rate debt. As of June 30, 2016, the Company had outstanding variable interest-bearing debt in the aggregate principal amount of $1.7 million. The Company’s current bank borrowings are at a variable rate tied to LIBOR plus 6% per annum adjusted on a monthly basis. Based on its current debt structure, for each 1% increase in LIBOR the Company’s interest expense could increase by approximately $14,100 over the succeeding 12-month period.

ITEM 4. Controls and Procedures

Based on their evaluation as of the end of the period covered by this report, A. Scott Mobley, the Company’s President and Chief Executive Officer, and Paul W. Mobley, the Company’s Executive Chairman and Chief Financial Officer, have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) are effective. There have been no changes in internal controls over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. Legal Proceedings.

The Company is not involved in material litigation against it.

ITEM 6. Exhibits.

(a) Exhibits: See the accompanying Exhibit Index.

SIGNATURES

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

	NOBLE ROMAN'S, INC.

Date: August 11, 2016	By:	/s/ Paul W. Mobley
		Paul W. Mobley, Executive Chairman, Chief Financial Officer and Principal Accounting Officer (Authorized Officer and Principal Financial Officer)

Index to Exhibits

3.1	Amended Articles of Incorporation of the Registrant, filed as an exhibit to the Registrant’s
	Amendment No. 1 to the Post Effective Amendment No. 2 to Registration Statement on Form
	S-1 filed July 1, 1985 (SEC File No.2-84150), is incorporated herein by reference.

3.2	Amended and Restated By-Laws of the Registrant, as currently in effect, filed as an exhibit to
	the Registrant’s Form 8-K filed December 23, 2009, is incorporated herein by reference.

3.3	Articles of Amendment of the Articles of Incorporation of the Registrant effective February 18,
	1992 filed as an exhibit to the Registrant’s Registration Statement on Form SB-2 (SEC File No.
	33-66850), ordered effective on October 26, 1993, is incorporated herein by reference.

3.4	Articles of Amendment of the Articles of Incorporation of the Registrant effective May 11,
	2000, filed as Annex A and Annex B to the Registrant’s Proxy Statement on Schedule 14A
	filed March 28, 2000, is incorporated herein by reference.

3.5	Articles of Amendment of the Articles of Incorporation of the Registrant effective April 16,
	2001 filed as Exhibit 3.4 to Registrant’s annual report on Form 10-K for the year ended
	December 31, 2005, is incorporated herein by reference.

3.6	Articles of Amendment of the Articles of Incorporation of the Registrant effective August 23,
	2005, filed as Exhibit 3.1 to the Registrant’s current report on Form 8-K filed August 29, 2005,
	is incorporated herein by reference.

4.1	Specimen Common Stock Certificates filed as an exhibit to the Registrant’s Registration
	Statement on Form S-18 filed October 22, 1982 and ordered effective on December 14, 1982
	(SEC File No. 2-79963C), is incorporated herein by reference.

4.2	Warrant to purchase common stock, dated July 1, 2015, filed as Exhibit 10.11 to the Registrant's Form 10-Q filed on August 11, 2015 in incorporated herein by reference.

10.1	Employment Agreement with Paul W. Mobley dated January 2, 1999 filed as Exhibit 10.1 to
	Registrant’s annual report on Form 10-K for the year ended December 31, 2005, is
	incorporated herein by reference.

10.2	Employment Agreement with A. Scott Mobley dated January 2, 1999 filed as Exhibit 10.2 to
	Registrant’s annual report on Form 10-K for the year ended December 31, 2005, is
	incorporated herein by reference.

10.3	Credit Agreement with BMO Harris Bank, N.A., dated May 25, 2012, filed as Exhibit 10.17 to
	the Registrant’s quarterly report on Form 10-Q filed on August 13, 2012, is incorporated herein by reference.

10.4		First Amendment to Credit Agreement with BMO Harris Bank, N.A. dated October 31, 2013,
		filed as Exhibit 10.4 to the Registrant’s annual report on Form 10-K filed on March 12, 2014, is
		incorporated herein by reference.

10.5		Second Amendment to Credit Agreement with BMO Harris Bank, N.A. dated October 15,
		2014, filed as Exhibit 10.7 to the Registrant’s annual report on Form 10-K filed on March 12,
		2015, is incorporated herein by reference.

10.6		Agreement dated April 8, 2015, by and among Noble Roman’s, Inc. and the Shareholder
		Parties, filed as Exhibit 10.1 to Registrant’s Form 8-K filed on April 8, 2015, is incorporated
		herein by reference.

10.7		Promissory Note payable to Kingsway America, Inc. dated July 1, 2015, filed as Exhibit 10.10
		to the Registrant's Form 10-Q filed on August 11, 2015 is incorporated herein by reference.

10.8		Third Amendment to Credit Agreement with BMO Harris Bank, N.A. dated January 22, 2016,
		filed as Exhibit 10.11 to the Registrant's Form 10-K filed on March 14, 2016 is incorporated
		herein by reference.

10.9		Promissory Note payable to BMO Harris Bank, N.A. dated January 22, 2016, filed as Exhibit
		10.12 to the Registrant's Form 10-K filed on March 14, 2016 is incorporated herein by
		reference.

10.10		Promissory Note payable to Paul Mobley dated December 21, 2015, filed as Exhibit 10.14
		to the Registrant's Form 10-K filed on March 14, 2016 is incorporated herein by reference.

10.11		Promissory Note payable to A. Scott Mobley dated December 21, 2015, filed as Exhibit 10.15
		to the Registrant's Form 10-K filed on March 14, 2016 is incorporated herein by reference.

10.12		Promissory Note payable to Paul Mobley dated August 10, 2016, filed herewith.

10.13		Promissory Note payable to A. Scott Mobley dated August 10, 2016, filed herewith.

10.15		Subordination Letter from Paul Mobley dated June 8, 2016, filed herewith.

10.16		Subordination Letter from A. Scott Mobley dated June 8, 2016, filed herewith.

10.17		Business Loan and Security Agreement with Super G Funding LLC dated June 10, 2016,
		filed herewith.

10.18		Debt and Lien Subordination Agreement between Super G Funding, LLC and BMO Harris
		Bank, N.A.

21.1		Subsidiaries of the Registrant filed in the Registrant’s Registration Statement on Form SB-2
		(SEC File No. 33-66850) ordered effective on October 26, 1993, is incorporated herein by
		reference.

31.1		C.E.O. Certification under Rule 13a-14(a)/15d-14(a)

31.2		C.F.O. Certification under Rule 13a-14(a)/15d-14(a)

32.1		C.E.O. Certification under 18 U.S.C. Section 1350

32.2		C.F.O. Certification under 18 U.S.C. Section 1350

101		Interactive Financial Data

EX-10.12 2 nrom_ex1012000.htm PROMISSORY NOTE Blueprint

EXHIBIT 10.12

AMENDED AND RESTATED PROMISSORY NOTE

$250,000.00

August 10, 2016

FOR VALUE RECEIVED, Noble Roman's, Inc, an Indiana corporation (the “Debtor” or the “Company”), hereby promises to pay to Paul and Jenny Mobley (the “Holder”) the principal sum of Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00) or so much as may have been disbursed hereunder, together with interest, in the manner provided herein. Each of the Holder and the Debtor are collectively referred to herein as the “Parties”. This Note amends, restates and continues the obligations of the Debtor evidenced by each of that certain Promissory Note dated December 21, 2015 and that certain Promissory Note dated April 20, 2016, in each case issued by the Debtor to the Holder and is not a novation thereof.

1. Loans. Upon the request of the Debtor, the Holder may, in its discretion, make certain loans to the Debtor from time to time prior to the Final Payment Date (as defined below). The Debtor may borrow, pay, reborrow and repay, in whole or in part, such loans; provided, that no loan shall be made if: (a) any Event of Default (as defined below) has occurred or is continuing or would result from such loan by the Holder; or (b) if, before or after the making of such loan, the aggregate outstanding principal amount of all loans evidenced by this Note would exceed Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00).

2. Repayment of Principal. The entire principal balance of this Note shall be due and payable on June 10, 2018 and (b) the exercise of remedies by the Holder pursuant to Section 5, of this Note (the “Final Payment Date”). All principal and interest payable pursuant to this Note may be prepaid in whole or in part at any time, without payment of any penalty or premium.

3. Interest on Unpaid Principal Balance. Interest shall accrue on the unpaid principal balance of this Note at a rate of ten percent (10%) per annum (computed on the basis of a 360-day year containing 12 months, counting the actual number of days in each month), such accrued and unpaid interest shall be paid quarterly in arrears on the last business day of March, June, September and December of each year commencing June 30, 2016. All accrued and unpaid interest shall be due and payable at the Final Payment Date.

4. Payments. The Debtor will pay to Holder, by check for all amounts payable to the Holder in respect of the principal of, or interest on, this Note, without any presentation of this Note. Each such payment, when paid, shall be applied first to the payment of interest, fees, expenses and other charges accrued and unpaid under this Note in such order as Holder shall determine and second to the payment or prepayment of the principal hereof. Notwithstanding anything herein to the contrary, all outstanding principal, accrued interest and all other amounts under this Note shall be immediately due and payable in full at the Final Payment Date.

5. Event of Default. The occurrence of any one or more of the following events will constitute an “Event of Default” hereunder:

(a) Nonpayment of any installment of principal and/or interest due under this Note when it shall become due and payable (no prior demand therefor being necessary);

(b) Any representation or warranty made or deemed to be made by Debtor in this Note, or any other document, instrument or certificate delivered in connection herewith or therewith is or shall be incorrect in any material respect on or as of the date when made or deemed to have been made; provided, that any representation or warranty that is already qualified in the text thereof as to “materiality”, “material adverse effect” or similar language shall be true and correct in all respects so stated on the applicable date;

(c) The Debtor shall default in the performance of any other obligation, covenant or agreement contained in this Note (subject to any applicable grace periods), provided that the Debtor shall have the opportunity to cure such default within ten (10) business days of its receipt of notice of default;

(d) (i) the appointment of a receiver, trustee, custodian or other fiduciary, for, or for any of the property of, the Debtor; or (ii) the making of an assignment for the benefit of creditors by the Debtor; and if any of (i) through (ii) are involuntary, the failure to discharge same within sixty (60) days;

(e) The filing of a petition, complaint, motion or other pleading seeking relief under any receivership, insolvency, or debtor relief law, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the filing of a petition, complaint, or motion under any chapter of the federal bankruptcy code, 11 U.S.C. 101 et seq., as the same now exists or may hereafter be amended (the “Bankruptcy Code”), by the Debtor;

(f) The filing of a petition, complaint, motion or other pleading seeking any relief under any receivership, insolvency, or debtor relief law, or under any chapter of the Bankruptcy Code, or seeking any readjustment of indebtedness, reorganization, composition, extension or any similar type of relief, or the entry of any order for relief under any chapter of the Bankruptcy Code, against, the Debtor; provided, however, that if the Debtor shall notify Holder in writing of the filing of any such petition, complaint, motion or other pleading against the Debtor and shall provide evidence satisfactory to Holder that the Debtor has in good faith and within thirty (30) days after the filing of any such petition, complaint, motion or other pleading filed an answer thereto contesting same, then there shall be no Event of Default under this subparagraph (e) until the earliest of (i) the entry of an order for relief or a judgment under any proceedings referred to in this subparagraph (e), (ii) the appointment of a receiver, trustee, custodian or other fiduciary in any such proceeding or (iii) the expiration of a period of sixty (60) days, at the end of which such petition, complaint, motion or other pleading remains undismissed;

(g) The dissolution, liquidation or termination of existence of the Debtor;

(h) A Sale of the Company shall occur;

(i) Debtor fails to make any of its filings required by the Securities Exchange Act of 1934, as amended, by the dates they are required to be filed in accordance with the rules and regulations promulgated by the Securities and Exchange Commission from time to time (without giving effect to any available extension of time with respect to any such filing);

(j) A delisting of the Debtor’s Common Stock from the OTCQB marketplace.

Upon the occurrence and continuance of any Event of Default, this Note, at the option of the Holder, shall become immediately due and payable without notice of any kind; provided that this Note shall become automatically due and payable upon any Event of Default occurring under clauses (d), (e) and (f) above without any further action on behalf of Holder. The Holder’s failure to exercise such option shall not constitute a waiver of the right to exercise it at any other time. Irrespective of the exercise or non-exercise of the foregoing option, if any payment of principal and/or interest is not paid in full on the date the same is due, the interest rate under this Note on the overdue amount shall be increased to eighteen percent (18%) per annum until said amount is paid in full.

Notwithstanding any provisions of this Note, it is the understanding and agreement of the Debtor and the Holder that the maximum rate of interest to be paid by the Debtor to the Holder shall not exceed the highest or maximum rate of interest permissible to be charged to a commercial borrower under any law applicable hereto. Any amount paid in excess of such rate shall be considered to have been payments in reduction of principal, and if there shall be no principal amount then outstanding, such excess shall be returned to the Debtor as an overpayment of principal.

6. Representations and Warranties.

(a) Power and Authority; Execution and Delivery. Debtor has the corporate or other organizational power and authority to execute, deliver, perform and otherwise carry out the terms and provisions of this Note and the Warrant (including such power and authority to borrow the funds as contemplated herein and to issue the equity securities as contemplated by the Warrant) and has taken all necessary corporate or other organizational action to authorize the execution, delivery and performance of this Note. Debtor has duly executed and delivered this Note and any documents executed and delivered in connection herewith or therewith.

(b) Enforceability. This Note constitutes the legal, valid and binding obligation of Debtor, enforceable against Debtor in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, moratorium, reorganization and other similar laws relating to or affecting creditors’ rights generally.

(c) No Violation. The execution, delivery and performance by Debtor of this Note, the compliance with the terms and provisions hereof and thereof, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with, contravene or violate any provision of any applicable law, (ii) violate any order or decree of, or require any authorization, consent, approval, exemption or other action by or notice to, any Person which has not been obtained and is in full force and effect, (iii) conflict with, result in a breach of any of the terms, covenants, conditions or provisions of, constitute a default under, otherwise result in the termination of or a termination right under, (x) any material indenture, note, loan agreement, lease agreement, mortgage, deed of trust or other financing or security agreement, or (y) any other material agreement to which it or any of its property or assets is bound, or (iv) violate any provision of the its organization documents (i.e., charter, by-laws, etc.) or any material permit or license of Debtor.

7. Definitions. The following terms, as used herein, have the following respective meanings:

“Sale of the Company” means the sale (in a single transaction or a series of related transactions) of the Company to any Independent Third Party or group of Independent Third Parties pursuant to which such Independent Third Party or group of Independent Third Parties acquires (a) a majority of the Common Stock on a Fully-Diluted Basis (whether by merger, consolidation, sale or Transfer of Common Stock, reorganization, recapitalization or otherwise), or (b) all or substantially all of the assets of the Company and its Subsidiaries, determined on a consolidated basis. For purposes of this definition, all Common Stock that is issuable upon exercise or conversion of any Stock Equivalents acquired by an Independent Third Party shall be deemed to be issued and held by such Independent Third Party.

“Subsidiary” means any corporation, limited liability company, partnership, association, joint stock company, trust, joint venture or unincorporated organization of which the Company, at the time in respect of which such term is used, (a) owns directly or indirectly more than fifty percent (50%) of the equity or beneficial interests, on a consolidated basis, or (b) owns directly or controls with power to vote, indirectly through one or more subsidiaries, shares of capital stock or beneficial interests having the power to cast a majority of the votes entitled to be cast for the election of directors, trustees, managers or other officials having powers analogous to those of directors of a corporation. Unless otherwise specifically indicated, when used in this Agreement, the term Subsidiary shall refer to a direct or indirect Subsidiary of the Company.

“Transfer” means any direct or indirect transfer, donation, sale, assignment, pledge, encumbrance, hypothecation, gift, creation of a security interest in or lien on, or other disposition, irrespective of whether any of the foregoing are effected with or without consideration, voluntarily or involuntarily, directly or indirectly, by operation of law or otherwise, inter vivos or upon death.

8. No Security. This Note is unsecured on a senior basis.

9. Costs. If, and as often as, this Note is referred to an attorney for the collection of any sum payable hereunder, or to defend or enforce any of the Parties’ rights hereunder, or to commence an action, cross-claim, third-party claim or counterclaim relating to this Note, the Debtor hereby agrees to pay all reasonable costs incurred by the Parties in connection therewith including reasonable attorneys' fees (including such fees incurred in appellate, bankruptcy or insolvency proceedings), with or without the institution of any action or proceeding.

10. Governing Law. This Agreement shall be governed by and construed in accordance with the domestic Laws of the State of Indiana without giving effect to any choice or conflict of Law provision or rule (whether of the State of Indiana or any other jurisdiction) that would cause the application of the Laws of any jurisdiction other than the State of Indiana.

11. Waiver of Jury Trial. EACH OF THE PARTIES WAIVES THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OR RELATED TO THIS PROMISSORY NOTE IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR ANY AFFILIATE OF ANY OTHER SUCH PARTY, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. THE PARTIES AGREE THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS PROMISSORY NOTE OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS NOTE.

12. Assignment. This Note and the rights and obligations hereunder shall be freely assignable, in whole or in part, by the Holder without the consent of the Debtor or any other Person; provided that any proposed assignee shall expressly agree to be bound by the terms of the Subordination Agreement.

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IN WITNESS WHEREOF, the Debtor has caused this Amended and Restated Promissory Note to be duly executed as of the day and year first above written.

DEBTOR:

NOBLE ROMAN'S, INC.

By:_________________________________

Name: A. Scott Mobley

Title: President and CEO

On this 10th day of August, 2016

EX-10.13 3 nrom_ex1013.htm MATERIAL CONTRACTS Blueprint

EXHIBIT 10.13

AMENDED AND RESTATED PROMISSORY NOTE

$60,000.00

August 10, 2016

FOR VALUE RECEIVED, Noble Roman's, Inc, an Indiana corporation (the “Debtor” or the “Company”), hereby promises to pay to Scott Mobley (the “Holder”) the principal sum of Sixty Thousand and 00/100 Dollars ($60,000.00) or so much as may have been disbursed hereunder, together with interest, in the manner provided herein. Each of the Holder and the Debtor are collectively referred to herein as the “Parties”. This Note amends, restates and continues the obligations of the Debtor evidence by each of that certain Promissory Note dated December 21, 2015 and that certain Promissory Note dated February 29, 2016, in each case issued by the Debtor to the Holder and is not a novation thereof.

3. Interest on Unpaid Principal Balance. Interest shall accrue on the unpaid principal balance of this Note at a rate of ten percent (10%) per annum (computed on the basis of a 360-day year containing 12 months, counting the actual number of days in each month), such accrued and unpaid interest shall be paid quarterly in arrears on the last business day of March, June, September and December of each year commencing March 31, 2016. All accrued and unpaid interest shall be due and payable at the Final Payment Date.

5. Event of Default. The occurrence of any one or more of the following events will constitute an “Event of Default” hereunder:

(a) Nonpayment of any installment of principal and/or interest due under this Note when it shall become due and payable (no prior demand therefor being necessary);

(g) The dissolution, liquidation or termination of existence of the Debtor;

(h) A Sale of the Company shall occur;

(j) A delisting of the Debtor’s Common Stock from the OTCQB marketplace.

6. Representations and Warranties.

(c) No Violation. The execution, delivery and performance by Debtor of this this Note, the compliance with the terms and provisions hereof and thereof, and the consummation of the transactions contemplated hereby and thereby, do not and will not (i) conflict with, contravene or violate any provision of any applicable law, (ii) violate any order or decree of, or require any authorization, consent, approval, exemption or other action by or notice to, any Person which has not been obtained and is in full force and effect, (iii) conflict with, result in a breach of any of the terms, covenants, conditions or provisions of, constitute a default under, otherwise result in the termination of or a termination right under, (x) any material indenture, note, loan agreement, lease agreement, mortgage, deed of trust or other financing or security agreement, or (y) any other material agreement to which it or any of its property or assets is bound, or (iv) violate any provision of the its organization documents (i.e., charter, by-laws, etc.) or any material permit or license of Debtor.

7. Definitions. The following terms, as used herein, have the following respective meanings:

8. No Security. This Note is unsecured on a senior basis.

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IN WITNESS WHEREOF, the Debtor has caused this Promissory Note to be duly executed as of the day and year first above written.

DEBTOR:

NOBLE ROMAN'S, INC.

By:

Name: Paul Mobley

Title: Executive Chairman

On this 10th day of August, 2016

EX-10.15 4 nrom_ex1015.htm SUBORDINATION LETTER Blueprint

EXHIBIT 10.15

June 8, 2016

Paul Mobley

Re: NOBLE ROMAN’S, INC., an Indiana corporation

Dear Paul:

You have made one or more loans (the “Loans”) to the foregoing entity and/or its affiliates (the “Borrower”).

Super G Funding, LLC (“Super G”) plans to lend funds (the “Super G Financing”) to the Borrower and requires your consent on this letter below.

By your signature below, you agree:

(1) that the Loans are subordinated to the Super G Financing. So long as the Borrower is not in default under the Super G Financing, the Borrower may make periodic interest payments (but no payments of principal) to you on the Loans. If the Borrower is in default under the Super G Financing, the Borrower may not make any payment to you on the Loans, and you cannot take any action to collect the Loans. If you do receive payments in violation of this Section (1), you must forward them to Super G.

(2) that the Loans are not secured by any security interest in property of the Borrower. If the Loans become secured, that security interest is subordinate to the security interest the Borrower has given to Super G.

(3) that, so long as the Super G Financing is outstanding, you will not make demand for payment on the Loans.

(4) to extend the maturity date of the Loans to June 10, 2018.

(5) that this letter binds you and your assigns and successors and is enforceable in a bankruptcy proceeding involving Borrower.

Please sign a copy of this letter below and return it to me. Thank you.

NOBLE ROMAN’S, INC.

By:_______________________

Name: Paul Mobley

Title: Executive Chairman & CFO

CONSENTED AND AGREED TO BY LENDER:

__________________________

Name: Paul Mobley

Address: Indianapolis, Indiana

EX-10.16 5 nrom_ex1016.htm SUBORDINATION LETTER Blueprint

EXHIBIT 10.16

June 8, 2016

A. Scott Mobley

Re: NOBLE ROMAN’S, INC., an Indiana corporation

Dear Scott:

You have made one or more loans (the “Loans”) to the foregoing entity and/or its affiliates (the “Borrower”).

Super G Funding, LLC (“Super G”) plans to lend funds (the “Super G Financing”) to the Borrower and requires your consent on this letter below.

By your signature below, you agree:

(3) that, so long as the Super G Financing is outstanding, you will not make demand for payment on the Loans.

(4) to extend the maturity date of the Loans to June 10, 2018.

(5) that this letter binds you and your assigns and successors and is enforceable in a bankruptcy proceeding involving Borrower.

Please sign a copy of this letter below and return it to me. Thank you.

NOBLE ROMAN’S, INC.

By:_______________________

Name: Paul Mobley

Title: Executive Chairman & CFO

CONSENTED AND AGREED TO BY LENDER:

__________________________

Name: A. Scott Mobley

Address: Indianapolis, Indiana

EX-10.17 6 nrom_ex1017.htm BUSINESS LOAN AND SECURITY AGREEMENT Untitled Document

EX-10.18 7 nrom_ex1018.htm DEBT AND LIEN SUBORDINATION AGREEMENT Blueprint

LA 12939541v3

EXHIBIT 10.18

DEBTAND LIEN SUBORDINATION AGREEMENT

This DEBTANDLIEN SUBORDINATION AGREEMENT (this "Agreement") is made as of June 10, 2016, among Noble Roman’s Inc., an Indiana corporation(the "Borrower"); SUPER G FUNDING, LLC, a Delaware limited liability company ("Subordinate Creditor"); and BMO Harris Bank N.A., a national banking association ("Senior Creditor").

Recitals:

Senior Creditor and Borrower are parties to (i) that certain Credit Agreement, dated as ofMay 15, 2012(as at any time amended or restated, the "Senior Credit Agreement") and (ii) that certain Security Agreement dated as of May 15, 2012 (as any time amended or restated, the “Senior Security Agreement”; collectively with the Senior Credit Agreement, the “Senior Loan Agreement”) pursuant to which Senior Creditor may from time to time make loans or other extensions of credit (collectively, "Credit Extensions") to Borrower secured by all or substantially all of Borrower's assets.

Borrower and Subordinate Creditor have entered into that certain Business Loan &Security Agreement dated as ofJune 10, 2016 (as at any time amended or restated, the "Subordinated Loan Agreement"). Pursuant to the Subordinated Loan Agreement, Borrower has obtained or may obtain loans from Subordinate Creditor, payment of which is or will be secured by a security interest in and lien upon all or substantially all assets of Borrower.

A condition precedent to Senior Creditor's willingness to make any Credit Extensions to Borrower under the Senior Loan Agreement is the execution and delivery of this Agreement pursuant to which, among other things, Subordinate Creditor shall subordinate the payment of all present and future indebtedness owed to it by Borrower to the payment in full of the Senior Debt (as defined below) and shall subordinate all Liens at any time held by it in respect of any Collateral (as defined below) to and in favor of all Liens granted to or obtained by Senior Creditor in respect of any of the Collateral.

NOW, THEREFORE, in consideration of the foregoing premises, the mutual covenants and conditions herein contained and for Ten Dollars ($10.00) in hand paid and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be bound hereby, agree as follows:

1. Definitions; Rules of Construction.

(a) Capitalized terms used in this Agreement, unless otherwise defined herein, shall have the meanings ascribed to them in the Senior Loan Agreement. In addition to such other terms as are elsewhere defined herein, the following terms shall have the following meanings for the purposes of this Agreement:

"Bankruptcy Code" shall mean title 11 of the United States Code.

"Business Day" shall mean any day other than a Saturday, Sunday or day on which banks are authorized or required to be closed under the laws of the State of Illinois.

"Collateral" shall mean all property of each Obligor (real or personal, tangible or intangible, and wherever located) at any time subject to a Lien in favor of Senior Creditor or Subordinate Creditor, including all types and items of property included in the definition of "Collateral" in the Senior Loan Agreement or any of the other Senior Creditor Documents, or in any of the Subordinate Creditor Documents, whether any of such property is acquired prior to, during the pendency of, or after an Insolvency Proceeding. Without limiting the generality of the foregoing, the term "Collateral" shall include all Accounts, Goods (including Inventory and Equipment), General Intangibles (including state and federal tax refund claims and other Payment Intangibles), Documents, Instruments, Chattel Paper, Deposit Accounts, Commercial Tort Claims,Letter-of-Credit Rights, and Investment Property, Supporting Obligations, and all Proceeds of the foregoing property.

"Creditor" shall mean Senior Creditor or Subordinate Creditor, as applicable, and the term "Creditors" means both of them.

"Default" shall mean an event or condition that constitutes an event of default under the Senior Creditor Documents or the Subordinate Creditor Documents.

"Enforcement Action" shall mean and include any remedy available to Senior Creditor under any of the Senior Creditor Documents or applicable law to enforce collection of any of the Senior Debt following the occurrence of any Default, and any remedy available to Subordinate Creditor under any of the Subordinate Creditor Documents or applicable law to enforce collection of the Subordinated Debt following the occurrence of any Default. Any remedy available to Senior Creditor and/or Subordinate Creditor shall include any of the following: (a) the repossession, sale, lease, setoff against or other disposition of any Collateral by Senior Creditor or Subordinate Creditor; (b) the commencement of any action, suit or other proceeding against an Obligor to enforce payment of any of the Senior Debt or the Subordinated Debt or to repossess, replevy, garnish, attach or otherwise to realize upon any of the Collateral; (c) any notification by Senior Creditor or Subordinate Creditor to any obligor on any Account or Payment Intangible to remit payments with respect to such Account or Payment Intangible to the notifying party; or (d) the commencement against any Obligor of an Insolvency Proceeding.

"Enforcement Expenses" shall mean all costs and expenses at any time incurred by Senior Creditor in connection with its enforcement of rights or exercise of remedies under any of the Senior Creditor Documents or applicable law to collect any of the Senior Debt, enforce any Liens of Senior Creditor, or otherwise enforce any provisions of the Senior Creditor Documents, protect or preserve any of the Collateral, or defend Senior Creditor's Liens therein against the claims of any Person, including costs and expenses consisting of legal fees, accounting fees, and any costs incurred in connection with the repossession, storing, maintenance, preservation, protection, insurance, collection, preparation for sale, advertising for sale, selling, leasing, liquidating, foreclosing upon or otherwise disposing all or any part of the Collateral, and any amounts advanced for the payment of rent, taxes, or insurance or to satisfy any encumbrances upon any of the Collateral or to pay payroll, appraisal fees, auctioneer's fees and commissions, and other similar costs of expenses.

"Full Payment," "Paid in Full," "Pay in Full" or "Payment in Full" shall mean, with respect to the Senior Debt(i) the indefeasible payment in full, in cash, of all of the Senior Debt, including, in the case of contingent obligations (such as, by way of example only, undrawn letters of credit that are issued or procured by Senior Creditor), the depositing of cash with Senior Creditor equal to 105% of the amount of such contingent obligations as security for the payment of such contingent obligations, in each case other than contingent obligations that are disputed or unliquidated in amount and for which no underlying claim has been asserted or threatened against Senior Creditor, and (ii) termination of any commitments or other agreements of Senior Creditor to make further extensions of credit under the Senior Loan Agreement.

"Insolvency Proceeding" shall mean any action, suit, case or proceeding commenced by or against any Obligor for the appointment of a receiver for such Obligor or any of such Obligor's other property, for entry of an order for relief under any chapter of the Bankruptcy Code with respect to an Obligor, for an assignment for the benefit of creditors of an Obligor, or for other any debtor relief under any other insolvency law relating to the adjustment of debts, reorganization, composition or extension of debts owed by an Obligor.

"Lien" shall mean any interest in property securing an obligation owed to, or a claim by, a Person, whether such interest is based on or arises pursuant to common law, statute, contract, judgment or court order. The term "Lien" shall also include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances affecting property.

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"Obligor" shall mean Borroweror any other Person who is liable to pay, or who has granted a Lien upon any of its property to secure payment of,the whole or any part of the Senior Debt.

"Party" shall mean a signatory to this Agreement.

"Person" shall mean any natural person, sole proprietorship, corporation, partnership, limited liability company, joint venture, business trust, other business entity, or any state, federal or foreign government entity or a department, agency, bureau or political subdivision thereof.

"Plan" shall mean a plan proposed in any Insolvency Proceeding for: (i) the liquidation or reorganization of an Obligor, (ii) a composition or extension of any of an Obligor's debts, or (iii) a sale or other disposition in whole or in part of an Obligor's assets.

"Senior Creditor Documents" shall mean the Senior Loan Agreement and all other instruments or agreements now or hereafter evidencing or securing the payment of the whole or any part of the Senior Debt.

"Senior Debt" shall mean all loans, advances, debts, liabilities, obligations, debit balances, covenants and duties at any time or times owed by any Obligor to Senior Creditor, whether now or hereafter created, incurred or arising, and whether direct or indirect, absolute or contingent, secured or unsecured, primary or secondary, joint or several, liquidated or unliquidated, due or to become due, now existing or hereafter arising, including (i) all Obligations (including those arising from Credit Extensions), in each caseat any time owed by Obligors to Senior Creditor under any of the Senior Creditor Documents, (ii) loans and other extensions of creditmade by Senior Creditor to Borrower under the Senior Loan Documents during the pendency of any Insolvency Proceeding, (iii) all interest, fees, charges, expenses and attorneys' fees for which any Obligor is now or hereafter becomes liable to pay to Senior Creditor under the Senior Loan Documents, includingall Enforcement Expenses which any Obligor is now or hereafter becomes liable to pay to Senior Creditor under any agreement or by applicable law and all interest, legal fees and other charges that accrue or are incurred in connection with any of the Senior Debt during the pendency of any Insolvency Proceeding of any Obligor, and (iv) any renewals, extensions or refinancings of any of the foregoing.

"Subordinate Creditor Documents" shall mean the Subordinated Loan Agreement and all other instruments or agreements now or hereafter evidencing or securing the payment of the whole or any part of the Subordinated Debt.

"SubordinatedDebt" shall mean all loans, advances, debts, liabilities, debit balances, covenants, duties and obligations at any time or times owed by any Obligor to Subordinate Creditor,whether now or hereafter created, incurred or arising, and whether direct or indirect, absolute or contingent, secured or unsecured, primary or secondary, joint or several, liquidated or unliquidated, due or to become due, now existing or hereafter arising, including (i) all debts, liabilities and obligations of any Obligor to Subordinate Creditor under any Subordinate Creditor Documents, (ii) all debts, liabilities or obligations that are incurred by any Obligor to Subordinate Creditor in any Insolvency Proceeding, (iii) all debts, liabilities or obligations at any time owed by any Obligor to other Persons which Subordinate Creditor may have obtained by assignment, pledge, or otherwise, (iv) all interest, fees, charges, expenses and attorneys' fees for which any Obligor is now or hereafter become liable to pay to Subordinate Creditor under any agreement or applicable law, and (v) any renewals, extensions or refinancings of any of the foregoing.

"UCC" shall mean the Uniform Commercial Code, as in effect from time to time in the State of Illinois.

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(b) Capitalized terms herein that are defined in the UCC, unless otherwise expressly defined herein, shall have the meanings ascribed to them in the UCC.

(c) All references to any instrument or agreement, including any of the Subordinate Creditor Documents or the Senior Creditor Documents, shall mean (unless otherwise provided herein) all amendments and modifications thereto and renewals, restatements and replacements thereof; all references to any statute shall mean and include all amendments thereto and all regulations issued pursuant thereto. The words "including" and "include" shall mean "including, without limitation" and "include, without limitation"; and the words "herein," "hereof" and "hereunder" and other words of similar import refer to this Agreement as a whole and not to any particular section or subdivision. Any pronouns used herein shall be deemed to cover all genders.

2. Consents to Liens. Senior Creditor hereby consents to each Obligor's grant of Liens in the Collateral to Subordinate Creditor as security for the Subordinated Debtsubject to the limitations set forth in this Agreement and agrees that the existence of any such Liens (other than any Lien that may hereafter arise from any judgment obtained against an Obligor) shall not constitute a Default under any of the Senior Creditor Documents. Subordinate Creditor hereby acknowledges each Obligor's grant of Liens in the Collateral to Senior Creditor as security for the Senior Debt and agrees that the existence of any such Liens shall not constitute a Default under any of the Subordinate Creditor Documents.

3. Priority of Liens; No Contest; Release.

(a) The Parties agree at all times, whether before, after or during the pendency of any Insolvency Proceeding and notwithstanding the priorities that would ordinarily result from the order of granting or perfection of any Liens, the order of filing or recording of any financing statements, or the priorities that would otherwise apply under applicablelaw, that (i) Senior Creditor's Liens in the Collateral shall constitute first priority Liens in such property to secure the Senior Debt and shall be superior to any Lien or other interest of Subordinate Creditor in the same property arising pursuant to the Subordinate Creditor Documents, by operation of law or otherwise; and (ii) any Lien or other interest at any time acquired by Subordinate Creditor in any of the Collateral shall be subordinate to the Liens of Senior Creditor therein as security for the Senior Debt. Subordinate Creditor agrees to execute such amendments to financing statements and other documents as may be necessary to reflect of record the existence of this Agreement and the priorities set forth in this Section 3(a).For purposes of the foregoing provisions, any claim of a right of setoff by Subordinate Creditor shall be treated in all respects as a Lien and no claim to a right of setoff by Subordinate Creditor shall be asserted to defeat or diminish the rights or priorities provided for herein in favor of Senior Creditor.The subordinations and priorities specified herein are applicable in all events and circumstances irrespective of the time, manner or order of: (i) any loan or advance by the Senior Creditor or the Subordinate Creditor to the Obligor or any other person; (ii) any demand for or acceleration of any indebtedness owing by the Obligor or any other person to the Senior Creditor or the Subordinate Creditor; (iii) the creation, attachment or perfection of any security interest, lien, or other claim; (iv) the time or order of filing any financing statements or similar registrations or filings in respect of personal property security; or (v) the giving or failure to give any notice of the acquisition or expected acquisition of any purchase money or other security interest.

(b) In no event shall either Creditor institute, or join as a party in the institution of, or directly or indirectly assist in the prosecution of, any action, suit or other proceeding seeking a determination that the Lien of the other Creditor in any Collateral is invalid, unperfected or avoidable, or is or should be subordinated to the interest of any other Person or that any claim of a Creditor against an Obligor is invalid or unenforceable in whole or in part;provided that nothing herein shall be construed to prevent Senior Creditorfrom enforcing the terms of this Agreement, including the provisions of Sections 3(a) relating to the priority of Liens of Creditors and Section 4.

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4. Debt Subordination/Permitted Payments.

(a) Subject to the provisions of Section 4(c) hereof relating to payments on the Subordinated Debt that are permitted to be made to the extent and under the circumstances set forth in Section 4(c), Subordinate Creditor hereby postpones and subordinates all of the Subordinated Debt to the Full Payment of all of the Senior Debt.

(b) In the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of any Obligor or the proceeds thereof to Subordinate Creditor or upon any indebtedness of any Obligor, by reason of the liquidation, dissolution or other winding up of any Obligor or such Obligor's business, or in the event of any sale of any Obligor's assets outside of the ordinary course of business or the commencement by or against any Obligor of any Insolvency Proceeding, then and in any such event any payment or distribution of any kind or character, whether in cash, securities or other property, which shall be payable or deliverable upon or with respect to any of the Subordinated Debt (including any payment or distribution that may be payable or deliverable by reason of the payment of any other indebtedness of any Obligor being subordinate to the payment of the Subordinated Debt) shall be paid or delivered directly to Senior Creditor for application to the Senior Debt (whether or not the same is then due and payable) until Full Payment of all of the Senior Debt. Each Obligor's and Subordinate Creditor's books shall be marked to evidence the subordination of all of the Subordinated Debt to the Full Payment of the Senior Debt and until Full Payment of the Senior Debt, Subordinate Creditor shall not be entitled to receive or accept any payment of the Subordinated Debt (whether for principal, interest or otherwise). Senior Creditor is authorized to examine such books from time to time and to make any notations required by this Agreement. The provisions of this Section 4 shall remain effective and binding upon Subordinate Creditor even if any of the Senior Debtor any Lien securing same is avoided, equitably subordinated or nullified in any Insolvency Proceeding of any Obligor.

(c) Except as otherwise provided in Section 4(b) hereof, in this Section 4(c) and Section 4(e) hereof,Borrower may pay to Subordinate Creditor, and Subordinate Creditor may accept and retain, any regularly scheduled installments of principal andinterest due and owing to Subordinate Creditor under the Subordinated Loan Agreement in accordance with its present tenor (including payment of principal and interest due at maturity), but without prepayment, whether mandatory or optional, or payment upon acceleration so long as (i) noDefault under any of the Senior Creditor Documents exists at the time of or would result from the making of any payment on account of any Subordinated Debt, and (ii) the Obligor shall be in compliance, on a pro forma basis after giving effect to the proposed payments, with all financial covenants of the Obligor contained in the Senior Creditor Documents.

(d) Senior Creditor shall not be required to give Subordinate Creditor notice of any kind of the creation or existence of any Senior Debt, nor of the amount or terms thereof, all such notice being hereby expressly waived. Senior Creditor, may at any time and from time to time, without the consent of or notice to the Subordinate Creditor, without incurring responsibility to the Subordinate Creditor, and without impairing or releasing the obligation of the Subordinate Creditor under this Agreement (i) renew, refund or extend the maturity of, or increase or decrease the amount of, any Senior Debt, or any part thereof, or otherwise revise, amend or alter the terms and conditions thereof, (ii) sell, exchange, release or otherwise deal with any property by whomsoever at any time pledged, mortgaged or otherwise hypothecated or subjected to a Lien to secure any Senior Debt, and (iii) exercise or refrain from exercising any rights against the Obligor and others, including the Subordinate Creditor.

(e) If a Default under any Senior Creditor Documents occurs and is continuing, then the Senior Creditor may provide written notice to the Subordinate Creditor of a “Blockage Period.” Each Blockage Period shall commence on the date that the Senior Creditor gives a written notice to the Obligor and the Subordinate Creditor identifying the Default under the Senior Creditor Documents and stating that a Blockage Period will commence (the “Blockage Notice”) and end on the earliest to occur of: (i) the date on which the outstanding Senior Debt is indefeasibly paid in full (without regard to Obligor’s ability to draw additional debt); (ii) the date on which the Obligor and the Subordinate Creditor receive from the Senior Creditor a written notice that (A) the Blockage Period has been terminated or (B) the Default under the Senior Creditor Documents is cured or waived in accordance with the Senior Creditor Documents; and (iii) the date that is 120 days after the Blockage Notice was given; provided that this Subsection (iii) shall not apply in the event of (x) a payment Default under the Senior Creditor Documents or (y) a Default with respect to which the Senior Creditor has accelerated the Senior Debt and exercised any of its rights and remedies with respect thereto under the Senior Creditor Documents. A Blockage Period with respect to a Default described in (x) or (y) shall continue in effect until ended under Subsection (i) or Subsection (ii) above. No payment shall be made by or on behalf of the Obligor on account of the Subordinated Debt during a Blockage Period. Upon the expiration of the Blockage Period, the Obligor may resume making all scheduled payments on the Subordinated Debt and shall be entitled to pay any payments of principal or interest on the Subordinated Debt missed during the Blockage Period.

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Nothing herein shall preclude or prohibit the capitalization or compounding of interest under the terms of the Subordinate Creditor Documents or the Senior Creditor Documents.

(f) Upon any distribution of assets of an Obligor upon any Insolvency Proceeding:

(i) the Senior Creditor shall first be entitled to receive payments in full of the Senior Debt before the Subordinate Creditor is entitled to receive any payment on account of the Subordinate Debt;

(ii) any payment or distribution of assets of the Obligor of any kind or character, whether in cash, property, or securities to which the Subordinate Creditor would be entitled except for the provisions of this Agreement, shall be paid by the liquidating trustee or agent or other Person making such a payment or distribution, directly to the Senior Creditor, to the extent necessary to pay the Senior Debt in full after giving effect to all concurrent payments and distributions; and

(iii) in the event that, notwithstanding the foregoing, any payment or distribution of assets of an Obligor of any kind or character, whether in cash, property, or securities, shall be received by the Subordinate Creditor on account of the Subordinate Debt before the Senior Debt is paid in full, such payment or distribution shall be received and held in trust by the Subordinate Creditor for the benefit of the Senior Creditor, and promptly paid to the Senior Creditor on demand, to the extent necessary to pay the Senior Debt in full.

The Obligor shall give written notice to the Senior Creditor and the Subordinate Creditor within one day of receipt of notice of any Proceeding.

(g) The Subordinate Creditor shall not exercise any Enforcement Action in respect of any Default under the Subordinate Creditor Documents until the earliest of (i) the date the Senior Debt has been indefeasibly paid in full, (ii) the date an Insolvency Proceeding is commenced, and (iii) such time as the Senior Creditor consents in writing to the termination of the Standstill Period (the “Standstill Period”). Upon the termination of any Standstill Period, then the Subordinate Creditor may, at its sole election, exercise any and all Enforcement Actions available to it under the Subordinate Creditor Documents and applicable law. Notwithstanding anything to the contrary contained in this Agreement or in the Subordinate Creditor Documents, unless and until all Senior Debt is indefeasibly paid in full and all commitments to make advances under the Senior Creditor Documents shall have been terminated, the Subordinate Creditor shall not in any event take any enforcement action with respect to any of the Collateral and the Senior Creditor is granted authority to terminate any current or future security interest of the Subordinate Collateral in any Collateral to facilitate enforcement of the Senior Creditor’s security interest in that Collateral provided that (x) Subordinate Creditor shall retain a security interest in the proceeds of any such Collateral and (y) the proceeds of any such Collateral are applied, first, in permanent reduction of the Senior Debt, and then, following payment in full of the Senior Debt, to Subordinate Creditor in payment of the Subordinate Debt. Notwithstanding anything to the contrary contained in the foregoing, the Subordinate Creditor shall not at any time be precluded from initiating and pursuing a suit for specific performance (not including any enforcement action with respect to any of the Collateral) to compel the Obligor to perform any covenants in the Subordinate Creditor Documents breached in bad faith in order to evade any agreement, covenant or restriction contained therein (other than the agreement to pay any of the Subordinate Debt), or commencing legal proceedings to the extent necessary to prevent the running of any applicable statute of limitations.

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(h) After the indefeasible payment in full of all Senior Debt, the Subordinate Creditor shall be subrogated to the rights of the Senior Creditor to receive payments or distributions of assets of the Obligor applicable to the Senior Debt until all amounts owing on the Subordinate Debt shall be paid in full. For purposes of such subrogation no such payments or distributions to the Senior Creditor by or on behalf of the Obligor, or by or on behalf of the Subordinate Creditor by virtue of this Agreement, that otherwise would have been made to the Subordinate Creditor shall, as between the Obligor and the Subordinate Creditor, be deemed to be payment by the Obligor to or on account of the Senior Debt in respect thereof, it being understood that the provisions of this Agreement are and are intended solely for the purpose of defining the relative rights of the Subordinate Creditor, on the one hand, and the Senior Creditor, on the other hand. If any payment or distribution to which the Subordinate Creditor would otherwise have been entitled but for the provisions of this Agreement shall have been applied, pursuant to the provisions of this Agreement, to the payment of amounts payable under the Senior Debt, then the Subordinate Creditor shall be entitled to receive from the Senior Creditor, unless otherwise prohibited by law, any payments or distributions received by the Senior Creditor in excess of the amount sufficient to pay all amounts payable under or in respect of the Senior Debt in full.

(i) The Senior Creditor hereby grants the Subordinate Creditor the right, but not the obligation, to cure any and all defaults under the Senior Debt (to the extent any such defaults are curable) within the same period of time afforded the Obligor for curing such defaults.

5. Warranties and Representations of Subordinate Creditor. Subordinate Creditor represents and warrants to Senior Creditorthat (i) it has not relied nor will it rely on any representation or information of any nature made by or received from Senior Creditor relative to any Obligor's financial condition or prospects, or the existence, value or extent of any Collateral, in deciding to execute this Agreement; (ii) Subordinate Creditor is the lawful owner of the Subordinated Debtand is duly empowered and authorized to execute, deliver and perform all of its obligations under this Agreement;(iii) Subordinate Creditor has not heretofore assigned or transferred to any Person any of the Subordinated Debt, any interest therein or any security pertaining thereto; and (iv) Subordinate Creditor has not heretofore given any subordination in respect of the Subordinated Debt.

6. Negative Covenants. Until all of the Senior Debt has been Paid in Full, subject to Section 7 hereof, (i) no Obligor party hereto shall, directly or indirectly, make any payment (other than a payment expressly permitted by Section 4 hereof) on account of the Subordinated Debt; (ii) Subordinate Creditor shall not demand, collect or accept from any Obligor or any other Person any payment (other than a payment permitted by Section 4 hereof) on account of the Subordinated Debt or any part thereof, or accelerate the maturity of any of the Subordinated Debt; (iii) Subordinate Creditor shall not realize upon or enforce any Lien granted by any Obligor as security for any of the Subordinated Debt, except as otherwise provided in Section 7(b); (iv) Subordinate Creditor shall not exchange, set off, release, convert to equity or otherwise discharge any part of the Subordinated Debt, except to the extent consented to by Senior Creditor in its discretion; (v) no Obligorparty hereto shall hereafter issue any instrument, security or other writing evidencing any part of the Subordinated Debt, and Subordinate Creditor will not receive any such writing, withoutSenior Creditor's consent; (vi) Borrower and Subordinate Creditor shall not amend, alter or modify any provision of the Subordinate Creditor Documents except as authorized by Section 16; (vii) Subordinate Creditorshall not commence or join with any other Person in commencing any Insolvency Proceeding against an Obligor; (viii) Subordinate Creditor shall not contact any obligor on any Account or Payment Intangible of an Obligor or any of an Obligor's suppliers; and (ix) no Obligor party hereto nor Subordinate Creditor shall otherwise take or permit any action prejudicial to or inconsistent with Senior Creditor's priority position over Subordinate Creditor that is created by this Agreement.

7. Standby as to Certain Actions.

(a) Except as otherwise set forth in Section 7(b), Subordinate Creditor agrees that it will not ask for, demand, sue for, take, receive, or repossess any of the Collateral from any Obligor by setoff or in any other manner, or otherwise take any Enforcement Action to collect any of the Subordinated Debt or to realize upon the whole or any part of the Collateral, whether by judicial action or under power of sale, by self-help repossession or otherwise, unless and until all of the Senior Debt has been Paid in Full. If Subordinate Creditor, in violation hereof, initiates any Enforcement Action against any Obligor or any Collateral, Senior Creditor may intervene and interpose this Agreement as a defense in Senior Creditor's name or in the name of any Obligor.

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(b) If a Default occurs under any of the Subordinate Creditor Documents as a result of Borrower's failure to pay to Subordinate Creditor any regularly scheduled installment of principal and interest due and owing to Subordinate Creditorunder the Subordinated Note in accordance with its present tenor (including any of the payments permitted described in the penultimate sentence of Section 4(b)), but without prepayment (whether mandatory or optional) or payment upon acceleration (a "Subordinated Debt Payment Default"), then, subject to Subordinate Creditor's giving to Senior Creditor at least ten (10) days prior written notice of Subordinate Creditor's intention to do so, (which notice may not be given by Subordinate Creditor at any time that a Blockage Period is in effect), Subordinate Creditor may initiate an Enforcement Action, but only if at the time of initiation of such Enforcement Action either (a) no Senior Debt is outstanding or (b) such Subordinated Debt Payment Default has not been cured, no Default under the Senior Credit Documents is in effect, no Insolvency Proceeding has been filed by or against any Obligor, and Senior Creditor has not initiated any Enforcement Action against any Obligor or any Collateral. Any payments or proceeds received by Subordinate Creditor in connection with any Enforcement Action shall be promptly turned over to Senior Creditor, in the identical form received, for application by Senior Creditor to the Senior Debt until the Senior Debt is Paid in Full. If after Subordinate Creditor initiates an Enforcement Action Senior Creditor initiates its own Enforcement Action to recover any Senior Debt, Subordinate Creditor shall forthwith, upon receipt of notice from Senior Creditor of its having commenced an Enforcement Action, cease and desist from any further Enforcement Action by Subordinate Creditor and Subordinate Creditor shall promptly turn over to Senior Creditor any Collateral (including any proceeds of Collateral) in Subordinate Creditor's possession.

8. Senior Creditor's Rights Exclusive. Subject to Section 7 hereof, for so long as any Senior Debt is outstanding, Senior Creditor shall have the exclusive right to collect, foreclose upon, sell, transfer, liquidate or otherwise dispose of any or all of the Collateral as provided in the Senior Creditor Documents or by applicable law, in the manner deemed appropriate by Senior Creditor, without regard to any Liens of Subordinate Creditor therein, and Subordinate Creditor will not hinder or delay Senior Creditor's actions in enforcing its remedies or taking any Enforcement Action with respect to any Collateral; provided, however, that after Full Payment of all Senior Debt, Senior Creditor shall make available to Subordinate Creditor (unless otherwise restricted by applicable law) for application to the Subordinated Debt any net proceeds remaining from the sale or other disposition of the Collateral.

9. Receipt of Monies by Subordinate Creditor. If any payment, distribution or security, or the proceeds thereof, are received by Subordinate Creditor on account of or with respect to any of the Subordinated Debt other than as expressly permitted in Section 4 hereof, or from the sale, liquidation, casualty or other disposition of, or as a result of any Lien it may have with respect to, any of the Collateral at any time prior to Full Payment of all of the Senior Debt, Subordinate Creditor shall forthwith deliver same to Senior Creditor in the form received (except for the addition of any endorsement or assignment necessary to effect a transfer of all rights therein to Senior Creditor) for application to the Senior Debt. Senior Creditor is irrevocably authorized by Borrowerand Subordinate Creditor to supply any required endorsement or assignment which may have been omitted. Until so delivered, any such payment, distribution or security shall be held by Subordinate Creditor in trust for Senior Creditor and shall not be commingled with other funds or property of Subordinate Creditor

10. Agreement on Certain Insolvency Proceeding Matters.

(a) Without impairing, abrogating or in any way affecting Senior Creditor's rights hereunder, including the priorities set forth inSection 3(a) hereof, Senior Creditor may during any Insolvency Proceeding give or withhold its consent to any Obligor's or any receiver's or trustee's use of any Collateral (including cash proceeds of any Collateral) or may provide financing or otherwise extend credit to such Obligor or any receiver or trustee secured by a Lien upon any or all of the Collateral (regardless of whether such Collateral is created, acquired or arises prior to or after the commencement of any such Insolvency Proceeding), and Subordinate Creditorshall be deemed to have consented(and shall give its written consent if requested) to any Obligor's or any receiver's or trustee's use of Collateral if and to the extent consented to by Senior Creditor during the pendency of any such Insolvency Proceeding. Any Lien at any time granted to or otherwise acquired by Subordinate Creditor in any of the Collateral, whether such Lien is granted to or otherwise acquired by Subordinate Creditor prior to or after the commencement of any Insolvency Proceeding or pursuant to a Plan and whether such Collateral is created, acquired or arises prior to or after the commencement of any such Insolvency Proceeding, shall be subject to all of the terms of this Agreement and shall be subordinate in priority to all Liens granted to or otherwise obtained by Senior Creditor with respect to any such Collateral as security for the Senior Debt, including Liens granted to secure any financing provided or consented to by Senior Creditorin any such Insolvency Proceeding or Liens granted to Senior Creditor as adequate protection.

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(b) Subordinate Creditor shall not oppose any relief from the automatic stay that is sought by Senior Creditor and will not seek relief from the automatic stay unless and to the extent the same relief is requested and obtained by Senior Creditor; and Subordinate Creditor shall not oppose any request for adequate protection made by Senior Creditor, nor shall Subordinate Creditor seek adequate protection of any of its Liens other than an additional or replacement Lien in respect of any Collateral acquired or arising during the pendency of an Insolvency Proceeding to the same extent sought and obtained by Senior Creditor.

(c) If in or as a result of any Insolvency Proceeding a Creditor returns, refunds or repays to any Obligoror any trustee or committee appointed in the Insolvency Proceeding any payment or proceeds of any Collateral in connection with any pending or threatened action, suit or proceeding alleging that such Creditor's receipt of such payments or proceeds was a transfer voidable under any applicable law, then such Creditor shall not be deemed ever to have received such payment or proceeds for purposes of this Agreement in determining whether and when all of the Senior Debt has been Paid in Full.

(d) If Subordinate Creditor has any claim against any Obligor in any Insolvency Proceeding, Subordinate Creditor hereby makes, constitutes and appoints Senior Creditor as Subordinate Creditor's attorney-in-fact and authorizes Senior Creditor(for so long as any Senior Debt is outstanding) (i) to file, in the name of Subordinate Creditor, such claim on behalf of Subordinate Creditor, if such claim has not been filed by Subordinate Creditor prior to thirty (30) days before the bar date for filing such claim; and (ii) to enforce such claim, either in its own name or in the name of Subordinate Creditor, by proof of claim, suit or otherwise, and any sums received by Senior Creditor in connection with such claim shall be applied to the Senior Debt. Senior Creditor shall remit to Subordinate Creditor any funds remaining after those sums have been so applied, to the extent permitted by applicable law or the proceedings governing any such Insolvency Proceeding. In no event shall Senior Creditor be liable to Subordinate Creditor for any act or action taken as attorney-in-fact. In no event shall Subordinate Creditor support any Plan that is opposed by Senior Creditor or oppose any Plan that is supported by Senior Creditor.

12. Agreement to Release Liens. If requested to do so by Senior Creditor after and during the continuance of a Default under the Senior Creditor Documents and for so long as any Senior Debt is outstanding,Subordinate Creditor agrees that it will release its Liens upon any Collateral simultaneously with and in order to facilitate an Enforcement Action by Senior Creditor, an orderly liquidation or going concern sale or other disposition of such Collateral by an Obligor (whether prior to or during the pendency of any Insolvency Proceeding),or a sale or other disposition by a bankruptcy trustee or receiver for an Obligor or its assets;and promptly upon the request of Senior Creditor, Subordinate Creditor will execute and deliver such documents, instruments and agreements as are necessary to effectuate such release and to evidence such release in the appropriate public records. Notwithstanding the foregoing, any Lien ofSubordinate Creditor shall, subject to all of the provisions of this Agreement, continue in the Proceeds of any such Collateral until applied to the Senior Debt.

13. Waiver of Marshaling; Application of Payments and Proceeds. Subordinate Creditor hereby waives any right to require Senior Creditor to marshal any security or Collateral or otherwise to compel Senior Creditor to seek recourse against or satisfaction of the indebtedness to it from one source before seeking recourse or satisfaction from another source. Senior Creditor shall be authorized to apply (and reapply) any and all payments and proceeds of Collateral received by it to such portion of the Senior Debt as Senior Creditor may elect.

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14. Provisions Concerning Insurance. Proceeds of the Collateral include insurance proceeds, and therefore the priorities set forth in Section 3(a)hereof govern the ultimate disposition of casualty insurance proceeds. Senior Creditor shall have the sole and exclusive right, as against Subordinate Creditor, to adjust settlement of insurance claims in the event of any covered loss, theft, damage to or destruction of any Collateral. For so long as any Senior Debt is outstanding, all proceeds of such insurance shall inure to Senior Creditor to the extent of the Senior Debt, and Subordinate Creditor shall cooperate to the extent necessary to effect payment of insurance proceeds to Senior Creditor. Senior Creditor shall have the right (as set forth in the Senior Creditor Documents) to determine whether such proceeds will be applied to the Senior Debt or used to rebuild, replace or repair the affected Collateral.If such proceeds are applied to Senior Debt, any proceeds remaining after Full Payment thereof(including expenses of collection) shall be promptly remitted to Subordinate Creditor for application to the Subordinated Debt or to an Obligor, as applicable, unless otherwise required by applicable law.

15. Option to Purchase Senior Debt.

(a) Upon the occurrence of (i) a Default under the Senior Creditor Documents or (ii) a Default under the Subordinate Creditor Documents that remains unwaived or uncured for a period of 120 days, Subordinate Creditor shall have the option at any time upon five (5) business days' prior written notice from Subordinate Creditor to Senior Creditor to purchase all of the Senior Debt from the Senior Creditor. Such notice from the Subordinate Creditor to Senior Creditor shall be irrevocable.

(b) On the date specified by Subordinate Creditor in such notice (which shall not be less than five (5) business days, nor more than twenty (20) days, after the receipt by Senior Creditor of the notice from Subordinate Creditor of its election to exercise such option), Senior Creditor shall sell to Subordinate Creditor, and Subordinate Creditor shall purchase from Senior Creditor, the Senior Debt. The Senior Creditor hereby represents and warrants that, as of the date hereof, no approval of any court or other regulatory or governmental authority is required for such sale.

(c) Upon the date of such purchase and sale, Subordinate Creditor shall (i) pay to Senior Creditor as the purchase price therefor the full amount of all the Senior Debt then outstanding and unpaid (including principal, interest, fees and expenses, including reasonable attorneys' fees and legal expenses), and (ii) agree to reimburse Senior Creditor for any loss, cost, damage or expense (including reasonable attorneys' fees and legal expenses) in connection with any commissions, fees, costs or expenses related to any checks or other payments provisionally credited to the Senior Debt, and/or as to which Senior Creditor has not yet received final payment. Such purchase price shall be remitted by wire transfer in federal funds to such bank account of Senior Creditor as Senior Creditor may designate in writing to the Subordinate Creditor for such purpose. Interest shall be calculated to but excluding the business day on which such purchase and sale shall occur if the amounts so paid by Subordinate Creditor to the bank account designated by Senior Creditor are received in such bank account prior to 2:00 p.m., Chicago time, and interest shall be calculated to and including such business day if the amounts so paid by the SubordinateCreditor to the bank account designated by Senior Creditor are received in such bank account later than 2:00 p.m., Chicago time.

(d) Such purchase shall be expressly made without representation or warranty of any kind by Senior Creditor as to the Senior Debt or otherwise and without recourse to Senior Creditor, except that Senior Creditor shall represent and warrant: (i) the amount of the Senior Debt being purchased, (ii) that Senior Creditor owns the Senior Debt free and clear of any liens or encumbrances and (iii) Senior Creditor has the right to assign the Senior Debt and the assignment is duly authorized.

16. Amendments to Documents. Senior Creditor and each Obligor shall be authorized to enter into amendments to any of the Senior Creditor Documents to which they are a party, in accordance with the terms thereof, and without prior notice to or the consent of Subordinate Creditor. Senior Creditor shall, promptly after receipt of a written request therefor from Subordinate Creditor, deliver to Subordinate Creditor copies of any amendments or modifications of any of the Senior Creditor Documents. Subordinate Creditor shall not be authorized to modify or amend any of the Subordinate Creditor Documents, without the prior written consent of Senior Creditor, to the extent that any such modification or amendment would have the effect of increasing the amount of the Subordinated Debt; increasing the rate of interest or fees payable in respect of any of the Subordinated Debt; altering the method, time of payment (other than to extend the time of payment)or manner of payment of any Subordinated Debt; or making more restrictive any covenants or Defaults contained in any of the Subordinate Creditor Documents.Subordinate Creditor shall, promptly after receipt of a written request therefor from Senior Creditor, deliver to Senior Creditor copies of any amendments or modifications of any of the Subordinate Creditor Documents. Borrower shall promptly, after the execution of such amendments or modifications to the Senior Creditor Documents or the Subordinate Creditor Documents, deliver conformed copies thereof to the Creditor not party thereto, but the failure to do so by Borrower shall in no way affect any of the rights or privileges of such Creditor under this Agreement.

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17. Notices. All notices, requests and demands to or upon a Party hereto shall be in writing and shall be delivered by hand, sent by certified or registered mail, return receipt requested or by telecopier and shall be deemed to have been validly served, given or delivered when delivered against receipt or three (3) Business Days after deposit in the U.S. mail, postage prepaid, or, in the case of telecopy notice, when received at the office of the noticed Party, in each case addressed as follows:

(A)	If to Senior Creditor:	BMO Harris Bank, N.A.
		135 N. Pennsylvania Avenue
		Indianapolis, IN 46204
		Attention:Brandon Williamson, Vice President

(B)	If to Subordinate	Super G Funding, LLC
	Creditor:	23 Corporate Plaza, Suite 100
		Newport Beach, CA 92660
		Attention: Marc Cole
		Telecopier No.:949-734-7486
	With a	Jeffer Mangels Butler & Mitchell LLP
	copy to:	1900 Avenue of the Stars, 7th Floor
		Los Angeles, CA 90067
		Attention: Joel J. Berman, Esq.
		Telecopier: 310-203-0567

(C)	If to Borrower:	Noble Roman’s, Inc.
		One Virginia Avenue, Suite 300
		Indianapolis, IN 46204
		Attention: Paul Mobley

or to such other address as each Party may designate for itself by like notice given in accordance with this section. Any written notice that is not sent in conformity with the provisions hereof shall nevertheless be effective on the date that such notice is actually received by the noticed Party. Subordinate Creditoragrees that any requirement for the giving of notice by Senior Creditor under the UCCor otherwise in connection with any Enforcement Action with respect to any Collateral shall be satisfied by the giving of written notice at least ten (10) days prior to the date on which such rights or remedies are to be exercised by Senior Creditor, provided that nothing herein shall be deemed to require the giving of any such notice when such notice is not required by applicable law.

18. No Duties Imposed Upon Senior Creditor. The rights granted to Senior Creditor in this Agreement are solely for its protection and nothing herein contained imposes on Senior Creditor any duty with respect to any of the Collateral or to advise Subordinate Creditor of information known to Senior Creditor regarding any Obligor, the Collateral, or actions taken or not taken by Senior Creditor pursuant to any of the Senior Creditor Documents or otherwise with respect to any Obligor or any Collateral. Senior Creditor has no duty to preserve rights against prior parties on any Instrument or Chattel Paper received from any Obligor as collateral security for any of the Senior Debt.

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19. Specific Enforcement. If Subordinate Creditor fails to comply with any provision of this Agreement that is applicable to it, Senior Creditor may demand specific performance of this Agreement and may exercise any other remedy available at law or equity. Borrower and Subordinate Creditor each hereby waives any defense based on the adequacy of a remedy at law which might be asserted as a bar to the remedy of specific performance of this Agreement in any action brought therefor by Senior Creditor.

20. Additional Credit Extensions. Senior Creditor may make Credit Extensions to Borrower from time to time, pursuant to the Senior Creditor Documents or otherwise, and all suchloans or other credit shall constitute part of the Senior Debtto the extent secured by all of the Collateral, and nothing herein shall restrict in any manner or in any way the right of Borrower to obtain additional Credit Extensions from Senior Creditor or the right of Senior Creditor to make available such additional Credit Extensions to Borrower as Senior Creditor in its sole discretion may elect.

21. Independent Credit Investigations. Neither Creditor, nor any of such Creditor's respective directors, officers, agents, employees, successors or assigns,shall be responsible to the other or to any other Person for any Obligor's financial condition (including solvency or ability to repay any of the Subordinated Debt or any of the Senior Debt); statements of any Obligor, oral or written; the validity, sufficiency or enforceability of any of the Subordinate Creditor Documents or any of the Senior Creditor Documents; or the validity, perfection or priority of any Liens granted by any Obligor to either Party in connection with any of the Subordinate Creditor Documents or any of the Senior Creditor Documents. Each Creditor has entered into its agreements with each Obligor based upon its own independent investigation, and makes no warranty or representation to the other nor does it rely upon any representation of the other with respect to matters identified or referred to in this Section.

22. No Additional Rights of Obligors Hereunder. Nothing herein shall be construed to confer additional rights upon any Obligor.

23. Term of Agreement. This Agreement shall continue in full force and effect and shall be irrevocable by any Party hereto until the sooner to occur of the following: (i) Creditors in writing mutually agree to terminate this Agreementor (ii) the Senior Debtis Paid in Full.

24. Entire Agreement; Amendments. This Agreement expresses the entire understanding and agreement of the Parties hereto with respect to the subject matter hereof and supersedes all prior understandings and agreements of the Parties regarding the same subject matter. This Agreement may not be amended or modified except by a writing signed by the Parties hereto; provided, however, that Creditors may in writing (without the necessity of the signature of any Obligor) amend, modify or waive any of the provisions herein relating to the rights, duties, remedies, powers, privileges, Lien priorities or subordinations of either Creditor.

25. No Third Party Beneficiaries. Nothing contained in this Agreement shall be deemed to indicate that this Agreement has been entered into for the benefit of or may be enforced by any Person other than the Parties hereto.

26. Conflict with Documents. The provisions of this Agreement are intended by the Parties to control any conflicting provisions in the Senior Creditor Documents or the Subordinate Creditor Documents, including any covenants prohibiting further borrowing or encumbrances of Collateral.

27. Counterparts; Signatures. This Agreement may be executed in any number of counterparts and by different Parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which counterparts taken together shall constitute but one and the same instrument. Any signature delivered by a Party by facsimile transmission or electronic means shall be deemed to be an original signature hereto.

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28. Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective successors and assigns. In no event, however, shall SubordinateCreditor transfer or assign any Lien that it may have in any of the Collateral to any Person unless the transferee or assignee thereof shall first agree in writing to be bound by the terms of this Agreement the same as if an original signatory hereto. In addition to, and without limiting the generality of the immediately preceding sentence, any Person whose loans or advances to Borrower hereafter are used to refinance and Pay in Full the Senior Debt shall be deemed for all purposes hereof to be the successor to Senior Creditor, and from and after the date of any such refinancing andFull Payment of the Senior Debt such Person shall be deemed a party hereto in the place and stead of Senior Creditor as if such Person had been an original signatory hereto, and all loans, advances, liabilities, debit balances, covenants and duties at any time or times owed by any or all of Obligors to such Person, whether direct or indirect, absolute or contingent, secured or unsecured, due or to become due, then existing or thereafter arising, including any renewals, extensions, modifications, or replacements of any of the foregoing, shall be deemed for all purposes hereunder to constitute and be Senior Debt. For removal of doubt, under no circumstance shall the amount of the Senior Debt be increased by virtue of any of the actions described in this Section.

29. Severability. Wherever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under Illinoislaw, but if any provision of this Agreement shall be prohibited by or invalid under Illinoislaw, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

30. Governing Law. This Agreement shall be interpreted, and the rights and obligations of the parties hereto determined, in accordance with the internal laws of the State of Illinois.

31. Litigation; Jurisdiction and Venue.Each Partyhereby irrevocably consents to the jurisdiction of the courts of the State of Illinois and of any federal court located in the State of Illinois, in connection with any action or proceeding arising out of or relating to this Agreement. In any such litigation, each Party waives personal service of any summons, complaint or other process, and agrees that the service thereof may be made by certified or registered mail direct to such Party at its place of business set forth in Section 17 hereof. The choice of forum set forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such forum or the taking of any action under this Agreement to enforce the same in any appropriate jurisdiction, or the commencement by Senior Creditor, in its sole discretion, of any action or suit in any jurisdiction where any Collateral may be found to repossess or foreclose upon any such Collateral.

32. Jury Trial Waiver. To the fullest extent permitted by applicable law, each Party hereby waives all rights to a trial by jury in connection with any claim, counterclaim, action, suit or other proceeding arising out of or related to this Agreement.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed and delivered by their duly authorized officers or agentsas of the day and year first above written.

BMO Harris Bank N.A.

("Senior Creditor")

By:

Name:

Title:

SUPER G FUNDING, LLC

("Subordinate Creditor")

By:

Name:

Title:

NOBLE ROMAN’S, INC.

("Borrower")

By:

Name:_______________________

Title:________________________

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ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA )

)

COUNTY OF _____________________ )

On _____________________, 201___, before me, ______________________________, a Notary Public, personally appeared _______________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ____________________________

(SEAL)

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EX-31.1 8 nrom_ex311.htm CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002 Untitled Document

Exhibit 31.1

I, A. Scott Mobley, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Noble Roman’s, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material

fact or omit to state a material fact necessary to make the statements made, in light of

the circumstances under which such statements were made, not misleading with respect

to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information

included in this report, fairly present in all material respects the financial condition,

results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and

maintaining disclosure controls and procedures (as defined in Exchange Act Rules

13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in

Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure

controls and procedures to be designed under our supervision, to ensure that

material information relating to the registrant, including its consolidated

subsidiaries, is made known to us by others within those entities, particularly

during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal

control over financial reporting to be designed under our supervision, to provide

reasonable assurance regarding the reliability of financial reporting and the

preparation of financial statements for external purposes in accordance with

generally accepted accounting principles;

and presented in this report our conclusions about the effectiveness of the

disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over

financial reporting that occurred during the registrant’s most recent fiscal quarter

that has materially affected, or is reasonably likely to materially affect, the

registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most

recent evaluation of internal control over financial reporting, to the registrant’s auditors

and the audit committee of the registrant’s board of directors (or persons performing the

equivalent functions):

(a)

All significant deficiencies and material weaknesses in the design or operation

of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

Any fraud, whether or not material, that involves management or other

employees who have a significant role in the registrant’s internal control over financial reporting.


Date: August 11, 2016	By:	/s/ A. Scott Mobley
		A. Scott Mobley
		President and Chief Executive Officer

EX-31.2 9 nrom_ex312.htm CERTIFICATION PURSUANT TO RULE 13A-14(A)/15D-14(A) CERTIFICATIONS SECTION 302 OF THE SARBANES-OXLY ACT OF 2002 Untitled Document

Exhibit 31.2

I, Paul W. Mobley, certify that: