8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): November 1, 2016

Regional Brands Inc.
(Exact name of registrant as specified in its charter)
Delaware	33-131110-NY	22-1895668
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

6060 Parkland Boulevard Cleveland, Ohio	44124
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s Telephone Number, Including Area Code: (216) 825-4000

(Former Name or Former Address, If Changed Since Last Report)

Copies to:

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019

Attention: Michael R. Neidell, Esq.

Tel: (212) 451-2300

Email: mneidell@olshanlaw.com

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

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

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

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

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

CURRENT REPORT ON FORM 8-K

Regional Brands Inc.

November 1, 2016

TABLE OF CONTENTS

	Page
Item 1.01 Entry into a Material Definitive Agreement.	1
Item 2.01 Completion of Acquisition or Disposition of Assets.	4
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.	30
Item 3.02 Unregistered Sales of Equity Securities.	31
Item 4.01 Changes in Registrant’s Certifying Accountant.	31
Item 5.02 Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.	32
Item 8.01 Other Events.	32
Item 9.01 Financial Statements and Exhibits.	33

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Cautionary Language Regarding Forward-Looking Statements and Industry Data

This report contains “forward-looking statements” that involve risks and uncertainties, many of which are beyond our control.  Our actual results could differ materially and adversely from those anticipated in such forward-looking statements as a result of certain factors, including those set forth in this report.  Important factors that may cause actual results to differ from projections include, but are not limited to, for example:

· adverse economic conditions,

· inability to raise sufficient additional capital to operate our business,

· unexpected costs or lower than expected sales and revenues,

· adverse results of any legal proceedings,

· the volatility of our operating results and financial condition,

· inability to attract or retain qualified senior management personnel, and

· other specific risks that may be referred to in this report.

All statements, other than statements of historical facts, included in this report regarding our strategy, future operations, financial position, estimated revenue or losses, projected costs, prospects, plans and objectives of management are forward-looking statements.  When used in this report, the words “will,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “plan” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.  All forward-looking statements speak only as of the date of this report.  We undertake no obligation to update any forward-looking statements or other information contained herein, except as required by federal securities laws.  Stockholders and potential investors should not place undue reliance on these forward-looking statements.  Although we believe that our plans, intentions and expectations reflected in or suggested by the forward-looking statements in this report are reasonable, we cannot assure stockholders and potential investors that these plans, intentions or expectations will be achieved.  We disclose important factors that could cause our actual results to differ materially from our expectations under “Risk Factors” and elsewhere in this report.  These cautionary statements qualify all forward-looking statements attributable to us or persons acting on our behalf.

Information regarding market and industry statistics contained in this report is included based on information available to us that we believe is accurate.  It is generally based on academic and other publications that are not produced for purposes of securities offerings or economic analysis.  Forecasts and other forward-looking information obtained from these sources are subject to the same qualifications and the additional uncertainties accompanying any estimates of future market size, revenue and market acceptance of products and services.  We have no obligation to update forward-looking information to reflect actual results or changes in assumptions or other factors that could affect those statements, except as required by federal securities laws.  See “Risk Factors” for a more detailed discussion of uncertainties and risks that may have an impact on our future results.

Item 1.01  Entry into a Material Definitive Agreement.

Overview

On November 1, 2016, our majority-owned subsidiary, B.R. Johnson, LLC (“BRJ LLC”) acquired substantially all of the assets (the “Acquisition”) of B.R. Johnson, Inc. (“BRJ Inc.”), a seller and distributor of windows, doors and related hardware as well as specialty products for use in commercial and residential buildings (the “Business”).  Following the Acquisition, BRJ LLC will carry on the Business.  The Acquisition was consummated pursuant to an Asset Purchase Agreement, dated as of November 1, 2016 (the “APA”).  Total consideration for the Acquisition is approximately $15.4 million (subject to customary working capital adjustments), including delivery by BRJ LLC of a promissory note for $2,500,000 to BRJ Inc. (the “Note”), which is subordinate to the Debt Agreements (as defined below).  We provided $10.95 million in debt and equity financing to complete the Acquisition, including $7.14 million of the Subordinated Loan (as defined below) and $3.81 million in preferred equity of BRJ LLC.

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Concurrently with the closing of the Acquisition, BRJ LLC entered into a senior secured revolving credit facility to borrow up to $6,000,000 (the “Credit Facility”) pursuant to that certain Credit and Security Agreement, dated November 1, 2016 (the “Credit Agreement”), with the lenders named therein and KeyBank, N.A. as agent for such lenders.  BRJ LLC also entered into that certain Loan and Security Agreement, dated November 1, 2016 (the “Loan Agreement and, together with the Credit Facility, the “Debt Agreements”), pursuant to which it received a $7,500,000 loan that is subordinate to the Credit Facility (the “Subordinated Loan”).  To finance the Acquisition and potential future acquisitions, we issued 894,393 shares of our common stock for aggregate proceeds to us of $12,074,305.50 in a private placement (the “Private Placement”) with 93 accredited investors, pursuant to the terms of a Subscription Agreement, dated as of November 1, 2016 (the “Subscription Agreement”).  The foregoing transactions are collectively hereinafter referred to as the “Transactions”.

Asset Purchase Agreement

On November 1, 2016, our majority-owned subsidiary BRJ LLC entered into the APA for the acquisition of the Business.  The aggregate purchase price for the Acquisition consisted of $12,900,000 in cash and the Note, with the cash payment subject to a working capital adjustment to be determined within 90 days of the closing.  The Note is payable to BRJ Inc. and accrues interest at a rate of 5.25% per annum, payable quarterly, with the principal amount of the Note payable in equal quarterly installments of $62,500 commencing on November 1, 2018 and maturing on November 30, 2021.  The Note is subordinated to the Credit Facility and the Subordinated Loan.  The purchase price for the Acquisition was determined as a result of arm’s-length negotiation among the parties.  The parties to the APA made customary representations, warranties, covenants and indemnities therein.

Following the Acquisition, all of operations of the Business will be conducted through our majority-owned subsidiary BRJ LLC.

Prior to the Acquisition, there were no material relationships between our company and BRJ Inc., any of their respective affiliates, directors or officers, or any associates of their respective officers or directors.  The foregoing description of the Acquisition is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the APA, which is filed as Exhibit 2.1 hereto and is incorporated herein by reference.

Debt Agreements

Concurrently with the closing of the Acquisition and in order to provide financing therefor, BRJ LLC entered into the Debt Agreements.

Credit Facility

Under the Credit Agreement, BRJ LLC may borrow up to an aggregate amount of $6,000,000 under revolving loans and letters of credit, with a sublimit of $500,000 for letters of credit.  The Credit Facility is payable upon demand of KeyBank, N.A., or the lenders, or upon acceleration as a result of an event of default.  At the closing of the Acquisition, $1,500,000 was drawn under the Credit Facility to pay a portion of the purchase price and costs associated with the Acquisition, with the balance being available for general working capital of BRJ LLC.

Interest under the Credit Facility is payable monthly, starting on November 30, 2016, and accrues pursuant to the “base rate” of interest, which is equal to the highest of (a) KeyBank, N.A.’s prime rate, (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate of the Federal Reserve Bank of New York, and (c) one hundred (100) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an interest period of one month, plus any applicable margin.  The Credit Agreement also requires the payment of certain fees, including, but not limited to, letter of credit fees.

The Credit Facility contains customary financial and other covenant requirements, including, but not limited to, a covenant to not permit BRJ LLC’s consolidated fixed charge coverage ratio to exceed 1.15 to 1.00. The Credit Facility also contains customary events of default.

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The Credit Facility is secured by substantially all of BJR LLC’s assets.  The foregoing description of the Credit Facility is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Credit and Security Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Subordinated Loan

Under the Loan Agreement, we agreed to loan BRJ LLC $7,500,000.  We participated $358,696 of the Subordinated Loan to BRJ Acquisition Partners, LLC, an entity owned by individuals affiliated with BRJ Inc. and Lorraine Capital, LLC.  The Subordinated Loan accrues interest at a rate of 6% per annum, payable quarterly on the first day of each calendar quarter.  BRJ LLC is required to repay a portion of the principal amount of the Subordinated Loan on each anniversary of the execution of the Loan Agreement.  The Subordinated Loan matures on November 1, 2021 and is secured by substantially all of BJR LLC’s assets.  The Subordinated Loan and the security interest created under the Loan Agreement are subordinated to the Credit Facility and the security interest of the lenders under the Credit Facility.  All of the covenants contained in the Credit Agreement are incorporated by reference in the Loan Agreement. The Loan Agreement contains customary events of default, including in the case of an event of default under the Credit Facility.  The foregoing description of the Subordinated Loan is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Loan Agreement, which is filed as Exhibit 10.3 hereto and is incorporated herein by reference.

Changes Resulting from the Acquisition

As of the closing of the Transactions, BRJ LLC will carry on the Business as its sole line of business.  We hold 76.17% of the common membership interests and 95.22% of the preferred membership interests of BRJ LLC, pursuant to the B.R. Johnson, LLC Limited Liability Company Agreement (the “LLC Agreement”) entered into by and among Lorraine Capital, LLC (which owns 20% of the common membership interests), Regional Brands Inc. and BRJ Acquisition Partners, LLC (which owns the remaining 3.83% of the common membership interests and 4.78% of the preferred membership interests).  Lorraine Capital, LLC and BRJ Acquisition Partners, LLC are collectively referred to as the “Lorraine Parties”.  Under the LLC Agreement, BRJ LLC will be overseen by a five-member Board of Managers, with three of the initial managers (William J. Maggio, Justin M. Reich and Richard F. Gioia) nominated by Lorraine Capital, LLC and two of the initial managers (Louis Joseph and Fred DiSanto) nominated by us.  In addition, each of Brian Hopkins, Jeff Anderson and Carl Grassi, members of our Board of Directors, will serve as observers on the Board of Managers.  The LLC Agreement also provides that certain major decisions on behalf of BRJ LLC may not be made without the consent of each of the members of BRJ LLC.  In the event the Management Services Agreement entered into between BRJ LLC and Lorraine Capital, LLC (as described in “Certain Relationships and Related Transactions” under Item 2.01 below) is terminated for any reason, then either we or (in the event that the Management Services Agreement is terminated by us) Lorraine Capital, LLC may elect to have BRJ LLC repurchase the Lorraine Parties’ entire membership interest in BRJ LLC for the fair market value thereof as determined by an independent appraiser (or the amount the Lorraine Parties’ would have received upon the closing of a Qualified Offer (as defined below), if one is then outstanding).  If the membership interests of the Lorraine Parties are so redeemed, we will be entitled to remove all of the members of the Board of Managers nominated by Lorraine Capital, LLC and will have the sole right to appoint the full Board of Managers.  If the Lorraine Parties’ membership interests are not so redeemed (other than due to a breach of the LLC Agreement), Lorraine Capital, LLC will retain the right to appoint two members of the Board of Managers and we will have the right to appoint three members of the Board of Managers.  In either of the foregoing cases, the Lorraine Parties’ consent will no longer be required to make any major decisions that would have otherwise required the consent of all of the members under the LLC Agreement.  If, on or after November 1, 2018, Lorraine Capital, LLC identifies a bona fide, written, fully financed offer for a sale of BRJ LLC (a “Qualified Offer”), we have the ability to either consent or not consent to such sale or to purchase (or cause BRJ LLC to purchase) the Lorraine Parties’ entire membership interest for the amount they would have received in connection with the closing of such sale.  If we do not exercise this repurchase right or withhold our consent to the sale of BRJ LLC, a sale process would be conducted under the supervision of the Board of Managers (although we would retain the right to repurchase the Lorraine Parties’ membership interests for a period of 30 days after the commencement of such sale process).  The foregoing description of the LLC Agreement is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the LLC Agreement, which is filed as Exhibit 10.5 hereto and is incorporated herein by reference.

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The principal executive offices of BRJ LLC are located at 6960 Fly Road, East Syracuse, NY 13057.  Our address remains unchanged at 6060 Parkland Boulevard, Cleveland, Ohio 44124.  Our telephone number continues to be (216) 825-4000 and our website is still located at http://www.regionalbrandsinc.com.  The contents of our website are not part of this report and should not be relied upon with respect thereto.

Expansion of Board of Directors; Management

At the closing of the Transactions, our Board of Directors (the “Board”) increased the number of members on the Board from two to four directors, and Carl Grassi and Fred DiSanto were appointed to serve in the vacancies created by this expansion of the Board.  Also, at the closing of the Transactions, the Board appointed Mr. Grassi as Chairman of the Board and Mr. DiSanto as Chief Executive Officer.  At the same time, our prior Board Chairman, President and Chief Executive Officer, Brian Hopkins, resigned all such positions but remained a member of the Board.

All directors hold office until the election and qualification of their successors.  Officers are elected by the Board and serve at the discretion of the Board until their successors are elected and qualified.

Concurrent Private Placement

For the purpose of financing the Acquisition and potential future acquisitions, on November 1, 2016, we completed the Private Placement, issuing 894,393 shares of our common stock at a price per share of $13.50 to 93 accredited investors.  We received gross proceeds from the Private Placement of $12,074,305.50.  No placement agent or other financial intermediary was engaged or compensated in connection with the Private Placement.  After the closing of the Private Placement, we currently have outstanding 1,274,425 shares of common stock.  For additional information about the Private Placement, see Item 3.02 (Unregistered Sale of Equity Securities) of this current report on Form 8-K.

Please see Item 2.01 (Completion of Acquisition or Disposition of Assets) of this current report on Form 8-K for a description of the Transactions and the material agreements entered into in connection therewith, which disclosure is incorporated herein by reference.

The foregoing information is a summary of the agreements involved in the Transactions described above, is not complete, and is qualified in its entirety by reference to the full text of the applicable agreements, copies of which are attached as exhibits to this current report on Form 8-K.  Readers should review such agreements for a complete understanding of the terms and conditions associated with the Transactions.

Item 2.01 Completion of Acquisition or Disposition of Assets.

Asset Purchase Agreement

On November 1, 2016, our majority-owned subsidiary BRJ LLC entered into the APA for the acquisition of the Business.  The aggregate purchase price for the Acquisition consisted of $12,900,000 in cash and the Note, with the cash payment subject to a working capital adjustment to be determined within 90 days of the closing.  The Note is payable to BRJ Inc. and accrues interest at a rate of 5.25% per annum, payable quarterly, with the principal amount of the Note payable in equal quarterly installments of $62,500 commencing on November 1, 2018 and maturing on November 30, 2021.  The Note is subordinated to the Credit Facility and the Subordinated Loan.  The purchase price for the Acquisition was determined as a result of arm’s-length negotiation among the parties.

Following the Acquisition, all of operations of the Business will be conducted through our majority-owned subsidiary BRJ LLC.  Prior to the Acquisition, there were no material relationships between our company and BRJ Inc., any of their respective affiliates, directors or officers, or any associates of their respective officers or directors.

On November 1, 2016, the Board determined that it was in the best interests of our company and our stockholders to enter into and perform the APA.

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Election of Board of Directors; Appointment of Officers

At the closing of the Transactions, our Board increased the number of members on the Board from two to four directors, and Carl Grassi and Fred DiSanto were appointed to serve in the vacancies created by this expansion of the Board.  Also, at the closing of the Transactions, the Board appointed Mr. Grassi as Chairman of the Board and Mr. DiSanto as Chief Executive Officer.  At the same time, our prior Board Chairman, President and Chief Executive Officer, Brian Hopkins, resigned all such positions but remained a member of the Board.

Description of Business

References to “we,” “us” or “our” throughout this report refer to Regional Brands Inc. and B.R. Johnson, LLC together, references to “Regional Brands” refer solely to Regional Brands Inc. and references to “BRJ LLC” refer solely to B.R. Johnson, LLC.

Corporate Information

We were originally incorporated under the laws of the State of Delaware in 1986 under the name Medtech Diagnostics, Inc., the business of which ceased operations in 1991.  We subsequently became a holding company, changing our name to 4net Software, Inc. in March 2000.  In April 2016, in connection with a change in control of our company, we changed our name to Regional Brands Inc.  As of the close of the Transactions, we will continue to be a “smaller reporting company,” as defined under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will operate as a holding company, with BRJ LLC, of which we own 76.17% of the common membership interests and 95.22% of the preferred membership interests, comprising our principal operating subsidiary.  Our principal executive offices are located at 6060 Parkland Boulevard, Cleveland, Ohio 44124.  Our telephone number is (216) 825-4000 and our website is located at http://www.regionalbrandsinc.com.  The contents of our website are not part of this report and should not be relied upon with respect thereto.  All share numbers in this current report on Form 8-K give effect to our 1-for-1,000 reverse stock split, effective July 22, 2016.

Overview of Regional Brands Inc. and B.R. Johnson

Regional Brands Inc. is a holding company formed to acquire regional companies with strong brand recognition, stable revenues and profitability. Regional Brands has been pursuing a business strategy whereby it was seeking to engage in an acquisition, merger or other business combination transaction with undervalued businesses (each, a “Target Company”) with a history of operating revenues in markets that provide opportunities for growth. After the acquisition of the business of BRJ Inc. by Regional Brands’ majority-owned subsidiary, BRJ LLC, Regional Brands is currently focused on considering opportunities for growth of BRJ LLC through utilizing its balance sheet to provide capital for additional acquisitions of companies that would be complementary to BRJ LLC. Additionally, Regional Brands may seek to acquire Target Companies that satisfy the following criteria: (1) established businesses with viable services or products; (2) an experienced and qualified management team; (3) opportunities for growth and/or expansion into other markets; (4) are accretive to earnings; (5) offer the opportunity to achieve and/or enhance profitability; and (6) increase shareholder value.

B.R. Johnson, Inc. was founded by Benjamin “Ben” R. Johnson in 1928.  Some of the original products sold by BRJ Inc. were steel windows, rolling self-storing screens, kitchen cabinets, and Modernfold operable wall partitions, a product it still distributes.  Over the course of the following decades, BRJ Inc. added commercial steel doors, hardware, and residential and commercial windows.   We believe BRJ Inc. has built a reputation of only distributing products that are the best in their respective category. Product categories include:

· Commercial doors and hardware;

· Commercial windows;

· Specialty division;

· Residential windows;

· Residential hardware; and

· Aftermarket door sales.

Industry Overview

According to an industry study published by the international business research company, The Freedonia Group, the total United States window and door market (measured by sales at the manufacturers’ level) was estimated to be valued at approximately $24.3 billion in sales in 2014.

In the same study, a rebound in housing completions and building construction expenditures is expected to drive approximately 6% growth per year in the industry through 2018. This would represent a rebound from the 2009-2014 period, with growth expected to be driven by both residential and non-residential building construction activity.

Regional variations in economic activity influence the level of demand for windows and door products across the United States. Of particular importance are regional differences in the level of construction and renovation activity. Demographic trends, including population growth and migration, contribute to the regional variations through their influence on regional new construction activity.

BRJ LLC’s core markets have not seen significant volatility of demand in recent years. Twenty of the 21 markets tracked by the Bureau of Labor and Statistics in the Northeastern part of the United States (with the sole exception being Syracuse) have shown growth in construction jobs since the beginning of 2009. BRJ LLC’s ancillary markets and target areas for growth have shown significant construction growth in recent years.

The $1.5 billion Upstate Revitalization Initiative signed into law by Gov. Cuomo in 2015 is slated to provide $100 million a year in revitalization money for Central New York for the next several years, which may provide a tailwind to the local economy.

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Our Growth Strategy

We target customer groups and emphasize product categories where we believe we are well positioned in comparison to our competitors. These include aftermarket door service and installation; commercial window customers with demanding installation requirements; and products requiring proprietary know-how and installation skills.

Commercial door and hardware remains a highly competitive product category. We believe the profit margins in this segment are not sufficient to attract new competitors.  Our strategy is to defend our market share so that our volume remains at sufficient levels to achieve the best pricing from our suppliers, thus enabling us to maintain acceptable profit margins in this segment.

We plan to expand our geographic reach. We believe we can achieve a greater share of the Western New York State market for our products by leveraging the relationship of Lorraine Capital, LLC (one of BRJ LLC’s members which also provides management services to it), which is headquartered in Buffalo, NY, and through ongoing business development efforts by our Rochester, NY sales office.

Our Products and Services

Commercial Windows: We have a long history of building restoration and new construction experience in a wide range of commercial window applications. We utilize multiple approaches that take advantage of the wide range of product offerings we have available to us from our extensive roster of suppliers and we draw on the experience gained from the diverse types of projects we have successfully performed.

We operate as a multi-line commercial window distributor and installer of high-performance architectural aluminum, clad wood, fiberglass, vinyl and steel windows, as well as curtainwall, storefront and entrance products.

While we specialize in creating commercial window solutions for existing buildings and historical renovations, we are also experienced in the requirements of new construction, navigating the technical, administrative and schedule demands of that industry segment.

Our team of salesmen, project managers, technical services and installation personnel work closely with our customers to provide an integrated project delivery approach that is most appropriate to balance performance, aesthetics, budgetary and schedule needs.

We offer our commercial window customers:

· Replacement and historical renovation;

· New construction - windows, curtainwall, storefront and entrances;

· Design development;

· Budgets, detailing and mock-ups;

· Installation; and

· Service across New York, including Buffalo, Rochester, Syracuse, Albany, Ithaca and Binghamton.

Commercial Doors and Hardware: We are a value added distributor and installer of commercial doors, frames and hardware characterized by a dedicated group of professionals with specialized knowledge to respond quickly to customer needs. We have provided the Upstate New York building industry with hollow metal steel doors and frames for over 40 years and commercial hardware since the mid-1980’s.

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We provide commercial door and hardware customers:

· Custom hollow metal door and frame welding and fabrication;

· The largest commercial solid core wood door inventory in Central New York;

· A large available selection of commercial and institutional hardware;

· Specialty overhead and rolling doors;

· Field service and installed sales;

· Budgets and specification consulting; and

· New construction, installation, replacement and service.

Commercial Specialty Products: We distribute, install and service products that require a strong emphasis on architectural promotion. Our sales personnel have been trained to know all aspects of each product from layout and design to providing classroom training to architects and building and fire code officials to maintain their license in New York State. As a result we are a trusted resource to the entire Upstate New York community of architects and building and fire code officials. The products we represent are nationally and internationally recognized as industry leaders and sold across the entire Upstate New York region where we have salesmen active in each major market from Buffalo to Albany. Our seasoned tradesmen round out our ability to provide installation services, inspections and preventative maintenance.

Specialty products and services include:

· Modernfold - Operable partitions, movable glass walls and accordion doors;

· Skyfold - vertically folding operable walls;

· Renlita Doors - custom designed vertical and horizontal doors;

· Smoke containment alternatives to elevator vestibules;

· Smoke Guard - fire and smoke containment systems;

· Gymnasium equipment;

· Safe-Path (safety device for gym partitions);

· Service; and

· Inspections and preventative maintenance.

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Residential Windows and Door:  We specialize in new construction, installation and replacement windows and doors for homes in Upstate New York. We have been providing builders and homeowners in Upstate New York with quality building products since 1928.

We offer our customers a wide selection of products to best meet their requirements from the following manufacturers:

· Andersen Windows, Inc., a part of Andersen Corporation, is the largest window and door manufacturer in North America. The flagship Andersen® brand is the most recognized and most used brand in the window and patio door industry.

· Eagle Window & Door, an Andersen Window & Door company, manufactures a complete line of high quality aluminum-clad wood windows (also known as Andersen E-series windows) and doors.

· Halfway between Utica and Albany, Kasson & Keller has been manufacturing windows and doors in nearby Fonda, NY since 1954, including EcoShield high-efficiency, low-maintenance windows.

· Sierra Pacific Industries, a third-generation, family-owned and operated forest products company based in northern California and the state of Washington, which in August 2014 acquired Hurd Windows and Superseal to complement its own Sierra Pacific product line.

· Norwood, a division of West-Wood Industries, is a family-owned manufacturer of some of the finest wood windows and doors in North America. In addition, Norwood’s Permaglass window line is manufactured from poltruded fiberglass for when wood is not the most suitable material for a customer’s application.

· Therma-Tru Doors, which first created the fiberglass entry door category 25 years ago with the introduction of the Fiber-Classic® wood-grained door. Today, Therma-Tru is the nation’s leading manufacturer of fiberglass and steel exterior door systems, and a preferred brand of entry doors by builders and remodelers.

 Sales and Marketing

As a result of our longstanding and leading position in the Upstate New York market, we have developed relationships with owners, architects, and developers and a reputation for providing products and services that best suit the customers’ needs, positioning us well in comparison to our competitors.

 Our customer service team responds to opportunities with our customers at an early stage and responds to quote opportunities quickly with the best solution for our customers based on access to multiple suppliers.  We prioritize opportunities based on the competitive advantages we identify, often where customers’ needs involve a level of complexity.

We remain one of the few in our business that maintains an extensive inventory of commercial door and hardware items.  This allows us to react to the smaller negotiated and non-bid opportunities quickly with product in stock.  With larger projects, we seek to utilize manufacturer service centers to provide fabrication when possible to minimize pass-through in our facility.

Other sales and marketing activities include attending industry related trade shows, targeted engagement with social media, and search engine optimization for our website.

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Customers

Our customers are varied and encompass building owners, building tenants (with long term property rights) and contractors who serve them.  We have customers who place orders that we book and ship, such as in the commercial door and hardware category. These same customers may have large projects from time to time such as commercial window projects that take several months (occasionally over a year ) to complete. Commercial customers include: owners of educational buildings, K-12 school districts, private schools and public and private colleges and universities; owners of multi-family housing, including senior housing, both private and public; other building owners, including retail health care and institutional buildings, casinos and hotels; and energy performance contractors. Our residential windows, doors and door hardware customers are generally contractors or developers serving this market.

Strategic Alliances

We view Lorraine Capital, LLC, Regional Brands and its affiliate, Ancora Advisors, LLC (“Ancora”), as strategic sources for identifying opportunities for new business in Western New York and Northeast Ohio. We also believe that Lorraine Capital, LLC and Regional Brands can assist us with sourcing capital to meet our expansion requirements or take advantage of consolidation opportunities with competitors through acquisitions.

We have a relationship with a union qualified commercial window subcontractor, Airways Door Service, Inc. (“ADSI”), which is advantageous to us in situations that require union installation labor. In connection with the Acquisition, individuals affiliated with Lorraine Capital, LLC acquired 57% of ADSI’s common stock; the remaining common stock is owned by three of our employees.  We paid ADSI for its services approximately $640,000 during the six months ended June 30, 2016 and $1,395,520 and $1,599,950 during the years ended December 31, 2015 and 2014, respectively.  In addition, we provide ADSI services utilizing an agreed-upon fee schedule.  These services include accounting, warehousing, equipment use, employee benefit administration, risk management coordination and clerical functions.  The fee for these services was approximately $23,000 for the six months ended June 30, 2016 and $47,350 and $44,200 during the years ended December 31, 2015 and 2014, respectively.

Competition

We believe it is useful to discuss the competitive environment we encounter by product category:

Commercial doors. Competition in commercial doors has decreased over the past 20 years.  Most of our competitors were family-owned enterprises that simply closed their businesses.  In the Upstate New York market, at least six businesses have stopped selling commercial doors and hardware during this period.  Today, there is only one major distributor other than BRJ LLC.  Entry into the market is hampered by unavailability of major lines and lack of start-up knowledge. To date, our suppliers have not sought additional distributors in this market due to the fact that we have been able to satisfy the markets requirements.

Commercial windows. Similar to commercial doors, the number of competitors has diminished over the past 20 years.  Twenty years ago, each Upstate New York metropolitan area generally had five to seven window contractors.  Today, there are one to two window contractors in each of these areas, and a few small family-run glass houses servicing the market for small projects (under $50,000). The remaining competitors generally gravitate to windows of one material type (e.g., aluminum distributors sell mainly aluminum windows, vinyl window suppliers sell mainly vinyl, and wood window distributors sell mainly wood).  BRJ LLC will look at and offer the best product choice for the project, including restoration.  We view this flexibility as a competitive advantage.

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Specialty partition products.   Historically, this category encompassed only movable wall partitions from one manufacturer, Modernfold, but in the past decade products have become more diverse.  These products now include vertical stacking walls, glass folding walls for exterior and interior use, and smoke containment systems for elevators and common areas.  Our suppliers include Modernfold, Skyfold, Smoke Guard, Renlita and Won-Dor.  These suppliers typically define a territory for us to serve which includes all of Upstate New York. We believe that institutional level projects (usually characterized by architect involvement) that are specification driven to one of these suppliers give us a competitive advantage. For projects that are not complex or that are smaller in scale (usually characterized by no architect involvement), we encounter competition, primarily based on price, from sole proprietor businesses, of which there are several in the region we serve.

Aftermarket door and door hardware.  This category consists of products and services sold to existing entities in need of door repair, replacement or possible space reconfiguration.  This segment requires access to quality commercial grade products quickly, as well as strong technical aptitude by both the salesman and the installer. We generally encounter competitors that only sell product to this market, rather than as part of a larger, integrated business, and thus have specialized knowledge in this area.

Residential windows. Competition in the residential market is intense, particularly from big-box stores and large independent chains, both of which sell at low margins.  However, we believe there is still a need for high-end quality products with installed requirements. For customers with those needs, competition is generally less intense.

Employees

BRJ LLC employed 84 people full-time and 1 person part-time as of November 1, 2016. Regional Brands has no employees other than its CEO, who receives no cash compensation for his services.

Properties

Regional Brands has principal offices at 6060 Parkland Boulevard, Cleveland, OH 44124. It pays no rent for the use of the offices, which are located at the corporate headquarters of Ancora.

BRJ LLC operates out of a 42,000 square foot facility in East Syracuse, NY and has a 2,200 square foot sales office in Rochester, NY.

Legal Proceedings

There are currently no pending or threatened material legal proceedings against us.

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Risk Factors

An investment in our common stock involves a high degree of risk.  You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision.  If any of the following risks actually occurs, our business, financial condition or results of operations could suffer.  In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.  You should read the section entitled “Cautionary Language Regarding Forward-Looking Statements and Industry Data” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.

Risks Relating to Our Business and Industry

There can be no assurance that our future operations will result in net income.

There can be no assurance that our future operations will result in net income.  Our failure to increase our revenues or maintain or improve our gross margins will harm our business.  We may not be able to sustain or increase profitability on a quarterly or annual basis in the future.  If our revenues grow more slowly than we anticipate, our gross margins decline or our operating expenses exceed our expectations, our operating results will suffer.  The prices we charge for products and services may decrease, which would reduce our revenues and harm our business.  If we are unable to sell products at acceptable prices relative to our costs, or if we fail to supply on a timely basis new products and services from which we can derive additional revenues, our financial results will suffer.

Uncertain economic conditions may adversely affect demand for our products.

Our revenue and gross margin depend significantly on general economic conditions and the demand for building products in the markets in which we operate.  Economic weakness and constrained construction and renovation spending has resulted, and may result in the future, in decreased revenue, gross margin, earnings and growth rates.  All of our revenues and profitability are derived from our clients in New York State, which makes us highly susceptible to disruptions or downturns in local economic conditions.  Ongoing economic volatility and uncertainty affect our business in a number of other ways, including making it more difficult to accurately forecast client demand beyond the short term and effectively build our revenue.  Uncertainty about future economic conditions makes it difficult for us to forecast operating results and to make decisions about future investments.  Delays or reductions in building products spending could have a material adverse effect on demand for our products and services, and consequently our results of operations, financial condition, cash flows and stock price.

We may not timely identify or effectively respond to consumer needs, expectations or trends, which could adversely affect our relationship with customers, our reputation and the demand for our products and services.

The success of our business depends in part on our ability to identify and respond promptly to evolving trends in demographics; consumer preferences, expectations and needs; and unexpected weather conditions, while also managing appropriate inventory levels and maintaining an excellent customer experience. It is difficult to successfully predict the products and services our customers will demand. As the housing and home improvement market continues to recover, resulting changes in demand will put further pressure on our ability to meet customer needs and expectations and maintain high service levels. Our failure to meet the individual needs and expectations of our customers may result in the erosion of our customer base.

Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which may cause us to incur losses or reduce our net income.

The building products distribution industry is subject to cyclical market pressures. Prices of building products are determined by overall supply and demand in the market. Market prices of building products historically have been volatile and cyclical, and we have limited ability to control the timing and amount of pricing changes. Demand for building products is driven mainly by factors outside of our control, such as general economic and political conditions, interest rates, availability of financing, the state of the credit markets, high levels of unemployment and foreclosures, the construction, repair and remodeling markets, industrial markets, weather, and population growth. The supply of building products fluctuates based on available manufacturing capacity, and excess capacity in the industry can result in significant declines in market prices for those products. To the extent that prices and volumes experience a sustained or sharp decline, our net sales and margins likely would decline as well.

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Additionally, many of the building products which we distribute are widely available from other distributors or manufacturers, including big-box stores and online retailers. At times, the purchase price for any one or more of the products we distribute may fall below our purchase costs, requiring us to incur short-term losses on product sales.

All of these factors could adversely affect demand for our products and services, our costs of doing business and our financial performance.

Product shortages, loss of key suppliers, and our dependence on third-party suppliers and manufacturers could affect our financial health.

Our ability to offer a wide variety of products to our customers is dependent upon our ability to continue to identify and develop relationships with qualified suppliers who can satisfy our high standards for quality and responsible sourcing, as well as our need to access products in a timely and efficient manner. Generally, our products are obtainable from various sources and in sufficient quantities. However, the loss of, or a substantial decrease in the availability of, products from our suppliers or the loss of key supplier arrangements could adversely impact our financial condition, operating results, and cash flows.

Disruptions in our supply chain and other factors affecting the distribution of our products could adversely impact our business.

A disruption within our supply chain network could adversely affect our ability to deliver inventory in a timely manner, which could impair our ability to meet customer demand for products and result in lost sales, increased costs or damage to our reputation. Such disruptions may result from damage or destruction to our warehouse facility; weather-related events; natural disasters; third-party strikes, lock-outs, work stoppages or slowdowns; supply or shipping interruptions or costs; or other factors beyond our control. Any such disruption could negatively impact our financial performance or financial condition.

The inflation or deflation of commodity prices could affect our prices, demand for our products, our sales and our profit margins.

Prices of certain commodity products, including lumber and other raw materials, are historically volatile and are subject to fluctuations arising from changes in supply and demand, labor costs, competition, market speculation, government regulations, periodic delays in delivery and other factors. Rapid and significant changes in commodity prices may affect the demand for our products, our sales and our profit margins.

Our industry is highly competitive. If we are unable to compete effectively, our net sales and operating results will be reduced.

The building products distribution industry is highly competitive, particularly in the residential sector. Competitive factors in our industry include pricing, availability of product, level of service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings. Also, financial stability is important to suppliers and customers in choosing distributors for their products, and affects the favorability of the terms on which we are able to obtain our products from our suppliers and sell our products to our customers.

Some of our competitors are part of larger companies, and therefore have access to greater financial and other resources than those to which we have access. In addition, certain product manufacturers sell and distribute their products directly to customers.  We also face growing competition from online and multichannel retailers.  Additional manufacturers of products distributed by us may elect to sell and distribute directly to end-users in the future or enter into exclusive supply arrangements with other distributors. Competitive pressures from one or more of our competitors or our inability to adapt effectively and quickly to a changing competitive landscape could affect our prices, our margins or demand for our products and services. If we are unable to timely and appropriately respond to these competitive pressures, our net sales and net income will be reduced.

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Our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.

We operate our business primarily out of a single facility.  While we maintain insurance, including business interruption insurance, our warehouse facility could be materially damaged by natural disasters, fire, adverse weather conditions, or other unexpected events, which could materially disrupt our business. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition, and results of operations.

Our cash flows and capital resources may be insufficient to make required payments on our substantial indebtedness or to maintain acceptable liquidity.

We have a substantial amount of debt which could have important consequences to you. For example, it could:

· make it difficult for us to satisfy our debt obligations;

· make us more vulnerable to general adverse economic and industry conditions;

· limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions, and other general corporate requirements;

· expose us to interest rate fluctuations because the interest rate on the debt under our revolving credit facility is variable;

· require us to dedicate a substantial portion of our cash flows to payments on our debt, thereby reducing the availability of our cash flows for operations and other purposes;

· limit our flexibility in planning for, or reacting to, changes in our business, and the industry in which we operate; and

· place us at a competitive disadvantage compared to competitors that may have proportionately less debt, and therefore may be in a better position to obtain favorable credit terms.

In addition, our ability to make scheduled payments or refinance our obligations depends on our successful financial and operating performance, cash flows, and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business, and other factors, many of which are beyond our control. These factors include, among others:

· economic and demand factors affecting the building products distribution industry;

· external factors affecting availability of credit;

· pricing pressures;

· increased operating costs;

· competitive conditions; and

· other operating difficulties. 

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If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital, or restructure our debt. Obtaining additional capital or restructuring our debt could be accomplished in part through new or additional borrowings or placements of debt or equity securities. There is no assurance that we could obtain additional capital or refinance our debt on terms acceptable to us, or at all. In the event that we are required to dispose of material assets or operations to meet our debt service and other obligations, the value realized on the disposition of such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. We may incur substantial additional indebtedness in the future. Our incurring additional indebtedness would intensify the risks described above.

The instruments governing our indebtedness restrict our ability to dispose of assets and the use of proceeds from any such disposition.

As of November 1, 2016, we had outstanding borrowings of $9.0 million and excess availability of $4.5 million under the terms of the Debt Agreements. Our obligations under the Debt Agreements are secured by security interests in all of the assets of our operating subsidiary, BRJ LLC, including its inventories, accounts receivable, and proceeds from those items. The foregoing encumbrances, as well as covenants in the Debt Agreements, limit our ability to dispose of material assets or operations.  Accordingly, we may not be able to consummate any disposition of assets or obtain the net proceeds which we could realize from such disposition, and these proceeds may not be adequate to meet the debt service obligations then due. In the event of our breach of the Debt Agreements, we may be required to repay any outstanding amounts earlier than anticipated, and the lenders may foreclose on their security interests in our assets or otherwise exercise their remedies with respect to such interests.

The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a maximum fixed charge coverage ratio.

Our Debt Agreements contain various restrictive covenants and restrictions, including financial covenants that limit management’s discretion in operating our business. In particular, these instruments limit our ability to, among other things:

· incur additional debt;

· grant liens on assets;

· make investments, including capital expenditures;

· sell or acquire assets outside the ordinary course of business;

· engage in transactions with affiliates; and

· make fundamental business changes.

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The Credit Facility also requires us to maintain a fixed charge coverage ratio of 1.15 to 1.00.  If we fail to comply with the restrictions in the Debt Agreements or any other current or future financing agreements, a default may allow the creditors under the relevant instruments to accelerate the related debts and to exercise their remedies under these agreements, which typically will include the right to declare the principal amount of that debt, together with accrued and unpaid interest, and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose on assets that are subject to liens securing that debt, and to terminate any commitments they had made to supply further funds.  The exercise of any default remedies by our creditors would have a material adverse effect on our ability to finance working capital needs and capital expenditures.

Affiliates of Ancora control a significant portion of our outstanding common stock and may have conflicts of interest with other stockholders.

Ancora Advisors, LLC (“Ancora”), a private investment firm, and investment partnerships and individuals affiliated with Ancora beneficially owned approximately 36.6% of our outstanding common stock as of November 2, 2016. As a result, Ancora is able to exert significant influence on the election of our directors, our corporate and management policies, and the outcome of most corporate transactions or other matters submitted to our stockholders for approval, including potential mergers or acquisitions, asset sales, and other significant corporate transactions. This concentrated ownership position limits other stockholders’ ability to influence corporate matters and, as a result, we may take actions that some of our stockholders may not view as beneficial.

Three of our four directors and our Chief Executive Officer are affiliated with Ancora.  The interests of Ancora may not coincide with the interests of other holders of our common stock. Additionally, Ancora is in the business of making investments in companies, and may, from time to time, acquire and hold interests in businesses that compete directly or indirectly with us. Ancora may also pursue, for its own account, acquisition opportunities that may be complementary to our business, and as a result, those acquisition opportunities may not be available to us. So long as Ancora continues to own a significant amount of the outstanding shares of our common stock, it will continue to be able to strongly influence our decisions, including potential mergers or acquisitions, asset sales, and other significant corporate transactions.

We may not have sufficient working capital in the long term.

It is likely we may require additional funds in the long term depending upon the growth of our revenues and our business strategy.  We can give no assurance that we will be able to obtain sufficient debt or equity capital now or in the future to support our operations.  Should we be unable to raise sufficient debt or equity capital, we could be forced to cease operations.

These and other factors could affect our business, financial condition and results of operations. Also, it is possible that our financial results may be below the expectations of public market analysts.

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Risks Related to our Common Stock

We have not paid dividends in the past and do not expect to pay dividends in the future.  Any return on investment may be limited to the value of our common stock.

We have not paid cash dividends on our common stock and do not anticipate paying cash dividends in the foreseeable future.  The payment of dividends on our common stock would depend on our earnings, financial condition and other business and economic factors affecting us at such time as our board of directors may consider relevant.  If we do not pay dividends, our common stock may be less valuable because a return on your investment will only occur if its stock price appreciates.

There is a limited market for our common stock which may make it more difficult to dispose of your stock.

Our common stock is currently quoted on the OTC marketplace.  There is a limited trading market for our common stock.  Accordingly, there can be no assurance as to the liquidity of any markets that may develop for our common stock, the ability of holders of our common stock to sell shares of our common stock, or the prices at which holders may be able to sell their common stock.  Because of its limited trading volume, the price of our common stock may experience significant volatility for reasons that may be unrelated to our business or financial performance.

A sale of a substantial number of shares of our common stock may cause the price of the common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, the market price of our common stock could fall.  These sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Failure to maintain effective internal controls in accordance with Section 404 of the Sarbanes-Oxley Act and disclosure controls and procedures in accordance with Section 302 of the Sarbanes-Oxley Act could have a material adverse effect on our business and operating results and cause stockholders to lose confidence in our financial reporting.

Effective internal controls and disclosure controls and procedures are necessary for us to provide reliable financial reports and effectively prevent fraud.  If we cannot provide reliable financial reports or prevent fraud, our operating results could be harmed.

Under the current SEC regulations, we are required to include a management report on internal controls over financial reporting in our annual report on Form 10-K.  Although we are not currently aware of anything that would impact our ability to maintain effective internal controls, we have not obtained an independent audit of our internal controls, and, as a result, we are not aware of any deficiencies which would result from such an audit.

Based on our evaluation carried out as of June 30, 2016, we concluded that our disclosure controls and procedures as of June 30, 2016 were not effective because we did not have an adequate process or appropriate controls in place to support the accurate and timely reporting of our financial results and disclosures in our Form 10-Q for the period then ended. As a result, errors were identified primarily related to stock splits and their accounting treatment. Accordingly, we believe we have a material weakness because there is a reasonable possibility that a material misstatement to our interim or annual financial statements would not be prevented or detected on a timely basis.

Failure to achieve and maintain an effective internal control environment or effective disclosure controls and procedures could cause investors to lose confidence in our reported financial information, which could have a material adverse effect on our stock price.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, our financial statements (and notes related thereto) and other more detailed financial information appearing elsewhere in this current report on Form 8-K.  Consequently, you should read the following discussion and analysis of our financial condition and results of operations together with such financial statements and other financial data included elsewhere in this current report on Form 8-K.  Some of the information contained in this discussion and analysis or set forth elsewhere in this current report on Form 8-K, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.  You should review the “Risk Factors” section of this current report on Form 8-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

On November 1, 2016, Regional Brands acquired a majority interest in BRJ LLC by contributing $3,808,696 in exchange for 95.22% of BRJ LLC’s preferred membership interest and 76.17% of its common membership interest. In addition, Regional Brands loaned to BRJ LLC $7,141,304 under a senior subordinated term note which bears interest at 6% per annum and has scheduled annual principal payments with the balance due at maturity in five years. BRJ LLC’s minority members contributed $191,304 for the remaining preferred and common membership interests and loaned to BRJ LLC $358,696 on the same terms as the Regional Brands senior subordinated loan pursuant to a participation agreement.

BRJ LLC, on November 1, 2016, acquired the business of BRJ Inc. in an asset purchase transaction in exchange for cash of $12,900,000 and a subordinated note of $2,500,000.  BRJ LLC will continue to operate the business of BRJ Inc. as a consolidated subsidiary of Regional Brands.

The acquisition by BRJ LLC of BRJ Inc. is being accounted for under the acquisition method of accounting.  This results in BRJ LLC allocating the total consideration issued in the acquisition to the fair value of the assets acquired and liabilities assumed as of the acquisition date.

Following the acquisition of BRJ Inc., all of our business operations will be conducted through our consolidated subsidiary BRJ LLC. We are considered the accounting successor to BRJ Inc. Our financial statements, prior to the acquisition, will be presented on the predecessor basis of accounting.

Results of Operations

Results of Operations for the Year Ended December 31, 2015 as Compared to the Year Ended December 31, 2014

	December 31,
	2015			2014
Net sales	$	27,612,825		$	29,697,461
Cost of sales		19,234,166			21,553,011
Gross Profit		8,378,659			8,144,450
Operating Expenses:
Selling		3,960,768			3,638,096
General and Administrative		2,709,955			2,781,790
Operating income		1,707,936			1,724,564
Other income (expense)		(11,811	)		17,441
Net Income	$	1,696,125		$	1,742,005

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Net sales

Net sales for the year ended December 31, 2015 decreased by $2,084,636 or 7.0% from the prior year due to lower contract volume.

 Cost of sales

Cost of sales for the year ended December 31, 2015 decreased by $2,318,845 or 10.8% from the prior year. About two-thirds of this decrease was due to lower net sales and the remainder was due to favorable margins due to pricing and business mix.

Selling expenses

Selling expenses increased $322,672 or 8.9% from the prior year. Nearly all of this increase was due to increased compensation costs.

General and administrative expenses

General and administrative expenses decreased $71,835 or 2.6% from the prior year mostly due to a recovery of accounts receivable from customers that had been previously written off or reserved.

Results of Operations for the Six Months Ended June 30, 2016 as Compared to the Six Months Ended June 30, 2015

	June 30,
	2016		2015
Net sales	$	17,835,664	$	11,842,593
Cost of sales		12,687,111		8,239,735
Gross Profit		5,148,553		3,602,858
Operating Expenses:
Selling		2,016,740		1,753,327
General and Administrative		1,397,875		1,390,571
Operating income		1,733,938		458,960
Other income		7,582		1,668
Net Income	$	1,741,520	$	460,628

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Net sales

Net sales for the six months ended June 30, 2016 increased $5,993,071 or 50.6% from the first six months of 2015 due to higher contract volume as a result of sharply increased construction activity in our primary market area – Upstate New York.

Cost of sales

Cost of sales for the six months ended June 30, 2016 increased by $4,447,376 or 54.0% from the first six months of 2015 primarily due to the increase in net sales.

Selling expenses

Selling expenses for the six months ended June 30, 2016 increased $263,413 or 15.0% from the first six months of 2015. Nearly all of this increase was due to increased compensation costs.

General and administrative expenses

General and administrative expenses increased $7,304, less than 1%, from the first six months of the prior year mostly due to reduced outside services and supplies.

Liquidity and Capital Resources

For the purpose of financing the Acquisition and future expansion opportunities we completed the Private Placement on November 1, 2016; we issued 894,393 shares of our common stock at $13.50 per share.

We have a balance of cash and investments as of November 4, 2016 of approximately $5.8 million after funding the Acquisition.

Cash provided by (used in) operating activities

Cash used in operating activities was $86,139 for the six month period ended June 30, 2016 as compared to cash used in operating activities of $862,984 for the first six months of 2015, a decrease of $776,845. This decrease was due to the $1,280,892 increase in net income for the six month period ended June 30, 2016 offset by net changes in working capital components.

Cash provided from operating activities was $79,067 for the year ended December 31 2015 as compared to $3,106,255 for the year ended December 31, 2014, a decrease of $3,027,188. This decrease is almost entirely a result of the net changes in working capital components, mainly with regard to accounts receivable.

Cash used in investing activities

Cash used in investing activities consists mainly of purchases of equipment due to replacement or upgrades.  These purchases were nearly the same in the first six months of 2016 as compared to the first six months of 2015, $117,278 and $117,792, respectively.

Purchases of equipment increased by $19,770 to $218,267 for the year ended December 31 2015 as compared to $198,497 for the year ended December 31, 2014.

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Cash used in financing activities

Cash used in financing activities during the six month period ended June 30, 2016 decreased by $1,015,810 as compared to the first six months of 2015 due to a reduction in distributions to BRJ Inc. stockholders of $916,000 and cash provided by borrowings on BRJ Inc.’s line of credit of $99,810.

Cash used in financing activities during the year ended December 31, 2015 consisted solely of distributions to BRJ Inc. stockholders of $2,086,800, an increase of $214,419 in cash used in financing activities for the year ended December 31 2014, which totaled $1,872,381 and included $1,795,000 in stockholder distributions and $77,381 in debt repayment.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Seasonality

Our operations are generally not affected by seasonal fluctuations.  Most of our customers are in Upstate New York.  Harsh weather conditions in winter months can cause delays and additional costs during the fourth and first quarters of our fiscal year.

Inflation

We do not believe that inflation had a significant impact on our results of operations for the periods presented.  On an ongoing basis, we attempt to minimize any effects of inflation on our operating results by controlling operating costs and, whenever possible, seeking to ensure that our pricing to customers reflects increases in costs due to inflation.

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Directors and Executive Officers

The names, ages and positions of our directors and executive officers are as follows:

Name	Age		Position
Carl Grassi		57	Chairman of the Board
Fred DiSanto		54	Chief Executive Officer and Director
Brian Hopkins		40	Director
Jeff Anderson		46	Director and Secretary

The principal occupations for the past five years (and, in some instances, for prior years) of each of our directors and executive officers are as follows:

Carl Grassi became our Chairman of the Board at the closing of the Transactions.  Mr. Grassi is the chairman of the law firm McDonald Hopkins LLC, where he has worked as an attorney since July 1992.  Mr. Grassi is corporate counsel and business advisor to a number of middle-market and growth companies.  Mr. Grassi also authors the Small Business “Tax Tips” column for Crain’s Cleveland Business and has written other articles for national publications.  Mr. Grassi earned his law degree from Cleveland-Marshall College of Law and his Bachelor’s degree from John Carroll University.  The Board believes that Mr. Grassi’s substantial experience as an accomplished attorney, negotiator and general counsel to public and private companies will enable him to bring a wealth of strategic, legal and business acumen to the Board, well qualifying him to serve as a director.

Fred DiSanto became a member of our Board and our Chief Executive Officer at the closing of the Transactions.  Mr. DiSanto has worked at Ancora, a registered investment advisor, since June 2005, was named its Chief Executive Officer in January 2006 and was later named its Chairman in December 2014. He was the former President and Chief Operating Officer of Maxus Investment Group (“Maxus”) from 1998 until 2000, during which time he was responsible for the marketing, sales and financial operations. When Maxus was sold to Fifth Third Bank in January 2001, and until June 2005, Mr. DiSanto served as Executive Vice President and Manager of the Fifth Third Bank’s Investment Advisors Division overseeing investment management, private banking and trust and banking services. Prior to Maxus, Mr. DiSanto was Managing Partner at Gelfand Partners Asset Management from 1991 until its merger with Maxus in 1997. He began his investment career in 1985 with McDonald Investments in Institutional Equity Sales. Mr. DiSanto is currently on the boards of Medical Mutual of Ohio, Case Western Reserve University, The Cleveland Film Commission, WF Hann and Sons and The Eastern Company. He is also on the Executive Committee for the Board of Trustees at Case Western Reserve University. Mr. DiSanto is a former Chairman of the Board of Regents of St. Ignatius High School and former Chairman and current Trustee of the Greater Cleveland Sports Commission. He is a past Board Member of Lorain National Bank (LNBB), Parkview Federal Savings Bank (PVFC) and Axia NetMedia (AXX).  Mr. DiSanto earned a Bachelor of Science degree in management science from Case Western Reserve University and a Master in Business Administration degree from Case Western Reserve University, Weatherhead School of Management (Cleveland, Ohio).  The Board believes that Mr. DiSanto’s qualifications to serve on the Board include his substantial financial expertise and his prior experience as an executive officer of several companies.

Brian Hopkins has been a member of our Board since April 2016 and served as our President and Chief Executive Officer from April 2016 until the closing of the Transactions.  Mr. Hopkins has been a Partner and Portfolio Manager at Ancora since September 2003. He is a Managing Director of Corporate Development and a member of the Executive Committee at Ancora.  In his role as Portfolio Manager, he is responsible for making investment decisions for the firm’s alternative products. Prior to joining Ancora, Mr. Hopkins was an Investment Associate with Primus Capital Partners, one of the largest private equity firms in the Midwest, from August 2001 to September 2003.  Before joining Primus, he worked in the Investment Banking Division of Deutsche Bank in London as an Associate from August 1998 to June 2001. Mr. Hopkins is currently a director of First Menasha Bancshares (OTC:FMBJ). Mr. Hopkins earned a Bachelor of Science degree in finance from Georgetown University.  The Board believes that Mr. Hopkins’ substantial management and investment experience well qualify him to serve as a director.

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Jeff Anderson has been a member of our Board since April 2016.  Mr. Anderson joined Ancora in May 2010 as an Analyst and Portfolio Manager. He focuses on special situations such as liquidations, bankruptcies and spinoffs.  Prior to joining Ancora full-time, he served as a consultant to Ancora.  Mr. Anderson managed a special situations portfolio for Millennium Partners in New York from May 2006 to November 2008.  He spent six years at the investment firm Kellogg Group in New York, working in the Specialist Operations Group on the floor of the New York Stock Exchange from January 2000 to October 2000, before working in the firm’s proprietary trading operation from October 2000 to March 2006.  Mr. Anderson graduated with a Bachelor of Arts degree from Wilfrid Laurier University in Ontario, Canada.  Mr. Anderson is a CFA charterholder.  The Board believes that Mr. Anderson’s extensive business and capital markets experience well qualify him to serve as a director.

Board Committees

The Board does not currently have an audit committee, compensation committee or nominations and corporate governance committee.

Director Compensation

We currently do not compensate our directors nor do we intend to compensate our directors for the foreseeable future.

Indebtedness of Directors and Executive Officers

None of our directors or executive officers or their respective associates or affiliates is currently indebted to us.

Family Relationships

There are no family relationships among our directors and executive officers.

Legal Proceedings

As of the date of this current report, there is no material proceeding to which any of our directors, executive officers, affiliates or stockholders is a party adverse to us.

2016 Equity Incentive Plan

On April 8, 2016, we adopted the 2016 Equity Incentive Plan (the “Equity Incentive Plan”). The maximum number of shares of our common stock available for issuance under the Equity Incentive Plan through the grant of non-qualified stock options is 135,000 shares.  The purpose of the Equity Incentive Plan is to enable us to attract, motivate and retain key employees and directors and to provide an additional incentive for such individuals through stock ownership and other rights that promote and recognize the financial success and growth of our company.  A summary of the Equity Incentive Plan is set forth below.

Summary of the Equity Incentive Plan

Administration of the Equity Incentive Plan.  The Equity Incentive Plan is to be administered by the Board.  Subject to the other provisions of the Equity Incentive Plan, the Board has the authority, in its discretion: (i) to grant nonqualified stock options, referred to collectively as “Awards”; (ii) to determine the terms and conditions of each Award granted (which need not be identical); (iii) to interpret the Equity Incentive Plan and all Awards granted thereunder; and (iv) to make all other determinations necessary or advisable for the administration of the Equity Incentive Plan.

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Eligibility.  The persons eligible for participation in the Equity Incentive Plan as recipients of Awards include employees, consultants and non-employee directors to our company or any subsidiary or affiliate of our company.  In selecting participants, and determining the number of shares of common stock covered by each Award, the Board may consider any factors that it deems relevant.

Shares Subject to the Plan.  Subject to the conditions outlined below, the total number of shares of common stock which may be issued pursuant to Awards granted under the Equity Incentive Plan may not exceed 135,000 shares of common stock.

In the event of certain corporate events or transactions (including, but not limited to, the sale of all, or substantially all, of our assets or a change in our shares or capitalization), the Board, in its sole discretion, in order to prevent dilution or enlargement of a participant’s rights under the Equity Incentive Plan, will substitute or adjust, as applicable, and subject to certain Code limitations, the number and kind of shares of common stock that may be issued under the Equity Incentive Plan or under particular forms of Awards, the number and kind of shares of common stock subject to outstanding Awards, the option price applicable to outstanding Awards and other value determinations applicable to outstanding Awards.

Options.  An option granted under the Equity Incentive Plan is a non-qualified stock option.  Upon the grant of an option to purchase shares of common stock, the Board will specify the option price, the maximum duration of the option, the number of shares of common stock to which the option pertains, the conditions upon which an option will become vested and exercisable, and such other provisions as the Board will determine which are not inconsistent with the terms of the Equity Incentive Plan.  The purchase price of each share of common stock purchasable under an option will be determined by the Board at the time of grant, but may not be less than 100% of the fair market value of such share of common stock on the date the option is granted.  No option will be exercisable later than the 15th anniversary date of its grant.

Restrictions on Transferability.  The Awards granted under the Equity Incentive Plan are not transferable and may be exercised solely by a participant or his authorized representative during his lifetime or after his death by the person or persons entitled thereto under his will or the laws of descent and distribution or his designation of beneficiary or as otherwise required by law.  Any attempt to transfer, assign, pledge or otherwise dispose of, or to subject to execution, attachment or similar process, any Award contrary to the provisions set forth in the Equity Incentive Plan will be void and ineffective and will give no right to the purported transferee.

Change in Control.  The Board may provide for the acceleration of the vesting and exercisability of outstanding options in the event of a change in control of our company (as defined in the Equity Incentive Plan).

Termination of the Plan.  Unless sooner terminated as provided therein, the Equity Incentive Plan will terminate 10 years from April 8, 2016, the date the Equity Incentive Plan was adopted.  The termination of the Equity Incentive Plan will not adversely affect any Awards granted prior to Equity Incentive Plan termination.

Amendments to the Plan.  The Board may at any time alter, amend, modify, suspend or terminate the Equity Incentive Plan and any evidence of an Award in whole or in part; provided, however, that, without the prior approval of our stockholders, options issued under the Equity Incentive Plan to any individual will not be repriced, replaced, or regranted through cancellation, and no amendment of the Equity Incentive Plan will be made without stockholder approval if stockholder approval is required by law, regulation, or stock exchange rule; and except where required by tax law, without the prior written consent of the participant, no modification will adversely affect an Award under the Equity Incentive Plan.

Grants Under the Equity Incentive Plan

As of November 1, 2016, there are outstanding options to purchase 23,738 shares of common stock to Ancora, options to purchase 9,351 shares of common stock to each of Messrs. Hopkins and Anderson, and options to purchase 156 shares of common stock to Steven N. Bronson, our former President and Chief Executive Officer, under the Equity Incentive Plan.  Mr. Bronson’s remaining options to purchase 9,195 shares of common stock were forfeited upon his resignation as a director on May 16, 2016.  The foregoing options were granted under the Equity Incentive Plan in connection with the closing of the transactions under the SPA (as defined below under “Certain Relationships and Related Transactions”).

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Executive Compensation

Summary Compensation Table

The following table provides certain summary information concerning compensation awarded to, earned by or paid to our Chief Executive Officer and our other highest paid executive officers (collectively, our “named executive officers”) for fiscal years 2015 and 2014.

Name & Principal Position	Year	Salary ($)		Bonus ($)		Stock Awards ($)		Option Awards ($)		Non-Equity Incentive Plan Compensa­tion ($)		Change in Pension Value and Non-Qualified Deferred Compensa­tion Earnings ($)		All Other Compensa­tion ($)		Total ($)
Fred DiSanto(1)	2015		-		-		-		-		-		-		-		-
CEO	2014		-		-		-		-		-		-		-		-
Brian Hopkins(2)	2015		-		-		-		-		-		-		-		-
Former Pres. and CEO	2014		-		-		-		-		-		-		-		-
Steven N. Bronson(3)	2015		-		-		-		-		-		-		-		-
Former Pres. and CEO	2014		-		-		-		-		-		-		-		-

_______________

(1) Fred DiSanto was appointed to his position on November 1, 2016.

(2) Brian Hopkins was appointed to his positions on April 8, 2016 and resigned from them on November 1, 2016.

(3) Steven N. Bronson was appointed to his positions in September 1998 and resigned from them on April 8, 2016.  In September 2002, we entered into an agreement with Mr. Bronson, which provided that, effective October 1, 2002, Mr. Bronson waived and would not receive a salary from our company.

Employment Agreements

We do not currently have an employment agreement in place with our Chief Executive Officer, nor do we currently intend to provide compensation to our Chief Executive Officer in his capacity as such.

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Outstanding Equity Awards at Fiscal Year-End

The following table sets forth information regarding our outstanding equity awards as of September 30, 2016:

	Option awards									Stock awards
Name	Number of securities underlying unexercised options  (#) exercisable		Number of securities  underlying  unexercised  options  (#) unexercisable		Equity  incentive  plan awards: Number of  securities  underlying  unexercised unearned  options  (#)		Option  exercise price  ($)		Option expiration date	Number of shares or units of stock that have not vested  (#)		Market value of shares of units of stock that have not vested  ($)		Equity  incentive plan awards: Number of  unearned shares, units or other rights that have not vested  (#)		Equity  incentive plan awards: Market or payout value of  unearned shares, units or other rights that have not vested  ($)
Brian Hopkins		779		8,572		-	$	16.00	4/8/2031		-		-		-		-
Jeff Anderson		779		8,572		-	$	16.00	4/8/2031		-		-		-		-

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Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding the beneficial ownership of our common stock as of November 2, 2016 by (a) each person who is known by us to beneficially own 5% or more of our common stock, (b) each of our present directors and executive officers, and (c) all of our present directors and executive officers as a group.

Name(1)	Number of Shares Beneficially Owned		Percentage of Shares Beneficially Owned(2)
Executive Officers and Directors:
Carl Grassi		37,037		2.9	%
Fred DiSanto(3)		425,988		33.4	%
Brian Hopkins(4)		5,106		*
Jeff Anderson(4)		5,106		*
All executive officers and directors as a group (4 persons)		473,237		37.1	%
5% Stockholders:
Ancora Advisors, LLC(5)		388,953		30.5	%

_______________

* Less than one percent of outstanding shares.

(1) The address of each person is c/o Regional Brands Inc., 6060 Parkland Boulevard Cleveland, Ohio 44124.

(2) The calculation in this column is based upon 1,274,425 shares of common stock outstanding on November 2, 2016.  Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities.  Shares of common stock that are currently convertible or exercisable or that are convertible or exercisable within 60 days of November 2, 2016 are deemed to be beneficially owned by the person holding such securities for the purpose of computing the percentage of ownership of such person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

(3) Includes 259,305 shares owned directly by Merlin Partners LP and 129,648 shares owned directly by Ancora Catalyst Fund LP, as well as 18,147 shares owned directly by Mr. DiSanto’s wife.  Ancora is the general partner of each of Merlin Partners LP and Ancora Catalyst Fund LP.  Mr. DiSanto is the Chief Executive Officer of Ancora.  By virtue of this relationship, Mr. DiSanto may be deemed to beneficially own the shares of common stock owned directly by Merlin Partners LP and Ancora Catalyst Fund LP.  Mr. DiSanto disclaims beneficial ownership of the shares that he does not directly own.

(4) Includes 1,403 shares subject to options that are currently exercisable or exercisable within 60 days of November 2, 2016.

(5) Includes 259,305 shares owned directly by Merlin Partners LP and 129,648 shares owned directly by Ancora Catalyst Fund LP.  Ancora is the general partner of each of Merlin Partners LP and Ancora Catalyst Fund LP.  By virtue of this relationship, Ancora may be deemed to beneficially own the shares of common stock owned directly by Merlin Partners LP and Ancora Catalyst Fund LP.  Ancora disclaims beneficial ownership of the shares that it does not directly own.

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Certain Relationships and Related Transactions

Loans from Former Chief Executive Officer

Since February 3, 2009, our former president and principal executive officer, Steven N. Bronson, had loaned our company money to fund working capital needs to pay operating expenses. The loans were repayable upon demand and accrued interest at the rate of 10% per annum. As of March 31, 2016, the aggregate principal loan balance amounted to $186,196 and such loans had accrued interest of $65,464 through March 31, 2016. On April 8, 2016, pursuant to a Securities Purchase Agreement (the “SPA”), dated as such date, among our company, Merlin Partners LP and Ancora Catalyst Fund LP (affiliates of Ancora), and Steven N. Bronson (collectively, the “Purchasers”), we issued to Mr. Bronson 18,522 shares of our common stock in full satisfaction for Mr. Bronson’s loans to us.

Management Services Agreements

Ancora

On April 8, 2016, in connection with the transactions contemplated by the SPA, we entered into a Management Services Agreement (the “MSA”) with Ancora, whereby Ancora agreed to provide specified services to us in exchange for a quarterly management fee in an amount equal to 0.14323% of our stockholders’ equity (excluding cash and cash equivalents) as shown on our balance sheet as of the end of each of our fiscal quarters. The management fee with respect to each fiscal quarter is paid no later than 10 days following the issuance of our financial statements for such fiscal quarter, and in any event no later than 60 days following the end of each fiscal quarter. Ancora had agreed to waive payment of the management fee until such time as we consummated an acquisition. Ancora currently intends to continue to waive payment of the management fee even though we have consummated the Acquisition, but reserves the right to institute payment of the management fee at its discretion.

Lorraine Capital, LLC

On November 1, 2016, in connection with the Transactions, our subsidiary BRJ LLC entered into a Management Services Agreement (the “BRJ MSA”) with Lorraine Capital, LLC, a member of BRJ LLC, whereby Lorraine Capital, LLC agreed to provide specified management, financial and reporting services to us in exchange for an annual management fee in an amount equal to the greater of (i) $75,000 or (ii) five percent (5%) of the annual EBITDA (as defined in the BRJ MSA) of BRJ LLC, payable quarterly in arrears and subject to certain adjustments and offsets set forth in the BRJ MSA.  The BRJ MSA may be terminated by BRJ LLC, Lorraine Capital, LLC or Regional Brands at any time upon 60 days’ prior written notice and also terminates upon the consummation of a sale of BRJ LLC.

Under its LLC Agreement, BRJ LLC is overseen by a five-member Board of Managers, with three of the initial managers nominated by Lorraine Capital, LLC and two of the initial managers nominated by Regional Brands.  In the event the BRJ MSA is terminated for any reason, then either Regional Brands or (in the event the BRJ MSA is terminated by Regional Brands) Lorraine Capital, LLC may elect to have BRJ LLC repurchase the Lorraine Parties’ entire membership interest in BRJ LLC for the fair market value thereof as determined by an independent appraiser (or the amount the Lorraine Parties’ would have received upon the closing of a Qualified Offer, if one is then outstanding).  If the membership interests of the Lorraine Parties are so redeemed, Regional Brands will be entitled to remove all of the members of the Board of Managers nominated by Lorraine Capital, LLC and will have the sole right to appoint the full Board of Managers.  If the Lorraine Parties’ membership interests are not so redeemed (other than due to a breach of the LLC Agreement), Lorraine Capital, LLC will retain the right to appoint two members of the Board of Managers and Regional Brands will have the right to appoint three members of the Board of Managers.  In either of the foregoing cases, the Lorraine Parties’ consent will no longer be required to make any major decisions that would have otherwise required the consent of all of the members under the LLC Agreement.

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Registration Rights Agreement

On April 8, 2016, we entered into a Registration Rights Agreement (the “RRA”) among us and the Purchasers, pursuant to the terms of the SPA. Under the RRA, we granted to the Purchasers certain registration rights related to the aggregate 370,441shares of our common stock issued pursuant to the SPA and agreed to certain customary obligations regarding the registration of such shares, including indemnification.

Airways Door Service

We have a relationship with a union qualified commercial window subcontractor, Airways Door Service, Inc. (“ADSI”), which is advantageous to us in situations that require union installation labor. In connection with the Acquisition, individuals affiliated with Lorraine Capital, LLC acquired 57% of ADSI’s common stock; the remaining common stock is owned by three of our employees.  We paid ADSI for its services approximately $640,000 during the six months ended June 30, 2016 and $1,395,520 and $1,599,950 during the years ended December 31, 2015 and 2014, respectively.  In addition, we provide ADSI services utilizing an agreed-upon fee schedule.  These services include accounting, warehousing, equipment use, employee benefit administration, risk management coordination and clerical functions.  The fee for these services was approximately $23,000 for the six months ended June 30, 2016 and $47,350 and $44,200 during the years ended December 31, 2015 and 2014, respectively.

Loan Agreement

Under the Loan Agreement, we agreed to loan $7,500,000 to our subsidiary BRJ LLC.  We participated $358,696 of the Subordinated Loan to BRJ Acquisition Partners, LLC, an entity owned by individuals affiliated with BRJ Inc. and Lorraine Capital, LLC. The Subordinated Loan accrues interest at a rate of 6% per annum, payable quarterly on the first day of each calendar quarter.  BRJ LLC is required to repay a portion of the principal amount of the Subordinated Loan on each anniversary of the execution of the Loan Agreement.  The Subordinated Loan matures on November 1, 2021 and is secured by substantially all of BJR LLC’s assets. The Subordinated Loan and the security interest created under the Loan Agreement are subordinated to the Credit Facility and the security interest of the lenders under the Credit Facility.  All of the covenants contained in the Credit Agreement are incorporated by reference in the Loan Agreement. The Loan Agreement contains customary events of default, including in the case of an event of default under the Credit Facility.

Leases

Prior to May 12, 2016, we occupied a portion of the offices occupied by BKF Capital Group, Inc., 31248 Oak Crest Drive, Suite 110, Westlake Village, California 91361 on a month to month basis for a fee of $50 per month paid to BKF Capital Group, Inc. Steven N. Bronson, our former Chairman and CEO, is also the Chairman, CEO and controlling shareholder of BKF Capital Group, Inc.

Effective May 12, 2016, we relocated our principal offices to 6060 Parkland Boulevard, Cleveland, OH 44124.  We pay no rent for the use of the offices, which are located at the corporate headquarters of Ancora.

Description of Securities

Our authorized capital consists of 50,000,000 shares of common stock, par value $0.00001 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share.  As of November 2, 2016, we had 1,274,425 shares of Common Stock outstanding and no shares of preferred stock outstanding.

Common Stock

Holders of our common stock are entitled to one vote per share.  Our certificate of incorporation does not provide for cumulative voting.  Holders of our common stock are entitled to receive ratably such dividends, if any, as may be declared by our Board out of legally available funds.  However, the current policy of our Board is to retain earnings, if any, for the operation and expansion of our company.  Upon liquidation, dissolution or winding-up, the holders of our common stock are entitled to share ratably in all of our assets which are legally available for distribution.  The holders of our common stock have no preemptive, subscription, redemption or conversion rights.

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Registration Rights

On April 8, 2016, we entered into the RRA among us and the Purchasers, pursuant to the terms of the SPA. Under the RRA, upon the demand of holders of at least 25% of the shares of common stock issued pursuant to the SPA, we are obligated to file a registration statement with the SEC covering the resale of such shares of common stock that have been requested to be included.  The RRA provides for the Purchasers to make up to three demand registrations during the ten-year term of the RRA.   The RRA also provides for piggyback registration rights in the event we file certain registration statements in respect of our common stock with the SEC, as well as an unlimited number of registrations on Form S-3.  We are obligated to maintain the effectiveness of a demand registration statement from its effective date until the earlier of (a) the date on which all shares covered by the registration statement have been sold or (b) the third anniversary after the registration statement has been declared effective by the SEC.  We agreed to use our best efforts to have the registration statement declared effective by the SEC and to bear all expenses in connection with each registration of shares under the RRA, other than underwriting discounts and commissions.  There are no monetary penalties if the registration statement is not filed or does not become effective on a timely basis, and under the RRA we have agreed to indemnify the Purchasers in connection with any registration made pursuant to the terms of the RRA.

Trading Information

Our common stock is traded on the OTC marketplace under the trading symbol “RGBD”.  The closing price of our common stock on November 2, 2016 was $15.00.

Transfer Agent

The transfer agent and registrar for our common stock is Standard Registrar and Transfer Co., Inc., located in Draper, Utah.

Holders of Record

As of November 2, 2016, there were approximately 136 holders of record of our common stock.

Dividends

We have not paid any dividends on our common stock and we do not intend to pay any dividends on our common stock in the foreseeable future.

Indemnification of Directors and Officers

Under Delaware law, a Delaware corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe that the person’s conduct was unlawful.

In the case of a derivative action, a Delaware corporation may indemnify any such person against expenses, including attorneys’ fees, actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification will be made in respect on any claim, issue or matter as to which such person will have been adjudged to be liable to the corporation unless, and only to the extent, that the Court of Chancery of the State of Delaware or any other court in which such action or suit was brought determines that such person is fairly and reasonably entitled to indemnity for such expense.

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Delaware law permits a corporation to include in its certificate of incorporation a provision eliminating or limiting a director’s personal liability to a corporation or its stockholders for monetary damages for breaches of fiduciary duty as a director.  Delaware law provides, however, that a corporation cannot eliminate or limit a director’s liability for (i) any breach of the director’s duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; (iii) the unlawful purchase or redemption of stock or payment of unlawful purchase or redemption of stock or payment of unlawful dividends; or (iv) for any transaction from which the director derived an improper personal benefit. Furthermore, such provision cannot eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision became effective.

Our certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law and may indemnify our officers and any other person whom we have the power to indemnify against any liability, reasonable expense or other matter whatsoever.

Under Delaware law, a corporation may also purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability.

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

Note

In connection with the Acquisition, BRJ LLC issued the Note to BRJ Inc., which accrues interest at a rate of 5.25% per annum, payable quarterly, with the principal amount of the Note payable in equal quarterly installments of $62,500 commencing on November 1, 2018 and maturing on November 30, 2021.  The Note is subordinated to the Credit Facility and the Subordinated Loan.  The foregoing description of the Note is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Note, which is filed as Exhibit 10.2 hereto and is incorporated herein by reference.

Credit Facility

Under the Credit Agreement, BRJ LLC may borrow up to an aggregate amount of $6,000,000 under revolving loans and letters of credit, with a sublimit of $500,000 for letters of credit.  The Credit Facility is payable upon demand of KeyBank, N.A., or the lenders, or upon acceleration as a result of an event of default.  At the closing of the Acquisition, $1,500,000 was drawn under the Credit Facility to pay a portion of the purchase price and costs associated with the Acquisition, with the balance being available for general working capital of BRJ LLC.

Interest under the Credit Facility is payable monthly, starting on November 30, 2016, and accrues pursuant to the “base rate” of interest, which is equal to the highest of (a) KeyBank, N.A.’s prime rate, (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate of the Federal Reserve Bank of New York, and (c) one hundred (100) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an interest period of one month, plus any applicable margin.  The Credit Agreement also requires the payment of certain fees, including, but not limited to, letter of credit fees.

The Credit Facility contains customary financial and other covenant requirements, including, but not limited to, a covenant to not permit BRJ LLC’s consolidated fixed charge coverage ratio to exceed 1.15 to 1.00. The Credit Facility also contains customary events of default.

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The Credit Facility is secured by substantially all of BJR LLC’s assets.  The foregoing description of the Credit Facility is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Credit and Security Agreement, which is filed as Exhibit 10.1 hereto and is incorporated herein by reference.

Subordinated Loan

Under the Loan Agreement, we agreed to loan BRJ LLC $7,500,000.  We participated $358,696 of the Subordinated Loan to BRJ Acquisition Partners, LLC, an entity owned by individuals affiliated with BRJ Inc. and Lorraine Capital, LLC.  The Subordinated Loan accrues interest at a rate of 6% per annum, payable quarterly on the first day of each calendar quarter.  BRJ LLC is required to repay a portion of the principal amount of the Subordinated Loan on each anniversary of the execution of the Loan Agreement.  The Subordinated Loan matures on November 1, 2021 and is secured by substantially all of BJR LLC’s assets.  The Subordinated Loan and the security interest created under the Loan Agreement are subordinated to the Credit Facility and the security interest of the lenders under the Credit Facility.  All of the covenants contained in the Credit Agreement are incorporated by reference in the Loan Agreement. The Loan Agreement contains customary events of default, including in the case of an event of default under the Credit Facility.  The foregoing description of the Subordinated Loan is included to provide information regarding its terms.  It does not purport to be a complete description and is qualified in its entirety by reference to the full text of the Loan Agreement, which is filed as Exhibit 10.3 hereto and is incorporated herein by reference.

Item 3.02 Unregistered Sales of Equity Securities.

For the purpose of financing the Acquisition and potential future acquisitions, on November 1, 2016, we completed the Private Placement, issuing 894,393 shares of our common stock at a price per share of $13.50 to 93 accredited investors.  We received gross proceeds from the Private Placement of $12,074,305.50.  No placement agent or other financial intermediary was engaged or compensated in connection with the Private Placement.  After the closing of the Private Placement, we currently have outstanding 1,274,425 shares of common stock.

The aggregate proceeds of the Private Placement were used to finance the Acquisition and will be used for potential future acquisitions, as well.  We have no agreements or commitments with regard to any other acquisitions at this time.

The shares of common stock issued in the Private Placement were exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), as a sale by an issuer not involving a public offering.  None of the shares of our common stock issued in the Private Placement were registered under the Securities Act, or the securities laws of any state, and were offered and sold in reliance on the exemption from registration afforded by Section 4(a)(2) and corresponding provisions of state securities laws, which exempts transactions by an issuer not involving any public offering.  Such securities may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements and certificates evidencing such shares contain a legend stating the same.

Item 4.01 Changes in Registrant’s Certifying Accountant.

On November 1, 2016, upon the closing of the Transactions, we dismissed Anton and Chia, LLP (“A&C”), as our independent registered public accounting firm, which was recommended and approved by our Board on November 1, 2016.  A&C audited our financial statements for the fiscal year ended September 30, 2015.  The reason for the replacement of A&C was that, following the Acquisition, BRJ LLC will carry on the business formerly conducted by BRJ Inc., and the current independent registered public accountants of BRJ Inc. is the firm of Freed Maxick CPAs, P.C. (“Freed Maxick”).  We believe that it is in our best interest to have Freed Maxick continue to work with our business, and we therefore retained Freed Maxick as our new independent registered public accounting firm effective November 1, 2016.  Freed Maxick is located at 424 Main Street, Suite 800, Buffalo, New York 14202.

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The decision to change auditors and the appointment of Freed Maxick was recommended and approved by our Board.  During our two most recent fiscal years, and the subsequent interim periods, prior to November 1, 2016, we did not consult Freed Maxick regarding either: (i) the application of accounting principles to a specified transaction, completed or proposed, or the type of audit opinion that might be rendered on our company’s financial statements, or (ii) any matter that was either the subject of a disagreement as defined in Item 304(a)(1)(iv) of Regulation S-K or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K.

A&C’s report on our financial statements for the fiscal year ended September 31, 2015 did not contain any adverse opinion or disclaimer of opinion and was not qualified as audit scope or accounting principles, however such year-end report did contain a modification paragraph that expressed substantial doubt about our ability to continue as a going concern.

During the fiscal year ended September 30, 2015 and the subsequent interim periods prior to November 1, 2016, (i) there were no disagreements between us and A&C on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure which, if not resolved to the satisfaction of A&C, would have caused A&C to make reference to the subject matter of the disagreement in connection with its reports and (ii) there were no “reportable events,” as described in Item 304(a)(1)(iv) of Regulation S-K of the Securities Act or the Securities Exchange Act of 1934, as amended.  The decision to replace A&C was not the result of any disagreement between us and A&C on any matter of accounting principle or practice, financial statement disclosure or audit procedure.  Our Board deemed it in our best interest to change independent auditors following the closing of the Transactions.

We furnished A&C with a copy of this current report prior to filing this report with the SEC.  We also requested that A&C furnish a letter addressed to the SEC stating whether it agrees with the statements made in this report.  We will file a copy of A&C’s letter to the SEC with an amendment to this current report on Form 8-K.

Item 5.02  Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

Please see Item 1.01 (Entry into a Material Definitive Agreement) and Item 2.01 (Completion of Acquisition or Disposition of Assets) of this current report on Form 8-K, which are incorporated herein by reference.

Item 8.01  Other Events.

On November 3, 2016, we issued a press release announcing the Acquisition and the changes to our Board and management as previously described in this current report on Form 8-K.  A copy of the press release is attached as Exhibit 99.3 to this Current Report on Form 8-K and incorporated herein by reference.

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Item 9.01  Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired

The following financial statements of B.R. Johnson, Inc. are being filed as an exhibit to this report and are incorporated by reference herein:

Exhibit 99.1 – Financial statements of B.R. Johnson, Inc. as of and for the fiscal years ended December 31, 2015 and 2014 (restated) and as of and for the six months ended June 30, 2016 and 2015 (unaudited).

(b) Pro Forma Financial Information

The Regional Brands and BRJ Inc. unaudited pro forma combined consolidated balance sheet as of June 30, 2016 and the Regional Brands and BRJ Inc. unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2015 and the six months ended June 30, 2016 and the notes related thereto are filed as Exhibit 99.2 hereto and are incorporated in this report by reference.

The unaudited pro forma combined consolidated balance sheet is presented to show how Regional Brands might have looked at June 30, 2016 had the Acquisition occurred as of that date. The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2015 and the six-month period ended June 30, 2016 are presented to show how Regional Brands might have looked had the Acquisition occurred as of January 1, 2015, the beginning of the presented period.

The unaudited pro forma combined consolidated financial statements should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth under Item 2.01 of this current report, which disclosure is incorporated herein by reference, and the historical financial statements and accompanying notes of BRJ Inc. and Regional Brands.  The unaudited pro forma combined consolidated financial statements are not intended to represent or be indicative of our consolidated results of operations or financial condition that would have been reported had the Acquisition been completed as of the dates presented, and should not be taken as representative of the future consolidated results of operations or financial condition of Regional Brands.

(d) Exhibits

The exhibits listed in the following Exhibit Index are filed as part of this report.

2.1*	Asset Purchase Agreement, dated as of November 1, 2016, by and among B. R. Johnson, Inc., William A. Harfosh, Michael V. Howard, Anthony C. Minieri, Arthur P. Brillanti, B.R. Johnson, LLC, William J. Maggio, Charles A. Rider, Richard F. Gioia and Justin M. Reich.
3.1*	Certificate of Incorporation of Regional Brands Inc., as amended.
3.2*	Amended and Restated Bylaws of Regional Brands Inc., as amended.
4.1*	Form of Subscription Agreement of Regional Brands Inc., dated as of November 1, 2016.
10.1*	Credit and Security Agreement, dated as of November 1, 2016, by and among B.R. Johnson, LLC, the lending institutions party thereto and KeyBank National Association.
10.2*	Subordinated Promissory Note, dated as of November 1, 2016, issued by B.R. Johnson, LLC in favor of B. R. Johnson, Inc.
10.3*	Loan and Security Agreement, dated as of November 1, 2016, by and between B.R. Johnson, LLC and Regional Brands Inc.
10.4*	Management Services Agreement, dated as of November 1, 2016, by and between B.R. Johnson, LLC, and Lorraine Capital, LLC.
10.5*	Limited Liability Company Agreement of B.R. Johnson, LLC, dated as of November 1, 2016, by and among Lorraine Capital, LLC, Regional Brands Inc. and BRJ Acquisition Partners, LLC.

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10.6	Securities Purchase Agreement among the Company and Merlin Partners LP, Ancora Catalyst Fund LP, and Steven N. Bronson, dated as of April 8, 2016 (filed as Exhibit 10.25 to Regional Brand Inc.’s Current Report on Form 8-K filed with the SEC on April 8, 2016 and incorporated herein by reference).
10.7	Registration Rights Agreement among the Company and Merlin Partners LP, Ancora Catalyst Fund LP, and Steven N. Bronson, dated as of April 8, 2016 (filed as Exhibit 10.26 to Regional Brand Inc.’s Current Report on Form 8-K filed with the SEC on April 8, 2016 and incorporated herein by reference).
10.8	Management Services Agreement between the Company and Ancora Advisors, LLC, dated as of April 8, 2016 (filed as Exhibit 10.27 to Regional Brand Inc.’s Current Report on Form 8-K filed with the SEC on April 8, 2016 and incorporated herein by reference).
10.9	Regional Brands Inc. 2016 Equity Incentive Plan, dated April 8, 2016 (filed as Exhibit 10.28 to Regional Brand Inc.’s Current Report on Form 8-K filed with the SEC on April 8, 2016 and incorporated herein by reference).
21.1*	Subsidiaries of Regional Brands Inc.
99.1*	Financial statements of B.R. Johnson, Inc. as of and for the fiscal years ended December 31, 2015 and 2014 (restated) and as of and for the six months ended June 30, 2016 and 2015 (unaudited).
99.2*	Unaudited pro forma combined consolidated balance sheet of Regional Brands Inc. as of June 30, 2016 and unaudited pro forma combined consolidated statements of operations of Regional Brands Inc. for the year ended December 31, 2015 and the six months ended June 30, 2016.
99.3*	Press Release, dated November 3, 2016.

*   Filed herewith.

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SIGNATURES

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

Date:  November 7, 2016	REGIONAL BRANDS INC.
	By:	/s/ Fred DiSanto
		Fred DiSanto
		Chief Executive Officer

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EX-2.1

Exhibit 2.1

Execution Copy

ASSET PURCHASE AGREEMENT

by and among

B. R. JOHNSON, INC.,

WILLIAM A. HARFOSH,

MICHAEL V. HOWARD,

ANTHONY C. MINIERI

and

ARTHUR P. BRILLANTI

as “Sellers”

and

B.R. JOHNSON, LLC,

WILLIAM J. MAGGIO,

CHARLES A. RIDER,

RICHARD F. GIOIA

and

JUSTIN M. REICH

collectively, as “Buyer”

Dated as of November 1, 2016

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS	1
1.01   Defined Terms.	1
1.02   Rules of Construction.	14
ARTICLE 2	14
2.01   Assets and Shares to be Sold.	14
2.02   Assumed Liabilities.	15
2.03   Excluded Liabilities.	15
ARTICLE 3 CALCULATION AND PAYMENT OF PURCHASE PRICE	18
3.01   Purchase Price.	18
3.02   Payment of the Initial Aggregate Cash Purchase Price.	18
3.03   Calculation of Closing Net Working Capital.	18
3.04   Calculation of Final Cash Purchase Price.	20
3.05   Post-Closing Adjustment.	21
3.06   Allocation of Purchase Price.	21
ARTICLE 4	22
4.01   Time and Place of Closing.	22
4.02   Delivery by Sellers.	22
4.03   Delivery By Buyer.	23
ARTICLE 5	24
5.01   Organization of the Company and ADSI.	24
5.02   Authorization by the Company and the Shareholders.	25
5.03   Binding Agreements.	25
5.04   No Violation; Consents and Approvals.	25
5.05   Financial Statements.	26
5.06   Absence of Certain Changes.	27
5.07   Title to Properties; Encumbrances; Etc.	28
5.08   Real Property.	28
5.09   Tangible Personal Property and Fixtures.	30
5.10   Accounts Receivable.	30
5.11   Inventory.	30
5.12   Personal Property Leases.	30
5.13   Intellectual Property.	31
5.14   Litigation.	32
5.15   Customers and Suppliers.	32
5.16   Banks and Brokers.	32
5.17   Employees.	33
5.18   Employee Benefit Plans.	33
5.19   Consents and Approvals.	34
5.20   Environmental Matters.	35
5.21   Insurance.	38
5.22   Contracts and Commitments.	38
5.23   Tax Matters.	39
5.24   Labor Relations.	40
5.25   Assets Necessary to Business.	40
5.26   Compliance with Law.	40

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5.27   Brokers and Finders.	41
5.28   Product Warranties.	41
5.29   Potential Conflicts of Interest.	41
5.30   Solvency.	41
5.31   No Material Adverse Change.	41
5.32   Disclosure.	41
ARTICLE 6	42
6.01   Organization.	42
6.02   Authorization by Asset Buyer.	42
6.03   Binding Agreements.	42
6.04   No Violation.	42
6.05   Litigation.	43
6.06   Brokers and Finders.	43
6.07   Sufficient Funds.	43
ARTICLE 7	43
7.01   Access On and After the Closing Date.	43
7.02   Record Retention.	43
7.03   Confidentiality.	44
7.04   Employees.	44
7.05   Medical Benefits, Workers’ Compensation.	45
7.06   Nonassignable Contracts.	45
7.07   Public Announcements.	45
7.08   Discharge of Liens.	46
7.09   Consents, Etc.	46
7.10   Patents, Trademarks, Trade Names.	46
7.11   Execution of Further Documents.	46
7.12   Non-Competition.	47
7.13   Non-Solicitation of Employees.	48
7.14   Collection of Receivables.	48
7.15   Additional Covenants.	48
7.16   Transfer Taxes.	48
7.17   Cooperation.	48
7.18   Post-Closing Warranty Work.	49
7.19   Limitation on Activities of the Company	49
ARTICLE 8	50
8.01   Certificate of Buyer.	50
8.02   Consents and Approvals.	50
8.03   Officer’s Certificate.	50
8.04   Closing Documents.	50
ARTICLE 9	50
9.01   Consents and Approvals.	50
9.02   Delivery of Bill of Sale and Other Documents.	51
9.03   Certificate as to Authorization.	51
9.04   Officer’s Certificate.	51

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ARTICLE 10	51
10.01   Survival of Representations.	51
10.02   Indemnification by the Sellers.	52
10.03   Indemnification by the Asset Buyer.	53
10.04   Procedures for Indemnification.	55
10.05   Procedures for Third-Party Claims.	55
10.06   Remedies Exclusive.	56
10.07   Pre-Closing Investigations.	57
10.08   Effect of Indemnification.	57
ARTICLE 11	57
11.01   Amendment and Modification.	57
11.02   Waiver of Compliance.	57
11.03   Notices.	57
11.04   Consent to Jurisdiction.	58
11.05   Waiver of Jury Trial.	58
11.06   Assignment.	59
11.07   Governing Law.	59
11.08   Counterparts.	59
11.09   Headings.	59
11.10   Entire Agreement.	59
11.11   Third Parties.	59
11.12   Severability.	60
11.13   Specific Performance.	60
11.14   Sellers Representative.	60

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ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT, dated as of November 1, 2016 (this “Agreement”), is made by and among B.R. JOHNSON, LLC, a Delaware limited liability company with an office at 591 Delaware Avenue, Buffalo, New York 14202 (the “Asset Buyer”) and WILLIAM J. MAGGIO, CHARLES A. RIDER, RICHARD F. GIOIA and JUSTIN M. REICH, each individual with an office address at 591 Delaware Avenue, Buffalo, New York 14219 (individually and collectively, the “Shares Buyer”) (collectively the Asset Buyer and the Shares Buyer hereinafter, jointly and severally, the “Buyer”), and B. R. JOHNSON, INC., a New York corporation with offices at 6960 Fly Road, East Syracuse, New York 13057 (the “Company”), WILLIAM A. HARFOSH, an individual residing at 18 Landgrove Drive, Fayetteville, New York 13066 (“Harfosh”), MICHAEL V. HOWARD, an individual residing at 45 Dwight Avenue, Clinton, New York 13323 (“Howard”), ANTHONY C. MINIERI, an individual residing at 2345 Asburn Drive, Lafayette, New York 13084 (“Minieri”), and ARTHUR P. BRILLANTI, an individual residing at 4346 Chickadee Circle, Syracuse, New York 13215 (“Brillanti” and, together with the Company, Harfosh, Howard and Minieri, collectively, the “Sellers”).

RECITALS:

The Company is engaged in the sale and distribution of windows, doors and related hardware as well as specialty products for use in commercial and residential buildings (hereinafter the “Products”). ADSI is an affiliate of the Company that engages in the installation and repair of the Products sold by the Company. Harfosh, Howard, Minieri and Brillanti collectively own all the issued and outstanding equity interests in the Company and a majority of the issued and outstanding equity interests in ADSI.

The Buyer desires to purchase from the Sellers, and the Sellers desire to sell to Buyer, substantially all the assets of the Company and all the issued and outstanding shares of Class A common stock of ADSI which are owned by Harfosh, Howard, Minieri and Brillanti (Harfosh, Howard, Minieri and Brillanti being sometimes hereinafter referred to as the “Shareholders”) upon the terms and subject to the conditions of this Agreement.

CONSIDERATION:

NOW THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements of the parties contained herein, and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1
DEFINITIONS

1.01Defined Terms.

As used herein, the terms below shall have the following meanings.

“1377 Election” means the election under Code Section 1377 to close the books of ADSI as of the Closing Date.

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“Action” shall mean any action, Claim (as hereinafter defined), suit, litigation, proceeding or investigation.

“ADSI” means Airways Door Service, Inc., a New York corporation with offices at 6960 Fly Road, East Syracuse, New York 13057.

“ADSI Consideration” means the aggregate consideration paid for the ADSI Shares in the amount of One Hundred and 00/100 Dollars ($100.00).

“ADSI Shares” means all of the shares of Class A common stock, no par value per share of ADSI which are issued and outstanding as of the date of this Agreement.

“Affiliate” shall have the meaning set forth in the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Agreement” has the meaning set forth in the preamble to this Agreement.

“Ancillary Agreements” shall mean, collectively, (a) the Assignment and Assumption Agreement (as hereinafter defined); (b) the Instruments of Assignment (as hereinafter defined); and (c) the Other Instruments (as hereinafter defined).

“Asset Buyer” has the meaning set forth in the preamble to this Agreement.

“Assets” shall mean, except to the extent expressly limited by the terms of this Agreement, all of the right, title and interest in and to the business, properties, assets and rights of any kind, whether tangible, intangible, real, personal or mixed, which are used in connection with or relate to the conduct of the Business (as hereinafter defined) and which are owned by the Company, ADSI or any Seller or in which the Company, ADSI or any Seller has any direct or indirect interest, including without limitation, all right, title and interest of the Company, ADSI and each Seller in and to the following:

(a)all accounts receivable and notes receivable held by the Company, ADSI or any Seller and arising in connection with the conduct by the Company, ADSI or any such Seller of any portion of the Business, all insurance proceeds receivable by the Company, ADSI or any Seller in connection with the conduct by the Company, ADSI or any such Seller of any portion of the Business, and all notes, bonds and other evidences of indebtedness of any Person held by the Company, ADSI or any Seller and arising from the conduct by the Company, ADSI or any such Seller of any portion of the Business, but specifically excluding any Related Party Indebtedness;

(b)all rights which the Company, ADSI or any Seller may have under the terms of any and all Contracts (as hereinafter defined) but, with respect to Contracts to which any of the Sellers is a party, only to the extent such Contracts are assignable, including, but not limited to, all real property leasehold interests and all personal property leases included within the Contracts;

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(c)all Fixtures and Equipment (as hereinafter defined);

(d)all Inventory (as hereinafter defined);

(e)all Intellectual Property (as hereinafter defined);

(f)all rights which the Company, ADSI or any Seller may have under the terms of any and all Permits (as hereinafter defined), to the extent transferable;

(g)all Records (as hereinafter defined);

(h)all art work, display units, telephone and fax numbers and purchasing records arising in connection with or related to the conduct of the Business;

(i)all prepaid items and deferred charges of the Company, ADSI or any Seller including prepaid rentals, security deposits, taxes (other than prepaid income taxes) and all other unbilled charges and deposits relating to the operations of the Business specifically including prepaid insurance premiums and any associated insurance coverage and premiums, capital contributions, dividend pool collateral and fees paid to the Insurance Captive (as hereinafter defined), but only to the extent assignable;

(j)all rights whatsoever under or pursuant to all Contracts with any suppliers, including, without limitation all rights under or pursuant to all warranties, representations, rebates offered and guarantees made by suppliers in connection with any assets or services furnished to the Company, ADSI or to any Seller pertaining to the Business or affecting the assets of the Business, other than and only in the case of the Sellers, to the extent such warranties, representations and guarantees are assignable;

(k)all claims, causes of action, choses in action, rights of recovery and rights of set-off of any kind, against any Person, which are held by or exist in favor of the Company, ADSI or any Seller and which arise in connection with the conduct by the Company, ADSI or any such Seller of any portion of the Business, including, without limitation, any liens, security interests, pledges or other rights to payment or to enforce payment in connection with products delivered by Seller on or prior to the Closing Date;

(l)all good will and going concern value of the Business;

(m)all rights in the name “B. R. Johnson”, the registered trademarks associated with such name and any other trademarks or copyrights relating to or used by the Sellers in connection with the Business;

(n)all domain names owned or used by the Sellers including www.brjohnson.com;

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(o)all telephone numbers associated with the Business; and

(p)the Insurance Captive Shares.

Notwithstanding the foregoing, the Assets shall not include any of the Excluded Assets (as hereinafter defined).

“Assignment and Assumption Agreement” has the meaning set forth in Section 4.02(a) hereof.

“Assumed Liabilities” has the meaning set forth in Section 2.02 hereof.

“Balance Sheets” has the meaning set forth in Section 5.05(a) hereof.

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

“Basket Amount” has the meaning set forth in Section 10.02(d) hereof.

“Breach of Buyer Rep Claims” has the meaning set forth in Section 10.03(c) hereof.

“Breach of Seller Rep Claims” has the meaning set forth in Section 10.02(c) hereof.

“Brillanti” has the meaning set forth in the preamble to this Agreement.

“Business” means the activities, business and operations conducted by each of the Company and ADSI in connection with the sale and distribution by the Company of the Products (as defined in the recitals to this Agreement), the business and operations conducted by ADSI in connection with the installation of the Products by ADSI, the Assets owned or used by any of the Sellers and ADSI in connection with the sale, distribution and installation of the Products and the Liabilities (as hereinafter defined) which ADSI, the Sellers or any of the Assets is bound by to the extent that such Liabilities arise in connection with the sale, distribution and installation of the Products.

“Business Day” means each day other than a Saturday, Sunday or other day on which commercial banks in the State of New York are authorized or required by Law to be closed.

“Buyer” has the meaning set forth in the preamble of this Agreement.

“Buyer Indemnified Parties” has the meaning set forth in Section 10.02(a) hereof.

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“Cap” has the meaning set forth in Section 10.02(d) hereof.

“Cash Flow Statements” has the meaning set forth in Section 5.05(c) hereof.

“Chemical Substance” has the meaning set forth in Section 5.20(m)(i) hereof.

“Claim” shall mean any claim, demand, cause of action, chose in action, right of recovery or right of set-off of whatever kind or description against any Person.

“Closing” means the closing of the purchase and sale of the Assets and the Shares (as hereinafter defined) and the consummation of the other transactions which, pursuant to this Agreement, are to be consummated on the Closing Date.

“Closing Date” shall have the meaning set forth in Section 4.01 hereof.

“Closing Net Working Capital” shall mean the amount of the Net Working Capital (as hereinafter defined) of the Company, determined as of the Closing Date.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Company” as defined in the preamble to this Agreement.

“Company’s 401(k) Plan” has the meaning set forth in Section 2.02(g) hereof.

“Contracts” means, except as otherwise expressly provided by the terms of this Agreement, all oral and written agreements, commitments, understandings and contracts, to which the Company or ADSI is a party, to which any Seller is a party or by which any of the Assets of any Seller are bound, which agreements, commitments, understandings and contracts arise in connection with or relate to the conduct by the Company, ADSI or any Seller of any portion of the Business, including, without limitation, all purchase orders, sales orders, distribution agreements, sales representative agreements, agency agreements, franchise agreements, confidentiality agreements, collective bargaining agreements, employment agreements, guarantee agreements, non-competition agreements, real property lease agreements, personal property lease agreements, security agreements, mortgages, line of credit agreements, term loan agreements, promissory notes and other agreements relating to the borrowing of money from third parties, licenses and construction contracts.

“Control” (including its correlative meanings “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of a person, whether through the ownership of securities or partnership or other interests, by contract or otherwise.

“Covenant Term” has the meaning set forth in Section 7.12 hereof.

5

“Current Assets” means, as of any specified date, trade accounts receivable of the Company, net of applicable reserves, plus Inventory of the Company, net of applicable reserves, plus prepaid expenses of the Company (which for this purpose shall include the ARU Dividend Pool Collateral and the ARU Capital Contribution totaling $96,667), plus the amount, if any, by which the aggregate costs incurred by the Company on jobs in process exceeds the aggregate amount of the billings issued by the Company with respect to such jobs in process, in each case, calculated as of such specified date in accordance with GAAP (as hereinafter defined); but excluding cash and cash equivalents, any trade accounts or other receivables from any Related Party (as hereinafter defined) and Tax refunds. For purposes of clarity, the categories of assets which will be included in the definition of “Current Assets” are set forth on Exhibit “A” hereto.

“Current Liabilities” means, as of any specified date, (x) trade accounts payable and accrued expenses of the Company coming due within one year, customer deposits related to jobs expected to be completed within one year, accrued payroll, accrued sales commissions and the amount, if any, by which the aggregate billings issued by the Company with respect to jobs in process exceeds the aggregate costs incurred by the Company with respect to such jobs in process, in each case, calculated as of such specified date in accordance with GAAP; but excluding (y) Excluded Liabilities, including the current portion of any Liabilities arising under any capital leases, Intercompany Indebtedness (as hereinafter defined), Related Party Indebtedness (as hereinafter defined) other than the current portion of the Liabilities of the Company arising under the terms of the lease of the East Syracuse Facility. For purposes of clarity, (i) the portion of the Liabilities of the Company arising under the terms of the lease of the East Syracuse Facility is intended to be included in the definition of Current Liabilities; (ii) the categories of Liabilities which will be included in the definition of “Current Liabilities” are set forth on Exhibit “A” hereto; and (iii) except as set forth in clause (i) immediately above, no portion of the Indebtedness shall be included in Current Liabilities.

“East Syracuse Facility” means the real property and improvements located at 6960 Fly Road, East Syracuse, New York 13057.

“Employee Pension Plans” has the meaning set forth in Section 5.18(a)(iii) hereof.

“Employee Welfare Plans” has the meaning set forth in Section 5.18(a)(ii) hereof.

“Employment Agreements” has the meaning set forth in Section 5.17 hereof.

“Encumbrance” shall mean any mortgage, lien, pledge, conditional sale agreement, charge, easement or other security interest.

“Environment” has the meaning set forth in Section 5.20(m)(ii).

“Environmental and Safety Laws” has the meaning set forth in Section 5.20(m)(iii).

6

“Environmental Liabilities and Costs” has the meaning set forth in Section 5.20(m)(iv).

“ERISA” has the meaning set forth in Section 2.03(r).

“Established Net Working Capital” means $5,014,000.00.

“Excluded Assets” shall mean the following assets relating to the Business which, notwithstanding any other provision of this Agreement, are expressly excluded from the assets to be acquired by the Buyer pursuant to this Agreement: (a) all cash and cash equivalents; (b) all Permits (as hereinafter defined) and pre-paid expenses, which may not be transferred without the consent, novation, waiver or approval of a third person or entity and for which such consent, novation, waiver or approval has not been obtained or is not obtainable; (c) the East Syracuse Facility; (d) all rights and remedies of Sellers pursuant to this Agreement and the Ancillary Agreements; (e) any claims against any third parties for violations of any applicable anti-trust or similar laws; (f) any assets listed on Schedule 1.01(i) hereto; (g) all life insurance policies insuring the lives of a Shareholder; (h) any Tax refunds related solely to periods prior to the Closing Date and (i) any net earnings of ADSI through the date of the Closing which net earnings shall be the sole and exclusive property of the shareholders of ADSI as of the Closing, including but not limited to the Shareholders.

“Excluded Liabilities” shall have the meaning set forth in Section 2.03 hereof.

“Final Cash Purchase Price” shall be an amount determined in accordance with the provisions of Section 3.04 hereof.

“Final Purchase Price” shall have the meaning set forth in Section 3.01 hereof.

“Financial Statements” has the meaning set forth in Section 5.05(c) hereof.

“Fixtures and Equipment” means all of the equipment, furniture, fixtures, furnishings, accessories, vehicles, automobiles, trucks, machinery, tooling, molds, patterns, dies, jigs, lab equipment and other tangible personal property owned by the Company, ADSI or any of the Sellers and related to or used in connection with the conduct of the Business.

“Fundamental Representations” means the representations and warranties of the Sellers contained in Sections 5.01, 5.02, 5.03, 5.05, 5.07 and 5.27 and the representations and warranties of the Buyer contained in Sections 6.01, 6.02 and 6.03.

“GAAP” means United States generally accepted accounting principles, applied in a manner which is consistent with the manner in which such accounting principles have been applied by ADSI and the Company, as applicable.

“Governmental Authority” shall mean any court, government (federal, state, local, foreign or multinational) or other regulatory, administrative or governmental agency or authority.

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“Governmental Order” shall mean any judgment, decision, consent decree, injunction, ruling, writ or order of or entered by any Governmental Authority that is binding on any person or its property under applicable Law.

“Harfosh” has the meaning set forth in the preamble to this Agreement.

“Historical Business” means the Assets, properties, businesses and operations of the Business, as currently existing and conducted and as the same may have existed or been conducted, whether under the ownership of Sellers or any other person, at any time prior to the Closing Date.

“Howard” has the meaning set forth in the preamble to this Agreement.

“Income Statements” has the meaning set forth in Section 5.05 hereof.

“Income Taxes” shall mean all taxes (including franchise taxes), charges, fees, levies or other assessments imposed by any Taxing Authority (as hereinafter defined) and based on or measured solely with respect to net income or profits, including any interest, penalties or additions attributable or imposed with respect thereto.

“Indebtedness” means, with respect to the Company or any Seller without duplication: (a) any indebtedness (including interest, fees and prepayment premiums or penalties) of such Person (as hereinafter defined) for borrowed money or in respect of loans or advances and other third party financing; (b) any indebtedness evidenced by any note, bond, debenture, capital lease, credit agreement or other debt security; (c) any indebtedness for the deferred purchase price of property or services with respect to which such Person is liable, contingently or otherwise, as obligor or otherwise; (d) any commitment by which such Person assures a creditor, customer or another person against loss (including contingent reimbursement obligations with respect to letters of credit (drawn or undrawn), guarantees or similar arrangements backed by cash collateral, performance bonds or payment bonds); (e) any indebtedness of another Person which is guaranteed in any manner by such Person (including guarantees in the form of an agreement to repurchase or reimburse) (other than as an endorser of instruments in the ordinary course of business); and (f) any indebtedness secured by any lien, mortgage or other encumbrance on such Person’s assets. For purposes of clarity, the term Indebtedness does not include any of the above with respect to ADSI.

“Indemnification Claim(s)” has the meaning set forth in Section 10.02(a) hereof.

“Indemnified Party” has the meaning set forth in Section 10.04(a) hereof.

“Indemnifying Party” has the meaning set forth in Section 10.04(a) hereof.

“Independent Accountants” has the meaning set forth in Section 3.03(e) hereof.

8

“Initial Aggregate Cash Purchase Price” means an amount equal to Fifteen Million Four Hundred Thousand United States Dollars ($15,400,000.00) plus the ADSI Consideration.

“Initial Cash Purchase Price” means an amount equal to Twelve Million Nine Hundred Thousand United States Dollars (U.S. $12,900,000.00) plus the ADSI Consideration.

“Instruments of Assignment” has the meaning set forth in Section 4.02(b) hereof.

“Insurance Captive” means ARU SPC, LTD, a Cayman Islands Company.

“Insurance Captive Shares” means all equity securities and other ownership of the Company in the Insurance Captive.

“Intellectual Property” means all proprietary rights and intellectual property owned by the Company, ADSI or any Seller and used by the Company, ADSI or any such Seller in connection with the sale, distribution, installation or repair of any of the Products of the Business or otherwise used in connection with the conduct of any portion of the Business, including, without limitation, all patents, patent applications, patent disclosures and inventions (whether or not patentable and whether or not reduced to practice); all trademarks, service marks, logos, trade dress, trade names; all registered and unregistered statutory and common law copyrights; all registrations, applications and renewals for any of the foregoing; all trade secrets, confidential information, ideas, formulae, compositions, know-how, manufacturing and production process information and techniques, routing sheets, work standards, shop rights, research and development data and information, engineering and technical designs and drawings, specifications, designs, plans, improvements, proposals, technical and computer data, databases, systems, domain names, documentation, e-mail exchanges and software, licenses for any of the above and all other related information relating to the manufacture, sale or service of products of the Business or to the conduct of the Business.

“Intellectual Property License” has the meaning set forth in Section 5.13(a) hereof.

“Intercompany Indebtedness” means any and all Liabilities of ADSI to the Company and any and all Liabilities of the Company to ADSI.

“Inventory” means all inventory of the Company or ADSI held for resale and all tools, spare parts, repair process supplies, office supplies, advertising and promotional materials and supplies, containers, wrapping materials, packaging materials and similar items.

“IRS” has the meaning set forth in Section 5.18(b) hereof.

“knowledge”, “known by”, “known” and any similar phrase means, when used with respect to the Shareholders, that the Shareholders shall be deemed to have knowledge: (a) which is the same as the actual knowledge any of the individuals identified in Schedule 1.01 attached hereto after due inquiry has been made by any such individuals; and (b) of any other fact or circumstance that should reasonably have come to the attention of any of the individuals identified in Schedule 1.01 in the course of discharging his or her duties in a manner consistent with sound business practices.

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“Law” shall mean any law, statute, ordinance, regulation, rule, court decision and order of any Governmental Authority.

“Liabilities” shall mean any direct or indirect liability, indebtedness, obligation, commitment, expense, claim, deficiency, guaranty or endorsement of or by any person of any type, whether accrued, absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, whenever arising, including all costs and expenses relating thereto, and including without limitation those liabilities, indebtedness and obligations arising under any Law, Claim, Action, threatened Action, Governmental Order or any award of any arbitrator of any kind, and those arising under any Contract, commitment or undertaking.

“Losses” shall mean, in respect of the indemnification obligations of any party pursuant to this Agreement, any and all actual costs, losses, liabilities, obligations, damages, deficiencies and other reasonable out-of-pocket expenses, including without limitation interest, penalties, reasonable attorneys’ fees and all amounts paid in investigation, defense or settlement of Actions relating to Losses. Payment by Buyer of amounts for which Buyer is entitled to be indemnified hereunder, and payment by any Seller of amounts for which such Seller is entitled to be indemnified hereunder, shall not be a condition precedent to recovery of such Losses pursuant to the indemnification provisions of ARTICLE 10.

“Material Adverse Effect” shall mean any effect, change or circumstance that is or could reasonably be expected to be material and adverse to the Assets or to the financial condition or results of operations of the Business, other than any effect or change arising out of any adverse change or trend in the economy in general.

“Material Contracts” has the meaning set forth in Section 5.22(a)(vi) hereof.

“Minieri” has the meaning set forth in the preamble to this Agreement.

“Net Working Capital” shall, at a specified date, mean the amount by which the aggregate total Current Assets of the Company as of such date, exceeds the total Current Liabilities of the Company as of such date.

“ordinary course of business” or “ordinary course” or any similar phrase shall mean, when used in connection with the Business, the ordinary course of conduct of the Business consistent with the past practices used by the Company and ADSI, as applicable, in operating the Business.

“Other Instruments” has the meaning set forth in Section 4.02(d) hereof.

“Other Tax” or “Other Taxes” shall mean all taxes, charges, levies, fees or other assessments, including without limitation transfer, gross receipts, sales, use, service, occupation, ad valorem, property, payroll, personal property, excise, severance, premium, stamp, documentary, license, registration, social security, employment, unemployment, disability, environmental (including taxes under Section 59A of the Code), add-on, value-added, withholding (whether payable directly or by withholding and whether or not requiring the filing of a Tax Return (as hereinafter defined) therefor), commercial rent and occupancy taxes, and any estimated taxes, deficiency assessments, interest, penalties and additions to tax or additional amounts in connection therewith, imposed by any Taxing Authority (as hereinafter defined), but specifically excluding Income Taxes.

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“Permits” shall mean, collectively: (a) all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority required in connection with the operation of the Business as presently conducted; and (b) all licenses, permits, franchises, approvals, authorizations, consents or orders of, or filings with, any Governmental Authority required in connection with the ownership of any of the Assets.

“Permitted Encumbrances” shall mean: (a) Encumbrances imposed by Law, such as carriers’, warehousemen’s, mechanics’, materialmen’s, landlords’, laborers’, suppliers’ and vendors’ liens incurred in the ordinary course of business and securing obligations which are not yet due or which are being contested in good faith; (b) Permitted Tax Liens (as hereinafter defined); and (c) with respect to real property, use or zoning or planning restrictions of record (and, with respect to leasehold interests, Encumbrances and other obligations of record which have been incurred, created, assumed or permitted to exist and arise by, through or under a landlord or owner of the leased property, with or without consent of the lessee); in each case which do not, individually or in the aggregate, materially impair the use (in the manner currently used) or value of the parcel of property to which they relate.

“Permitted Tax Liens” shall mean: (a) liens securing the payment of Taxes (as hereinafter defined) which are either not delinquent or being contested in good faith by appropriate proceedings; and (b) liens for current Taxes not yet due and payable.

“Person” shall mean an individual, a partnership, a corporation, a limited liability company, a trust, an unincorporated organization, a government or any department or agency thereof or any other entity.

“Personal Property Leases” has the meaning set forth in Section 5.12 hereof.

“Personnel Practices” has the meaning set forth in Section 5.18(a)(i) hereof.

“Plan” has the meaning set forth in Section 5.18(a) hereof.

“Preliminary Allocation” has the meaning set forth in Section 3.06 hereof.

“Products” has the meaning set forth in the recitals to this Agreement.

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“Promissory Note” means a promissory note in the principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00), payable to the Company and in the form of Exhibit “B” attached hereto.

“Property” shall mean any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible

“Proposed Statement of Closing Net Working Capital” has the meaning set forth in Section 3.03(a) hereof.

“Purchase Price Allocation” has the meaning set forth in Section 3.06 hereof.

“Real Property” means all real property and any buildings, structures or other improvements located thereon, or portions thereof, which is used by the Company or ADSI in the conduct of the Business.

“Real Property Lease” has the meaning set forth in Section 5.08(b) hereof.

“Records” means all operating data and records of the Company and ADSI, whether printed or electronic, which are used by the Company or ADSI in connection with the conduct of any portion of the Business including, without limitation, customer and supplier lists, financial, accounting and credit reports, personnel files, records pertaining to suppliers and distributors, sales brochures, instruction manuals, promotional graphics, promotional literature, business and marketing plans, correspondence, budgets and all other files, documents and records of or pertaining to the Business.

“Related Party” means: (a) with respect to the Company, ADSI, any Affiliate of ADSI, each shareholder of the Company or ADSI and any Affiliate of any shareholder of the Company or ADSI; (b) with respect to ADSI, the Company, any Affiliate of the Company, each shareholder of ADSI or the Company and any Affiliate of any shareholder of ADSI or the Company; and (c) with respect to any of the Shareholders, the Company and ADSI and any Affiliate of the Company or ADSI.

“Related Party Indebtedness” means any and all Liabilities of ADSI for payment of any amount to any Related Party and any and all Liabilities of the Company for payment of any amount to any Related Party.

“Release” has the meaning set forth in Section 5.20(m)(v) hereof.

“Representative” shall mean, with respect to any Person, any officer, director, principal, attorney, agent, employee or other authorized representative of such Person.

“Sellers” has the meaning set forth in the preamble to this Agreement.

“Sellers’ Affiliates” has the meaning set forth in Section 7.15 hereof.

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“Seller Indemnified Parties” has the meaning set forth in Section 10.03(a) hereof.

“Sellers Representative” has the meaning set forth in Section 11.14 hereof.

“Sellers Representative Expenses” has the meaning set forth in Section 11.14 hereof.

“Shares” means shares of Class A common stock, no par value per share, of Airways Door Service, Inc. which are owned, as of the date hereof, by each of Harfosh, Howard, Minieri and Brillanti.

“Shares Buyers” has the meaning set forth in the preamble to this Agreement.

“Shareholders” has the meaning set forth in the recitals to this Agreement.

“Solvent” means, as to any Person at any time, that (a) the fair value of the Property of such Person is greater than the amount of such Person’s liabilities (including disputed, contingent and unliquidated liabilities) as such value is established and liabilities evaluated for purposes of Section 101(32)(A) of the Bankruptcy Code and, in the alternative, for purposes of the Uniform Fraudulent Transfer Act; (b) the present fair saleable value of the Property of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured; (c) such Person is able to realize upon its Property and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as they mature in the normal course of business; (d) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature; and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s Property would constitute unreasonably small capital.

“Structures” has the meaning set forth in Section 5.08(c) hereof.

“Survival Period” has the meaning set forth in Section 10.01(a) hereof.

“Tax” or “Taxes” shall mean Income Taxes and Other Taxes.

“Tax Return” shall mean any return, report or similar statement or form required to be filed with respect to any Tax (including any attached schedules and related or supporting information), including without limitation any information return, claim for refund, amended return or declaration of estimated Tax.

“Taxing Authority” shall mean any Governmental Authority (domestic or foreign) responsible for the imposition of any Tax or exercising Tax regulatory authority.

“Third Party Claim” has the meaning set forth in Section 10.04(a) hereof.

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“Transferring Employee(s)” has the meaning set forth in Section 7.06(b) hereof.

“Union Contracts” shall have the meaning set forth in Section 5.24 hereof.

“WARN Act” means the New York State Worker Adjustment and Retraining Notification Act.

1.02                 Rules of Construction. Unless the context of this Agreement otherwise clearly requires: (i) references to the plural include the singular, and references to the singular include the plural; (ii) references to any gender include the other genders; (iii) the words “include”, “includes” and “including” do not limit the preceding terms or words and shall be deemed to be followed by words “without limitation”; (iv) the term “or” has the inclusive meaning represented by the phrase “and/or”; (v) the terms “day” and “days” mean and refer to calendar day(s); (vi) the terms “year” and “years” mean and refer to calendar year(s); and (vii) the term “dollars” shall mean United States dollars.

(b)Unless otherwise set forth herein, references in this Agreement to: (i) any document, instrument or agreement (including this Agreement): (A) includes and incorporates all exhibits, schedules and other attachments thereto; and (B) means such documents, instruments or agreements, as amended, modified of supplemented from time to time prior to the Closing Date; and (ii) a particular law means such Law as in effect (including any amendments, modifications or supplements thereto) as of the Closing Date. All Article, Section, Annex, Exhibit and Schedule references herein are to Articles, Sections, Annexes, Exhibits and Schedules of this Agreement unless otherwise specified. This Agreement shall not be construed as if prepared by one of the parties, but rather according to its fair meaning as a whole, as if all parties had prepared it.

ARTICLE 2 

TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES;
PURCHASE AND SALE OF SHARES

2.01Assets and Shares to be Sold.

(a)       Subject to the terms and conditions of this Agreement, at the Closing provided for in Section 4.01 hereof, the Sellers will sell, convey, assign, transfer and deliver to Asset Buyer, and Asset Buyer will purchase, acquire and accept from the Sellers, free and clear of all Encumbrances other than Permitted Encumbrances, all of the right, title and interest of the Sellers at the time of the Closing Date, in and to all of the Assets other than: (i) the Excluded Assets; and (ii) any Assets to the extent that such Assets are owned by ADSI.

(b)       Subject to the terms and conditions of this Agreement, at the Closing provided for in Section 4.01 hereof, each of the Shareholders will sell, convey, assign, transfer and deliver to the Shares Buyer, and the Shares Buyer will purchase, acquire and accept from the Shareholders, free and clear of all Encumbrances, all of the right, title and interest of the Shareholders at the time of the Closing Date, in and to all of the shares of ADSI which are owned by the Shareholders (the “Shares”) which shall be allocated among the Shares Buyer as set forth on “Exhibit C” hereto.

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2.02                Assumed Liabilities.

Subject to the limitations contained in Section 2.02 hereof, Asset Buyer agrees to and on the Closing Date will assume and agree to pay, discharge or perform when lawfully due: (a) all Current Liabilities of the Company to the extent included in the calculation of Closing Net Working Capital; (b) subject to the provisions of Section 7.06 hereof, all Liabilities arising after the Closing Date under the terms of all Contracts, excluding Contracts to which ADSI is a party or by which the assets or properties of ADSI are bound, but only to the extent that: (i) such Contracts are in writing or are oral and are listed on Schedule 2.02, (ii) such contracts have been disclosed pursuant to Section 5.22 hereof; (c) the Liabilities arising under the terms of the Contracts identified in Section 2.02(b)(i) above are not specifically listed or otherwise described in the list of Excluded Liabilities set forth in Section 2.03 below; and (d) any liabilities of Sellers (including any fines or penalties that may be imposed) resulting from Sellers’ failure to comply with any requirements of the WARN Act (the Liabilities described in Section 2.02(a), (b), (c) and (d) above being hereinafter collectively referred to as the “Assumed Liabilities”).

2.03                Excluded Liabilities.

The Assumed Liabilities shall exclude and neither the Asset Buyer nor the Shares Buyer shall assume or be liable for any of the following Liabilities of the Sellers as the same shall exist at the Closing Date (the “Excluded Liabilities”):

(a)            any obligations and Liabilities of any Seller arising under this Agreement;

(b)            any Liabilities of any Seller for expenses incurred in connection with the sale of the Assets pursuant hereto, the sale of the Shares pursuant hereto and in connection with all other transactions contemplated hereby, including without limitation, the fees and expenses for services provided to Sellers and ADSI by counsel, investment advisors and independent auditors, provided however, in no event shall any Seller or ADSI be responsible for any amounts due to Buyer’s auditors, Freed Maxick, in connection with its audit of the Company;

(c)            all Liabilities of Sellers not otherwise assumed by the Buyer pursuant to Section 2.02 hereof and arising out of any actions taken or omitted to be taken or any transactions entered into by any Seller or ADSI prior to the Closing Date or any events occurring after the Closing Date, including, but not limited to, all Current Liabilities of ADSI, Liabilities of any Seller and Liabilities of ADSI arising in connection with any transaction with any Related Party to any Seller or ADSI;

(d)            all Current Liabilities of the Company to the extent not included in the calculation of Closing Net Working Capital:

(e)            all Liabilities of any Seller arising in connection with or related to any Indebtedness of any Seller or any Indebtedness of ADSI;

(f)            all Liabilities of any Seller arising under the terms of the Union Contracts arising on or prior to the Closing Date;

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(g)            all Liabilities of any Seller arising under terms of the 401(k) plan maintained by the Company (the “Company’s 401(k) Plan”) and all Liabilities of any Seller arising under the terms of any Employee Pension Plan;

(h)            all Liabilities relating to or arising under warranties extended by the Company or implied by Law with respect to Products of the Business which are sold on or prior to the Closing Date, except to the extent of any reserve therefore included in the calculation of the Final Purchase Price;

(i)            all Liabilities of any Seller arising out of the litigation matters described in Schedule 5.14;

(j)            all Liabilities of any Seller relating to the Excluded Assets;

(k)            all Liabilities of any Seller arising from claims or obligations with respect to workers’ compensation, product liability, tort liability or general liability, personal injury or property damage claims arising with respect to occurrences on or prior to the Closing Date;

(l)            all Liabilities of any Seller for federal, state or local Tax liabilities arising from the operations of the Company prior to the Closing Date, exclusive of any Taxes included in the calculation of Closing Net Working Capital (e.g., accrued payroll taxes) (it being understood and agreed that the Buyer shall not be deemed to be a transferee of any Seller or ADSI with respect to any Liabilities of any Seller for such Taxes, including, but not limited to “built in gains” taxes provided for by Section 1374 of the Code);

(m)            all Liabilities of any Seller to the extent due to facts and circumstances existing or arising prior to or on the Closing Date by reason of any violation by the Company of any state, federal or local Environmental and Safety Laws (as defined in Section 5.20 hereof);

(n)            all Liabilities of any Seller to the extent due to facts and circumstances existing or arising on or prior to the Closing Date by reason of any violation by any Seller of any Law;

(o)            all Liabilities of any Seller arising from any violation of, whether arising before or after the Closing Date, to the extent that the alleged violation first occurs prior to the Closing Date and all Liabilities arising from any infringement upon, whether arising before or after the Closing Date, to the extent that the alleged infringement first occurs prior to the Closing Date, any patent, trademark or other intellectual property rights of any Person;

(p)            all Liabilities of any Seller for any casualty, loss or accident (including, without limitation, destruction of or damage to property, personal injury or death) to the extent due to any facts or circumstances existing or arising: (i) prior to the Closing Date; or (ii) after the Closing Date but based upon Products sold by the Company prior to the Closing Date;

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(q)            all Liabilities arising as a result of a default in the performance of or other breach by any Seller of any Liabilities arising under the terms of any Permits or any Contracts to the extent that any such default in performance or breach is a result of facts or circumstances existing or arising prior to the Closing Date;

(r)            any Liabilities of the Company to provide any medical, dental, disability, accidental death and dismemberment, general or umbrella liability, life or other insurance coverage to or for the benefit of: (i) any former (whether by reason of retirement or other termination of employment) employee of the Company; or (ii) any of their respective dependents, including, but not limited to, any obligation to continue health insurance coverage for any former employee of the Company or his or her dependents as may be required by the applicable continuation coverage provisions of Subchapter I, Subtitle B, Part 6 of the Employee Retirement Income Security Act of 1974, as amended (hereinafter “ERISA”), exclusive of any Transferring Employee;

(s)            all Liabilities of the Company to maintain for the benefit of or make any payments or provide any benefits to: (i) any employee employed by the Company immediately prior to the Closing Date; (ii) any former (whether by reason of retirement or other termination of employment) employee of the Company; or (iii) any of their respective dependents, under the terms of any severance, change in control, bonus, retirement, pension, profit sharing, stock bonus, thrift, stock option, medical reimbursement, dependent care assistance, incentive compensation, deferred compensation, executive compensation, health insurance, retiree medical insurance, disability insurance, life insurance, or any other direct or indirect benefit plan, program or arrangement, whether formal or informal, maintained, contributed to or otherwise provided for by any Seller;

(t)            all Liabilities of ADSI and all other Liabilities of any Seller whether known, unknown, accrued, absolute, fixed or contingent which have not otherwise been assumed by the Asset Buyer pursuant to the Assignment and Assumption Agreement;

(u)            all severance obligations of the Company, ADSI or any other Seller;

(v)            all Liabilities related to the Insurance Captive and the ownership of the Insurance Captive Shares by the Company for periods prior to the Closing Date;

(w)            all Liabilities for accrued and unpaid premiums, capital contributions, dividend pool collateral and fees due to the Insurance Captive for periods prior to the Closing. For purposes of clarity, the Buyer shall be responsible for premiums and collateral requirements due for any periods after the Closing, including, but not limited to, the collateral requirements which must be posted with the Insurance Captive for the third, fourth and fifth policy renewal years and such amounts shall not be deemed to be an Excluded Liability; provided, further, however, (i) Buyer shall maintain the Company as a named insured under the Insurance Captive through May 31, 2017, (ii) after May 31, 2017, Buyer shall only be required to maintain the Company as a named insured under the Insurance Captive until the date on which Buyer provides notice, in writing, to the Insurance Captive of its intent to withdraw from the Insurance Captive and (iii) Buyer shall provide Sellers with notice of Buyer’s intent to withdraw from the Insurance Captive thirty (30) days prior to the date of the issuance by Buyer of such notice; and

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(x)            all Liabilities for Claims related to the operations of the Business completed prior to the Closing Date and subject to the provisions Section 7.18 hereof for Products sold and/or installed prior to the Closing Date.

For purposes of clarity, nothing herein contained is intended to or shall be construed as altering or modifying the liability of ADSI for any of its obligations regardless of the fact that Buyer is not assuming any such obligations. ADSI shall remain liable for and shall promptly pay any and all such obligations when due.

ARTICLE 3
CALCULATION AND PAYMENT OF PURCHASE PRICE

3.01                Purchase Price. The aggregate cash purchase price to be paid by the Buyer to the Sellers for the Business, the Assets and the Shares shall be equal to the Initial Aggregate Cash Purchase Price, adjusted (if applicable) as described in this Article 3. The final purchase price (the “Final Purchase Price”) shall be an amount equal to the Final Cash Purchase Price (as determined pursuant to Section 3.04 below) plus the assumption of the Current Liabilities assumed by Buyer in accordance herewith, determined as of the Closing Date. 

3.02                Payment of the Initial Aggregate Cash Purchase Price.

At the Closing, Buyer shall:

(a)            pay to or for the account of the Sellers, by wire transfer of immediately available funds to one or more accounts, specified in writing by the Sellers Representative, an amount equal to the Initial Cash Purchase Price; and

(b)            the Asset Buyer shall deliver the Promissory Note to the Company.

3.03                Calculation of Closing Net Working Capital.

(a)            As soon as practicable after the Closing Date, but in no event later than ninety (90) days following the Closing Date, Buyer shall prepare and deliver to the Company a statement of the Net Working Capital of the Company, determined as of the Closing Date (hereinafter the “Proposed Statement of Closing Net Working Capital”). For purposes of this Agreement, the Proposed Statement of Closing Net Working Capital shall be prepared based on the books and records of the Company shall be based on the Current Assets and the Current Liabilities transferred to the Asset Buyer and, for the avoidance of doubt, shall include only the Current Assets and the Current Liabilities of the Company (and not ADSI).

(b)            The Proposed Statement of Closing Net Working Capital shall be subject to verification and examination by Sellers and, in order to facilitate such verification and examination, Buyer shall, at such reasonable times and places as may be requested by Sellers Representative, deliver copies of all supporting documents to Sellers Representative and any Persons designated in writing by Sellers Representative and provide to Sellers Representative and any Person designated in writing by Sellers Representative, the right to examine or take copies of any work papers (other than proprietary work papers) used by Buyer in the preparation of the Proposed Statement of Closing Net Working Capital.

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(c)            Sellers Representative shall have a period of sixty (60) days after delivery of the Proposed Statement of Closing Net Working Capital to Sellers Representative, to present in writing to Buyer any objections Sellers Representative may have to the accuracy of the Proposed Statement of Closing Net Working Capital, which objections shall be set forth in reasonable detail. If no objections are raised within such sixty (60) day period, the Proposed Statement of Closing Net Working Capital shall be deemed to be accepted and approved by Sellers, the amount of the Net Working Capital as contained in the Proposed Statement of Closing Net Working Capital shall be deemed to be the amount of the Closing Net Working Capital and any amounts required to be paid by Section 3.05 hereof shall be paid by the Sellers or Buyer as the case may be.

(d)           If Sellers Representative shall disagree as to the accuracy of the amount of the Closing Net Working Capital as contained in the Proposed Statement of Closing Net Working Capital, Sellers Representative shall present to Buyer written notice within the sixty (60) day period described in Section 3.03(c) above specifying such disagreement. Following receipt of such notice by Buyer, Sellers Representative and Buyer shall use their best efforts to promptly resolve the matter or matters in disagreement. If Sellers Representative and Buyer resolve the matter or matters in disagreement, Sellers Representative and the Buyer shall either confirm or revise the original Proposed Statement of Closing Net Working Capital and the amount of the Closing Net Working Capital whereupon the amount of the Net Working Capital of the Business as contained in the confirmed or revised Proposed Statement of Closing Net Working Capital shall be deemed to be the amount of the Closing Net Working Capital, shall be final and binding upon the parties hereto and any amounts required to be paid as provided for in Section 3.05 hereof shall be paid by Sellers or Buyer as the case may be.

(e)           If Sellers Representative and Buyer are unable to resolve the matter or matters in disagreement within thirty (30) days following Buyer’s receipt of written notice from Sellers Representative of disagreement with the accuracy of the amount of the Closing Net Working Capital contained in the Proposed Statement of Closing Net Working Capital, then such disagreement or disagreements (and only such disagreement or disagreements) shall be referred for resolution to a nationally recognized firm of independent certified public accountants that is mutually agreeable to Buyer and Sellers Representative (the “Independent Accountants”). The Independent Accountants shall be directed to furnish written notice to Sellers Representative and Buyer of their resolution of any such disagreements referred to them (to the extent such amounts are in dispute) as soon as practicable but in no event later than twenty (20) days following the referral of such dispute to the Independent Accountants. Buyer and Sellers Representative shall instruct the Independent Accountants not to, and the Independent Accountants shall not, assign a value to any item in dispute greater than the greatest value for such item assigned by Buyer, on the one hand, or Sellers Representative, on the other hand, or less than the smallest value for such item assigned by Buyer, on the one hand, or Sellers Representative, on the other hand. Buyer and Sellers Representative shall also instruct the Independent Accountants to, and the Independent Accountants shall, make its determination based solely on presentations by Buyer and Sellers Representative that are in accordance with this Agreement (i.e., not on the basis of an independent review). The amount of the Closing Net Working Capital as determined by the Independent Accountants shall be final and binding upon the parties and any amounts required to be paid by Section 3.05 hereof shall be paid or adjusted (as hereinafter provided) as provided in Section 3.05 by Sellers or Buyer, as the case may be.

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(f)           Notwithstanding anything to the contrary in this Section 3.03 during the period that the determination of the Closing Net Working Capital shall remain in dispute, neither party shall be required to pay to the other party the amount that would otherwise be payable under this Section 3.03 and Section 3.04 if no such disagreement were to exist.

(g)           During and with respect to the audit and reviews referred to in this Section 3.03, Sellers and Buyer shall: (i) fully cooperate with all reasonable requests of Sellers Representative, Buyer and the Independent Accountants, as the case be; (ii) upon reasonable request make available to Sellers Representative, Buyer and the Independent Accountants, all work papers, (excluding proprietary programs and information of Sellers and Buyer) supporting schedules, documents and other information (including access to all appropriate knowledgeable personnel of Sellers) upon which the Proposed Statement of Closing Net Working Capital was prepared and the Closing Net Working Capital was determined; and (iii) promptly provide the Independent Accountants with such management representation letters (in customary form) executed by appropriate personnel of Sellers and Buyer as applicable, as may reasonably be requested with respect to the calculation of the Closing Net Working Capital and the preparation of the Closing Statement of Net Working Capital.

(h)          With the exception of the fees and expenses of the Independent Accountants, all fees and expenses of Sellers relating to the matters described in this Section 3.03 shall be borne by Sellers and all fees and expenses of the Buyer relating to the matters described in this Section 3.03 shall be borne by Buyer. The costs and expenses of the Independent Accountants shall be allocated between Buyer and Seller based upon the percentage of the portion of the contested amount not awarded to Buyer or Seller bears to the amount actually contested by such party. For example, if Seller claims the Closing Net Working Capital is $1,000 greater than the amount claimed by Buyer, and Buyer contests only $500 of the amount claimed by Seller, and if the Independent Accountants ultimately resolves the dispute by awarding Seller $300 of the $500 contested, then the costs and expenses of the Independent Accountants will be allocated 60% (i.e., 300 ÷ 500) to Buyer and 40% (i.e., 200 ÷ 500) to Seller.

3.04                Calculation of Final Cash Purchase Price.

The final cash purchase price (the “Final Cash Purchase Price”) shall be calculated as follows, as of the Effective Time (defined below):

(a)           if the amount of the Closing Net Working Capital, as determined as provided in Section 3.03 above exceeds the amount of the Established Net Working Capital, then the Final Cash Purchase Price shall be equal to the Initial Aggregate Cash Purchase Price plus the amount by which the amount of the Closing Net Working Capital exceeds the amount of the Established Net Working Capital; and

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(b)           if the amount of the Closing Net Working Capital is less than the amount of the Established Net Working Capital, then the Final Cash Purchase Price shall be equal to the Initial Aggregate Cash Purchase Price minus the amount by which the amount of the Closing Net Working Capital is less than the amount of the Established Net Working Capital.

3.05                Post-Closing Adjustment.

If the Final Cash Purchase Price as determined pursuant to the provisions of Section 3.04 above exceeds the Initial Aggregate Cash Purchase Price, the amount by which the Final Cash Purchase Price exceeds the Initial Aggregate Cash Purchase Price shall be paid by Buyer within ten (10) days following the determination of such amount, by wire transfer of immediately available funds to such account or accounts as may be specified by the Sellers Representative in writing. If the Final Cash Purchase Price as determined pursuant to Section 3.04 above is less than the Initial Aggregate Cash Purchase Price, the Shareholders shall, jointly and severally, be obligated to pay to the Buyer, no later than five (5) Business Days following the determination of the Final Cash Purchase Price and in one lump sum payment by certified check(s) or wire transfer of immediately available funds the amount by which the Initial Aggregate Cash Purchase Price exceeds the Final Cash Purchase Price.

3.06                Allocation of Purchase Price. Prior to the Closing, Buyer and Sellers shall prepare an example of an allocation of the Initial Aggregate Cash Purchase Price to and among the Assets and the Shares based on the Balance Sheets (the “Preliminary Allocation”). Within sixty (60) days after the Final Purchase Price is determined pursuant to Section 3.04, Buyer shall provide Sellers Representative with an allocation of the Final Purchase Price to and among the Assets and the Shares for all purposes (including Tax and financial accounting) (the “Purchase Price Allocation”). The Purchase Price Allocation shall be based on the same principals and methodologies employed in preparing the Preliminary Allocation based on the Closing Statement of Net Working Capital and the Final Cash Purchase Price. Buyer shall permit Sellers Representative to review and comment on the Purchase Price Allocation and shall consider such revisions as are reasonably requested by Sellers Representative provided, however, Buyer shall not be required to make any such revisions which Buyer reasonably believes are unnecessary or unwarranted. Buyer and Sellers agree that they will file their federal, state and local income tax returns and such other forms as may be required pursuant to Section 1060 of the Code on the basis of the allocation of the Final Purchase Price, unless otherwise required pursuant to a determination (as defined in Section 1313(a) of the Code). The Purchase Price Allocation shall be revised to appropriately take into account any adjustments made pursuant Section 3.05 to this Agreement, and Buyer shall deliver to Sellers Representative an amended Purchase Price Allocation reflecting any such revisions. Buyer shall permit Sellers Representative to review and comment on the amended Purchase Price Allocation and shall consider such revisions as are reasonably requested by Sellers Representative, provided, however, Buyer shall not be required to make any such revisions provided, however, Buyer shall not be required to make any such revisions which Buyer reasonably believes are unnecessary or unwarranted. Buyer and Sellers agree that they shall file their federal, state and local income tax returns (including amended returns and claims for refund) and information reports in a manner consistent with the amended Purchase Price Allocation, unless otherwise required pursuant to a determination (as defined in Section 1313(a) of the Code).

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ARTICLE 4

CLOSING

4.01                Time and Place of Closing.

The closing of the sale and purchase of the Assets and the sale of the Shares hereunder (the “Closing”) shall take place at the offices of Lippes Mathias Wexler Friedman LLP, 50 Fountain Plaza, Suite 1700, Buffalo, New York 14202 at 9:00 a.m. local time on the date hereof (the “Closing Date”), or at such place as the parties may mutually agree or remotely via the exchange of executed documents and other closing deliverables. The effective time of the Closing shall be deemed to be 12:01 a.m. (New York time) on the Closing Date (the “Effective Time”).

4.02                Delivery by Sellers.

At the Closing, Sellers will deliver to Buyer (unless delivered previously) the following:

(a)            a duly executed general conveyance, assignment and assumption agreement, in a form satisfactory to Buyer, providing for the sale, transfer, conveyance and assignment of the Assets from Sellers to the Asset Buyer and the assumption of the Assumed Liabilities by the the Asset Buyer (hereinafter the “Assignment and Assumption Agreement”);

(b)           duly executed and acknowledged instruments of assignment, in a form satisfactory to the Buyer and providing for the assignment by Sellers to Asset Buyer of the Intellectual Property and the Contracts (the “Instruments of Assignment”);

(c)           from each of the Shareholders, stock certificates representing the Shares owned by each such ADSI Shareholder, duly endorsed in blank form for transfer or accompanied by appropriate stock transfer powers and/or assignments separate from certificate duly executed in blank;

(d)           a lease of the East Syracuse Facility containing such terms as may be agreeable to the Buyer in the Buyer’s reasonable discretion;

(e)           such other bills of sale, endorsements, patent assignments, trademark assignments, and other assignments and instruments, in such form as in each case is satisfactory to the Buyer and as shall be sufficient to vest in the Asset Buyer, good, valid and marketable title to the Assets free and clear of all Encumbrances, except the Assumed Liabilities and the Permitted Encumbrances (hereinafter collectively the “Other Instruments”);

(f)            from each of the Shareholders, an employment agreement providing for the employment by the Asset Buyer of each such Shareholder upon terms mutually agreeable to the Asset Buyer and such Shareholder;

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(g)            all consents required to be obtained under the terms of the Material Contracts and the Permits in connection with or as a result or the assignment to Buyer of such Material Contracts and Permits and in connection with the sale of the Shares to the Buyer;

(h)           the certificate referenced in Section 9.03;

(i)            the officer’s certificate of each Seller, which is an entity, referenced in Section 9.04;

(j)            all consents, approvals and notices with respect to the transactions described in this Agreement and the Transaction Documents as are required to ensure that any Contract or Permit will continue in full force and effect without any change or modification after the consummation of the transactions described in this Agreement and the Transaction Documents;

(k)            customary documentation setting forth the amount of and procedure for paying off in full any Indebtedness outstanding as of the Closing, including (i) the amount of and the procedures for paying in full any Indebtedness outstanding as of the Closing and (ii) the agreement of each holder of Indebtedness (as applicable) that, upon receipt of a specified amount, its Indebtedness (as applicable) shall be paid in full and the agreement of each applicable creditor to release all of its Liens upon the assets of the Company or the Shares and terminate all U.C.C. financing statements filed in connection therewith; and

(l)            all other documents, instruments and writings reasonably required by Buyer to be delivered by Seller at or prior to the Closing Date pursuant to this Agreement or otherwise reasonably required in connection herewith or as, in the opinion of Buyer’s counsel, are necessary to transfer to Buyer good, valid and marketable title to the Assets and the Shares pursuant to this Agreement.

4.03                Delivery By Buyer.

At the Closing, the Asset Buyer will deliver to Sellers or the Sellers Representative, as applicable, (unless delivered previously) the following:

(a)            by wire transfer of immediately available funds to such account or accounts as may be designated by Sellers Representative in writing, an amount equal to the Initial Cash Purchase Price;

(b)           a duly executed lease of the East Syracuse Facility containing such terms as may be agreeable to Sellers in Sellers’ reasonable discretion;

(c)            the duly executed Assignment and Assumption Agreement;

(d)            the certificate of Buyer referenced in Section 8.01;

(e)            all consents and approvals as required by Section 8.02;

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(f)            a good standing certificate with respect to Buyer from the Secretary of State of the State of Delaware, dated as of a recent date prior to the Closing Date; and

(g)            the Promissory Note;

(h)           duly executed Employment Agreements with each of the Shareholders;

(i)            the officer’s certificate of Buyer referenced in Section 8.03;

(j)            a fully executed 1377 Election; and

(k)           all other documents, instruments and writings reasonably required by Sellers to be delivered by Buyer at or prior to the Closing Date pursuant to this Agreement or otherwise reasonably required in connection herewith.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SHAREHOLDERS

Each of the Shareholders hereby, jointly and severally, and the Company, jointly and severally with the Shareholders, represent and warrant to Buyer the following:

5.01                Organization of the Company and ADSI.

(a)            Each of the Company and ADSI is a corporation, duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation, as the case may be, and has the corporate power and authority to carry on its business as presently conducted. Each of the Company and ADSI is duly qualified to do business as a foreign corporation and in good standing in each jurisdiction in which the Company or ADSI is required to be so qualified. Except as set forth on Schedule 5.01 and the Company’s ownership of the Insurance Captive Shares, neither the Company nor ADSI has any subsidiaries owns any equity interest in any Person.

(b)            Schedule 5.01 attached hereto contains a true, correct and complete list of each Person which owns any shares of common stock of ADSI together with the number of share of common stock of ADSI owned by each such Person. Each of the Shareholders owns, beneficially and of record, all of the Shares identified in Schedule 5.01 as being owned by such Shareholder. Each of the Shares identified in Schedule 5.01 as being owned by a Shareholder have been duly authorized and validly issued, are fully paid and non-assessable and are owned, directly by the Shareholder identified in Schedule 5.01, free and clear of any Encumbrances (other than limitations on transfers arising under applicable securities Laws) and each of the Shareholders has good, valid and marketable title to the Shares which such Shareholder is identified as owning in Schedule 5.01. Except for as identified in Schedule 5.01, there are no stockholders agreements, voting trusts, proxies or other agreements or understandings with respect to the Shares or other equity securities of ADSI. Except for the Shares, there are no options, warrants, calls, rights, purchase rights, commitments or other agreements of any character to which ADSI or any of the Shareholders is a party or which is binding on ADSI or any of its Affiliates which would require, and there are no securities of ADSI outstanding which, upon conversion or exchange would require, the issuance, sale or transfer by ADSI of any additional shares of any capital stock or other equity securities of ADSI or other securities of ADSI or any Affiliate of ADSI which would be convertible into, exchangeable for or evidence the right to subscribe for or purchase any shares of capital stock or other equity interest in ADSI.

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5.02                Authorization by the Company and the Shareholders.

The Company has full corporate power and authority to enter into, execute and deliver this Agreement and the Ancillary Agreements and to carry into effect the transactions contemplated hereunder and thereunder. Each of the Shareholders has the requisite power and authority and full legal capacity to execute and deliver this Agreement and each of the Ancillary Agreements to which such Shareholder is a party and to carry into effect the transactions contemplated hereunder and thereunder. The execution, delivery and performance of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of the Company. No other corporate act or proceeding on the part of the Company is necessary to authorize the execution and delivery of this Agreement and the Ancillary Agreements or the consummation by the Company of the transactions contemplated hereby and thereby. This Agreement has been duly and validly executed and delivered by each of the Company and the Shareholders and each of the Ancillary Agreements to which the Company or a Shareholder will be a party will be duly executed and delivered by such Shareholder.

5.03                Binding Agreements.

This Agreement constitutes and, when executed and delivered on the Closing Date, each of the Ancillary Agreements will constitute, valid and binding obligations of the Company and each of the Shareholders enforceable against the Company and each of the Shareholders, as the case may be, in accordance with their respective terms, except that: (a) such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditor’s rights; and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

5.04                No Violation; Consents and Approvals.

Except as set forth in Schedule 5.04 attached hereto, neither the execution and delivery of this Agreement by the Sellers, nor the consummation by the Sellers of the transactions contemplated hereby will: (a) to the knowledge of the Shareholders: (i) violate any Law applicable to any of the Sellers or ADSI; or (ii) violate any Governmental Order applicable to any of the Sellers or ADSI; or (b) violate or conflict with or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, or result in the creation of any Encumbrance upon any of the Assets or any of the Shares under any term or provision of: (i) the charter documents or By-Laws of the Company or ADSI; or (ii) any lease, contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which any Seller or ADSI is a party or by which any Seller, ADSI or any of the assets or properties of any Seller or ADSI may be bound except (with respect to any such lease, contract, commitment, understanding, arrangement, agreement or restriction) as set forth on Schedule 5.04. Except for filings, consents, approvals or authorizations set forth on Schedule 5.04 attached hereto, no filing with, or consent, approval, authorization or action by, any governmental or regulatory authority is required in connection with the execution and delivery by the Sellers of this Agreement or the consummation by each of the Sellers of the transactions contemplated hereby.

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5.05                Financial Statements.

Sellers have heretofore delivered to Buyer: (a) the unaudited balance sheets of the Company and ADSI as of December 31, 2014 and December 31, 2015 as well as an unaudited balance sheet for each of the Company and ADSI as of August 31, 2016 (such balance sheets being hereinafter referred to as the “Balance Sheets”); (b) the unaudited income statements of earnings and retained earnings for each of the Company and ADSI for each of their respective fiscal years ending December 31, 2014 and 2015 as well as an unaudited statement of earnings and retained earnings for each of the Company and ADSI for the eight (8) month period ending August 31, 2016 (such statements of earnings and retained earnings being hereinafter referred to as the “Income Statements”); and (c) unaudited statements of cash flows for each of the Company and ADSI for each of the fiscal years of the Company and ADSI ending December 31, 2014 and December 31, 2015 as well as an unaudited statement of cash flows for each of the Company and ADSI for the eight (8) month period ending August 31, 2016 (such statements of cash flows being hereinafter referred to as the “Cash Flow Statements” and, together with the Balance Sheets and the Income Statements, collectively the “Financial Statements”). Each of the Financial Statements has been prepared in accordance with GAAP consistently applied with the past practices of the Company and ADSI, as the case may be (except the Financial Statements not with respect to a calendar year do not contain any required footnote disclosures, did not use the percentage of completion method of accounting for jobs in progress and do not reflect any ordinary year-end adjustments and accruals, none of which in the aggregate are material). Subject to the foregoing, each of the Balance Sheets fairly presents, respectively, the assets and liabilities of the Company and ADSI, as the case may be, as of the dates reflected therein. Subject to the foregoing, each of the Income Statements fairly presents, the revenues and expenses of the Company and ADSI, as the case may be, for the periods referred to therein, all in conformity with GAAP applied on a basis consistent with that of the preceding years of the Company and ADSI. The Cash Flow Statements fairly present the cash flows of the Company and ADSI, as the case may be, for the periods referred to therein (with the same exceptions set forth above). The Financial Statements were prepared using the financial books, records and accounts of the Company and ADSI, as the case may be, which financial books, records and accounts are accurate and complete in all material respects (with the same exceptions set forth above) and have been maintained, in all material respects, in accordance with good business practices and in accordance with all applicable Laws.

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5.06                Absence of Certain Changes.

Except as and to the extent set forth in Schedule 5.06 attached hereto, from July 1, 2015 through the date hereof, the Company and ADSI have not, and, as of the Closing Date, the Company and ADSI will not have:

(a)            suffered any material adverse change in the financial condition, Assets, Liabilities, business or results of the operations of the Business, other than changes relating to the economy in general;

(b)            sold, transferred or otherwise disposed of any Assets other than in the ordinary course of conduct of the Business;

(c)            created, incurred or permitted any Encumbrance (other than a Permitted Encumbrance) to exist with respect to any of the Assets;

(d)            canceled any claims which are material to the Assets;

(e)            changed the methods of valuing any Inventory;

(f)            disposed of any Intellectual Property or permitted any Intellectual Property to lapse;

(g)            made any single capital expenditure or commitment related to the Business which exceeds U.S. $50,000.00 for any addition or replacement to property, plant or equipment;

(h)            entered into any agreement with any customer, distributor or representative which was not in the ordinary course of conduct of the Business or entered into any other transaction which is material to the Assets or the Business;

(i)            made any change in any method of accounting or accounting practice or policy or in the manner in which the books, accounts or records of the Business are maintained;

(j)            made any changes in the warranty or other business policies of the Business;

(k)            granted any general increase in the compensation or benefits of officers or employees of the Company or ADSI other than in the ordinary course of business (including any such increase pursuant to any bonus, pension, profit sharing, severance or other plan or commitment);

(l)            made any loan or advance to any employee of the Company or ADSI in an amount of which is in excess of $5,000 other than routine travel advances in the ordinary course of business; or

(m)           agreed, whether in writing or otherwise, to take any of the actions set forth in this Section 5.06.

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Buyer hereby acknowledges that ADSI is including on its financial statements a liability for “accrued distributions due shareholders” representing the amount due the shareholders of ADSI as of the Closing Date with respect to the earnings for the first ten (10) months of calendar year 2016. Such amount shall be distributed by ADSI as soon after the Closing as is practicable to the shareholders of ADSI as of immediately prior to the Closing.

5.07                Title to Properties; Encumbrances; Etc.

Collectively, the Sellers and ADSI have good and valid title to or a valid enforceable license to use the Assets and, on the Closing Date, Sellers and ADSI collectively will have good and valid title to or a valid enforceable license to use the Assets free and clear of all Encumbrances other than Permitted Encumbrances. On the Closing Date, upon execution and delivery of this Agreement and the Ancillary Agreements, Buyer will receive good and valid title to or a valid enforceable license to use the Assets, free and clear of all Encumbrances other than Permitted Encumbrances. Except as set forth in Schedule 5.07 attached hereto, none of the Assets is, nor immediately prior to or at the Closing will be, subject to any Encumbrance other than Permitted Encumbrances.

5.08                Real Property. (a) Schedule 5.08(a) attached hereto contains a complete and correct list by address of all Real Property together with a statement of whether such Real Property is owned by the Company, ADSI or any Related Party and the identity of the owner of such Real Property or leased by the Company or ADSI and, in the case of any Real Property which is leased by the Company or ADSI, the identity of the lessor and lessee of such Real Property.

(b)            With respect to each parcel of Real Property which is identified in Schedule 5.08(a) as being leased, the Company or ADSI, as the case may be, has a valid and enforceable leasehold interest in such Real Property and, except as set forth in Schedule 5.08(b) attached hereto, the Company and ADSI, as the case may be, are not in default under the terms of any lease of any such Real Property (any such lease being hereinafter a “Real Property Lease”) and no event has occurred which, with the giving of notice of such event or the lapse of time from such event, or both the giving of notice and lapse of time from such event, would constitute an event of default on the part of the Company or ADSI under the terms of any such Real Property Lease. Except as set forth in Schedule 5.08(b), no filing with, consent, approval, authorization or other action is required from or of any party to the Real Property Leases in order for such Real Property Leases to be valid, binding and enforceable by the Buyer or ADSI after the Closing Date. To the knowledge of the Shareholders, no Person from whom the Company or ADSI leases any Real Property has defaulted under the terms of any such Real Property Lease and no event has occurred with respect to any such Person which, with the giving of notice of such event or the lapse of time from such event, or both the giving of notice and lapse of time from such event would constitute an event of default under the terms of any such Real Property Lease. Prior to the date hereof, the Sellers have delivered to Buyer true, correct and complete copies of each Real Property Lease.

(c)            Except as set forth in Schedule 5.08(c) attached hereto, to the knowledge of the Shareholders, all the buildings, offices and other structures (such buildings, offices and other structures being sometimes hereinafter collectively referred to as “Structures”) located at the Real Property have been adequately and properly maintained and are in good condition, free of defects.

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(d)            Except for matters relating to the compliance by the Business with applicable Environmental and Safety Laws (which matters are provided for in Section 5.20 hereof) and except as set forth in Schedule 5.08(d) attached hereto, to the knowledge of the Shareholders, the use, occupancy and ownership by the Company or ASDI of the Structures located at any Real Property which is owned or leased by the Company or ADSI in connection with the conduct of the Business does not violate, in any way, any restrictive covenants applicable to such Real Property or any building, zoning, health, fire, safety or other ordinances, codes or regulations of any Governmental Authority.

(e)            Except as set forth in Schedule 5.08(e) attached hereto, each of the Company and ADSI has obtained all approvals and Permits of all Government Authorities required in connection with the conduct of the Business at any Real Property which is identified as being owned or leased by the Company or ADSI in Schedule 5.08(a) attached hereto. To the knowledge of Sellers, the Structures located at the Real Property which is identified as being owned or leased by the Company or ADSI in Schedule 5.08(a) attached hereto and the conduct by the Company or ADSI, as the case may be, of the Business at the Real Property which is identified as being owned or leased by the Company or ADSI in Schedule 5.08(a) attached hereto are not dependent on and do not benefit from any “non-conforming use” or similar zoning classification.

(f)            Except as set forth in Schedule 5.08(f) attached hereto, there are no parties other than the Company or ADSI, as the case may be, in possession of any of the Real Property and to the knowledge of the Sellers, there are no leases, subleases, licenses or other agreements granting to any party or parties the right of use or occupancy of any of the Real Property.

(g)            Except as set forth in Schedule 5.08(g) attached hereto, the Real Property which is identified as being owned by the Company or ADSI in Schedule 5.08(a) attached hereto and the Structures located thereon are supplied with utilities and other services necessary and adequate for the use and operation of such Real Property and Structures, including, without limitation, gas, electricity, water, telephone and sanitary sewer. Except as set forth in Schedule 5.08(g) attached hereto, all such utilities enter onto the Real Property which is identified as being owned by the Company or ADSI in Schedule 5.08(a) attached hereto from public roads which abut such Real Property or from adjoining property in accordance with valid, permanent, irrevocable and appurtenant easements benefiting such Real Property.

(h)            Except as set forth in Schedule 5.08(h) attached hereto, each parcel of Real Property which is identified as being owned by the Company or ADSI in Schedule 5.08(a) attached hereto abuts on and has direct pedestrian and vehicular access to public roads or has access to public roads across adjoining property in accordance with valid, permanent, irrevocable and appurtenant easements benefiting such Real Property. All points of pedestrian and vehicular access to any Real Property which is identified as being owned by the Company or ADSI in Schedule 5.08(a) attached hereto from any public road are adequate for the current use and operation of the Real Property.

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(i)            There is no pending, or to the knowledge of Shareholders, threatened condemnation proceedings or other Actions relating to any Real Property which have been instituted (or threatened to be instituted) by any Governmental Authority.

5.09                Tangible Personal Property and Fixtures.

Schedule 5.09 attached hereto contains a listing as of August 1, 2016, of all of the individual items included within the Fixtures and Equipment which have a value, determined as of August 1, 2016 in excess of U.S. $25,000.00. Each of the Company and ADSI has good and valid title to all Fixtures and Equipment which they purport to own, free and clear of all Encumbrances other than Permitted Encumbrances. Except as set forth in Schedule 5.09 attached hereto, all the Fixtures and Equipment listed in Schedule 5.09 (other than spare parts or salvage items contained in such list) are in good operating condition and repair, reasonable wear and tear excepted, are useable in the ordinary course of the Business and no material maintenance, replacement or repair of any such Fixtures and Equipment has been deferred or neglected.

5.10                Accounts Receivable.

Schedule 5.10 attached hereto contains a true, correct and complete list of the accounts receivable of the Business determined as of August 31, 2016. All of the accounts receivable identified in Schedule 5.10 attached hereto arose from bona fide transactions in the ordinary course of business and are and will be good and collectible net of any bad debt reserve set forth in the applicable Balance Sheets which have been prepared as of August 31, 2016.

5.11                Inventory.

The Inventory consists of items of a quality and quantity useable and saleable in the ordinary course of conduct of the Business. The value of the Inventory as reflected in the applicable Balance Sheets does not include any of such Inventory which is obsolete, of below standard quality or in excess of the reasonably estimated usage requirements of the Business.

5.12                Personal Property Leases.

Schedule 5.12 attached hereto contains a complete and accurate list of each lease of any Fixtures and Equipment leased by the Company or ADSI and used in connection with or relating to the Business, which lease either: (a) provides for annual lease payments in excess of U.S. $25,000.00; or (b) has a term in excess of one year and which is not cancelable upon thirty (30) or fewer days’ notice without any Liability, penalty or premium becoming due (such leases being hereinafter individually a “Personal Property Lease” and collectively the “Personal Property Leases”). Prior to the date hereof, Sellers have delivered to Buyer true, complete and correct copies of all Personal Property Leases including all amendments thereof and all modifications thereto. Schedule 5.12 attached hereto also sets forth a complete and accurate list of each of the Personal Property Leases with respect to which, consent to assignment by the Company of such Personal Property Leases and with respect to which consent to the sale of Shares is required in order for any such Personal Property Leases to be valid, and in full force and effect after the Closing. Each of the Company and ADSI, as the case may be, has a good and valid leasehold interest in all of the Fixtures and Equipment which are being leased from any Person, including, but not limited to, Fixtures and Equipment which are leased pursuant to the Personal Property Leases. Neither the Company nor ADSI is in default with respect to any terms or conditions of any of the Personal Property Leases to which it is a party and upon assignment by the Company to the Buyer of any such Personal Property Leases and receipt of any consents with respect thereto as described in Schedule 5.12 such Personal Property Leases, will be in full force and effect. To the knowledge of the Shareholders, there is no basis for any claim that any party with whom the Company or ADSI has entered into any of the Personal Property Leases is in default with respect to its obligations under any such Personal Property Lease. Neither the Company nor ADSI has taken any action, or failed to take any action, which would render any of the Personal Property Leases to which it is a party, invalid, nonbinding or unenforceable, and there are no overdue unpaid liabilities existing with respect to any of the Personal Property Leases.

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5.13                Intellectual Property.

(a)            Schedule 5.13 attached hereto contains an accurate and complete description of all patents, patent applications, trademarks, trademark applications, copyrights, copyright applications and domain names included with the Intellectual Property. Schedule 5.13 attached hereto also contains a list of each agreement (other than agreements relating to “off-the-shelf” software) providing the Company or ADSI a license or other right to use any Intellectual Property used by the Business and a list of each agreement pursuant to which the Company or ADSI has granted any person any license or other right to use any Intellectual Property (each such agreement being hereinafter an “Intellectual Property License”). Schedule 5.13 attached hereto also contains a brief description of any Intellectual Property which is not patented, trademarked or copyrighted and which is material to the Business, including any software (other than “off-the-shelf” software). The use of the Intellectual Property by the Company and ADSI, as the case may be, does not infringe on any patents, trademarks or copyrights or any other rights of any Person. Except as set forth in Section 5.13, all the Intellectual Property is owned by the Company or ADSI, free and clear of any Encumbrances, other than Permitted Encumbrances. Except as set forth in Schedule 5.13, the Company and ADSI have not received any written notice of any infringement or unlawful use of any Intellectual Property identified in Schedule 5.13 and to the knowledge of the Shareholders, no such Action is threatened and no Person has infringed or is infringing on any Intellectual Property. During the five (5) year period ending on the date hereof, there have not been any Claims made by the Company or ADSI or against the Company or ADSI with respect to infringement of any Intellectual Property used in or relating to the Business.

(b)            Each Intellectual Property License is valid, binding, in full force and effect and enforceable against the Person with whom the Company or ADSI has entered into such Intellectual Property License. Except as set forth in Schedule 5.13(b), no filing with, consent, approval, authorization or other action is required from or of any party to the Intellectual Property Licenses in order for such Intellectual Property Licenses to be valid, binding and enforceable by the Buyer or ADSI, as the case may be, after the Closing Date. Except as set forth in Schedule 5.13(b) attached hereto, the Company and ADSI, as the case may be, are not in default under the terms of any Intellectual Property License and no event has occurred with respect to either which, with the giving of notice of such event or the lapse of time from such event, or both the giving of notice and lapse of time from such event, would constitute an event of default by the Company or ADSI under the terms of any such Intellectual Property License. To the knowledge of the Shareholders, no Person from whom the Company or ADSI has entered into any Intellectual Property License has defaulted under the terms of any such Intellectual Property License and no event has occurred with respect to any such Person which, with the giving of notice of such event or the lapse of time from such event, or both the giving of notice and lapse of time from such event, would constitute an event of default under the terms of any such Intellectual Property License. Prior to the date hereof, the Sellers have delivered to Buyer true, correct and complete copies of each Intellectual Property License.

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5.14                Litigation.

Except as set forth in Schedule 5.14(i) attached hereto, as of the date hereof and as of the Closing Date, there are no Actions or Claims (including without limitation, product liability claims or claims that the Company or ADSI has breached or otherwise failed to perform its obligations under any product or service warranties described in Section 5.28 hereof) or legal, administrative, equitable or arbitration proceedings or outstanding Governmental Orders pending or, to the knowledge of the Shareholders, threatened against or involving the Company, ADSI, the Shareholders, the Assets, the Shares or the Business. In addition, except as set forth in Schedule 5.14(ii), during the five (5) year period ending on the date hereof, there have been no Actions or Claims which, if they were pending or threatened as of the date hereof, would be required to be disclosed in Schedule 5.14(i) pursuant to the provisions of the preceding sentence.

5.15                Customers and Suppliers.

Except as set forth in Schedule 5.15 attached hereto, neither the Company nor ADSI is engaged in any disputes with any material customers or material suppliers of the Business. To the knowledge of the Sellers, neither the Company nor ADSI has received or obtained any credible information reasonably suggesting the possibility of a loss of a material supplier to the Business or the possibility of a loss of any group of suppliers of the Business. Neither the Company nor ADSI has received or obtained any credible information reasonably suggesting the loss of any customer or related group of customers of the Business where the annual revenues generated by such customer or related group of customers constitutes twenty percent (20%) or more of the annual revenues, in the aggregate, of the Business for the fiscal years of the Company and ADSI ending December 31, 2016.

5.16                Banks and Brokers.

Schedule 5.16 attached hereto sets forth the name of each bank, trust company, securities or other broker or other financial institution with which the Company and ADSI have an account, lock box, safe deposit box or vault, or otherwise maintains relations in connection with the conduct by the Company or ADSI of the Business, the account number of any such account, lock box, safe deposit box or vault and the name of each individual having any authority to withdraw any funds contained in any such account, lock box, safe deposit box or vault.

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5.17                Employees.

Schedule 5.17 attached hereto contains a complete and correct list of each individual who, as of the date hereof, is employed by the Company or ADSI, including, each active employee and each employee classified as inactive as a result of disability, leave of absence or other absence. The Company and ADSI, as applicable, have a completed Form I-9 which verifies the identity and work authorization status of each of its employees as required by the Immigration and Nationality Act, as amended, the Immigration Reform and Control Act of 1986, as amended and the regulations thereunder. Except as set forth in Schedule 5.17 attached hereto, neither the Company nor ADSI is a party to or is obligated in connection with any written or material oral agreements, contracts, commitments or understandings with any current or former employees of the Company or ADSI, as the case may be (all such agreements, contracts, commitments and understandings being hereinafter individually an “Employment Agreement” and collectively, the “Employment Agreements”). Prior to the date hereof, Sellers have delivered to Buyer true, complete and correct copies of all written Employment Agreements and a summary of the material terms of all material oral Employment Agreements. No Seller is in default under the terms of any of the Employment Agreements and, to the knowledge of the Shareholders, there is no basis for any claim that any employee that is the subject of any Employment Agreement is in default with respect to his or her obligations under such Employment Agreement.

5.18                Employee Benefit Plans. (a) Except for any Employment Agreement disclosed in Schedule 5.17 attached hereto, Schedule 5.18(a) attached hereto sets forth a list, and a general description, of: 

(i)       each written personnel practice (other than personnel practices required to be maintained by the Company or ADSI under the terms of any Law of any Governmental Authority) (hereinafter the “Personnel Practices”), including, without limitation, vacation policies, holiday pay policies, severance pay policies, sick or personal pay policies, incentive bonus programs, bereavement pay programs, company car policies, service award policies, tuition refund policies, relocation assistance policies and patent award policies;

(ii)       each plan, fund or program constituting an “employee welfare plan” (other than employee welfare plans required to be maintained by any Seller under the terms of any Law of any Governmental Authority) (hereinafter the “Employee Welfare Plans”), within the meaning of Section 3(1) of ERISA, including, without limitation, basic and supplemental life insurance, health insurance (including medical, dental and hospitalization), accidental death and dismemberment insurance, business travel and accident insurance, short and long term disability insurance programs; and

(iii)       each “employee pension benefit plan” within the meaning of Section 3(2) of ERISA (the “Employee Pension Plans”) including, without limitation, pension, profit sharing, and 401(k) retirement plans;

which is maintained, assumed or contributed to by the Company or ADSI for the benefit of any of their employees (each of the Personnel Practices, each of the Employee Welfare Plans and each of the Employee Pension Plan being sometimes hereinafter referred to individually as a “Plan” and all of the Personnel Practices, the Employee Welfare Plans and the Employee Pension Plans being hereinafter collectively referred to as the “Plans”).

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(b)            Except as otherwise set forth in Schedule 5.18(b) attached hereto, Sellers have previously delivered to Buyer: (i) complete copies of all plan documents which set forth the terms of each of the Plans and where applicable, complete copies of any related trusts; (ii) a general description of any of the Plans with respect to which no formal plan document has been adopted; and (iii) where applicable, the most recent Form 5500, as filed with the U.S. Department of Labor and the Internal Revenue Service (“IRS”) together with all attachments thereto, relating to any Plans.

(c)            Each of the Plans is intended to conform to the requirements of the Code and ERISA is in material compliance with the applicable requirements of the Code and ERISA and, to the knowledge of Sellers, has been administered in all material respects, in substantial compliance with the applicable requirements of the Code and ERISA.

(d)            Except as set forth in Schedule 5.18(d) attached hereto: (i) there has been no prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any of the Plans; (ii) neither the Company nor ADSI has incurred, directly or indirectly, any liability under Title IV of ERISA (other than liability for premium payments to the Pension Benefit Guaranty Corporation arising in the ordinary course); (iii) no reportable event (within the meaning of Section 4043 of ERISA) has occurred with respect to the Company or ADSI at any time during the last 5 years or to Shareholders’ knowledge is expected to occur with respect to any of the Plans which are subject to Title IV of ERISA; (iv) none of the Plans has incurred an accumulated funding deficiency (within the meaning of Section 302 of ERISA) or Section 412 of the Code), whether or not waived, as of the most recently ended plan year of such Plan; (v) none of the assets of the Company or ADSI is the subject of any lien arising under Section 302(f) of ERISA or Section 412(n) of the Code; (vi) neither the Company nor ADSI has been required to post any security under Section 307 of ERISA or Section 401(a)(29) of the Code; and (vii) none of the Plans is a multiemployer plan (within the meaning of Sections 3(37) or 4001(a)(3) of ERISA) or a single employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for which any Seller has incurred liability under Sections 4063 or 4064 of ERISA.

(e)            Except as set forth in Schedule 5.18(e) attached hereto, on or prior to the Closing Date, the Company and ADSI will have made all payments required to be made by the Company and ADSI on or prior to the Closing Date to the Plans and will have accrued (in accordance with generally accepted accounting principles consistently applied with the past practices of the Company and ADSI) all payments due to be paid to the Plans but not yet payable as of the Closing Date.

5.19                Consents and Approvals.

Except for consents listed in Schedule 5.19 attached hereto, no permit, consent, approval or authorization of, or declaration, filing or registration with, any Governmental Authority or any other Person is necessary or required to be obtained in connection with the execution and delivery by Sellers and ADSI of this Agreement and the Ancillary Agreements or the consummation by Sellers of the transactions contemplated hereby and thereby. Schedule 5.19 attached hereto also contains a list of all Permits necessary to the operation of the Business as it is presently being conducted. Except as set forth on Schedule 5.19, all Permits are in full force and effect and no Seller has received any notice of non-renewal, suspension, revocation or expiration of any Permits.

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5.20                Environmental Matters.

(a)            Except as disclosed on Schedule 5.20(a) attached hereto, the Assets, properties, businesses and operations of the Historical Business are and have been in compliance in all respects with all applicable Environmental and Safety Laws (as hereinafter defined) in effect in the jurisdiction in which such assets, properties, businesses and operations are or have been located, except for such non-compliance which has not had a Material Adverse Effect.

(b)            Each of the Company and ADSI, as the case may be, has timely filed all applications, notices and other documents necessary to effect the timely renewal or issuance of all Permits necessary under any Environmental and Safety Laws for the continued conduct, in the manner now conducted, of the Business.

(c)            Except as disclosed on Schedule 5.20(c) attached hereto, none of the operations or properties of the Historical Business presently has interim status or requires a hazardous waste permit for the treatment, storage or disposal of hazardous waste pursuant to the Resource Conservation and Recovery Act, 42 U.S.C. §6901 et seq., or pursuant to any Environmental and Safety Laws dealing with hazardous waste.

(d)            Except as set forth in Schedule 5.20(d) attached hereto, there is no reason known to the Shareholders why any Permit held by the Company under the Environmental and Safety Laws in connection with the conduct by the Company of the Business cannot be transferred or reissued, if necessary, to Buyer without material modification and there is no reason known to the Shareholders why any such Permits will not be renewed upon expiration of their current term without imposition of materially stricter requirements if such expiration will occur within one year after the date of this Agreement.

(e)            Except as disclosed in Schedule 5.20(e) attached hereto, the businesses and operations of the Historical Business are not and have not and none of the assets or properties owned or leased and used in the conduct of the Historical Business is, subject to any outstanding Governmental Order or any Action relating to any Environmental and Safety Laws or any Release of a Chemical Substance (as hereinafter defined).

(f)            Except as set forth in Schedule 5.20(f) attached hereto, there are and have been no circumstances or conditions present at or arising out of the assets, properties, businesses or operations of the Historical Business, including, but not limited to, any on-site or off-site disposal or other Release of a Chemical Substance, which may give rise to any Environmental Liabilities and Costs (as hereinafter defined).

(g)            Except as disclosed in Schedule 5.20(g) attached hereto, neither the Company nor ADSI has received a written notice or claim that it may be liable or named as a party potentially responsible for Environmental Liabilities and Costs as a result of any Release of a Chemical Substance in connection with the conduct of the Historical Business.

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(h)            Except as disclosed in Schedule 5.20(h) attached hereto, to the knowledge of Sellers, there are no Chemical Substances in any inactive, closed or abandoned storage or disposal areas or facilities on property formerly leased, operated or owned in connection with the conduct of the Historical Business.

(i)            Except as disclosed in Schedule 5.20(i) attached hereto, each of the Company and ADSI is in substantial compliance with all occupational, safety and health standards required by the Environmental and Safety Laws in connection with the conduct of the Business and has not received notice of any work-related chronic illness or injury among employees of the Business except accidents accurately reported in its OSHA 200 Log.

(j)            Schedule 5.20(j) attached hereto contains an accurate and complete list of each substance or waste generated at any facility of the Company or ADSI which, at any time during the five (5) year period ending on the date hereof, was or has been used by the Company, ADSI or any Affiliate of the Company or ADSI in the conduct of the Business and for which an exclusion or exemption from compliance with solid or hazardous waste regulations is claimed including, without limitation, those recycled, reclaimed, used for fuel or sold as a commercial product.

(k)            Except as set forth in Schedule 5.20(k) attached hereto, neither the Company nor ADSI has received any written notice from any Governmental Authority that any of the products, raw materials, components, intermediates, by-products or other substances used in the Business is the subject of any study, investigation or proceeding conducted or sponsored by any governmental agency under the Environmental and Safety Laws.

(l)            Except as disclosed in Schedule 5.20(l) attached hereto, if the Company or ADSI discharges process wastes to any publicly owned treatment works (POTW) in connection with the conduct of the Business, it is in material compliance with all requirements of the POTW and the Governmental Authority responsible for its operation including, without limitation, any applicable pretreatment requirements.

(m)            For purposes of this Agreement, the following terms have the indicated meanings:

(i)       “Chemical Substance” means any substance, including but not limited to, any pollutant; contaminant; chemical; raw material; intermediate product or by-product; industrial, solid, toxic or hazardous substance, material or waste; solid waste; petroleum or any fraction thereof; asbestos or asbestos-containing material, radon, urea-formaldehyde or polyurethane foam and polychlorinated biphenyls; including, without limitation, all substances, materials or wastes which are identified or regulated under the National Environmental Policy Act, the Clean Air Act, the Clean Water Act, the Occupational Safety and Health Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act as amended (including SARA), the Federal Insecticide, Fungicide and Rodenticide Act, the Emergency Planning and Community Right to Know Act, the Noise Control Act, the Marine Protection, Research and Sanctuaries Act or the Safe Drinking Water Act, or any other applicable state or local law, ordinance rule or regulation;

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(ii)       “Environment” includes real property and the physical buildings and structures thereon, and also includes, but is not limited to, ambient air, surface water, drinking water, groundwater, land surface, subsurface strata and river sediment;

(iii)       “Environmental and Safety Laws” means any Law in effect, on the Closing Date (not including any subsequent amendments to the laws or regulations), in the jurisdiction in which any assets, properties, businesses and operations may be located, relating to pollution or protection or cleanup of the Environment attributable to Chemical Substances, including without limitation the National Environmental Policy Act (NEPA), the Clean Air Act (CAA), the Clean Water Act (CWA), The Toxic Substances Control Act (TSCA), the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) as amended (including SARA), the Emergency Planning and Community Right to Know Act (EPCRA), the Marine Protection, Research and Sanctuaries Act, the Noise Control Act, the Federal Insecticide Fungicide and Rodenticide Act, (FIFRA), the Safe Drinking Water Act (SDWA) and the Occupational Safety and Health Act (OSHA), and any other state or local environmental law, ordinance, rule or regulation in effect on the Closing Date relating to release, containment, removal, remediation, response, cleanup or abatement of any sort of Chemical Substance;

(iv)       “Environmental Liabilities and Costs” means all liabilities, costs, obligations, damages, and other expenses (including, without limitation, all fees, disbursements and expenses of counsel and technical consultants, experts and contractors, and costs of investigations and feasibility studies), fines, penalties, sanctions and interest incurred pursuant to any Environmental and Safety Laws; and

(v)       “Release” means any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping, or disposing of any Chemical Substance into the Environment of any kind whatsoever (including the abandonment or discarding of barrels, containers, tanks or other receptacles containing or previously containing any Chemical Substance).

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5.21                Insurance.

Schedule 5.21 attached hereto contains an accurate and complete description (including the amount of any applicable deductibles) of all policies of fire, liability, workmen’s compensation and other forms of insurance owned or held by the Company or ADSI and issued with respect to or covering risks associated with the Assets, properties, or business, or operations of the Business and a claims history under such policies for the immediately preceding three (3) year period. All such policies are in full force and effect, all premiums with respect thereto covering all periods up to and including the Closing Date have been paid, and no notice of cancellation or termination has been received with respect to any such policy. Such policies are valid, outstanding and enforceable policies; will remain in full force and effect through the respective dates set forth in Schedule 5.21 without the payment of additional premiums; and will not, with respect to all periods up to and including the Closing Date, in any way be affected by, or terminate or lapse by reason of, the transactions contemplated by this Agreement except to the extent set forth in Schedule 5.21. During the five (5) year period ending on the date hereof, neither the Company nor ADSI has received any written notice or other communication regarding any actual or threatened cancellation or invalidation of any insurance coverage in effect during such period and during such five (5) year period, neither the Company nor ADSI has had any application for insurance refused or any claim for payment of insurance proceeds refused or denied. The Company and ADSI has each given notice to the insurers of all claims of which, each, respectively, is actually aware that may be insured under the insurance policies set forth on Schedule 5.21.

5.22                Contracts and Commitments.

(a)            Except for the Union Contracts, the Personal Property Leases required to be disclosed pursuant to Section 5.12 hereof, the Employment Agreements required to be disclosed pursuant to Section 5.17 hereof, the Plans required to be disclosed pursuant to Section 5.18 hereof and the insurance policies required to be disclosed pursuant to Section 5.21 hereof, Schedule 5.22 attached hereto contains a complete and accurate list of each of the Contracts which the Company or ADSI is a party to and which: (i) requires the Company or ADSI to make payments to any Person in excess of U.S. $25,000.00 per year; or (ii) provides that the Company or ADSI is entitled to receive payments in excess of U.S. $25,000.00 per year; or (iii) limits the freedom of the Company or ADSI to conduct the Business in any geographic area; or (iv) contains any “change in control” provision which would be breached or otherwise activated by the consummation of the transactions contemplated by this Agreement; or (v) contains the terms of any guaranty of the payment or performance of any Liabilities; or (vi) has a term in excess of one year and is not cancelable upon thirty (30) or fewer days’ notice without any liability, penalty or premium (other than a nominal cancellation fee or charge) (all such Contracts being collectively with the Union Contracts, Personal Property Leases, Real Property Leases and Employment Agreements referred to as the “Material Contracts”). Prior to the date hereof Sellers have delivered or otherwise made available to Buyer, true, complete and correct copies of the written Material Contracts including all amendments thereof and modifications thereto and complete descriptions of all oral Material Contracts.

(b)             Except as set forth in Schedule 5.22(b) attached hereto, each of the Material Contracts is valid, binding and in full force and effect and enforceable against the Company or ADSI, as the case may be, and, to the knowledge of the Shareholders, against the other parties thereto in accordance with its terms. Assuming any necessary consents are obtained, the enforceability of the Material Contracts will not be affected in any manner solely by the execution and delivery of this Agreement or the effectuation of the transactions contemplated hereby. Except as set forth in Schedule 5.22(b) attached hereto, no filing with, consent, approval, authorization or other action is required from or of any party to any of the Material Contracts in order for such Material Contracts to be valid, binding and enforceable by Buyer after the Closing Date.

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(c)            Neither the Company nor ADSI is in default under any of the Material Contracts, there is no basis for any valid claim that the Company or ADSI is in default under any Material Contracts and, to the knowledge of the Shareholders, there is no basis for any claim that any other parties to any of the Material Contracts is in default with respect to its obligations under such Material Contracts. Other than pursuant to warranty terms or as may be required by Law, neither the Company nor ADSI Seller is under any liability or obligation to return to any supplier or other person or to receive consignments back from any customer of a material quantity of any Inventory or products used, manufactured or otherwise produced by any Seller in the conduct of the Business.

5.23                Tax Matters.

(a)            (i) All Tax Returns required to be filed by the Company or ADSI with respect to the Business have been timely filed; (ii) all Taxes shown on such Tax Returns or otherwise due or payable have been timely paid; (iii) except as set forth on Schedule 5.23(a)(iii), no adjustment relating to any of such Tax Returns has been proposed formally or informally by any Governmental Authority and, to the knowledge of the Shareholders, no basis exists for any such adjustment which could affect the Assets; (iv) there are no outstanding subpoenas or requests for information with respect to any such Tax Returns or the periods corresponding thereto; (v) there are no pending or to the knowledge of the Shareholders, threatened actions or proceedings for the assessment or collection of Taxes against the Company or ADSI; (vi) there are no Tax liens on any assets of the Company or ADSI; (vii) there is no agreement or arrangement that would result, separately or in the aggregate, in the payment of any “excess parachute payment” within the meaning of Section 280G of the Code by reason of the transactions contemplated hereby; (viii) except as set forth on Schedule 5.23(a)(viii), neither the Company nor ADSI has at any time been a member of any partnership or joint venture or the holder of a beneficial interest in any trust for any period for which the statute of limitations for any Tax potentially applicable as a result of such membership or holding has not expired; (ix) all Taxes required to be withheld, collected or deposited by the Company or ADSI have been timely withheld, collected or deposited and, to the extent required, have been paid to the relevant Governmental Authority; (x) the Company and ADSI have delivered to the Buyer true and complete copies of all federal, state, local and foreign income tax returns of the Company and ADSI for all open taxable years; and (xi) no Claim has been made since January 1, 2011 by a Governmental Authority in a jurisdiction in which Tax Returns are not filed by the Company or ADSI, that the Company or ADSI is subject to taxation by that jurisdiction.

(b)            Schedule 5.23(b) sets forth (i) any outstanding waivers or agreements extending the statute of limitations for any period with respect to the Company or ADSI; (ii) any notices or requests for information currently outstanding that could affect the Taxes of the Company or ADSI; (iii) any power of attorney that is currently in force and has been granted with respect to any matter relating to Taxes that could affect the Company or ADSI or the Business; and (iv) any deficiencies proposed or agreed to (plus interest and any penalties) as a result of any ongoing audit, the most recently completed audit for each relevant jurisdiction, and the extent to which such deficiencies have been paid, reserved against, settled, or are being contested in good faith by appropriate proceedings.

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5.24                Labor Relations.

Schedule 5.24 sets forth a true and complete list of each agreement by and between the Company or ADSI and any labor union (collectively, the “Union Contracts”). Except as set forth in Schedule 5.24 attached hereto, during the last three years neither the Company nor ADSI has experienced any labor disputes or any work stoppage due to labor disagreements. Except to the extent set forth in Schedule 5.24 attached hereto: (a) there is no unfair labor practice charge, or complaint or other action against the Company or ADSI pending or to the knowledge of the Shareholders, threatened before the National Labor Relations Board, and neither the Company nor ADSI is subject to any order to bargain by the National Labor Relations Board; (b) there is no, and during the past three (3) years there has been no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of the Shareholders, threatened against or affecting the Company or ADSI; (c) no question concerning representation is pending or, to the knowledge of the Shareholders, is threatened respecting employees of the Company or ADSI; (d) no written grievance is pending and no arbitration proceeding relating to the Business and arising out of or under the Union Contacts is pending. The Union Contracts do not restrict the Company or ADSI from relocating, closing or subcontracting any of the operations of the Business. Prior to the date hereof, the Company and ADSI have delivered or otherwise made available to Buyer, true, correct and complete copies the Union Contracts, all current employee handbooks and all current employee manuals applicable to employees of the Company or ADSI, including all amendments thereof and modifications thereto.

5.25                Assets Necessary to Business.

The Assets, together with the Excluded Assets, (i) include all tangible and intangible assets, properties and rights necessary to conduct the Business following the Closing Date in the same manner as it is currently conducted, and (ii) constitute all of the tangible and intangible assets, properties and rights of the Company.

5.26                Compliance with Law.

Except for matters pertaining to Environmental and Safety Laws which are covered in Section 5.20, the operations of the Business are and have been, at all times prior to the date hereof, conducted in all material respects in accordance with all applicable Laws of all Governmental Authorities having jurisdiction over the Assets and the Business. Neither the Company nor ADSI has, since January 1, 2011, received any notification of any asserted failure by the Company or ADSI to comply with any such Laws, rules or regulations. In connection with the foregoing but not in limitation thereof, neither the Company nor ADSI, nor any of their respective officers, directors or management employees has, to the knowledge of the Shareholders, directly or indirectly, given or agreed to give any gift or similar benefit to any customer, supplier, governmental employee or other Person who is or may be in a position to help or hinder the business (or assist the Company in connection with any actual or proposed transaction which: (a) could reasonably be expected to subject the Buyer, the Company or ADSI to any damage or penalty in any civil or criminal Action; or (b) if not continued in the future, could reasonably be expected to adversely affect the Buyer or the Business. No Seller has received any notification of any asserted failure by any Seller to comply, whether currently or at any time after July 1, 2010, with any such Laws, rules or regulations.

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5.27                Brokers and Finders.

Except as set forth in Schedule 5.27 attached hereto, the Company and ADSI have not and none of their respective officers, directors or employees, as the case may be, have employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

5.28                Product Warranties.

The standard product or service warranties, indemnifications and guarantees which the Company or ADSI extend to customers in the ordinary course of the conduct of the Business, copies of which have been delivered to Buyer, are identified and described in Schedule 5.28 attached hereto. No warranties, indemnifications or guarantees are now in effect or outstanding with respect to Products or services manufactured, produced or performed by the Company or ADSI in the conduct of the Business, except for the warranties, indemnifications and guarantees identified and described in Schedule 5.28 attached hereto. Except for product returns, the scope and magnitude of which are consistent with the product returns experienced by the Business prior to the date hereof, Products sold by the Business do not have any defects or failure rates which have in the past or in the future could give rise to material warranty, product liability or related Claims.

5.29                Potential Conflicts of Interest.

Schedule 5.29 attached hereto sets forth a complete and accurate description of each written or oral contract, agreement or arrangement between the Company or ADSI and any officer or director or shareholder of the Company or ADSI which relates to the conduct of the Business. Except as set forth in Schedule 5.29 attached hereto, none of the shareholders, officers or directors of the Company or ADSI has any interest in any of the Assets, has any Action or other Claim whatsoever against any Seller with respect to the operations of the Business or owes any amount to the Company or ADSI.

5.30                Solvency.

ADSI is, as of the Closing Date, Solvent.

5.31                No Material Adverse Change.

Except as set forth in the Schedules attached hereto, since July 1, 2014, there has been no material adverse change in the Assets, business operations or financial condition of the Business.

5.32                Disclosure.

No representations or warranties in this Agreement and no statement contained in this Agreement or any Schedule attached hereto or any certificate, or other writing furnished or to be furnished by the Company or ADSI to Buyer pursuant to the provisions hereof contains or will contain any untrue statement of material fact, or omits or will omit any material fact necessary, in light of the circumstances under which it was made, to make the statements herein or therein not misleading.

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ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF BUYER

Buyer represents and warrants to Sellers as follows:

6.01                Organization.

Asset Buyer is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware, and has the power and authority to carry on its business as presently conducted, to enter into, execute and deliver this Agreement and the other documents to be executed and delivered by Asset Buyer hereunder, and to carry out the transactions contemplated hereby and thereby. Notwithstanding the foregoing, Sellers acknowledge that Asset Buyer will formally qualify for business in New York following the change in the Company’s name in compliance with the provisions of Section 7.10 hereunder.

6.02                Authorization by Asset Buyer.

The execution and delivery of this Agreement and the Ancillary Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of Asset Buyer. No other act or proceeding on the part of Asset Buyer or its equity owners is necessary to authorize the execution and delivery of this Agreement and the Ancillary Agreements or the consummation of the transactions contemplated hereby and thereby.

6.03                Binding Agreements.

This Agreement constitutes and, when executed and delivered on the Closing Date, each of the Ancillary Agreements will constitute valid and binding obligations of Buyer, enforceable against Buyer in accordance with its terms except that: (a) such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect affecting the enforcement of creditors’ rights generally; and (b) the remedy of specific performance and injunctive and other forms of equitable relief may be subject to equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

6.04                No Violation.

Neither the execution and delivery of this Agreement, nor the consummation by Buyer of the transactions contemplated hereby will: (a) to the knowledge of Buyer: (i) violate any Law; or (ii) violate any Governmental Order; or (b) violate or conflict with or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or will result in the termination of, or accelerate the performance required by, any term or provision of: (i) the governing documents of Buyer or (ii) any lease, contract, commitment, understanding, arrangement, agreement or restriction of any kind or character to which Buyer is a party or by which Buyer or any of its assets or properties may be bound or affected, except (with respect to any such lease, contract, commitment, understanding, arrangement or restriction), to the extent that the existence of any such violation, conflict, default, termination, acceleration of performance or creation of any lien, security interest, charge or encumbrance would not have a material adverse effect on the Buyer’s ability to consummate the transactions contemplated by this Agreement. Except for filings, consents, approvals or authorizations on Schedule 6.04 attached hereto, no filing with or consent, approval, authorization or action by any governmental or regulatory authority is required in connection with the execution and delivery by Buyer of the Agreement or the consummation by Buyer of the transactions contemplated hereby.

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6.05                Litigation.

There are no Actions pending against Asset Buyer which challenge the validity of this Agreement or any action taken or to be taken by Asset Buyer pursuant to this Agreement or in connection with the transactions contemplated hereby, before or by any Governmental Authority.

6.06                Brokers and Finders.

Neither Asset Buyer, nor any of its officers, directors or employees, as the case may be, has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finders’ fees in connection with the transactions contemplated by this Agreement.

6.07                Sufficient Funds.

Asset Buyer will have at the Closing sufficient cash, available lines of credit or other sources of funds to enable it to make payment of the Initial Cash Purchase Price and all other amounts payable pursuant to this Agreement and to perform all of its obligations under this Agreement, including, but not limited to, to pay the Promissory Note when the same is due and payable.

ARTICLE 7

COVENANTS

7.01                Access On and After the Closing Date.

The Company, ADSI and Buyer agree that, on and after the Closing Date, each, upon reasonable advance notice, will permit the other and their respective representatives (including their counsel and auditors), during normal business hours and for reasonable business purposes to have access to and examine and make copies of all books and Records of the other which pertain to the Business (including, but not limited to, correspondence, memoranda, books of account, payroll records, computer records, insurance policies and the like) or which relate to the Assets. The out-of-pocket costs of photocopying any such material (excluding the compensation and related payroll taxes of employees engaged in the copying of any such materials) shall be borne by the party requesting such photocopies.

7.02                Record Retention.

For a period until the expiration of all applicable statutes of limitation, Buyer, the Company and ADSI agree that, prior to the destruction or disposition of any books or records pertaining to the operation of the Business prior to the Closing Date or which relate to the Assets, each party shall provide not less than forty-five (45) nor more than ninety (90) days prior written notice to the other of any such proposed destruction or disposal. If the recipient of such notice desires to obtain any of such documents, it may do so by notifying the other party in writing at any time prior to the scheduled date for such destruction or disposal. Such notice must specify the documents which the requesting party wishes to obtain. The parties shall then promptly arrange for the delivery of such documents. All out-of-pocket costs associated with the delivery of the requested documents (excluding the compensation (and related payroll taxes) of employees engaged in the preparation, copying or delivery of any such documents) shall be paid by the requesting party.

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7.03                Confidentiality.

Each party hereto will hold and will cause its directors, officers, managers, members, employees, agents, consultants and advisors to hold in strict confidence, unless compelled to disclose by judicial or administrative process or, in the opinion of its counsel, by other requirements of Law, all documents and information concerning the other party furnished to it by such other party or its representatives in connection with the transactions contemplated by this Agreement (except to the extent that such information can be shown to have been: (a) previously lawfully known by the party to which it was furnished; (b) in the public domain through no fault of such party; or (c) later lawfully acquired from other sources by the party to which it was furnished), and each party will not release or disclose such information to any other person, except its auditors, attorneys, financial advisors, bankers and other consultants and advisors in connection with this Agreement. If the transactions contemplated by this Agreement are not consummated, such confidence shall be maintained except to the extent such information comes into the public domain through no fault of the party required to hold it in confidence, and in any event such information shall not be used to the detriment of, or in relation to any investment in, the other party and all such documents (including copies thereof and software) shall be returned to the other party immediately upon the written request of such other party.

7.04                Employees.

(a)            On the Closing Date, Buyer shall make offers of employment to all individuals who are actively employed by the Company in the conduct of the Business on the date immediately preceding the Closing Date. For purposes of the immediately preceding sentence, employees of the Company that are absent on the business day immediately preceding the Closing Date as a result of any illness or injury with respect to which the employee is receiving payments required under any applicable workers compensation law or payments under any short or long term disability plan, program or insurance policy maintained by any Seller for employees of the Business shall not be deemed to be actively employed by the Company in the conduct of the Business. The terms and conditions of employment which Buyer shall offer to active employees of the Company shall be substantially comparable in the aggregate to the terms and conditions upon which they are employed by the Company.

(b)            For purposes of this Agreement, any individual that accepts an offer of employment made by Buyer (as contemplated by Section 7.04(a) above) shall be referred to individually as a “Transferring Employee” and all such individuals shall be referred to collectively as “Transferring Employees”. Nothing contained herein shall be deemed to limit or otherwise restrict the rights of Buyer to reduce or otherwise modify the compensation or employee benefits paid or made available to any Transferring Employee nor shall anything herein be deemed to limit or otherwise restrict the right of Buyer to modify the terms and conditions of employment of any Transferring Employee at any time after the Closing Date or to terminate the employment of any Transferring Employee at any time after the Closing Date for any reason whatsoever.

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(c)            The Company shall be responsible for payment of any severance benefits or other Liabilities which may arise with respect to the employment and termination of employment of any employees that are not actively employed in the conduct of the Business on the business day immediately preceding the Closing Date and any severance benefits or other liabilities payable in connection with the termination of employment of any employee that does not accept the offer of employment made by Buyer to such individual on the Closing Date. For purposes of clarity, any such severance benefits shall not be included as a Current Liability for purposes of calculating Closing Net Working Capital.

7.05                Medical Benefits, Workers’ Compensation.

The Company agrees that, with respect to workers’ compensation claims and all claims under the Company’s medical, dental, life insurance and disability benefit programs made with respect to occurrences, prior to the Closing Date, by persons who are or were employed by the Company prior to the Closing Date (including retirees), and who were participants in the medical, dental, life insurance or disability benefit programs maintained by the Company for the benefit of employees or former employees of the Business or covered under applicable workers’ compensation policies by the Company, the Company will, at its expense, honor or cause each of its insurance carriers to honor such proper claims in accordance with the terms and conditions of prevailing programs of the Company or applicable workers’ compensation statutes as if such employees had continued in the employ of the Company and without interruption as a result of the employment by Buyer of any Transferring Employee on or after the Closing Date.

7.06                Nonassignable Contracts.

To the extent that the assignment hereunder by the Company to Buyer of any Material Contract is not permitted or is not permitted without the consent of any other party to the Material Contract, this Agreement shall not be deemed to constitute an assignment of any such Material Contract if such consent is not given or if such assignment otherwise would constitute a breach of, or cause a loss of contractual benefits under any such Material Contract, and Buyer shall not assume any Liabilities thereunder. Without in any way limiting the Company’s obligations to obtain all consents and waivers necessary for the sale, transfer, assignment and delivery of the Material Contracts and the Assets to Asset Buyer hereunder, if any such consent is not obtained or if such assignment is not permitted irrespective of consent and the Closing hereunder is consummated, the Company shall continue to use its reasonable efforts to obtain such consents and shall cooperate with Asset Buyer in any arrangement designed to provide the Asset Buyer with the rights and benefits (subject to the Liabilities) arising under the terms of any such Material Contracts.

7.07                Public Announcements.

Buyer and the Company and the other Sellers will consult with each other before issuing any press releases or otherwise making any public statements with respect to this Agreement or the transactions contemplated hereby and shall not issue any press release or make any public statement prior to such consultation, except as may be required by Law; provided that, following the Closing Date, nothing herein shall be deemed to prohibit the parties from informing customers and suppliers of the purchase of the Assets and the assumption of the Assumed Liabilities provided for hereunder.

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7.08                Discharge of Liens.

Except as set forth on Schedule 7.08 attached hereto and except for the Permitted Liens, on or before the Closing Date, the Company will take such action as may be necessary to discharge any mortgage, pledge, lien, security interest, conditional sale agreement, encumbrance or charge of any kind which burdens any of the Assets and which is capable of being satisfied by the payment of money.

7.09                Consents, Etc.

The Company shall use all reasonable best efforts to obtain all Permits and all approvals, authorizations and consents of persons necessary to the consummation of the transactions contemplated hereby. The Company will provide to Buyer copies of each such Permit, approval, authorization and consent obtained by the Company at or prior to the Closing. The Buyer shall use all reasonable best efforts to obtain at the earliest practicable date and prior to the Closing Date all Permits and all approvals, authorizations and consents of any person necessary to the consummation by it of the transactions contemplated hereby.

7.10                Patents, Trademarks, Trade Names.

If and to the extent that the Company is not the owner of record of any Intellectual Property described in Schedule 5.13 hereto that has been registered with the United States Patent and Trademark Office or any similar registrar of any foreign country and the Company or ADSI claims an ownership interest therein, the Company will, at the Company’s cost and expense cause the record ownership of all such Intellectual Property to be transferred to the Company on the records maintained at the United States Patent and Trademark Office or any similar registrar of any foreign country to the extent such transfer is required to transfer good, valid and marketable title to such Intellectual Property to Asset Buyer. In addition, following the Closing Date, the Company, without any cost or expense to the Asset Buyer, shall execute and deliver to Asset Buyer any and all documents prepared and reasonably requested by or on behalf of Asset Buyer and relating to the transfer or assignment to Asset Buyer of any Intellectual Property included within the Assets. Notwithstanding the foregoing, the Company shall have no obligation or liability to pay any filing or recording fees relating to the transfer of the record ownership of any of the Intellectual Property referred to in this Section 7.10 from the Company, as owner of record, to Buyer. At or promptly following the Closing Date, the Company shall change its name to any name other than (or that is not confusingly similar to) “B. R. Johnson”.

7.11                Execution of Further Documents.

From and after the Closing Date, each party hereto shall, from time to time, upon request of the other party, acknowledge and deliver all such further acts, deeds, bills of sale, assignments, transfers, conveyances, powers of attorney and assurances the other party may reasonably request to more effectively consummate the transactions contemplated hereby. In addition, from and after the Closing Date, the Company shall, at the Company’s cost and expense, take any action reasonably requested by Asset Buyer to enable Asset Buyer to obtain any consents to the assignment by the Company of any of the Material Contracts which were not obtained by the Company prior to the Closing Date. Finally, from and after the Closing Date, the Company shall execute and deliver to Buyer, such documents (including, without limitation, waivers, estoppel certificates and novation agreements) as Asset Buyer may reasonably request to enable Asset Buyer to obtain any consents to the assignment by the Company of any of the Material Contracts to Buyer to the extent such consents are not delivered to Buyer at the Closing.

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7.12                Non-Competition.

As a part of the inducement to Buyer to enter into this Agreement, the Company and the Shareholders hereby agree that for a period of five (5) years (the “Covenant Term”) from the Closing Date, the Company and the Shareholders shall not, nor shall any person then controlled by any of the Shareholders (hereinafter referred to as “Sellers’ Affiliates”), without the prior express written consent of the Buyer: (a) own, manage, operate, control, engage, invest or otherwise participate in, directly or indirectly, any business, firm or corporation which is engaged anywhere in the Northeast United States comprised of the states of New York, New Jersey, Vermont, Massachusetts, Connecticut, Rhode Island, Maine, Ohio and Pennsylvania in the sale or distribution of any Products; (b) solicit, entice, encourage or otherwise induce or attempt to induce, whether by mailing of promotional literature, by use of telephonic or direct personal contact with sales personnel of the Company or Sellers’ Affiliates or sales representatives engaged by any the Company or Sellers’ Affiliates or by any other means solicit, encourage, entice or otherwise induce or attempt to induce any person to purchase from the Company or any of Sellers’ Affiliates, any products which compete with the Products. Ownership or purchase by the Company, any of the Shareholders and Seller’s Affiliates in the aggregate, at or after the time of Closing, of less than 5% of the issued and outstanding capital stock of any enterprise engaged in the production or sale of products which compete with the Products, the securities of which are listed on a national securities exchange or included in the national list of over-the-counter securities shall not be deemed a violation of this Section 7.12 nor shall the Company’s or ADSI’s performance of any Contract which cannot be assigned hereunder or (c) directly or indirectly, either individually or on behalf of any other person or entity, do any of the following: (i) solicit, encourage, or induce customers, prospective customers, suppliers, prospective suppliers, independent contractors, licensees, licensors, or other business relationship of the Company or ADSI to reduce or terminate their relationships with the Company or ADSI, as applicable, or (ii) contact, approach, or solicit any business relationship of the Company or ADSI for the purpose or effect of interfering with their relationship with the Company or ADSI. Upon breach by the Company, any of the Shareholders or any of Sellers’ Affiliates of any provision of this Section 7.12, Buyer shall be entitled to seek injunctive relief, both preliminarily and permanently, since the remedy at law would be inadequate and insufficient. Additionally, Buyer will be entitled to all such other legal and equitable remedies as may be available to it. In the event any of the provisions of this Section 7.12 is determined by a court of competent jurisdiction to be contrary to any applicable statute, Law, or for any reason to be unenforceable as written, such court may modify any of such provisions so as to permit enforcement thereof as thus modified.

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7.13                Non-Solicitation of Employees.

As a part of the inducement to Buyer to enter into this Agreement, the Company and each of the Shareholders hereby agree that, for a period of five (5) years following the Closing Date, the Company and each of the Shareholders shall not, nor shall any Sellers’ Affiliate, without the prior express written consent of Buyer, directly or indirectly, employ any individual that becomes a Transferring Employee, solicit any Transferring Employees for employment or accept any applications for employment from any Transferring Employees. Notwithstanding the foregoing, nothing herein shall be deemed to prohibit the Company or any of the Shareholders from (i) employing or accepting an application for employment from any individual that becomes a Transferring Employee in connection with the transactions contemplated by this Agreement and whose employment by the Buyer is terminated by the Buyer, or (ii) employing or accepting an application for employment from any individual in response to a general, non-targeted advertisement. Upon breach by the Company, any of the Shareholders or any of Sellers’ Affiliates of any provision of this Section 7.13, Buyer shall be entitled to seek injunctive relief, both preliminarily and permanently, since the remedy at law would be inadequate and insufficient. Additionally, Buyer will be entitled to all such other legal and equitable remedies as may be available to it. In the event any of the provisions of this Section 7.13 is determined by a court of competent jurisdiction to be contrary to any applicable statute, Law, or for any reason to be unenforceable as written, such court may modify any of such provisions so as to permit enforcement thereof as thus modified.

7.14                Collection of Receivables.

Following the Closing Date, the Company and the Shareholders shall take or cause to be taken, the following actions, in the Company’s name or otherwise, to assist Asset Buyer in the collection of the accounts receivable of the Company which are included within the Assets: (a) the endorsement to Asset Buyer of checks made payable to the Company; and (b) the payment to the Asset Buyer of all money received by the Company with respect to accounts receivable of the Company which are included within the Assets, promptly, but in any event, within five (5) Business Days following receipt by the Company of any payments with respect to such accounts receivable.

7.15                Additional Covenants.

Subject to the terms and conditions herein provided, each of the parties hereto agrees to use its best efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement.

7.16                Transfer Taxes.

Buyer hereby agrees that Buyer shall be responsible for and pay or cause to be paid any federal, state or local sales taxes and use taxes arising in connection with the transfer of the Assets to Buyer as provided for in the Agreement.

7.17                Cooperation.

Buyer and the Sellers shall cooperate with each other and shall cause their respective officers, employees, agents, auditors and representatives to cooperate with each other: (a) to ensure the orderly transition of the Assets from the Company to Asset Buyer and to minimize any disruption to the Business that might result from the transactions contemplated hereby; (b) in the investigation, prosecution, defense and settlement of any Action to which either is a party relating to any of the Excluded Liabilities or any claim for workers' compensation, and in obtaining for each of the parties all benefits to which either may be entitled under insurance policies applicable to any such claims; and (c) in connection with the preparation of any Tax Return, any audit or other examination by any taxing authority, or any other judicial or administrative proceeding relating to liability for Taxes arising with respect to periods ending on or prior to the Closing Date with respect to the Assets or the Business. Each party shall reimburse the other for reasonable out-of-pocket costs and expenses incurred in assisting the other pursuant to this Section 7.17.

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7.18                Post-Closing Warranty Work.

Buyer acknowledges that as of the Closing, the Company and ASDI will each have an obligation to honor its existing warranty obligations. Buyer agrees to perform any work required with respect to such warranty obligations. Such work shall be performed at Buyer’s expense up to the amount of any warranty reserves included in the calculation of Closing Net Working Capital. Sellers shall, subject to the Basket Amount, reimburse Buyer for any work (at Buyer’s direct out-of-pocket costs) for any work in excess of such warranty reserves. Any work which Buyer reasonably estimates will result in a charge in excess of $10,000 shall require Sellers Representative’s prior written approval such approval not to be unreasonably withheld or delayed.

7.19                Limitation on Activities of the Company.

On and after the Closing Date, the Company shall not:

(a)          Conduct, transact or otherwise engage in or commit to conduct, transact or otherwise engage in, any business or operations other than: (i) ownership of Company’s rights and obligations under this Agreement, (ii) the maintenance of its existence and compliance with applicable Laws and legal, tax and accounting matters related thereto and activities relating to its employees and activities incident thereto, and (iii) activities related to the performance by the Company of this Agreement;

(b)            Incur, create, assume or suffer to exist any Indebtedness or other Liabilities or financial obligations;

(c)            create, incur, assume or suffer to exist any lien upon or with respect to any property or assets of any kind (real or personal, tangible or intangible) of the Company whether now owned or hereafter acquired;

(d)            form any subsidiary or own any equity interest in any other person;

(e)            consummate any merger, consolidation, or purchase substantially all of the assets of any person; or

(f)             make or commit to make or be or become obligated under any guaranty.

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ARTICLE 8

DELIVERIES OF BUYER

Buyer has simultaneously with the date of this Agreement delivered:

8.01                Certificate of Buyer.

A certificate of the Secretary or Assistant Secretary of Buyer, dated the Closing Date setting forth the resolutions of the governing body of Buyer authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby and certifying that such resolutions were duly adopted and have not been rescinded or amended as of the Closing Date.

8.02                Consents and Approvals.

All U.S. and foreign governmental Permits and approvals required by Law for the consummation of the transactions contemplated by this Agreement shall have been obtained.

8.03                Officer’s Certificate.

A certificate, dated as of the Closing and signed by one of Buyer’s authorized officers, stating that the representations and warranties of Buyer are true and correct as of the date hereof. 

8.04                Closing Documents.

Buyer has delivered: (a) to the Company and to the Shareholders, an amount equal to the Initial Cash Purchase Price by wire transfer of immediately available funds to such account or accounts as may be designated by Sellers’ Representative in writing; and (b) to the Company, the Promissory Note. 

ARTICLE 9

DELIVERIES OF SELLERS

Sellers have simultaneously with the date of this Agreement delivered:

9.01                Consents and Approvals.

All U.S. and foreign governmental Permits and approvals required by Law for consummation of the transactions contemplated by this Agreement shall have been obtained. All consents and approvals required to be obtained from any parties to any Material Contracts, any parties to any Intellectual Property Licenses or any parties to any Personal Property Leases in connection with the assignment of any such Material Contracts, Intellectual Property Licenses or Personal Property Leases to Asset Buyer and the consummation of the transactions contemplated by this Agreement shall have been obtained and delivered to Buyer.

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9.02                Delivery of Closing and Other Documents.

The Sellers shall have executed and delivered to Buyer at the Closing the documents described in Section 4.02 hereof.

9.03                Certificate as to Authorization.

A certificate of the Secretary or an Assistant Secretary of each Seller which is an entity, dated the Closing Date, setting forth resolutions of the Boards of Directors and shareholders of such Seller authorizing the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby, certifying that such resolutions were duly adopted and have not been rescinded or amended as of the Closing Date.

9.04                Officer’s Certificate.

A certificate, dated as of the Closing Date and signed by one of Seller’s duly authorized officers, of each Seller which is an entity, stating that the representations and warranties of Seller are true and correct.

ARTICLE 10

SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS

10.01               Survival of Representations.   

(a)            Each and every representation and warranty made by the Sellers and the Buyer in this Agreement or in any Schedule, instrument of transfer or other document delivered pursuant hereto or in connection herewith shall survive the Closing for a period of twenty four (24) months following the Closing, except that; (i) the representations and warranties of the Sellers contained in Section 5.18 (Employee Benefit Plans), 5.20 (Environmental Matters) and 5.23 (Tax Matters) shall survive until sixty (60) days after the end of the applicable statute of limitations; and (ii) the Fundamental Representations shall survive the Closing without limitation as to time. Each and every covenant and agreement of a party set forth herein shall survive the Closing without limitation as to time. Except as otherwise provided in Section 10.01(b), following the expiration of the period during which the representations and warranties survive the Closing as set forth in the preceding sentence (such period being hereinafter the “Survival Period”), the representations and warranties shall be of no further force or effect.

(b)            Any representation or warranty that would otherwise terminate at the expiration of the Survival Period with respect thereto shall survive if written notice of a breach or inaccuracy thereof shall have been given to the party against whom indemnification may be sought on or prior to the expiration of the applicable Survival Period; provided that such survival shall only apply to the portion of any such representation or warranty with respect to which such breach or inaccuracy has occurred and only with respect to that particular breach or inaccuracy.

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10.02               Indemnification by the Sellers.

(a)            Subject to the terms and conditions of this Section 10.02, the Sellers hereby, jointly and severally, agree to indemnify, defend and hold the Buyer, and its Affiliates, officers, directors, members, managers, employees, agents, successors and assigns (collectively the “Buyer Indemnified Parties”) harmless, from and against all Losses resulting to, imposed upon or incurred by any Buyer Indemnified Party or against the Assets, by reason of or resulting from Claims relating to: (i) any Excluded Liabilities or Excluded Assets; (ii) any failure of any Seller to perform any agreement, covenant or obligation contained in this Agreement or any of the Ancillary Agreements; (iii) any Liabilities arising in connection with any Seller’s operation of the Business or ownership of the Assets prior to the Closing Date except for the Assumed Liabilities; and (iv) any breach or inaccuracy of any representation or warranty of any Seller contained in or made pursuant to this Agreement. For purposes of this Agreement, Claims described in Sections 10.02(a)(i) through (iv) and Claims described in Sections 10.03(a)(i) through (iii) are hereinafter individually referred to as an “Indemnification Claim” and collectively as “Indemnification Claims”.

(b)            With respect to Losses incurred by any Buyer Indemnified Party arising from any Indemnification Claim or Indemnification Claims described in Sections 10.02(a)(i), (ii) or (iii), the Sellers shall be obligated, jointly and severally, to indemnify each Buyer Indemnified Party from and against the full amount of all Losses arising in connection with such Indemnification Claims, without regard to when such Losses may be incurred and notwithstanding the fact that the facts and circumstances forming the basis for such Indemnification Claim might entitle such Buyer Indemnified Party to make an Indemnification claim against any Seller for a breach or inaccuracy of any of the representations and warranties made by any Seller or ADSI pursuant to this Agreement.

(c)            With respect to Losses which are incurred by any Buyer Indemnified Party and arise from any Indemnification Claim or Indemnification Claims described in Section 10.02(a)(iv) hereof which (i) are not also Indemnification Claims under the provisions of Section 10.02(a)(i), (ii) or (iii) (such Indemnification Claims being hereinafter individually a “Breach of Seller Rep Claim” and collectively “Breach of Seller Rep Claims”), and (ii) are based upon a breach or inaccuracy of any Fundamental Representations of Sellers, the Sellers shall be obligated, jointly and severally, to indemnify the Buyer Indemnified Parties from and against the full amount of the Losses incurred by the Buyer Indemnified Parties.

(d)            With respect to Losses incurred by any Buyer Indemnified Parties as a result of any Breach of Seller Rep Claims which are not based upon any Fundamental Representations, the Sellers shall have no liability or obligation to indemnify and hold each Buyer Indemnified Party harmless from and against any Losses incurred by such Person unless written notice of an Indemnification Claim is delivered by the Buyer to the Sellers Representative prior to the expiration of the applicable Survival Period with respect to the representation and warranty which forms the basis of any such Breach of Seller Rep Claims. In addition, with respect to Losses incurred by any Buyer Indemnified Parties as a result of any Breach of Seller Rep Claims which are not based on any Fundamental Representations of Sellers or ADSI, the Sellers shall have no liability or obligation to indemnify and hold each Buyer Indemnified Party harmless from any Losses incurred by such Persons except to the extent that the aggregate amount of the Losses incurred by such Persons with respect to all such Indemnification Claims exceeds Seventy Five Thousand United States Dollars ($75,000.00) (such amount being hereinafter the “Basket Amount”) provided that, after the aggregate amount of all such Losses exceeds the Basket Amount, each Buyer Indemnified Party shall be entitled to be indemnified for the full amount of all such Losses. Finally, with respect to Losses incurred by any Buyer Indemnified Parties as a result of any Breach of Seller Rep Claims which are not based upon any Fundamental Representations, the Sellers shall have no liability or obligation to indemnify and hold each Buyer Indemnified Party harmless from any Losses incurred by such Person to the extent that the aggregate amount of the Losses arising with respect to any such Indemnification Claims, exceeds three Million Dollars ($3,000,000.00) (such amount being hereinafter the “Cap”).

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(e)            The Buyer shall first recover the amount of the Losses incurred by the Buyer as a result of any Indemnification Claims by reducing the amount of any interest payable to the Company under the terms of the Promissory Note for the period during which interest only is payable under the terms of the Promissory Note and, to the extent that the Losses incurred by the Buyer as a result of all Indemnification Claims and the amounts, if any, offset against interest payable under the terms of the Promissory Note pursuant to the preceding provisions of this Section 10.02(e) exceed the amount of any interest which is payable under the Promissory Note for the period during which interest only is payable under the terms of the Promissory Note, the Buyer shall have the right, at the Buyer’s election, to recover the amount of such excess, by reducing the quarterly principal and/or interest payments due and payable under the Promissory Note in the order in which they become due and payable under the terms of the Promissory Note. If and to the extent that the amount of the Losses which have been incurred by the Buyer as a result of any Indemnification Claims exceed the amounts payable by the Buyer under the terms of the Promissory Note (as determined at the time that an Indemnification Claim is made, taking into consideration any reductions in the amount of such payments resulting from prior Losses which the Buyer has recovered through a reduction of payments due under the Promissory Note), the Sellers shall be jointly and severally obligated to pay to the Buyer the amount of any Losses which have been incurred by the Buyer Indemnified Parties which have not been recovered through a reduction of payments due under the terms of the Promissory Note.

10.03               Indemnification by the Asset Buyer.

(a)            The Asset Buyer hereby agrees to indemnify, defend and hold the Sellers, and each of their respective Affiliates, officers, managers, directors, employees, agents, successors and assigns (the “Seller Indemnified Parties”) harmless from any Losses arising by reason of or resulting from: (i) the Asset Buyer’s failure to pay, perform or discharge all Assumed Liabilities assumed by the Buyer pursuant to this Agreement; (ii) any failure of Asset Buyer to perform any agreement, covenant or obligation contained in this Agreement or any of the Ancillary Agreements; (iii) Asset Buyer’s operation of the Business or ownership of the Assets after the Closing Date (provided such Losses do not arise out of or relate to an Excluded Liability or the breach or inaccuracy of a representation or warranty made by Sellers in this Agreement); and (iv) a breach or inaccuracy of any representation or warranty of the Buyer contained in or made pursuant to this Agreement.

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(b)            With respect to Losses incurred by any Seller Indemnified Party arising from any Indemnification Claim or Indemnification Claims described in Sections 10.03(a)(i) through (iv), the Asset Buyer shall be obligated to indemnify each Seller Indemnified Party from and against the full amount of all Losses arising in connection with such Indemnification Claims notwithstanding the fact that the facts and circumstances forming the basis for such Indemnification Claim might also entitle such Seller Indemnified Party to make an Indemnification Claim against Asset Buyer for a breach of any of the representations and warranties made by Buyer in this Agreement.

(c)            With respect to Losses which are incurred by any Seller Indemnified Party and arise from any Indemnification Claim or Indemnification Claims described in Section 10.03(a)(iv) hereof which (i) are not also Indemnification Claims under the provisions of Section 10.03(a)(i), (ii), or (iii) (such Indemnification Claims being hereinafter individually a “Breach of Buyer Rep Claim” and collectively, “Breach of Buyer Rep Claims”), and (ii) are based upon a breach of any Fundamental Representations of Buyer, the Asset Buyer shall be obligated to indemnify the Seller Indemnified Parties from and against the full amount of the Losses incurred by the Seller Indemnified Parties.

(d)            With respect to Losses incurred by any Seller Indemnified Parties as a result of any Breach of Buyer Rep Claims which are not based upon any Fundamental Representations of the Buyer, the Buyer shall have no liability or obligation to indemnify and hold each Seller Indemnified Party harmless from any Losses incurred by such Person unless written notice of an Indemnification Claim is delivered by the Sellers to the Asset Buyer prior to the expiration of the Survival Period with respect to the representation and warranty which forms the basis of any such Breach of Buyer Rep Claims. In addition, with respect to Losses incurred by any Seller Indemnified Parties as a result of any Breach of Buyer Rep Claims which are not based upon any Fundamental Representations of the Buyer, the Buyer shall have no liability or obligation to indemnify and hold each Seller Indemnified Party harmless from any Losses incurred by such Person except to the extent that the aggregate amount of the Losses incurred by such Person arising from any such Breach of Buyer Rep Claim or Breach of Buyer Rep Claims exceeds the Basket Amount provided that, after the aggregate amount of all such Losses exceeds the Basket Amount, each Seller Indemnified Party shall be entitled to be indemnified from the first dollar of all such Losses. Finally with respect to Losses incurred by any Seller Indemnified Parties as a result of any Breach of Buyer Rep Claims which are not based upon any Fundamental Representations of the Buyer, the Buyer shall have no liability or obligation to indemnify and hold each Seller Indemnified Party harmless from any Losses incurred by such Person to the extent that the aggregate amount of the Losses arising with respect to any such Indemnification Claims, exceeds the Cap.

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10.04               Procedures for Indemnification.

(a)            If any Buyer Indemnified Party or any Seller Indemnified Party (hereinafter an “Indemnified Party”) shall Claim to have suffered any Losses (other than with respect to any Claim asserted, demand or other Action by any Person who is not a party to this Agreement (hereinafter a “Third-Party Claim”)) for which indemnification is available under Section 10.02 or 10.03, as the case may be, the Indemnified Party shall notify the party required to provide indemnification (hereinafter an “Indemnifying Party”) in writing of such Claim. Any written notice provided by an Indemnified Party to an Indemnifying Party of a Claim for which indemnification is available hereunder shall be given promptly after the Indemnified Party becomes aware of the Claim, shall describe the nature of such Claim, the facts and circumstances that give rise to such Claim and the amount of the Losses attributable to such Claim if reasonably ascertainable at the time such Claim is made (or if not then reasonably ascertainable, the maximum amount of such Claim reasonably estimated by the Indemnified Party). In the event that within thirty (30) days after the receipt by the Indemnifying Party of such a written notice from the Indemnified Party, the Indemnified Party shall not have been given notice by the Indemnifying Party of a written objection to such Indemnification Claim, the Indemnifying Party shall conclusively be deemed to have agreed that it is liable to indemnify the Indemnified party for the full amount of all Losses arising with respect to the Claim described in the written notice which is delivered to the Indemnifying Party with respect to any such Indemnification Claim, including the amount of the Losses specified by the Indemnified Party in the written notice of the Indemnification Claim which is delivered to the Indemnifying Party. Notwithstanding anything to the contrary contained in Section 10.02 or Section 10.03 hereof, an Indemnifying Party shall have no obligation to indemnify an Indemnified Party with respect to a Breach of Seller Rep Claim or a Breach of Buyer Rep Claim unless the written notice required to be delivered by the Indemnified Party pursuant to this Section 10.04(a) is delivered prior to the expiration of the applicable Survival Period provided for in Section 10.01 hereof for the representation and warranty giving rise to the Breach of Seller Rep Claim or the Breach of Buyer Rep Claim.

(b)            If within the thirty (30) day period described in Section 10.04(a) above, the Indemnified Party shall have been given notice by the Indemnifying Party setting forth the Indemnifying Party’s objections to such Indemnification Claim and the Indemnifying Party’s reasons for such objection, then the parties shall negotiate in good faith for a period of ten (10) Business Days from the date the Indemnified Party receives such objection. After such ten (10) Business Day period (or such longer period as they may agree in writing), if the parties still cannot agree on the Indemnification Claim, the Indemnified Party may, at any time thereafter, until the expiration of the applicable statute of limitations with respect to its Indemnification Claim, commence legal proceedings against the Indemnifying Party to enforce its rights to indemnification from and against any Losses described in the written notice described in Section 10.04(a) above.

10.05               Procedures for Third-Party Claims.

(a)            Any Indemnified Party seeking indemnification pursuant to this Article 10 in respect of any Third-Party Claim shall give the Indemnifying Party from whom indemnification with respect to such Indemnification Claim is sought: (i) prompt written notice (but in no event more than fifteen (15) days after the Indemnified Party acquires knowledge thereof) of such Third-Party Claim; and (ii) copies of all documents and information relating to any such Third-Party Claim within ten (10) days of their being obtained by the Indemnified Party; provided, that the failure by the Indemnified Party to so notify or provide copies to the Indemnifying Party shall not relieve the Indemnifying Party from any liability to the Indemnified Party for any liability hereunder except to the extent that such failure shall have materially and irreparably prejudiced the defense of such Third-Party Claim.

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(b)            The Indemnifying Party shall have twenty (20) days (or such lesser time as may be necessary to comply with statutory response requirements for litigated Claims that are included in any Third-Party Claim) from receipt of the notice contemplated in this Section 10.05 to notify the Indemnified Party whether or not the Indemnifying Party will, at its sole cost and expense, defend the Indemnified Party against such Third-Party Claim. If the Indemnifying Party timely gives notice that it intends to defend the Third-Party Claim, it shall have the right, except as hereafter provided, to defend against, negotiate, settle or otherwise deal with the Third-Party Claim and to be represented by counsel of its own choice, and the Indemnified Party will not admit any liability with respect thereto or settle, compromise, pay or discharge the same without the consent of the Indemnifying Party; provided, that the Indemnified Party may participate in any proceeding with counsel of its choice and at its expense; and provided further, that the Indemnifying Party may not enter into a settlement of any such Third-Party Claim without (i) obtaining the consent of the Indemnified Party, which consent shall be not unreasonably withheld, unless such settlement requires no more than a monetary payment for which the Indemnified Party is fully indemnified by the Indemnifying Party or involves other matters not binding upon the Indemnified Party and (ii) obtaining a full release of the Indemnified Party from the Third-Party Claim. In the event the Indemnifying Party does not agree in writing to accept the defense of, and assume all responsibility for, such Third-Party Claim as provided above in this Section 10.05, then the Indemnified Party shall have the right to defend against, negotiate or otherwise deal with the Third-Party Claim in such manner as the Indemnified Party deems appropriate, and the Indemnified Party shall be entitled to indemnification for all Losses arising from any such Third-Party Claim; provided that the Indemnified Party shall not settle a Third-Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed.

(c)            Notwithstanding the foregoing, if in the reasonable opinion of the Indemnified Party such Third-Party Claim, or the litigation or resolution of such Third-Party Claim, involves: (i) an issue or matter that could have a material adverse effect on the Indemnified Party, including a dispute with a significant supplier or customer of the Indemnified Party; (ii) an action the object of which is to obtain an injunction, restraining order, declaratory relief or any other non-monetary relief against the Indemnified Party; or (iii) an issue or matter in which there is a conflict of interest in the defense of such action between the Indemnified Party and the Indemnifying Party, the Indemnified Party shall have the right to control the defense or settlement of any such claim or demand and its reasonable costs and expenses shall be included as part of the indemnification obligations of the Indemnifying Party; provided that the Indemnified Party shall not settle such claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. If the Indemnified Party elects to exercise such right, the Indemnifying Party shall have the right to participate in, but not control, the defense or settlement of such claim at its sole cost and expense.

10.06               Remedies Exclusive.

Except as herein expressly provided, the remedies provided in this Article 10 shall be the exclusive remedies of the parties from and after the Closing arising out of the consummation of the transactions contemplated hereby provided that nothing herein shall be deemed or construed to prohibit any party from asserting or recovering damages in connection with any claims for damages arising from fraud.

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10.07               Pre-Closing Investigations.

The right of an Indemnified Party to indemnification hereunder will not be affected by any investigation conducted, or any knowledge acquired (or capable or being acquired), at any time, whether before or after the execution and delivery of this Agreement or the Closing Date, with respect to the accuracy of, or compliance with, any of the representations, warranties, covenants or agreements set forth in this Agreement, except that, in such event, an Indemnified Party will not be entitled to indemnification with respect to any inaccuracy or breach of any representation, warranty, covenant or agreement that it had actual knowledge of prior to Closing and that would result in the failure of a condition set forth in Section 8.03 or 9.03.

10.08               Effect of Indemnification.

Any indemnity payment made hereunder shall be treated by the parties as an adjustment to the Final Purchase Price to the maximum extent permitted by applicable Law.

ARTICLE 11

MISCELLANEOUS PROVISIONS

11.01               Amendment and Modification.

Subject to applicable law, this Agreement may be amended, modified and supplemented only by written agreement of the parties hereto at any time with respect to any of the terms contained herein.

11.02               Waiver of Compliance.

Any failure of Sellers on the one hand, or Buyer, on the other, to comply with any obligation, covenant, agreement or condition herein may be expressly waived in writing by any duly elected officer of Buyer or Sellers’ Representative, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

11.03               Notices.

All notices, requests, demands and other communications required or permitted hereunder shall be in writing. Any notice, request, demand or other communication given verbally shall not be deemed to be effective or to have been given unless receipt thereof is acknowledged in writing by the party to whom such notice, request, demand or other communication is delivered. Any notice, request, demand or other communication which is in writing shall be deemed to have been duly given: (a) if delivered by hand when delivered; (b) if by overnight delivery, two Business Days following the Business Day on which any such notice, request, demand or other communication is delivered by the party providing such notice to a nationally recognized overnight delivery service; or (c) if by mail, five (5) days after being mailed, certified or registered mail, with postage prepaid:

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(i) If to Sellers, to:

William A. Harfosh

18 Landgrove Drive

Fayetteville, New York 13066

with a copy to (which copy shall not constitute notice):

Barclay Damon, LLP

125 East Jefferson Street

Syracuse, New York 13202

Attn: Gerald F. Stack, Esq.

or to such other person or address as Sellers’ Representative shall furnish to Buyer in writing.

(ii)  If to Buyer, to:

c/o Lorraine Capital, LLC

591 Delaware Avenue

Buffalo, New York 14202

Attention: Richard Gioia, Member

With a copy to (which copy shall not constitute notice):

Brian J. Bocketti, Esq.

Lippes Mathias Wexler Friedman LLP

50 Fountain Plaza, Suite 1700

Buffalo, New York 14202

or to such other person or address as Buyer shall furnish to Sellers in writing.

11.04              Consent to Jurisdiction.

Sellers and Buyer each hereby consent to the jurisdiction of the courts of the State of New York and to the jurisdiction of the federal courts of the United States of America in connection with any proceedings to interpret or enforce the provisions of this Agreement and in connection with the granting of any legal or equitable remedies in connection therewith.

11.05               Waiver of Jury Trial.

Each party hereto hereby waives, to the fullest extent permitted by applicable Law, any right it or he may have to a trial by jury in respect of any litigation directly or indirectly arising out of, under or in connection with this Agreement or any of the Ancillary Agreements. Each party hereto: (a) certifies that no representative, agent or attorney of any of the other parties has represented, expressly or otherwise, that any of the other parties would not, in the event of litigation, seek to enforce the foregoing waiver; and (b) acknowledges that it and the other parties hereto have been induced to enter into this Agreement, by, among other things, the mutual waivers and certifications in this Section 11.05.

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11.06               Assignment.

This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, but neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto without the prior written consent of the other parties; provided, however, that without the prior written consent of Sellers, Buyer shall be permitted to (i) collaterally assign its rights and interests to its senior lender; and (ii) assign its rights, interests or obligations to an affiliate of Buyer; provided further, however, that notwithstanding any such assignment by Buyer, Buyer shall remain liable for payment of all amounts due from Buyer and performance of all obligations of Buyer contained herein.

11.07               Governing Law.

This Agreement and the legal relations among the parties hereto and the Ancillary Agreements and the legal relations among the parties thereto shall be governed by and construed in accordance with the internal laws of the State of New York without regard to its conflicts of law doctrine.

11.08              Counterparts.

This Agreement may be executed simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

11.09              Headings.

The headings of the Sections and Articles of this Agreement are inserted for convenience only and shall not constitute a part hereof or affect in any way the meaning or interpretation of this Agreement.

11.10               Entire Agreement.

This Agreement, including the Exhibits hereto, the Schedules hereto and the other documents and certificates delivered pursuant to the terms hereof, sets forth the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein, and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto.

11.11              Third Parties.

Except as specifically set forth or referred to herein, nothing herein expressed or implied is intended or shall be construed to confer upon or give to any person or corporation other than the parties hereto and their successors or assigns, any rights or remedies under or by reason of this Agreement.

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11.12              Severability.

The invalidity or illegality of any provision, term, or agreement contained in or made a part of this Agreement shall not affect the validity of the remainder of this Agreement.

11.13              Specific Performance.

The parties agree that irreparable damage would occur if any provisions of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in addition to any other remedy to which they are entitled at law or in equity.

11.14              Sellers Representative.

(a)            In order to administer the transactions contemplated by this Agreement, including the calculations set forth in Section 3.03 hereof, the Sellers hereby designate and appoint William A. Harfosh as their representative for purposes of this Agreement and as attorney-in-fact and agent for and on behalf of each Seller (in such capacity, the “Sellers Representative”) in connection with and to facilitate the consummation of the transaction contemplated hereby, which shall include such power and authority.

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(b)            The Sellers hereby authorize the Sellers Representative to represent them, and their successors, with respect to the following matters: (i) to make all calculations and determinations in order to determine the Closing Net Working Capital pursuant to Section 3.03 hereof, (ii) to enforce and protect the rights and interests of the Sellers arising out of or under or in any manner relating to this Agreement and each other agreement, document, instrument or certificate referred to herein or therein or the transactions provided for herein or therein (including in connection with any and all claims for indemnification brought under Section 10.02 hereof, including the defense or settlement of any claims) and to take any and all actions which the Sellers Representative believes are necessary or appropriate under this Agreement for and on behalf of the Sellers, (iii) to make, execute, acknowledge, deliver and receive all such other agreements, guarantees, orders, receipts, endorsements, notices, requests, instructions, certificates, stock powers, letters and other writings, and, in general, to do any and all things and to take any and all action that the Sellers Representative, in its sole and absolute discretion, may consider necessary or proper or convenient in connection with or to carry out the transactions contemplated by this Agreement and all other agreements, documents or instruments referred to herein or therein or executed in connection herewith and therewith, (iv) to execute and deliver such waivers and consents in connection with this Agreement and the consummation of the transactions contemplated hereby as the Sellers Representative, in his sole discretion, may deem necessary or desirable and (v) to cause the delivery of all documents to be delivered to Buyer pursuant to Section 4.03 (and to waive any condition to the Closing). The Sellers Representative shall send copies of notices it receives to the applicable Sellers. In the event that William A. Harfosh or any substitute Sellers Representative dies, becomes unable to perform his responsibilities as Sellers Representative or resigns from such position, the Sellers having an aggregate percentage of greater than 50% of the Shares (or if after the Closing, who had immediately prior to the Closing an aggregate percentage of greater than 50% of the Shares) shall select another representative to fill such vacancy and such substituted Sellers Representative shall be deemed to be the Sellers Representative for all purposes of this Agreement. All decisions and actions by the Sellers Representative, including without limitation any agreement between the Sellers Representative and Buyer relating to indemnification obligations of Buyer under Section 10.03, including the defense or settlement of any claims and the making of payments with respect hereto, shall be binding upon all of the Sellers, and no Seller shall have the right to object, dissent, protest or otherwise contest the same. The Sellers Representative shall incur no liability to the Sellers with respect to any action taken or suffered by the Sellers Representative in reliance upon any notice, direction, instruction, consent, statement or other documents believed by him to be genuinely and duly authorized, nor for any other action or inaction with respect to the indemnification obligations of Buyer under Section 10.03, including the defense or settlement of any claims and the making of payments with respect thereto, except to the extent resulting from the Sellers Representative’s own willful misconduct or gross negligence. The Sellers Representative may, in all questions arising under this Agreement, rely on the advice of counsel, and for anything done, omitted or suffered in good faith by the Sellers Representative shall not be liable to the Sellers. The Buyer and the Sellers shall be able to rely conclusively on the instructions and decisions of the Sellers Representative with respect to the indemnification obligations of the Buyer under Section 10.03, including the defense or settlement of any claims or the making of payments with respect thereto, or as to any other actions required or permitted to be taken by the Sellers Representative hereunder, and no party hereunder shall have any cause of action against the Buyer and the Sellers to the extent they have relied upon the instructions or decisions of the Sellers Representative. The Sellers acknowledge and agree that the Sellers Representative may incur reasonable costs and expenses on behalf of the Sellers (“Sellers Representative Expenses”). Each Seller agrees to pay the Sellers Representative, promptly upon demand by the Sellers Representative therefor, its portion of any Sellers Representative Expenses. The Sellers Representative shall have the authority to represent any Seller with respect to the indemnification obligations of the Sellers under Section 10.02 of this Agreement.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

[SIGNATURE PAGE TO FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed all as of the day and year first above written.

SELLERS:
	B. R. JOHNSON, INC.
	By:	/s/ William A. Harfosh
		William A. Harfosh, President
	/s/ William A. Harfosh
	WILLIAM A. HARFOSH
	/s/ Michael V. Howard
	MICHAEL V. HOWARD
	/s/ Anthony C. Minieri
	ANTHONY C. MINIERI
	/s/ Arthur P. Brillanti
	ARTHUR P. BRILLANTI
BUYER:
	B.R. JOHNSON, LLC
	By:		/s/ Justin M. Reich
			Justin M. Reich, Manager

SHARES BUYERS:	/s/ William J. Maggio
	WILLIAM J. MAGGIO
	/s/ Charles A. Rider
	CHARLES A. RIDER
	/s/ Richard F. Gioia
	RICHARD F. GIOIA
	/s/ Justin M. Reich
	JUSTIN M. REICH

[Signature Page to Asset Purchase Agreement]

EX-4.1

Exhibit 4.1

Subscription Agreement

This Subscription Agreement (this “Agreement”) is being delivered to the purchaser identified on the signature page to this Agreement (the “Subscriber”) in connection with its investment in Regional Brands Inc., a Delaware corporation (the “Company”). The Company is conducting a private placement (the “Offering”) of up to $12,500,000.00 of its shares of common stock, par value $0.00001 per share (“Shares”), at a purchase price of $13.50 per Share (the “Purchase Price”).

IMPORTANT INVESTOR NOTICES

NO OFFERING LITERATURE OR ADVERTISEMENT IN ANY FORM MAY BE RELIED UPON IN THE OFFERING OF THESE SECURITIES EXCEPT FOR THIS SUBSCRIPTION AGREEMENT AND ANY SUPPLEMENTS HERETO, AND NO PERSON HAS BEEN AUTHORIZED TO MAKE ANY REPRESENTATIONS EXCEPT THOSE CONTAINED HEREIN.

THIS AGREEMENT IS CONFIDENTIAL AND THE CONTENTS HEREOF MAY NOT BE REPRODUCED, DISTRIBUTED OR DIVULGED BY OR TO ANY PERSONS OTHER THAN THE RECIPIENT OR ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY. EACH PERSON WHO ACCEPTS DELIVERY OF THIS AGREEMENT ACKNOWLEDGES AND AGREES TO THE FOREGOING RESTRICTIONS.

THIS AGREEMENT DOES NOT PURPORT TO BE ALL-INCLUSIVE OR TO CONTAIN ALL OF THE INFORMATION THAT YOU MAY DESIRE IN EVALUATING THE COMPANY OR AN INVESTMENT IN THE OFFERING. THIS AGREEMENT DOES NOT CONTAIN ALL OF THE INFORMATION THAT WOULD NORMALLY APPEAR IN A PROSPECTUS FOR AN OFFERING REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). YOU MUST CONDUCT AND RELY ON YOUR OWN EVALUATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED, IN DECIDING WHETHER TO INVEST IN THE OFFERING.

THIS AGREEMENT CONTAINS A SUMMARY OF CERTAIN PROVISIONS OF VARIOUS DOCUMENTS RELATING TO THE OPERATIONS OF THE COMPANY. THESE SUMMARIES DO NOT PURPORT TO BE COMPLETE AND ARE QUALIFIED IN THEIR ENTIRETY BY REFERENCE TO THE TEXTS OF THE ORIGINAL DOCUMENTS.

THIS AGREEMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION OF AN OFFER TO ANY PERSON OR IN ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION IS UNLAWFUL OR NOT AUTHORIZED. EACH PERSON WHO ACCEPTS DELIVERY OF THIS SUBSCRIPTION AGREEMENT AGREES TO RETURN IT AND ALL RELATED DOCUMENTS IF SUCH PERSON DOES NOT PURCHASE ANY OF THE SECURITIES DESCRIBED HEREIN.

NEITHER THE DELIVERY OF THIS AGREEMENT AT ANY TIME NOR ANY SALE OF SECURITIES HEREUNDER SHALL IMPLY THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE. THE COMPANY WILL EXTEND TO EACH PROSPECTIVE INVESTOR (AND TO ITS REPRESENTATIVE, ACCOUNTANT OR LEGAL COUNSEL, IF ANY) THE OPPORTUNITY, PRIOR TO ITS PURCHASE OF SHARES, TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM THE COMPANY CONCERNING THE OFFERING AND TO OBTAIN ADDITIONAL INFORMATION, TO THE EXTENT THE COMPANY POSSESSES THE SAME OR CAN ACQUIRE IT WITHOUT UNREASONABLE EFFORT OR EXPENSE, IN ORDER TO VERIFY THE ACCURACY OF THE INFORMATION SET FORTH HEREIN. ALL SUCH ADDITIONAL INFORMATION SHALL ONLY BE PROVIDED IN WRITING AND IDENTIFIED AS SUCH BY THE COMPANY THROUGH ITS DULY AUTHORIZED OFFICERS AND/OR DIRECTORS ALONE; NO ORAL INFORMATION OR INFORMATION PROVIDED BY ANY BROKER OR THIRD PARTY MAY BE RELIED UPON.

NO REPRESENTATIONS, WARRANTIES OR ASSURANCES OF ANY KIND ARE MADE OR SHOULD BE INFERRED WITH RESPECT TO THE ECONOMIC RETURN, IF ANY, THAT MAY ACCRUE TO AN INVESTOR IN THE COMPANY.

THIS AGREEMENT CONTAINS FORWARD-LOOKING STATEMENTS REGARDING THE COMPANY’S PERFORMANCE, STRATEGY, PLANS, OBJECTIVES, EXPECTATIONS, BELIEFS AND INTENTIONS. THE OUTCOME OF THE EVENTS DESCRIBED IN THESE FORWARD-LOOKING STATEMENTS IS SUBJECT TO SUBSTANTIAL RISKS, AND ACTUAL RESULTS COULD DIFFER MATERIALLY.

THIS SUBSCRIPTION AGREEMENT AND THE COMPANY’S FILINGS AND REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) INCLUDE DATA OBTAINED FROM INDUSTRY PUBLICATIONS AND REPORTS, WHICH THE COMPANY BELIEVES TO BE RELIABLE SOURCES; HOWEVER, NEITHER THE ACCURACY NOR COMPLETENESS OF THIS DATA IS GUARANTEED. WE HAVE NEITHER INDEPENDENTLY VERIFIED THIS DATA NOR SOUGHT THE CONSENT OF SUCH SOURCES TO REFER TO THEIR REPORTS IN THIS SUBSCRIPTION AGREEMENT.

THE OFFERING PRICE OF THE SHARES HAS BEEN DETERMINED ARBITRARILY. THE PRICE OF THE SHARES DOES NOT NECESSARILY BEAR ANY RELATIONSHIP TO THE ASSETS, EARNINGS OR BOOK VALUE OF THE COMPANY, OR TO ANY POTENTIAL ASSETS, EARNINGS OR BOOK VALUE OF THE COMPANY. THERE IS NOT CURRENTLY AN ACTIVE TRADING MARKET IN THE COMPANY’S COMMON STOCK AND THERE CAN BE NO ASSURANCE THAT AN ACTIVE TRADING MARKET IN ANY OF THE COMPANY’S SECURITIES WILL DEVELOP OR BE MAINTAINED. THE PRICE OF SHARES QUOTED ON THE OTC PINK SHEETS MAY BE IMPACTED BY A LACK OF LIQUIDITY OR AVAILABILITY OF SHARES FOR PUBLIC SALE AND ALSO WILL NOT NECESSARILY BEAR ANY RELATIONSHIP TO THE ASSETS, EARNINGS, BOOK VALUE OR POTENTIAL PROSPECTS OF THE COMPANY OR APPLICABLE QUOTED OR TRADING PRICES THAT MAY EXIST FOLLOWING THE LAPSE OF RESTRICTIONS ON THE SECURITIES SOLD PURSUANT TO THIS OFFERING OR OTHER RESTRICTIONS. SUCH PRICES SHOULD NOT BE CONSIDERED ACCURATE INDICATORS OF FUTURE QUOTED OR TRADING PRICES THAT MAY SUBSEQUENTLY EXIST FOLLOWING THIS OFFERING.

THE COMPANY RESERVES THE RIGHT, IN ITS SOLE DISCRETION, TO REJECT ANY SUBSCRIPTION IN WHOLE OR IN PART FOR ANY REASON OR FOR NO REASON. THE COMPANY IS NOT OBLIGATED TO NOTIFY RECIPIENTS OF THIS SUBSCRIPTION AGREEMENT WHETHER ALL OF THE SHARES OFFERED HEREBY HAVE BEEN SOLD.

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SUBSCRIBERS MAY BE DEEMED TO BE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION WITHIN THE MEANING OF THE UNITED STATES SECURITIES LAWS AND REGULATIONS REGARDING A PUBLIC COMPANY. THIS AGREEMENT CONTAINS CONFIDENTIAL INFORMATION CONCERNING THE COMPANY, AND HAS BEEN PREPARED SOLELY FOR USE IN CONNECTION WITH THE OFFERING DESCRIBED HEREIN. ANY USE OF THIS INFORMATION FOR ANY PURPOSE OTHER THAN IN CONNECTION WITH THE CONSIDERATION OF AN INVESTMENT IN THE SECURITIES OF THE COMPANY THROUGH THE OFFERING DESCRIBED HEREIN MAY SUBJECT THE USER TO CIVIL AND/OR CRIMINAL LIABILITY. THE RECIPIENT, BY ACCEPTING THIS SUBSCRIPTION AGREEMENT, AGREES: (I) NOT TO DISTRIBUTE OR REPRODUCE THIS SUBSCRIPTION AGREEMENT, IN WHOLE OR IN PART, AT ANY TIME, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY; (II) TO KEEP CONFIDENTIAL THE EXISTENCE OF THIS DOCUMENT AND THE INFORMATION CONTAINED HEREIN OR MADE AVAILABLE IN CONNECTION WITH ANY FURTHER INVESTIGATION OF THE COMPANY; AND (III) TO REFRAIN FROM TRADING IN THE PUBLICLY-TRADED SECURITIES OF THE COMPANY OR ANY OTHER RELEVANT COMPANY FOR SO LONG AS SUCH RECIPIENT IS IN POSSESSION OF THE MATERIAL NON-PUBLIC INFORMATION CONTAINED HEREIN. SUBSCRIBERS ARE ADVISED THAT THEY SHOULD SEEK THEIR OWN LEGAL COUNSEL PRIOR TO EFFECTUATING ANY TRANSACTIONS IN THE PUBLICLY TRADED COMPANY’S SECURITIES.

FOR RESIDENTS OF ALL STATES

THIS OFFERING IS BEING MADE SOLELY TO “ACCREDITED INVESTORS,” AS SUCH TERM IS DEFINED IN RULE 501 OF REGULATION D UNDER THE SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE AND WILL BE OFFERED AND SOLD IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) THEREUNDER AND REGULATION D (RULE 506) OF THE SECURITIES ACT AND CORRESPONDING PROVISIONS OF STATE SECURITIES LAWS.

THE SECURITIES OFFERED HEREBY ARE SUBJECT TO RESTRICTION ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE STATE LAWS, INCLUDING PURSUANT TO EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC, ANY STATE SECURITIES COMMISSION OR ANY OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS SUBSCRIPTION AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.

PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS AGREEMENT AS INVESTMENT, LEGAL, BUSINESS, OR TAX ADVICE. EACH INVESTOR SHOULD CONTACT HIS, HER OR ITS OWN ADVISORS REGARDING THE APPROPRIATENESS OF THIS INVESTMENT AND THE TAX CONSEQUENCES THEREOF, WHICH MAY DIFFER DEPENDING ON AN INVESTOR’S PARTICULAR FINANCIAL SITUATION. IN NO EVENT SHOULD THIS AGREEMENT BE DEEMED OR CONSIDERED TO BE TAX ADVICE PROVIDED BY THE COMPANY.

FOR FLORIDA RESIDENTS ONLY

THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER § 517.061 OF THE FLORIDA SECURITIES ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA. IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE BY SUCH SUBSCRIBER TO THE COMPANY, AN AGENT OF THE COMPANY, OR AN ESCROW AGENT OR WITHIN THREE DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH SUBSCRIBER, WHICHEVER OCCURS LATER.

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1. SUBSCRIPTION AND PURCHASE PRICE

(a)Subscription. Subject to the conditions set forth in Section 2 hereof, the Subscriber hereby subscribes for and agrees to purchase the number of Shares indicated on page 13 hereof on the terms and conditions described herein.

(b)Purchase of Shares. The Subscriber understands and acknowledges that the Purchase Price to be remitted to the Company in exchange for the Shares shall be set at Thirteen and 50/100 Dollars ($13.50) per Share, for an aggregate purchase price as set forth on page 13 hereof (the “Aggregate Purchase Price”). The Subscriber’s delivery of this Agreement to the Company shall be accompanied by payment for the Shares subscribed for hereunder, payable in United States Dollars, by wire transfer of immediately available funds delivered to the Company and in accordance with the wire instructions set forth on Exhibit A attached hereto. The Subscriber understands and agrees that, subject to Section 2 and applicable laws, by executing this Agreement, it is entering into a binding agreement.

2. ACCEPTANCE AND CLOSING

(a)Acceptance or Rejection. Subject to full, faithful and punctual performance and discharge by the Company of all of its duties, obligations and responsibilities as set forth in this Agreement and any other agreement entered into between the Subscriber and the Company relating to this subscription (collectively, the “Transaction Documents”), the Subscriber shall be legally bound to purchase the Shares pursuant to the terms and conditions set forth in this Agreement. For the avoidance of doubt, upon the occurrence of the failure by the Company to fully, faithfully and punctually perform and discharge any of its duties, obligations and responsibilities as set forth in any of the Transaction Documents, which shall have been performed or otherwise discharged prior to the Closing, the Subscriber may, on or prior to the Closing (as defined below), at its sole and absolute discretion, elect not to purchase the Shares and receive the full and immediate refund of the Aggregate Purchase Price. The Subscriber understands and agrees that the Company reserves the right to reject this subscription for Shares in whole or part in any order at any time prior to the Closing for any reason, notwithstanding the Subscriber’s prior receipt of notice of acceptance of the Subscriber’s subscription. In the event the Closing does not take place because of (i) the rejection of subscription for Shares by the Company; or (ii) the election not to purchase the Shares by the Subscriber, this Agreement and any other Transaction Documents shall thereafter be terminated and have no force or effect, and the parties shall take all steps to ensure that the Aggregate Purchase Price shall promptly be returned or caused to be returned to the Subscriber without interest thereon or deduction therefrom.

(b)Closing. The closing of the purchase and sale of the Shares hereunder (the “Closing”) shall take place at the Company’s offices or such other place as determined by the Company and may take place in one of more closings. Closings shall take place on a Business Day promptly following the satisfaction of the conditions set forth in Section 7 below, as determined by the Company (the “Closing Date”). “Business Day” shall mean from the hours of 9:00 a.m. (Eastern Time) through 5:00 p.m. (Eastern Time) of a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required to be closed. The Shares purchased by the Subscriber will be delivered by the Company promptly following the Closing Date of the Offering.

(c)Following Acceptance or Rejection. The Subscriber acknowledges and agrees that this Agreement and any other documents delivered in connection herewith will be held by the Company. In the event that this Agreement is not accepted by the Company for whatever reason, which the Company expressly reserves the right to do, this Agreement, the Aggregate Purchase Price received (without interest thereon) and any other documents delivered in connection herewith will be returned to the Subscriber at the address of the Subscriber as set forth in this Agreement.

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3. THE SUBSCRIBER'S REPRESENTATIONS, WARRANTIES AND COVENANTS

The Subscriber hereby acknowledges, agrees with and represents, warrants and covenants to the Company, as follows:

(a)              The Subscriber has full power and authority to enter into this Agreement, the execution and delivery of which has been duly authorized, if applicable, and this Agreement constitutes a valid and legally binding obligation of the Subscriber, enforceable against the Subscriber in accordance with its terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

(b)The Subscriber acknowledges its understanding that the Offering and sale of the Shares is intended to be exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”), by virtue of Section 4(2) of the Securities Act and the provisions of Regulation D promulgated thereunder (“Regulation D”). In furtherance thereof, the Subscriber represents and warrants to the Company and its affiliates as follows:

(i)The Subscriber realizes that the basis for the exemption from registration may not be available if, notwithstanding the Subscriber’s representations contained herein, the Subscriber is merely acquiring the Shares for a fixed or determinable period in the future, or for a market rise, or for sale if the market does not rise. The Subscriber does not have any such intention.

(ii)The Subscriber realizes that the basis for exemption would not be available if the Offering is part of a plan or scheme to evade registration provisions of the Securities Act or any applicable state or federal securities laws.

(iii)The Subscriber is acquiring the Shares solely for the Subscriber’s own beneficial account, for investment purposes, and not with a view towards, or resale in connection with, any distribution of the Shares.

(iv)The Subscriber has the financial ability to bear the economic risk of the Subscriber’s investment, has adequate means for providing for its current needs and contingencies, and has no need for liquidity with respect to an investment in the Company.

(v)The Subscriber and the Subscriber’s attorney, accountant, purchaser representative and/or tax advisor, if any (collectively, the “Advisors”) has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of a prospective investment in the Shares, and has so evaluated the merits and risks of such investment. If other than an individual, the Subscriber also represents it has not been organized solely for the purpose of acquiring the Shares.

(vi)The Subscriber (together with its Advisors, if any) has received all documents requested by the Subscriber, if any, has carefully reviewed them and understands the information contained therein, prior to the execution of this Agreement.

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(c)              The Subscriber is not relying on the Company or any of its officers, directors, employees, agents or advisors with respect to the legal, tax, economic and related considerations involved in this investment. The Subscriber has relied on the advice of, or has consulted with, only its Advisors. Each Advisor, if any, has disclosed to the Subscriber in writing (a copy of which is annexed to this Agreement) the specific details of any and all past, present or future relationships, actual or contemplated, between the Advisor and the Company or any affiliate thereof.

(d)The Subscriber has carefully considered the potential risks relating to the Company and a purchase of the Shares, and fully understands that the Shares are a speculative investment that involves a high degree of risk of loss of the Subscriber’s entire investment, and the Subscriber is able to afford a complete loss of such investment.

(e)The Subscriber will not sell or otherwise transfer any Shares without registration under the Securities Act or an exemption therefrom, and fully understands and agrees that the Subscriber must bear the economic risk of its purchase because, among other reasons, the Shares have not been registered under the Securities Act or under the securities laws of any state and, therefore, cannot be resold, pledged, assigned or otherwise disposed of unless they are subsequently registered under the Securities Act and under the applicable securities laws of such states, or an exemption from such registration is available. In particular, the Subscriber is aware that the Shares are “restricted securities,” as such term is defined in Rule 144 promulgated under the Securities Act (“Rule 144”), and they may not be sold pursuant to Rule 144 unless all of the conditions of Rule 144 are met. The Subscriber understands that any sales or transfers of the Shares are further restricted by state securities laws and the provisions of this Agreement.

(f)No oral or written representations or warranties have been made, or information furnished, to the Subscriber or its Advisors, if any, by the Company or any of its officers, directors, employees, agents, affiliates or advisors in connection with the Offering, other than any representations of the Company contained herein, and in subscribing for the Shares, the Subscriber is not relying upon any representations other than those contained herein.

(g)Subscriber’s overall commitment to investments that are not readily marketable is not disproportionate to the Subscriber’s net worth, and an investment in the Shares will not cause such overall commitment to become excessive.

(h)The Subscriber understands and agrees that the certificates for the Shares shall bear substantially the following legend until (i) such Shares shall have been registered under the Securities Act and effectively disposed of in accordance with a registration statement that has been declared effective or (ii) in the opinion of counsel acceptable to the Company, such Shares may be sold without registration under the Securities Act, as well as any applicable “blue sky” or state securities laws:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS. SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION COVERING SUCH SECURITIES UNDER THE SECURITIES ACT OR AN OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.

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(i)                 Neither the SEC nor any state securities commission has approved the Shares or passed upon or endorsed the merits of the Offering. There is no government or other insurance coverage with respect to any of the Shares.

(j)The Subscriber and its Advisors, if any, have had a reasonable opportunity to ask questions of and receive answers from a person or persons acting on behalf of the Company concerning the Offering and the business, financial condition, results of operations and prospects of the Company, and all such questions have been answered to the full satisfaction of the Subscriber and its Advisors, if any.

(k)(i) In making the decision to invest in the Shares, the Subscriber has relied solely upon the information provided by the Company in the Transaction Documents. The Subscriber disclaims reliance on any statements made or information provided by any person or entity in the course of Subscriber’s consideration of an investment in the Shares other than the Transaction Documents.

    (ii)The Subscriber represents and warrants that: (A) the Subscriber was contacted regarding the sale of the Shares by the Company (or an authorized agent or representative thereof) with whom the Subscriber had a prior substantial pre-existing relationship and (B) no Shares were offered or sold to it by means of any form of general solicitation or general advertising, and in connection therewith, the Subscriber did not (I) receive or review any advertisement, article, notice or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed circuit, or generally available; (II) attend any seminar meeting or industry investor conference whose attendees were invited by any general solicitation or general advertising; or (III) observe any website or filing of the Company with the SEC in which any offering of securities by the Company was described and as a result learned of any offering of securities by the Company.

(l) The Subscriber has taken no action that would give rise to any claim by any person for brokerage commissions, finders’ fees or the like relating to this Agreement or the transactions contemplated hereby.

(m)The Subscriber acknowledges that any estimates or forward-looking statements or projections furnished by the Company to the Subscriber were prepared by the management of the Company in good faith, but that the attainment of any such projections, estimates or forward-looking statements cannot be guaranteed by the Company or its management and should not be relied upon.

(n)(For ERISA plans only) The fiduciary of the ERISA plan (the “Plan”) represents that such fiduciary has been informed of and understands the Company’s investment objectives, policies and strategies, and that the decision to invest “plan assets” (as such term is defined in ERISA) in the Company is consistent with the provisions of ERISA that require diversification of plan assets and impose other fiduciary responsibilities. The Subscriber or Plan fiduciary (i) is responsible for the decision to invest in the Company; (ii) is independent of the Company and any of its affiliates; (iii) is qualified to make such investment decision; and (iv) in making such decision, the Subscriber or Plan fiduciary has not relied primarily on any advice or recommendation of the Company or any of its affiliates.

(o)This Agreement is not enforceable by the Subscriber unless it has been accepted by the Company, and the Subscriber acknowledges and agrees that the Company reserves the right to reject any subscription for any reason.

(p)The Subscriber will indemnify and hold harmless the Company and, where applicable, its directors, officers, employees, agents, advisors, affiliates and stockholders, and each other person, if any, who controls any of the foregoing, from and against any and all loss, liability, claim, damage and expense whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred (including reasonable attorneys’ fees) in investigating, preparing or defending against any action, claim, lawsuit, administrative proceeding or investigation whether commenced or threatened) (each, a “Loss”) arising out of or based upon (i) any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company in connection herewith being untrue or having been breached in any material respect or (ii) any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or therein; provided, however, that the Subscriber shall not be liable for Losses that in the aggregate exceed the Subscriber’s Aggregate Purchase Price tendered hereunder.

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(q)The Subscriber is, and on each date on which the Subscriber continues to own restricted Shares from the Offering will be, an “Accredited Investor” as defined in Rule 501(a) under the Securities Act. The categories of “Accredited Investors” are described on the attached Investor Questionnaire.

(r)The Subscriber has not authorized any person or entity to act as its Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Securities Act) in connection with the Offering.

(s)The Subscriber has reviewed, or had an opportunity to review, all of the SEC Filings (as defined below), including all “Forward Looking Statements” disclaimers contained therein.

4. THE COMPANY’S REPRESENTATIONS, WARRANTIES AND COVENANTS

The Company hereby acknowledges, agrees with and represents, warrants and covenants to the Subscriber, as follows:

(a)Organization and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware. The Company is duly qualified to do business, and is in good standing in the states required due to (a) the ownership or lease of real or personal property for use in the operation of the Company’s business or (b) the nature of the business conducted by the Company. The Company has all requisite power, right and authority to own, operate and lease its properties and assets, to carry on its business as now conducted, to execute, deliver and perform its obligations under this Agreement and the other Transaction Documents to which it is a party, and to carry out the transactions contemplated hereby and thereby. All actions on the part of the Company and its officers and directors necessary for the authorization, execution, delivery and performance of this Agreement and the other Transaction Documents, the consummation of the transactions contemplated hereby and thereby, and the performance of all of the Company’s obligations under this Agreement and the other Transaction Documents have been taken or will be taken prior to the Closing. This Agreement has been, and the other Transaction Documents to which the Company is a party on the Closing will be, duly executed and delivered by the Company, and this Agreement is, and each of the other Transaction Documents to which it is a party on the Closing will be, a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by bankruptcy, reorganization, insolvency, moratorium and similar laws of general application relating to or affecting the enforcement of rights of creditors, and except as enforceability of the obligations hereunder are subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law).

(b)Issuance of Shares. The Shares to be issued to the Subscriber pursuant to this Agreement, when issued and delivered in accordance with the terms of this Agreement, will be duly and validly issued and will be fully paid and non-assessable.

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(c)No Conflict. The execution, delivery and performance of this Agreement and the other Transaction Documents by the Company, and the consummation of the transactions contemplated hereby and thereby, will not (a) constitute a violation (with or without the giving of notice or lapse of time, or both) of any provision of any law or any judgment, decree, order, regulation or rule of any court, agency or other governmental authority applicable to the Company, (b) require any consent, approval or authorization of, or declaration, filing or registration with, any person, other than applicable requirements under federal and state securities laws, (c) result in a default (with or without the giving of notice or lapse of time, or both) under, acceleration or termination of, or the creation in any party of the right to accelerate, terminate, modify or cancel, any agreement, lease, note or other restriction, encumbrance, obligation or liability to which the Company is a party or by which it is bound or to which any assets of the Company are subject, (d) result in the creation of any lien or encumbrance upon the assets of the Company, or upon other securities of the Company, (e) conflict with or result in a breach of or constitute a default under any provision of the certificate of incorporation or bylaws of the Company, or (f) invalidate or adversely affect any permit, license, authorization or status used in the conduct of the business of the Company.

(d)SEC Filings. The Company has made available to each Subscriber through the EDGAR system true and complete copies of each of the Company’s Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Current Reports on Form 8-K (collectively, the “SEC Filings”), and all such SEC Filings are incorporated herein by reference. The SEC Filings, when they were filed with the SEC (or, if any amendment with respect to any such document was filed, when such amendment was filed), complied in all material respects with the applicable requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder and did not, as of such date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

(e)No Financial Advisor. The Company acknowledges that the Subscriber is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any advice given by the Subscriber or any of its representatives or agents in connection with this Agreement and the transactions contemplated hereby is merely incidental to the Subscriber’s purchase of the Shares. The Company further represents to the Subscriber that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the transactions contemplated hereby by the Company and its representatives.

(f)Indemnification. The Company will indemnify and hold harmless the Subscriber and, where applicable, its directors, officers, employees, agents, advisors, affiliates and stockholders, from and against any and all Losses arising out of or based upon (i) any representation or warranty of the Company contained herein or in any Transaction Document being untrue or having been breached in any material respect or (ii) any breach or failure by the Company to comply with any covenant or agreement made by the Company to the Subscriber herein or therein; provided, however, that the Company’s liability shall not exceed the Subscriber’s Aggregate Purchase Price tendered hereunder.

(g)Private Placements. Assuming the accuracy of the Subscriber’s representations and warranties set forth in Section 3, no registration under the Securities Act is required for the offer and sale of the Shares by the Company to the Subscribers as contemplated hereby.

(h)Investment Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Shares will not be or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

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5. OTHER AGREEMENTS OF THE PARTIES

(a)Furnishing of Information. As long as any Subscriber owns Shares, the Company covenants to timely file (or obtain extensions in respect thereof and file within the applicable grace period) all reports required to be filed by the Company after the date hereof pursuant to the Exchange Act. As long as any Subscriber owns Shares, if the Company is not required to file reports pursuant to the Exchange Act, it will prepare and furnish to the Subscribers and make publicly available in accordance with Rule 144(c) under the Securities Act such information as is required for the Subscribers to sell the Shares under Rule 144. The Company further covenants that it will take such further action as any Subscriber may reasonably request, all to the extent required from time to time to enable such Subscriber to sell such Shares without registration under the Securities Act within the limitation of the exemptions proved by Rule 144 under the Securities Act.

(b)Securities Laws Disclosure; Publicity. The Company shall not publicly disclose the name of any Subscriber, or include the name of any Subscriber in any filing with the SEC or any regulatory agency, without the prior written consent of such Subscriber, except as required by federal or applicable state securities law.

6. CONDITIONS TO ACCEPTANCE OF SUBSCRIPTION

The Company’s right to accept the subscription of the Subscriber is conditioned upon satisfaction of the following conditions precedent on or before the date the Company accepts such subscription:

(a)As of the Closing, no legal action, suit or proceeding shall be pending that seeks to restrain or prohibit the transactions contemplated by this Agreement.

(b)The representations and warranties of the Subscriber contained in this Agreement shall have been true and correct on the date of this Agreement and shall be true and correct as of the Closing as if made on the Closing Date.

7. MISCELLANEOUS PROVISIONS

(a)All parties hereto have been represented by counsel, and no inference shall be drawn in favor of or against any party by virtue of the fact that such party’s counsel was or was not the principal draftsperson of this Agreement.

(b)Each of the parties hereto shall be responsible to pay the costs and expenses of its own legal counsel in connection with the preparation and review of this Agreement and related documentation.

(c)Neither this Agreement, nor any provisions hereof, shall be waived, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, discharge or termination is sought.

(d)The representations, warranties, covenants and agreements of the Subscriber and the Company made in this Agreement shall survive the execution and delivery of this Agreement and the delivery of the Shares.

(e)Any party may send any notice, request, demand, claim or other communication hereunder to the Subscriber at the address set forth on the signature page of this Agreement or to the Company at its primary office (including personal delivery, overnight courier, messenger service, fax, ordinary mail or electronic mail), but no such notice, request, demand, claim or other communication will be deemed to have been duly given unless and until it actually is received by the intended recipient. Any party may change the address to which notices, requests, demands, claims and other communications hereunder are to be delivered by giving the other parties written notice in the manner herein set forth.

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(f)Except as otherwise provided herein, this Agreement shall be binding upon, and inure to the benefit of, the parties to this Agreement and their heirs, executors, administrators, successors, legal representatives and permitted assigns. If the Subscriber is more than one person or entity, the obligation of the Subscriber shall be joint and several and the agreements, representations, warranties, covenants and acknowledgments contained herein shall be deemed to be made by, and be binding upon, each such person or entity and its heirs, executors, administrators, successors, legal representatives and permitted assigns. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and merges and supersedes all prior discussions, agreements and understandings of any and every nature among them.

(g)This Agreement is not transferable or assignable by the Subscriber.

(h)This Agreement shall not be changed, modified or amended except by a writing signed by both (i) the Company and (ii) Subscribers in the Offering holding a majority of the Shares issued in the Offering then held by the original Subscribers.

(i)This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflicts of law principles that would require the application of the laws of another jurisdiction.

(j)The Company and the Subscriber hereby agree that any dispute that may arise between them arising out of or in connection with this Agreement shall be adjudicated before a court located in the City of New York, Borough of Manhattan, and they hereby submit to the exclusive jurisdiction of the federal and state courts of the State of New York located in the City of New York, Borough of Manhattan with respect to any action or legal proceeding commenced by any party, and irrevocably waive any objection they now or hereafter may have respecting the venue of any such action or proceeding brought in such a court or respecting the fact that such court is an inconvenient forum, relating to or arising out of this Agreement or any acts or omissions relating to the sale of the securities hereunder, and consent to the service of process in any such action or legal proceeding by means of registered or certified mail, return receipt requested, postage prepaid, in care of the address set forth herein or such other address as either party shall furnish in writing to the other.

(k)WAIVER OF JURY TRIAL. IN ANY ACTION, SUIT OR PROCEEDING BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY, THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY, IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY JURY.

(l)This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument; provided that a facsimile, electronic or .pdf signature shall be considered due execution and shall be binding upon the signatory thereto with the same force and effect as if the signature were an original, not a facsimile, electronic or .pdf signature.

[Signature Pages Follow]

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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE

IN WITNESS WHEREOF, the Subscriber has executed this Agreement on the ____ day of _____, 2016.

	x $[______] for each Share =
Shares subscribed for		Aggregate Purchase Price

Manner in which Title is to be held (Please Check One):

1.	___	Individual	7.	___	Trust/Estate/Pension or Profit Sharing Plan Date Opened:______________
2.	___	Joint Tenants with Right of Survivorship	8.	___	As a Custodian for
					Under the Uniform Gift to Minors Act of the State of
3.	___	Community Property	9.	___	Married with Separate Property
4.	___	Tenants in Common	10.	___	Keogh
5.	___	Corporation/Partnership/Limited Liability Company	11.	___	Tenants by the Entirety
6.	___	IRA

ALTERNATIVE DISTRIBUTION INFORMATION

To direct distribution to a party other than the registered owner, complete the information below.

YOU MUST COMPLETE THIS SECTION IF THIS IS AN IRA INVESTMENT.

Name of Firm (Bank, Brokerage, Custodian):

Account Name:

Account Number:

Representative Name:

Representative Phone Number:

Address:

City, State, Zip:

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IF MORE THAN ONE SUBSCRIBER, EACH SUBSCRIBER MUST SIGN.
INDIVIDUAL SUBSCRIBERS MUST COMPLETE THIS PAGE 14.
SUBSCRIBERS WHICH ARE ENTITIES MUST COMPLETE PAGE 15.

EXECUTION BY NATURAL PERSONS

Exact Name in Which Title is to be Held
Name (Please Print)	Name of Additional Subscriber
Residence: Number and Street	Address of Additional Subscriber
City, State and Zip Code	City, State and Zip Code
Social Security Number	Social Security Number
Telephone Number	Telephone Number
Fax Number (if available)	Fax Number (if available)
E-Mail (if available)	E-Mail (if available)
(Signature)	(Signature of Additional Subscriber)
ACCEPTED this ___ day of _________ 2016, on behalf of the Company.

By:

Title:

Name:

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]

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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY

(Corporation, Partnership, LLC, Trust, Etc.)

Name of Entity (Please Print)

Date of Incorporation or Organization:

State of Principal Office:

Federal Taxpayer Identification Number:

Address

City, State and Zip Code

Telephone Number

Fax Number (if available)

E-Mail (if available)

		By:
		Name:
		Title:
[seal]
Attest:
	(If Entity is a Corporation)
		Address

ACCEPTED this ____ day of __________ 2016, on behalf of the Company.

By:

Name:

Title:

[SIGNATURE PAGE FOR SUBSCRIPTION AGREEMENT]

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INVESTOR QUESTIONNAIRE

Instructions: Check all boxes below which correctly describe the category of Accredited Investor to which you belong.

[  ] You are (i) a bank, as defined in Section 3(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), (ii) a savings and loan association or other institution, as defined in Section 3(a)(5)(A) of the Securities Act, whether acting in an individual or fiduciary capacity, (iii) a broker or dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), (iv) an insurance company as defined in Section 2(a)(13) of the Securities Act, (v) an investment company registered under the Investment Company Act of 1940, as amended (the “Investment Company Act”), (vi) a business development company as defined in Section 2(a)(48) of the Investment Company Act, (vii) a Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958, as amended, (viii) a plan established and maintained by a state, its political subdivisions, or an agency or instrumentality of a state or its political subdivisions, for the benefit of its employees and you have total assets in excess of $5,000,000, or (ix) an employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and (A) the decision that you shall subscribe for and purchase shares of common stock of the Company (the “Shares”) is made by a plan fiduciary, as defined in Section 3(21) of ERISA, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or (B) you have total assets in excess of $5,000,000 and the decision that you shall subscribe for and purchase the Shares is made solely by persons or entities that are accredited investors, as defined in Rule 501 of Regulation D promulgated under the Securities Act (“Regulation D”), or (C) you are a self-directed plan and the decision that you shall subscribe for and purchase the Shares is made solely by persons or entities that are accredited investors.

[  ] You are a private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940, as amended.

[  ] You are an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the “Code”), a corporation, Massachusetts or similar business trust or a partnership, in each case not formed for the specific purpose of making an investment in the Shares, with total assets in excess of $5,000,000.

[  ] You are a director or executive officer of the Company.

[  ] You are a natural person whose individual net worth, or joint net worth with your spouse, exceeds $1,000,000.^[1]

[  ] You are a natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with your spouse in excess of $300,000 in each of the two most recent years, and who has a reasonable expectation of reaching the same income level in the current year.

--------
^[1] For this purpose, “net worth” means the excess of total assets at fair market value over total liabilities (including any indebtedness secured by the Subscriber’s primary residence in excess of the fair market value of such primary residence), provided, however, (1) the value of the Subscriber’s primary residence and indebtedness secured by such primary residence up to the fair market value of such primary residence are specifically excluded from definition of net worth for this purpose, and (2) any incremental debt secured by the Subscriber’s primary residence incurred within 60 days before the date on which this Subscription Agreement is completed by the Subscriber shall be included as a liability, unless such incremental debt was used to purchase the Subscriber’s primary residence.

15

[  ] You are a trust, with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the Shares and whose subscription for and purchase of the Shares is directed by a sophisticated person as described in Rule 506(b)(2)(ii) of Regulation D.

[  ] You are an entity in which all of the equity owners are persons or entities described in one of the preceding paragraphs.

Check all boxes below which correctly describe you.

With respect to this investment in the Shares, your:

Investment Objectives:	[  ] Aggressive Growth	[  ] Speculation
Risk Tolerance:	[  ] Low Risk	[  ] Moderate Risk	[  ] High Risk

Are you associated with a FINRA Member Firm? [  ] Yes [  ] No

Your initials (Subscriber and co-Subscriber, if applicable) are required for each item below:

____ ____	I/We understand that this investment is not guaranteed.
____ ____	I/We are aware that this investment is not liquid.
____ ____	I/We are sophisticated in financial and business affairs and are able to evaluate the risks and merits of an investment in this offering.
____ ____	I/We confirm that this investment is considered “high risk.” (This type of investment is considered high risk due to the inherent risks including lack of liquidity and lack of diversification. Success or failure of private placements such as this is dependent on the corporate issuer of these securities and is outside the control of the investors. While potential loss is limited to the amount invested, such loss is possible.)

[Signature page follows]

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The Subscriber hereby represents and warrants that all of its answers to this Investor Questionnaire are true as of the date of its execution of the Subscription Agreement pursuant to which it is purchasing the Shares.

Name of Subscriber [please print]	Name of Co-Subscriber [please print]
Signature of Subscriber (Entities please provide signature of Subscriber’s duly authorized signatory.)	Signature of Co-Subscriber
Name of Signatory (Entities only)
Title of Signatory (Entities only)

[SIGNATURE PAGE FOR INVESTOR QUESTIONNAIRE]

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EXHIBIT A

Wire Instructions

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EX-10.1

Exhibit 10.1 

CREDIT AND SECURITY AGREEMENT

This CREDIT AND SECURITY AGREEMENT (as the same may from time to time be amended, restated, supplemented or otherwise modified, this “Agreement”) is made effective as of the 1st day of November, 2016, among B.R. JOHNSON, LLC, a Delaware limited liability company (“BRJ”), each other Person which may be added as a “Borrower” hereto, subsequent to the date hereof (collectively, together with BRJ, the “Borrowers”, and each individually, a “Borrower”), certain Credit Parties (as hereinafter defined) which from time to time become party hereto, the lending institutions from time to time party hereto (collectively, “Lenders”, and individually, “Lender”), and KEYBANK NATIONAL ASSOCIATION (“KeyBank”, and in its capacity as agent for the Lenders under this Agreement, “Agent”).

WITNESSETH:

WHEREAS, Borrowers, the other Credit Parties and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to Borrowers upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE I. DEFINITIONS AND GENERAL TERMS

SECTION 1.1 DEFINITIONS. As used in this Agreement, the following terms shall have the following meanings:

“Acquisition” shall mean any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person, or any business or division of any Person, (b) the acquisition of in excess of 50% of the Capital Stock of any Person, or (c) the acquisition of another Person (other than a Credit Party) by a merger or consolidation or any other combination with such Person.

“Administrative Questionnaire” shall mean an Administrative Questionnaire in a form supplied by Agent.

“Advantage” shall mean any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender in respect of the Debt, if such payment results in that Lender having less than its Pro Rata Share of the Applicable Debt then outstanding, than was the case immediately before such payment.

“Affiliate” shall mean, with respect to a specified Person (a) an officer or directors of such Person, (b) another Person that directly or indirectly, controls or is controlled by or is under direct or indirect common control with the Person specified; and “control” (including the correlative meanings, the terms “controlled by” and “under common control with”) shall mean the possession, directly or indirectly, of (i) 10% or more of the Voting Power of such Person, or (ii) the power to direct or cause the direction of the management and policies of such specified Person, whether through the ownership of voting securities, by contract or otherwise; provided, however, that neither any Lender nor any of its Affiliates shall be deemed or construed to be an Affiliate of the Companies.

“Agent” shall have the meaning given to such term in the opening paragraph of this Agreement and shall include any successor agent appointed pursuant to the provisions of Article X hereto.

“Agent’s Report” shall have the meaning given to such term in Section 2.3(c) hereof.

“Aggregate Commitment Percentage” shall mean, for any Lender, as of any date, the percentage calculated by dividing (a) the Revolving Credit Commitments of such Lender, or if the Revolving Credit Commitments have expired or have been terminated or otherwise reduced to $0, then the amount outstanding under the Revolving Credit Notes of such Lender, by (b) the aggregate, on such date, of the Revolving Credit Commitments of all Lenders, or if the Revolving Credit Commitments have expired or have been terminated or otherwise reduced to $0, then the amount outstanding under the Revolving Credit Notes of all Lenders.

“Anti-Terrorism Laws” shall mean any Laws relating to terrorism or money laundering, including Executive Order No. 13224, the USA Patriot Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by the United States Treasury Department’s Office of Foreign Asset Control (as any of the foregoing Laws may from time to time be amended, renewed, extended, or replaced).

“Applicable Commitment Percentage” shall mean, for each Lender, with respect to the Revolving Credit Commitment, the percentage set forth opposite such Lender’s name under the column headed “Revolving Credit Commitment Percentage” as described in Schedule 1 hereto.

“Applicable Debt” at any time shall mean, with respect to the Revolving Credit Commitment, collectively, (i) all Debt incurred by Borrowers to Agent or the Lenders pursuant to this Agreement and includes the principal of and accrued and unpaid interest on all Notes at such time, and (ii) each extension, renewal or refinancing thereof in whole or in part.

“Applicable Margin” means 250 basis points for Eurodollar Loans or Overnight LIBOR Loans and zero (0) basis points for Base Rate Loans.

“Applicable Tax Percentage” shall mean the greater of (i) the highest effective marginal combined rate of federal, state, and local income taxes for an individual, and (ii) the highest effective marginal combined rate of federal, state and local income taxes applicable to a corporation.

“Approved Fund” shall mean any Fund that is administered or managed by (a) a Lender, (b) an affiliate of a Lender or (c) an entity or an Affiliate of an entity that administers or manages a Lender.

“Assigned Contracts” means, collectively, all of each Credit Party’s rights and remedies under, and all moneys and claims for money due or to become due to any Credit Party under any contract with respect to the BRJ Acquisition Documents or any other Acquisition to which any Credit Party is or becomes a party, and any and all amendments, supplements, extensions, and renewals thereof including all rights and claims of any Credit Party now or hereafter existing: (a) under any insurance, indemnities, warranties, and guarantees provided for or arising out of or in connection with any of the foregoing agreements; (b) for any damages arising out of or for breach or default under or in connection with any of the foregoing contracts; (c) to all other amounts from time to time paid or payable under or in connection with any of the foregoing agreements; or (d) to exercise or enforce any and all covenants, remedies, powers and privileges thereunder.

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“Assignment and Assumption” shall mean an assignment and assumption entered into by a Lender and an Eligible Assignee (with the consent of any party whose consent is required by Section 11.10), and accepted by Agent, in substantially the form of Exhibit D or any other form approved by Agent.

“Banking Services” shall mean each and any of the following bank services provided to any Credit Party by Agent or any Lender or any their respective affiliates: (a) commercial credit cards, (b) stored value cards and (c) treasury management services (including, without limitation, controlled disbursement, automated clearinghouse transactions, returned items, overdrafts and interstate depository network services).

“Banking Services Obligations” shall mean any and all obligations of any one or more of the Credit Parties to Agent or any Lender or any their respective affiliates, whether absolute or contingent and howsoever and whensoever created, arising, evidenced or acquired (including all renewals, extensions and modifications thereof and substitutions therefor) in connection with Banking Services.

“Base Rate” means, for any day, a rate per annum equal to the highest of (a) the Prime Rate, (b) one-half of one percent (.50%) in excess of the Federal Funds Effective Rate, and (c) one hundred (100) basis points in excess of the London Interbank Offered Rate for loans in Eurodollars with an Interest Period of one month (or, if such day is not a Business Day, such rate as calculated on the most recent Business Day). Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate.

“Base Rate Loan” shall mean a Loan on which Borrowers shall pay interest at a rate based on the Base Rate.

“Blocked Person” shall have the meaning given to such term in Section 7.26 hereof.

“Borrower” and “Borrowers” shall have the meaning given to such terms in the opening paragraph of this Agreement.

“Borrowing Agent” shall mean BRJ.

“BRJ” shall have the meaning given to such term in the opening paragraph of this Agreement.

“BRJ Acquisition” shall mean the acquisition by BRJ of substantially all of the assets of BRJ Seller, pursuant to the terms and conditions of the BRJ Acquisition Documents.

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“BRJ Acquisition Agreement” shall mean that certain Asset Purchase Agreement dated on or about the date hereof among BRJ Seller, William A. Harfosh, Michael V. Howard, Anthony C. Minieri, Arthur P. Brillanti, BRJ, William J. Maggio, Charles A. Rider, Richard F. Gioia and Justin M. Reich.

“BRJ Acquisition Documents” shall mean the BRJ Acquisition Agreement and all agreements, instruments and documents executed pursuant thereto or in connection therewith, as any of the foregoing may be amended, restated or otherwise modified from time to time.

“BRJ Seller” shall mean B.R. Johnson, Inc., a New York corporation.

“Business Day” shall mean a day of the year on which banks are not required or authorized to close in Cleveland, OH, and if the applicable Business Day relates to any Eurodollar Loan, a day on which dealings are carried on in the London interbank eurodollar market.

“Capital Distribution” shall mean a payment made, liability incurred or other consideration given for the purchase, acquisition, redemption or retirement of any Capital Stock of any Company or as a dividend, return of capital or other distribution (other than any stock dividend, stock split or other equity distribution payable only in Capital Stock of the Company in question) in respect of any Company’s Capital Stock.

“Capital Expenditures” shall mean, for any Person and for any period, the aggregate amount of all expenditures made, directly or indirectly, by such Person and its Consolidated Subsidiaries during such period which should be capitalized in accordance with GAAP and, without duplication, the principal portion of Capital Lease Obligations paid by such Person and its Consolidated Subsidiaries during such period.

“Capital Lease” shall mean, as applied to any Person, any lease of (or any other agreement conveying the right to use) any property (whether real, personal or mixed) by such Person as lessee which would, in accordance with GAAP, be required to be classified and accounted for as a capital lease on the balance sheet of such person.

“Capital Lease Obligation” shall mean with respect to any Capital Lease, the amount of the obligation of the lessee thereunder which would, in accordance with GAAP, appear on a balance sheet of such lessee (or the notes thereto) in respect of such Capital Lease and, for purposes of this Agreement, the amount of such obligations at any time shall be the capitalized amount thereof at such time determined in accordance with GAAP.

“Capital Stock” shall mean (a) any and all shares, interests, participations or other equivalents of or interests in (however designated) corporate stock, including without limitation, shares of common stock, preferred stock or preference stock, in any Person which is a corporation, (b) all partnership interests (whether general or limited) in any Person which is a partnership, (c) all membership interests or limited liability company interests in any Person which is a limited liability company, and (d) all equity or ownership interests in any Person of any other type.

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“Cash Collateral Account” shall mean a commercial Deposit Account designated as a “cash collateral account” and maintained by a Credit Party with Agent or its designee, without liability by Agent or the Lenders to pay interest thereon, from which account Agent shall have the exclusive right to withdraw funds until all of the Secured Debt is paid in full.

“Cash Equivalents” shall mean (a) securities issued or directly and fully guaranteed or insured by the United States or any agency or instrumentality thereof having maturities of not more than nine (9) months from the date of acquisition, (b) certificates of deposit with maturities of six (6) months or less from the date of acquisition, bankers’ acceptances with maturities not exceeding six (6) months and overnight bank deposits, in each case with any Lender that is a domestic commercial bank having capital and surplus in excess of $100,000,000 or any other domestic commercial bank having capital and surplus in excess of $500,000,000, (c) repurchase obligations with a term of not more than seven (7) days for underlying securities of the types described in clauses (a) and (b) entered into with any financial institution meeting the qualifications specified in clause (b) above, (d) commercial paper issued by any Lender or the parent corporation of any Lender, and commercial paper rated A-1 or the equivalent thereof by Standard & Poor’s or P-1 or the equivalent thereof by Moody’s and in each case maturing within six (6) months after the date of acquisition, (e) money market accounts or funds containing only assets of types described in clauses (a) through (d) above.

“Change in Control” shall mean the occurrence of any event (whether in one or more transactions) which results in (i) Sponsor and Senior Subordinated Creditor in the aggregate ceasing to directly own and control at least 51% of the outstanding Voting Power of BRJ, (ii) Sponsor ceasing to have the right under BRJ’s Limited Liability Company Agreement to elect the majority of the Board of Managers of BRJ, or (iii) each Borrower ceasing to, directly or indirectly, own and control 100% of each class of the outstanding Capital Stock of each of such Borrower’s Subsidiaries.

“Closing Date” shall mean the effective date of this Agreement.

“Code” shall mean the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

“Collateral” shall have the meaning ascribed thereto in Section 6.1.

“Commitment” shall mean the obligation hereunder of each Lender as set forth on Schedule 1, in its sole and absolute discretion, to make Loans pursuant to the Revolving Credit Commitment and to participate in the issuance of Letters of Credit up to the Maximum Amount for such Lender, as such amounts may be reduced or adjusted pursuant to the terms hereof.

“Commitment Period” shall mean the period from the Closing Date until DEMAND by Agent or the Lenders, or such earlier date on which the Commitment shall have been terminated pursuant to Article IX hereof.

“Commodity Account” shall mean an account maintained by a commodity intermediary in which a commodity contract is carried for a commodity customer.

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“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, and any successor statute.

“Company” shall mean any Borrower or any Subsidiary.

“Companies” shall mean all Borrowers and all Subsidiaries.

“Compliance Certificate” shall mean a certificate, substantially in the form of the attached Exhibit C.

“Consolidated” shall mean the resultant consolidation of the financial statements of BRJ and its Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the consolidated financial statements referred to in Section 7.17 hereof.

“Consolidated Depreciation and Amortization Expense” shall mean, for any Person and for any period, the Consolidated depreciation and amortization expense of such Person and its Consolidated Subsidiaries for such period, determined in accordance with GAAP.

“Consolidated EBITDA” shall mean, for any Person and for any period of determination, without duplication, such Person’s Consolidated Net Income for such period increased, to the extent deducted in the calculation of Consolidated Net Income, by the sum of such Person’s (i) Consolidated Interest Expense, plus (ii) Consolidated Income Tax Expense, plus (iii) Consolidated Depreciation and Amortization Expense, plus (iv) Sponsor Management Fees to the extent permitted in this Agreement and to the extent such items have been expensed and have reduced the calculation of Consolidated EBITDA, plus (v) one-time fees and expenses incurred on or prior to 90 days following the Closing Date in connection with the transactions contemplated by this Agreement and the BRJ Acquisition Agreement in an amount not to exceed $500,000 and to the extent not capitalized. For purposes of this definition, each reference to Person shall be deemed to include such Person and its Subsidiaries on a Consolidated basis.

“Consolidated Fixed Charge Coverage Ratio” shall mean, for any Person and for any period, the ratio of (a) Consolidated EBITDA, to (b) Consolidated Fixed Charges.

“Consolidated Fixed Charges” shall mean, for any period, on a Consolidated basis and in accordance with GAAP, the sum, without duplications, of (a) the current maturities of long-term Indebtedness of the Companies, (b) the current maturities of Capital Leases, (c) Consolidated Interest Expense, (d) Unfunded Capital Expenditures, (e) Capital Distributions by BRJ to the extent permitted under this Agreement (to the extent paid in cash), (f) Consolidated Income Tax Expense for such period (to the extent paid in cash), and (g) Sponsor Management Fees paid in cash (to the extent not already expensed and included in the determination of Consolidated EBITDA).

“Consolidated Income Tax Expense” shall mean, for any Person and for any period, on a Consolidated basis, the aggregate of all Federal, state, local and foreign taxes, based upon income and franchise tax expense of such Person and its Consolidated Subsidiaries for such period, determined in accordance with GAAP.

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“Consolidated Interest Expense” shall mean, for any Person and for any period, on a Consolidated basis, the aggregate amount of interest expense (including the interest portion of any deferred payment obligation, calculated in accordance with the effective interest method of accounting and amortization of original issue discount) and all but the principal component of rentals in respect of Capital Leases, paid, accrued and/or scheduled to be paid or accrued by such Person and its Consolidated Subsidiaries during such period (including, without limitation, any payment-in-kind interest accrued during such period), all determined in accordance with GAAP. For purposes of this definition, interest on a Capital Lease will be deemed to accrue at an interest rate reasonably determined in accordance with GAAP.

“Consolidated Net Income” shall mean, for any Person and for any period, on a Consolidated basis, the net income (loss) of such Person and its Consolidated Subsidiaries for such period, determined in accordance with GAAP, provided that: (a) all gains and all losses realized by such Person and its Consolidated Subsidiaries upon the sale or other disposition (including, without limitation, pursuant to sale and leaseback transactions) of property or assets which are not sold or otherwise disposed of in the ordinary course of business, or pursuant to the sale of any capital stock of such person or any Subsidiary, shall be excluded, (b) all items of gain or loss which are properly classified as extraordinary in accordance with GAAP shall be excluded, (c) all items which are properly classified in accordance with GAAP as cumulative effects of accounting changes shall be excluded, and (d) net income (loss) of any Person which is not a Subsidiary of such Person and which is Consolidated with such Person or is accounted for by such Person by the equity method of accounting shall be included in the calculation of Consolidated Net Income hereunder only to the extent of the amount of dividends or distributions paid to such Person.

“Controlled Group” shall mean a Company and each “person” (as therein defined) required to be aggregated with a Company under Code Sections 414(b), (c), (m) or (o).

“Copyright” shall mean any copyright, any copyrightable work, any registration or recording of any copyright or copyrightable work, and any application in connection with any copyright or copyrightable work, including, without limitation, any such registration, recording, or application in the United States Copyright Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision of such other country, and any renewal of any of the foregoing.

“Copyright License” shall mean any agreement granting any right in any Copyright, as the same may from time to time be amended, restated or otherwise modified.

“Credit Party” shall mean any Borrower or any other Person that shall join as a Credit Party hereunder pursuant to the terms of Section 5.22 hereof.

“Credit Parties” shall mean all Borrowers and all other Persons that join as a Credit Party hereunder pursuant to the terms of Section 5.22 hereof.

“Debt” shall mean, collectively, (a) all Indebtedness incurred by Borrowers to Agent and the Lenders pursuant to this Agreement and includes the principal of and interest on all Loans; (b) each extension, renewal or refinancing thereof in whole or in part; (c) the commitment and other fees and any prepayment fees payable hereunder; (d) all Related Expenses; and (e) all other obligations of Borrowers under this Agreement and the Loan Documents.

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“Default” shall mean an event or condition that, with the lapse of any applicable grace period or the giving of notice or both would constitute, an Event of Default and which has not been waived by the Required Lenders (or all of the Lenders if required by Section 11.3) in writing or fully corrected prior to becoming an actual Event of Default.

“Defaulting Lender” means any Lender who: (a) has failed, within one Business Day of the date required to be funded or paid, to (i) fund any portion of its portion of any incurrence of Loans, (ii) if applicable, fund any portion of its participation in Letters of Credit or (iii) pay over to Agent, or any Lender any other amount required to be paid by it hereunder, unless, in the case of clause (i) above, such Lender notifies Agent in writing that such failure is the result of such Lender’s good faith determination that a condition precedent to funding (specifically identified and including a particular Default or Event of Default, if any) has not been satisfied; (b) has notified Borrowers or Agent in writing, or has made a public statement to the effect, that it does not intend or expect to comply with any of its funding obligations under this Agreement (unless such writing or public statement indicates that such position is based on such Lender’s good faith determination that a condition precedent (specifically identified and including a particular Default or Event of Default, if any) to funding a loan under this Agreement cannot be satisfied) or generally under other agreements in which it commits to extend credit; (c) has failed, within one Business Day after request by Agent, acting in good faith, to provide a certification in writing from an authorized officer of such Lender that it will comply with its obligations (and is financially able to meet such obligations) to fund prospective Loans and, if applicable, participations in then outstanding Letters of Credit under this Agreement, provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (c) upon Agent’s receipt of such certification in form and substance satisfactory to Agent; (d) has become the subject of any action or proceeding of a type described in Section 8.12 hereof; or (e) has failed at any time to comply with the provisions of Section 9.5 with respect to purchasing participations from the other Lenders, whereby such Lender’s share of any payment received, whether by setoff or otherwise, is in excess of its pro rata share of such payments due and payable to all of the Lenders.

“Default Rate” means (a) with respect to any Loan or other Obligation for which a rate is specified, a rate per annum equal to two percent (2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount, if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the Derived Base Rate from time to time in effect.

“Derived Base Rate” means a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) for Base Rate Loans plus the Base Rate.

“Derived Eurodollar Rate” means a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) for Eurodollar Loans plus the Eurodollar Rate.

“Derived Overnight LIBOR Rate” means a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) for Overnight LIBOR Loans plus the Overnight LIBOR Rate.

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“Designated Lender” means (a) a Lender; (b) any commercial bank organized under the laws of the United States or any State, having been consented to by the Required Lenders and Agent, and having total assets in excess of $3,000,000,000 and a reported unimpaired capital and surplus of at least $150,000,000, (c) any savings and loan association or savings bank organized under the laws of the United States or any State, having been consented to by the Required Lenders and Agent, and having total assets in excess of $3,000,000,000 and a reported unimpaired capital and surplus of at least $150,000,000, and (d) any finance company or other financial institution (other than any described in the immediately preceding clauses (b) or (c)) organized under the laws of the United States or any State and engaged in making commercial loans in the ordinary course of its business, having been consented to by the Required Lenders and Agent, and having total assets in excess of $3,000,000,000 and a reported unimpaired capital and surplus of at least $150,000,000.

“Dodd-Frank Act” means the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) signed into law on July 21, 2010, as amended from time to time.

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

“Domestic Subsidiary” shall mean any Subsidiary that is not a Foreign Person.

“Eligible Assignee” means (a) a Lender; (b) an affiliate of a Lender; (c) an Approved Fund; and (d) any other Person (other than a natural Person) approved by (i) Agent, and (ii) unless an Event of Default has occurred and is continuing, Borrowers (such approval not to be unreasonably withheld or delayed); provided that notwithstanding the foregoing, “Eligible Assignee” shall not include Borrowers, Sponsor, or any of Borrowers’ or Sponsor’s Affiliates or Subsidiaries.

“Environmental Laws” shall mean all legally binding provisions of law, statutes, ordinances, rules, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, awards and standards promulgated by the government of the United States of America or by any state or municipality thereof or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning occupational health and safety with respect to hazardous substances and protection of, or regulation of the discharge of substances into, the environment.

“Equipment” shall mean goods other than Inventory, farm products or consumer goods.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto, in each case, as in effect from time to time.

“ERISA Event” shall mean (a) the existence of any condition or event with respect to an ERISA Plan that presents a risk of the imposition of an excise tax or any other liability on a Company or of the imposition of a Lien on the assets of a Company; (b) a Controlled Group member has engaged in a non-exempt “prohibited transaction” (as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under ERISA that could result in liability to a Company; (c) a Controlled Group member has applied for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or ERISA Section 307; (d) a Reportable Event has occurred with respect to any Pension Plan as to which notice is required to be provided to the PBGC; (e) a Controlled Group member has withdrawn from a Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” (as such terms are defined in ERISA Sections 4203 and 4205, respectively); (f) a Multiemployer Plan is in or is likely to be in reorganization under ERISA Section 4241; (g) an ERISA Plan (and any related trust) that is intended to be qualified under Code Sections 401 and 501 fails to be so qualified or any “cash or deferred arrangement” under any such ERISA Plan fails to meet the requirements of Code Section 401(k); (h) the PBGC takes any steps to terminate a Pension Plan or appoint a trustee to administer a Pension Plan, or a Controlled Group member takes steps to terminate a Pension Plan; (i) a Controlled Group member or an ERISA Plan fails to satisfy any requirements of law applicable to an ERISA Plan; (j) a claim, action, suit, audit or investigation is pending or threatened with respect to an ERISA Plan, other than a routine claim for benefits; or (k) a Controlled Group member incurs or is expected to incur any liability for post-retirement benefits under any Welfare Plan, other than as required by ERISA Section 601, et. seq. or Code Section 4980B.

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“ERISA Plan” shall mean an “employee benefit plan” (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors, maintains, contributes to, has liability with respect to or has an obligation to contribute to such plan.

“Eurocurrency Reserve Percentage” shall mean, for any day, that percentage (expressed as a decimal) that is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of Eurocurrency Liabilities. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Eurocurrency Reserve Percentage.

“Eurodollar Loan” shall mean a Loan described in Section 2.1 hereof, that shall be denominated in Dollars and on which Borrowers shall pay interest at a rate based upon the Eurodollar Rate.

“Eurodollar Rate” means, with respect to a Eurodollar Loan, for any Interest Period, a rate per annum equal to the quotient obtained by dividing (a) the rate of interest, determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 A.M. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, equal to the London interbank offered rate as administered by the ICE Benchmark Administration (or any other Person that takes over the administration of such rate for Dollars) as displayed on pages LIBOR01 or LIBOR02 of the Reuters screen that displays such rate (or, in the event such rate does not appear on a Reuters page or screen, on any successor or substitute page on such screen that displays such rate, or on the appropriate page of such other information service that publishes such rate from time to time as shall be selected by the Agent from time to time in its reasonable discretion, applicable to Dollar deposits in immediately available funds with a maturity comparable to such Interest Period, provided that, in the event that such rate quotation is not available for any reason, then the Eurodollar Rate shall be the average of the per annum rates at which deposits in immediately available funds in Dollars for the relevant Interest Period and in the amount of the Eurodollar Loan to be disbursed or to remain outstanding during such Interest Period, as the case may be, are offered to the Agent (or an affiliate of the Agent, in the Agent’s discretion) by prime banks in any Eurodollar market reasonably selected by the Agent, determined as of 11:00 A.M. (London time) (or as soon thereafter as practicable), two Business Days prior to the beginning of the relevant Interest Period pertaining to such Eurodollar Loan; by (b) 1.00 minus the Eurocurrency Reserve Percentage. With respect to the Revolving Loan, “Eurodollar Rate” is further defined as the value from above, rounded up to the next one sixteenth percent (“1/16th%”); provided, however, that no such rounding shall take place if a Hedge Agreement with Agent, any Lender or any of their respective Affiliates is in effect with respect to the Revolving Loans.

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“Event of Default” shall mean an event or condition that constitutes an event of default as defined in Article VIII hereof.

“Excess Cash Flow” shall mean, as calculated for any period in accordance with GAAP, (a) Consolidated EBITDA during such period, minus (b) Consolidated Fixed Charges for such period.

“Excluded Accounts” shall mean (a) up to three (3) Deposit Accounts which are not maintained with KeyBank so long as (i) the maximum amount at any time in any such account is not more than $10,000, and (ii) the maximum aggregate amount at any time in all such accounts is not more than $50,000, (b) any other Deposit Accounts used exclusively to fund payroll obligations (including payroll taxes and other employee wage and benefit payments) so long as the Credit Parties shall not maintain funds on deposit therein or credited thereto at any time in excess of 105% of the amounts necessary to fund such payroll obligations and any related payroll processing expenses routinely paid from such accounts on a current basis, and (c) Deposit Accounts used for segregating 401(k) contributions.

“Excluded Property” means (a) any rights of a Credit Party in any contract, license, right or other agreement if under the terms thereof, or any applicable law with respect thereto, the valid grant of a security interest therein to Agent is prohibited and such prohibition has not been waived or the consent of the other party to such contract or license has not been obtained or, under applicable law, such prohibition cannot be waived, provided however that the “Excluded Property” shall not be interpreted (i) to apply to any contract, license, right or other agreement to the extent the applicable prohibition is ineffective or unenforceable under the UCC (including Sections 9-406 through 9-409 or any other applicable law), or (ii) so as to limit, impair or otherwise affect Agent’s or any Lender’s unconditional continuing security interest in and Lien upon any rights or interests of such Credit Party in or to moneys due or to become due under any such contract, license, right or other agreement (including any Accounts); and (b) any intent-to-use trademark application to the extent that, and solely during the period in which, the grant of a security interest therein to Agent would impair the validity or enforceability of such intent-to-use trademark application or the trademark that is the subject of such application under federal law; provided that the proceeds of any of the foregoing property (including, without limitations, proceeds from the sale or other disposition thereof) shall not constitute Excluded Property.

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“Excluded Swap Obligation” means, with respect to any Credit Party, any Swap Obligation if, and to the extent that, all or a portion of the guaranty of such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Obligation (or any guaranty thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Credit Party’s failure for any reason not to constitute an “eligible contract participant” as defined in the Commodity Exchange Act at the time the guaranty of such Credit Party becomes effective with respect to such related Swap Obligation.

“Excluded Taxes” shall mean with respect to Agent, any Lender or any other recipient of any payment to be made by or on account of any obligation of Borrowers hereunder (i) any taxes imposed on or measured in whole or in part by its revenue or net income and franchise or other taxes imposed on it in lieu thereof by the United States or by any jurisdiction in which such Lender or Agent (a) is organized or incorporated, (b) maintains its principal office, (c) has a lending office or as a result of any other present or former connection between such recipient and such jurisdiction (other than any connection arising from such recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to, or enforced, any Loan Document), (ii) any branch profit taxes imposed by the United States or any similar tax imposed by any other jurisdiction in which any Borrower is located, (iii) any withholding tax that is imposed on amounts payable to such Lender at the time such Lender becomes a party hereto (or designates a new lending office) except to the extent that such Lender (or its assignor, if any) was entitled, at the time of designation of a new lending office (or assignment), to receive additional amounts from Borrowers with respect to such withholding tax pursuant to Section 3.2, (iv) any taxes imposed under FATCA and (v) in each of clause (i) through (iv), including any interest, fines, additions to Tax or penalties applicable thereto.

“Executive Order No. 13224” shall mean Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

“FATCA” means Section 1471 through 1474 of the Code (as of the date hereof) and any regulations or official interpretations thereof (including any Revenue Ruling, Revenue Procedure, Notice or similar guidance issued by the IRS thereunder) as a precondition to relief or exemption from Taxes under such provisions.

“Federal Funds Effective Rate” shall mean, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the Closing Date.

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“Financial Officer” shall mean any of the following officers: chief executive officer, president, chief financial officer, controller or treasurer.

“First Tier Foreign Subsidiary” means any Subsidiary that is a Foreign Person owned directly by a Domestic Subsidiary.

“Fiscal Quarter” shall mean each March 31, June 30, September 30 and December 31 occurring in each Fiscal Year of any Credit Party.

“Fiscal Year” shall mean the fiscal year of each Credit Party ending on December 31 in each calendar year. Changes of the fiscal year of any Credit Party subsequent to the date of this Agreement will not change the definition of “Fiscal Year” for purposes of this Agreement unless such change of fiscal year complies with Section 5.26 hereof.

“Foreign Person” shall mean a Person organized under the laws of any jurisdiction other than the United States or any State thereof.

“Formation Documents” shall mean, with respect to any Person (other than a natural Person), such Person’s Articles (or Certificate) of Incorporation, Articles of Organization, Certificate of Formation or equivalent formation documents which were filed with the Secretary of State in the jurisdiction in which such Person was incorporated, organized or formed, together with any amendments to any of the foregoing.

“Fund” shall mean any Person (other than a natural person) that is (or will be) engaged in making, purchasing, holding or otherwise investing in commercial loans and similar extensions of credit in the ordinary course of its business.

“GAAP” shall mean generally accepted accounting principles as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a basis consistent with the past accounting practices and procedures of BRJ Seller.

“Governance Documents” shall mean, with respect to any Person (other than a natural Person), such Person’s Regulations (or Bylaws), Operating Agreement (or Limited Liability Company Agreement), Partnership Agreement or equivalent governing documents, together with any amendments to any of the foregoing.

“Governmental Authority” means any nation or government, any state, province or territory or other political subdivision thereof, any governmental agency, department, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any self-regulatory organization exercising such functions.

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“Guarantor” shall mean a Person that pledges its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that agrees conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind.

“Guarantor of Payment” shall mean any Person which shall deliver a Guaranty of Payment to Agent subsequent to the Closing Date.

“Guarantor Security Agreement” shall mean any security agreement, including this Agreement, executed and delivered on or after the Closing Date in connection herewith by the Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.

“Guaranty of Payment” shall mean the terms and provisions of Article XII hereof and any other guaranty of the obligations of Borrowers executed and delivered on or after the Closing Date in connection herewith by the Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.

“Hedge Agreement” shall mean (a) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Highest Lawful Rate” means at the particular time in question the maximum rate of interest which, under applicable law, any applicable Lender is then permitted to charge on the Notes. If the maximum rate of interest which, under applicable law, any applicable Lender is permitted to charge on the Notes shall change after the date hereof, the Highest Lawful Rate shall be automatically increased or decreased, as the case may be, from time to time as of the effective time of each change in the Highest Lawful Rate without notice to Borrowers.

“Indebtedness” shall mean, for any Person, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all Capital Lease Obligations of such Person, (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit or banker’s acceptance, (e) net obligations under any Hedge Agreement, (f) all obligations of such Person under synthetic leases, (g) all obligations of such Person with respect to asset securitization financing programs to the extent that there is recourse against such Person or such Person is liable (contingent or otherwise) under any such program, (h) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, (i) all trade payables (other than trade payables payable in the ordinary course of business by such Person which are due within 120 days of the incurrence thereof and which are not more than 60 days past due), (j) any earnout obligation or other deferred purchase price obligation, and (k) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Person to finance its operations or capital requirements.

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“Insurance Proceeds” shall have the meaning given to such term in Section 2.7(e) hereof.

“Intellectual Property” shall mean any Copyright, any Copyright License, any Patent, any Patent License, any Trademark, any Trademark License, any customer list, any trade secret, any confidential or proprietary information, any invention (whether or not patented or patentable), any technical information, procedure, design, knowledge, know how, skill, expertise, experience, process, model, drawing, or record, and any work (whether or not copyrighted or copyrightable).

“Intellectual Property Security Agreement” shall mean an agreement relating to the Patents, Trademarks, Copyrights and licenses of any Borrower or any Guarantor of Payment executed and delivered to Agent and the Lenders by such Credit Party on or after the Closing Date in connection with this Agreement, as the same may be from time to time amended, restated or otherwise modified.

“Intercompany Promissory Note” shall mean the Master Intercompany Subordinated Note, dated the Closing Date, made by each Credit Party, as obligors, to each other Credit Party, as payees, as the same may be amended, restated or otherwise modified from time to time.

“Interest Adjustment Date” shall mean the last day of each Interest Period.

“Interest Period” means, with respect to a Eurodollar Loan, the period commencing on the date such Eurodollar Loan is made and ending on the last day of such period, as selected by Borrowing Agent pursuant to the provisions hereof, and, thereafter (unless such Eurodollar Loan is converted to a Base Rate Loan or an Overnight LIBOR Loan), each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by Borrowing Agent pursuant to the provisions hereof. The duration of each Interest Period for a Eurodollar Loan shall be one (1) month, two (2) months or three (3) months, in each case, as Borrowing Agent may select upon notice, as set forth in Section 2.2 hereof, provided that: (a) if Borrowing Agent fails to so select the duration of any Interest Period, Borrowers shall be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end of the then current interest period; and (b) Borrowers may not select any Interest Period for a Eurodollar Loan that ends after any date when principal is due on such Eurodollar Loan.

“Letter of Credit” shall mean any sight commercial documentary letter of credit or any standby letter of credit that shall be issued by Agent for the account of a Borrower or any Credit Party, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) one (1) year after the date of its issuance, or (b) 30 Business Days prior to the last day of the Commitment Period.

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“Letter of Credit Exposure” shall mean the sum of (a) the aggregate undrawn face amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on Letters of Credit that have not been reimbursed by Borrowers or converted to a Revolving Loan pursuant to Section 2.1 hereof.

“Letter of Credit Right” shall mean a right to payment or performance under a letter of credit, whether or not the beneficiary has demanded or is at the time entitled to demand payment or performance, provided, that the term “Letter of Credit Right” does not include the right of a beneficiary to demand payment or performance under a letter of credit.

“Letter of Credit Sublimit” shall mean $500,000.

“Liabilities” shall have the meaning given to such term in Section 12.1 hereof.

“Lien” shall mean any mortgage, security interest, lien, charge, encumbrance on, pledge or deposit of, or conditional sale or other title retention agreement with respect to any property (real or personal) or asset.

“Loan” or “Loans” shall mean the credit extended to Borrowers by the Lenders in accordance with Section 2.1 hereof.

“Loan Documents” shall mean this Agreement, each of the Notes, each of the Guaranties of Payment, each of the Guarantor Security Agreements, each Intellectual Property Security Agreement, each Pledge Agreement, the Management Subordination Agreement, the Seller Subordination Agreement, the Senior Subordination Agreement, all documentation relating to each Letter of Credit, any Hedge Agreement entered into pursuant hereto and any other documents relating to any of the foregoing, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced.

“Management Agreement” shall mean that certain Management Services Agreement dated as of the date hereof, by and between Sponsor and BRJ, as the same may be modified, amended or supplemented from time to time.

“Management Fees” shall mean any management fee or similar fee paid, and the reimbursement of ordinary and reasonable out-of-pocket expenses, by any Company to any Person, including, without limitation, any Sponsor Management Fees.

“Management Subordination Agreement” shall mean that certain Management Fee Subordination Agreement dated as of even date herewith among Agent, Sponsor and Borrowers, as the same may from time to time be amended, restated or otherwise modified.

“Material Adverse Effect” shall mean (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties or financial condition of Borrowers or the Credit Parties taken as a whole; (b) a material impairment of the ability of any Credit Party or any other Person (other than Agent or Lenders) to perform in any material respect its obligations under any Loan Document; or (c) a material adverse effect upon (i) the legality, validity, binding effect or enforceability of any Loan Document, or (ii) the perfection or priority of any Lien granted to the Lenders or to the Agent for the benefit of the Lenders hereunder or under any of the Loan Documents, except, in the case of clause (ii), to the extent arising solely as a result of any act or failure to act by Agent or the Lenders.

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“Maximum Amount” shall mean, for each Lender, the amount set forth opposite such Lender’s name under the column headed “Maximum Amount” as listed on Schedule 1 hereto.

“Maximum Revolving Amount” shall mean $6,000,000.

“Moody’s” shall mean Moody’s Investors Service, Inc., or any successor to such company.

“Multiemployer Plan” shall mean a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA.

“Net Cash Proceeds” shall mean (a) in the case of a sale, lease, transfer or other disposition of assets, the aggregate amount received in cash (including any cash received by way of deferred payment, but only when and as such cash is received) from such sale or disposition, net of (i) the principal, premium, penalty and interest amount of Indebtedness secured by such assets (other than the Secured Debt), or that is required to be repaid in connection with the sale or disposition thereof (other than pursuant to Section 2.7(d)), (ii) the reasonable fees, commissions and other out-of-pocket expenses incurred by the Companies in connection with such sale, lease, transfer or disposition, other than any such amounts payable to an Affiliate of a Company, including attorney, accountant, brokerage and/or consultant fees, and (iii) taxes incurred or payable in connection with such sale, lease transfer or disposition; and (b) in the case of an equity or debt offering, the aggregate amount received in cash (including any cash received by way of deferred payment, but only when and as such cash is received) from such offering, net of (i) the fees, commission and other out-of-pocket expenses incurred by any Company in connection with such offering, other than any such amounts payable to an Affiliate of a Company, and (ii) taxes incurred or payable in connection with such offering.

“Note” or “Notes” shall mean any Revolving Credit Note or any other note delivered pursuant to this Agreement, together with any replacement or substitution thereof, any addition or allonge thereto and any amendment, restatement or other modification thereto from time to time.

“Notice of Loan” shall mean a Notice of Loan in the form of the attached Exhibit B.

“Obligor” shall mean a Person whose credit or any of whose property is pledged to the payment of any portion of the Secured Debt and includes, without limitation, any Borrower and any Guarantor of Payment.

“Organizational Documents” shall mean, with respect to any Person (other than an individual), such Person’s Formation Documents and Governance Documents.

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“Other Debt” shall mean (a) every liability, whether owing by only a Credit Party or by a Credit Party with one or more others in a several, joint or joint and several capacity, whether owing absolutely or contingently, whether created by note, overdraft, guaranty of payment or other contract or by quasi-contract, tort, statute or other operation of law, whether incurred directly to Agent or any Lender or any their respective affiliates or acquired by Agent or any Lender or any their respective affiliates by purchase, pledge or otherwise and whether participated to or from Agent or any Lender or any their respective affiliates in whole or in part, (b) all obligations and liabilities of Borrowers now existing or hereafter incurred under, arising out of or in connection with any Hedge Agreement entered into by any Credit Party with Agent or any Lender or any their respective affiliates, and (c) the Banking Services Obligations.

“Other Taxes” means any and all present or future stamp or documentary taxes or any other excise, ad valorem or property taxes, goods and services taxes, harmonized sales taxes and other sales taxes, use taxes, value added taxes, charges or similar taxes or levies arising from any payment made hereunder or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document.

“Overnight LIBOR Interest Period” means, with respect to an Overnight LIBOR Loan, the period commencing on the date such Overnight LIBOR Loan is made and ending on the next day, with successive Overnight LIBOR Interest Periods automatically commencing daily thereafter.

“Overnight LIBOR Loan” means a Loan described in Section 2.1 hereof, that shall be denominated in Dollars and on which the Borrowers shall pay interest at a rate based on the Overnight LIBOR Rate.

“Overnight LIBOR Rate” means, for any Overnight LIBOR Interest Period with respect to an Overnight LIBOR Loan, the per annum rate of interest (rounded upwards, if necessary, to the nearest 1/16^th of 1%) at which, determined by the Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest error) as of approximately 11:00 A.M. (London time) two Business Days prior to the beginning of such Overnight LIBOR Interest Period, dollar deposits in immediately available funds in an amount comparable to such Overnight LIBOR Loan and with a maturity of one day are offered to the prime banks by leading banks in the London interbank market.

“Participant” has the meaning assigned to such term in clause (d) of Section 11.10.

“Patent” shall mean any letters patent of the United States or any other country, any registration or recording of any letters patent, any application for letters patent in the United States or any other country, including, without limitation, any such registration, recording, or application in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision of such other country, and all reissues, continuations, continuations in part, or extensions of any of the foregoing.

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“Patent License” shall mean any agreement granting any right to practice any invention on which any Patent is in existence, as the same may from time to time be amended, restated or otherwise modified.

“PBGC” shall mean the Pension Benefit Guaranty Corporation, or its successor.

“Pension Plan” shall mean an ERISA Plan that is a “pension plan” (within the meaning of ERISA Section 3(2)).

“Permitted Discretion” shall mean a determination made in good faith and in the exercise of reasonable (from the perspective of a secured lender) business judgment.

“Permitted Liens” shall mean:

(a)       any Lien granted to Agent or the Lenders pursuant to this Agreement or the other Loan Documents or Related Writings;

(b)       Liens for taxes, assessments, fees and other governmental charges, the payment of which is being Properly Contested;

(c)       statutory liens of landlords and liens of carriers, warehousemen, mechanics, repairmen and materialmen incurred in the ordinary course of business for sums not yet due or, if due, the payment of which is being Properly Contested;

(d)       Liens (other than any lien created by section 406B of ERISA and securing an obligation of any employer or employers which is delinquent) incurred or deposits made in the ordinary course of business in connection with worker’s compensation, unemployment insurance and other types of social security, or to secure the performance of tenders, statutory obligations, surety and appeal bonds, payment and performance bonds, return of money bonds and other similar obligations (not incurred in connection with the borrowing of money or the obtaining of advances or credits to finance the purchase price of property);

(e)       any attachment or judgment Lien, provided that the claims (or appeal or other surety bond related to such judgment) secured thereby, together with all other claims secured by any attachment or judgment lien, do not exceed an aggregate of $250,000, the execution or other enforcement of all such claims is effectively stayed, such claims are being Properly Contested;

(f)       easements, rights of way, restrictions and other Liens incurred, and leases and subleases (including oil and gas leases and subleases), timber rights and other similar rights granted to others in the ordinary course of business (but not incurred or granted in connection with the borrowing of money or the obtaining of advances or credits to finance the purchase price of property) and not, individually or in the aggregate, materially interfering with the use (actual or proposed) made or to be made of the properties and assets of any Credit Party, or materially detracting from the value thereof;

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(g)       Liens securing Indebtedness permitted pursuant to Section 5.8(b) and 5.8(k) and UCC financing statements filed in connection with same; provided that (i) such Liens do not at any time encumber any property other than the property being financed by such Indebtedness, and (ii) the Indebtedness secured thereby does not exceed the purchase price or lease amount of such property being purchased or leased, as the case may be;

(h)       the Liens set forth on Schedule 5.9 attached hereto and any replacement or extension thereof so long as any replacements or extensions do not extend to any other property or asset of any Company;

(i)       the filing of precautionary UCC financing statements relating solely to leases of personal property entered into in the ordinary course of business and the filing of UCC financing statements by bailees and consignees in the ordinary course of business;

(j)       bankers’ Liens, rights of setoff and other similar Liens existing solely with respect to cash and Cash Equivalents on deposit in one or more accounts maintained by any Credit Party with any financial institution, in each case in the ordinary course of business in favor of the bank or banks with which such accounts are maintained, securing solely the customary amounts owing to such bank with respect to cash management and operating account arrangements; provided, that in no case shall any such Liens secure (either directly or indirectly) the repayment of any Indebtedness; and

(k)       any interest or title of a lessor, licensor or sublessor under any lease, license or sublease entered into by any Credit Party in the ordinary course of business and covering only the assets so leased, licensed or subleased.

“Person” shall mean any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, institution, trust, estate, government or other agency or political subdivision thereof or any other entity.

“Pledge Agreement” shall mean each of the agreements executed and delivered to Agent and the Lenders on or after the date hereof in connection with the Pledged Securities, as the same may be from time to time amended, restated or otherwise modified.

“Pledged Securities” shall mean the Capital Stock of Borrowers and the Capital Stock of any direct or indirect Domestic Subsidiary (and up to 65% of the Capital Stock of any Subsidiary which is a First Tier Foreign Subsidiary) of any Borrower, whether now owned or existing or hereafter acquired or created, and all Proceeds thereof.

“Prime Rate” shall mean the interest rate established from time to time by Agent as Agent’s prime rate, whether or not such rate is publicly announced; the Prime Rate may not be the lowest interest rate charged by Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.

“Products” shall mean property directly or indirectly resulting from any manufacturing, processing, assembling, or commingling of any goods.

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“Properly Contested” means, with respect to any obligation of an applicable Person, (a) the obligation is subject to a bona fide dispute regarding amount or such Person’s liability to pay; (b) the obligation is being properly contested in good faith by appropriate proceedings promptly instituted and diligently pursued; (c) appropriate reserves have been established in accordance with GAAP; (d) non-payment could not result in a Material Adverse Effect, nor result in forfeiture or sale of any assets of the Person; (e) no Lien is imposed on assets of the Person, unless bonded and stayed to the satisfaction of Agent; and (f) if the obligation results from entry of a judgment or other order, such judgment or order is stayed pending appeal or other judicial review.

“Pro Rata Basis” shall mean distribution to the Lenders by Agent in accordance with each Lender’s Applicable Commitment Percentage of the Applicable Debt.

“Pro Rata Share” shall mean, with respect to the Applicable Debt, such Lender’s share of such Applicable Debt in accordance with such Lender’s Applicable Commitment Percentage with respect to such Applicable Debt.

“Qualified ECP Guarantor” means, in respect of any Swap Obligation, each Credit Party that has total assets exceeding $10,000,000 at the time such Swap Obligation is incurred or such other person that constitutes an “eligible contract participant” under the Commodity Exchange Act or any regulations promulgated thereunder.

“Ratable Account” shall mean each Lender’s share of the Applicable Debt in accordance with such Lender’s Applicable Commitment Percentage with respect to such Applicable Debt.

“Ratable Share” shall mean each Lender’s share of the Applicable Debt in accordance with such Lender’s Applicable Commitment Percentage with respect to such Applicable Debt.

“Ratably” shall mean in accordance with each Lender’s Ratable Share.

“Receivable” shall mean any claim for or right to payment, however arising, whether classified as an Account, a Deposit Account, Investment Property, a Letter of Credit Right, a Payment Intangible, a Supporting Obligation, or otherwise, whether contingent or fixed, whether or not evidenced by any writing or other record, and, if so evidenced, whether evidenced by one or more certificated securities, any Chattel Paper, one or more Instruments, any letter of credit, or otherwise.

“Related Expenses” shall mean any and all costs, liabilities, and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable attorneys’ fees, legal expenses, judgments, suits, and disbursements) (a) incurred by, imposed upon, or asserted against, Agent in any attempt by Agent to (i) obtain, preserve, perfect, or enforce any security interest evidenced by this Agreement or any Loan Document; (ii) obtain payment, performance, and observance of any and all of the Secured Debt; or (iii) maintain, insure, audit, collect, preserve, repossess, and dispose of any of the Collateral securing the Secured Debt or any thereof, including, without limitation, costs and expenses for appraisals, assessments, field examinations, site visits and audits of the Credit Parties or any such Collateral, in each case permitted pursuant to, and subject to the limitations of, this Agreement and the other Loan Documents; or (b) incidental or related to (a) above, including, without limitation, interest thereupon from the date incurred, imposed or asserted until paid at the Default Rate.

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“Related Parties” shall mean, with respect to any specified Person, such Person’s Affiliates and the respective directors, officers, employees, agents and advisors of such Person and such Person’s Affiliates.

“Related Writing” shall mean each Loan Document and any other assignment, mortgage, security agreement, guaranty agreement, pledge agreement, subordination agreement, financial statement, audit report or other writing furnished by any Company or any Obligor, or any of their respective officers, to Agent or the Lenders pursuant to or otherwise in connection with this Agreement.

“Reportable Event” shall mean a reportable event as that term is defined in Title IV of ERISA, with respect to which notice is required to be provided to the PBGC.

“Required Lenders” shall mean the holders of 51% of the Revolving Credit Commitments, provided that the unused Revolving Credit Commitment of, and the portion of the total outstandings held or deemed held by, any Defaulting Lender shall be excluded for purposes of making a determination of Required Lenders; provided further, however, that at any time there are fewer than three (3) Lenders hereunder, “Required Lenders” shall mean both such Lenders.

“Requirement of Law” means, as to any Person, any law, treaty, rule or regulation or determination or policy statement or interpretation of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property.

“Restricted Payment” shall mean with respect to any Company (a) a Capital Distribution; (b) any dividend or other distribution of assets, properties, cash, rights, obligations or securities, direct or indirect, on account of any Capital Stock of such Company, or on account of the Subordinated Indebtedness; or (c) any amount paid in redemption, retirement, repurchase, direct or indirect, of (x) any shares of any Capital Stock or the Subordinated Indebtedness; or (y) any warrants, options or other rights to acquire any Capital Stock or other equity interests of such Company.

“Revolving Borrowing Limit” shall mean an amount equal to the Maximum Revolving Amount.

“Revolving Credit Commitment” shall mean the obligation hereunder of the Revolving Loan Lenders in their sole and absolute discretion, during the Commitment Period, to make Revolving Loans and to issue Letters of Credit, up to an aggregate principal amount outstanding at any time equal to the Revolving Borrowing Limit; with each Revolving Loan Lender’s obligation to participate therein being equal to the amount set forth opposite such Revolving Loan Lender’s name under the column headed “Revolving Credit Commitment” as set forth on Schedule 1 hereto.

“Revolving Credit Exposure” shall mean, at any time, the sum of (a) the aggregate principal amount of all Revolving Loans outstanding, and (b) the Letter of Credit Exposure.

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“Revolving Credit Note” shall mean any Revolving Credit Note executed and delivered pursuant to Section 2.1 hereof, together with any replacement or substitution thereof, any addition or allonge thereto and any amendment, restatement or other modification thereto from time to time.

“Revolving Loan” shall mean a Loan granted to Borrowers by the Lenders in accordance with Section 2.1 hereof.

“Revolving Loan Availability” shall mean an amount equal to (a) the Revolving Borrowing Limit, minus (b) the Revolving Credit Exposure.

“Revolving Loan Lenders” shall mean, collectively, each Lender which has committed to make Revolving Loans.

“Secured Debt” shall mean, collectively, (a) the Debt; and (b) the Other Debt.

“Securities Account” shall mean an account to which a financial asset is or may be credited in accordance with an agreement under which the Person maintaining the account undertakes to treat the Person for whom the account is maintained as entitled to exercise the rights that comprise the financial asset.

“Seller Subordinated Note” shall mean that certain Subordinated Promissory Note dated on or about the date hereof and issued by BRJ to BRJ Seller pursuant to the terms of the BRJ Acquisition Agreement in the original principal amount of $2,500,000 as the same may be amended, restated or otherwise modified.

“Seller Subordinated Debt Documents” shall mean the Seller Subordinated Note and all documents, agreements and instruments executed pursuant thereto or in connection therewith, as any of the foregoing may from time to time be amended, restated or otherwise modified.

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“Seller Subordination Agreement” shall mean that certain Subordination Agreement dated as of the date hereof among Agent and Lenders (as senior lenders), BRJ Seller (as junior lender) and the Credit Parties in connection with the Seller Subordinated Debt Documents, in form and substance satisfactory to Agent, as the same may from time to time be amended, restated or otherwise modified.

“Senior Subordinated Creditor” shall mean Regional Brands Inc., a Delaware corporation.

“Senior Subordinated Debt” shall mean the Indebtedness owing from BRJ to Senior Subordinated Creditor pursuant to the Senior Subordinated Debt Documents.

“Senior Subordinated Loan Agreement” shall mean that certain Loan and Security Agreement, dated as of the date hereof, by and among BRJ and Senior Subordinated Creditor, as the same may be amended, restated or otherwise modified or replaced from time to time.

“Senior Subordinated Debt Documents” shall mean the Senior Subordinated Loan Agreement, the Senior Subordinated Note and all agreements, instruments, and documents and all other writings heretofore, now or hereafter executed, delivered, or otherwise authenticated by any one or more the Credit Parties in connection therewith, in each case as any of the foregoing may be amended, restated or otherwise modified from time to time.

“Senior Subordinated Note” shall mean that certain Promissory Note in the principal amount of $7,500,000, dated as of the date hereof, executed and delivered by BRJ in favor of Senior Subordinated Creditor, and any replacements thereto, as any of the foregoing may be amended, modified, supplemented or restated from time to time.

“Senior Subordination Agreement” shall mean that certain Subordination Agreement dated as of the date hereof, among Agent and Lenders (as senior lenders), Senior Subordinated Creditor (as junior lender) and the Credit Parties, in form and substance reasonably satisfactory to Agent, as the same may from time to time be amended, restated or otherwise modified.

“Settlement” means as of any time, the making of, or the receiving of, payments, in immediately available funds, by a Revolving Loan Lender, to the extent necessary to cause such Revolving Loan Lender’s actual share of the outstanding amount of Revolving Loans (after giving effect to any Revolving Loan to be made on such day) to be equal to such Revolving Loan Lender’s Applicable Commitment Percentage of the Revolving Loans then outstanding (after giving effect to any Revolving Loan to be made on such day), in any case where, prior to such event or action, such Revolving Loan Lender’s actual share of the Revolving Loans is not so equal.

“Settlement Amount” shall have the meaning given to such term in Section 2.3(c) hereof.

“Settlement Date” shall have the meaning given to such term in Section 2.3(c) hereof.

“Software” shall mean any computer program and any supporting information provided in connection with a transaction relating to the program, provided, that the term “Software” does not include a computer program embedded in goods (other than goods that consist solely of the medium with which the program is embedded) or any information provided in connection with a transaction relating to the program so embedded if (a) the program is associated with the goods in such a manner that it customarily is considered a part of the goods or (b) by becoming the owner of the goods, a Person acquires the right to use the program in connection with the goods.

“Sponsor” shall mean Lorraine Capital, LLC, a New York limited liability company.

“Sponsor Management Fees” shall mean the management fees payable by Borrowers pursuant to the Management Agreement as in effect on the date hereof or as otherwise amended in accordance with the terms hereof.

“Standard & Poor’s” shall mean Standard & Poor’s Rating Group, a division of McGraw-Hill, Inc., or any successor to such company.

“State” shall mean a State of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

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“Subordinated”, as applied to Indebtedness, shall mean that the Indebtedness has been subordinated (by written terms or written agreement being, in either case, in form and substance reasonably satisfactory to Agent) in favor of the prior payment in full of the Secured Debt.

“Subsidiary” of a Company or any of its Subsidiaries shall mean a Person (other than an individual) of which more than 50% of the Capital Stock or Voting Power is owned, directly or indirectly, by a Company or by one or more other Subsidiaries of a Company or by a Company and one or more Subsidiaries of a Company.

“Swap Obligation” means, with respect to any Guarantor, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Tax Distributions” means the tax distributions permitted under Section 4.1(a) of BRJ’s Limited Liability Company Agreement as in effect on the date hereof.

“Taxes” means any and all present or future taxes of any kind, including but not limited to, levies, imposts, duties, surtaxes, charges, fees, deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (together with any interest, penalties, fines, additions to taxes or similar liabilities with respect thereto) other than Excluded Taxes.

“Total Commitment Amount” shall mean the Maximum Revolving Amount.

“Trademark” shall mean any trademark, trade name, corporate name, business name, Internet domain name, trade style, service mark, logo, source identifier, business identifier, design, or intangible identifier of the source of goods of like nature, any registration or recording of the foregoing or any thereof, and any application in connection therewith, including, without limitation, any such registration, recording, or application in the United States Patent and Trademark Office or in any similar office or agency of the United States, any State thereof, or any other country or political subdivision of such other country, and all reissues, extensions, or renewals of any of the foregoing, but not including any “intent to use” applications for which a statement of use has not been filed and accepted with the U.S. Patent and Trademark Office.

“Trademark License” shall mean any agreement granting any right to use any Trademark or Trademark registration, as the same may from time to time be amended, restated or otherwise modified.

“UCC” shall mean the Uniform Commercial Code as in effect in the State of Ohio; provided, however, that if by reason of any mandatory provisions of law, any or all of the attachment, perfection, or priority of Agent’s security interest in any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than the State of Ohio, then, and in each such case, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the attachment, perfection, or priority of Agent’s security interest in such Collateral. Except as otherwise specified in this Agreement or any other Loan Document, the UCC “as in effect” in the State of Ohio or any other jurisdiction shall mean the UCC as in effect from time to time in the State of Ohio or such other jurisdiction.

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“Unfunded Capital Expenditures” shall mean Capital Expenditures made by any one or more of the Companies which Capital Expenditures are (i) made with Proceeds received in connection with any asset sale, equity issuance, debt issuance or from insurance proceeds in each case to the extent permitted hereunder, (ii) or otherwise unfinanced or financed with Revolving Loans.

“USA Patriot Act” shall mean the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56, as the same has been, or shall hereafter be, renewed, extended, amended or replaced.

“Voting Power” shall mean, with respect to any Person, the exclusive ability to control, through the ownership of Capital Stock or otherwise, the election of members of the board of directors or other similar governing body of such Person, and the holding of a designated percentage of Voting Power of a Person means the ownership of Capital Stock of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person.

“Welfare Plan” shall mean an ERISA Plan that is a “welfare plan” within the meaning of ERISA Section 3 (l).

“Wholly-Owned Subsidiary” shall mean, with respect to any Person, any corporation, limited liability company or other entity all of the Capital Stock of which (having ordinary Voting Power) are at the time directly or indirectly owned by such Person. 

SECTION 1.2INTERPRETIVE MATTERS. Each term defined in the singular in this Agreement shall have the same meaning when used in the plural and each term defined in the plural in this Agreement shall have the same meaning when used in the singular. Except as otherwise defined in this Agreement, or unless the context otherwise requires, each term that is used in this Agreement and that is defined in Article 9 of the UCC shall have, for purposes of this Agreement and the other Related Writings, the meaning ascribed to that term in such Article. Except as otherwise defined in this Agreement, or unless the context otherwise requires, each accounting term that is used in this Agreement and that is defined by GAAP shall have, for purposes of this Agreement and the other Related Writings, the meaning ascribed to that term by GAAP.

SECTION 1.3TERMINOLOGY. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) any reference herein to any Person shall be construed to include such Person’s successors and permitted assigns, (c) the words “herein,” “hereof” and “hereunder,” and words of similar import, shall be construed to refer to this Agreement in its entirety and not to any particular provision hereof, and (d) all references herein to Sections, Schedules and Exhibits shall be construed to refer to Sections of, and Schedules and Exhibits to, this Agreement. Section headings herein and in the other Loan Documents are included for convenience of reference only and shall not affect the interpretation of this Agreement or any other Loan Document. Unless otherwise provided, all financial calculations shall be performed with Inventory valued on a first-in, first-out basis. A Default or Event of Default shall be deemed to exist at all times during the period commencing on the date that such Default or Event of Default occurs to the date on which such Default or Event of Default is waived in writing pursuant to this Agreement or, in the case of a Default, is cured within any period of cure expressly provided for in this Agreement; and an Event of Default shall “continue” or be “continuing” until such Event of Default has been waived in writing by the Required Lenders. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise within the limitations of, another covenant shall not avoid the occurrence of a default if such action is taken or condition exists. In addition, all representations and warranties hereunder shall be given independent effect so that if a particular representation or warranty proves to be incorrect or is breached, the fact that another representation or warranty concerning the same or similar subject matter is correct or is not breached will not affect the incorrectness of a breach of a representation or warranty hereunder.

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SECTION 1.4TIMES OF DAY. Except as otherwise specifically provided herein, all references herein to times of day shall be references to Eastern Standard or Eastern Daylight Savings time, whichever shall then be applicable.

SECTION 1.5CERTIFICATIONS. Any certificate or other writing required hereunder or under any other Loan Document to be certified by any officer or other authorized representative of any Person shall be deemed to be executed and delivered by such officer or other authorized representative solely in such individual’s capacity as an officer or other authorized representative of such Person and not in such officer’s or other authorized representative’s individual capacity.

ARTICLE II. AMOUNT AND TERMS OF CREDIT 

SECTION 2.1AMOUNT AND NATURE OF CREDIT. Subject to the terms and conditions of this Agreement, each Lender will, to the extent hereinafter provided, make Loans to Borrowers, and participate in Letters of Credit issued at the request of Borrowers, in such aggregate amount as Borrowers shall request pursuant to the Commitment; provided, however, that in no event shall the aggregate principal amount of all Loans and Letter of Credit Exposure outstanding under this Agreement be in excess of the Total Commitment Amount.

Each Lender, for itself and not for any other Lender, agrees to make Loans and to participate in Letters of Credit issued hereunder during the Commitment Period on such basis that (a) immediately after the completion of any borrowing by Borrowers or issuance of a Letter of Credit hereunder, the aggregate principal amount then outstanding on the Loans held by such Lender, when combined with such Lender’s Pro Rata Share of the Letter of Credit Exposure, shall not be in excess of the Maximum Amount for such Lender, (b) the aggregate principal amount outstanding of all outstanding Revolving Loans held such Lender shall represent that percentage of the aggregate principal amount then outstanding on all Revolving Loans (including the Revolving Loans held by such Lender) which is not in excess of such Lender’s Applicable Commitment Percentage with respect thereto; and (c) such aggregate principal amount outstanding on the Loans held such Lender shall represent that percentage of the aggregate principal amount then outstanding on all Loans (including the Loans held by such Lender) that is not in excess of such Lender’s Aggregate Commitment Percentage.

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Each borrowing from the Lenders hereunder shall be made on a Pro Rata Basis according to the Lenders’ respective Applicable Commitment Percentages. The Loans may be made as Revolving Loans and Letters of Credit may be issued, as follows:

1.       Revolving Loans.

(i)       Subject to the terms and conditions of this Agreement, during the Commitment Period, the Revolving Credit Lenders shall make a Revolving Loan or Revolving Loans to Borrowers in such amount or amounts as Borrowers may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Revolving Borrowing Limit, when such Revolving Loans are combined with the Letter of Credit Exposure.

(ii)     Borrowers shall pay interest on the unpaid principal amount of Base Rate Loans outstanding from time to time from the date thereof until paid at the Derived Base Rate from time to time in effect. Interest on such Base Rate Loans shall be payable, commencing November 30, 2016, and on the last day of each succeeding month thereafter and at the maturity thereof.

(iii)    Borrowers shall pay interest on the unpaid principal amount of Overnight LIBOR Loans outstanding from time to time from the date thereof until paid at the Derived Overnight LIBOR Rate from time to time in effect. Interest on such Overnight LIBOR Loans shall be payable, commencing November 30, 2016, and on the last day of each succeeding month thereafter and at the maturity thereof.

(iv)    Borrowers shall pay interest on the unpaid principal amount of each Eurodollar Loan outstanding from time to time, from the date thereof until paid, at the Derived Eurodollar Rate, fixed in advance for each Interest Period as herein provided for each such Interest Period. Interest on such Eurodollar Loans shall be payable on each Interest Adjustment Date with respect to an Interest Period.

(v)     At the request of Borrowing Agent to Agent, provided no Default or Event of Default exists hereunder and subject to the notice and other provisions of Section 2.2 hereof, the Revolving Credit Lenders shall convert (x) Base Rate Loans to Overnight LIBOR Loans or Eurodollar Loans at any time, (y) Overnight LIBOR Loans to Base Rate Loans or Eurodollar Loans at any time and (z) Eurodollar Loans to Base Rate Loans or Overnight LIBOR Loans on any Interest Adjustment Date.

(vi)    The joint and several obligation of Borrowers to repay the Revolving Loans made by each Revolving Credit Lender and to pay interest thereon shall be evidenced by a Revolving Credit Note of Borrowers in the form of Exhibit A hereto (if requested by the particular Revolving Credit Lender), with appropriate insertions, dated the Closing Date and payable to the order of such Revolving Credit Lender in the principal amount of its Revolving Credit Commitment, or, if less, the aggregate unpaid principal amount of Revolving Loans made hereunder by such Revolving Credit Lender. Subject to the provisions of this Agreement, Borrowers shall be entitled under this Section 2.1 to borrow Revolving Loans, repay the same in whole or in part and reborrow hereunder at any time and from time to time during the Commitment Period.

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2.       Letters of Credit.

(i)       Subject to the terms and conditions of this Agreement, during the Commitment Period, Agent shall, but only as Agent for the Revolving Credit Lenders, issue such Letters of Credit for the account of Borrowers or any other Credit Party, as Borrowers may from time to time request. Borrowers shall not request any Letter of Credit (and Agent shall not be obligated to issue any Letter of Credit) if, after giving effect thereto, (a) the aggregate undrawn face amount of all issued and outstanding Letters of Credit would exceed the Letter of Credit Sublimit or (b) the Revolving Credit Exposure would exceed the Revolving Borrowing Limit. The issuance of each Letter of Credit shall confer upon each Revolving Credit Lender the benefits and liabilities of a participation consisting of an undivided Pro Rata Share in the Letter of Credit to the extent of such Revolving Credit Lender’s Applicable Commitment Percentage.

(ii)      Each request for a Letter of Credit shall be delivered to Agent not later than 12:00 P.M. two (2) Business Days prior to the day upon which the Letter of Credit is to be issued. Each such request shall be in a form acceptable to Agent and specify the face amount thereof, whether such Letter of Credit is a commercial documentary or a standby Letter of Credit, the account party, the beneficiary, the intended date of issuance, the expiry date thereof, and the nature of the transaction to be supported thereby. Concurrently with each such request, Borrowers, and any other Credit Party for whose benefit the Letter of Credit is to be issued, shall execute and deliver to Agent an appropriate application and agreement, being in the standard form of Agent for such letters of credit, as amended to conform to the provisions of this Agreement if required by Agent. Agent shall give each Revolving Credit Lender notice of each such request for a Letter of Credit.

(iii)     In respect of each Letter of Credit that is a commercial documentary letter of credit and the drafts thereunder, Borrowers jointly and severally agree (a) to pay to Agent, on a Pro Rata Basis for the benefit of the Revolving Credit Lenders, a non-refundable commission based upon the face amount of the Letter of Credit, which shall be paid on the date that any draw is made on a Letter of Credit, at the rate per annum equal to the Applicable Margin for Revolving Loans that are Eurodollar Loans multiplied by the amount drawn under such Letter of Credit, and (b) to pay to Agent, for its sole account, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are generally charged by Agent under its fee schedule as in effect from time to time. In respect of each Letter of Credit that is a standby letter of credit and the drafts thereunder, if any, whether issued for the account of Borrowers or another Credit Party, Borrowers agree (a) to pay to Agent, on a Pro Rata Basis for the benefit of the Revolving Credit Lenders, a non-refundable commission based upon the face amount of the Letter of Credit, which shall be paid monthly in arrears, on the 15th day of each month, at the rate per annum of 2.5% times the face amount of the Letter of Credit; (b) to pay to Agent, for its sole account, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit is issued and each anniversary thereafter at the rate per annum 0.25% of the face amount of such Letter of Credit, calculated based on a 360-day year and the actual number of days elapsed; and (c) to pay to Agent for its sole account, such other issuance, amendment, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are generally charged by Agent under its fee schedule as in effect from time to time.

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(iv)     Whenever a Letter of Credit is drawn, Borrowers shall immediately reimburse Agent for the amount drawn. In the event that the amount drawn is not reimbursed by Borrowers within one (1) Business Day of the drawing of such Letter of Credit, at the sole option of Agent, Borrowers shall be deemed to have requested a Revolving Loan, subject to the provisions and requirements of subpart 1 of this Section 2.1 and Section 2.2(a) hereof, in the amount drawn. Such Revolving Loan shall be evidenced by the Revolving Credit Notes. Each Revolving Credit Lender agrees to make a Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each Revolving Credit Lender acknowledges and agrees that its obligation to make a Revolving Loan pursuant to subpart 1 of this Section 2.1 when required by this subpart 2 of this Section 2.1 is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to Agent, for the account of Agent, of the proceeds of such Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not such Lender’s Revolving Credit Commitment shall have been reduced or terminated. Each Revolving Credit Lender also agrees with Agent that Agent shall not be responsible for, and each Revolving Credit Lender’s obligations under this subpart 2 of this Section 2.A shall not be affected by, among other things, the validity or genuineness of documents or of any endorsements thereon, even though such documents shall in fact prove to be invalid, fraudulent or forged, or any dispute between or among Borrowers and any beneficiary of any Letter of Credit or any other party to which such Letter of Credit may be transferred or any claims whatsoever of Borrowers against any beneficiary of such Letter of Credit or any such transferee. Agent shall not be liable for any error, omission, interruption or delay in transmission, dispatch or delivery of any message or advice, however transmitted, in connection with any Letter of Credit issued by it, except for errors or omissions caused by Agent’s gross negligence or willful misconduct. Borrowers irrevocably authorize and instruct Agent to apply the proceeds of any borrowing pursuant to this paragraph to reimburse, in full, Agent for the amount drawn on such Letter of Credit. Each such Revolving Loan shall be deemed a Base Rate Loan unless otherwise requested by and available to Borrowers hereunder. Each Revolving Credit Lender is hereby authorized to record on its records relating to its Revolving Loans such Revolving Credit Lender’s Pro Rata Share of the amounts paid and not reimbursed on the Letters of Credit.

SECTION 2.2CONDITIONS TO LOANS AND LETTERS OF CREDIT. The obligation of the Lenders to make a Loan, convert a Base Rate Loan or Overnight LIBOR Loan or continue a Eurodollar Loan and of Agent to issue any Letter of Credit is conditioned, in the case of each borrowing, conversion, continuation or issuance hereunder, upon:

(a)       all conditions precedent as listed in Article IV hereof shall have been satisfied;

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(b)       with respect to Base Rate Loans and Overnight LIBOR Loans, receipt by Agent of a Notice of Loan, such notice to be received by 12:00 P.M. on the proposed date of borrowing or conversion, and, with respect to Eurodollar Loans, by 12:00 P.M. three (3) Business Days prior to the proposed date of borrowing or conversion;

(c)       with respect to Letters of Credit, satisfaction of the notice provisions set forth in subsection 2 of Section 2.1 hereof;

(d)       Borrowers’ request for (i) a Base Rate Loan or an Overnight LIBOR Loan shall be in any amount, and (ii) a Eurodollar Loan shall be in an amount of not less than $250,000 increased by increments of $50,000;

(e)       the fact that no Default or Event of Default shall then exist or immediately after the making, continuation or conversion of the Loan or issuance of the Letter of Credit would exist;

(f)       the fact that no Material Adverse Effect, in the reasonable opinion of Agent, shall have occurred; and

(g)       the fact that each of the representations and warranties contained in Article VII hereof shall be true and correct in all material respects (without duplication of materiality qualifiers) with the same force and effect as if made on and as of the date of the making, conversion or continuation of such Loan, or the issuance of the Letter of Credit, except to the extent that any thereof expressly relate to an earlier date.

At no time shall Borrowers request that Eurodollar Loans be outstanding for more than four (4) different Interest Periods at any time, and, if Base Rate Loans are outstanding, then LIBOR Loans shall be limited to one (1) Interest Period at any time.

Each request by Borrowers for the making of a Loan, conversion of a Base Rate Loan or Overnight LIBOR Loan or continuation of a Eurodollar Loan or for the issuance of a Letter of Credit hereunder shall be deemed to be a representation and warranty by the Credit Parties as of the date of such request as to the facts specified in (e) and (g) above.

Each request for a Eurodollar Loan shall be irrevocable and binding on Borrowers and Borrowers shall indemnify Agent and the Lenders against any loss or expense incurred by Agent or the Lenders as a result of any failure by Borrowers to consummate such transaction including, without limitation, any loss in accordance with Section 2.4 (including loss of anticipated profits) or expense incurred by reason of liquidation or re-employment of deposits or other funds acquired by the Lenders to fund such Loan. A certificate as to the amount of such loss or expense submitted by the Lenders to Borrowers shall be conclusive and binding for all purposes, absent manifest error. Borrowers’ obligations to pay all or any portion of the Secured Debt or the Notes when due under the terms hereof is without setoff or counterclaim.

ANYTHING HEREIN TO THE CONTRARY NOTWITHSTANDING, THE REVOLVING CREDIT COMMITMENT IS A DISCRETIONARY FACILITY FOR WHICH DEMAND FOR PAYMENT MAY BE MADE AT ANY TIME AND NOTHING CONTAINED IN THIS AGREEMENT SHALL REQUIRE ANY LENDER, AT ANY TIME, TO MAKE REVOLVING LOANS TO BORROWERS OR TO ISSUE LETTERS OF CREDIT OR SHALL PREVENT ANY LENDER FROM MAKING DEMAND AT ANY TIME IN ITS SOLE DISCRETION, AND THE GRANTING AND AMOUNT OF ANY REVOLVING LOAN, THE ISSUANCE OF ANY LETTER OF CREDIT AND THE RIGHT TO MAKE DEMAND SHALL AT ALL TIMES BE IN EACH LENDER’S SOLE DISCRETION.

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SECTION 2.3PAYMENT ON NOTES, ETC.

(a)       Time and Manner of Payments. All payments of principal, interest and commitment and other fees shall be made to Agent in immediately available funds for the account of the Lenders. Agent shall maintain a record of (a) any principal, interest or other payment, and (b) the principal amount of the Base Rate Loans, Overnight LIBOR Loans and the Eurodollar Loans and all prepayments thereof and the applicable dates with respect thereto, by such method as such Agent may generally employ; provided, however, that failure to make any such entry shall in no way detract from Borrowers’ obligations with respect to the Secured Debt. The aggregate unpaid amount of Loans set forth on the records of Agent shall be rebuttably presumptive evidence of the principal and interest owing and unpaid on each Loan. Whenever any payment to be made hereunder, including without limitation any payment to be made on any Loan, shall be stated to be due on a day which is not a Business Day, such payment shall be made on the next succeeding Business Day and such extension of time shall in each case be included in the computation of the interest payable on such Loan; provided, however, that with respect to any Eurodollar Loan, if the next succeeding Business Day falls in the succeeding calendar month, such payment shall be made on the preceding Business Day and the relevant Interest Period shall be adjusted accordingly.

(b)       Application of Funds. Notwithstanding anything else to the contrary contained herein, any funds received by Agent or any Lender with respect to the Secured Debt shall be applied as follows:

(i)       No Default. Subject to Section 2.7 hereof, if at the time any such funds are received hereunder (A) the Secured Debt has not been accelerated pursuant to Article IX, and (B) no Event of Default has occurred and be continuing (or if an Event of Default has occurred and is continuing, Agent, at the direction of the Required Lenders, shall not have provided notice to a Borrower of its intention to apply the provisions of Section 2.3(b)(ii)), in the following manner: (a) first, to the following items (i), (ii) and (iii) below in such manner as Borrowers shall direct (except that Borrowers may not alter the division as between Lenders as set forth in subparts (ii) and (iii) below), or in the absence of such direction in the following order: (i) to the payment of all fees, charges and reimbursable expenses due and payable to Agent or a Lender under the Secured Debt, this Agreement or the other Loan Documents at such time; (ii) to the payment of all of the interest which shall be due and payable on the principal of the Secured Debt at the time of such payment in accordance with each Lender’s Applicable Commitment Percentage; (iii) to the payment of all obligations and liabilities of Borrowers under any Hedge Agreement entered into by Borrowers with Agent or any of the Lenders (or their respective affiliates) to the extent then due and payable; (b) second, subject to the provisions of Section 2.4 hereof and the fees set forth in Section 2.4, if applicable, to the payment of the principal amount of any Revolving Loans then outstanding in accordance with each Revolving Loan Lender’s Applicable Commitment Percentage, and (c) to Borrowers.

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(ii)       Post-Default. Notwithstanding and in lieu of Section 2.7 hereof, if the Debt has been accelerated pursuant to Article IX, or if an Event of Default shall have occurred and be continuing (and Agent, at the direction of the Required Lenders, has provided notice to a Borrower of its intention to apply the provisions of this Section 2.3(b)(ii)), then such funds received with respect to the Secured Debt shall be applied in the following manner: (A) first, to the payment or reimbursement of Agent for all costs, expenses, disbursements and losses owing pursuant to this Agreement which shall have been incurred or sustained by Agent or the Lenders in or incidental to the collection of the Secured Debt or the exercise, protection or enforcement by Agent of all or any of the rights, remedies, powers and privileges of Lenders and Agent under this Agreement, the Notes, or any of the other Loan Documents and in and towards the provision of adequate indemnity to Agent and any of Lenders against all taxes or liens which by law shall have, or may have, priority over the rights of Agent or Lenders in and to such funds; (B) second, to the payment of all of the accrued but unpaid interest on the principal of the Loans in accordance with each Lender’s Aggregate Commitment Percentage; (C) third, pro rata to (i) the payment of principal of the Loans in accordance with each Lender’s Aggregate Commitment Percentage and (ii) the payment of all obligations and liabilities of any Borrower under any Hedge Agreement entered into by a Borrower with Agent or any of the Lenders (or their respective affiliates); (D) fourth, to the payment of any other amounts owing to the Lenders pursuant to this Agreement and the other Loan Documents, in accordance with each Lender’s Aggregate Commitment Percentage; (E) fifth, to the payment of any other Secured Debt to be allocated pro rata amongst the Lenders based on the amount of such Secured Debt outstanding, and (F) sixth, to Borrowers or whoever else may be lawfully entitled thereto.

(c)       Weekly Settlement. In order to minimize the frequency of transfers of funds between Agent and the Lenders, advances and repayments of Loans will be settled according to the procedures described in this Section 2.3(c).

(i)       Agent shall, once every seven (7) calendar days, or sooner, if so elected by Agent in its discretion, but in each case on a Business Day (each such day being a “Settlement Date”), distribute to each Lender a statement (the “Agent’s Report”) disclosing as of the immediately preceding Business Day, the aggregate unpaid principal balance of Loans outstanding as of such date (including Revolving Loans made by Agent under Section 2.3(c)(v) hereof), repayments and prepayments of principal received from Borrowers with respect to the Loans since the immediately preceding Agent’s Report, additional Loans made to Borrowers since the date of the immediately preceding Agent’s Report. Each Agent’s Report shall disclose the net amount (the “Settlement Amount”) due to or due from the Lenders to effect a Settlement of any Loan and the calculations therefor. Agent’s Report submitted to a Lender shall be prima facie evidence of the amount due to or from such Lender to effect a Settlement of any Loan. If Agent’s Report discloses a net amount due from Agent to any Lender to effect the Settlement of any Loan, Agent, concurrently with the delivery of Agent’s Report to the Lenders, shall transfer, by wire transfer or otherwise, such amount to such Lender in funds immediately available to such Lender, in accordance with such Lender’s instructions. If Agent’s Report discloses a net amount due to Agent from any Lender to affect the Settlement of any Loan, then such Lender shall wire transfer such amount, in funds immediately available to Agent, as instructed by Agent. Such net amount due from a Lender to Agent shall be due on the Settlement Date if such Agent’s Report is received before 1:00 p.m. and such net amount shall be due on the first Business Day following the Settlement Date if such Agent’s Report is received after 1:00 p.m.

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(ii)       All funds advanced to Borrowers by Agent or a Lender pursuant to this Section 2.3(c) shall for all purposes be treated as a Loan made by such Lender and all funds received by any Lender pursuant to this Section 2.3(c) shall for all purposes be treated as a repayment of the Loans made by such Lender.

(iii)       In the event that any bankruptcy, reorganization, liquidation, receivership, or similar cases or proceedings in which Borrowers are a debtor prevent Agent or any Lender from making any Loan to effect a Settlement contemplated hereby, Agent or such Lender, as the case may be, will make such dispositions and arrangements with the other Lenders with respect to such Loans, either by way of purchase of participations, distribution, pro tanto assignment of claims, subrogation, or otherwise, as shall result in each Lender’s share of the outstanding Loans being equal to its Aggregate Commitment Percentage of all outstanding Loans.

(iv)       Payments to effect a Settlement shall be made without set off, counterclaim or reduction of any kind. The failure or refusal of any Lender to make available to Agent at the aforesaid time and place the amount of the Settlement Amount due from such Lender (i) shall not relieve any other Lender from its several obligation hereunder to make available to Agent the amount of such other Lender’s Settlement Amount and (ii) shall not impose upon such other Lender any liability with respect to such failure or refusal or otherwise increase the Commitment of such other Lender.

(v)       Notwithstanding the notice requirements set forth in Section 2.2 above, but otherwise in accordance with the terms of this Agreement, Agent may, in its sole discretion without conferring with the Revolving Loan Lenders but on their behalf, make Revolving Loans in an amount requested by Borrowers. Any such Revolving Loans so funded by Agent shall be deemed Revolving Loans made by Agent under its Revolving Credit Commitment, except for purposes of Section 2.5 hereof. Each Revolving Loan Lender’s obligation to fund its portion of any such Revolving Loan made by Agent will commence on the date such Revolving Loan is actually so made by Agent. However, until the date on which the Settlement of such Revolving Loan is required in accordance with this Section 2.3(c)(i) above, such obligation of the Revolving Loan Lender shall be satisfied by Agent making such Revolving Loan. So long as Borrowers shall have requested the Revolving Loan, Borrowers acknowledge and agree that the making of such Revolving Loans by Agent under this Section 2.3(c)(v) shall be subject in all respects to the provisions of this Agreement as if each such Revolving Loan was made in response to a notice requesting such Revolving Loan made in accordance with Section 2.2 hereof. All actions taken by Agent pursuant to the provisions of this Section 2.3(c)(v) shall be conclusive and binding on Borrowers in the absence of manifest error. Notwithstanding anything herein to the contrary, prior to the Settlement with any Revolving Loan Lender of any Revolving Loan funded by Agent under this Section 2.3(c)(v), interest payable on such Revolving Loan otherwise allocable to such Revolving Loan Lender shall be for the sole account of Agent and payment of principal on such Revolving Loan otherwise allocable to such Revolving Loan Lender shall be for the sole account of Agent.

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SECTION 2.4PREPAYMENT. Borrowers shall have the right at any time or from time to time to prepay all or any part of the principal amount of the Loans then outstanding, to be applied pursuant to the terms of Section 2.3(b) hereof, plus interest accrued on the amount so prepaid to the date of such prepayment. Borrowers shall give Agent notice of prepayment of any Base Rate Loan or Overnight LIBOR Loan by not later than 12:00 P.M. on the Business Day such prepayment is to be made and written notice of the prepayment of any Eurodollar Loan not later than 1:00 P.M. two (2) Business Days before the Business Day on which such prepayment is to be made. Prepayments of Base Rate Loans shall be without any premium or penalty, other than any prepayment fees, penalties or other charges that may be contained in any Hedge Agreement. Notwithstanding anything contrary contained herein, Borrowers hereby agree to give Agent at least 10 Business Days prior notice of a prepayment of the Secured Debt in full in connection with a termination of this Agreement.

In any case of prepayment of a Eurodollar Loan, Borrowers agree that if the Eurodollar Rate, as determined as of 11:00 A.M. (London time), two (2) Business Days prior to the date of prepayment of such Eurodollar Loan (hereinafter, “Prepayment LIBOR”), shall be lower than the last Eurodollar Rate previously determined for such Eurodollar Loan with respect to which prepayment is intended to be made (hereinafter, “Last LIBOR”), then Borrowers shall, upon written notice by Agent, promptly pay to Agent, for the account of each of the Lenders, in immediately available funds, a prepayment fee equal to the product of (a) a rate (the “Prepayment Rate”) that shall be equal to the difference between the Last LIBOR and the Prepayment LIBOR, times (b) all or such part of the principal amounts of the Notes as relate to the Eurodollar Loan to be prepaid, times (c) the quotient obtained by dividing (i) the number of days in the period commencing with the date on which such prepayment is to be made to that date which coincides with the last day of the Interest Period previously established when the Eurodollar Loan, that is to be prepaid, was made, by (ii) three hundred sixty (360). In addition, Borrowers shall immediately pay directly to Agent, for the account of the Lenders, the amount of any additional reasonable costs or expenses (including, without limitation, cost of telex, wires, or cables) incurred by Agent or the Lenders in connection with the prepayment, upon Borrowers’ receipt of a written statement from Agent. Each prepayment of a Eurodollar Loan shall be in the aggregate principal sum of not less than $250,000, increased by increments of $50,000. In the event Borrowers cancel a proposed Eurodollar Loan subsequent to the delivery to Agent of the notice of the proposed date, aggregate amount and initial Interest Period of such Loan, but prior to the drawdown of funds thereunder, such cancellation shall be treated as a prepayment subject to the aforementioned prepayment fee.

SECTION 2.5[RESERVED].

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SECTION 2.6COMPUTATION OF INTEREST AND FEES; DEFAULT RATE. With the exception of Base Rate Loans, interest on Loans, Related Expenses and commitment and other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed. With respect to Base Rate Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of days elapsed. Anything herein to the contrary notwithstanding, if an Event of Default shall occur hereunder, at the option of Agent or the Required Lenders (but automatically with respect to an Event of Default under Section 8.14 hereof), (a) the principal of each Loan and the unpaid interest thereon shall bear interest, from the date of the occurrence of such Event of Default until paid, at the Default Rate; and (b) the fee for the aggregate undrawn face amount of all issued and outstanding Letters of Credit shall be increased by two percent (2%). In no event shall the rate of interest hereunder exceed the Highest Lawful Rate.

SECTION 2.7MANDATORY PAYMENT.

(a)       If the Revolving Credit Exposure at any time exceeds the Revolving Borrowing Limit, Borrowers shall, as promptly as practicable, but in no event later than the next Business Day, prepay an aggregate principal amount of the Revolving Loans sufficient to cause the Revolving Credit Exposure not to be in excess of the Revolving Borrowing Limit (without a permanent commitment reduction).

(b)       [Reserved].

(c)       If any Credit Party commences and completes a public or private offering of equity or debt securities (other than (i) a debt offering permitted under Section 5.8 hereof, or (iii) an equity or debt offering by any Credit Party to another Credit Party), then 100% of the Net Cash Proceeds of any such equity or debt offering shall be paid, within ten (10) days of receipt of such Net Cash Proceeds by such Company, to Agent, for the benefit of the Lenders, to be applied as a prepayment of the Loans. The provisions of this Section 2.7(c) shall not be understood to limit the rights and remedies of Agent and the Lenders for any breach of the provisions of this Agreement.

(d)       If any Credit Party sells or otherwise disposes of any assets (other than assets specifically permitted to be sold or disposed pursuant to Section 5.12 to the extent they have not been made specifically subject to this Section 2.7(d) under the provisions of Section 5.12), then the Net Cash Proceeds in an amount in excess of $25,000 of such sale or disposition shall be paid, within ten (10) days of the receipt of such proceeds, by Borrowers to Agent, for the benefit of the Lenders, to be applied as a prepayment on the Loans; provided, however, that so long as no Default or Event of Default then exists or would exist as a result thereof, Borrowers shall not be required to prepay the Loans with any such Net Cash Proceeds to the extent that Borrowers indicate to the Agent that they (or any Credit Party) intend to reinvest such Net Cash Proceeds within 270 days of receipt thereof in assets used in the business of any Company and which will be subject to a first priority Lien of Agent for the benefit of the Lenders, subject only to Permitted Liens. To the extent any Net Cash Proceeds are not so reinvested within 270 days of receipt thereof, Borrowers shall make the prepayment otherwise provided by this Section 2.7(d). The provisions of this Section 2.7(d) shall not be understood to limit the rights and remedies of Agent and the Lenders for any breach of the provisions of Section 5.12 hereof.

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(e)       Upon receipt by Agent or a Company of any insurance proceeds (other than business interruption insurance) (“Insurance Proceeds”), then 100% of the net Insurance Proceeds shall be applied as a mandatory prepayment of the Loans; provided, however, that so long as no Default or Event of Default then exists or would exist as a result thereof and the aggregate of such Insurance Proceeds for any occurrence is less than $500,000, Borrowers may use such Insurance Proceeds for the purpose of replacing, repairing, or restoring the insured property; provided, further, however, that if such funds have not been applied to such replacing, repairing or restoring within 270 days of the receipt thereof, Borrowers shall pay any remaining portion of such sums to Agent for application to the Loans.

(f)       Upon receipt by Agent or a Credit Party of any proceeds (other than Insurance Proceeds) resulting from any condemnation, seizure, taking, confiscation or requisition for use of any property of a Credit Party, by the exercise of the power of eminent domain or otherwise, then 100% of such net proceeds shall be applied as a mandatory prepayment of the Loans; provided, however, that so long as no Default or Event of Default then exists or would exist as a result thereof and the aggregate of such proceeds for any occurrence is less than $500,000, Borrowers may use such proceeds for the purpose of replacing, repairing, or restoring such property; provided, further, however, that if such funds have not been applied to such replacing, repairing or restoring within 270 days of the receipt thereof, Borrowers shall pay any remaining portion of such sums to Agent for application to the Loans.

(g)       Each prepayment of the Loans pursuant to this Section 2.7 (other than subpart (a)) (unless subject to the provisions of Section 2.3(b)(ii) hereof) shall be applied to the prepayment in full of all outstanding Revolving Loans, which such prepayment shall not constitute a permanent reduction to the Revolving Credit Commitment. Any prepayment required to made under this Section 2.7 shall be subject to any fee or other charge in connection with any Hedge Agreement.

ARTICLE III. ADDITIONAL PROVISIONS RELATING TO
LOANS; INCREASED CAPITAL; TAXES 

SECTION 3.1REQUIREMENTS OF LAW, ETC.

(a)       If, after the Closing Date, (i) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by a Governmental Authority, or (ii) the compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority:

(A)       shall subject any Lender to any tax of any kind whatsoever with respect to this Agreement, any Letter of Credit or any Eurodollar Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes and Excluded Taxes which are governed by Section 3.2 hereof);

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(B)       shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate; or

(C)       shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrowers shall pay to such Lender, promptly after receipt of a written request therefor, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection (a), such Lender shall promptly notify Borrowing Agent (with a copy to the Agent) of the event by reason of which it has become so entitled.

(b)       If any Lender shall have determined that, after the Closing Date, the adoption of or any change in any Requirement of Law regarding capital adequacy or in the interpretation or application thereof by a Governmental Authority or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder, or under or in respect of any Letter of Credit, to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender or such corporation with respect to capital adequacy), then from time to time, upon submission by such Lender to Borrowing Agent (with a copy to the Agent) of a written request therefor (which shall include the method for calculating such amount), the Borrowers shall promptly pay or cause to be paid to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.

(c)       For purposes of this Section 3.1, the Dodd-Frank Act, any requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, or the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) under Basel III, and any rules, regulations, orders, requests, guidelines and directives adopted, promulgated or implemented in connection with any of the foregoing, regardless of the date adopted, issued, promulgated or implemented, are deemed to have been introduced and adopted after the Closing Date.

(d)       A certificate as to any additional amounts payable pursuant to this Section 3.1 submitted by any Lender to Borrowing Agent (with a copy to the Agent) shall be conclusive absent manifest error. In determining any such additional amounts, such Lender may use any method of averaging and attribution that it (in its sole discretion) shall deem applicable. The obligations of the Borrowers pursuant to this Section 3.1 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

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SECTION 3.2TAX LAW, ETC.

(a)       All payments made by any Credit Party under any Loan Document shall be made free and clear of, and without deduction or withholding for or on account of any Taxes or Other Taxes. If any Taxes or Other Taxes are required to be deducted or withheld from any amounts payable to the Agent or any Lender hereunder, the amounts so payable to the Agent or such Lender shall be increased to the extent necessary to yield to the Agent or such Lender (after deducting, withholding and payment of all Taxes and Other Taxes) interest or any such other amounts payable hereunder at the rates or in the amounts specified in the Loan Documents.

(b)       Whenever any Taxes or Other Taxes are required to be withheld and paid by a Credit Party, such Credit Party shall timely withhold and pay such taxes to the relevant Governmental Authorities. As promptly as possible thereafter, Borrowing Agent shall send to the Agent for its own account or for the account of the relevant Lender, as the case may be, a certified copy of an original official receipt received by such Credit Party showing payment thereof or other evidence of payment reasonably acceptable to the Agent or such Lender. If such Credit Party shall fail to pay any Taxes or Other Taxes when due to the appropriate Governmental Authority or fails to remit to the Agent the required receipts or other required documentary evidence, such Credit Party and the Borrowers shall indemnify the Agent and the appropriate Lenders on demand for any incremental Taxes or Other Taxes paid or payable by the Agent or such Lender as a result of any such failure.

(c)       Each Lender that is not (i) a citizen or resident of the United States of America, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States of America (or any jurisdiction thereof), or (iii) an estate or trust that is subject to U.S. federal income taxation regardless of the source of its income (any such Person, a “Non-U.S. Lender”) shall deliver to Administrative Borrower and the Administrative Agent two copies of either U.S. Internal Revenue Service Form W-8BEN-E, W-8BEN, Form W-8IMY or Form W-8ECI, or, in the case of a Non-U.S. Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of “portfolio interest”, a statement with respect to such interest and two copies of a Form W-8BEN or W-BEN-E, as applicable, or any subsequent versions thereof or successors thereto, properly completed and duly executed by such Non-U.S. Lender claiming complete exemption from, or a reduced rate of, U.S. federal withholding tax on all payments by Credit Parties under this Agreement and the other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on or before the date it becomes a party to this Agreement or such other Loan Document. In addition, each Non-U.S. Lender shall deliver such forms or appropriate replacements promptly upon the obsolescence or invalidity of any form previously delivered by such Non-U.S. Lender. Each Non-U.S. Lender shall promptly notify Borrowing Agent at any time it determines that such Lender is no longer in a position to provide any previously delivered certificate to Borrowing Agent (or any other form of certification adopted by the U.S. taxing authorities for such purpose). Notwithstanding any other provision of this subsection (c), a Non-U.S. Lender shall not be required to deliver any form pursuant to this subsection (c) that such Non-U.S. Lender is not legally able to deliver.

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(d)       Each Lender that is not a Non-U.S. Lender shall deliver to Borrowing Agent and the Agent on or prior to the date on which such Lender becomes a party to this Agreement or any other Loan Document (and from time to time thereafter upon the reasonable request of Borrowing Agent or the Agent) executed copies of IRS Form W-9, as applicable, certifying that such Lender is exempt from U.S. federal backup withholding tax.

(e)       If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to Borrowing Agent and the Agent at the time or times prescribed by law and at such time or times reasonably requested by Borrowing Agent or Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Borrowing Agent or Agent as may be necessary for Borrowing Agent and Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 3.2(e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

(f)       The agreements in this Section 3.2 shall survive the termination of the Loan Documents and the payment of the Loans and all other amounts payable hereunder.

SECTION 3.3FUNDING LOSSES. The Borrowers agree to indemnify each Lender, promptly after receipt of a written request therefor, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by a Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after such Borrower has given a notice (including a written or verbal notice that is subsequently revoked) requesting the same in accordance with the provisions of this Agreement, (b) default by a Borrower in making any prepayment of or conversion from Eurodollar Loans after such Borrower has given a notice (including a written or verbal notice that is subsequently revoked) thereof in accordance with the provisions of this Agreement, (c) the making of a prepayment of a Eurodollar Loan on a day that is not the last day of an Interest Period applicable thereto, or (d) any conversion of a Eurodollar Loan to a Base Rate Loan or an Overnight LIBOR Loan on a day that is not the last day of an Interest Period applicable thereto, or (e) any compulsory assignment of such Lender’s interests, rights and obligations under this Agreement. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amounts so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) in each case at the applicable rate of interest for such Loans provided for herein over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the appropriate London interbank market, along with any administration fee charged by such Lender. A certificate as to any amounts payable pursuant to this Section 3.3 submitted to Borrowing Agent (with a copy to the Agent) by any Lender shall be conclusive absent manifest error. The obligations of the Borrowers pursuant to this Section 3.3 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

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SECTION 3.4EURODOLLAR RATE AND OVERNIGHT LIBOR RATE LENDING UNLAWFUL; INABILITY TO DETERMINE RATE.

(a)       If any Lender shall determine (which determination shall, upon notice thereof to Borrowing Agent and the Agent, be conclusive and binding on the Borrowers in the absence of manifest error) that, after the Closing Date, (i) the introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into a Eurodollar Loan or Overnight LIBOR Loan, the obligations of such Lender to make, continue or convert any such Eurodollar Loan or Overnight LIBOR Loan shall, upon such determination, be suspended until such Lender shall notify the Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Loans and Overnight LIBOR Loans payable to such Lender shall automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan, or be repaid (if no conversion is permitted) at the end of the then current Interest Periods with respect thereto or sooner, if required by law or such assertion.

(b)       If the Agent or the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate or Overnight LIBOR Rate with respect to a proposed Eurodollar Loan for any requested Interest Period or any proposed Overnight LIBOR Loan for any Overnight LIBOR Interest Period, as the case may be, or that (i) the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan, or (ii) the Overnight LIBOR Rate for any Overnight LIBOR Interest Period with respect to a proposed Overnight LIBOR Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Agent will promptly so notify Borrowing Agent and each Lender. Thereafter, the obligation of the Lenders to make or maintain such Eurodollar Loan or Overnight LIBOR Loan, as the case may be, shall be suspended until the Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, Borrowing Agent may revoke any pending request for a borrowing of, conversion to or continuation of such Eurodollar Loan or such Overnight LIBOR Loan, as the case may be, or, failing that, will be deemed to have converted such request into a request for a borrowing of a Base Rate Loan in the amount specified therein.

SECTION 3.5DISCRETION OF LENDERS AS TO MATTERS OF FUNDING. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of such Lender’s Loans in any manner such Lender deems to be appropriate; it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurodollar Loan during the applicable Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period.

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ARTICLE IV. CONDITIONS PRECEDENT 

The obligation of the Lenders to make the first Loan and of Agent to issue the first Letter of Credit is subject to the Credit Parties satisfying each of the following conditions to the reasonable satisfaction of the Agent:

SECTION 4.1NOTES. Borrowers shall have executed and delivered to each Lender its Revolving Credit Note.

SECTION 4.2[RESERVED].

SECTION 4.3[RESERVED].

SECTION 4.4SECRETARY’S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL DOCUMENTS. Each Borrower and each Guarantor of Payment shall have delivered to each Lender a secretary’s certificate (or equivalent) certifying the names of the officers (or other authorized Persons) of such Borrowers or such Guarantor of Payment authorized to sign the Loan Documents, together with the true signatures of such officers (or other authorized Persons) and certified copies of (a) the resolutions of the board of directors (or equivalent governing body) of each Borrower and each Guarantor of Payment evidencing approval of the execution and delivery of the Loan Documents to which such Borrowers or such Guarantor of Payment, as the case may be, is a party, (b) the Formation Documents of each Borrower and each Guarantor of Payment, in each case having been certified, not more than thirty (30) days prior to the date of this Agreement, by the Secretary of State of the jurisdiction under which such Borrowers or such Guarantor of Payment has been organized, and (c) the Governance Documents of each Borrower and each Guarantor of Payment.

SECTION 4.5GOOD STANDING CERTIFICATES. Each Borrower shall have delivered to Agent a good standing certificate (or equivalent) for such Borrowers and each Guarantor of Payment, issued on or about the Closing Date by the Secretary of State in the state(s) where such Borrowers or such Guarantor of Payment is organized or qualified as a foreign organization.

SECTION 4.6LEGAL OPINION. Borrowers shall have delivered to Agent and each Lender an opinion of counsel for Borrowers and each Guarantor of Payment, in form and substance reasonably satisfactory to the Lenders.

SECTION 4.7CLOSING, AGENT AND LEGAL FEES. Borrowers shall have paid to Agent, for the benefit of the Lenders, a closing fee in the amount of $30,000; and (b) all reasonable legal fees and expenses of Agent and the Lenders in connection with the preparation and negotiation of the Loan Documents.

SECTION 4.8FINANCING STATEMENTS; LIEN SEARCHES AND PAYOFF LETTERS. With respect to the property owned or leased by each Borrower, BRJ Seller and each Guarantor of Payment and any other property securing the Secured Debt, Borrowers shall have caused to be delivered to Agent (a) the results of UCC lien searches reasonably satisfactory to Agent; (b) the results of federal and state tax lien and judicial lien searches reasonably satisfactory to Agent; and (c) UCC termination statements and payoff letters reflecting termination of all financing statements (other than financing statements related to Permitted Liens) previously filed by any party having a security interest in any part of the Collateral or any other property securing the Secured Debt other than the Senior Subordinated Debt.

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SECTION 4.9BRJ ACQUISITION. In connection with the BRJ Acquisition, Borrowers shall have delivered to Agent (i) copies of the BRJ Acquisition Documents having been certified by an officer of Borrowers as true and correct, and (ii) any other evidence that Agent reasonably requests, in form and substance satisfactory to Agent, that the BRJ Acquisition has been completed.

SECTION 4.10SELLER SUBORDINATION AGREEMENT; SELLER SUBORDINATED DEBT DOCUMENTS. Borrowers shall have delivered a fully executed Seller Subordination Agreement, in form and substance reasonably satisfactory to Agent. In addition, Borrowers shall have delivered to Agent a copy of the Seller Subordinated Debt Documents, in each case having been certified by an officer of Borrowers as being true and complete.

SECTION 4.11SENIOR SUBORDINATION AGREEMENT; SENIOR SUBORDINATED DEBT DOCUMENTS. Borrowers shall have delivered a fully executed Senior Subordination Agreement, in form and substance reasonably satisfactory to Agent. In addition, Borrowers shall have delivered to Agent a copy of the Senior Subordinated Debt Documents, in form and substance satisfactory to Agent, in each case having been certified by an officer of Borrowers as being true and complete.

SECTION 4.12MANAGEMENT SUBORDINATION AGREEMENT. Borrowers shall have delivered to Agent a fully executed Management Subordination Agreement, in form and substance reasonably satisfactory to the Lenders, together with a fully executed copy of the Management Agreement, in form and substance satisfactory to Agent.

SECTION 4.13INSURANCE CERTIFICATE. Borrowers shall have delivered to Agent certificates of insurance, in form and substance reasonably satisfactory to Agent, as required by Section 5.1 with Agent listed as loss payee and additional insured.

SECTION 4.14DEPOSIT ACCOUNTS. Borrowers shall have (a) delivered to Agent either (i) evidence, satisfactory to Agent, that Borrowers and each other Credit Party shall have closed or moved to Agent all Deposit Accounts (other than any Excluded Accounts) and lockboxes, or (ii) with respect to any such Deposit Accounts (other than Excluded Accounts) that are not closed or moved (the “Other Accounts”), deliver fully executed control agreements, in form and substance satisfactory to Agent, whereby Agent is given exclusive control over such Other Accounts; and (b) established Agent as its primary depository, cash management and treasury management institution.

SECTION 4.15SOLVENCY CERTIFICATE. Agent shall have received a solvency certificate, in form and substance reasonably satisfactory to Agent, with respect to Borrowers.

SECTION 4.16LANDLORD’S AND BAILEE’S WAIVER. Borrowers shall have delivered a landlord’s waiver and/or a bailee’s waiver, if applicable, each in form and substance satisfactory to Agent and the Lenders, for each location where either (a) a Credit Party’s books and records are located, or (b) any Collateral of a Credit Party with a fair market value in excess of $50,000 in the aggregate is located.

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SECTION 4.17CASH MANAGEMENT PROCEDURES. Each Credit Party shall have established cash management and treasury management procedures with Agent satisfactory to Agent, in its sole and absolute discretion, including, without limitation, the establishment of (a) a demand Deposit Account with Agent as well as its other primary Deposit Accounts with Agent, (b) a subscription to Agent's web based financial reporting system.

SECTION 4.18CUSTOMER IDENTIFICATION PROGRAM. Agent shall have received all customer identification program documentation and related documentation that it shall request in its sole discretion.

SECTION 4.19FINANCIAL INFORMATION. Borrowers shall have delivered to Agent a proforma opening balance sheet for the Companies and cash flow statements, income statements and balance sheets for the Companies covering the one year period from Closing Date and set forth on a monthly basis.

SECTION 4.20NO MATERIAL ADVERSE CHANGE. No material adverse change, in the opinion of the Lenders, shall have occurred in the financial condition or operations of the Credit Parties or the BRJ Seller since December 31, 2015.

SECTION 4.21MISCELLANEOUS. The Credit Parties shall have provided to Agent such other items and shall have satisfied such other conditions as may be reasonably required by the Lenders.

ARTICLE V. COVENANTS 

Each Credit Party agrees that so long as the Commitment remains in effect and thereafter until all of the Secured Debt shall have been paid in full (other than contingent indemnification obligations), each Credit Party shall perform and observe, and shall cause each other Company to perform and observe, each of the following provisions:

SECTION 5.1INSURANCE. Each Company shall at all times maintain insurance upon its insurable Inventory, Equipment and other personal and real property, business interruption and general liability insurance in such form, written by such companies, in such amounts, for such period, and against such risks as are maintained by similar companies similarly situated, with provisions reasonably satisfactory to Agent for payment of all losses thereunder to Agent, for the benefit of the Lenders, and such Company as their interests may appear (loss payable and additional insured endorsement in favor of Agent), and, if required by Agent, Borrowers shall deposit the policies with Agent. Any such policies of insurance shall provide for no fewer than thirty (30) days prior written notice of cancellation to Agent. During the continuance of an Event of Default, Agent is hereby authorized to act as attorney-in-fact for any Credit Party in obtaining, adjusting, settling and canceling such insurance and indorsing any drafts. In the event of failure to provide such insurance as herein provided, Agent may, at its option, provide such insurance and the Credit Parties shall pay to Agent, upon demand, the cost thereof. Should the Credit Parties fail to pay such sum to Agent upon demand, interest shall accrue thereon, from the date of demand until paid in full, at the Default Rate. Within ten (10) days of Agent’s written request, each Credit Party shall furnish to Agent such information about any Company’s insurance as Agent may from time to time reasonably request, which information shall be prepared in form and detail satisfactory to Agent and certified by a Financial Officer of Borrowers. Notwithstanding the foregoing requirements, Agent acknowledges that Borrower’s insurance coverage in effect on the date hereof as reviewed by the Agent is satisfactory as of the Closing Date.

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SECTION 5.2MONEY OBLIGATIONS. Each Company shall pay in full (a) prior in each case to the date when penalties would attach, all taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be Properly Contested) for which it may be or become liable or to which any or all of its properties may be or become subject; (b) all of its wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. 206 207) or any comparable provisions; and (c) all of its other material obligations calling for the payment of money (except only those so long as and to the extent that the same shall be Properly Contested) before such payment becomes overdue.

SECTION 5.3FINANCIAL STATEMENTS. The Credit Parties shall furnish to each Lender:

(a)       within 20 days after the end of each calendar month for the prior calendar month (i) an accounts receivable aging, (ii) an accounts payable aging (reconciled to the general ledger), and (iii) an Inventory report (valued on a first-in, first-out basis);

(b)       within 20 days after the end of each calendar month, balance sheets of Borrowers as of the end of such period and statements of income (loss), and cash flow for the Fiscal Quarter and Fiscal Year to date periods, all prepared on a Consolidated and consolidating basis, in accordance with GAAP, and in form and detail satisfactory to Agent and certified by a Financial Officer of Borrowers, together with a certificate of such officer setting forth the Defaults and Events of Default coming to such Financial Officer’s attention or, if none, a statement to that effect;

(c)       within 120 days after the end of each Fiscal Year, an annual audit report of Borrowers for that year prepared on a Consolidated and consolidating basis, in accordance with GAAP, and in form and detail satisfactory to Agent and certified by an independent public accountant satisfactory to Agent (Agent acknowledges that Freed Maxick CPAs, P.C. is satisfactory to Agent), which report shall include balance sheets and statements of income (loss), stockholders’ equity and cash-flow for that period, together with an opinion with respect to such financial statements of such independent accountants which opinion will be unqualified as to scope or going concern and will (i) state, in substance, that such accountants audited such financial statements in accordance with GAAP, that such audit provides a reasonable basis for their opinion, and that in their opinion such financial statements present fairly, in all material respects, the Borrowers and their Consolidated Subsidiaries on a Consolidated and consolidating basis as at the end of such Fiscal Year and the results of their operations and cash flows for such Fiscal Year in conformity with GAAP, or (ii) contain such statements as are customarily included in unqualified reports of independent accountants in conformity with the recommendations and requirements of the American Institute of Certified Public Accountants (or any successor organization);

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(d)       concurrently with the delivery of the financial statements in (b) (with respect to a Fiscal Quarter end only) and (c) above, a Compliance Certificate;

(e)       with the delivery of the financial statements in (b) and (c) above, a copy of any management report, letter or similar writing furnished to the Companies by the accountants in respect of the Companies’ systems, operations, financial condition or properties;

(f)       by January 31^st of each Fiscal Year, pro-forma projections and budget, set forth on a monthly basis, of Borrowers and their Subsidiaries on a Consolidated basis for such Fiscal Year, to be in form acceptable to Agent;

(g)       concurrently with the delivery of the financial statements in (c) above, a management discussion and analysis highlighting performance, in form and detail satisfactory to Agent; and

(h)       within 10 days of Agent’s written request, such other information about the financial condition, properties and operations of any Company as Agent may from time to time reasonably request, which information shall be submitted in form and detail reasonably satisfactory to Agent.

SECTION 5.4FINANCIAL RECORDS. Each Company shall at all times maintain true and complete records and books of account, including, without limiting the generality of the foregoing, appropriate reserves for possible losses and liabilities, all in accordance with GAAP, and at all reasonable times (during normal business hours and upon notice to such Company) permit the Lenders to examine that Company’s books and records and to make excerpts therefrom and transcripts thereof.

SECTION 5.5FRANCHISES. Except as permitted under Section 5.12 hereof, each Company shall preserve and maintain at all times its existence, material rights and other franchises material to such Company’s business.

SECTION 5.6ERISA COMPLIANCE. No Company shall incur any material accumulated funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. The Credit Parties shall furnish to the Lenders (a) as soon as possible and in any event within thirty (30) days after any Company knows or has reason to know that any Reportable Event with respect to any ERISA Plan has occurred, a statement of the Financial Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if a copy of such notice is available to such Company, (b) promptly after the filing thereof with the Internal Revenue Service, copies of each annual report with respect to each ERISA Plan that is subject to Title IV of ERISA or provides retiree medical benefits and is established or maintained by such Company for each plan year, including (i) where required by law, a statement of assets and liabilities of such ERISA Plan as of the end of such plan year and statements of changes in fund balance and in financial position, or a statement of changes in net assets available for plan benefits, for such plan year, certified by an independent public accountant satisfactory to Agent and (ii) if such ERISA Plan is required by law to perform an annual actuarial review, an actuarial statement of such ERISA Plan applicable to such plan year, certified by an enrolled actuary of recognized standing acceptable to Agent, and (c) promptly after receipt thereof a copy of any notice such Company or any member of the Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided, that this latter clause shall not apply to notices of general application promulgated by the PBGC or the Internal Revenue Service. Borrowers shall promptly notify the Lenders of any material taxes assessed, proposed to be assessed or that any Credit Party has reason to believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As soon as practicable, and in any event within twenty (20) days, after any Company becomes aware that an ERISA Event has occurred, such Company shall provide Lender with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. Each Credit Party shall, at the request of Agent or any Lender, deliver or cause to be delivered to Agent or such Lender, as the case may be, true and correct copies of any documents relating to the ERISA Plan established or maintained by any Company.

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SECTION 5.7FINANCIAL COVENANTS;

(a)       CONSOLIDATED FIXED CHARGE COVERAGE RATIO. The Companies shall not permit the Consolidated Fixed Charge Coverage Ratio of Borrowers to be less than 1.15 to 1.00 for the Fiscal Quarter ending December 31, 2017, and each Fiscal Quarter thereafter, as calculated for the four (4) consecutive Fiscal Quarter period ending on such date.

(b)       [RESERVED].

SECTION 5.8BORROWING. No Company shall create, incur or have outstanding any Indebtedness of any kind; provided, that this Section shall not apply to (a) the Loans, the Letters of Credit or any other Indebtedness under the Loan Documents; (b) any Indebtedness incurred by Borrowers or any Credit Party in respect of Capital Leases and any Indebtedness incurred to finance the acquisition, construction or improvement of any fixed or capital assets after the Closing Date that is secured by purchase money mortgage or purchase money security interests, so long as the combined aggregate principal amount of all such Indebtedness does not exceed $500,000 at any time outstanding; (c) the Indebtedness existing on the Closing Date as set forth in Schedule 5.8 hereto and any refinancings, refundings, renewals or extensions thereof, which do not increase the principal amount or shorten the maturity thereof; (d) loans to a Company from a Company so long as (I) each such Company borrowing such money is a Borrower or a Credit Party, (II) each such loan is evidenced by the Master Promissory Note, which such promissory note has been pledged to Agent, for the benefit of the Lenders, in a manner reasonably satisfactory to Agent, and (III) the Master Promissory Note is Subordinated; (e) Indebtedness under any Hedge Agreement entered into by Borrowers in connection with the Debt and not for speculative purposes, (f) guarantee obligations incurred in the ordinary course of business by a Company of Indebtedness of a Credit Party, (g) Indebtedness in respect of netting services, overdraft protections and otherwise in connection with deposit accounts, (h) Indebtedness constituting Investments permitted pursuant to Section 5.11 hereof or Restricted Payments permitted pursuant to Section 5.20 hereof, (i) Indebtedness evidenced by the Seller Subordinated Debt Documents; provided that such Indebtedness remains at all times subject to the terms of the Seller Subordination Agreement; (j) Indebtedness evidenced by the Senior Subordinated Debt Documents; provided that such Indebtedness remains at all times subject to the terms of the Senior Subordination Agreement; (k) Indebtedness of any Credit Party arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn by such Credit Party in the ordinary course of business against insufficient funds, so long as such Indebtedness is repaid within five (5) Business Days; (l) endorsements of items for deposit or collection of commercial paper received in the ordinary course of business; (m) Indebtedness in respect of deposits or advances received in the ordinary course of business; and (n) other unsecured Indebtedness in an aggregate amount not to exceed $50,000, at any time outstanding.

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SECTION 5.9LIENS. No Company shall create, assume or suffer to exist any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section shall not apply to Permitted Liens and Liens securing the Senior Subordinated Debt so long as such Liens are in compliance with the terms of the Senior Subordination Agreement. In addition, no Company shall enter into any contract or agreement that would prohibit Agent or the Lenders from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of a Company, other than in connection with the Indebtedness described in Section 5.8(b) hereof or the licensing of Intellectual Property; provided that any such restriction contained therein relates only to the asset or assets subject to such Liens.

SECTION 5.10REGULATIONS U AND X. No Company shall take any action that would result in any non-compliance of the Loans with Regulations U and X of the Board of Governors of the Federal Reserve System.

SECTION 5.11INVESTMENTS AND LOANS. No Company shall: (a) create, acquire or hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a party to any joint venture or other partnership, (d) make or keep outstanding any advance or loan to any Person, or (e) be or become a Guarantor of any kind; provided, that this Section shall not apply to:

(i)         any endorsement of a check or other medium of payment for deposit or collection through normal banking channels or similar transaction in the normal course of business;

(ii)        any investments in cash or Cash Equivalents;

(iii)       the holding of Subsidiaries listed on Schedule 7.1 hereto as of the Closing Date;

(iv)       intercompany loans to the extent permitted under Section 5.8(d);

(v)        any advance or loan to an officer, director or employee of a Company made in the ordinary course of such Company’s business, so long as all such advances and loans from all Companies aggregate not more than the maximum principal sum of $25,000 at any time outstanding;

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(vi)       the creation, acquisition or holding of any Wholly-Owned Subsidiary that is a Domestic Subsidiary so long as such Subsidiary is in compliance with Section 5.22 of this Agreement;

(vii)      extensions of trade credit in the ordinary course of business;

(viii)     investments by Borrowers in Hedge Agreements other than for speculative purposes;

(ix)       investments acquired by Borrowers (a) in exchange for any other investment held by Borrowers in connection with or as a result of a bankruptcy, workout, reorganization or recapitalization of the issuer of such other investment or (b) as a result of the foreclosure by Borrowers with respect to any secured investment or other transfer of title with respect to any secured investment in default;

(x)        investments, loans and guaranties described on Schedule 5.11 hereto and any renewal or replacement thereof;

(xi)       investments that constitute Restricted Payments permitted under Section 5.20 hereof;

(xii)      Investments in Capital Expenditures to the extent permitted hereunder;

(xiii)     guaranties permitted under Section 5.8 hereof;

(xiv)     contributions of capital by any Credit Party to any other Credit Party until such time as Agent or the Required Lenders directs the Credit Parties during the existence of a Default or Event of Default, that no such contribution of capital may be made; or

(xv)      other investments in an aggregate amount not to exceed $100,000.

SECTION 5.12MERGER AND SALE OF ASSETS. No Company shall merge or consolidate with any other Person, liquidate, wind-up or dissolve itself, or sell, lease or transfer or otherwise dispose of any assets to any Person other than Inventory in the ordinary course of business, except that, if no Default or Event of Default shall then exist or immediately thereafter shall begin to exist:

(a)       any Company may sell or dispose of assets (i) for fair market value (as determined in the good faith of a Borrowers’ senior management), and (ii) in amounts not to exceed $250,000 in the aggregate for all Companies in any Fiscal Year so long as the proceeds of such sale or disposition are applied in the manner set forth in Section 2.7;

(b)       so long as the security interest granted to Agent, for the benefit of the Lenders, in the Collateral shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such merger) any Subsidiary may merge with (i) any Borrower (provided that such Borrower shall be the continuing or surviving Person) or (ii) any one or more Credit Parties, provided that the continuing or surviving Person shall be a Domestic Subsidiary that is a Wholly-Owned Subsidiary that is a Credit Party;

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(c)       so long as the security interest granted to Agent, for the benefit of the Lenders, in the Collateral shall remain in full force and effect and perfected (to at least the same extent as in effect immediately prior to such transfer), any Subsidiary may sell, lease, transfer or otherwise dispose of any of its assets to (i) a Borrower, or (ii) any Wholly-Owned Subsidiary that is a Domestic Subsidiary that is a Credit Party; or

(d)       any Company may (i) dispose of accounts receivable in connection with the collection or compromise thereof in the ordinary course of business; (ii) sell or otherwise dispose of Cash Equivalents for fair market value; or (iii) dispose of obsolete, damaged, surplus, unused or worn out property in the ordinary course of business in amounts not to exceed $250,000 in the aggregate for all Companies in any Fiscal Year so long as the proceeds of such sale or disposition are applied in the manner set forth in Section 2.7.

SECTION 5.13ACQUISITIONS. Except for the BRJ Acquisition or as expressly permitted under Section 5.11 or 5.12 hereof, without the prior written consent of the Required Lenders, no Company shall acquire or permit any Subsidiary to acquire the assets or stock of any other Person.

SECTION 5.14NOTICE. The Credit Parties shall cause a Financial Officer of Borrowers to notify Agent and the Lenders within three (3) Business Days after obtaining knowledge of any (a) Default or Event of Default that has occurred hereunder or any representation or warranty made in Article VII hereof or elsewhere in this Agreement or in any Related Writing that has for any reason ceased in any material respect to be true and complete, (b) any default has occurred under the BRJ Acquisition Documents, the Seller Subordinated Debt Documents or the Senior Subordinated Debt Documents, (c) litigation or proceeding that is brought against any Company before any court or administrative agency which could reasonably be expected to have or result in a Material Adverse Effect, (d) material adverse change or development in connection with any such litigation or proceeding, (e) there is (i) any change to a Borrower’s right to use any of its Intellectual Property necessary for the conduct of its business, (ii) any addition or acquisition of any material new Intellectual Property or (iii) any registration of any Intellectual Property with the United States Patent and Trademark Office, and (f) material change to any Company’s insurance coverage, (g) there is any change to the requirement of any Credit Party to obtain any consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other Person, required to be obtained or completed by the Credit Parties in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed, (h) any material change in accounting policies of any Credit Party, (i) any labor controversy resulting in or threatening to result in any strike, work stoppage, boycott, shutdown or other labor disruption against or involving any Credit Party, (j) any material breach or non-performance of, or any material default under, any material contract of a Credit Party, or any material violation of, or material non-compliance with, any law (statutory or common), ordinance, treaty, rule, regulation, order, policy, other legal requirement, (k) any material dispute, litigation, investigation, proceeding or suspension which may exist at any time between any Credit Party and any Governmental Authority, and (l) any Material Adverse Effect shall have occurred as determined by a Financial Officer of a Company. Each notice pursuant to this Section shall be accompanied by a written statement by a Financial Officer on behalf of the Credit Parties setting forth details of the occurrence referred to therein, and stating what action Borrowers or any other Company proposes to take with respect thereto and at what time. Each notice under Section 5.14(a) hereof shall describe with particularity any and all clauses or provisions of this Agreement or other Loan Document that have been breached or violated.

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SECTION 5.15ENVIRONMENTAL COMPLIANCE. Each Company shall comply with any and all Environmental Laws including, without limitation, all Environmental Laws in jurisdictions in which any Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid waste or other wastes, accepts for transport any hazardous substances, solid waste or other wastes or holds any interest in real property or otherwise, the failure to comply with which could be reasonably expected to result in a Material Adverse Effect. Borrowers shall furnish to the Lenders, promptly after receipt thereof, a copy of any notice any Company may receive from any governmental authority, private Person or otherwise that any material litigation or proceeding pertaining to any environmental, health or safety matter has been filed or is threatened against such Company, any real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous substances, hazardous waste, solid waste or other substances or wastes on, under or to any real property in which any Company holds any interest in violation of any Environmental Law, the failure to comply with which could be reasonably expected to result in a Material Adverse Effect. As used in this Section, “litigation or proceeding” means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any governmental authority, private Person or otherwise. Each Credit Party shall defend, indemnify and hold Agent and the Lenders harmless against all costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including reasonable attorneys’ fees) arising out of or resulting from the noncompliance of any Company with any Environmental Law, provided that no Lender or Agent shall have the right to be indemnified under this Section for its gross negligence or willful misconduct. Such indemnification shall survive any termination of this Agreement.

SECTION 5.16AFFILIATE TRANSACTIONS. No Company shall, or shall permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate of a Company on terms that are less favorable in any material respect to such Company or such Subsidiary, as the case may be, than those that might be obtained at the time in a transaction with a non-Affiliate; provided, however, that the foregoing shall not prohibit (a) the payment of customary and reasonable directors’ fees to directors who are not employees of a Company or any Affiliate of a Company; (b) compensation arrangements for officers and other employees of or consultants to any Company entered into in the ordinary course of business; (c) any transaction between a Borrower and an Affiliate (if a Credit Party) that Borrowers reasonably determine in good faith is beneficial to Borrowers and their Affiliates as a whole and that is not entered into for the purpose of hindering the exercise by Agent or the Lenders of their rights or remedies under this Agreement, (d) the payment of any Sponsor Management Fee to the extent permitted pursuant to Section 5.21 hereof; (e) any reimbursement and indemnification obligations pursuant to the Management Agreement in effect as of the Closing Date; (f) loan to employees and other investments permitted by Section 5.11; or (g) Restricted Payments permitted by Section 5.20, Indebtedness permitted by Section 5.8 and transactions permitted by Section 5.12.

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SECTION 5.17ASSIGNED CONTRACTS. Each Credit Party will secure all consents and approvals necessary or appropriate for the assignment to or for the benefit of Agent of any Assigned Contract and to enforce the security interests granted hereunder. Each Credit Party shall fully perform all of its obligations under each of its Assigned Contracts, and shall enforce all of its rights and remedies thereunder, in each case, as it deems appropriate in its business judgment. Such Credit Party shall notify Agent in writing, promptly after such Credit Party becomes aware thereof, of any event or fact which could give rise to a material claim by it for indemnification under any of its Assigned Contracts. If an Event of Default then exists, Agent may, and at the direction of Required Lenders shall, directly enforce such right in its own or such Credit Party’s name and may enter into such settlements or other agreements with respect thereto as Agent shall determine. In any suit, proceeding or action brought by Agent under any Assigned Contract for any sum owing thereunder or to enforce any provision thereof, the Credit Parities shall indemnify and hold Agent and Lenders harmless from and against all expense, loss or damage suffered by reason of any defense, setoff, counterclaims, recoupment, or reduction of liability whatsoever of the obligor thereunder arising out of a breach by such Credit Party of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing from the Credit Parties to or in favor of such obligor or its successors, except for such expenses, damages or losses resulting from Agent’s or any Lender’s gross negligence or willful misconduct. All such obligations of the Credit Parties shall be and remain enforceable only against the Credit Parties and shall not be enforceable against Agent or Lender. Notwithstanding any provision hereof to the contrary, the Credit Parties shall at all times remain liable to observe and perform all of its duties and obligations under its Assigned Contracts, and Agent’s exercise of any of its rights with respect to the Collateral shall not release the Credit Parties from any of such duties and obligations. Neither Agent nor any Lender shall be obligated to perform or fulfill any of any Credit Party’s duties or obligations under its Assigned Contracts or to make any payment thereunder, or to make any inquiry as to the nature or sufficiency of any payment or property received by it thereunder or the sufficiency of performance by any party thereunder, or to present or file any claim, or to take any action to collect or enforce any performance, any payment of any amounts, or any delivery of any property.

SECTION 5.18NAMES AND LOCATION OF COLLATERAL. No Company shall change its jurisdiction of organization or name (as set forth in its Formation Documents), unless, in each case, such Company shall provide Agent with at least five (5) days prior written notice thereof. Borrowers shall also provide Agent with at least five (5) days prior written notification of (a) any new locations where any Company’s Inventory or Equipment is to be maintained; (b) any change in the location of the office where any Company’s records pertaining to its Accounts are kept; (c) the location of any new places of business and the changing or closing of any of its existing places of business; and (d) any change in any Company’s chief executive office. In the event of any of the foregoing, each Credit Party hereby authorizes Agent to file, new UCC financing statements (as such Credit Party’s irrevocable attorney-in-fact) describing the Collateral and otherwise in form and substance sufficient for recordation wherever necessary or appropriate, as determined in Agent’s sole discretion, to perfect or continue perfected the security interest of Agent, for the benefit of the Lenders, in the Collateral, based upon such new places of business or names, and the Credit Parties shall pay all filing and recording fees and taxes in connection with the filing or recordation of such financing statements and shall promptly reimburse Agent therefor if Agent pays the same. Such amounts shall be Related Expenses hereunder. Notwithstanding anything to the contrary contained herein, no Credit Party shall be permitted to move any Collateral from a location inside the United States to a location outside the United States without the prior written consent of the Required Lenders.

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SECTION 5.19AMENDMENT OF ORGANIZATIONAL DOCUMENTS. Except as necessary to effectuate the mergers and consolidations permitted pursuant to Section 5.12 hereof, no Company shall amend its Organizational Documents without the prior written consent of Agent, only if such change would adversely affect the rights of Agent or the Lenders hereunder.

SECTION 5.20RESTRICTED PAYMENTS. The Companies shall not pay or commit themselves to pay any Restricted Payments at any time; provided, however, that:

(a)       Borrowers may make Tax Distributions so long as no Default or Event of Default has occurred and is continuing;

(b)       any Borrower may pay or commit itself to pay a Capital Distribution (other than a Tax Distribution) so long as:

(i)        no Default has occurred and is continuing or would result immediately after giving effect to such Capital Distribution;

(ii)       immediately after giving effect to such Capital Distribution, the Borrowers shall have a Consolidated Fixed Charge Coverage Ratio for the trailing four (4) consecutive Fiscal Quarters calculated on a pro forma basis after giving effect to such Capital Distribution of not less than 1.20 to 1.00; and

(iii)      the Borrowing Agent shall have delivered to the Agent a certificate in form and substance reasonably satisfactory to the Agent certifying as to the items described in subsections (i) and (ii) above and attaching calculations for subsection (ii).

(c)       Borrowers may make scheduled payments on account of the Seller Subordinated Debt Documents so long as such payments are permitted under the terms of the applicable Seller Subordination Agreement; and

(d)       Borrowers may make payments on account of the Senior Subordinated Debt so long as such payments are permitted under the terms of the Senior Subordination Agreement.

SECTION 5.21MANAGEMENT FEES. The Companies shall not pay any Management Fees during any Fiscal Year; provided, however, that the Companies may pay Sponsor Management Fees permitted under the Management Subordination Agreement.

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SECTION 5.22SUBSIDIARY GUARANTIES. Each Domestic Subsidiary created or acquired subsequent to the Closing Date (as permitted under the terms of this Agreement) shall also be subject to the satisfaction of the following conditions on or prior to the date of its creation or acquisition or within five (5) Business Days thereafter (or such other time frame as specified below):

(i)         Borrowers shall provide written notice to Agent at least ten (10) days prior to the creation or acquisition of such Subsidiary,

(ii)        such Subsidiary shall execute and deliver to Agent, a joinder and assumption agreement to this Agreement, in form and substance satisfactory to Agent, which agreement shall make such Subsidiary a Credit Party hereunder, including, without limitation, pursuant to Articles VI and XII hereunder,

(iii)       Borrowers or such other Person shall execute and deliver to Agent, for the benefit of the Lenders, a Pledge Agreement with respect to all of its issued and outstanding Capital Stock of such Subsidiary, and otherwise in form and substance reasonably satisfactory to Agent, together with the original stock certificates (or equivalent) and appropriate stock powers (or equivalent),

(iv)       such Subsidiary shall authorize Agent to file appropriate UCC financing statements naming such Subsidiary as debtor,

(v)        with respect to an acquired Subsidiary, Borrowers shall deliver to Agent, the results of UCC, federal and state tax lien and judicial lien searches with regard to such Subsidiary, satisfactory to Agent,

(vi)       Borrowers shall cause such Subsidiary to deliver to Agent an officer’s certificate certifying the names of the officers (or other authorized Persons) of such Subsidiary authorized to sign the Loan Documents, together with the true signatures of such officers (or other authorized Persons) and certified copies of (A) the resolutions of the board of directors (or equivalent governing body) of such Subsidiary evidencing approval of the execution and delivery of the Loan Documents and the execution of other Related Writings to which such Subsidiary is a party, (B) the Formation Documents of such Subsidiary having been recently certified by the Secretary of State of the jurisdiction under which such Domestic Subsidiary shall have been organized, and (C) the Governance Documents of such Subsidiary,

(vii)      Borrowers shall, upon reasonable request of Agent, deliver to Agent and the Lenders, an opinion of counsel for such Subsidiary, in form and substance reasonably satisfactory to Agent,

(viii)     Borrowers shall deliver to Agent a good standing certificate (or equivalent) for such Subsidiary issued by the Secretary of State in the state(s) where such Subsidiary is organized or qualified as a foreign entity,

(ix)       Borrowers shall deliver to Agent a revised Schedule 7.1 to this Agreement reflecting the information required thereon for such Subsidiary; and

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(x)        Each Credit Party, including such Subsidiary, shall deliver to Agent such other documents as Agent may request, in its reasonable discretion.

SECTION 5.23COLLATERAL. Each Credit Party shall:

(a)       at all reasonable times and with prior notice thereof allow Agent by or through any of its officers, agents, employees, attorneys, or accountants to (i) examine, inspect, and make extracts from each Credit Party’s books and other records, including, without limitation, the tax returns of such Credit Party; (ii) arrange for verification of each Credit Party’s Accounts, under reasonable procedures, directly with Account Debtors or by other methods; and (iii) examine and inspect Each Credit Party’s Inventory and Equipment, wherever located; provided, however, unless an Event of Default is continuing, the Credit Parties shall not be required to reimburse the Agent for more than one such inspection or visit in any Fiscal Year;

(b)       promptly furnish to Agent upon request (i) additional statements and information with respect to the Collateral, and all writings and information relating to or evidencing any of any Credit Party’s Accounts (including, without limitation, computer printouts or typewritten reports listing the mailing addresses of all present Account Debtors), and (ii) any other writings and information as Agent may reasonably request;

(c)       notify Agent in writing of any Accounts with respect to which the Account Debtor is the United States of America or any state, city, county or other governmental authority or any department, agency or instrumentality of any of them, or any foreign government or instrumentality thereof or any business which is located in a foreign country;

(d)       promptly notify Agent in writing of any information which any Credit Party has or may receive with respect to the Collateral which materially and adversely affects the value thereof or the rights of Agent or the Lenders with respect thereto; and

(e)       maintain the Equipment in good operating condition and repair, ordinary wear and tear excepted, making all necessary replacements thereof so that the value and operating efficiency thereof shall at all times be maintained and preserved, and promptly inform Agent of any material deletions from the Equipment, other than obsolete, worn out, damaged, surplus, unused or permanently retired Equipment.

If the Credit Parties fail to keep and maintain any material Equipment in good operating condition, other than obsolete, worn out, damaged, surplus, unused or permanently retired Equipment, Agent may (but shall not be required to) so maintain or repair all or any part of the Equipment and the cost thereof shall be a Related Expense. All Related Expenses are payable to Agent upon demand therefor; Agent may, at its option, debit Related Expenses directly to the Revolving Credit Notes or any other Notes.

SECTION 5.24FURTHER ASSURANCE. Each Credit Party will, and will cause each other Company, at no expense to Agent or any Lender, make and do all such acts and things (including, without limitation, the delivery to Agent of any Chattel Paper, Document, Instrument, or other writing or record of any kind the possession of which perfects a security interest therein, and the taking of any action necessary to give Agent control of any Chattel Paper, Deposit Account, Investment Property, or Letter of Credit Rights the control of which perfects a security interest therein) as Agent may from time to time reasonably require for the better evidencing, perfection, protection, or validation of, or realization of the benefits of, its security interest in the Collateral of the Credit Parties or any real property of the Credit Parties. Without limiting the generality of the foregoing, each Credit Party will, at no expense to Agent or any Lender, upon each request of Agent:

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(i)         complete, correct, amend, continue, supplement, sign (or otherwise authenticate if Agent shall so require), and file in such public offices as Agent may from time to time deem advisable, such financing statements and amendments thereto (including, without limitation, continuation statements) naming such Credit Party as debtor and containing such collateral indications (including, by way of example, but without limitation, “all assets in which debtor now has or hereafter acquires any rights or any power to transfer rights” or “all personal property and fixtures in which debtor now has or hereafter acquires any rights or any power to transfer rights”) and other information (including, without limitation, if Agent shall require, a statement to the effect that all chattel paper and each and every instrument in which such Credit Party has or at any time acquires any rights or any power to transfer rights has been assigned to Agent, and any further assignment of all or any part of any such chattel paper or instrument or any interest therein violates the rights of Agent) as Agent may from time to time require,

(ii)        sign (or otherwise authenticate if Agent shall so require) and deliver, and, upon each request of Agent, use reasonable commercial efforts to cause third parties to sign (or otherwise authenticate if Agent shall so require) and deliver, such affidavits, assignments, financing statements, indorsements of specific items of the Collateral of such Credit Party, mortgages, powers of attorney, control agreements, security agreements, and other writings and other records, as Agent may from time to time reasonably require, each in form and substance satisfactory to Agent, including, without limitation, short form motor vehicle security agreements in the form and substance as Agent shall require,

(iii)       cause all Chattel Paper and Instruments in which such Credit Party now has or hereafter acquires any rights to bear a conspicuous legend, in form and substance reasonably satisfactory to Agent, indicating that the Chattel Paper or Instrument, as the case may be, has been assigned to Agent and that further assignment thereof violates the rights of Agent; provided, however, that so long as no Event of Default exists, such Credit Party shall only be required to comply with this subpart (iii) to the extent that the aggregate value of the Companies’ Chattel Paper and Instruments exceeds $50,000,

(iv)       cause all applicable certificates of title (in the case of any motor vehicle or other chattel in which Agent has been granted a security interest by such Credit Party and which is subject to any certificate of title law) to be duly noted with Agent’s security interest and to be deposited with Agent,

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(v)        comply with every other requirement deemed necessary by Agent in its reasonable discretion for the perfection of its security interest in the Collateral of such Credit Party, and

(vi)       with respect to any other location where any books and records or any Collateral is located, cause to be delivered a landlord waiver and mortgagee waiver, if applicable, each in form and substance reasonably satisfactory to Agent.

Each Credit Party hereby authorizes Agent, on behalf of the Lenders, to file financing statements with respect to the Collateral, including such financing statements that describe the Collateral as “all assets” or “all personal property” or words of similar effect. Each Credit Party hereby authorizes Agent or Agent’s designated agent (but without obligation by Agent to do so) to make and do all such acts and things referred to in this Section 5.24, and to incur Related Expenses (whether prior to, upon, or subsequent to any Default or Event of Default), and each Credit Party shall promptly repay, reimburse, and indemnify Agent and the Lenders for any and all Related Expenses. All Related Expenses are payable to Agent upon demand therefor.

SECTION 5.25MODIFICATIONS TO CERTAIN MATERIAL DOCUMENTS. Without the prior written consent of the Required Lenders, the Companies shall not permit any amendment, restatement, waiver or other modification, in a manner adverse to any Company, Agent or any Lender, of any of the (a) BRJ Acquisition Documents, (b) the Seller Subordinated Debt Documents unless permitted under the terms of the Seller Subordination Agreement, (c) Senior Subordinated Debt Documents unless permitted under the terms of the Senior Subordination Agreement or otherwise permitted under this Agreement, or (d) the Management Agreement.

SECTION 5.26FISCAL YEAR. No Company will, or will permit any Subsidiary to, change its Fiscal Year or the Fiscal Year of its Subsidiaries.

SECTION 5.27ANTI-TERRORISM LAWS. No Company shall (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224; or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224, the USA Patriot Act or any other Anti-Terrorism Law. Each Credit Party shall deliver to Lenders any certification or other evidence requested from time to time by any Lender in its sole discretion, confirming such Credit Party’s compliance with this Section.

SECTION 5.28POST CLOSING COVENANT. Borrowers covenant and agree that they shall deliver to Agent, in form and substance satisfactory to Agent, a good standing certificate (or equivalent) for BRJ by the Secretary of State of the state of New York within five (5) days of the Closing Date.

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SECTION 5.29OTHER BUSINESSES. Each Company will not, and will not permit any of its Subsidiaries to, engage in any business other than the business in which they are currently engage or any other businesses reasonably related or incidental thereto.

SECTION 5.30ACCOUNTING CHANGES. No Company will, or will permit any of its Subsidiaries to, make or permit any change in its accounting policies or financial reporting practices and procedures, except changes in accounting policies which are required or permitted by GAAP and changes in financial reporting practices and procedures which are required or permitted by GAAP or recommended by Borrowers’ accountants, in each case as to which Borrowers shall have delivered to the Agent prior to the effectiveness of any such change a report prepared by a Financial Officer of Borrowers describing such change and explaining in reasonable detail the basis therefor and effect thereof. In the event any “Accounting Changes” (as defined below) shall occur and such changes affect financial covenants, standards or terms in this Agreement, then the Credit Parties, the Lenders and the Agent agree to enter into negotiations in order to amend such provisions of this Agreement so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of the Credit Parties, shall be the same after such Accounting Changes as if such Accounting Changes had not been made, and until such time as such an amendment shall have been executed and delivered by the Borrowers, the Required Lenders and Agent (a) all financial covenants, standards and terms in this Agreement shall be calculated and/or construed as if such Accounting Changes had not been made, and (b) Borrowers shall prepare footnotes to the financial statements required to be delivered hereunder that show the differences between the financial statements required to be delivered hereunder (which reflect such Accounting Changes) and the basis for calculating financial covenant compliance (without reflecting such Accounting Changes). For the purposes of this Section 5.30, “Accounting Changes” shall mean changes in accounting principles required or permitted by Borrowers’ GAAP and implemented by Borrowers.

SECTION 5.31SPECULATIVE TRANSACTIONS. No Company will enter into any Hedge Agreement, except (a) Hedge Agreements entered into to hedge or mitigate risks to which any Company has actual exposure, and (b) Hedge Agreements entered into in order to cap, collar or exchange interest rates (from floating rate to fixed rate, from one floating rate to another floating rate or otherwise) with respect to any interest bearing liability or investment of any Company. In no event shall any Company enter into any Hedge Agreement for speculative purposes.

SECTION 5.32SUBSIDIARY RESTRICTIONS. No Company will, or permit any Subsidiary to, enter into, or be otherwise subject to, any contract or agreement (including its certificate of incorporation or formation, by-laws, limited liability company operating agreement or partnership agreement) which limits the amount of or otherwise imposes restrictions on (i) the payment of dividends or distributions by any Subsidiary to Borrowers or any other Subsidiary, (ii) the payment by any Subsidiary of any indebtedness owed to Borrowers or any other Subsidiary, (iii) the making of loans or advances by any Subsidiary to Borrowers or any other Subsidiary, (iv) the transfer by any Subsidiary of its property or assets to Borrowers or any other Subsidiary, (v) the merger or consolidation of any Subsidiary with or into Borrowers or any other Subsidiary, or (vi) the guaranty by any Subsidiary of Borrowers’ indebtedness under the Loan Documents; provided that (a) the foregoing shall not apply to restrictions and conditions imposed by law or by the Loan Documents, (b) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary or asset pending such sale, provided such restrictions and conditions apply only to the Subsidiary or asset that is to be sold and such sale is permitted hereunder, (c) clause (iv) of the foregoing shall not apply to customary provisions in leases, licenses and other contracts restricting the assignment, licensing, subletting, leasing thereof or otherwise granting a Lien on the assets subject thereto, (d) the foregoing shall not apply to restrictions set forth in the Indebtedness described in paragraph 5.8(b), (e) the foregoing shall not apply to customary provisions in joint venture agreements expressly permitted hereunder and applicable solely to such joint venture, (f) the foregoing shall not apply to restrictions contained in any non-material agreement in effect at the time a Person becomes a Subsidiary of Borrowers so long as such agreement was not entered into in contemplation of such Person becoming a Subsidiary of Borrowers, (g) the foregoing shall not apply to restrictions that arise in connection with cash or other deposits permitted hereunder and limited to such cash or deposit, and (h) the foregoing shall not apply to restrictions on cash earnest money deposits in favor of sellers in connection with acquisitions not prohibited hereunder.

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SECTION 5.33[RESERVED].

SECTION 5.34PAYMENT LIMITATIONS. No Company will enter into or become subject to any contractual restriction on the payment of the Secured Debt.

ARTICLE VI. SECURITY

SECTION 6.1SECURITY INTEREST IN COLLATERAL. In consideration of and as security for the full and complete payment of all of the Secured Debt, each Credit Party hereby creates and provides in favor of Agent for the benefit of the Lenders, and grants to Agent for the benefit of the Lenders, a security interest in and an assignment of the Collateral of such Credit Party. The “Collateral” of any Credit Party shall mean, collectively,

(a)       all Accounts, all Chattel Paper, all Deposit Accounts, all Documents, all Equipment, all fixtures, all General Intangibles, all Instruments, all Inventory, all Investment Property, all letters of credit, all Letter of Credit Rights, all Receivables, all Intellectual Property, all Assigned Contracts and all Supporting Obligations in which such Credit Party now has or hereafter acquires any rights or any power to transfer rights;

(b)       all Commercial Tort Claims in which such Credit Party now has rights or any power to transfer rights and which are described on Schedule 7.4 hereto, as may be amended from time to time;

(c)       all property, tangible or intangible, in which such Credit Party now has or hereafter acquires any rights or any power to transfer rights and which now or hereafter is in the control (by Document or otherwise) or possession of the Lenders and Agent or any of them or is owed by the Lenders and Agent or any of them to such Credit Party, including, without limitation, any Cash Collateral Account and all other Deposit Accounts; and

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(d)       all accessions to and Products of all or any part of the goods hereinbefore described, all replacements and substitutions for, and all additions to, and all Proceeds of, all or any part of the property described in the foregoing clauses (a), (b), and (c) or any other accessions, Products, replacements, substitutions, additions, or Proceeds in which such Credit Party now has or hereafter acquires any rights or any power to transfer rights.

Notwithstanding anything herein to the contrary, in no event shall the Lien granted under this Section 6.1 attach to or be deemed to be created in any Excluded Property.

SECTION 6.2AFTER ACQUIRED PROPERTY. As to any property that would be included among the Collateral of any Credit Party on the date hereof but for the fact that such property does not presently exist or the fact that such Credit Party does not presently have any rights in such property or any power to transfer rights therein, such property shall be included among the Collateral of such Credit Party, and Agent’s security interest in such property shall automatically attach thereto, immediately when such property comes into existence and such Credit Party acquires any rights therein or any rights to transfer rights therein, in each case without the making or doing of any further or other act or thing. If, at any time after the date hereof, any Credit Party shall acquire any rights or any power to transfer rights in any Commercial Tort Claim, or if the UCC shall be amended to include within its scope any property that, prior to giving effect to such amendment, would not be included among the Collateral of such Credit Party, then, and in each such case, such Credit Party shall forthwith notify Agent and shall execute and deliver to Agent (or otherwise authenticate if Agent shall require) such security agreements and other writings or records as Agent shall require, each in form and substance reasonably satisfactory to Agent, for the purpose of granting in favor of Agent, for the benefit of Agent and the Lenders, as security for the Secured Debt, a perfected first priority security interest in and assignment of such Commercial Tort Claim or other property and all proceeds thereof, free and clear of any Lien other than any in favor of Agent. Upon the granting of such security interest, such Commercial Tort Claim or other property, as the case may be, and all Proceeds thereof shall be deemed to be included among the Collateral of such Credit Party. No Credit Party shall open any Commodity Account, Deposit Account, or Securities Account, other than any petty cash accounts, payroll accounts, or trust accounts, unless, prior to or concurrently with the opening thereof, such Credit Party and the Person by which or with which such Commodity Account, Deposit Account or Securities Account, as the case may be, is to be maintained shall have entered into a control agreement in form and substance satisfactory to Agent and the Lenders.

SECTION 6.3COLLECTIONS AND RECEIPT OF PROCEEDS BY THE CREDIT PARTIES. Prior to the exercise by Agent and the Lenders of their rights under Article IX of this Agreement, both (i) the lawful collection and enforcement of all of each Credit Party’s Receivables, and (ii) the lawful receipt and retention by each Credit Party of all Proceeds of all of such Credit Party’s Receivables and Inventory shall be as the agent of the Lenders. Following notice from Agent to a Borrower after the occurrence and during the continuance of an Event of Default, a Cash Collateral Account shall be opened by each Credit Party at the main office of Agent and substantially all such lawful collections of such Credit Party’s Receivables and such Proceeds of such Credit Party’s Receivables and Inventory shall be remitted daily by such Credit Party to Agent in the form in which they are received by such Credit Party, either by mailing or by delivering such collections and Proceeds to Agent, appropriately endorsed for deposit in the Cash Collateral Account. No Credit Party shall commingle such collections or Proceeds with any of such Credit Party’s other funds or property, but shall hold such collections and Proceeds separate and apart therefrom upon an express trust for Agent for the benefit of the Lenders. Agent may, in its sole discretion, at any time and from time to time, apply all or any portion of the account balance in the Cash Collateral Account as a credit against the Secured Debt in accordance with the provisions of Section 2.3(b) hereof. If, as a result of collections or Proceeds, a credit balance exists in favor of the a Credit Party and no Event of Default has occurred and is continuing, such credit balance shall be disbursed on a daily basis to an interest bearing Deposit Account reasonably acceptable to Agent maintained by such Credit Party which shall be subject to a control agreement consistent with the provisions of this sentence, in form and substance satisfactory to the Agent, but prior to the occurrence of an Event of Default which is continuing, the funds within which may be withdrawn by such Credit Party. For the avoidance of doubt, after the occurrence of an Event of Default which is continuing, any funds then in such account shall not be subject to withdrawal by any Credit Party but shall be remitted to the Cash Collateral Account on a daily basis for application on a daily basis to the Secured Debt in accordance with Section 2.3(b) hereof. If any remittance shall be dishonored, or if, upon final payment, any claim with respect thereto shall be made against Agent on its warranties of collection, Agent may charge the amount of such item against the Cash Collateral Account or any other Deposit Account maintained by a Credit Party with Agent or with any other Lender, and, in any event, retain the same and such Credit Party’s interest therein as additional security for the Secured Debt. Agent may, in its sole discretion, at any time and from time to time, release funds from the Cash Collateral Account to the applicable Credit Party for use in such Credit Party’s business. The balance in the Cash Collateral Account may be withdrawn by the Credit Parties upon termination of this Agreement and payment in full of all of the Secured Debt. Following notice from Agent to a Borrower after the occurrence and during the continuance of an Event of Default, each Credit Party shall cause substantially all remittances representing collections and Proceeds of Collateral to be mailed to a lock box selected by Agent, to which Agent shall have access for the processing of such items in accordance with the provisions, terms and conditions of Agent’s customary lock box agreement.

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Agent shall at all times have the rights and remedies of a secured party under the UCC, in addition to the rights and remedies of a secured party provided elsewhere within this Agreement, in any other writing executed by any Credit Party or otherwise provided by law. Agent, or Agent’s designated agent, is hereby constituted and appointed each Credit Party’s attorney-in-fact with authority and power to endorse any and all instruments, documents, and chattel paper upon such Credit Party’s failure to do so. Such authority and power, being coupled with an interest, shall be (a) irrevocable until all of the Secured Debt is paid, (b) exercisable by Agent at any time and without any request upon any Credit Party by Agent to so endorse, and (c) exercisable in Agent’s name or any Credit Party’s name. Each Credit Party hereby waives presentment, demand, notice of dishonor, protest, notice of protest, and any and all other similar notices with respect thereto, regardless of the form of any endorsement thereof. Neither Agent nor the Lenders shall be bound or obligated to take any action to preserve any rights therein against prior parties thereto.

SECTION 6.4COLLECTIONS AND RECEIPT OF PROCEEDS BY AGENT. Each Credit Party hereby constitutes and appoints Agent, or Agent’s designated agent, as such Credit Party’s attorney-in-fact to exercise, at any time, all or any of the following powers which, being coupled with an interest, shall be irrevocable until the complete and full payment of all of the Secured Debt:

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(a)       to receive, retain, acquire, take, endorse, assign, deliver, accept, and deposit, in Agent’s name or such Credit Party’s name, any and all of such Credit Party’s cash, instruments, chattel paper, documents, Proceeds of Receivables, Proceeds of Inventory, collection of Receivables, and any other writings relating to any of the Collateral;

(b)       after the occurrence of an Event of Default and during the continuance thereof, to transmit to Account Debtors, on any or all of such Credit Party’s Receivables, notice of assignment to Agent for the benefit of the Lenders thereof and Agent’s, for the benefit of the Lenders, security interest therein and to request from such Account Debtors at any time, in Agent’s name or in such Credit Party’s name, information concerning such Credit Party’s Receivables and the amounts owing thereon;

(c)       after the occurrence of an Event of Default and during the continuance thereof, to transmit to purchasers of any or all of such Credit Party’s Inventory, notice of Agent’s security interest therein, and to request from such purchasers at any time, in Agent’s name or in such Credit Party’s name, information concerning such Credit Party’s Inventory and the amounts owing thereon by such purchasers;

(d)       after the occurrence of an Event of Default and during the continuance thereof, to notify and require Account Debtors on such Credit Party’s Receivables and purchasers of such Credit Party’s Inventory to make payment of their indebtedness directly to Agent;

(e)       after the occurrence of an Event of Default and during the continuance thereof, to take or bring, in Agent’s name or such Credit Party’s name, all steps, actions, suits, or proceedings deemed by Agent necessary or desirable to effect the receipt, enforcement, and collection of the Collateral; and

(f)       to accept all collections in any form relating to the Collateral, including remittances which may reflect deductions, and to deposit the same, into such Credit Party’s Cash Collateral Account or, at the option of Agent, to apply them as a payment against the Secured Debt in accordance with Section 2.3(b) hereof.

SECTION 6.5USE OF INVENTORY AND EQUIPMENT. Unless otherwise prohibited by Agent and the Required Lenders after an Event of Default shall have occurred and be continuing, each Credit Party may (a) retain possession of and use its Inventory and Equipment in any lawful manner not inconsistent with this Agreement or with the terms, conditions, or provisions of any policy of insurance thereon; (b) sell or lease its property consisting solely of Inventory in the ordinary course of business and other property as expressly permitted under this Agreement; provided, however, that a sale or lease in the ordinary course of business does not include a transfer in partial or total satisfaction of an Indebtedness, except for transfers in satisfaction of partial or total purchase money prepayments by a buyer in the ordinary course of such Credit Party’s business; and (c) use and consume any raw materials or supplies, the use and consumption of which are necessary or desirable in order to carry on such Credit Party’s business.

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ARTICLE VII. REPRESENTATIONS AND WARRANTIES 

Each Credit Party hereby represents and warrants, as applicable, that the statements set forth in this Article VII are true, correct and complete.

SECTION 7.1EXISTENCE; SUBSIDIARIES; FOREIGN QUALIFICATION; CAPITALIZATION. Each Company is a corporation or limited liability company duly organized, validly existing, and in good standing (or good standing equivalent) under the laws of its state of organization and as of the date hereof is duly qualified and authorized to do business and is in good standing (or good standing equivalent) as a foreign organization in the jurisdictions set forth opposite its name on Schedule 7.1 hereto, which are all of the states or jurisdictions where the character of its property or its business activities makes such qualification necessary (with the exception of the state of New York, for which Borrowers shall provide such qualification within five (5) days of the Closing Date), except where the failure to so qualify will not cause or result in a Material Adverse Effect. Except as set forth in Schedule 7.1 hereto, no Company has, at any time during the period of five (5) consecutive years ending on the date of this Agreement, used or done business under, or been known among creditors by, any name other than the name of such Company set forth in such Company’s Formation Documents. Schedule 7.1 sets forth as of the Closing Date all fictitious names and “DBAs” utilized by the Companies as of the date hereof. Schedule 7.1 hereto sets forth, as of the Closing Date, each Company, each Person that is an owner of such Company’s Capital Stock, its name as set forth in its Formation Documents, its state of organization, its organizational identification number (or if none a statement to that effect), its relationship to Borrowers, including the percentage of Capital Stock owned by a Company or the percentage of Capital Stock of a Company owned by it and its principal place of business. As of the date hereof, none of the Credit Parties have outstanding any interests or securities convertible or exchangeable for any of its Capital Stock or containing any profit participation features, and does not have outstanding any rights or options to subscribe for or to purchase its Capital Stock or any stock appreciation rights or phantom stock plans, except as set forth on Schedule 7.1. Schedule 7.1 accurately sets forth the following, as of the date hereof, with respect to all outstanding options and rights to acquire any of the Credit Parties’ Capital Stock: (i) the total number of shares (or equivalent) issuable upon exercise of all outstanding options; (ii) the range of exercise prices for all such outstanding options; (iii) the number of shares (or equivalent) issuable, the exercise price and the expiration date for each such outstanding option; and (iv) with respect to all outstanding options, warrants and rights to acquire such Credit Party’s Capital Stock, the holder, the number of shares (or equivalent) covered, the exercise price and the expiration date. None of the Credit Parties are subject to any obligation (contingent or otherwise) to repurchase, redeem, retire or otherwise acquire any Capital Stock or any warrants, options or other rights to acquire its Capital Stock, except as set forth on Schedule 7.1. None of the Credit Parties have violated any applicable federal or state securities laws in connection with the offer, sale or issuance of any of its Capital Stock.

SECTION 7.2AUTHORITY. Each Company has the corporate or equivalent right and power and is duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which each Company is a party are the valid and binding obligations of such Company, enforceable against such Company in accordance with their respective terms, subject to the effects of` (a) bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights generally and (b) general equitable principles (regardless of whether enforcement is sought in equity or at law). The execution, delivery and performance of the Loan Documents will not conflict with nor result in any breach in any of the provisions of, or constitute a default under, or result in the creation of any Lien (other than the Permitted Liens) upon any assets or property of any Company under the provisions of, such Company’s Organizational Documents or any material agreement.

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SECTION 7.3COMPLIANCE WITH LAWS. Except as would not reasonably be expected to result in a Material Adverse Effect, each Company and, as of the Closing Date, BRJ Seller:

(a)       holds all permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from federal, state, local, and foreign governmental and regulatory bodies necessary for the conduct of its business and is in compliance with all applicable laws relating thereto, except where the failure to obtain such permits, certificates, licenses, orders and registrations could not reasonably be expected to result in a Material Adverse Effect;

(b)       is in compliance with all federal, state, local, or foreign applicable statutes, rules, regulations, and orders including, without limitation, those relating to environmental protection, occupational safety and health, and equal employment practices; and

(c)       is not in violation of or in default under any agreement to which it is a party or by which its assets are subject or bound.

SECTION 7.4LITIGATION AND ADMINISTRATIVE PROCEEDINGS. No Company has any rights in or any power to transfer rights in any Commercial Tort Claim except for any such claim described on Schedule 7.4 to this Agreement or in any security agreement executed and delivered to Agent by such Company after the date of this Agreement pursuant to this Agreement or another Related Writing. Except (i) as of the Closing Date, as disclosed on Schedule 7.4 hereto, as to any of which, if determined adversely, could not reasonably be expected to have a Material Adverse Effect, and (ii) subsequent to the Closing, as could not reasonably be expected to result in a Material Adverse Effect, there are (a) no lawsuits, actions, investigations, or other proceedings pending or, to the knowledge of each Company, threatened in writing against any Company or, as of the Closing Date, BRJ Seller, or in respect of which any Company or, as of the Closing Date, BRJ Seller, may have any liability, in any court or before any governmental authority, arbitration board, or other tribunal, (b) no orders, writs, injunctions, judgments, or decrees of any court or government agency or instrumentality to which any Company or, as of the Closing Date, BRJ Seller, is a party or by which the property or assets of any Company or, as of the Closing Date, BRJ Seller, are bound, and (c) no grievances, disputes, or controversies outstanding with any union or other organization of the employees of any Company or, as of the Closing Date, BRJ Seller, or, to the knowledge of each Company, threats of work stoppage, strike, or pending demands for collective bargaining.

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SECTION 7.5LOCATION. Schedule 7.5 hereto sets forth, for each Company and BRJ Seller as of the date hereof:

(a)       the location of its chief executive offices existing during the period of four (4) consecutive months ending upon and including the date of this Agreement;

(b)       each location at which any Company or BRJ Seller has maintained, at any time during the period of five (5) consecutive years ending upon and including the date of this Agreement, a place of business, and each location at which any Credit Party has kept any goods or any records concerning its Receivables during such period; and

(c)       the name and address of each Person (other than a Company) having possession of any goods of any Company, and a description of the goods in such Person’s possession.

Each Person set forth in Schedule 7.5 hereto pursuant to clause (c) of this Section 7.5 has acknowledged in writing, in form and substance reasonably satisfactory to Agent, that among other things, it holds possession of such Company’s goods for the sole benefit of Agent, except to the extent that obtaining such acknowledgement has been waived by Agent.

SECTION 7.6TITLE TO ASSETS. Each Company has good title to and ownership of all property it purports to own, which property is free and clear of all Liens, except Permitted Liens and Liens securing the Senior Subordinated Debt.

SECTION 7.7LIENS AND SECURITY INTERESTS. On and after the Closing Date, except for (i) the Permitted Liens, (ii) Liens securing the Senior Subordinated Debt so long as such Liens are in compliance with the terms of the Senior Subordination Agreement, (iii) any agreement relating to Indebtedness of the type permitted by Section 5.8(b) hereof and (iv) any lease, license, contract, property rights or agreement of the type permitted by the last paragraph of Section 6.1, (a) there is no financing statement outstanding covering any personal property of any Company; (b) there is no mortgage outstanding covering any real property of any Company; (c) no real or personal property of any Company is subject to any security interest or Lien of any kind; and (d) Agent, for the benefit of the Lenders, has a valid and enforceable first priority security interest in the Collateral. No Company has entered into any contract or agreement that exists on or after the Closing Date that would prohibit Agent or the Lenders from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of any Company other than contracts and agreements (x) in respect of Capital Leases, (y) resulting in purchase money security interests and (z) in respect of the lease or licensing of intellectual property and other rights permitted hereunder.

SECTION 7.8INVESTMENT ACCOUNTS. Schedule 7.8 hereof sets forth, as of the date hereof, for each Company, the name of each Person by which there is maintained, or with which there is maintained, any Commodity Account, Deposit Account, or Securities Account in which such Company has rights or the power to transfer rights and the title and account number of each such Commodity Account, Deposit Account or Securities Account.

SECTION 7.9REAL PROPERTIES. Schedule 7.9 hereof sets forth, as of the date hereof the address or tax parcel number of each parcel of real property owned or leased by any Company. Each Company further represents and warrants that with respect to each parcel of such real property, except as would not reasonably be expected to result in a Material Adverse Effect,

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(a)       such parcel has all required public utilities, and means of access (both physical and legal) between such parcel and public highways;

(b)       the use and accessory uses of such parcel do not violate (i) any laws, ordinances or regulations (including subdivision, zoning, building, environmental protection and wetland protection laws), or (ii) any building permits, restrictions of record, or agreements affecting such parcel or any part thereof;

(c)       no zoning authorizations, approvals or variances, and no other right to construct or use of such parcel is to any extent dependent upon or related to any real estate other than another parcel of a Company’s real property;

(d)       all consents, licenses and permits and all other authorizations or approvals required for operation of such parcel as contemplated have been obtained on and as of the Closing Date, and all laws relating to the operation of such improvements have been complied with;

(e)       the lawful use and operation of such parcel does not require any variances or special use permits;

(f)       such parcel is taxed separately without regard to any other property, and for all purposes such parcel may be mortgaged, conveyed and otherwise dealt with as an independent parcel;

(g)       no Company has entered into any leases, subleases or other arrangements for occupancy of space within such parcel, other than the leases described in Schedule 7.9 hereof, and Borrowers has delivered to Agent a true, correct and complete copy of each lease, sublease, or other arrangement so described;

(h)       each lease, sublease, or other arrangement in Schedule 7.9 hereof, is in full force and effect, and, except as disclosed in Schedule 7.9 hereof, or as otherwise disclosed to Agent in writing after the date hereof, there is not continuing any default on the part of any such each lease, sublease, or other arrangement; and

(i)       to any Company’s knowledge, no building or other improvements encroach upon any property line, building line, setback line, side yard line or any recorded or visible easement (or other easement of which any Company is aware or has reason to believe may exist) with respect to such parcel, except as shown in the survey delivered in connection herewith.

SECTION 7.10LETTERS OF CREDIT. The Companies do not have, as of the date hereof, any letters of credit under which any Company is a beneficiary.

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SECTION 7.11TAX RETURNS. All federal, state and material local tax returns and other material reports required by law to be filed in respect of the income, business, properties and employees of each Company and BRJ Seller have been filed and all taxes, assessments, fees and other governmental charges that are shown thereon to be due and payable have been paid, except as otherwise permitted herein. The provision for taxes on the books of each Company is adequate in all material respects for all years not closed by applicable statutes and for the current fiscal year.

SECTION 7.12ENVIRONMENTAL LAWS. Each Company and, as of the Closing Date, BRJ Seller, is in compliance with any and all Environmental Laws, including, without limitation, all Environmental Laws in all jurisdictions in which any Company and, as of the Closing Date, BRJ Seller, owns or operates, or has owned or operated, a facility or site, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise except where the failure to comply with such Environmental Laws does not and would not reasonably be expected to cause or result in a Material Adverse Effect. No litigation or proceeding arising under, relating to or in connection with any Environmental Law is pending or, to the knowledge of each Company, threatened in writing, against any Company or, as of the Closing Date, BRJ Seller, that relates to, any real property or leased property in which any Company or, as of the Closing Date, BRJ Seller, holds or has held an interest except for such litigation or proceedings that do not and would not reasonably be expected to cause or result in a Material Adverse Effect. No release, threatened release or disposal of hazardous substances, hazardous waste, solid waste or other substances or wastes is occurring, or has occurred (other than those that are currently being cleaned up in accordance with Environmental Laws), on, under or to any real property in which any Company or, as of the Closing Date, BRJ Seller, holds any interest in violation of any Environmental Law except for such releases or disposals that do not and would not reasonably be expected to cause or result in a Material Adverse Effect. As used in this Section, “litigation or proceeding” means any demand, claim, notice, suit, suit in equity, action, administrative action, investigation or inquiry whether brought by any governmental authority, private Person or otherwise.

SECTION 7.13CONTINUED BUSINESS. Except for the termination of business relationships upon the completion of services performed by any Company in the ordinary course of business, there exists no actual, pending, or, to any Credit Party’s knowledge, any threatened termination, cancellation or limitation of, or any material modification or material change in the business relationship of any Company and any material customer or material supplier, or any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate, are material to the business of any Company, and, to any Credit Party’s knowledge, there exists no present condition or state of facts or circumstances that would materially affect adversely any Company in any respect or prevent a Company from conducting such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted.

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SECTION 7.14EMPLOYEE BENEFITS PLANS. Schedule 7.14 hereto identifies as of the date hereof each ERISA Plan sponsored or maintained by a Company or BRJ Seller. Except as would not reasonably be expected to have a Material Adverse Effect: (a) no ERISA Event has occurred or is expected to occur with respect to an ERISA Plan; (b) payment has been made of all amounts which a Controlled Group member is required, under applicable law or under the governing documents, to have been paid as a contribution to or a benefit under each ERISA Plan; (c) the liability of each Controlled Group member with respect to each ERISA Plan has been fully funded based upon reasonable and proper actuarial assumptions, has been fully insured, or has been fully reserved for on its financial statements to the extent required by GAAP; and (d) to our knowledge, no changes have occurred or are expected to occur that would cause an increase in the cost of providing benefits under any ERISA Plan. Except as would not reasonably be expected to have a Material Adverse Effect, with respect to each ERISA Plan that is intended to be qualified under Code Section 401(a): (i) there has been no non-compliance by the ERISA Plan and any associated trust with the applicable requirements of Code Section 401(a), (ii) the ERISA Plan and any associated trust have been amended to comply with all such requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the “remedial amendment period” available under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely), (iii) the ERISA Plan and any associated trust have received a favorable determination letter from the Internal Revenue Service stating that the ERISA Plan qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described “remedial amendment period” has not yet expired, (iv) the ERISA Plan currently satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that may be made within the above-described “remedial amendment period”, and (v) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972. Except as would not reasonably be expected to have a Material Adverse Effect, with respect to any Pension Plan, the “accumulated benefit obligation” of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, “Employers’ Accounting for Pensions”) does not exceed the fair market value of Pension Plan assets. Except as would not reasonably be expected to have a Material Adverse Effect, no Controlled Group Member has or has had in the past, an obligation to contribute to a Multiemployer Plan.

SECTION 7.15CONSENTS OR APPROVALS. No material consent, approval or authorization of, or filing, registration or qualification with, any governmental authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed.

SECTION 7.16SOLVENCY. Each Credit Party has received consideration that is the reasonable equivalent value of the obligations and liabilities that such Credit Party has incurred to the Lenders. No Credit Party is insolvent as defined in any applicable state or federal statute, nor will Borrowers be rendered insolvent by the execution and delivery of the Loan Documents to Agent and the Lenders. No Credit Party is engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to Agent and the Lenders incurred hereunder. No Credit Party intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature.

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SECTION 7.17FINANCIAL STATEMENTS. The December 31, 2015, reviewed Consolidated financial statements of the BRJ Seller and the June 30, 2016, internally prepared Consolidated financial statements of the BRJ Seller, furnished to Agent and the Lenders, are true and complete, have been prepared in accordance with GAAP, and fairly present in all material respects the Companies’ financial condition as of the dates of such financial statements and the results of their operations for the periods then ending. Since the dates of such statements, there has been no Material Adverse Effect nor any change in any Company’s accounting procedures (except as permitted by Section 5.30 hereof).

SECTION 7.18REGULATIONS. No Company is engaged principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any “margin stock” (within the meaning of Regulation U of the Board of Governors of the Federal Reserve System of the United States of America). Neither the granting of any Loan (or any conversion thereof) nor the use of the proceeds of any Loan will violate, or be inconsistent with, the provisions of Regulation U or X of said Board of Governors.

SECTION 7.19MATERIAL AGREEMENTS. Except as disclosed on Schedule 7.19 hereto, no Company is a party to any contract, agreement, understanding, or arrangement that if violated, breached, or terminated for any reason, would have or would be reasonably expected to have a Material Adverse Effect.

SECTION 7.20INTELLECTUAL PROPERTY. Each Company owns, possesses, or has the right to use all of the material Intellectual Property necessary for the conduct of its business without, to any Company’s knowledge, any conflict with the rights of others. Schedule 7.20 hereto provides, as of the Closing Date, a complete and accurate list of all registered Intellectual Property owned by each Company, showing as of the date hereof the jurisdiction in which registered, the registration number, the date of registration and the expiration date.

SECTION 7.21INSURANCE. Each Company maintains insurance as required by Section 5.1 hereof. Schedule 7.21 hereto sets forth, as of the Closing Date, all insurance carried by the Companies, setting forth in detail the amount and type of such insurance.

SECTION 7.22ACCURATE AND COMPLETE STATEMENTS. Neither the Loan Documents nor any written statement made by any Company in connection with any of the Loan Documents (other than any financial projections or estimates or other forward looking statements as to which no representation or warranty is made or given) contains any untrue statement of a material fact or omits a material fact necessary to make the statements contained therein or in the Loan Documents not misleading. After due inquiry by each Credit Party, there is no known fact that any Company has not disclosed to Agent and the Lenders that has or would have a Material Adverse Effect. The representations and warranties made by the Credit Parties in the BRJ Acquisition Documents and in any other agreements, instruments or certificates delivered pursuant hereto or thereto, are true and correct in all material respects (except where any such representation and warranty is stated as being true only as of a specific date, in which case such representation and warranty was true and correct in all material respects on such date).

SECTION 7.23DEFAULTS. No Default or Event of Default exists hereunder, nor will any begin to exist immediately after the execution and delivery hereof.

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SECTION 7.24[RESERVED].

SECTION 7.25ANTI-TERRORISM LAWS. No Credit Party nor any Affiliate of any Credit Party, is in violation of any Anti-Terrorism Law or engages in or conspires to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law.

SECTION 7.26EXECUTIVE ORDER NO. 13224. No Credit Party, nor any Affiliate of any Credit Party, or their respective agents acting or benefiting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder, is any of the following (each a “Blocked Person”):

(i)         a Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

(ii)        a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, the Executive Order No. 13224;

(iii)       a Person or entity with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law;

(iv)       a Person or entity that commits, threatens or conspires to commit or supports “terrorism” as defined in the Executive Order No. 13224;

(v)        a Person or entity that is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list; or

(vi)       a person or entity who is affiliated or associated with a person or entity listed above.

No Credit Party nor to the knowledge of any Credit Party, any of its agents acting in any capacity in connection with the Loans, Letters of Credit or other transactions hereunder (i) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (ii) deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to the Executive Order No. 13224.

ARTICLE VIII. EVENTS OF DEFAULT 

Each of the following shall constitute an Event of Default hereunder:

SECTION 8.1PAYMENTS. If any of the Companies shall fail to pay (a) any principal of any Loan (including, without limitation, pursuant to the Notes, Section 2.1 hereof and Section 2.7 hereof) when the same shall become due and payable within five (5) Business Days of the date that such payment is due, or (b) any interest on any Loans or any other payment required to be made by the Companies to the Agent or the Lenders under any Loan Document within five (5) Business Days of the date that such payment is due.

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SECTION 8.2SPECIAL COVENANTS. If any Company or any Obligor shall fail or omit to perform and observe Sections 5.1, 5.3, 5.7, 5.8, 5.9, 5.10, 5.11, 5.12, 5.13, 5.14, 5.17, 5.18, 5.19, 5.20, 5.21, 5.25 , 5.26, 5.27, 5.29, 5.31, 5.32, 5.34 and 6.3 hereof.

SECTION 8.3OTHER COVENANTS. If any Company or any Obligor shall fail or omit to perform and observe any agreement or other provision (other than those referred to in this Article VIII) contained or referred to in this Agreement or any Related Writing that is on such Company’s or Obligor’s part, as the case may be, to be complied with, and such Default shall not have been fully corrected within 30 days after the earlier to occur of (a) the date an executive officer of a Company becomes aware or should have become aware of such Default, or (b) the giving of written notice thereof to Borrowers by Agent or any Lender that the specified Default is to be remedied.

SECTION 8.4REPRESENTATIONS AND WARRANTIES. If any representation, warranty or statement made in or pursuant to this Agreement or any Loan Document or any other material written factual information (excluding any projections or forward looking information) furnished by any Company or any Obligor to the Lenders or any thereof or any other holder of any Note, shall be false or erroneous in any material respect when made or deemed made (without duplication of any materiality qualifiers).

SECTION 8.5CROSS DEFAULT. If (a) any Company or any Obligor shall default in the payment of principal or interest due and owing upon any other obligation for borrowed money in excess of the aggregate, for all such obligations for all such Companies and Obligors, of $250,000 (other than the Seller Subordinated Debt Documents and the Senior Subordinated Debt Documents) beyond any period of grace provided with respect thereto or in the performance or observance of any other agreement, term or condition contained in any agreement under which such obligation is created, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity, or (b) any default by any Company shall have occurred under the BRJ Acquisition Documents, the Seller Subordinated Debt Documents or the Senior Subordinated Debt Documents.

SECTION 8.6ERISA DEFAULT. The occurrence of one or more ERISA Events that (a) would reasonably be expected to have a Material Adverse Effect, or (b) results in a Lien in excess of $250,000 on any of the assets of any Obligor.

SECTION 8.7CHANGE IN CONTROL. If any Change in Control shall occur.

SECTION 8.8MONEY JUDGMENT. A final judgment or order for the payment of money not covered by insurance shall be rendered against any Company or any Obligor by a court of competent jurisdiction, that remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of 30 days after the date on which the right to appeal has expired, provided that the aggregate of all such judgments for all the Obligors exceeds $250,000 at any time outstanding.

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SECTION 8.9VALIDITY OF LOAN DOCUMENTS. (a) Any material provision, in the reasonable judgment of Agent, of any Loan Document shall at any time for any reason cease to be valid and binding and enforceable against Borrowers, any Credit Party or any other Obligor; (b) the validity, binding effect or enforceability of any Loan Document against Borrowers, any Credit Party or any Obligor shall be contested by any Company or any other Obligor; (c) Borrowers, any Credit Party or any other Obligor shall deny that it has any or further liability or obligation thereunder; (d) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Agent and the Lenders the benefits purported to be created thereby; or (e) any Lien purported to be created with respect to the Collateral shall be asserted by any Company not to be, a valid and perfected Lien on the Collateral and of the same effect and priority purported to be created thereby.

SECTION 8.10NONMONETARY JUDGMENTS. Any nonmonetary judgment or order shall be rendered against any Obligor that would have a Material Adverse Effect and either (i) enforcement proceedings shall have been commenced by any person upon such judgment or order, or (ii) there shall be any period of 60 consecutive days during which a stay of enforcement of such judgment or order, by reason of a pending appeal or otherwise, shall not be in effect.

SECTION 8.11ENCUMBRANCES OF SECURITY DOCUMENTS. Except as specifically agreed to in writing by the Agent, any applicable Loan Document for any reason (other than pursuant to the terms thereof) ceases to create a valid and perfected first priority Lien (subject to Permitted Liens) in any of the Collateral.

SECTION 8.12INTENTIONALLY OMITTED.

SECTION 8.13SOLVENCY. If any Obligor shall (a) discontinue its operations other than as permitted hereunder, (b) generally not pay its debts as such debts become due, (c) make a general assignment for the benefit of creditors, (d) apply for or consent to the appointment of a receiver, a custodian, a trustee, an interim trustee or liquidator of all or a substantial part of its assets, (e) be adjudicated a debtor or have entered against it an order for relief under Title 11 of the United States Code, as the same may be amended from time to time, (f) file a voluntary petition in bankruptcy or file a petition or an answer seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law (whether federal or state) relating to relief of debtors, or admit (by answer, by default or otherwise) the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal or state) relating to relief of debtors, (g) suffer or permit to continue unstayed and in effect for 60 consecutive days any judgment, decree or order entered by a court of competent jurisdiction, that approves a petition seeking its reorganization or appoints a receiver, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets, or (h) take, or omit to take, any action in order thereby to effect any of the foregoing.

SECTION 8.14MATERIAL ADVERSE EFFECT. A Material Adverse Effect has occurred in the reasonable opinion of Agent.

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ARTICLE IX. REMEDIES UPON DEFAULT 

Notwithstanding any contrary provision or inference herein or elsewhere,

SECTION 9.1OPTIONAL DEFAULTS. If any Event of Default referred to in Article VIII (other than Section 8.13) hereof shall occur, the Required Lenders shall have the right, in their or its discretion, by directing Agent, on behalf of the Lenders, to give written notice to any Borrower, to:

(a)       terminate the Commitments and the credits hereby established, if not previously terminated, and, immediately upon such election, the obligations of the Lenders, and each thereof, to make any further Loan and the obligation of Agent to issue any Letter of Credit hereunder immediately shall be terminated, and/or

(b)       accelerate the maturity of all of the Secured Debt (if the Secured Debt is not already due and payable), whereupon all of the Secured Debt shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by each Credit Party.

SECTION 9.2AUTOMATIC DEFAULTS. If any Event of Default referred to in Section 8.13 hereof shall occur:

(a)       all of the Commitments and the credits hereby established shall automatically and immediately terminate, if not previously terminated, and no Lender thereafter shall be under any obligation to grant any further Loan, nor shall Agent be obligated to issue any Letter of Credit hereunder, and

(b)       the principal of and interest then outstanding on all Notes, and all of the Secured Debt to the Lenders, shall thereupon become and thereafter be immediately due and payable in full (if the Secured Debt is not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by each Credit Party.

SECTION 9.3LETTERS OF CREDIT. If the maturity of the Loans is accelerated pursuant to Section 9.1 or 9.2 hereof or demand is otherwise made hereunder, Borrowers shall immediately deposit with Agent, as security for Borrowers’, any Credit Party’s and any other Obligor’s obligations to reimburse Agent and the Lenders for any then outstanding Letters of Credit, cash equal to 105% of the sum of the aggregate undrawn balance of any then outstanding Letters of Credit. Agent and the Lenders are hereby authorized, at their option, to deduct any and all such amounts from any deposit balances then owing by any Lender to or for the credit or account of any Company, as security for Borrowers’, any Credit Party’s and any other Obligor’s obligations to reimburse Agent and the Lenders for any then outstanding Letters of Credit.

SECTION 9.4OFFSETS. If there shall occur or exist any Event of Default, each Lender shall have the right at any time to set off against, and to appropriate and apply toward the payment of, any and all Secured Debt then owing by any Credit Party to that Lender (including, without limitation, any participation purchased or to be purchased pursuant to Section 9.5 hereof), whether or not the same shall then have matured, any and all deposit balances and all other Indebtedness then held or owing by that Lender to or for the credit or account of any Credit Party, all without notice to or demand upon any Credit Party or any other Person, all such notices and demands being hereby expressly waived by each Credit Party. Any such amounts set off by such Lender shall be delivered to the Agent to be applied in accordance with Section 2.3(b) hereof.

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SECTION 9.5EQUALIZATION PROVISION. Each Lender agrees with the other Lenders that if it, at any time, shall obtain any Advantage over the other applicable Lenders or any thereof in respect of the Applicable Debt (except under Article III hereof), it shall purchase from the other applicable Lenders, for cash and at par, such additional participation in the Debt as shall be necessary to nullify the Advantage. If any such Advantage resulting in the purchase of an additional participation as aforesaid shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (but without interest unless the Lender receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Lender) Ratably to the extent of the recovery. Each Lender further agrees with the other Lenders that if it at any time shall receive any payment for or on behalf of Borrowers on any Indebtedness owing by Borrowers to that Lender by reason of offset of any deposit or other Indebtedness, it will apply such payment first to any and all Applicable Debt owing by Borrowers to that Lender (including, without limitation, any participation purchased or to be purchased pursuant to this Section or any other Section of this Agreement). Borrowers agree that any Lender so purchasing a participation from the other Lenders or any thereof pursuant to this Section may exercise all its rights of payment (including the right of set off) with respect to such participation as fully as if such Lender was a direct creditor of Borrowers in the amount of such participation.

SECTION 9.6COLLATERAL. Upon the occurrence and during the continuance of an Event of Default, Agent, at the direction of the Required Lenders, may require any Credit Party to assemble the Collateral, which such Credit Party agrees to do, and make it available to Agent at a reasonably convenient place to be designated by Agent. Upon the occurrence and during the continuance of an Event of Default, Agent, at the direction of the Required Lenders, may, with or without notice to or demand upon any Credit Party and with or without the aid of legal process, make use of such force as may be necessary to enter any premises where the Collateral, or any thereof, may be found and to take possession thereof (including anything found in or on the Collateral that is not specifically described in this Agreement, each of which findings shall be considered to be an accession to and a part of the Collateral) and for that purpose may pursue the Collateral wherever the same may be found, without liability for trespass or damage caused thereby to any Credit Party. After any delivery or taking of possession of the Collateral, or any thereof, pursuant to this Agreement, then, with or without resort to any Credit Party personally or any other Person or property, all of which each Credit Party hereby waives, and upon such terms and in such manner as Agent may deem advisable, Agent, in its discretion, may sell, assign, transfer and deliver any of the Collateral at any time, or from time to time. No prior notice need be given to any Credit Party or to any other Person in the case of any sale of Collateral which Agent determines to be perishable or to be declining speedily in value or which is customarily sold in any recognized market, but in any other case Agent shall give such Credit Party not fewer than ten (10) days prior notice of either the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof is to be made. Each Credit Party waives advertisement of any such sale and (except to the extent specifically required by the preceding sentence) waives notice of any kind in respect of any such sale. At any such public sale, Agent or the Lenders may purchase the Collateral, or any part thereof, free from any right of redemption, all of which rights such Credit Party hereby waives and releases. After paying all claims, if any, secured by Liens having precedence over this Agreement, Agent shall apply any payments received on the Secured Debt and the net proceeds of each such sale to or toward the payment of the Secured Debt, whether or not then due, in such order and by such division as set forth in Section 2.3(b) hereof. Any excess, to the extent permitted by law, shall be paid to the Credit Parties, and the Credit Parties shall remain liable for any deficiency. Upon the occurrence and during the continuance of an Event of Default, Agent shall at all times have the right to obtain new appraisals of any Credit Party or the Collateral, the cost of which shall be paid by the Credit Parties. If Agent sells, leases, licenses, or otherwise disposes of any Collateral of any Credit Party on credit, then, and in each such case, Borrowers will be credited only with payments actually received by Agent and, if any Person obligated to make any payment for any Collateral of any Credit Party does not make such payment when due, Agent may thereafter sell, lease, license, or otherwise dispose of such Collateral of such Credit Party. In connection with any sale or other disposition of any Collateral of any Credit Party, Agent, shall have the right, but no duty, to disclaim warranties of title, possession, quiet enjoyment, and the like, and Agent shall have the right to comply with any applicable requirements of law (whether federal, state, local, or otherwise), and no such disclaimer or compliance shall be considered to have adversely affected the commercial reasonableness of any such sale or other disposition.

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SECTION 9.7APPOINTMENT OF RECEIVER. Upon the occurrence and during the continuance of an Event of Default, Agent shall be entitled, to make application to the United States District Court for the Northern District of Ohio or any other applicable court of competent jurisdiction, for the immediate appointment of a receiver for all or part of the Collateral or the real property, whether such receivership is incidental to a proposed sale of the Collateral or the real property, pursuant to the Uniform Commercial Code or otherwise. Each Credit Party hereby irrevocably consents to the appointment of such a receiver without bond, to the full extent permitted by applicable statute or law as a matter of strict right and without any requirement of any notice to any Credit Party and without regard to the adequacy of the Collateral or the real property for the repayment of the Obligations or the solvency of any Borrower or any Obligor. Each Credit Party hereby further waives any and all notices of and defenses to such appointment and agrees not to oppose any application therefor by Agent. Nothing herein shall be construed to deprive Agent or any Lender of any other right, remedy or privilege Agent or any Lender may now have under the law to have a receiver appointed. Any such receiver shall have all of the usual powers and duties of receivers in similar cases, including, without limitation, the full power to hold, develop, rent, lease, manage, maintain, operate and otherwise use or permit the use of the Collateral or the real property upon such terms and conditions as said receiver may deem to be prudent and reasonable under the circumstances.

ARTICLE X. THE AGENT 

The Lenders authorize KeyBank and KeyBank hereby agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions set forth elsewhere in this Agreement, and upon the terms and conditions set forth below. Except as to Section 10.10 in connection with the appointment of a successor Agent, it is understood that this Article X shall not be intended to confer any rights, powers, privileges or benefits upon any Obligor, but is intended solely to establish the rights, powers and duties of the Agent and the Lenders.

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SECTION 10.1APPOINTMENT AND AUTHORIZATION. Each Lender hereby irrevocably appoints and authorizes Agent to take such action as agent on its behalf and to exercise such powers hereunder as are delegated to Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither Agent, its Affiliates nor any of their respective directors, officers, attorneys or employees shall be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct. In no event shall Agent be liable for punitive, special, consequential, incidental, exemplary or other similar damages.

SECTION 10.2NOTE HOLDERS. Agent may treat the payee of any Note as the holder thereof until written notice of transfer shall have been filed with it, signed by such payee and in form satisfactory to Agent.

SECTION 10.3CONSULTATION WITH COUNSEL. Agent may consult with legal counsel selected by it and shall not be liable for any reasonable action taken or suffered in good faith by it in accordance with the opinion of such counsel.

SECTION 10.4DOCUMENTS. Agent shall not be under any duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Documents or any other Related Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be.

SECTION 10.5AGENT AND AFFILIATES. With respect to the Loans, Agent shall have the same rights and powers hereunder as any other Lender and may exercise the same as though it were not Agent, and Agent and its Affiliates may accept deposits from, lend money to and generally engage in any kind of business with any Company or any Affiliate thereof.

SECTION 10.6KNOWLEDGE OF DEFAULT. It is expressly understood and agreed that Agent shall be entitled to assume that no Default or Event of Default has occurred, unless Agent has been notified by a Lender in writing that such Lender believes that a Default or Event of Default has occurred and is continuing and specifying the nature thereof.

SECTION 10.7ACTION BY AGENT. So long as Agent shall be entitled, pursuant to Section 10.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, Agent shall be entitled to use its discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable in the premises, except for any liability arising from Agent’s gross negligence or willful misconduct.

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SECTION 10.8NOTICES, DEFAULT, ETC. In the event that Agent shall have acquired actual knowledge of any Default or Event of Default, Agent shall promptly notify the Lenders and shall take such action and assert such rights under this Agreement as the Required Lenders shall direct and Agent shall inform the other Lenders in writing of the action taken. Agent may take such action and assert such rights as it deems to be advisable, in its discretion, for the protection of the interests of the holders of the Notes.

SECTION 10.9INDEMNIFICATION OF AGENT. The Lenders agree to indemnify Agent (to the extent not reimbursed by the Credit Parties) ratably, according to their respective Aggregate Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent in its capacity as agent in any way relating to or arising out of this Agreement or any Loan Document or any action taken or omitted by Agent with respect to this Agreement or any Loan Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including attorneys’ fees) or disbursements resulting from Agent’s gross negligence, willful misconduct or from any action taken or omitted by Agent in any capacity other than as agent under this Agreement.

SECTION 10.10SUCCESSOR AGENT. Agent may resign as agent hereunder by giving not fewer than thirty (30) days prior written notice to Borrowers and the Lenders. If Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders (with the consent of Borrowers so long as an Event of Default has not occurred and which consent shall not be unreasonably withheld), or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following Agent’s notice to the Lenders of its resignation, then Agent shall appoint a successor agent that shall serve as agent until such time as the Required Lenders appoint a successor agent. Upon its appointment, such successor agent shall succeed to the rights, powers and duties as agent, and the term “Agent” shall mean such successor effective upon its appointment, and the former agent’s rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such former agent or any of the parties to this Agreement.

SECTION 10.11NATURE OF RELATIONSHIP. Notwithstanding the use of the defined term “Agent,” it is expressly understood and agreed that the Agent shall not have any fiduciary responsibilities to any of the Lenders by reason of this Agreement or any other Loan Document and that the Agent is merely acting as the contractual representative of the Lenders with only those duties as are expressly set forth in this Agreement and the other Loan Documents. In its capacity as the Lenders’ contractual representative, the Agent (i) does not hereby assume any fiduciary duties to any of the Lenders, (ii) is a “representative” of the Lenders within the meaning of the term “secured party” as defined in the UCC, and (iii) is acting as an independent contractor, the rights and duties of which are limited to those expressly set forth in this Agreement and the other Loan Documents. Each of the Lenders, for itself and on behalf of its Affiliates, hereby agrees not to assert any claim against the Agent on any agency theory or any other theory of liability for breach of fiduciary duty, all of which claims each such Person hereby waives.

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SECTION 10.12NATURE OF DUTIES. The duties of Agent shall be mechanical and administrative in nature. Nothing in this Agreement or any of the Loan Documents, express or implied, is intended to or shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Loan Documents except as expressly set forth herein or therein. Without limitation of the foregoing, neither the Agent nor any of its directors, officers, agents, attorneys or employees shall be responsible for or have any duty to ascertain, inquire into, or verify (a) any statement, warranty or representation made in connection with any Loan Document or any borrowing hereunder; (b) the performance or observance of any of the covenants or agreements of any Obligor under any Loan Document, including, without limitation, any agreement by an Obligor to furnish information directly to each Lender; (c) the satisfaction of any condition specified in Article IV, except receipt of items required to be delivered solely to the Agent; (d) the existence or possible existence of any Default or Event of Default; (e) the validity, enforceability, effectiveness, sufficiency or genuineness of any Loan Document or any other instrument or writing furnished in connection therewith; (f) the value, sufficiency, creation, perfection or priority of any Lien in any Collateral; or (g) the financial condition of the Borrowers or any Credit Party or of any other Company. The Agent shall have no duty to disclose to the Lenders information that is not required to be furnished by the Credit Parties to the Agent at such time, but is voluntarily furnished by the Credit Parties to the Agent (either in its capacity as Agent or in its individual capacity).

SECTION 10.13NO RELIANCE ON AGENT'S CUSTOMER IDENTIFICATION PROGRAM. Each Lender acknowledges and agrees that neither such Lender, nor any of its Affiliates, participants or assignees, may rely on the Agent to carry out such Lender’s, Affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the USA Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other Anti-Terrorism Law, including any programs involving any of the following items relating to or in connection with Borrowers, Borrowers’ Affiliates or its agents, the Loan Documents or the transactions hereunder or contemplated hereby: (1) any identity verification procedures, (2) any record-keeping, (3) comparisons with government lists, (4) customer notices or (5) other procedures required under the CIP Regulations or such other laws.

SECTION 10.14COLLATERAL MATTERS. Each Lender agrees that any action taken by Agent with respect to the Collateral in accordance with the provisions of this Agreement or the Loan Documents, and the exercise by Agent of the powers set forth herein or therein, together with such other powers as are reasonably incidental thereto, shall be authorized and binding upon all Lenders. Lenders hereby irrevocably authorize Agent, at its option and in its discretion, to release any Lien granted to or held by Agent upon any Collateral (i) upon termination of the Commitments, the payment in full of all Secured Debt and the satisfaction of all other obligations (other than those obligations surviving indefinitely pursuant to Section 11.18 hereof to the extent no claims giving rise thereto have been asserted); (ii) constituting property being sold or disposed of if Borrowers certify to Agent that the sale or disposition is made in compliance with the provisions of this Agreement, including, without limitation, Section 5.12 hereof (and Agent may rely conclusively on any such certificate, without further inquiry); (iii) constituting property in which a Credit Party did not own any interest at the time the Lien was granted or at any time thereafter; (iv) in connection with any foreclosure sale or other disposition of Collateral after the occurrence and during the continuation of an Event of Default; or (v) if approved, authorized or ratified in writing by Agent at the direction of all Lenders in accordance with Section 11.3 hereof. Upon request by Agent at any time, Lenders will confirm in writing Agent’s authority to release particular types or items of Collateral pursuant hereto. Agent shall have no obligation whatsoever to any Lender or to any other Person to assure that the Collateral exists or is owned by any Credit Party or is cared for, protected or insured or has been encumbered or that the Liens granted to Agent herein or pursuant to this Agreement or the other Related Writings have been properly or sufficiently or lawfully created, perfected, protected or enforced or are entitled to any particular priority, or to exercise at all or in any particular manner or under any duty of care, disclosure or fidelity, or to continue exercising, any of its rights, authorities and powers granted or available to Agent in this Section 10.14 or in any of the Loan Documents, it being understood and agreed that in respect of the Collateral, or any act, omission or event related thereto, Agent may act in any manner it may deem appropriate, in its sole discretion, but consistent with the provisions of this Agreement, including given Agent's own interest in the Collateral as a Lender and that Agent shall have no duty or liability whatsoever to any Lender.

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SECTION 10.15AUTHORIZATION TO ENTER INTO THE LOAN DOCUMENTS. Agent is hereby irrevocably authorized by each of the Lenders to execute and deliver the Loan Documents and any other Related Writing on behalf of each of the Lenders and to take such action and exercise such powers under the Loan Documents and any other Related Writing as Agent considers appropriate; provided, however, that Agent shall not amend the Loan Documents or any other Related Writing or consent to any waiver of its provisions unless such amendment or waiver is agreed to in writing by the Required Lenders (or all the Lenders if required by Section 11.3 hereof). Each Lender acknowledges and agrees that it will be bound by the terms and conditions of the Loan Documents and the Related Writings upon the execution and delivery thereof by Agent.

ARTICLE XI. MISCELLANEOUS 

SECTION 11.1LENDERS’ INDEPENDENT INVESTIGATION. Each Lender, by its signature to this Agreement, acknowledges and agrees that Agent has made no representation or warranty, express or implied, with respect to the creditworthiness, financial condition, or any other condition of any Company or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between Agent and such Lender. Each Lender represents that it has made and shall continue to make its own independent investigation of the creditworthiness, financial condition and affairs of the Companies in connection with the extension of credit hereunder, and agrees that Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by Agent to the Lenders hereunder), whether coming into its possession before the granting of the first Loans or the issuing of the first Letter of Credit hereunder or at any time or times thereafter.

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SECTION 11.2NO WAIVER; CUMULATIVE REMEDIES. No omission or course of dealing on the part of Agent, any Lender or the holder of any Note in exercising any right, power or remedy hereunder or under any of the Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held by operation of law, by contract or otherwise.

SECTION 11.3AMENDMENTS, CONSENTS. Except for actions expressly permitted to be taken by Agent, no amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom, shall be effective unless the same shall be in writing and signed by the Required Lenders and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. Anything herein to the contrary notwithstanding, unanimous consent of the Lenders shall be required with respect to (a) any increase in the Commitment hereunder, (b) the extension of maturity of the Loans, the scheduled payment date of principal or interest thereunder (other than with respect to a mandatory prepayment under Section 2.7), or the payment of commitment or other fees or amounts payable hereunder, (c) any reduction in the rate of interest on the Loans, or in any amount of principal or interest due on any Loan, or the payment of commitment or other fees hereunder or any change in the manner of application of any payments made by Borrowers or any Credit Party to the Lenders hereunder, (d) any change in Section 2.3(b) hereof, the percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (e) except as provided in Section 10.14 hereof, the release of any Guarantor of Payment or all or substantially all of the Collateral, (f) any amendment to this Section 11.3 or Section 9.5 hereof, (g) any amendment to the definition of Revolving Credit Commitment or any defined term used therein, or (h) any amendment to this Agreement that would cause a Lender to be obligated to make Revolving Loans in excess of its share of the Revolving Credit Commitment. Notice of amendments or consents ratified by the Lenders hereunder shall promptly be forwarded by Borrowers to all Lenders. Each Lender or other holder of a Note shall be bound by any amendment, waiver or consent obtained as authorized by this Section, regardless of its failure to agree thereto. For purposes of this Section 11.3, with respect to any Lender which makes a non-pro rata assignment as contemplated by Section 11.10(b)(ii) hereof, any Approved Fund of such Lender or any Affiliate of such Lender that becomes bound by this Agreement by virtue of such a non-pro rata assignment shall, by becoming so bound, be deemed to have irrevocably appointed such Lender as such Person’s agent for purposes of signing any amendment, modification or termination of, or any waiver or consent under or in connection with this Agreement or any other Related Writing, and such Person shall have no right individually to approve any such amendment, modification, termination, waiver or consent. Each such Lender, by becoming bound by this Agreement, shall be deemed to have irrevocably accepted its appointment as agent for such purposes, and each Lender agrees to exercise all powers of such Lender in its capacity as agent of such Person in a manner that is consistent with the manner in which such Lender exercises its individual rights under this Agreement and the other Related Writings.

SECTION 11.4NOTICES. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to a Credit Party, mailed or delivered to such Credit Party, addressed to such Credit Party at the address specified on the signature pages of this Agreement, if to a Lender, mailed or delivered to it, addressed to the address of such Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be given by overnight delivery or first class mail with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile with telephonic confirmation of receipt, except that all notices hereunder shall not be effective until received.

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SECTION 11.5COSTS, EXPENSES AND TAXES. Each Credit Party agrees to pay on demand all documented Related Expenses and all other costs and expenses of Agent, including, but not limited to, (a) administration (including field examinations), travel and out of pocket expenses, including but not limited to reasonable attorneys’ fees and expenses, of Agent in connection with the preparation, negotiation and closing of the Loan Documents and Related Writings and the administration of the Loan Documents and Related Writings, the collection and disbursement of all funds hereunder and the other instruments and documents to be delivered hereunder; (b) extraordinary expenses of Agent in connection with the administration of the Loan Documents and Related Writings and the other instruments and documents to be delivered hereunder, (c) the reasonable fees and out of pocket expenses of special counsel for the Lenders, with respect to the foregoing, and of local counsel, if any, who may be retained by said special counsel with respect thereto, (d) the hiring or retention (with the consultation of Borrowers during such times when no Event of Default exists) of any third party consultant deemed necessary by Agent and the Lenders to protect and preserve the Collateral, and (e) costs of settlement incurred by Agent after the occurrence of an Event of Default, including but not limited to (1) costs in enforcing any obligation or in foreclosing against the Collateral or other security or exercising or enforcing any other right or remedy available by reason of such Event of Default, (2) costs in connection with any refinancing or restructuring of the credit arrangements provided under this Agreement in the nature of a “work-out” or in any insolvency or bankruptcy proceeding, (3) costs of commencing, defending or intervening in any litigation or in filing a petition, complaint, answer, motion or other pleadings in any legal proceeding relating to any Credit Party and related to or arising out of the transactions contemplated hereby or by any of the Loan Documents, (4) costs of taking any other action in or with respect to any suit or proceeding (whether in bankruptcy or otherwise) (other than a suit among the Lenders to which no Company is a party), (5) costs of protecting, preserving, collecting, leasing, selling, taking possession of, or liquidating any of the Collateral, (6) costs in connection with attempting to enforce or enforcing any lien on or security interest in any of the Collateral or any other rights under the Loan Documents, or (7) costs incurred in connection with meeting with any Credit Party to discuss such Event of Default and the course of action to be taken in connection therewith. In addition, each Credit Party shall pay reasonable attorneys’ fees and reasonable fees of other professionals, all lien search and title search fees, all title insurance premiums, all filing and recording fees, all reasonable travel expenses and any and all stamp and other similar taxes and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and documents to be delivered hereunder, and agrees to hold Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or omission to pay such taxes or fees unless such delay or omission is the result of the gross negligence or the willful misconduct of Agent or any Lender. All of the foregoing will be part of the obligations, payable within five (5) Business Days of demand (unless any of the foregoing are to be paid at closing), shall be accompanied by reasonably detailed invoices, and shall be secured by the Collateral and other security for the Secured Debt. The obligations described in this Section 11.5 will survive any termination of this Agreement or the restructuring of the financing arrangements.

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SECTION 11.6INDEMNIFICATION. Each Credit Party agrees to defend, indemnify and hold harmless Agent and the Lenders (and their respective Affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable attorneys’ fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against Agent or any Lender in connection with any investigative, administrative or judicial proceeding (whether or not such Lender or Agent shall be designated a party thereto) or any other claim by any Person relating to or arising out of any Loan Document or any actual or proposed use of proceeds of the Loans or any of the Secured Debt, or any activities of any Company or any Obligor or any of their respective Affiliates; provided that neither any Lender nor Agent shall have the right to be indemnified under this Section for its own bad faith, gross negligence or willful misconduct. All obligations provided for in this Section 11.6 shall survive any termination of this Agreement. Notwithstanding anything to the contrary contained herein or in any Related Writing, neither Agent nor any Lender, nor any agent or attorney for any of them, shall be liable to any Credit Party or any Company (or any Affiliate of any such Person) for indirect, punitive, exemplary or consequential damages arising from any breach of contract, tort or other wrong relating to the establishment, administration or collection of the Secured Debt or as a result of any transaction contemplated under this Agreement or any Related Writing.

SECTION 11.7OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by Agent or the Lenders pursuant hereto shall be deemed to constitute the Lenders a partnership, association, joint venture or other entity. No default by any Lender hereunder shall excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or acquire any additional obligation of any kind by reason of such default. The relationship between the Credit Parties and the Lenders with respect to the Loan Documents and the Related Writings is and shall be solely that of debtor and creditors, respectively, and neither Agent nor any Lender has any fiduciary obligation toward any Credit Party with respect to any such documents or the transactions contemplated thereby.

SECTION 11.8EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement. The delivery of a facsimile or pdf or other electronic counterpart shall be effective as an original counterpart.

SECTION 11.9BINDING EFFECT; ASSIGNMENT. This Agreement shall become effective when it shall have been executed by each Borrower, Agent and by each Lender and thereafter shall be binding upon and inure to the benefit of Borrowers, the Credit Parties, Agent and each of the Lenders and their respective successors and assigns, except that no Credit Party shall have the right to assign its rights hereunder or any interest herein without the prior written consent of Agent and all of the Lenders.

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SECTION 11.10LENDER ASSIGNMENTS/PARTICIPATIONS.

(a)       No Lender may assign or, otherwise transfer any of its rights or obligations hereunder except (i) to an Eligible Assignee in accordance with the provisions of paragraph (b) of this Section, (ii) by way of participation in accordance with the provisions of paragraph (d) of this Section or (iii) by way of pledge or assignment of a security interest subject to the restrictions of paragraph (f) of this Section (and any other attempted assignment or transfer by any party hereto shall be null and void). Nothing in this Agreement, expressed or implied, shall be construed to confer upon any Person (other than the parties hereto, their respective successors and assigns permitted hereby, Participants to the extent provided in paragraph (d) of this Section and, to the extent expressly contemplated hereby, the Related Parties of each of Agent and the Lenders) any legal or equitable right, remedy or claim under or by reason of this Agreement.

(b)       Any Lender may at any time assign to one or more Eligible Assignees all or a portion of its rights and obligations under this Agreement (including all or a portion of its Commitment and the Loans at the time owing to it); provided that (i) except in the case of an assignment of the entire remaining amount of the assigning Lender’s Commitment and the Loans at the time owing to it or in the case of an assignment to a Lender or an Affiliate of a Lender or an Approved Fund with respect to a Lender, the aggregate amount of the applicable Commitment (which for this purpose includes Loans outstanding thereunder) or, if the applicable Commitment is not then in effect, the principal outstanding balance of the Loan of the assigning Lender subject to each such assignment (determined as of the date the Assignment and Assumption with respect to such assignment is delivered to Agent or, if “Trade Date” is specified in the Assignment and Assumption, as of the Trade Date) shall not be less than $3,000,000, unless each of Agent and, so long as no Event of Default has occurred and is continuing, Borrowers otherwise consent (each such consent not to be unreasonably withheld or delayed); (ii) each partial assignment shall be made as an assignment of a proportionate part of all the assigning Lender’s rights and obligations under this Agreement with respect to the Loan or the Commitment assigned; provided, however, that no Lender shall be prohibited from assigning all or a portion of its rights and obligations among separate loan facilities on a non-pro rata basis to any Affiliate or Approved Fund of such Lender subject to the provisions of Section 11.3 hereof; (iii) any assignment of a Revolving Credit Commitment must be approved by Agent unless the Person that is the proposed assignee is itself a Lender with a Revolving Commitment (whether or not the proposed assignee would otherwise qualify as an Eligible Assignee); and (iv) the parties to each assignment shall execute and deliver to Agent an Assignment and Assumption, together with, unless such assignment is to a Lender or an Affiliate of a Lender, a processing and recordation fee of $3,500, and the Eligible Assignee, if it shall not be a Lender, shall deliver to Agent an Administrative Questionnaire. Subject to acceptance and recording thereof by Agent pursuant to paragraph (c) of this Section, from and after the effective date specified in each Assignment and Assumption, the Eligible Assignee thereunder shall be a party to this Agreement and, to the extent of the interest assigned by such Assignment and Assumption, have the rights and obligations of a Lender under this Agreement, and the assigning Lender thereunder shall, to the extent of the interest assigned by such Assignment and Assumption, be released from its obligations under this Agreement (and, in the case of an Assignment and Assumption covering all of the assigning Lender’s rights and obligations under this Agreement, such Lender shall cease to be a party hereto) but shall continue to be entitled to the benefits of Article III and Sections 11.5, and 11.6 with respect to facts and circumstances occurring prior to the effective date of such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with paragraph (d) of this Section.

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(c)       Agent, acting solely for this purpose as an agent of Borrowers, shall maintain at its address set forth on the signature page to this Agreement a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive, and Borrowers, Agent and the Lenders may treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement, notwithstanding notice to the contrary. The Register shall be available for inspection by Borrowers and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

(d)       Any Lender may at any time, without the consent of, or notice to, any Credit Party or Agent, sell participations to any Person (other than a natural Person or any Credit Party or any of Borrowers’ Affiliates or Subsidiaries) (each, a “Participant”) in all or a portion of such Lender’s rights and/or obligations under this Agreement (including all or a portion of its Commitment and/or the Loans owing to it); provided that (i) such Lender’s obligations under this Agreement shall remain unchanged, (ii) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations and (iii) the Credit Parties, Agent and the other Lenders shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, modification or waiver with respect to any provision which requires the unanimous consent of Lender pursuant to Section 11.3 hereof. Subject to paragraph (e) of this Section, Borrowers agree that each Participant shall be entitled to the benefits of Article III and Sections 11.5 and 11.6 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to paragraph (b) of this Section. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 9.4 as though it were a Lender, provided such Participant agrees to be subject to Section 9.5 as though it were a Lender.

(e)       A Participant shall not be entitled to receive any greater payment under Article III or Section 11.5 than the applicable Lender would have been entitled to receive with respect to the participation sold to such Participant, unless the sale of the participation to such Participant is made with Borrowers’ prior written consent.

(f)       Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement to secure obligations of such Lender, including without limitation any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

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(g)       Each Lender or assignee or Participant of a Lender that is not incorporated under the laws of the United States of America or a state thereof (and is not excepted from the certification requirement contained in Section 313 of the USA Patriot Act and the applicable regulations because it is both (i) an affiliate of a depository institution or foreign bank that maintains a physical presence in the United States or foreign country, and (ii) subject to supervision by a banking authority regulating such affiliated depository institution or foreign bank) shall deliver to the Agent the certification, or, if applicable, recertification, certifying that such bank is not a "shell" and certifying to other matters as required by Section 313 of the USA Patriot Act and the applicable regulations: (1) on the Closing Date and (2) at such other times as are required under the USA Patriot Act.

SECTION 11.11SUBSTITUTION OF LENDERS. In the event that (a) Borrowers receive a claim from any Lender for material compensation under Article III hereof at a time when (i) no Default or Event of Default exists hereunder, and (ii) no other Lender has demanded such compensation, (b) any Lender is a Defaulting Lender, or (c) in the event a Lender fails to consent to an amendment or waiver requested under Section 11.3 hereof at a time when Agent has approved such amendment or waiver (any such Lender referred to in clause (a), (b) or (c) above, an “Affected Lender”), Borrowers may require, at their expense, any such Affected Lender to assign, at par plus accrued interest and fees, without recourse, all of its interest, rights and obligations hereunder (including all its Commitments and the Loans and any other amounts at any time owing to it hereunder and under the other Loan Documents) to a Designated Lender; provided, however, that (i) such assignment shall not conflict with or violate any law, rule or regulation or order of any court or other governmental authority, (ii) Borrowers shall have received the written consent of the Agent to such assignment (which such consent shall not be unreasonably withheld), (iii) Borrowers shall have paid to the Affected Lender all monies (together with amounts due such Affected Lender under Section 2.4 hereof as if the Loans owing to it were prepaid rather than assigned), and (iv) the assignment is entered into in accordance with the other requirements of Section 11.10 hereof (provided any assignment fees and reimbursable expenses due thereunder shall be paid by Borrowers). In the event that any Lender is a Defaulting Lender, such Lender shall not be entitled to vote and shall not be included in such calculation, and shall not be entitled to receive any fees otherwise payable to such Lender hereunder.

SECTION 11.12SEVERABILITY OF PROVISIONS; CAPTIONS; ATTACHMENTS. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to Sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.

SECTION 11.13INVESTMENT PURPOSE. Each of the Lenders represents and warrants to Borrowers that it is entering into this Agreement with the present intention of acquiring any Note issued pursuant hereto for investment purposes only and not for the purpose of distribution or resale, it being understood, however, that each Lender shall at all times retain full control over the disposition of its assets.

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SECTION 11.14ENTIRE AGREEMENT. This Agreement, any Note and any other Loan Document or other agreement, document or instrument attached hereto or executed on or as of the Closing Date integrate all the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof.

SECTION 11.15GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement, each of the Notes and any Related Writing shall be governed by and construed in accordance with the laws of the State of Ohio and the respective rights and obligations of the Credit Parties and the Lenders shall be governed by Ohio law, without regard to principles of conflict of laws. Each Credit Party hereby irrevocably submits to the non-exclusive jurisdiction of any Ohio state or federal court sitting in Cleveland, Ohio, over any action or proceeding arising out of or relating to this Agreement, the Secured Debt or any Related Writing, and each Credit Party hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such Ohio state or federal court. Each Credit Party, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. Each Credit Party agrees that a final, nonappealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

SECTION 11.16LEGAL REPRESENTATION OF PARTIES. The Loan Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.

SECTION 11.17SURVIVAL OF REPRESENTATIONS. All representations and warranties made herein or in any other Loan Document or in certificates given pursuant hereto or thereto shall survive the execution and delivery of this Agreement and the other Loan Documents, and shall continue in full force and effect with respect to the date as of which they were made as long as any credit is in use or available hereunder.

SECTION 11.18SURVIVAL OF INDEMNITIES. All indemnities of Agent and the Lenders and other provisions relative to the reimbursement to the Lenders of amounts sufficient to protect the yield of the Lenders with respect to the Loans and Letters of Credit, including, but not limited to, Article III, Section 11.5 and 11.6 hereof, shall survive the termination of this Agreement and the other Loan Documents and the payment in full of the Secured Debt.

SECTION 11.19PRESS RELEASES AND RELATED MATTERS. Each Credit Party hereby authorizes and consents to the publication by each Lender of customary advertising materials relating to the transactions contemplated by this Agreement and the other Loan Documents using such Credit Party’s name, product photographs, logos and/or trademarks. Each of Agent, each Lender, and each Credit Party agrees that neither it nor its Affiliates will in the future issue any press releases or other public disclosure using the name of Agent, any Lender, any Credit Party or their respective Affiliates or referring to this Agreement or any of the other Loan Documents without the prior written consent of each such other Person unless (and only to the extent that) Agent, each Lender, such Credit Party or such Affiliate, as applicable, is required to do so under law and then, in any event, such Credit Party or such Affiliate will consult with such Person before issuing such press release or other public disclosure, provided that so long as there are no material changes in the form or substance of such press releases or public disclosure, such written consent will be deemed to cover multiple dates, publications or other dissemination of the information.

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SECTION 11.20JOINT AND SEVERABILITY; BORROWING AGENCY. Each Borrower states and acknowledges that: (i) pursuant to this Agreement, Borrowers desire to utilize their borrowing potential on a consolidated basis to the same extent possible as if they were merged into a single corporate entity and that this Agreement reflects the establishment of credit facilities which would not otherwise be available to such Borrower if each Borrower were not jointly and severally liable for payment of the obligations; (ii) it has determined that it will benefit specifically and materially from the advances of credit contemplated by this Agreement; (iii) it is both a condition precedent to the obligations of Agent and the Lenders hereunder and a desire of Borrowers that each Borrower execute and deliver to Agent and the Lenders this Agreement; and (iv) Borrowers have requested and bargained for the structure and terms of and security for the advances contemplated by this Agreement.

Each Borrower shall be liable for all amounts due to Agent and the Lenders from any Borrower under this Agreement, regardless of which Borrower actually receives Loans or other extensions of credit hereunder or the amount of such Loans received by any Borrower or the manner in which Agent or the Lenders accounts for such Loans or other extensions of credit on its books and records (without limiting the foregoing, each Borrower shall be liable for the Loans made to each other Borrower). Each Borrower’s obligations with respect to Loans made to it, and each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder, with respect to Loans made to another Borrower hereunder, shall be separate and distinct obligations, but all such obligations shall be primary obligations of such Borrower.

Each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Loans or other extensions of credit made to another Borrower hereunder shall, to the fullest extent permitted by law, be unconditional irrespective of (i) the validity or enforceability, avoidance or subordination of the obligations of any other Borrower or of any promissory note or other document evidencing all or any part of the obligations of any other Borrower, (ii) the absence of any attempt to collect the obligations from any other Borrower, any other guarantor, or any other security therefor, or the absence of any other action to enforce the same, (iii) the waiver, consent, extension, forbearance or granting of any indulgence by Agent or any Lender with respect to any provision of any instrument evidencing the obligations of any other Borrower, or any part thereof, or any other agreement now or hereafter executed by any other Borrower and delivered to Agent or any Lender, (iv) the failure by Agent or any Lender to take any steps to perfect and maintain its security interest in, or to preserve its rights to, any security or collateral for the obligations of any other Borrower, (v) Agent or any Lender’s election, in any proceeding instituted under the Bankruptcy Code, of the application of Section 1111(b)(2) of the United States Bankruptcy Code, (vi) any borrowing or grant of a security interest by any other Borrower, as debtor-in-possession under Section 364 of the United States Bankruptcy Code, (vii) the disallowance of all or any portion of Agent or any Lender’s claim for the repayment of the obligations of any other Borrower under Section 502 of the United States Bankruptcy Code, or (viii) any other circumstances which might constitute a legal or equitable discharge or defense of a guarantor or of any other Borrower. With respect to each Borrower’s obligations arising as a result of the joint and several liability of such Borrower hereunder with respect to Loans or other extensions of credit made to any Borrower hereunder, such Borrower waives, until the Secured Debt shall have been paid in full and this Agreement shall have been terminated, any right of subrogation, reimbursement, exoneration, indemnity, contribution or any remedy which such Borrower now has or may hereafter have against any other Borrower or any Obligor, and any benefit of, and any right to participate in, any security or collateral (including the Collateral) given to Agent or any Lender to secure payment of the Secured Debt or any other liability of any other Borrower to Agent or any Lender.

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Each Borrower agrees if such Borrower’s joint and several liability hereunder, or if any Liens securing such joint and several liability, would, but for the application of this sentence, be unenforceable under applicable law, such joint and several liability and each such Lien shall be valid and enforceable to the maximum extent that would not cause such joint and several liability or such Lien to be unenforceable under applicable law, and such joint and several liability and such Lien shall be deemed to have been automatically amended accordingly at all relevant times.

Upon the occurrence and during the continuance of any Event of Default, Agent and the Lenders may proceed directly and at once, without notice, against a Borrower to collect and recover the full amount, or any portion of the obligations, without first proceeding against any other Borrower or any other Person, or against any security or collateral for the obligations. Each Borrower consents and agrees that neither Agent nor any Lender shall be under any obligation to marshal any assets in favor of such Borrower or against or in payment of any or all of the obligations.

Borrowers are obligated to repay the obligations as joint and several obligors under this Agreement. To the extent that any Borrower shall, under this Agreement as a joint and several obligor, repay any of the obligations constituting Loans made to another Borrower hereunder or other obligations incurred directly and primarily by any other Borrower (an “Accommodation Payment”), then the Borrower making such Accommodation Payment shall be entitled to contribution and indemnification from, and, be reimbursed by, each of the other Borrowers in an amount, for each of such other Borrowers, equal to a fraction of such Accommodation Payment, the numerator of which fraction is such other Borrower’s “Allocable Amount” (as defined below) and the denominator of which is the sum of the Allocable Amounts of all of the Borrowers. As of any date of determination, the “Allocable Amount” of each Borrower shall be equal to the maximum amount of liability for Accommodation Payments which could be asserted against such Borrower hereunder without (i) rendering such Borrower “insolvent” within the meaning of Section 101(31) of the Bankruptcy Code, Section 2 of the Uniform Fraudulent Transfer Act (“UFTA”) or Section 2 of the Uniform Fraudulent Conveyance Act (“UFCA”), (ii) leaving such Borrower with unreasonably small capital or assets, within the meaning of Section 548 of the United States Bankruptcy Code, Section 4 of the UFTA, or (iii) leaving such Borrower unable to pay its debts as they become due within the meaning of Section 548 of the United States Bankruptcy Code or Section 4 of the UFTA, or Section 5 of the UFCA. All rights and claims of contribution, indemnification and reimbursement under this Section shall be subordinate in right of payment to the prior payment in full of the obligations. The provisions of this Section shall, to the extent expressly inconsistent with any provision in any Loan Document, supersede such inconsistent provision.

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Each of the Borrowers hereby appoints Borrowing Agent as its as its agent for all purposes relevant to this Agreement, including the requesting of Loans, the giving and receipt of notices and execution and delivery of all documents, instruments and certificates contemplated herein and all modifications hereto. Any acknowledgment, consent, direction, certification or other action which might otherwise be valid or effective only if given or taken by all of the Borrowers acting singly, shall be valid and effective if given or taken only by Borrowing Agent, whether or not any of the other Borrowers joins therein.

The handling of this credit facility as a co-borrowing facility with a borrowing agent in the manner set forth in this Agreement is solely as an accommodation to Borrowers and at their request. Neither Agent nor any Lender shall incur liability to Borrowers as a result thereof. To induce Agent and the Lenders to do so and in consideration thereof, each Borrower hereby indemnifies Agent and the Lenders and holds Agent and the Lenders harmless from and against any and all liabilities, expenses, losses, damages and claims of damage or injury asserted against Agent or any Lender by any Person arising from or incurred by reason of the handling of the financing arrangements of Borrowers as provided herein, reliance by Agent or any Lender on any request or instruction from Borrowing Agent or any other action taken by Agent or any Lender with respect to this Section except due to willful misconduct or gross negligence of the Agent or any Lender.

SECTION 11.21EXCLUDED SWAP OBLIGATIONS; KEEPWELL.

(a)       NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT, ANY EXCLUDED SWAP OBLIGATIONS SHALL BE EXCLUDED FROM (X) THE DEFINITION OF “SECURED DEBT”, “DEBT” OR “OTHER DEBT” (OR ANY EQUIVALENT DEFINITION) CONTAINED HEREIN OR IN ANY OTHER GUARANTY OF THE SECURED DEBT AND NO EXCLUDED SWAP OBLIGATIONS SHALL BE GUARANTEED PURSUANT TO ANY SUCH GUARANTEE AND (Y) THE DEFINITION OF “SECURED DEBT” OR “DEBT” (OR ANY EQUIVALENT DEFINITION) CONTAINED IN ANY LOAN DOCUMENT, AND NO LIEN GRANTED PURSUANT TO ANY LOAN DOCUMENT SHALL SECURE ANY EXCLUDED SWAP OBLIGATIONS.

(b)       Each Qualified ECP Guarantor hereby jointly and severally absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party to honor all of its obligations under this Agreement in respect of Swap Obligations (provided, however, that each Qualified ECP Guarantor shall only be liable under this Section 11.21 for the maximum amount of such liability that can be hereby incurred without rendering its obligations under this Section 11.21, or otherwise under this Agreement, as it relates to such other Credit Party, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer, and not for any greater amount). The obligations of each Qualified ECP Guarantor under this Section shall remain in full force and effect until the payment in full of the Secured Debt, termination of the Commitments and expiration or cancellation of all Letters of Credit. Each Qualified ECP Guarantor intends that this Section 11.21 constitute, and this Section 11.21 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

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SECTION 11.22[RESERVED].

SECTION 11.23JURY TRIAL WAIVER. BORROWERS, AGENT AND EACH OF THE LENDERS WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT’S OR ANY LENDER’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF.

ARTICLE XII. GUARANTY 

SECTION 12.1GUARANTY. Each Credit Party hereby unconditionally guaranties the full and prompt payment and performance when due, whether by acceleration or otherwise, and at all times thereafter, of any and all present and future Secured Debt of any type or nature of any Credit Party to Agent and the Lenders arising under or related to this Agreement or any other Loan Document and/or any one or more of them, whether due or to become due, matured or unmatured, liquidated or unliquidated, or contingent or noncontingent, including obligations of performance as well as obligations of payment, including interest on any of the foregoing whether accruing before or after any bankruptcy or insolvency case or proceeding involving any Credit Party or any other Person and, if interest on any portion of such obligations ceases to accrue by operation of law by reason of the commencement of such case or proceeding, including such interest as would have accrued on any such portion of such obligations if such case or proceeding had not commenced, and further agrees to pay all expenses (including reasonable attorneys’ fees and legal expenses) paid or incurred by Agent in endeavoring to collect any of the foregoing, or any part thereof, and in enforcing the obligations of such Credit Party (collectively, the “Liabilities”).

Each Credit Party agrees that, in the event of the dissolution, bankruptcy or insolvency of any Credit Party, or the inability or failure of any Credit Party to pay debts as they become due, or an assignment by Borrowers for the benefit of creditors, or the commencement of any case or proceeding in respect of Borrowers under any bankruptcy, insolvency or similar laws, and if such event shall occur at a time when any of the Liabilities may not then be due and payable, such Credit Party will pay to Agent, for the benefit of the Lenders, forthwith the full amount which would be payable hereunder by such Credit Party if all Liabilities were then due and payable.

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This Guaranty shall in all respects be a continuing, absolute and unconditional guaranty of payment and performance (and not of collection), and shall remain in full force and effect (notwithstanding, without limitation, the dissolution of any Credit Party).

SECTION 12.2GUARANTORS’ OBLIGATIONS UNCONDITIONAL. The covenants and agreements of each Credit Party set forth in this Guaranty of Payment shall be primary obligations of such Credit Party, and such obligations shall be continuing, absolute and unconditional, shall not be subject to any counterclaim, setoff, deduction, diminution, abatement, recoupment, suspension, deferment, reduction or defense (other than full and strict compliance by Credit Party with its obligations hereunder), whether based upon any claim that any Credit Party or any other Person may have against Agent, any Lender or any other Person or otherwise, and shall remain in full force and effect without regard to, and shall not be released, discharged or in any way affected by, any circumstance or condition whatsoever (whether or not Borrowers or other Company shall have any knowledge or notice thereof) including, without limitation:

(a)       Any amendment, modification, addition, deletion, supplement or renewal to or of or other change in the Liabilities or this Agreement or the other Loan Documents or any related instrument or agreement, or any other instrument or agreement applicable thereto or to any of the parties to such agreements, or to any Collateral, or any furnishing or acceptance of additional security for, guaranty of or right of offset with respect to, any of the Liabilities; or the failure of any security or the failure of Agent or any Lender to perfect or insure any interest in any Collateral;

(b)       Any failure, omission or delay on the part of any Credit Party, Agent or any Lender to conform or comply with any term of any instrument or agreement referred to in subsection (a) above;

(c)       Any waiver, consent, extension, indulgence, compromise, release or other action or inaction under or in respect of any instrument, agreement, guaranty, right of offset or security referred to in subsection (a) above or any obligation or liability of any Credit Party, Agent or any Lender, or any exercise or non-exercise by Agent or any Lender of any right, remedy, power or privilege under or in respect of any such instrument, agreement, guaranty, right of offset or security or any such obligation or liability;

(d)       Any bankruptcy, insolvency, reorganization, arrangement, readjustment, composition, liquidation or similar proceeding with respect to any Credit Party, Agent, any Lender or any other Person or any of their respective properties or creditors, or any action taken by any trustee or receiver or by any court in any such proceeding;

(e)       Any limitation on the liability or obligations of any Person under this Agreement and the other Loan Documents or any other related instrument or agreement, the Liabilities, any collateral security for the Liabilities, or any other guaranty of the Liabilities or any discharge, termination, cancellation, frustration, irregularity, invalidity or unenforceability, in whole or in part, of any of the foregoing, or any other agreement, instrument, guaranty or security referred to in subsection (a) above or any term of any thereof;

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(f)       Any merger or consolidation of Borrowers or any other Credit Party into or with any Person or any sale, lease or transfer of any of the assets of Borrowers or any other Credit Party to any other Person;

(g)       Any change in the ownership of any of the equity interests of any Borrower or any other Credit Party or any entity change in Borrowers or any other Credit Party; or

(h)       Any other occurrence or circumstance whatsoever, whether similar or dissimilar to the foregoing and any other circumstance that might otherwise constitute a legal or equitable defense or discharge of the liabilities of any Credit Party or surety or that might otherwise limit recourse against any Credit Party.

The obligations of each Credit Party set forth herein constitute the full recourse obligations of such Credit Party, enforceable against it to the full extent of all its assets and properties.

Without limiting the provisions of Section 12.1 hereof, each Credit Party waives any and all notice of the creation, renewal, extension or accrual of any of the Liabilities and notice of or proof of reliance by Agent and the Lenders upon this Guaranty of Payment or acceptance of this Guaranty of Payment, and the Liabilities, and any of them, shall conclusively be deemed to have been created, contracted or incurred in reliance upon this Guaranty of Payment. Each Credit Party unconditionally waives, to the extent permitted by law: (a) acceptance of this Guaranty of Payment and proof of reliance by Agent and the Lenders hereon; (b) notice of any of the matters referred to in the foregoing subsections (a) through (h) hereof, or any right to consent or assent to any thereof; (c) all notices that may be required by statute, rule or law or otherwise, now or hereafter in effect, to preserve intact any rights against any Credit Party, including without limitation, any demand, presentment, protest, proof or notice of nonpayment under this Agreement or any other Loan Document or any related instrument or agreement; (d) any right to the enforcement, assertion or exercise against any Credit Party of any right, power, privilege or remedy conferred in this Agreement, any other Loan Document or any related instrument or agreement or otherwise; (e) any requirement of diligence on the part of any Person; (f) any requirement of Agent or any Lender to take any action whatsoever, to exhaust any remedies or to mitigate the damages resulting from a default under this Agreement, any other Loan Document or any related instrument or agreement; (g) any notice of any sale, transfer or other disposition by any Person of any right under, title to or interest in this Agreement, any other Loan Document or any related instrument or agreement relating thereto or any Collateral for the Liabilities; and (h) any other circumstance whatsoever that might otherwise constitute a legal or equitable discharge, release or defense of a guarantor or surety, or that might otherwise limit recourse against a Credit Party.

Without limiting the foregoing, each Credit Party hereby absolutely, unconditionally and irrevocably waives and agrees not to assert or take advantage of any defense based upon an election of remedies by Agent or any Lender, including an election to proceed by non-judicial rather than judicial foreclosure, which destroys or impairs any right of subrogation of such Credit Party or the right of such Credit Party to proceed against any Person for reimbursement or both.

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Each Credit Party agrees that this Guaranty of Payment shall be automatically reinstated if and to the extent that for any reason any payment by or on behalf of any Borrower or any other Credit Party is rescinded or must be otherwise restored by Agent or any Lender, whether as a result of any proceedings in bankruptcy or reorganization or otherwise.

SECTION 12.3SUBORDINATION.

(a)       Subordination to Senior Obligations.

(i) Each Credit Party hereby covenants and agrees that, as provided herein, all indebtedness, intercompany charges and other sums owing and claims of any nature whatsoever owed to such Credit Party by any other Credit Party (“Intercompany Obligations”), the payment of the principal of and interest thereon and any lien or security interest therefor are hereby expressly made subordinate and subject in right of payment to this Agreement or the prior payment in full of: (A) all Secured Debt and all other obligations now or hereafter incurred by any of the Credit Parties under this Agreement or any of the other Loan Documents, (B) interest thereon (including, without limitation, any such interest accruing subsequent to the filing by or against any of the Credit Parties of any proceeding brought under Chapter 11 of the Bankruptcy Code, whether or not such interest is allowed as a claim pursuant to the provisions of such Chapter), and (C) all fees, expenses, indemnities and other amounts now or hereafter payable pursuant to or in connection with this Agreement and all other Loan Documents (collectively the “Senior Obligations”), and any lien on any property or asset securing the Senior Obligations.

(ii) No payment or prepayment of any Intercompany Obligations (whether of principal, interest or otherwise) shall be made by any Credit Party at any time prior to the indefeasible payment in full, in cash, of the Senior Obligations, provided that the Credit Parties may make payments (not prepayments) of Intercompany Obligations in the ordinary course of business to the extent that at the time of, and immediately after giving effect to, any such payment, no Default or Event of Default exists.

(b)       Payment Over of Proceeds Upon Bankruptcy. In the event of (i) any insolvency or bankruptcy case or proceeding, or any receivership, liquidation, reorganization or other similar case or proceeding in connection therewith, relative to any Credit Party or to its creditors as such, or to its properties or assets, or (ii) any liquidation, dissolution or other winding-up of any Credit Party, whether voluntary or involuntary and whether or not involving insolvency or bankruptcy, or (iii) any assignment for the benefit of creditors or any other marshaling of assets or liabilities of any Credit Party, then and in any such event the holders of Senior Obligations shall be entitled to receive payment in full of all amounts due on or in respect of Senior Obligations, in cash or in any other manner acceptable to the holders of Senior Obligations, before any Credit Party is entitled to receive any payment or distribution of any kind or character on account of principal of or interest on any Intercompany Obligations of such Credit Party, and to that end the holders of Senior Obligations shall be entitled to receive, for application to the payment thereof, any payment or distribution of assets of such Credit Party of any kind or character including, without limitation, securities that are subordinated in right of payment to all Senior Obligations to substantially the same extent as, or to a greater extent than, as provided in this Guaranty of Payment, that may be payable or deliverable in respect of this Guaranty of Payment in any such case, proceeding, dissolution, liquidation or other winding-up or event referred to in clauses (i) through (iii) above.

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(c)       Payments to be Held in Trust. In the event that a Credit Party shall receive any payment or distribution of assets of any Credit Party of any kind or character in respect of the Intercompany Obligations in contravention of the foregoing Subsection (b), then and in such event such payment or distribution shall be received and held by such Credit Party in trust for Agent, and shall be paid over and delivered forthwith to Agent, the trustee in bankruptcy, receiver, liquidating trustee, custodian, assignee, agent or other Person making payment or distribution of assets of the Credit Party in trust for the holders of the Senior Obligations, and for application to the payment of, all Senior Obligations remaining unpaid, to the extent necessary to pay all Senior Obligations in full, in cash or in any other manner acceptable to Agent, after giving effect to any concurrent payment or distribution to or for the Senior Obligations.

(d)       Legend. Each Credit Party hereby covenants to cause any instrument from time to time evidencing any Intercompany Obligations to have fixed upon it a legend which reads substantially as follows:

“This instrument is subject to the terms and conditions of that certain Credit and Security Agreement dated as of November 1, 2016, among the undersigned maker or maker(s), certain of their affiliates, the financial institutions which are now or which hereafter become a party thereto (each, a “Lender” and collectively, the “Lenders”), and KEYBANK NATIONAL ASSOCIATION, as agent for Lenders, which, among other things, contains provisions subordinating such maker’s or makers’ obligations to the holders of Senior Obligations (as defined in said Agreement), to which provisions the holder of this instrument, by acceptance hereof, agrees.”

(e)       No Disposition. No Credit Party will sell, assign, pledge, encumber or otherwise dispose of any of the Intercompany Obligations owed to it, provided that such Credit Party may forgive Intercompany Obligations or contribute Intercompany Obligations to a Credit Party.

SECTION 12.4WAIVER OF SUBROGATION. Each Credit Party hereby irrevocably waives, solely for the benefit of Agent and the Lenders, until the indefeasible repayment in full of the Secured Debt, any claim or other rights which it may now or hereafter acquire that arise from the existence, payment, performance or enforcement of such Credit Party’s obligations under this Guaranty of Payment, including any right of subrogation, reimbursement, exoneration, or indemnification, any right to participate in any claim or remedy of Agent and the Lenders against any of the Credit Parties or any of their assets which Agent or any Lender now has or hereafter acquires, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including the right to take or receive from any Credit Party, directly or indirectly, in cash or other property or by set-off or in any manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Credit Party in violation of the preceding sentence and the Liabilities shall not have been indefeasibly paid in cash, such amount shall be deemed to have been paid to such Credit Party for the benefit of, and held in trust for, Agent and the Lenders, and shall forthwith be paid to Agent to be credited and applied pursuant to the terms of this Agreement. Each Credit Party acknowledges that it will receive substantial direct and indirect benefits form the financing arrangements contemplated by this Agreement and that the waiver set forth in this paragraph is knowingly made in contemplation of such benefits.

94

SECTION 12.5FRAUDULENT TRANSFER LIMITATION. If, in any action to enforce this Guaranty of Payment or any proceeding to allow or adjudicate a claim under this Guaranty of Payment, a court of competent jurisdiction determines that enforcement of this Guaranty of Payment against any Credit Party for the full amount of the Obligations is not lawful under, and would be subject to avoidance under, Section 548 of the Bankruptcy Code or any applicable provision of comparable state law, the liability of such Credit Party shall be limited to the maximum amount lawful and not subject to avoidance under such law.

SECTION 12.6CONTRIBUTION AMONG GUARANTORS. The Credit Parties desire to allocate among themselves in a fair and equitable manner, their rights of contribution from each other when any payment is made by one of the Credit Parties under this Guaranty of Payment. Accordingly, if any payment is made by a Credit Party under this Guaranty of Payment (a “Funding Guarantor”) that exceeds its Fair Share, the Funding Guarantor shall be entitled to a contribution from each other Credit Party in the amount of such other Credit Party’s Fair Share Shortfall, so that all such contributions shall cause each Credit Party’s Aggregate Payments to equal its Fair Share. For these purposes:

(a)       “Fair Share” means, with respect to a Credit Party as of any date of determination, an amount equal to (i) the ratio of (x) the Adjusted Maximum Amount of such Credit Party to (y) the aggregate Adjusted Maximum Amounts of all Credit Parties, multiplied by (ii) the aggregate amount paid on or before such date by all Funding Guarantors under this Guaranty of Payment.

(b)       “Fair Share Shortfall” means with respect to a Credit Party as of any date of determination, the excess, if any, of the Fair Share of such Credit Party over the Aggregate Payments of such Credit Party.

(c)       “Adjusted Maximum Amount” means with respect to a Credit Party as of any date of determination, the maximum aggregate amount of the liability of such Credit Party under this Guaranty of Payment, limited to the extent required under Section 12.5 (except that, for purposes solely of this calculation, any assets or liabilities arising by virtue of any rights to or obligations of contribution under this Section 12.6 shall not be counted as assets or liabilities of such Credit Party).

(d)       “Aggregate Payments” means, with respect to a Credit Party as of any date of determination, the aggregate net amount of all payments made on or before such date by such Credit Party under this Guaranty of Payment (including, without limitation, under this Section 12.6).

95

The amounts payable as contributions hereunder shall be determined by the Funding Guarantor as of the date on which the related payment or distribution is made by the Funding Guarantor, and such determination shall be binding on the other Credit Parties absent manifest or demonstrable error. The allocation and right of contribution among the Credit Parties set forth in this Section 12.6 shall not be construed to limit in any way the liability of any Credit Party under this Guaranty.

SECTION 12.7FUTURE GUARANTORS. Any other Person who may hereafter become a Subsidiary of any Credit Party (other than any Foreign Person) may and shall become bound by the terms and conditions hereof by executing and delivering an joinder and assumption agreement in accordance with the terms of Section 5.22 hereof.

SECTION 12.8JOINT AND SEVERAL OBLIGATION. This Guaranty of Payment and all liabilities of each Credit Party hereunder shall be the joint and several obligation of each Credit Party and may be freely enforced against each Credit Party, for the full amount of the Liabilities (subject to Section 12.5), without regard to whether enforcement is sought or available against any other Credit Party.

SECTION 12.9NO WAIVER. No delay in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise of any right or remedy shall preclude other or further exercise thereof, or the exercise of any other right or remedy; nor shall any modification or waiver of any of the provisions of this Guaranty of Payment be binding upon Agent and the Lenders except as expressly set forth in a writing duly signed and delivered on their behalf.

[The remainder of this page is intentionally left blank.]

96

Each of the parties has signed this Agreement as of the day and year first above written.

		BORROWERS:
Address:	c/o Lorraine Capital, LLC	B.R. JOHNSON, LLC
	591 Delaware Avenue
	Buffalo, New York 14202
	Attention:  Richard Gioia, Member
		By:	/s/ Justin M. Reich
	and	Name:  Justin M. Reich
		Title:  Manager
	c/o Regional Brands Inc.
	6060 Parkland Boulevard
	Cleveland, Ohio 44124
	Attention:  Brian Hopkins
With a copy to:
	Brian J. Bocketti, Esq.
	Lippes Mathias Wexler Friedman LLP
	50 Fountain Plaza, Suite 1700
	Buffalo, New York 14202
	and
	Michael R. Neidell, Esq.
	Olshan Frome Wolosky LLP
	1325 Avenue of the Americas
	New York, New York 10019

[Signature Page to Credit and Security Agreement]

		AGENT AND THE LENDERS:
Address:	250 Delaware Avenue	KEYBANK NATIONAL ASSOCIATION,
	Suite 600	as Agent and as a Lender
	Buffalo, NY 14202
	Attention:  Michael McMahon	By:	/s/ Michael P. McMahon
	Name:	Michael P. McMahon
		Title:  Senior Vice President
With a copy to:
	Ross J. Kirchick, Esq.
	Benesch Friedlander Coplan & Aronoff LLP
	200 Public Square, Suite 2300
	Cleveland, OH 44114-2378

[Continuation of Signature Page to Credit and Security Agreement]

SCHEDULE 1

LENDING INSTITUTIONS	REVOLVING CREDIT COMMITMENT PERCENTAGE	REVOLVING CREDIT COMMITMENT	MAXIMUM AMOUNT
KeyBank National Association	100%	$6,000,000	$6,000,000
Total Commitment Amount	100%	$6,000,000	$6,000,000

EXHIBIT A

REVOLVING CREDIT NOTE

$_________	Cleveland, Ohio
	[__], 2016

FOR VALUE RECEIVED, the undersigned, B.R. JOHNSON, LLC, a Delaware limited liability company (“BRJ”), each other Person which may be added as a “Borrower” hereto, subsequent to the date hereof (collectively, together with BRJ, the “Borrowers”, and each individually, a “Borrower”), jointly and severally promise to pay, on DEMAND, to the order of _________ (“Lender”) at the office of KEYBANK NATIONAL ASSOCIATION, as Agent, 250 Delaware Avenue, Suite 600, Buffalo, NY 14202, the principal sum of

_____________________AND 00/100 DOLLARS

or the aggregate unpaid principal amount of all Revolving Loans made by Lender to Borrowers pursuant to Section 2.1 of the Credit Agreement, whichever is less, in lawful money of the United States of America. As used herein, “Credit Agreement” means the Credit and Security Agreement dated as of even date herewith, among Borrowers, certain other Credit Parties from time to time party thereto, the lenders named therein and KeyBank National Association, as Agent, as the same may from time to time be amended, restated or otherwise modified. Capitalized terms used herein shall have the meanings ascribed to them in the Credit Agreement.

Borrowers also promise to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full thereof, at the rates per annum which shall be determined in accordance with the provisions of Section 2.1 of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.1; provided, however, that interest on any principal portion which is not paid when due shall be payable on demand.

The portions of the principal sum hereof from time to time representing Revolving Loans, and payments of principal of any thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided, however, that failure to make any such entry shall in no way detract from Borrowers’ obligations under this Revolving Credit Note (this “Note”).

If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or demand or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, until paid, at a rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds. In the event of a failure to pay interest or principal, when the same becomes due after giving effect to any applicable grace or cure period, Lender may collect and Borrowers agree to pay a late charge of an amount equal to the greater of $50 or 5% of the amount of such late payment.

A-1

This Note is one of the Revolving Credit Notes referred to in the Credit Agreement. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder to declare this Note due, and other terms and conditions upon which this Note is issued.

Except as expressly provided in the Credit Agreement, each Borrower expressly waives presentment, demand, protest and notice of any kind.

EACH OF THE UNDERSIGNED WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE, THE CREDIT AND SECURITY AGREEMENT OR ANY OTHER NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO. THIS WAIVER SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY AGENT’S OR ANY LENDER’S ABILITY TO PURSUE REMEDIES PURSUANT TO ANY PROVISION CONTAINED IN ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT AMONG BORROWERS, AGENT AND THE LENDERS, OR ANY THEREOF.

[The remainder of this page is intentionally left blank.]

A-2

IN WITNESS WHEREOF, the undersigned have executed this Revolving Credit Note as of the date and year first written above.

B.R. JOHNSON, LLC

By:

Name:

Title:

A-3

EXHIBIT B

NOTICE OF LOAN

[Date]_______________________, 20____

KeyBank National Association

250 Delaware Avenue , Suite 600

Buffalo, NY 14202

Attention:_______________

Ladies and Gentlemen:

The undersigned, B.R. JOHNSON, LLC, refers to the Credit and Security Agreement, dated as of November 1, 2016 (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, certain other Credit Parties (as defined in the Credit Agreement) from time to time party thereto, the Lenders (as defined in the Credit Agreement), and KEYBANK NATIONAL ASSOCIATION, as Agent, and hereby gives you notice, pursuant to Section 2.2 of the Credit Agreement that the undersigned hereby requests a Loan under the Credit Agreement, and in connection therewith sets forth below the information relating to the Loan (the “Proposed Loan”) as required by Section 2.2 of the Credit Agreement:

(a) The Proposed Loan is a Revolving Loan.

(b) The Business Day of the Proposed Loan is __________, 20__.

(c) The amount of the Proposed Loan is $_______________.

(d) The Proposed Loan is to be a Base Rate Loan ____ /Overnight LIBOR Loan ___/ Eurodollar Loan ___.
(Check one.)

(e) If the Proposed Loan is a Eurodollar Loan, the Interest Period requested is
one month ___, two months ___, three months ___. (Check one.)

The undersigned hereby certifies that the following statements are true on the date hereof, and will be true on the date of the Proposed Loan:

(i)       the representations and warranties contained in each Loan Document are correct in all material respects to the extent not otherwise qualified by a materiality concept, before and after giving effect to the Proposed Loan and the application of the proceeds therefrom, as though made on and as of such date (except to the extent any representation or warranty is stated to relate solely to an earlier date);

B-1

(ii)       no event has occurred and is continuing, or would result from such Proposed Loan, or the application of proceeds therefrom, that constitutes a Default or Event of Default; and

(iii)       the conditions set forth in Section 2.2 and Article IV of the Credit Agreement have been satisfied.

Very truly yours,

B.R. JOHNSON, LLC

By:

Print Name:

Title:

B-2

EXHIBIT C

COMPLIANCE CERTIFICATE

For Fiscal Quarter ended __________________

THE UNDERSIGNED HEREBY CERTIFY THAT:

(1)       We are the duly elected President and Chief Financial Officer of B.R. JOHNSON, LLC, a Delaware limited liability company (together with its successors and assigns, the “Borrowing Agent”), which is delivering this Compliance Certificate on its own behalf and on behalf of each other Person which has been added a “Borrower” to the Credit Agreement (collectively, “Borrowers”, and each individually, a “Borrower”), in its capacity as Borrowing Agent for the Borrowers under the Credit Agreement (as hereinafter defined);

(2)       We are familiar with the terms of that certain Credit and Security Agreement, dated as of November 1, 2016, among the undersigned, certain other Credit Parties (as defined in the Credit Agreement) from time to time party thereto, the Lenders (as defined in the Credit Agreement), and KEYBANK NATIONAL ASSOCIATION, as Agent (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”, the terms defined therein and not otherwise defined in this Certificate being used herein as therein defined), and the terms of the other Loan Documents, and we have made, or have caused to be made under our supervision, a review in reasonable detail of the transactions and condition of Borrowers and its Subsidiaries during the accounting period covered by the attached financial statements;

(3)       The review described in paragraph (2) above did not disclose, and we have no knowledge of, the existence of any condition or event that constitutes or constituted a Default or Event of Default, at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate;

(4)       The representations and warranties made by Borrowers contained in each Loan Document are true and correct in all material respects to the extent not otherwise qualified by a materiality concept as though made on and as of the date hereof (except to the extent any representation or warranty is stated to relate solely to an earlier date); and

(5)       Set forth on Attachment I hereto are calculations of the financial covenants set forth in Sections 5.7 of the Credit Agreement, which calculations show compliance with the terms thereof.

C-1

IN WITNESS WHEREOF, we have signed this certificate the _______ day of ____________________, 20____.

B.R. JOHNSON, LLC

By:

Title:

And by:

Title:

C-2

EXHIBIT D

ASSIGNMENT AND ASSUMPTION

This Assignment and Assumption (the “Assignment and Assumption”) is dated as of the Effective Date set forth below and is entered into by and between _________________________ (the “Assignor”) and ___________________________ (the “Assignee”). Capitalized terms used but not defined herein shall have the meanings given to them in that certain Credit and Security Agreement (as more fully described below and as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”), receipt of a copy of which is hereby acknowledged by the Assignee. The standard terms and conditions set forth in Annex 1 attached hereto (the “Standard Terms and Conditions”) are hereby agreed to and incorporated herein by reference and made a part of this Assignment and Assumption as if set forth herein in full.

For an agreed consideration, the Assignor hereby irrevocably sells and assigns to the Assignee, and the Assignee hereby irrevocably purchases and assumes from the Assignor, subject to and in accordance with the Standard Terms and Conditions and the Credit Agreement, as of the Effective Date inserted by Agent as contemplated below (i) all of the Assignor’s rights and obligations in its capacity as a Lender under the Credit Agreement and any other documents or instruments delivered pursuant thereto to the extent related to the amount and percentage interest identified below of all of such outstanding rights and obligations of the Assignor under the respective facilities identified below (including without limitation any letters of credit, guarantees, and swingline loans included in such facilities) and (ii) to the extent permitted to be assigned under applicable law, all claims, suits, causes of action and any other right of the Assignor (in its capacity as a Lender) against any Person, whether known or unknown, arising under or in connection with the Credit Agreement, any other Loan Documents or Related Writings or in any way based on or related to any of the foregoing, including, but not limited to, contract claims, tort claims, malpractice claims, statutory claims and all other claims at law or in equity related to the rights and obligations sold and assigned pursuant to clause (i) above (the rights and obligations sold and assigned pursuant to clauses (i) and (ii) above being referred to herein collectively as, the “Assigned Interest”). Such sale and assignment is without recourse to the Assignor and, except as expressly provided in this Assignment and Assumption, without representation or warranty by the Assignor.

1.	Assignor:
2.	Assignee:	and is an Affiliate/Approved Fund of [identify Lender]
3.	Borrowers(s):
4.	Agent: [_____________], as the administrative agent under the Credit Agreement
5.	Credit Agreement:	[The [amount] Credit Agreement dated as of ___________ among [name of Borrowers(s)], the Lenders parties thereto,  KeyBank National Association, as Agent, and the other agents parties thereto]

D-1

6.       Assigned Interest:

Facility Assigned	Aggregate Amount of Commitment/Loans for all Lenders	Amount of Commitment/Loans Assigned	Percentage Assigned of Commitment/Loans [to 9 decimals]
	$	$	%
	$	$	%
	$	$	%

[7.	Trade Date:	__________________] [USE ONLY IF THE ASSIGNOR AND THE ASSIGNEE INTEND THAT THE MINIMUM ASSIGNMENT AMOUNT IS TO BE DETERMINED AS OF THE TRADE DATE]
Effective Date: _______ __, 20___		[TO BE INSERTED BY AGENT AND WHICH SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER IN THE REGISTER THEREFOR.]

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

D-2

The terms set forth in this Assignment and Assumption are hereby agreed to:

ASSIGNOR

By:

Title:

ASSIGNEE

By:

Title:

[Consented to and – add if Agent consent

required] Accepted:

[_________________], as Agent

By:

Title:

[Consented to:] [ADD ONLY IF CONSENT

REQUIRED PURSUANT TO CREDIT

AGREEMENT]

BORROWERS:

[_________________]

By:

Title:

[_________________]

By:

Title:

D-3

ANNEX 1

STANDARD TERMS AND CONDITIONS FOR

ASSIGNMENT AND ASSUMPTION

1.       Representations and Warranties.

1.1       Assignor. The Assignor (a) represents and warrants that (i) it is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned Interest is free and clear of any lien, encumbrance or other adverse claim and (iii) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby; and (b) assumes no responsibility with respect to (i) any statements, warranties or representations made in or in connection with the Credit Agreement or any other Loan Document or Related Writing, (ii) the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any collateral thereunder, (iii) the financial condition of the Borrowers, any of its Subsidiaries or Affiliates or any other Person obligated in respect of any Loan Document or (iv) the performance or observance by the Borrowers, any of its Subsidiaries of Affiliates or any other Person of any of their respective obligations under any Loan Document.

1.2       Assignee. The Assignee (a) represents and warrants that (i) it has full power and authority, and has taken all action necessary, to execute and deliver this Assignment and Assumption and to consummate the transactions contemplated hereby and to become a Lender under the Credit Agreement, (ii) it meets all requirements of an Eligible Assignee under the Credit Agreement (subject to receipt of such consents as may be required under the Credit Agreement), (iii) from and after the Effective Date, it shall be bound by the provisions of the Credit Agreement as a Lender thereunder and, to the extent of the Assigned Interest, shall have the obligations of a Lender thereunder, (iv) it has received a copy of the Credit Agreement, together with copies of the most recent financial statements delivered pursuant to Section 5.3 thereof, as applicable, and such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Assumption and to purchase the Assigned Interest on the basis of which it has made such analysis and decision independently and without reliance on the Agent or any other Lender; and (b) agrees that (i) it will, independently and without reliance on the Agent, the Assignor or any other Lender, and (v) if it is a Foreign Person, attached to the Assignment and Assumption is any documentation required to be delivered by it (or by any Foreign Person that is a Participant) pursuant to the terms of the Credit Agreement, duly completed and executed by the Assignee; and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents, and (ii) it will perform in accordance with their terms all of the obligations which by the terms of the Loan Documents are required to be performed by it as a Lender.

2.       Payments. From and after the Effective Date, the Agent shall make all payments in respect of the Assigned Interest (including payments of principal, interest, fees and other amounts) to the Assignor for amounts which have accrued [to but excluding the Effective Date and to the Assignee for amounts which have accrued from and after the Effective Date or prior to, on or after the Effective Date. The Assignor and Assignee shall make all appropriate adjustments in payment or with respect to the making of this assignment directly between themselves.] [CHOOSE OPTION BASED ON AGENT’S SYSTEM]

D-4

3.       General Provisions. This Assignment and Assumption shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors and assigns. This Assignment and Assumption may be executed in any number of counterparts, which together shall constitute one instrument. Delivery of an executed counterpart of a signature page of this Assignment and Assumption by telecopy shall be effective as delivery of manually executed counterpart of this Assignment and Assumption. This Assignment and Assumption shall be governed by, and construed in accordance with, the law of the State of [Ohio].

D-5

CREDIT AND SECURITY AGREEMENT

AMONG

KEYBANK NATIONAL ASSOCIATION,

as “Agent”

and

Those lending institutions set forth on

Schedule 1 hereto

as “Lenders”

and

B.R. JOHNSON, LLC

and

Each other Person which from time to time

becomes a Borrower hereunder

as “Borrowers”

and

Certain other Credit Parties from time to time party hereto

November 1, 2016

TABLE OF CONTENTS

Page

ARTICLE I. DEFINITIONS AND GENERAL TERMS	1
SECTION 1.1   DEFINITIONS	1
SECTION 1.2   INTERPRETIVE MATTERS	26
SECTION 1.3   TERMINOLOGY	26
SECTION 1.4   TIMES OF DAY	27
SECTION 1.5   CERTIFICATIONS	27
ARTICLE II. AMOUNT AND TERMS OF CREDIT	27
SECTION 2.1   AMOUNT AND NATURE OF CREDIT	27
SECTION 2.2   CONDITIONS TO LOANS AND LETTERS OF CREDIT	30
SECTION 2.3   PAYMENT ON NOTES, ETC	32
SECTION 2.4   PREPAYMENT	35
SECTION 2.5   [RESERVED]	35
SECTION 2.6   COMPUTATION OF INTEREST AND FEES; DEFAULT RATE	36
SECTION 2.7   MANDATORY PAYMENT	36
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO  LOANS; INCREASED CAPITAL; TAXES	37
SECTION 3.1   REQUIREMENTS OF LAW, ETC	37
SECTION 3.2   TAX LAW, ETC	39
SECTION 3.3   FUNDING LOSSES	40
SECTION 3.4   EURODOLLAR RATE AND OVERNIGHT LIBOR RATE LENDING UNLAWFUL; INABILITY TO DETERMINE RATE	41
SECTION 3.5   DISCRETION OF LENDERS AS TO MATTERS OF FUNDING	41

i

ARTICLE IV. CONDITIONS PRECEDENT	42
SECTION 4.1   NOTES	42
SECTION 4.2   [RESERVED]	42
SECTION 4.3   [RESERVED]	42
SECTION 4.4   SECRETARY’S CERTIFICATE, RESOLUTIONS, ORGANIZATIONAL DOCUMENTS	42
SECTION 4.5   GOOD STANDING CERTIFICATES	42
SECTION 4.6   LEGAL OPINION	42
SECTION 4.7   CLOSING, AGENT AND LEGAL FEES	42
SECTION 4.8   FINANCING STATEMENTS; LIEN SEARCHES AND PAYOFF LETTERS	42
SECTION 4.9   BRJ ACQUISITION	43
SECTION 4.10   SELLER SUBORDINATION AGREEMENT; SELLER SUBORDINATED DEBT DOCUMENTS	43
SECTION 4.11   SENIOR SUBORDINATION AGREEMENT; SENIOR SUBORDINATED DEBT DOCUMENTS	43
SECTION 4.12   MANAGEMENT SUBORDINATION AGREEMENT	43
SECTION 4.13   INSURANCE CERTIFICATE	43
SECTION 4.14   DEPOSIT ACCOUNTS	43
SECTION 4.15   SOLVENCY CERTIFICATE	43
SECTION 4.16   LANDLORD’S AND BAILEE’S WAIVER	43
SECTION 4.17   CASH MANAGEMENT PROCEDURES	44
SECTION 4.18   CUSTOMER IDENTIFICATION PROGRAM	44
SECTION 4.19   FINANCIAL INFORMATION	44
SECTION 4.20   NO MATERIAL ADVERSE CHANGE	44
SECTION 4.21   MISCELLANEOUS	44

ii

ARTICLE V. COVENANTS	44
SECTION 5.1   INSURANCE	44
SECTION 5.2   MONEY OBLIGATIONS	45
SECTION 5.3   FINANCIAL STATEMENTS	45
SECTION 5.4   FINANCIAL RECORDS	46
SECTION 5.5   FRANCHISES	46
SECTION 5.6   ERISA COMPLIANCE	46
SECTION 5.7   FINANCIAL COVENANTS	47
SECTION 5.8   BORROWING	47
SECTION 5.9   LIENS	48
SECTION 5.10   REGULATIONS U AND X	48
SECTION 5.11   INVESTMENTS AND LOANS	48
SECTION 5.12   MERGER AND SALE OF ASSETS	49
SECTION 5.13   ACQUISITIONS	50
SECTION 5.14   NOTICE	50
SECTION 5.15   ENVIRONMENTAL COMPLIANCE	51
SECTION 5.16   AFFILIATE TRANSACTIONS	51
SECTION 5.17   ASSIGNED CONTRACTS	52
SECTION 5.18   NAMES AND LOCATION OF COLLATERAL	52
SECTION 5.19   AMENDMENT OF ORGANIZATIONAL DOCUMENTS	53
SECTION 5.20   RESTRICTED PAYMENTS	53
SECTION 5.21   MANAGEMENT FEES	53
SECTION 5.22   SUBSIDIARY GUARANTIES	54
SECTION 5.23   COLLATERAL	55
SECTION 5.24   FURTHER ASSURANCE	55

iii

SECTION 5.25   MODIFICATIONS TO CERTAIN MATERIAL DOCUMENTS	57
SECTION 5.26   FISCAL YEAR	57
SECTION 5.27   ANTI-TERRORISM LAWS	57
SECTION 5.28   POST CLOSING COVENANT	57
SECTION 5.29   OTHER BUSINESSES	58
SECTION 5.30   ACCOUNTING CHANGES	58
SECTION 5.31   SPECULATIVE TRANSACTIONS	58
SECTION 5.32   SUBSIDIARY RESTRICTIONS	58
SECTION 5.33   [RESERVED]	59
SECTION 5.34   PAYMENT LIMITATIONS	59
ARTICLE VI. SECURITY	59
SECTION 6.1   SECURITY INTEREST IN COLLATERAL	59
SECTION 6.2   AFTER ACQUIRED PROPERTY	60
SECTION 6.3   COLLECTIONS AND RECEIPT OF PROCEEDS BY THE CREDIT PARTIES	60
SECTION 6.4   COLLECTIONS AND RECEIPT OF PROCEEDS BY AGENT	61
SECTION 6.5   USE OF INVENTORY AND EQUIPMENT	62
ARTICLE VII. REPRESENTATIONS AND WARRANTIES	63
SECTION 7.1   EXISTENCE; SUBSIDIARIES; FOREIGN QUALIFICATION; CAPITALIZATION	63
SECTION 7.2   AUTHORITY	63
SECTION 7.3   COMPLIANCE WITH LAWS	64
SECTION 7.4   LITIGATION AND ADMINISTRATIVE PROCEEDINGS	64
SECTION 7.5   LOCATION	65

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SECTION 7.6   TITLE TO ASSETS	65
SECTION 7.7   LIENS AND SECURITY INTERESTS	65
SECTION 7.8   INVESTMENT ACCOUNTS	65
SECTION 7.9   REAL PROPERTIES	65
SECTION 7.10   LETTERS OF CREDIT	66
SECTION 7.11   TAX RETURNS	67
SECTION 7.12   ENVIRONMENTAL LAWS	67
SECTION 7.13   CONTINUED BUSINESS	67
SECTION 7.14   EMPLOYEE BENEFITS PLANS	67
SECTION 7.15   CONSENTS OR APPROVALS	68
SECTION 7.16   SOLVENCY	68
SECTION 7.17   FINANCIAL STATEMENTS	69
SECTION 7.18   REGULATIONS	69
SECTION 7.19   MATERIAL AGREEMENTS	69
SECTION 7.20   INTELLECTUAL PROPERTY	69
SECTION 7.21   INSURANCE	69
SECTION 7.22   ACCURATE AND COMPLETE STATEMENTS	69
SECTION 7.23   DEFAULTS	69
SECTION 7.24   [RESERVED]	70
SECTION 7.25   ANTI-TERRORISM LAWS	70
SECTION 7.26   EXECUTIVE ORDER NO. 13224	70
ARTICLE VIII. EVENTS OF DEFAULT	70
SECTION 8.1   PAYMENTS	70
SECTION 8.2   SPECIAL COVENANTS	71
SECTION 8.3   OTHER COVENANTS	71

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SECTION 8.4   REPRESENTATIONS AND WARRANTIES	71
SECTION 8.5   CROSS DEFAULT	71
SECTION 8.6   ERISA DEFAULT	71
SECTION 8.7   CHANGE IN CONTROL	71
SECTION 8.8   MONEY JUDGMENT	71
SECTION 8.9   VALIDITY OF LOAN DOCUMENTS	72
SECTION 8.10   NONMONETARY JUDGMENTS	72
SECTION 8.11   ENCUMBRANCES OF SECURITY DOCUMENTS	72
SECTION 8.12   INTENTIONALLY OMITTED	72
SECTION 8.13   SOLVENCY	72
SECTION 8.14   MATERIAL ADVERSE EFFECT.	72
ARTICLE IX. REMEDIES UPON DEFAULT	73
SECTION 9.1   OPTIONAL DEFAULTS	73
SECTION 9.2   AUTOMATIC DEFAULTS	73
SECTION 9.3   LETTERS OF CREDIT	73
SECTION 9.4   OFFSETS	73
SECTION 9.5   EQUALIZATION PROVISION	74
SECTION 9.6   COLLATERAL	74
SECTION 9.7   APPOINTMENT OF RECEIVER	75
ARTICLE X. THE AGENT	75
SECTION 10.1   APPOINTMENT AND AUTHORIZATION	76
SECTION 10.2   NOTE HOLDERS	76
SECTION 10.3   CONSULTATION WITH COUNSEL	76
SECTION 10.4   DOCUMENTS	76
SECTION 10.5   AGENT AND AFFILIATES	76

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SECTION 10.6   KNOWLEDGE OF DEFAULT	76
SECTION 10.7   ACTION BY AGENT	76
SECTION 10.8   NOTICES, DEFAULT, ETC	77
SECTION 10.9   INDEMNIFICATION OF AGENT	77
SECTION 10.10   SUCCESSOR AGENT	77
SECTION 10.11   NATURE OF RELATIONSHIP	77
SECTION 10.12   NATURE OF DUTIES	78
SECTION 10.13   NO RELIANCE ON AGENT'S CUSTOMER IDENTIFICATION PROGRAM	78
SECTION 10.14   COLLATERAL MATTERS	78
SECTION 10.15   AUTHORIZATION TO ENTER INTO THE LOAN DOCUMENTS	79
ARTICLE XI. MISCELLANEOUS	79
SECTION 11.1   LENDERS’ INDEPENDENT INVESTIGATION	79
SECTION 11.2   NO WAIVER; CUMULATIVE REMEDIES	80
SECTION 11.3   AMENDMENTS, CONSENTS	80
SECTION 11.4   NOTICES	80
SECTION 11.5   COSTS, EXPENSES AND TAXES	81
SECTION 11.6   INDEMNIFICATION	82
SECTION 11.7   OBLIGATIONS SEVERAL; NO FIDUCIARY OBLIGATIONS	82
SECTION 11.8   EXECUTION IN COUNTERPARTS	82
SECTION 11.9   BINDING EFFECT; ASSIGNMENT	82
SECTION 11.10   LENDER ASSIGNMENTS/PARTICIPATIONS	83
SECTION 11.11   SUBSTITUTION OF LENDERS	85
SECTION 11.12   SEVERABILITY OF PROVISIONS; CAPTIONS; ATTACHMENTS	85

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SECTION 11.13   INVESTMENT PURPOSE	85
SECTION 11.14   ENTIRE AGREEMENT	86
SECTION 11.15   GOVERNING LAW; SUBMISSION TO JURISDICTION	86
SECTION 11.16   LEGAL REPRESENTATION OF PARTIES	86
SECTION 11.17   SURVIVAL OF REPRESENTATIONS	86
SECTION 11.18   SURVIVAL OF INDEMNITIES	86
SECTION 11.19   PRESS RELEASES AND RELATED MATTERS	86
SECTION 11.20   JOINT AND SEVERABILITY; BORROWING AGENCY	87
SECTION 11.21   EXCLUDED SWAP OBLIGATIONS; KEEPWELL	89
SECTION 11.22   [RESERVED]	90
SECTION 11.23   JURY TRIAL WAIVER	90
ARTICLE XII. GUARANTY	90
SECTION 12.1   GUARANTY	90
SECTION 12.2   GUARANTORS’ OBLIGATIONS UNCONDITIONAL	91
SECTION 12.3   SUBORDINATION	93
SECTION 12.4   WAIVER OF SUBROGATION	94
SECTION 12.5   FRAUDULENT TRANSFER LIMITATION	95
SECTION 12.6   CONTRIBUTION AMONG GUARANTORS	95
SECTION 12.7   FUTURE GUARANTORS	96
SECTION 12.8   JOINT AND SEVERAL OBLIGATION	96
SECTION 12.9   NO WAIVER	96

EXHIBIT A REVOLVING CREDIT NOTE A-1

EXHIBIT B NOTICE OF LOAN B-1

EXHIBIT C COMPLIANCE CERTIFICATE C-1

EXHIBIT D ASSIGNMENT AND ASSUMPTION D-1

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EX-10.2

Exhibit 10.2

THE INDEBTEDNESS EVIDENCED BY THIS DOCUMENT IS SUBORDINATE TO THE INDEBTEDNESS OF THE MAKER (OR ANY SUCCESSOR THERETO) TO KEYBANK NATIONAL ASSOCIATION, AS AGENT, OR ANY OF ITS SUCCESSORS OR ASSIGNS, PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF NOVEMBER 1, 2016, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED, RESTATED OR OTHERWISE MODIFIED (OR ANY SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH AGREEMENT).

THE INDEBTEDNESS EVIDENCED BY THIS DOCUMENT IS SUBORDINATE TO THE INDEBTEDNESS OF THE MAKER (OR ANY SUCCESSOR THERETO) TO REGIONAL BRANDS INC., OR ANY OF ITS SUCCESSORS OR ASSIGNS, PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF NOVEMBER 1, 2016, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED, RESTATED OR OTHERWISE MODIFIED (OR ANY SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH AGREEMENT).

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

B.R. JOHNSON, LLC

SUBORDINATED PROMISSORY NOTE

Date of Issuance: November 1, 2016 $2,500,000.00

B.R. JOHNSON, LLC, a Delaware limited liability company (the “Company”), promises to pay to the order of B. R. JOHNSON, INC., a New York corporation (“Holder”), the principal amount of Two Million Five Hundred Thousand AND NO/100 Dollars ($2,500,000), together with interest thereon and/or added thereto, in each case calculated from the date hereof (the “Date of Issuance”) in accordance with the provisions of this Note.

1.        Payment of Interest. The Company shall pay to Holder all interest as follows:

(a)       the Company shall pay interest on the unpaid principal amount of this Note on the first day of each fiscal quarter (or, if any such day is not a Business Day (as defined in section 8 below), on the immediately succeeding Business Day), beginning with a payment on January 1, 2017 (each such date, an “Interest Payment Date”) at a rate of five and one quarter percent (5.25%) per annum, computed on the basis of a three hundred sixty (360) day year and the actual number of days elapsed in any year commencing on the date hereof; and

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(b)       upon the occurrence and during the continuance of an Event of Default (as defined in section 4.1 below), the unpaid principal balance of this Note and any due and unpaid interest shall bear interest at an annual rate (the “Default Rate”) equal to the rate otherwise in effect under subsection 1(a) plus two (2%) percentage points, payable upon demand in cash. On and after the Maturity Date (as defined in section 2(a)(ii) below), the unpaid principal balance of this Note and all accrued and unpaid interest thereon shall bear interest at the Default Rate, payable upon demand.

2.        Payment of Principal on Note.

(a)       Scheduled Payments.

(i)        Commencing November 1, 2018 and on the first day of each fiscal quarter thereafter, the Company shall pay the principal amount of this Note in equal installments of $62,500.00.

(ii)       The Company, upon the earlier of November 30, 2021 (“Maturity Date”) and acceleration of this Note pursuant to section 4.2 below shall pay the following: (i) the remaining outstanding principal amount of this Note and (ii) without duplication of any amounts paid pursuant to the immediately preceding clause (i), all accrued and unpaid interest thereon.

(b)      Optional Prepayments. The Company may, at any time and from time to time, voluntarily prepay all or any portion of the outstanding principal amount of this Note, without penalty or premium. In connection with each such voluntary prepayment of principal hereunder, the Company shall also pay all accrued and unpaid interest on the principal amount of this Note being prepaid.

(c)       Application of Prepayments of Loan. The Company shall give notice (which shall be irrevocable) to Holder of each prepayment pursuant to subsection 2(b) above not later than 12:00 noon, Buffalo, New York time, on the Business Day preceding the date of payment, specifying the aggregate principal amount of this Note to be prepaid and the payment date. Once any such notice has been given, the principal amount of this Note specified in such notice, together with interest on the amount of each such prepayment to the date of payment, shall become due and payable on such date of payment. Any such prepayment shall be applied to future unpaid installments in their inverse order and shall not first reduce the installments next falling due.

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3.        Replacement; Cancellation.

(a)       Replacement. Upon receipt of evidence reasonably satisfactory to the Company (an affidavit of Holder shall be satisfactory) of the ownership and the loss, theft, destruction or mutilation of this Note and, in the case of any such loss, theft or destruction, upon receipt of an indemnity reasonably satisfactory to the Company, or, in the case of any such mutilation, upon the surrender of this Note to the Company, the Company shall (at its expense) execute and deliver, in lieu thereof, a new Note representing the same rights represented by such lost, stolen, destroyed or mutilated Note and dated so that there will be no loss of interest on this Note.

(b)       Cancellation. After all principal, accrued interest and all other amounts at any time owed on this Note have been paid irrevocably in full, this Note shall be surrendered to the Company for cancellation. 

4.        Events of Default, Acceleration and Remedies.

4.1       Events of Default. The occurrence of any of the following shall constitute an “Event of Default” under this Note:

(a)       the Company fails to pay all or any portion of any amount due hereunder when the same becomes due and payable, whether at a stated payment date or by acceleration and such failure to timely pay continues uncured for a period of ten (10) days after the date such amount becomes due; or

(b)       the Company becomes insolvent or fails generally to pay its debts as they become due; or

(c)       the filing by the Company of a petition in bankruptcy or the Company institutes any action under federal or state law for the relief of debtors or seeks or consents to the appointment of an administrator, receiver, custodian or similar official for the winding up of its business (or has such a petition or action filed against it and such petition action or appointment is not dismissed or stayed within ninety (90) days); or

(d)       if any Governmental Authority of competent jurisdiction shall enter an order appointing, without consent of the Company, a custodian, receiver, trustee or other officer with similar powers with respect to the Company, or with respect to any substantial part of the Company’s property, or if an order for relief relating to the Company shall be entered in any case or proceeding for liquidation or reorganization or otherwise to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company, or if any petition for any such relief shall be filed against the Company and such petition shall not be dismissed or stayed within ninety (90) days; or

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(e)       the Company sells all or substantially all of its assets either in a single transaction or a series of related transactions; or

(f)       the owners of the Company as of the date hereof ceasing to own, directly or indirectly, in excess of 50.01% of the voting interests of Holder.

For purposes of this Note, the term “Governmental Authority” means any nation or government, any state or other political subdivision thereof, any agency, authority, instrumentality, regulatory body, court, administrative tribunal, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

4.2       Acceleration. Upon the occurrence of:

(a)       any Event of Default under subsections 4.1(c) or 4.1(d), the unpaid principal balance of this Note and all accrued and unpaid interest thereon at that time outstanding automatically shall mature and become due, and

(b)       any other Event of Default, Holder, at any time, at its option, and without notice or demand, may declare this Note and all accrued and unpaid interest thereon, due and payable, whereupon such amounts immediately shall mature and become due and payable.

4.3       Remedies. Upon the occurrence of an Event of Default, Holder may, at its option: (i) declare the entire unpaid principal balance of this Note, together with all accrued interest thereon, immediately due and payable regardless of any prior forbearance; or (ii) exercise any and all rights and remedies available to it at equity or law, by virtue of this Note, by statute or otherwise, including, without limitation, the right to collect from all sums due under this Note. The Company shall pay, jointly and severally, all costs and expenses incurred by or on behalf of Holder in connection with Holder's exercise of any or all of its rights and remedies under this Note, including, without limitation, reasonable attorneys' fees.

5.        Payments. All payments to be made to Holder shall be made in the lawful money of the United States of America in immediately available funds without setoff, counterclaim or deduction. Any payment received by Holder and its registered assigns after 4:00 p.m. (Buffalo, New York time) on any day, will be deemed to have been received on the next following Business Day. Notwithstanding the foregoing, Holder acknowledges that one or more payments may be made on this note as a setoff payment pursuant to the Section 10.02 (e) of that certain Asset Purchase Agreement dated the date hereof by and among the Company, the Holder and the other parties thereto.

6.        Place of Payment. Payments of principal, interest and other amounts shall be made by wire transfer of immediately available funds to the account referenced on Schedule A attached hereto or to such other account or to the attention of such other person as specified by prior written notice to the Company.

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7.        Waiver. The rights and remedies of Holder under this Note shall be cumulative and not alternative. No waiver by Holder of any right or remedy under this Note shall be effective unless in a writing signed by Holder. Neither the failure nor any delay in exercising any right, power or privilege under this Note will operate as a waiver of such right, power or privilege and no single or partial exercise of any such right, power or privilege by Holder will preclude any other or further exercise of such right, power or privilege or the exercise of any other right, power or privilege. To the maximum extent permitted by applicable law: (i) no claim or right of Holder arising out of this Note can be discharged by Holder, in whole or in part, by a waiver or renunciation of the claim or right unless in a writing, signed by Holder; (ii) no waiver that may be given by Holder will be applicable except in the specific instance for which it is given; and (iii) no notice to or demand on the Company will be deemed to be a waiver of any obligation of the Company or of the right of Holder to take further action without notice or demand as provided in this Note. The Company hereby expressly waives presentment for payment, protest and demand and notice of protest, demand, dishonor, nonpayment, intent to accelerate and acceleration of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time before, at or after maturity, without affecting the liability of the Company.

8.        Business Days. If any payment is due, or any time period for giving notice or taking action expires, on a day which is not a Business Day, the payment shall be due and payable on, and the time period shall automatically be extended to, the next Business Day immediately following, and Interest shall continue to accrue at the required rate hereunder until any such payment is made. For purposes of this Note the term “Business Day” means any day which is neither a Saturday or Sunday nor a legal holiday on which commercial banks are authorized or required to be closed in the State of New York.

9.        Governing Law. This Note shall be governed and construed in accordance with the domestic laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of New York.

10.      Authority. The Company represents and warrants that it has the full legal right, power and authority to execute and deliver this Note, and that this Note constitutes a valid, binding and enforceable obligation of it.

11.      Usury Laws. It is the intention of the Company and Holder to conform strictly to all applicable usury laws now or hereafter in force, and any interest payable under this Note shall be subject to reduction to the amount not in excess of the maximum legal amount allowed under the applicable usury laws as now or hereafter construed by the courts having jurisdiction over such matters. If the maturity of this Note is accelerated by reason of an election by Holder resulting from an Event of Default, voluntary prepayment by the Company or otherwise, then earned interest may never include more than the maximum amount permitted by law, computed from the date hereof until payment, and any interest in excess of the maximum amount permitted by law shall be canceled automatically and, if theretofore paid, shall at the option of Holder either be rebated to the Company or constitute payment on account of the principal amount of this Note, or if this Note has been paid, then the excess shall be rebated to the Company. The aggregate of all interest (whether designated as interest, service charges, points or otherwise) contracted for, chargeable, or receivable under this Note shall under no circumstances exceed the maximum legal rate upon the unpaid principal balance of this Note remaining unpaid from time to time. If such interest does exceed the maximum legal rate, it shall be deemed a mistake and such excess shall be canceled automatically and, if theretofore paid, rebated to the Company or constitute payment on account of the principal amount of this Note, or if this Note has been repaid, then such excess shall be rebated to the Company.

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12.      Successors and Assigns. This Note shall be binding upon the Company and upon its successors and assigns, and shall inure to the benefit of Holder and its successors and assigns; provided that this Note may not be assigned by the Company or the Holder without the prior written consent of the other party; provided, further, however, that the Holder may assign this Note to its shareholders in connection with the liquidation of the Company without the prior written consent of the Company.

13.      Severability. In the event that any provision of this Note is deemed to be invalid by reason of the operation of any law or by reason of the interpretation placed thereon by any Governmental Authority, the validity, legality and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby, all of which shall remain in full force and effect, and the affected term or provision shall be modified to the minimum extent permitted by law so as to achieve most fully the intention of this Note.

14.      WAIVER OF JURY TRIAL. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS NOTE. EACH PARTY CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.

15.      Forum Selection and Consent to Jurisdiction. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF NEW YORK, AND ANY APPELLATE COURT FROM ANY THEREOF, IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND EACH PARTY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, IN SUCH FEDERAL COURT. EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING IN THIS NOTE SHALL AFFECT ANY RIGHT HOLDER MAY OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO THIS NOTE AGAINST EACH PARTY OR ITS PROPERTY IN THE COURTS OF ANY JURISDICTION. EACH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS NOTE IN ANY COURT REFERRED TO ABOVE. EACH PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH COURT. EACH PARTY IRREVOCABLY CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES HEREIN SECTION. NOTHING IN THIS NOTE WILL AFFECT THE RIGHT OF HOLDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY APPLICABLE LAW.

- Remainder of Page Intentionally Left Blank; Signature Page Follows -

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[Signature Page to Seller Subordinated Promissory Note]

IN WITNESS WHEREOF, the undersigned has executed and delivered this Note on the Date of Issuance.

B.R. JOHNSON, LLC
By:	/s/ Justin M. Reich
Name:		Justin M. Reich
Title:		Manager

Accepted and Agreed this 1st day of November, 2016
B.R. JOHNSON, INC.
By:	/s/ William A. Harfosh
Name:		William A. Harfosh
Title:		President

Promissory Note –B.R. Johnson, Inc.

Schedule A

Account Name:

Account Number:

Bank:

ABA:

Reference:

Promissory Note –B.R. Johnson, Inc

EX-10.3

Exhibit 10.3

THE LIENS, SECURITY INTERESTS, ASSIGNMENTS AND/OR OTHER ENCUMBRANCES GRANTED BY THIS DOCUMENT IS SUBORDINATE TO THE LIENS OF KEYBANK NATIONAL ASSOCIATION, OR ITS SUCCESSORS OR ASSIGNS, PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF NOVEMBER 1, 2016, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED, RESTATED OR OTHERWISE MODIFIED (OR ANY SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH AGREEMENT).

LOAN AND SECURITY AGREEMENT

Loan and Security Agreement, dated as of November 1, 2016 (as the same may from time to time be amended, restated, supplemented or otherwise modified, this “Agreement”), by and between B.R. Johnson, LLC, a Delaware limited liability company (the “Company”), and Regional Brands Inc., a Delaware corporation (“Lender”).

WITNESSETH:

WHEREAS, the Company desires to obtain a term loan from Lender and Lender desires to make such loan available to the Company;

WHEREAS, the Company desires to grant to Lender a security interest in certain collateral to secure the prompt payment and performance in full of the Company’s obligations hereunder;

WHEREAS, the Company is entering into that certain Credit and Security Agreement, dated as of the date hereof (as the same may from time to time be amended, restated, supplemented or otherwise modified, the “Credit Agreement”), with KeyBank National Association;

WHEREAS, capitalized terms used but not defined in this Agreement shall have the respective meanings given to such terms in the Credit Agreement.

NOW, THEREFORE, in consideration of the mutual promises, representations and warranties contained herein, and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

1.       Loans. Subject to the terms and conditions of this Agreement, Lender agrees to make a term loan (the “Term Loan”) to the Company on the date hereof in the aggregate principal amount of $7,500,000.00. The Term Loan shall be evidenced by a promissory note in the form attached hereto as Exhibit A (the “Note” and, together with this Agreement, the “Loan Documents”). Payments of principal on the Term Loan will be due and payable as follows: (a) $300,000.00 on the first anniversary of the date hereof; (b) $500,000.00 on the second anniversary of the date hereof; (c) $600,000.00 on the third anniversary of the date hereof; (d) $700,000.00 on the fourth anniversary of the date hereof; and (e) the remaining outstanding principal balance of the Term Loan will be due and payable in full on the fifth anniversary of the date hereof (the “Maturity Date”).

2.       Interest.

2.1.       The Term Loan will bear interest at the rate of six percent (6%) per annum payable in cash on the outstanding principal balance of the Term Loan. Accrued and unpaid interest will be payable quarterly on January 1, April 1, July 1 and October 1 of each year during the term of this Agreement, with the first payment due and payable on January 1, 2017. In addition, accrued and unpaid interest will be payable together with each scheduled payment of principal on the Term Loan and on the Maturity Date. Interest will be computed on the basis of the actual number of days elapsed, over a year of 365/366 days.

2.2.       Notwithstanding the rates of interest specified in Section 2.1, or elsewhere herein, effective immediately upon the occurrence of an Event of Default (as defined in the Note) and for as long thereafter as such Event of Default is continuing, the principal balance of the Term Loan and the amount of all other Obligations (as defined below) will bear interest at a rate per annum equal to the rate of interest that would otherwise be applicable thereto pursuant to Section 2.1 plus four percent (4%) per annum (the “Default Interest”); provided, however, no interest charged thereon shall exceed the maximum amount allowed by law.

3.       Security Interest.

3.1.       To secure the prompt payment and performance in full when due, whether by lapse of time, acceleration or otherwise, of all of the obligations of the Company under the Loan Documents (the “Obligations”), the Company hereby grants to Lender a continuing security interest in, and a right to set off against, any and all right, title and interest of the Company in and to all of the Collateral. The parties hereto hereby acknowledge and agree that the security interest created hereby in the Collateral constitutes continuing collateral security for all of the Obligations, whether now existing or hereafter arising.

3.2.       The Company covenants that, so long as any of the Obligations remain outstanding, the Company will execute and deliver to Lender and/or file such agreements, assignments or instruments and do all such other things as Lender may reasonably deem necessary or appropriate (i) to assure to Lender its security interests hereunder are perfected, including such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as Lender may from time to time reasonably request in order to perfect and maintain the security interests granted hereunder in accordance with UCC and any other personal property security legislation in the appropriate state(s) or jurisdiction(s), and (ii) to otherwise protect and assure Lender of its rights and interests hereunder. The Company hereby authorizes Lender to prepare and file such financing statements (including continuation statements) or amendments thereof or supplements thereto or other instruments as Lender may from time to time deem necessary or appropriate in order to perfect and maintain the security interests granted hereunder in accordance with the UCC.

3.3.       The Company covenants that, so long as any of the Obligations remain outstanding, the Company will defend its interests in the Collateral against the claims and demands of all other parties claiming an interest therein and keep the Collateral free from all liens, claims and encumbrances of every nature whatsoever, except for the security interests granted hereunder and under the Credit Agreement, and for Permitted Liens.

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3.4.       The Company hereby irrevocably makes, constitutes and appoints Lender, its nominee or any other person whom Lender may designate as the Company’s attorney-in-fact with full power and for the limited purpose to sign in the name of the Company any financing statements, amendments and supplements to financing statements, continuation financing statements, notices and any similar documents which in Lender’s reasonable discretion would be necessary, appropriate or convenient in order to perfect or maintain perfection of the security interests granted hereunder, such power, being coupled with an interest, being and remaining irrevocable so long as any of the Obligations remain outstanding.

3.5.       Upon the occurrence of an Event of Default (as defined in the Note) and during continuation thereof, Lender will have, in addition to the rights and remedies provided herein or in the Note or by law, the rights and remedies of a secured party under the UCC (regardless of whether the UCC is the law of the jurisdiction where the rights and remedies are asserted and regardless of whether the UCC applies to the affected Collateral). In addition, Lender will have the right to exercise any one or more of the following remedies following the occurrence and during the continuance of an Event of Default: (i) to declare all amounts payable under the Loan Documents to be immediately due and payable without notice or demand to the Company; (ii) to sue for and recover all such payments; (iii) to take possession of the Collateral, without notice or demand (except to the extent otherwise required by law), wherever it may be located (and to enter on any premises of the Company for such purpose), without any court order or other process of law (and the Company hereby waives any and all damages resulting from such taking of possession); and (iv) to pursue any other remedy at law or in equity not inconsistent with the foregoing.

3.6.       Notwithstanding any action which Lender may take, the Company will be and remain liable for the payment and performance in full of all Obligations. The rights and remedies of Lender under the Loan Documents will be cumulative and not exclusive of any other right or remedy which Lender may have.

3.7.       In addition to all other sums due Lender with respect to the Obligations, the Company will pay to Lender promptly upon demand all reasonable documented costs and expenses incurred by Lender, including, but not limited to, reasonable attorneys’ fees and court costs, in protecting, preserving or obtaining the Collateral, in enforcing payment of the Obligations, in the prosecution or defense of any action or proceeding by or against Lender or the Company concerning any matter arising out of or in connection with this Agreement, the Note, any Collateral or any of the Obligations, or otherwise in exercising any of its rights or remedies hereunder or under applicable law, including, without limitation, any of the foregoing arising in, arising under or related to a case under Title 11 of the United States Code, as amended, modified, succeeded or replaced form time to time.

3.8.       In addition to other powers of attorney contained herein, the Company hereby designates and appoints Lender, and each of its designees or agents, as attorney-in-fact of the Company, irrevocably and with full power of substitution, with authority to do, take and perform all such acts and things as Lender may reasonably deem to be necessary, proper or convenient in connection with the Collateral, or in exercising any of its rights or remedies hereunder or under applicable law, upon the occurrence and during the continuation of an Event of Default. This power of attorney is a power coupled with an interest and will be irrevocable for so long as any of the Obligations remain outstanding. Lender will be under no duty to exercise or withhold the exercise of any of the rights, powers and privileges expressly or implicitly granted to it in any of the Loan Documents, and will not be liable for any failure to do so or any delay in doing so. This power of attorney is conferred on Lender solely to protect, preserve and realize upon its security interest in the Collateral.

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3.9.       The security interest in the Collateral will continue to be effective or be automatically reinstated, as the case may be, if at any time payment, in whole or in part, of any of the Obligations is rescinded or must otherwise be restored or returned by Lender. In the event that payment of all or any part of the Obligations is rescinded or must be restored or returned, all reasonable documented costs and expenses (including without limitation any reasonable legal fees and disbursements) incurred by Lender in enforcing such reinstatement will be paid promptly upon demand by the Company.

3.10.       Lender will not be liable under any of the Loan Documents for any acts or omissions other than as a result of its gross negligence or willful misconduct. In no event will Lender be liable for any special, incidental, indirect, exemplary, consequential or punitive damages or lost profits for any reason whatsoever.

4.       Representations of the Company. The Company represents and warrants to Lender as follows:

4.1.       The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite limited liability company power and authority to conduct its business as it is now being conducted and to own, lease and operate its properties and assets.

4.2.       The Company has all requisite power and authority to execute, deliver and perform the Loan Documents and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance by the Company of the Loan Documents and the consummation by the Company of the transactions contemplated hereby and thereby have been duly and validly authorized by all required limited liability company action on the part of the Company. Each of the Loan Documents has been duly and validly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting creditors’ rights generally, including the effect of statutory and other laws regarding fraudulent conveyances and preferential transfers and subject to the limitations imposed by general equitable principles (regardless whether such enforceability is considered in a proceeding at law or in equity).

4.3.       None of the execution, delivery or performance by the Company of any of the Loan Documents or the consummation of any of the transactions contemplated hereby or thereby, including, without limitation, the grant by the Company, and perfection, of the security interest in the Collateral granted hereby, will (a) violate any provision of the organizational or governing documents of the Company, (b) require any consent, waiver, approval, exemption, declaration, license, authorization or permit of, or filing or registration with or notification to, any federal, state, municipal or local government, official thereof, governmental or regulatory authority, agency, commission or department, including courts of competent jurisdiction (each, a “Governmental Authority”), except for the filing or recording of UCC financing statements, (c) require a consent under, result in a violation or breach of, constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation, amendment or acceleration or any obligation) under, or result in the creation of any lien, claim or encumbrance on any of the properties or assets of the Company pursuant to, any of the terms, conditions or provisions of any indenture, mortgage, note, bond, license, government registration, contract, lease, franchise, permit, agreement or other instrument or obligation to which the Company is a party or by which the Company or any of its properties or assets may be bound, or (d) violate any statute, law, rule, regulation, code or ordinance of any Governmental Authority applicable to the Company or by which the Company or any of its properties or assets may be bound.

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4.4.       There are no actions, suits, proceedings or claims pending or, to the knowledge of the Company, threatened against or affecting the Company by or before any Governmental Authority which, if adversely determined, would adversely affect (a) the ability of the Company to perform any of its obligations under any of the Loan Documents or (b) the legality, validity or enforceability of any of the Loan Documents.

4.5.       Following the closing of the BRJ Acquisition, the Company will be a solvent entity and a going concern with current liquidity to fund its operations, and none of the execution, delivery or performance of this Agreement or the Credit Agreement, and no other fact, event, circumstance or condition has occurred or exists that, would cause the Company to be insolvent.

4.6.       To the knowledge of the Company, all of the financial statements and other financial information of the Company and BRJ Seller provided to Lender on or prior to the date hereof are true and correct in all material respects, and fairly present in all material respects the financial position and results of operations of the Company or BRJ Seller, as applicable, as of and for the applicable periods covered thereby.

4.7.       The Company and its representatives have fully disclosed any and all facts that are important and material to Lender’s consideration of the Term Loan, and no fact, event, condition or occurrence exists that has not been disclosed and would cause a reasonable person not to make the Term Loan.

4.8.       As of the date hereof, the address of the Company’s chief executive office and chief place of business is 6960 Fly Road, East Syracuse, New York. As of the date hereof, the Company’s exact legal name is as shown in this Agreement.

4.9.       Following the closing of the BRJ Acquisition, the Company will have good, valid and marketable title to the Collateral, free and clear of all liens, claims and encumbrances of every nature whatsoever other than the security interest created hereby and by the Credit Agreement, and for Permitted Liens.

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4.10.       This Agreement creates a valid security interest in favor of Lender in the Collateral which, when properly perfected, will constitute a valid, perfected security interest in such Collateral, to the extent such security interest can be perfected by filing under the UCC, which security interest shall be a second priority security interest until such time as the Credit Agreement has been terminated in accordance with its terms and shall thereafter be a first priority security interest.

5.       Covenants. All of the covenants set forth in Article V of the Credit Agreement (the “Covenants”) are hereby incorporated by reference in this Agreement. For purposes of this Agreement, all references in the Covenants to Agent or any Lender shall be deemed to refer to Lender hereunder. The Company will be required to comply with all of the Covenants and perform all of its obligations under the Covenants (including, without limitation, all notice and information delivery requirements) for the benefit of Lender as if the Covenants were fully set forth herein, and Lender will be entitled to exercise any and all rights and remedies available to Agent under the Credit Agreement in the event that the Company breaches, defaults or otherwise fails to perform or comply with any of the Covenants. For purposes of this Agreement, all of the Covenants, and all of Lender’s rights and remedies with respect thereto, will survive any termination of the Credit Agreement. In the event that (i) any modification of the Covenants is approved by the Agent, such modification shall automatically apply to this Agreement and (ii) in the event that any Event of Default under the Credit Agreement is at any time waived by the Agent, such waiver shall be deemed effective with respect to any Event of Default hereunder caused by the Event of Default under the Credit Agreement.

6.       Survival. All representations, warranties, covenants and agreements contained in the Loan Documents and in any document, exhibit, schedule or certificate delivered in connection herewith or incorporated by reference herein will survive the execution and delivery of this Agreement and the closing of the Term Loan and will not be affected by any investigation at any time made by Lender or on its behalf.

7.       Miscellaneous.

7.1.       This Agreement shall be governed by, and construed and enforced in accordance with, the internal laws of the State of Ohio without giving any effect to principles of conflicts of laws. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of the transactions contemplated by this Agreement will be commenced in the state and federal courts sitting in the County of Cuyahoga, State of Ohio (the “Ohio Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the Ohio Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of this Agreement), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such Ohio Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HERETO HEREBY IRREVOACABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMNT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

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7.2.       All notices, requests, demands, instructions and other communications to be given under this Agreement shall be in writing and shall be deemed given (a) when sent if sent by facsimile or e-mail (or on the immediately following Business Day if sent after the close of business or on a day that is not a Business Day) with electronic confirmation of delivery thereof, (b) when delivered, if delivered personally to the intended recipient, (c) one Business Day following sending by overnight delivery via a nationally recognized overnight courier service, or (d) three Business Days following sending by registered or certified mail, return receipt requested, postage prepaid and in each case, addressed to a party at the following address for such party:

To the Company:

c/o Lorraine Capital, LLC

591 Delaware Avenue

Buffalo, New York 14202

Attention: Richard Gioia, Member

Facsimile: (940) 382-9966

E-mail: jreich@lorrainecapital.com

With a copy (which shall not constitute notice) to:

Lippes Mathias Wexler Friedman LLP

50 Fountain Plaza, Suite 1700

Buffalo, New York 14202

Attention: Brian J. Bocketti, Esq.

Facsimile: (716) 853-5199

E-mail: bbocketti@lippes.com

To Lender:

Regional Brands Inc.

6060 Parkland Boulevard

Cleveland, Ohio 44124

Attention: Brian Hopkins

Facsimile: (216) 825-4001

E-mail: brian@ancora.net

With a copy (which shall not constitute notice) to:

Olshan Frome Wolosky LLP

1325 Avenue of the Americas

New York, New York 10019

Attention: Michael R. Neidell, Esq.

Facsimile: (212) 451-2222

E-mail: mneidell@olshanlaw.com

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7.3.       This Agreement shall be binding upon and inure to the benefit of the Company, Lender and their respective successors and permitted assigns. The Company may not assign any of its rights or delegate any of its obligations under all or any part of this Agreement or the Note without the prior written consent of Lender.

7.4.       This Agreement, the Note and all exhibits and schedules hereto constitute the entire agreement between the parties hereto in respect of the subject matter hereof and supersede all other prior agreements and understandings, both written and oral, between the parties in respect of the subject matter hereof.

7.5.       This Agreement may be amended, modified and supplemented in any and all respects by written agreement of the parties hereto with respect to any of the terms contained herein. No waiver hereunder shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated. No failure or delay in exercising any right, power or privilege hereunder or under applicable law will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder or under applicable law. The failure of Lender to insist upon strict adherence to any term of this Agreement on one or more occasions shall not be considered a waiver or deprive Lender of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement.

7.6.       This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which together shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other party hereto. Facsimile or .pdf signatures shall have the same force and effect as original signatures.

7.7.       If any provision of this Agreement is determined to be illegal, invalid or unenforceable, such provision shall be fully severable and the remaining provisions shall remain in full force and effect and shall be construed without giving effect to the illegal, invalid or unenforceable provision.

7.8.       The headings in this Agreement are for reference purposes only and shall not constitute a part hereof.

[Signature page follows]

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

B.R. JOHNSON, LLC
By:	/s/ Justin M. Reich
	Name:	Justin M. Reich
	Title:	Manager

REGIONAL BRANDS INC.
By:	/s/ Brian Hopkins
	Name:	Brian Hopkins
	Title:	Chairman and Chief Executive Officer

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EXHIBIT A

THE INDEBTEDNESS EVIDENCED BY THIS DOCUMENT IS SUBORDINATE TO THE INDEBTEDNESS OF THE MAKER(S) (OR ANY SUCCESSOR THERETO) TO KEYBANK NATIONAL ASSOCIATION, AS AGENT, OR ANY OF ITS SUCCESSORS OR ASSIGNS, PURSUANT TO THE TERMS OF A SUBORDINATION AGREEMENT DATED AS OF NOVEMBER 1, 2016, AS SUCH AGREEMENT MAY FROM TIME TO TIME BE AMENDED, RESTATED OR OTHERWISE MODIFIED (OR ANY SUCCESSOR AGREEMENT WHICH REPLACES AND REFERENCES SUCH AGREEMENT).

PROMISSORY NOTE

$7,500,000.00 November 1, 2016

FOR VALUE RECEIVED, B.R. Johnson, LLC (“Borrower”) hereby promises to pay to the order of Regional Brands Inc. (“Lender”), in lawful money of the United States of America, the principal sum of Seven Million Five Hundred Thousand Dollars ($7,500,000.00). Capitalized terms used but not defined herein shall have the respective meanings given to such terms in the Loan and Security Agreement, dated as of November 1, 2016, between Borrower and Lender (the “Loan and Security Agreement”). The principal of this Note will be payable on each date provided for in Section 1 of the Loan and Security Agreement.

Borrower also promise to pay interest on the unpaid principal amount of the Term Loan, from the date of this Note until the payment in full thereof, at the rate per annum set forth in Section 2.1 of the Loan and Security Agreement. Such interest will be payable on each date provided for in such Section 2.1; provided, however, that interest (including Default Interest) on any principal portion which is not paid when due will be payable on demand. All payments of principal of and interest on this Note shall be made in immediately available funds.

All payments by Borrower of principal of and interest on this Note will be made to Lender at its address referred to in Section 7.2 of the Loan and Security Agreement. If any payment becomes due on a day other than a business day, the due date thereof shall be extended until the next succeeding business day, and interest shall be payable at the applicable rate during such extension.

Borrower hereby authorizes Lender to endorse on Schedule 1 (or continuation thereof) annexed to this Note the date and amount of the Term Loan made to Borrower and all payments of principal amounts in respect of such Term Loan, which endorsements shall, absent manifest error, be conclusive evidence of the outstanding principal amount of the Term Loan; provided, however, that the failure by Lender to make any such notation with respect to the Term Loan or any payment thereof shall not limit or otherwise affect the obligations of Borrower under this Note.

The delay or failure to exercise any right hereunder shall not waive such right. The undersigned hereby waives demand, presentment, protest, notice of dishonor or nonpayment, notice of protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note, any and all delays or lack of diligence in collection hereof and assents to each and every extension or postponement of the time of payment or other indulgence.

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Lender may, at any time, present this Note or any sum payable hereunder to Borrower in satisfaction of any sum due or payable by Lender to Borrower for any reason whatsoever.

The payment and performance of Borrower’s obligations under this Note are secured by a security interest in the Collateral, as defined and provided in the Loan and Security Agreement.

The occurrence of any one or more of the following events shall constitute an Event of Default: (a) the failure to pay principal of this Note as and when due within five (5) Business Days of the date such payment is due; (b) the failure to pay interest on this Note or any other payment required to be made to Lender under any Loan Document within five (5) Business Days of the date such payment is due; (c) any representation or warranty of Borrower contained in the Loan and Security Agreement shall prove to have been incorrect, false or misleading in any material respect on or as of the date made or shall have become inaccurate in any material respect; (d) Borrower shall have breached or failed to perform or comply with any covenant contained in the Loan and Security Agreement (including the Covenants, after giving effect to any applicable grace or cure period contained in the Credit Agreement); (f) there shall have occurred an Event of Default under the Credit Agreement; (g) (i) any material provision, in the reasonable judgment of Lender, of any Loan Document shall at any time for any reason cease to be valid and binding and enforceable against Borrower; (ii) the validity, binding effect or enforceability of any Loan Document against Borrower shall be contested by Borrower; (iii) Borrower shall deny that it has any or further liability or obligation under any Loan Document; (iv) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to Lender the benefits purported to be created thereby; (v) any security interest purported to be created with respect to the Collateral shall be asserted by Borrower not to be a valid and perfected security interest on the Collateral and of the same effect and priority purported to be created thereby; or (vi) except as specifically agreed to in writing by Lender, any applicable Loan Document for any reason (other than pursuant to the terms thereof) ceases to create a valid and perfected security interest (subject to Permitted Liens) in any of the Collateral; (h) a proceeding is filed or commenced against Borrower for bankruptcy, reorganization, dissolution or liquidation which, in the case of an involuntary proceeding, is not dismissed or discontinued within sixty (60) days, or Borrower voluntarily or involuntarily terminates or dissolves or is terminated or dissolved; or (g) the insolvency of, the appointment of a custodian, trustee, liquidator or receiver for any of the property of, an assignment for the benefit of creditors by, or the filing of a petition under bankruptcy, insolvency or debtor’s relief law, or for any readjustment of indebtedness, composition or extension by or against, Borrower.

Borrower agrees that if an Event of Default occurs under this Note, then the unpaid principal balance of this Note, together with interest and other amounts owing in respect thereof, including but not limited to all fees and expenses provided for in the Loan and Security Agreement, will immediately become due and payable without notice or demand. In addition, Lender will have all of the rights and remedies provided in the Loan and Security Agreement and by law. Borrower agrees to pay to Lender all expenses incurred by Lender, including reasonable attorneys’ fees, in enforcing and collecting this Note.

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In the event any one or more of the provisions of this Note shall for any reason be held to be invalid, illegal or unenforceable, in whole or in part or in any respect, or in the event that any one or more of the provisions of this Note operate to invalidate this Note, then and in either of those events, such provision or provisions only shall be deemed null and void and shall not affect any other provision of this Note, and the remaining provisions of this Note shall remain operative and in full force and effect and shall in no way be affected, prejudiced or disturbed thereby.

Borrower further agrees to indemnify and hold harmless Lender from and against any and all damages, liabilities, losses, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) which Lender may incur by reason of Borrower’s failure promptly to pay when due any indebtedness evidenced by this Note.

This Note may not be prepaid by Borrower. This Note shall be paid without deduction by reason of any set-off, defense or counterclaim of Borrower.

The Note shall be governed by and construed in accordance with the laws of the State of Ohio, without giving any effect to principles of conflicts of law, and shall be binding upon the successors and permitted assigns of Borrower and shall inure to the benefit of the successors and assigns of Lender. Exclusive jurisdiction relating to this Note shall vest in the Ohio Courts.

B.R. JOHNSON, LLC
By:	/s/ Justin M. Reich
	Name:	Justin M. Reich
	Title:	Manager

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SCHEDULE 1

Date	Amount of Loan	Amount of Principal Repaid	Unpaid Principal Amount
November 1, 2016	$7,500,000.00

EX-10.4

Exhibit 10.4

MANAGEMENT SERVICES AGREEMENT

This Management Services Agreement, dated as of November 1, 2016, is entered into by and between B.R. JOHNSON, LLC, a Delaware limited liability company (the “Company”) and LORRAINE CAPITAL, LLC, a New York limited liability company (“Lorraine”).

WHEREAS, the Company desires to engage Lorraine to render certain management services to the Company and Lorraine desires to provide such services to the Company.

NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto agree as follows:

Section 1.              Services.

1.1           Engagement of Lorraine. The Company hereby retains Lorraine to render the management services described in this Section 1 during the term of this Agreement, and Lorraine hereby agrees to provide such services to the Company during the term hereof.

1.2          Management Services. During the term of this Agreement, Lorraine agrees to:

(a)       provide management services to the Company, including monitoring the business of the Company and conducting periodic reviews and analyses of such business as reasonably requested by the Company or by Regional Brands Inc., a Delaware corporation (“Regional Brands”);

(b)       evaluate potential merger and acquisition opportunities, including financial modeling, industry research, management evaluation and other due diligence services, in each case as reasonably requested by the Company or by Regional Brands; and

(c)       manage all accounting/financial duties and reporting functions including preparing and distributing monthly and quarterly unaudited financial statements and annual audited financial statements as well as annual budgets as may be reasonably requested by the Company or by Regional Brands, including, with respect to such financial statements, in sufficient time and in such form and substance as are needed to enable Regional Brands to timely file the reports filed by it under the Securities Exchange Act of 1934, as amended, and assist and support Regional Brands’ compliance with applicable requirements of the Securities Exchange Act of 1934, as amended, the Securities Act of 1933, as amended, the Sarbanes-Oxley Act of 2002, and the rules and regulations of the Securities and Exchange Commission promulgated under each of the foregoing.

1.3          Extent of Services. In carrying out its obligations under this Section 1, Lorraine shall devote such of its time and personnel as may be reasonably required to discharge its obligations to provide services hereunder and shall have regard to the objectives of the Company and of Regional Brands with respect to their respective businesses and any specific instructions from time to time communicated in writing by the Company or by Regional Brands to Lorraine with respect to the respective businesses of the Company and Regional Brands and the services provided hereunder. Lorraine shall perform the services hereunder with the same degree of care, skill and prudence customarily exercised by it in respect of its own business, operations and affairs. Lorraine shall be free to render similar services to others.

Section 2.               Expense Reimbursement and Compensation.

2.1           Reimbursement of Expenses. Lorraine shall be reimbursed within ten (10) business days after the submission to the Company of a reasonably detailed invoice for any out-of-pocket expenses reasonably incurred by Lorraine or any of its personnel in connection with the provision of the services described in Section 1 hereof, but not to exceed $25,000 annually without Regional Brands’ prior written consent; provided that Lorraine shall not be entitled to any reimbursement hereunder for any of its general overhead, including, compensation or benefits payable to its employees.

2.2           Fees.

(a)       Subject to subsections (c) and (d) below, as compensation for the services provided pursuant to this Agreement, the Company shall pay Lorraine an annual fee in the amount of the greater of (i) $75,000 or (ii) five percent (5%) of the annual EBITDA (as defined below) of the Company (the “Management Fee”), payable in quarterly installments, in arrears, and payable on a pro-rated basis for any partial months.

(b)       EBITDA shall be determined by mutual agreement of Lorraine and Regional Brands. In the event that Lorraine and Regional Brands are unable to agree upon EBITDA for the applicable period within twenty (20) days after their commencement of discussions regarding the calculation of EBITDA, they shall submit any items in dispute (“Disputed Amounts”) for resolution to an independent public accounting firm to be agreed upon by Lorraine and Regional Brands (the “Independent Accountant”), who shall resolve the Disputed Amounts only and determine EBITDA accordingly. The Independent Accountant’s decision for each Disputed Amount must be within the range of values assigned to each such item by Lorraine, on the one hand, and Regional Brands, on the other hand. The Independent Accountant shall make a determination as soon as practicable and in any event within thirty (30) days after its engagement, and its resolution of the Disputed Amounts and resulting determination of EBITDA shall be conclusive and binding upon the parties hereto and may be entered as a final judgment in any court of competent jurisdiction. The fees and expenses of the Independent Accountant shall be paid by the Company.

(c)       In the event that EBITDA for any fiscal year ended during the term of this Agreement is negative, any such negative amount shall offset (on a dollar-for-dollar basis) any positive EBITDA achieved during the next subsequent fiscal year only for purposes of determining Lorraine’s entitlement to, and the amount of, the Management Fee hereunder. Notwithstanding the foregoing, in no event shall the Management Fee be less than $75,000 for any fiscal year.

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(d)       Within one hundred fifty (150) days after the end of each fiscal year, the Management Fees calculated and paid pursuant to subsections (a), (b) and (c) above shall be increased or decreased to the extent that the actual, aggregate EBITDA for such fiscal year, determined in the manner provided above based on the Company’s audited financial statements for such fiscal year, is higher or lower than the EBITDA calculated in connection with the quarterly calculations above. The amount of any adjustment, if any, shall be offset against or added to the amount of Management Fees due and owing for subsequent quarterly payment(s) due or, at the election of Regional in the event of a downward adjustment, refunded to the Company by Lorraine.

(e)       “EBITDA” shall mean the normalized earnings of the Company, for the applicable measurement period, before interest, taxes, depreciation and amortization, determined in accordance with generally accepted accounting principles consistently applied.  For purposes of normalizing earnings, earnings will be calculated without giving effect to extraordinary or non-recurring gains or losses, whether from sales of assets (other than inventory sold in the ordinary course of business) or from other sources.

Section 3.              Term; Termination.

3.1          Term of Agreement. This Agreement shall become effective on the date hereof and shall continue in full force and effect unless and until terminated in accordance with Section 3.2(a) below.

3.2          Termination.

(a)       Termination. Either party hereto or Regional Brands may terminate this Agreement upon sixty (60) days’ prior written notice to the other party for any reason or for no reason. In connection with any such termination, Lorraine agrees to cooperate with the Company in transitioning any responsibilities of Lorraine to a new service provider. Further, this Agreement shall terminate upon the consummation of a Company Sale (as defined in the Limited Liability Company Agreement, dated as of November 1, 2016, of the Company (as the same may be amended and/or restated from time to time, the “LLC Agreement”)).

(b)       Effect of Termination. From and after the effective date of any termination pursuant to Section 3.2(a) hereof, the Company shall have no liability to Lorraine for any compensation hereunder, and Lorraine shall have no obligation to perform services hereunder. Upon effectiveness of the termination of this Agreement, Lorraine shall return to the Company all original records belonging to the Company. Lorraine will maintain confidential and, except to the extent required by law or legal process, not disclose to others any information or records received by it from or on behalf of the Company in connection with the performance of this Agreement, which obligation will survive any termination of this Agreement. Notwithstanding anything to the contrary contained herein, in the event of termination of this Agreement, the Company shall remain obligated to reimburse the Lorraine for its expenses incurred prior to the effectiveness of such termination in accordance with, and subject to, the provisions of Section 2.1 hereof.

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(c) Transition Services. Following a termination of this Agreement by Regional Brands pursuant to Section 3.2(a) above, Regional Brands may elect, by notice to Lorraine, to engage Lorraine to continue to provide management services to the Company hereunder for a period of no less than six (6) months. In consideration of providing such services, the Company shall pay Lorraine a fee in the amount of ten percent (10%) of the EBITDA for such period. The management fees payable hereunder shall be calculated by the Company and paid within twenty (20) days of the end of such six (6) month period. Any dispute regarding the amount of management fees payable under this Section shall be finally determined by the Independent Accountant pursuant to Section 2.2(b).

Section 4.              Miscellaneous.

4.1          Assignment. Neither Lorraine nor the Company may assign this Agreement or their respective rights or obligations hereunder to any third party; provided, however, that Lorraine may assign any or all of its rights or obligations hereunder to an entity which controls, is controlled by, or is under common control with Lorraine.

4.2           Notices. All notices and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given (a) when delivered personally, (b) if sent by facsimile, when receipt thereof is acknowledged at the telecopy number below, (c) the day following the day on which the same has been delivered prepaid for overnight delivery to a national air courier service, (d) five (5) business days following deposit in the United States Mail, certified, postage prepaid, to the respective addresses of the parties as set forth below:

If to the Company,             B.R. Johnson, LLC

to:                                       6960 Fly Road

East Syracuse, New York 13057

Attention:

Email:

Fax:

and                                      Regional Brands Inc.

6060 Parkland Boulevard 

Cleveland, Ohio 44124
Attention: Brian Hopkins216-825-4000
Email: brian@ancora.net

Fax: (216) 825-4001

If to Lorraine, to:                Lorraine Capital, LLC

591 Delaware Avenue
Buffalo, New York 14202

Attention: Justin Reich
Email: jreich@lorrainecapital.com
Fax: (940) 382-9966

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4.3          Waiver; Remedies. Any waiver by any party of a breach of any provision of this Agreement shall not operate as or be construed to be a waiver of any other breach of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement on one or more occasions will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver hereunder must be in writing. All rights and remedies which the Company or Lorraine may have under this Agreement are cumulative and in addition to any rights or remedies under applicable law or in equity. Any amendment, modification, or waiver of any provision of this Agreement must be in writing shall require the prior approval of the Board of Managers and the members of the Company as provided in the LLC Agreement.

4.4           Binding Effect. The provisions of this Agreement shall be binding upon and inure to the benefit of the Company and Lorraine and their respective successors and permitted assigns.

4.5           No Third Party Beneficiaries. This Agreement does not create, and shall not be construed as creating, any rights enforceable by any person not a party to this Agreement, except that Regional Brands shall be an express third-party beneficiary of this Agreement and shall have the right to enforce all rights and remedies of the Company and/or Regional Brands under, or with respect to, this Agreement.

4.6           Headings. The headings in this Agreement are solely for convenience of reference and shall be given no effect in the construction or interpretation of this Agreement.

4.7           Counterparts; Governing Law. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to conflict of laws principles. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com) or other transmission method and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

4.8          Relationship of Parties. The parties agree that Lorraine in the performance of its duties hereunder is an independent contractor acting as the agent of the Company, and that nothing contained herein shall constitute either party as employee or legal representative of the other for any purpose whatsoever, nor shall this Agreement be deemed to create any form of business organization, joint venture, or partnership between the parties hereto or as giving Lorraine any type of property interest in the Company, nor is any party granted any right or authority to assume or create any obligation or responsibility on behalf of the other party, except as otherwise provided herein, nor shall any party be in any way liable to the other party for any debt of the other. The Company acknowledges that neither Lorraine nor any of its principals is registered under any federal or state law, rule or regulation as an investment advisor or securities broker or dealer and agrees that Lorraine, unless and until registered, shall not be subject to restrictions thereunder in its relationship with the Company, including without limitation the nature and amount of compensation received for services hereunder.

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4.9          Entire Agreement. This Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof.

4.10        Indemnification. The Company hereby agrees to indemnify and hold Lorraine, its managers, members, officers, employees and agents harmless from, against, for and in respect of any loss, obligation, claim, liability, settlement payment, award, judgment, fine, penalty, interest charged, expense, damage or deficiency or other charge or expense (including reasonable attorneys’ fees and disbursements and related court filing fees, court costs, witness fees and similar matters, in each case whether incurred in a third party action or an action to enforce this Agreement) incurred or required to be paid as a result of or arising out of its entering into this Agreement or its providing services hereunder; provided, however, that a party shall not be entitled to any indemnification pursuant to this Section 4.10 if a court of competent jurisdiction has finally determined that such party is guilty of actual fraud, willful misconduct or gross negligence.

[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date first above written.

B.R. JOHNSON, LLC
By:	/s/ Justin M. Reich
	Name:	Justin M. Reich
	Title:	Manager
LORRAINE CAPITAL, LLC
By:	/s/ Justin M. Reich
	Name:	Justin M. Reichu
	Title:	Member

[Signature Page to Management Services Agreement]

EX-10.5

Exhibit 10.5

_________________________



B.R. JOHNSON, LLC

LIMITED LIABILITY COMPANY AGREEMENT

__________________________

Table of Contents

Page

ARTICLE I FORMATION OF COMPANY		1
1.1	Formation	1
1.2	Name	1
1.3	Principal Office of the Company	1
1.4	Purposes	1
1.5	Term	2
1.6	Representations	2
1.7	Definitions	2
ARTICLE II CAPITAL		9
2.1	Capital Contributions	9
2.2	Capital Accounts	9
ARTICLE III ALLOCATIONS OF NET INCOME AND NET LOSS		10
3.1	Allocations of Net Income and Net Loss	10
3.2	Allocations on Liquidation	10
3.3	Special Allocation Rules	10
3.4	Special Allocations	12
3.5	Allocation of Taxable Income or Loss.	12
3.6	Depreciation Recapture	13
ARTICLE IV DISTRIBUTIONS		13
4.1	Distributions	13
4.2	Restriction on Distributions	14
4.3	Passed Distributions	14
ARTICLE V MEMBERS		14
5.1	Powers of Members	14
5.2	Meetings of Members	14
ARTICLE VI MANAGEMENT		16
6.1	Board of Managers; Election	16
6.2	Notice of Board of Managers Meetings; Location; Waiver of Notice	17
6.3	Quorum; Approvals; Written Action	18
6.4	Powers, Rights and Duties of the Board of Managers	18
6.5	Compensation of Managers	19
6.6	Limitations on Actions	19
6.7	Consent to Company Sale	21
6.8	Executive Officers	23
6.9	Partnership Representative	24
6.10	Board Observers	24
ARTICLE VII OPERATION OF THE COMPANY		24
7.1	Books of Account	24
7.2	Reports	25
7.3	Access to Books	25
7.4	Bank Accounts	25
7.5	Tax Filings, Elections and Cooperation	26
7.6	Partnership Representative	28

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7.7	Tax Matters Partner for Transition Years	29
7.8	Survival	30
ARTICLE VIII DISSOLUTION; CONTINUATION OF COMPANY		30
8.1	Dissolution of the Company	30
8.2	Continuation	31
8.3	Distributions on Liquidation	31
8.4	Termination	31
8.5	Final Statement	32
8.6	Company Sale	32
ARTICLE IX LIABILITY, EXCULPATION AND INDEMNIFICATION		32
9.1	Liability	32
9.2	Exculpation	32
9.3	Duties and Liabilities of Covered Persons.	33
9.4	Indemnification	33
9.5	Expenses	34
9.6	Limitation on Indemnification	34
9.7	Non Exclusivity	34
9.8	Amendments	34
ARTICLE X TRANSFER		34
10.1	Transfer	34
10.2	Restrictions on Transfer	35
10.3	Additional Restrictions on Transfer	36
10.4	Right of First Refusal	36
10.5	Tag-Along Right	38
10.6	Put/Call Right	39
ARTICLE XI ISSUANCE OF MEMBERSHIP CERTIFICATES		40
11.1	No Issuance of Membership Certificates	40
11.2	Transfer of Membership Interests	40
ARTICLE XII GENERAL		41
12.1	Relationship of Members	41
12.2	Waiver of Jury Trial	41
12.3	Amendment	41
12.4	Governing Law	42
12.5	Consent to Jurisdiction, Etc	42
12.6	Intentionally Omitted	42
12.7	Notices	42
12.8	Severability	43
12.9	Title to Company Property	43
12.10	Partition	43
12.11	Captions	43
12.12	Pronouns and Plurals	43
12.13	Payment	43
12.14	Counterparts	43

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12.15	Confidentiality	43
12.16	Further Assurances	44
12.17	Directors and Officers Liability Insurance	44
12.18	No Third Party Rights	44
12.19	Successors and Assigns	44
12.20	Power of Attorney	44
12.21	Equitable Relief	45
12.22	Waiver	45
12.23	Entire Agreement	45

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SCHEDULE A MEMBER CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS

SCHEDULE B NOTICE INFORMATION

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B.R. JOHNSON, LLC
LIMITED LIABILITY COMPANY AGREEMENT

THIS LIMITED LIABILITY COMPANY AGREEMENT (as the same may be amended from time to time, the “Agreement”) of B.R. Johnson, LLC, a limited liability company organized under the laws of the State of Delaware (the “Company”) is dated and effective as of November 1, 2016 (the “Effective Date”), by and among each of the Persons whose name appears at the foot of this Agreement (such persons being hereinafter referred to collectively as the “Members” and individually as a “Member”).

WHEREAS, the Company was organized under the Delaware Limited Liability Company Act pursuant to a Certificate of Formation of the Company filed in the Office of the Secretary of the State of Delaware on September 8, 2016 (the “Certificate”); and

WHEREAS, the parties hereto desire to establish their respective rights and obligations pursuant to the Delaware Limited Liability Company Act in connection with their forming such limited liability company.

NOW THEREFORE, for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, and in consideration of the mutual covenants and agreements herein contained, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

FORMATION OF COMPANY

1.1            Formation. The Company was formed as a limited liability company by the filing of the Certificate. The Members hereby set forth their agreements with one another regarding the operation of the Company pursuant to the terms of the Delaware Limited Liability Company Act, as amended from time to time (the “LLC Act”). The Members agree that each of them shall execute and file all certificates and documents and take all actions as the Company shall determine shall be necessary or appropriate for the qualification of the Company to do business, and its continuation, as a foreign limited liability company in any jurisdiction where the Company’s business would require the Company to be qualified. The Certificate and any other documents shall be recorded in all offices or jurisdictions where the Company shall determine such recording to be necessary or advisable for the conduct of the business of the Company.

1.2            Name. The name of the Company is “B.R. Johnson, LLC”.

1.3            Principal Office of the Company. The principal office of the Company is located at 6960 Fly Road, East Syracuse New York. The Board of Managers may, at any time, change the location of the Company’s principal place of business.

1.4            Purposes. The purposes of the Company are to (a) receive as capital contributions certain assets (cash as well as tangible and intangible property) from the Members; (b) conduct and carry on the business and manage the assets formerly carried on and managed by BR Johnson, Inc. and its Affiliates and such other businesses and assets as may subsequently be acquired or developed by the Company in accordance with the provisions hereof (collectively, the “Operations”); (c) employ personnel to manage the Operations and (d) take all actions necessary or appropriate in order to consummate such capital contributions and thereafter carry on and maximize the value of the Operations.

1.5            Term. The term of the Company commenced with the filing of the Certificate in the Office of the Secretary of State of the State of Delaware on September 8, 2016 and shall continue until dissolved in accordance with this Agreement.

1.6            Representations.

 (a)            Each Member, severally and not jointly, represents and warrants that (i) if an entity, the Member is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and that it has all requisite power, authority and capacity to own, operate and lease its properties and to carry on its business; (ii) it has all requisite power, authority and capacity to enter into this Agreement and to perform its obligations hereunder; (iii) it has duly authorized the execution, delivery and performance of this Agreement and the transactions contemplated hereby, and this Agreement constitutes its valid and binding obligation, enforceable against it in accordance with its terms; (iv) the execution, delivery and performance of this Agreement by it and the consummation of the transactions contemplated hereby do not and will not result in the breach of any of the terms and conditions of, or cause a default under, any contract, agreement, commitment, indenture, mortgage, pledge, note, bond, license or other instrument or obligation to which it is a party or by which it or any of its respective properties or assets may be bound or affected, and if an entity, do not and will not violate any of the terms of its organizational documents; (v) no consent or approval of any other Person is required in connection with its execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby; (vi) it is acquiring the Membership Interest in the Company solely for its own account and not for the account of any other Person and not with a current view toward the distribution or resale thereof; and (vii) it is an “accredited investor” as that term is defined in the Securities Act.

 (b)            Each Member agrees to furnish such certificates, resolutions or other documentary evidence with respect to the foregoing representations and warranties as may be reasonably requested to enable the Company to consummate the transactions contemplated by this Agreement and the Management Services Agreement, and otherwise to carry out the Company’s purposes.

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

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or a material amount of the assets of any Person, or any business or division of any Person, (b) the acquisition of outstanding equity interests of any Person, or (c) the acquisition of another Person by a merger, amalgamation or consolidation or any other combination with such Person.

“Affiliate” means, with respect to any Person, any other Person which directly or indirectly, through one or more intermediaries, Controls, is Controlled by or is under common Control with such Person and when used with respect to any natural Person shall also include (i) any trust or other estate in which such Person has a substantial beneficial interest or as to which such Person serves as trustee or in a similar capacity and (ii) any relative or spouse of such Person, or any relative of such spouse, who has the same principal residence as such Person.

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“Asset Value” means, with respect to any asset of the Company, the asset’s adjusted basis for federal income tax purposes, except as follows:

(a)            the initial Asset Value of any asset contributed by a Member to the Company shall be the Gross Fair Market Value of such asset;

(b)            upon the distribution in kind of any Company asset, the Asset Value of such asset shall be adjusted immediately prior to such distribution to equal its Gross Fair Market Value;

(c)            to the extent the Members agree that such adjustment is reasonably necessary or appropriate to reflect the relative economic interests of the Members in the Company, the Asset Values of all Company assets shall be adjusted to equal their respective Gross Fair Market Values as of the following times: (i) upon the acquisition of an interest in the Company by a new Member or an additional interest by an existing Member in exchange for more than a de minimis capital contribution; (ii) upon the distribution by the Company to a Member of more than a de minimis amount of property as consideration for an interest in the Company; (iii) the grant of a Membership Interest in the Company (other than a de minimis interest) as consideration for the provision of services to or for the benefit of the Company by an existing Member acting in the capacity of a Member or by a new Member acting in the capacity of a Member or in anticipation of being a Member; and (iv) the Liquidation of the Company; and

(d)            if the Asset Value of an asset has been determined or adjusted in accordance with paragraphs (a), (b) or (c) of this definition, such Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Net Income and Net Losses.

“Available Funds” means funds available for distribution to Members after all current Company obligations, including, without limitation, payments due under the Management Services Agreement, have been satisfied or have been provided for by the establishment of reserves in amounts reasonably determined by the Board of Managers to be appropriate.

“Board” or “Board of Managers” means the Board of Managers of the Company described in Article VI hereof.

“Book Value” shall mean with respect to any asset, such asset’s adjusted basis for United States federal income tax purposes, except as follows: (i) the initial Book Value of any asset contributed by a Member to the Company shall be the fair market value of such asset as of the date of the contribution (as determined hereunder); (ii) the Book Value of all Company assets shall be adjusted to equal their respective fair market value (as determined hereunder) upon each occurrence of the liquidation of the Company within the meaning of Treasury Regulations Section 1.704-1(b)(2)(ii)(g); and (iii) the Book Value of any asset distributed by the Company to a Member shall be adjusted to equal the fair market value (as determined hereunder) of such asset on the date of distribution.

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“BRJ” means BR Johnson, Inc., a New York corporation.

“BRJ Partners” means BRJ Acquisition Partners, LLC, a New York limited liability company.

“Business Day” means any day other than Saturday, Sunday or other day in which commercial banking institutions in New York, New York are authorized or required by law or other governmental action to remain closed for business.

“Capital Account” means the capital account established for each Member pursuant to Section 2.2 hereof.

“Capital Contribution” means the sum of the cash and the net fair market value of any other property contributed by a Member to the Company in accordance with Section 2.1 hereof.

“Certificate” has the meaning given such term in the recitals to this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, or any successor legislation as in effect from time to time.

“Common Member” means each of the Persons listed on Schedule A attached hereto and designated as a Common Member thereon and any assignee, transferee or successor of such Common Member who has been admitted as a Member of the Company and whose admission is reflected on the books and records of the Company.

“Common Member Pro Rata Interest” means, with respect to each Common Member, the percentage of Common Membership Interest of such Common Member shown on Schedule A hereto.

“Common Membership Interest” means the Common Membership Interest in the Company held by each Common Member, as set forth on Schedule A hereto.

“Company Sale” means a transaction or series of transactions with a party or group of parties acting in concert (other than an Affiliate of the Company or any Member) which involves (a) any merger, consolidation or business combination of the Company or a sale of Membership Interests following which the Members of the Company immediately prior to such sale own, directly or indirectly, less than 50% of the outstanding voting interests of the surviving or resulting entity, or (b) any sale or transfer of all or substantially all of the assets of the Company.

“Control” of a Person means the power, directly or indirectly, to direct or cause the direction of the management and policies of such Person whether by voting power, contract or otherwise.

“Covered Person” means any Member, any Manager, any Observer, any Affiliate of any Member, Manager or Observer, or any officer, director, shareholder, member, manager, partner, employee, representative or agent of a Member, a Manager, an Observer, the Company or any of their respective Affiliates (including any former officer, director, shareholder, member, manager, partner, employee, representative or agent).

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“Default Rate” means a rate per annum which is twelve percent (12%).

“Depreciation” means, for each Fiscal Year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period for federal income tax purposes, except that if the Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Asset Value as the federal income tax depreciation, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the federal income tax depreciation, amortization or other cost recovery deduction for such year is zero, Depreciation shall be determined with reference to such beginning Asset Value using any reasonable method selected by the Board of Managers.

“Family Member” means, with respect to any Member who is a natural person, such Member’s spouse and any lineal descendant (whether by birth or adoption) of such Member.

“Fiscal Year” means the fiscal year of the Company, which shall be the twelve month period ending on December 31 of each year; provided, however, that (i) the first “Fiscal Year” shall be the period commencing with the date of the filing of the Certificate with the Office of the Secretary of State of the State of Delaware and ending on December 31, 2016, and (ii) upon Termination, “Fiscal Year” means the period from the end of the last preceding Fiscal Year to the date of Termination.

“Gross Fair Market Value” means the fair market value reasonably determined by the Board of Managers, unreduced by any liabilities. If there is any dispute concerning the fair market value of property, the Company will have the property appraised by an independent appraiser acceptable to the disputing party and the Company.

“Independent Appraiser” means any one of Pricewaterhouse Coopers, LLP, Deloitte & Touche, LLP, Ernst & Young, LLP or KPMG, LLP as selected by Lorraine and approved by Regional, it being understood that Regional specifically agrees that Regional shall be required to select one of such firms as Independent Appraiser within five (5) days of the issuance of a Put/Call Notice by Lorraine under Section 10.6 below.

“Liquidation” means a liquidation of the Company or a liquidation of the interest of any Member in the Company, as the case may be, in each case as defined in Section 1.704 1(b)(2)(ii)(g) of the Treasury Regulations.

“LLC Act” has the meaning given such term in Section 1.1 hereof.

“Lorraine” means Lorraine Capital, LLC, a New York limited liability company, and any Permitted Transferee of Lorraine.

“Lorraine Parties” has the meaning given such term in Section 10.6 hereof.

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“Management Services Agreement” means the Management Services Agreement, dated the date hereof, by and between Lorraine and the Company, as amended from time to time.

“Manager” means a member of the Board of Managers.

“Member” means individually, each Common Member and each Preferred Member and collectively, the Common Members and Preferred Members and, subject to the provisions of Article X of this Agreement, any assignee or successor of any thereof who is admitted as a Member of the Company in accordance with the terms and provisions of this Agreement and whose admission is reflected on the books and records of the Company.

“Membership Interest” means, with respect to each Member, its Common Membership Interest in the Company or its Preferred Membership Interest in the Company (in each case expressed as a percentage) as set forth on Schedule A annexed hereto, as the same may be amended from time to time.

“Net Income” or “Net Loss” for any Fiscal Year or other period means an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a) (for this purpose, all items of income, gain, loss or deduction required to be stated separately pursuant to Code Section 703(a)(1) shall be included in taxable income or loss), with the following adjustments:

(a)            Any income of the Company that is exempt from Federal income tax and not otherwise taken into account in computing Net Income or Net Loss shall be added to such taxable income or loss;

(b)            Any expenditure of the Company described in Code Section 705(a)(2)(B) or treated as a Code Section 705(a)(2)(B) expenditure pursuant to Treasury Regulations Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in computing Net Income or Net Loss shall be subtracted from such taxable income or loss;

(c)            In the event the Asset Value of any Company asset is adjusted pursuant to the definition of Asset Value, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Net Income or Net Loss for the Fiscal Year in which such adjustment occurs;

(d)            Gain or loss resulting from any disposition of property with respect to which gain or loss is recognized for Federal income tax purposes shall be computed by reference to the Asset Value of the property disposed of, notwithstanding that the adjusted tax basis of such property differs from its Asset Value;

(e)            In lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing Federal taxable income or loss, there shall be taken into account Depreciation for such fiscal year or other period;

(f)            Notwithstanding any other provision, any items which are specially allocated pursuant to Section 3.3 hereof shall not be taken into account in computing Net Income or Net Loss. Nevertheless, such items shall be taken into account in adjusting Capital Accounts.

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“Non-Transition Year” means any Fiscal Year other than a Transition Year.

“Operations” has the meaning ascribed thereto in Section 1.4 hereof.

“Percentage Interest” means, with respect to each Member, the percentage ownership of the Company held by such Member, as set forth on Schedule A, as amended from time to time.

“Permitted Transferee” means (a) with respect to any Member that is a natural person, any Family Member of such Member, any trustee of a trust solely for the benefit of such Member or any Family Member of such Member, and any Testamentary Transferee, and (b) with respect to any Member that is not a natural person, the Affiliates of such Member; provided, however, that no Person shall be a Permitted Transferee until and unless such Person shall have complied with the requirements of Section 10.2 and the other provisions of this Agreement.

“Person” means any natural person, partnership, firm, trust, association, corporation, limited liability company, joint stock company, joint venture, bank, trust company, unincorporated organization or business entity or governmental authority or political subdivision, including any agency, department or instrumentality thereof.

“Preferred Member” means each of those Members so designated on Schedule A, but only in its capacity as a Preferred Member and not as a Common Member, and any assignee, transferee or successor of such Preferred Member who has been admitted as a Member of the Company and whose admission is reflected on the books and records of the Company.

“Preferred Member Pro Rata Interest” means, with respect to each Preferred Member, the percentage of Preferred Membership Interest of such Preferred Member shown on Schedule A hereto.

“Preferred Membership Interest” means the Preferred Membership Interest in the Company held by each Preferred Member, as set forth on Schedule A hereto.

“Preferred Return” means, as determined with respect to a Preferred Member, an amount that, when combined with all prior distributions made under Section 4.1(b)(i) to such Preferred Member, yields a cumulative return of five percent (5%) per annum, compounded annually, on the Unreturned Preferred Capital (as outstanding from time to time) of such Preferred Member, which return shall accrue daily and shall be computed on the basis of a 365 day or a 366 day year, as applicable.

“Prime Rate” means the rate posted by a majority of top 25 insured U.S.-chartered commercial banks to price short-term business loans, as published in the Federal Reserve Statistical Release H.15 daily update for Selected Interest Rates at http://www.federalreserve.gov/releases/H15/update/default.htm.

“Pro Rata Interest” means a Common Member Pro Rata Interest or a Preferred Member Pro Rata Interest, as applicable, based upon whether Common Membership Interests or Preferred Membership Interests are proposed to be Transferred.

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“Purchase Agreement” means the Asset Purchase Agreement, dated as of the date hereof (as the same may be amended from time to time), by and among BRJ, William A. Harfosh, Michael V. Howard, Anthony C. Minieri, Arthur P. Brillanti, the Company, William J. Maggio, Charles A. Rider, Richard F. Gioia and Justin M. Reich.

“Qualified Offer” means a written offer from any Person (other than an Affiliate of the Company or any Member) for a Company Sale provided that such offer is a bona fide offer, without financing contingencies, with a reasonable likelihood of closing on terms substantially consistent with the terms set forth in the offer.

“Record Holder” means the Person in whose name a Membership Interest is registered on the books of the Company.

“Regional” means Regional Brands Inc., a Delaware corporation, and any Permitted Transferee of Regional Brands Inc.

“Securities Act” means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder.

“Taxable Income” or “Taxable Loss” for any Fiscal Year means the taxable income or taxable loss of the Company for such Fiscal Year, computed for federal income tax purposes.

“Termination” means the complete distribution of the assets of the Company to the Members following dissolution and winding up of the Company.

“Testamentary Transferee” means, with respect to any Member who is a natural person, any heir, beneficiary, executor or trustee of a trust which is a testamentary trust under such Member’s will or other instrument taking effect at death or under applicable laws of descent and distribution; provided, however, that no Person shall be a Testamentary Transferee unless such Person (a) is a Family Member of such Member (in the case of an heir or beneficiary) and (b) shall have complied with the requirements of Section 10.2 and the other provisions of this Agreement.

“Transfer” means any sale, assignment, transfer, pledge, hypothecation, gift, encumbrance or other disposition.

“Transferee” has the meaning given such term in Section 10.1 of this Agreement.

“Transition Year” means any Fiscal Year beginning on or before December 31, 2017.

“Treasury Regulations” means the rules, regulations and interpretations of rules and regulations adopted under the Code, as in effect from time to time.

“Underpayment Amount” means, as determined with respect to a Member, (a) any “imputed underpayment” determined under Code Section 6225, (b) any similar or corresponding amount determined under any similar or corresponding provision of any state tax, (c) any other similar or corresponding amount if and to the extent such amount represents the payment or collection of any tax that would otherwise be paid or payable by such Member as a result of the pass-through (or similar treatment) of any item of income or loss to such Member, and (d) any withholding, estimated or other tax required by law to be withheld or paid by the Company with respect to or on behalf of such Member.

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“Unreturned Preferred Capital” means an amount not less than zero and equal to the excess of a Preferred Member’s total Capital Contributions with respect to its Preferred Membership Interest over the sum of any distributions to such Member pursuant to Section 4.1(b)(ii) with respect to such Member’s Preferred Membership Interest.

ARTICLE II

CAPITAL

2.1            Capital Contributions.

(a)            The Capital Contributions of the Members to the Company, made on or about the date of this Agreement, are as shown on Schedule A.

(b)            No Member shall be required to make any Capital Contributions in excess of the amounts contributed by each Member as shown on Schedule A, and no Member shall be required to make up any deficit in its Capital Account.

(c)            A Member is not entitled to be paid interest in respect of either its Capital Account or its Capital Contributions.

2.2            Capital Accounts. The Company shall maintain a separate Capital Account for each Member according to the rules of Treasury Regulation Section 1.704 1(b)(2)(iv). For this purpose, the Company may, upon the occurrence of the events specified in Treasury Regulation Section 1.704 1(b)(2)(iv)(f), adjust the Members’ Capital Accounts in accordance with the rules of such regulation and Treasury Regulation Section 1.704 1(b)(2)(iv)(g) to reflect a revaluation of Company property. For purposes of computing the amount of any item of Company income, gain, loss or deduction to be allocated pursuant to Section 3.1 below and to be reflected as an adjustment to the Members’ Capital Accounts, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for federal income tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose), provided that:

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

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

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

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

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

ARTICLE III

ALLOCATIONS OF NET INCOME AND NET LOSS

3.1            Allocations of Net Income and Net Loss. For each Fiscal Year, after adjusting each Member’s Capital Account for all Capital Contributions and distributions during such Fiscal Year and making all allocations pursuant to Section 3.3 with respect to such Fiscal Year, items of Net Income and Net Loss shall be allocated to each Member such that, as of the end of such Fiscal Year, the Capital Account of each Member shall equal:

(a)            the amount that would be distributed under Section 4.1(b) to such Member, determined as if the Company were to sell (as of the last day of the Fiscal Year) all of its assets for cash equal to their gross Asset Values and distribute all of such cash in accordance with Section 8.3 (with the assumption that the amount paid in satisfaction of any nonrecourse obligation is limited to the gross Asset Value of any property securing the nonrecourse obligation), minus

(b)            the amount, if any, which each Member is or would be obligated to contribute to the capital in connection with a liquidation of the Company or otherwise in accordance with the Agreement or applicable law.

3.2            Allocations on Liquidation. Upon a Liquidation, all or substantially all of the assets of the Company shall be sold and any assets not sold shall be treated as if they were sold for their gross Asset Values. Any resulting Net Income or Net Loss shall be allocated in accordance with Section 3.1.

3.3            Special Allocation Rules. Notwithstanding any other provision of this Agreement:

(a)            Nonrecourse deductions (as defined in Treasury Regulations Section 1.704-2(c)) for each fiscal year shall be allocated to the Common Members in the ratio of their Membership Interests.

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(b)            Any member nonrecourse deductions (defined in the same way as “partner nonrecourse deductions” in Treasury Regulations Section 1.704-2(i)) for each Fiscal Year shall be specially allocated to the Common Member who bears the economic risk of loss with respect to the member nonrecourse debt (defined in the same way as “partner nonrecourse debt” in Treasury Regulations Section 1.704-2(b)(4)) to which such member nonrecourse deductions are attributable in accordance with Treasury Regulations Section 1.704-2(i)(2).

(c)            If there is a net decrease in Company minimum gain (calculated in the same way as “partnership minimum gain” in Treasury Regulations Section 1.704-2(b)(2) and 1.704-2(d)) or in minimum gain attributable to member nonrecourse debt (calculated in the same way as “partner nonrecourse debt minimum gain” in Treasury Regulations Section 1.704-2(i)(3)) during a Fiscal Year, the Common Members shall be allocated items of income and gain in accordance with Treasury Regulations Section 1.704-2(f) and 1.704-2(i)(4).

(d)            A Common Member shall not be allocated items of loss or deduction to the extent such an allocation would cause or increase a deficit Capital Account balance for such Member as of the close of any taxable year in excess of the amount of such balance the Member is obligated or deemed obligated to restore pursuant to Treasury Regulations under Section 704(b) of the Code. In determining the Capital Account balance of a Member for this purpose, adjustments, allocations and distributions described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) shall be taken into account. Any items of loss and deduction not allocated to a Common Member under this Section 3.3(d) shall be allocated first, to the remaining Common Members with positive Capital Account balances (as adjusted in accordance with the preceding sentence and after adding back each Common Member’s share of Company minimum gain and minimum gain attributable to member nonrecourse debt) in proportion to, and to the extent of, such positive Capital Account balances and thereafter, as provided in applicable Treasury Regulations. If a Common Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) which results in a negative Capital Account balance in excess of any deficit balance which the Common Member is obligated or deemed obligated to restore pursuant to Treasury Regulations under Section 704(b) of the Code, items of income and gain (consisting of a pro rata portion of each item of income, including gross income, and gain) shall be allocated to such Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. This Section 3.3(d) is intended to comply with the qualified income offset requirement of Treasury Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted and applied consistently therewith.

(e)            The special allocations set forth in Section 3.3(d) herein (the “Loss Limit Allocations”) are intended to comply with certain requirements of Treasury Regulations under Section 704(b) of the Code. Notwithstanding any other provisions of this Agreement (other than the provisions of this Section 3.3 and Section 3.4), the Loss Limit Allocations shall be taken into account in allocating other Net Income, Net Loss and items of income, gain, loss and deduction among the Common Members so that, to the extent possible, the net amount of such allocations of other Net Income, Net Loss and other items and the Loss Limit Allocations to each Common Member shall be equal to the net amount that would have been allocated to each such Member if the Loss Limit Allocations had not occurred.

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3.4            Special Allocations. Notwithstanding Sections 3.1, 3.2 and 3.3 hereof, if any interest in the Company is sold, assigned or transferred during any Fiscal Year in compliance with the provisions of Article X hereof, Net Income and Net Loss, each item thereof and all other items of income, gain, loss and deduction attributable to the transferred interest for such Fiscal Year shall be divided and allocated between the transferor and the transferee by taking into account their varying interests during the period in accordance with Code Section 706(d), using any conventions permitted by law and selected by the Board of Managers, in their reasonable discretion. Solely for purposes of making such allocations, such transfer shall be effective on the first day of the calendar month immediately following the date of such assignment or transfer. All distributions on or before the effective date of a transfer shall be made to the transferor, and all distributions thereafter shall be made to the transferee.

3.5            Allocation of Taxable Income or Loss.

(a)            Subject to Section 3.5(b) hereof, in any Fiscal Year, items of Taxable Income or Taxable Loss shall be allocated to the Members, solely for Federal income tax purposes, in an amount equal to such Member’s share of the corresponding items of Net Income or Net Loss, as the case may be, allocated in accordance with Sections 3.1, 3.2, 3.3 and 3.4 hereof.

(b)            Income, gain, loss or deduction with respect to property contributed to the Company shall be allocated for Federal income tax purposes among the Members in accordance with the provisions of Section 704(c) of the Code (and the Treasury Regulations thereunder), using any allocation method described in the regulations under Section 704(c) of the Code chosen by the Board of Managers, in their discretion. The Capital Accounts of the Members shall not be adjusted to reflect any item of income, gain, loss or deduction attributable to the difference between the basis for Federal income tax purposes of such property as of the date of such contribution and the fair market value of such property credited to the Capital Account of such Member by reason of such contribution.

(c)            If the Asset Value of any property of the Company is adjusted so as to differ from its adjusted basis for Federal income tax purposes, subsequent allocations of income, gain, loss and deduction (and any item thereof) with respect to such asset shall take account of any variation between the adjusted basis of such asset for Federal income tax purposes and the Asset Value in the same manner as under Code Section 704(c) and the applicable Treasury Regulations thereunder.

(d)            Allocations pursuant to this Section 3.5 are solely for tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Net Income, Net Loss or other items, or distributions pursuant to any provision of this Agreement.

(e)            If any fees paid to a Member are determined to be a distribution by the Company for Federal income tax purposes, any resulting increase in Taxable Income or decrease in Taxable Loss in an amount equal to such fees shall be allocated to such Member. To the extent that any distribution to a Member is determined for Federal income tax purposes to be a fee paid to such Member, such Member’s allocated share of Taxable Loss shall be increased, or its share of Taxable Income reduced, by an amount equal to such distribution.

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3.6            Depreciation Recapture. To the extent the Company recognizes gain as a result of a sale, exchange or other disposition of assets which is taxable as ordinary income pursuant to Code Section 1245 or Code Section 1250, such ordinary income shall be allocated for Federal income tax purposes among the Common Members in the same proportion as the Depreciation giving rise to such ordinary income was allocable among the Common Members. In no event, however, shall any Common Member be allocated ordinary income hereunder in excess of the amount of gain allocated to such Member under this Agreement.

ARTICLE IV

DISTRIBUTIONS

4.1            Distributions. For each Fiscal Year, the Company shall make the following distributions, out of Available Funds, to the Members as follows:

(a)            Tax Distributions.

(i)            Notwithstanding anything herein to the contrary, during each Fiscal Year or within ninety (90) days thereafter, to the extent of Available Funds and to the extent permitted by the LLC Act, the Company shall, before any distributions are made under Section 4.1(b), distribute, in cash, to each Member an amount sufficient to enable such Member to satisfy such Member’s federal, state and local tax liabilities attributable to the items of income, gain, loss or deduction allocated to such Member by the Company with respect to such Fiscal Year. The amount to be distributed shall be determined by the Board in consultation with the Company’s accountants and shall be computed for each Member (i) as if such Member were taxable at the highest applicable federal, state and local income Tax rates applicable to an individual domiciled in New York City, New York; provided that such rate may be increased or decreased from time to time as reasonably determined by the Board to take into account increases or decreases in applicable federal, state and local income tax rates for such location; (ii) as if allocations from the Company were, for such year, the sole source of income and loss for such Member (but determined without regard to allocations of any Company items deductible by individuals only under Code Section 212); and (iii) without regard to the carryover of items of loss, deduction and expense previously allocated by the Company to such Member. The Board may cause the Company to make tax distributions to Members during any year to cover estimated Taxes based on good-faith estimates of their respective tax liabilities attributable to Company tax items for such year.

(ii)           Any distributions under Section 4.1(a)(i) to, and any Underpayment Amount required by law to be withheld or paid by the Company with respect to or on behalf of or that is otherwise allocable to, a Member shall be treated as an advance and offset against and shall reduce any amount otherwise distributable to a Member under Section 4.1(b). Promptly upon demand from the Company, a Member shall pay to the Company an amount equal to any Underpayment Amount (to the extent not previously offset against any distributions under Section 4.1(b) or otherwise reimbursed to the Company by the Member) that the Company has withheld or paid with respect to such Member.

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(b)            Available Funds Distributions.

(i)            First, to the Preferred Members, in accordance with their respective Preferred Member Pro Rata Interests, until each Preferred Member has received an amount equal to the Preferred Return of such Preferred Member;

(ii)           Second, to the Preferred Members, pro rata in accordance with their respective amounts of Unreturned Preferred Capital, until the Unreturned Preferred Capital of each Preferred Member equals zero;

(iii)          Third, to the Common Members, in accordance with their respective Common Member Pro Rata Interests.

4.2            Restriction on Distributions. Notwithstanding any other provision in this Agreement, no distribution may be made by the Company to any Member in violation of the LLC Act.

4.3            Passed Distributions. If any Member assigns all or part of its interest in the Company in accordance with Section 10.1 of this Agreement, unless otherwise agreed by the assigning Member and the assignee, the assignee shall be entitled to receive, to the extent of the interest in the Company assigned, the amount of any distributions required to be made to the assigning Member under Section 4.1 of this Agreement that were not actually made prior to the date of the assignment (“passed distributions”), when such passed distributions are made by the Company.

ARTICLE V

MEMBERS

5.1            Powers of Members. No Member shall, in its capacity as a Member of the Company, transact any business for the Company or have the power to act for or bind the Company, all such powers being vested solely and exclusively in the Board of Managers. The possession or exercise by a Member of its rights under Section 6.6 or 12.3 hereof shall not constitute a violation of this Section. Except as otherwise provided in this Agreement, Membership Interests held by Common Members and Preferred Members shall be identical in every respect and shall be entitled to the same rights, benefits, duties and obligations.

5.2            Meetings of Members.

(a)            Meetings of the Members may be called by the Board of Managers and shall be called upon the written request of any Member not more than once per fiscal quarter. The call shall state the location of the meeting and the nature of the business to be transacted. Notice of any such meeting shall be given to all Members not less than five (5) days or more than thirty (30) days prior to the date of such meeting. Members may vote in person, by proxy or by telephone at such meeting and may waive advance notice of such meeting. A quorum shall be present at a meeting of Members if the holders of (i) a majority of the Preferred Member Pro Rata Interests and (ii) a majority of the Common Member Pro Rata Interests are represented at the meeting in person or by proxy. Whenever the vote or consent of Members is permitted or required under the Agreement, such vote or consent may be given at a meeting of the Members or may be given in accordance with the procedure prescribed in this Section 5.2. Except as otherwise expressly provided in this Agreement, the vote of the Members holding (a) a majority of the Preferred Member Pro Rata Interests and (b) a majority of the Common Member Pro Rata Interests at a meeting of Members at which a quorum is present shall be required to constitute the act of the Members (it being understood and agreed that any failure to vote by a Member or abstention from voting by a Member shall be deemed in all cases to be a vote by such Member against such act).

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(b)            For the purpose of determining the Members entitled to vote on, or to vote at, any meeting of the Members or any adjournment thereof, the Board of Managers or the Member requesting such meeting may fix, in advance, a date as the record date for any such determination. Such date shall not be more than thirty (30) days nor less than ten (10) days before any such meeting.

(c)            Each Member may authorize any Person or Persons to act for it by proxy on all matters on which a Member is entitled to participate, including waiving notice of any meeting, or voting or participating at a meeting. Every proxy must be signed by the Member or its attorney-in-fact. No proxy shall be valid after the expiration of eleven months from the date thereof unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the Member executing it.

(d)            Each meeting of Members shall be conducted by the Board of Managers or such other Person that the Board of Managers may appoint.

(e)            The approval or consent of any Member required under this Agreement, except as expressly provided to the contrary in this Agreement, may be given or withheld in the sole and absolute discretion of such Member. If the Board of Managers receives the necessary approval or consent of the Members to such action, the Board of Managers shall be authorized and empowered to implement such action as approved by the Members without further authorization by such Members; provided, however, that prior to the implementation of any such action, the Board of Managers shall provide each Member with at least ten (10) days prior written notice thereof; provided, further, however, that to the extent any such action to be taken by the Board of Managers deviates in any material respect from the action approved by the Members, such action by the Board of Managers shall require the further approval of the Members.

(f)            Any action required or permitted to be taken at any meeting of Members may be taken without a meeting, without prior notice, and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the Members that would be necessary to take such action at a meeting at which the holders of all Members entitled to vote on the action were present and voted. Prompt notice of the taking of the action without a meeting by less than unanimous written consent, to the extent permitted hereunder, shall be given to those Members who have not consented in writing and who, if the action had been taken at a meeting, would have been entitled to notice of the meeting if the record date for such meeting had been the date that written consents signed by a sufficient number of holders to take the action were delivered to the Company as provided in this section. The record date for determining Members entitled to consent to action in writing without a meeting shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken is delivered to the Company by delivery to its principal place of business.

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(g)            Members may participate in and hold a meeting by means of conference telephone or similar communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in such meeting shall constitute attendance and presence in person at such meeting, except where a Person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.

ARTICLE VI

MANAGEMENT

6.1            Board of Managers; Election.

(a)            Except as otherwise specifically provided in this Agreement (including matters as to which the approval of the Members is required by this Agreement), the business, property and affairs of the Company shall be managed by the Board of Managers. The Board of Managers shall have all of the rights and powers of Managers as provided in the LLC Act and as otherwise provided by law and shall have the full, complete and exclusive right, power and authority to do on behalf of the Company all things which, in its judgment, are necessary or desirable to carry out the aforementioned duties and responsibilities as set forth in this Agreement or as required by law, subject to the provisions of this Article VI. Approval by or action taken by the Board of Managers in accordance with this Agreement shall constitute approval or action by the Company and shall be binding on the Members. No Manager, solely in his or her capacity as such, shall have any power to act for, sign for or do any act that would bind the Company, unless authorized by the Board of Managers with respect to a specific action.

(b)            During the term of this Agreement, there shall be five (5) Managers of the Company, selected as set forth in Section 6.1(c) below. At each meeting of the Members of the Company for the election of Managers, the Members shall vote all Membership Interests held by them for the election of the five (5) persons nominated pursuant to Section 6.1(c).

(c)            During the term of this Agreement, but subject to Section 6.1(h), Managers shall be nominated by the Members as follows: the nominees for Managers shall be (i) three (3) persons nominated by Lorraine, and (ii) two (2) persons nominated by Regional. The three (3) initial persons nominated by Lorraine are William J. Maggio, Justin M. Reich and Richard F. Gioia. The two (2) initial persons nominated by Regional are Louis Joseph and Fred DiSanto.

(d)            During the term of this Agreement, should a vacancy in the Board of Managers be caused by death, resignation, removal or any other reason, each of the Members agrees to vote all Membership Interests owned by such Member as follows: (i) in the case of a vacancy of a Manager previously nominated under Section 6.1(c)(i), the nominee selected by Lorraine, and (ii) in the event of a vacancy of a Manager previously nominated under Section 6.1(c)(ii), the nominee selected by Regional.

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(e)            If at any time any Member proposes to remove any Manager who was nominated by such Member as provided in Section 6.1(c) hereof, each Member agrees to vote all of the Membership Interests owned by such Member for such removal if removal has been approved by the Persons who would be entitled to fill a vacancy pursuant to Section 6.1(d) hereof.

(f)            Notwithstanding any reference herein to votes cast at a meeting of the Members, Managers may be chosen for nomination by the Members acting by written consent without a meeting, and Managers may be elected by the Members acting by written consent without a meeting to the extent permitted by law; provided, however, that nothing in this Section 6.1(f) shall authorize the nomination, election or removal of Managers other than in accordance with the provisions of this Section 6.1.

(g)            The Board of Managers shall appoint a Chairman who shall preside over the meetings of the Board of Managers and carry out such other responsibilities as are customarily exercised by a Chairman. The initial Chairman shall be William J. Maggio. The Chairman shall have no greater authority than any other Manager.

(h)            Notwithstanding anything to the contrary contained in this Agreement, in the event the Management Services Agreement is terminated for any reason and all of the Membership Interests of the Lorraine Parties are redeemed in accordance with the provisions of Section 10.6 hereof, Regional will be entitled to remove all of the Managers nominated by Lorraine from the Board of Managers, and Regional will have the sole right to nominate and remove all of the members of the Board of Managers and to fill all vacancies occurring on the Board of Managers for any reason, provided, however that the removal of the Managers nominated by Lorraine shall only become effective upon the redemption of all of the Membership Interests of the Lorraine Parties in accordance with the provisions of Section 10.6, and in the event the Management Services Agreement is terminated for any reason and the Lorraine Parties’ Membership Interests are not redeemed in accordance with the provisions of Section 10.6 hereof, Lorraine shall retain the sole right to appoint and maintain two (2) Managers on the Board of Managers and shall cause the third Manager appointed by Lorraine to resign from the Board, and Regional will have the sole right to appoint and maintain three (3) Managers on the Board, provided, further that Lorraine shall retain the right appoint three (3) Managers if the Lorraine Parties’ Membership Interests are not redeemed as a result of any breach of the provisions of Section 10.6 by the Company or Regional. In any of the foregoing cases, any provision in this Agreement (including, without limitation, Section 6.6) that requires the consent or approval of each of the Members will no longer require the consent or approval of the Lorraine Parties.

6.2            Notice of Board of Managers Meetings; Location; Waiver of Notice. Regular meetings of the Board of Managers will be held at least once per calendar quarter at the offices of the Company at such time as may be fixed by the Board of Managers, or at such other times and places as may be fixed by the Board of Managers, upon at least seven (7) days’ prior written notice to the Managers. Special meetings of the Board of Managers may be called by the Chairman or by any Manager upon at least seven (7) days’ prior written notice to the other Managers, which notice shall identify the purpose of the special meeting and the business to be transacted. Notice of meeting may be waived before or after a meeting by a written waiver of notice signed by the Manager entitled to notice. Managers may participate in any Board of Managers meeting by means of conference telephone or similar communications equipment by which all persons participating in the meeting can hear each other. Such participation shall constitute presence in person at the meeting. A Manager’s attendance at a meeting shall constitute waiver of notice unless the Manager states at the beginning of the meeting his objection to the transaction of business because the meeting was not lawfully called or convened.

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6.3            Quorum; Approvals; Written Action.

(a)            The presence in person or by proxy of a majority of the entire Board of Managers (which must include at least one Manager nominated by Regional) shall constitute a quorum for the transaction of business at a meeting of the Board of Managers; provided, however, that if a quorum is not present at a meeting of the Board of Managers because no Manager nominated by Regional is present at such meeting, a new meeting of the Board of Managers will be held upon proper notice, and it shall not be necessary for a Manager nominated by Regional to be present in order for there to be a quorum at such new meeting. Each Manager shall have a single vote. The vote of a majority of the Managers present at the time of the vote, if a quorum is present at that time, shall constitute an act of and approval by the Board of Managers, except for such actions as to which a higher than majority vote is required pursuant to the provisions of this Agreement. The Board of Managers may act without a meeting if the action taken is approved in writing by the unanimous consent of all Managers. The Board of Managers shall cause written minutes to be prepared of all action taken by the Board of Managers and shall cause a copy thereof to be delivered to each Manager.

(b)            Subject to the provisions of Section 6.6 hereof, the Board of Managers may enter into, amend or modify any agreement, understanding or arrangement or otherwise enter into any transaction (including loans) in which any Member or any Affiliate of any Member has a direct or indirect interest, provided that such agreement, understanding or arrangement shall be on terms which are no less favorable to the Company than those which would have been obtained if such agreement, understanding or arrangement had been entered into with an unrelated third party.

6.4            Powers, Rights and Duties of the Board of Managers. Subject to the provisions of Section 6.6 hereof, the Board of Managers shall have the full, exclusive and complete authority and discretion in the management, control and operation of the business of the Company and shall make all decisions affecting the business of the Company. Subject to the provisions of Section 6.6 hereof, the Board of Managers shall have all the rights, powers and duties generally conferred upon managers of a limited liability company by law and that are necessary, advisable or consistent with the purposes of the Company and the management of Company affairs in accordance with this Agreement, including but not limited to the following:

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(a)            To make, execute, acknowledge, deliver, file and/or record such certificates, instruments and documents as may be required by, or which the Board of Managers may deem appropriate under, the laws or regulations of any state, municipality or government in connection with the business and affairs of the Company;

(b)            To supervise the business of the Company and to expend Company funds in furtherance of the purposes of the Company;

(c)            To consummate any Acquisition with a purchase price less than $500,000;

(d)            To make investments or enter into a joint venture or partnership with an investment or contribution amount less than $500,000 per transaction or series of related transactions;

(e)            To acquire and enter into any contract of insurance necessary and proper for the protection of the Company, for the conservation of its assets, or for any other purpose convenient or beneficial to the Company;

(f)            To employ attorneys and accountants, at the Company’s expense, to advise and perform services for the Company, and to designate and change from time to time the agent for acceptance of service of process of the Company; and

(g)            To file such reports and take such action as may be required by any governmental authority having jurisdiction over the business of the Company.

6.5            Compensation of Managers. No Manager shall be compensated for his services as a Manager but each Manager and Observer (as defined below) shall be reimbursed for his reasonable and necessary out-of-pocket expenses incurred in connection with attending meetings of the Board of Managers.

6.6            Limitations on Actions. Notwithstanding any other provision of this Agreement, neither the Company nor the Board of Managers on behalf of the Company shall, without the prior written consent of each of the Members:

(i)            cause the Company to lose its status as a partnership for United States federal income tax purposes or cause the Company to be considered a publicly traded partnership under §7704(b) of the Code;

(ii)           settle, or confess a judgment against the Company in connection with, any threatened or pending legal action;

(iii)          amend the Management Services Agreement;

(iv)          enter into or modify any agreement or transaction with any Covered Person;

(v)           create, authorize, issue or sell (A) any Membership Interests or other equity interests of the Company, (B) any obligation or security convertible into or exchangeable for any Membership Interests or other equity interests of the Company or (C) any options, warrants or other rights to acquire any Membership Interests or other equity interests of the Company;

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(vi)          make any distribution of Company property to the Members other than in cash;

(vii)         file or consent to the filing of any petition, either voluntary or involuntary, under any applicable insolvency, bankruptcy, liquidation or reorganization statute, or make any assignment for the benefit of creditors;

(viii)        effect the dissolution or liquidation of the Company;

(ix)            incur, assume, modify or refinance any indebtedness, or any guarantee thereof (specifically excluding any working capital line of credit established by the Company from time to time (including as contemplated by clause (B) below) up to an aggregate principal amount of $500,000, other than (A) trade credit incurred in the ordinary course of business and (B) the indebtedness of the Company incurred on or about the date hereof in connection with the purchase of the Operations and the assets of BRJ;

(x)           enter into or consummate any Acquisition with a purchase price equal to or in excess of $500,000;

(xi)          make any investment or enter into any joint venture or partnership with an investment or contribution amount equal to or in excess of $500,000 per transaction or series of related transactions;

(xii)         subject to the provisions of Section 6.7 below, enter into or consummate any Company Sale;

(xiii)        subject to the provisions of Section 6.7 below, transfer any assets having a fair market value equal to or in excess of $500,000 per transaction or series of related transactions, other than in the ordinary course of business;

(xiv)        subject to the provisions of Sections 6.7 and 10.6 below, purchase, redeem, retire or otherwise acquire any equity interests of the Company or any obligation or security convertible or exchangeable into, or exercisable for, any such equity interests;

(xv)         amend or modify the purpose or Operations of the Company as set forth in Section 1.4;

(xvi)        materially change or modify any accounting or tax practice or procedure of the Company;

(xvii)       create a subsidiary of the Company;

(xviii)      admit a new member to the Company, other than a Permitted Transferee;

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(xix)         amend, modify, supplement, alter, terminate, waive or repeal any provision in the Certificate or this Agreement that would adversely affect the rights of Preferred Members or Common Members (in each case including in connection with any merger, consolidation, business combination or other extraordinary corporate transaction); or

(xx)          increase or decrease the authorized number of Managers constituting the Board of Managers.

6.7            Consent to Company Sale.

(a)            In the event that, on or after November 1, 2018, Lorraine identifies a Qualified Offer, Lorraine shall provide Regional a fully executed letter of intent for such Qualified Offer (which shall include the proposed form and amount of consideration and other material terms and conditions of the Company Sale) and Regional shall have a period of ten (10) Business Days (the “Consent Notice Period”) to notify Lorraine in writing either:

(i)            that Regional will provide its consent to the Company Sale described in the Qualified Offer under Sections 6.6(xii), 6.6(xiii) and/or 6.6(xiv) above (a “Consent Notice”);

(ii)           that Regional will withhold its consent to the Company Sale set forth in the Qualified Offer under Section 6.6(xii), 6.6(xiii) and/or 6.6(xiv) above (a “Consent Withhold Notice”) (it being understood that a failure by Regional to provide a Consent Notice by the expiration of the Consent Notice Period shall be deemed to be notice that Regional will provide consent to the Company Sale described in the Qualified Offer); or

(iii)          that Regional will purchase, or cause the Company to purchase, all of Lorraine’s Membership Interests and BRJ Partners’ Membership Interests (the “Repurchase Right”) for the value Lorraine and BRJ Partners (collectively, the “Lorraine Parties”), respectively, would receive for their Membership Interests in connection with closing of the Qualified Offer pursuant to Section 8.6 and the other applicable provisions hereof (a “Repurchase Notice”).

If Regional issues a Repurchase Notice, Regional shall, within thirty (30) days of the issuance thereof (the “Repurchase Period”) pay or cause the Company to pay the Lorraine Parties the amount the Lorraine Parties would have, respectively, received for their respective Membership Interests pursuant to Section 8.6 and the other applicable provisions hereof had the Qualified Offer closed in accordance with the terms thereof (the “Repurchase Price”). In addition, Regional shall pay any reasonable, documented, out-of-pocket expenses of, and/or break-up fees (not exceeding two percent (2%) of the purchase price for the Company Sale set forth in the Qualified Offer) payable to the seller to the extent required by the transaction documents of the Qualified Offer, promptly, upon request therefor. Once exercised, the Repurchase Right shall be irrevocable and Regional shall have the absolute and unconditional obligation to pay, or cause the Company to pay, the Lorraine Parties the Repurchase Price. If the Lorraine Parties have not been paid the amount of the Repurchase Price within thirty (30) days of the date of the Repurchase Notice, the Lorraine Parties shall also become entitled to receive, in addition to the Repurchase Price, (i) an amount equal to the accrued interest on the Repurchase Price at the Default Rate (compounded quarterly), measured from the date due to and including the date of payment in full of the Repurchase Price and such additional accrued amount, (ii) a penalty equal to 3% of the Repurchase Price and (iii) an amount equal to the amount of any reasonable, documented, out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees incurred to enforce the collection of the Repurchase Price and any amount of default interest accrued thereon. The Lorraine Parties will take, and cause the Managers nominated by Lorraine to take, all actions and will do, and cause the Managers nominated by Lorraine to do, all things necessary, proper or advisable to consummate the repurchase of the Lorraine Parties’ Membership Interests in accordance with this Section 6.7. The repurchase of the Lorraine Parties’ Membership Interests will be subject to (x) the resignation of all of Lorraine’s nominees from the Board of Managers, (y) the termination of any and all agreements between the Company, on the one hand, and any of the Lorraine Parties or any of their respective Affiliates, on the other hand, including the Management Services Agreement, and (z) the execution by the Company, on the one hand, and the Lorraine Parties, on the other hand, of purchase documentation (containing customary representations and warranties from the Lorraine Parties regarding such sale (including non-contravention, and ownership of, and authority to sell, such Membership Interests free and clear of all liens, encumbrances and adverse claims of any nature whatsoever)), a non-competition and non-solicitation agreement, and a general release and discharge of the Company, its Affiliates and all present and former directors, officers, managers, members, agents, representatives, employees, their respective successors and assigns and their respective direct or indirect equity holders, each in form and substance reasonably satisfactory to Regional and Lorraine.

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(b)            During the Repurchase Period, Lorraine hereby agrees to conduct the Operations in the ordinary course of business consistent with the historical practices of the Company and to consult with, and cause the Managers designated by Lorraine to consult with, Regional and to obtain Regional’s consent on any material changes related to the Operations. Unless extended in writing by Lorraine, the rights conferred on Regional under this Section 6.7(b) shall automatically terminate thirty (30) days after the issuance of a Repurchase Notice.

(c)            From and after the expiration of the Consent Notice Period, if Regional has not exercised its Repurchase Right or has not delivered a Consent Withhold Notice (the “Sale Process Period”), the Board of Managers and the Company shall commence negotiations and activities directed at closing the Company Sale described in the Qualified Offer (the “Sale Process”). Throughout the Sale Process, Lorraine will provide Regional with periodic updates about the status of the Sale Process and the Company Sale, such updates to include notifications concerning any material developments with respect to the negotiation of the Company Sale. In addition, from and after the commencement of the Sale Process Period through the closing of the Company Sale, (i) in the case of a Company Sale structured as a sale of securities or other equity interests, Regional shall have the obligation to sell its Membership Interests, free and clear of any liens, encumbrances or adverse claims of any nature, on the terms and conditions of the Company Sale and (ii) Regional shall vote for, consent to and raise no objections to such Company Sale and shall take such other necessary or desirable actions in connection with the consummation of such Company Sale as reasonably requested by Lorraine, including executing and delivering such documents as are necessary or appropriate to effectuate the Company Sale and which the Lorraine Parties have also agreed to execute and deliver, and shall not bring any claim against the Company or any of its Affiliates or Lorraine, the Lorraine Parties or any of their Affiliates, or any of their respective officers, directors, members, managers, partners, stockholders, employees, agents, advisors or representatives with respect to the Company Sale, or contest or seek to enjoin the Company Sale, or seek appraisal, dissenters or other similar rights with respect thereto. If any Member is given an option as to the form of consideration to be received, each Member of the same class or series will be given the same option.

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(d)            Notwithstanding anything to the contrary contained in the foregoing:

(i)            for a period of thirty (30) days after the commencement of the Sale Process Period, Regional may issue a Repurchase Notice. If Regional issues a Repurchase Notice after the commencement of a Sale Process, the terms set forth in Section 6.7(a)(iii) above shall apply, provided, however that the Repurchase Price shall be due and payable within five (5) Business Days of the issuance of the Repurchase Notice.

(ii)           if any of the material terms of the proposed Company Sale are re-negotiated or changed in any material respect that adversely affects the value of the Qualified Offer to the Members, and if Lorraine desires to pursue such Company Sale, then Lorraine must deliver to Regional a revised Qualified Offer, triggering a new Consent Notice Period with respect to such revised Qualified Offer, and the provisions of this Section 6.7 will apply anew to such revised Qualified Offer (and any Sale Process then being conducted with respect to any prior Qualified Offer will be terminated).

(iii)          no Member will be obligated to execute and deliver any document which requires such Member to be obligated for any indemnification obligations other than (A) an obligation to join on a pro rata basis (but not on a joint and several basis), based on its respective share of the aggregate proceeds received by the Members in such Company Sale, in any indemnification obligations and (B) indemnification with respect to representations and warranties given by such Member regarding such Member’s ownership of Membership Interests and its ability to convey title thereto free and clear of liens, encumbrances or adverse claims; provided, however, that the aggregate indemnification obligations of a Member shall not exceed the amount of net proceeds actually received by such Member in such Company Sale.

(e)            The terms and provisions of this Section 6.7 shall not constitute a proposed transfer for the purposes of Sections 10.4 or 10.5 and the provisions set forth in those Sections of this Agreement and the time periods set forth therein shall not apply upon Lorraine’s initiation of a Company Sale pursuant to a Qualified Offer.

6.8            Executive Officers.

(a)            The Board of Managers shall appoint a President (the “President”), who will manage the day to day affairs of the Company. The initial President shall be William A. Harfosh. In the event of his death, retirement, resignation, termination or inability to serve, a successor President shall be appointed by the Board of Managers.

(b)            The Board of Managers may appoint a Chief Executive Officer, Executive Vice President, one or more Vice Presidents, a Treasurer and a Secretary, and may appoint one or more Assistant Secretaries and/or Assistant Treasurers (together with the President, each an “Executive Officer”) with such duties as may be established by the Board of Managers.

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(c)            Each officer shall hold office until his or her successor shall be duly appointed and shall qualify or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Any number of offices may be held by the same Person. Any officer may be removed as such, either with or without cause, by the Board of Managers. Designation of an officer shall not of itself create contract rights. Any vacancy occurring in any office of the Company may be filled by the Board of Managers.

6.9            Partnership Representative. The partnership representative (the “Partnership Representative”) shall act (i) with respect to a Transition Year, as the “tax matters partner” within the meaning of Code Section 6231(a)(7) (as in effect with respect to the Transition Year), (ii) with respect to a Non-Transition Year, as the “partnership representative” within the meaning of Code Section 6223 (as in effect with respect to the Non-Transition Year) and/or (iii) with respect to any Fiscal Year for purposes of a state tax, in a capacity similar to any of the foregoing positions for purposes of the state tax. No more than one Person at any time may serve as the Partnership Representative with respect to the same tax in the same Fiscal Year. No Person shall be selected as the Partnership Representative with respect to a Fiscal Year, unless (x) for federal income tax purposes in the case of a Transition Year, such Person is qualified to serve as the “tax matters partner” within the meaning of Code Section 6231(a)(7) (as in effect with respect to the Transition Year), (y) for federal income tax purposes in the case of a Non-Transition Year, such Person is qualified to serve as the “partnership representative” within the meaning of Code Section 6223 (as in effect with respect to the Non-Transition Year) and (z) in the case of any state tax for any Fiscal Year, such Person is qualified to serve in the requisite capacity under the state tax. During any time that a Partnership Representative is not also a Manager, the Partnership Representative shall act at all times only under the supervision of and at the direction of the Board and, except as otherwise provided in this Agreement, the Partnership Representative shall not and shall not have the authority to bind the Company, any Manager, any Member or any officer in any proceeding.

6.10            Board Observers. Each of Brian Hopkins, Jeff Anderson and Carl Grassi shall be entitled to attend each meeting of the Board of Managers as an observer (each, an “Observer”). The Company shall provide to each Observer copies of all notices, minutes, consents and other materials, financial and otherwise, provided to the Board of Managers. Each Observer may, at his option, attend any meeting of the Board of Managers by means of conference telephone or similar communications equipment, but shall not have the right to vote with the Board on any matter.

ARTICLE VII

OPERATION OF THE COMPANY

7.1            Books of Account. The Company shall maintain its books and records on a full accrual basis of accounting in accordance with generally accepted accounting principles consistently applied.

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7.2            Reports.

(a)            Within thirty (30) days after the end of each quarter of the Fiscal Year, there shall be prepared and delivered to each Member an unaudited balance sheet, income statement and statement of cash flows of the Company showing the financial position of the Company as of the end of such quarter, its results of operations during such quarter and for the portion of the Fiscal Year then ended, and its cash flows for the portion of the Fiscal Year then ended, and stating in comparative form the figures as of the end of and for the comparable periods in the prior Fiscal Year.

(b)            Within seventy-five (75) days after the end of each Fiscal Year, the Company shall deliver to each Member (i) financial statements for the Company as of the end of and for such Fiscal Year, audited by the Company’s independent certified public accountants, consisting of a balance sheet, income statement, and statements of cash flows and members’ equity as of the end of and for such Fiscal Year, showing the computation and allocation of Net Income and Net Losses and stating in comparative form the figures as of the end of and for the prior Fiscal Year, (ii) the amount of the distributions to the Members and the effect of such distributions on the balance sheet of the Company, and (iii) a statement of such Member’s Capital Account, including such Member’s allocation and share of Net Income and Net Loss and any special allocations for such Fiscal Year.

(c)            As soon as available, but in any event not later than thirty (30) days prior to the beginning of each Fiscal Year of the Company, the business plan and projections of the Company for such Fiscal Year and a capital budget and operating budget, calculated monthly, for such Fiscal Year, each as approved by the Board of Managers, and any updates or revisions as soon as available.

(d)            From time to time, and promptly, such additional information and financial data regarding the results of operations, financial condition, business or affairs of the Company, which any Member may reasonably request.

The annual and quarterly financial information referred to in paragraphs (a) and (b) above will be prepared in accordance with United States generally accepted accounting principles consistently applied and will be prepared on a consolidated basis, to the extent applicable.

7.3            Access to Books. The books and records of the Company shall be available to each Member or its representatives for inspection and audit (at its own expense) during normal business hours at the principal office of the Company. The Board of Managers shall request the Company’s independent certified public accountants to cooperate in any such inspection and audit and to provide any of their work papers requested in connection therewith, all at the cost and expense of such Member.

7.4            Bank Accounts. The operating bank accounts of the Company shall be maintained in such bank or banks as may be designated by the Board of Managers and withdrawals from said accounts shall be made as the Board of Managers may determine. There shall be no commingling of the moneys or funds of the Company with moneys or funds of any Member or any other Person (other than with moneys or funds of corporations or other entities wholly owned by the Company).

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7.5            Tax Filings, Elections and Cooperation.

(a)            Except as otherwise set forth herein, the Company shall properly prepare and timely file or shall cause to be properly prepared and timely filed all tax returns required to be filed for or on behalf of the Company, which tax returns shall be prepared, except as otherwise provided herein, in such manner (including, but not limited to, the making of any election or the taking of any position, subject to the provisions of Section 6.6) as the Board of Managers may determine in good faith to be in the best interests of the Members. Unless otherwise required by applicable law, the Company shall use the Fiscal Year as the tax period on all income tax returns.

(b)            The Company shall (i) use reasonable efforts to cause to be delivered within seventy-five (75) days after the end of each Fiscal Year (but in no event later than ninety (90) days following each such Fiscal Year), a Schedule K-1 with respect to each such Fiscal Year to each Person that was a Member at any time during each such Fiscal Year; and (ii) make available to each Member such other information as may be necessary for the preparation of any tax return for or including such Member or the making of any estimated tax payment for on behalf of such Member (or if such Member is a flow-through entity for federal income tax purposes, its direct or indirect owners).

(c)            With respect to each Non-Transition Year, to the maximum extent permitted by the Code, the Treasury Regulations and other applicable law, the Company shall make or cause to be made and shall maintain or cause to be maintained the following elections:

(i)            in the case of any Non-Transition Year with respect to which the Company is eligible to make an election under Code Section 6221(b), an election to apply Code Section 6221(b), and

(ii)           in the case of any Non-Transition Year with respect to which the Company fails or is ineligible to make an election under Code Section 6221(b), an election to apply Code Section 6226.

(d)            With respect to each Non-Transition Year, subject to the provisions of Section 6.6, the Company shall take and shall cause to be taken any and all actions (including, but not limited to, the providing of all notices required under Code Section 6221(b)(1)(E) and all statements required under Code Section 6226(a)(2)) necessary to allow the making and maintenance of any election in accordance with Section 7.5(c). As determined by the Board in good faith, the Company may apply any reasonable method for the purpose of determining (i) a Member’s share of any adjustment described in Code Section 6226(a)(2) (including, but not limited to, for the purpose of providing any statement described in Code Section 6226(a)(2)) or for any other tax purpose or (ii) the extent to which any Underpayment Amount has been withheld or paid by the Company with respect to or on behalf of or is otherwise attributable to a Member. Any determination under the preceding sentence shall be final and binding on the Company and all Members and neither the Company nor any Member shall take any position for any purpose that is inconsistent with such determination.

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(e)            To the extent permitted by a state tax, the Company shall take such actions as may be reasonably necessary to reduce, prevent or otherwise mitigate the Company’s liability for any Underpayment Amount under the state tax, including, but not limited to, making elections similar to and in the same order of preference as the elections described in each of Section 7.5(c) and Section 7.5(d).

(f)            As determined by the Board in its reasonable discretion, the Company may elect in a timely manner pursuant to Code Section 754 and pursuant to any corresponding provisions of applicable state and local tax laws to adjust the bases of the assets of the Company pursuant to Code Sections 734 and 743 and pursuant to any corresponding provisions of applicable state and local tax laws.

(g)            Neither the Company, any Manager, any officer, nor any Member shall take any action (including, but not limited to, the filing of any tax return or the making of any election on or in connection with any tax return) or permit or cause any action to be taken by or on behalf of the Company that would cause or otherwise result in:

(i)            the classification of the Company or any of its Affiliates as an association taxable as a corporation for any income tax purpose,

(ii)           the exclusion of the Company from the application of the provisions of subchapter K of chapter 1 of subtitle A of the Code or any similar provisions of other applicable tax law,

(iii)          the taking by any Member of any position for any purpose that is inconsistent with the treatment of such position on any U.S. federal income tax return of the Company or any of its Affiliates,

(iv)          in the case of a Transition Year, the application of all or any portion of any of Code Sections 6221 through 6241, as in effect with respect to any Non-Transition Year, and

(v)          in the case of a Non-Transition Year, the amendment, revocation, lapse or termination of any election under Code Section 6221(b) or Code Section 6226, each as in effect with respect to the Non-Transition Year.

(h)            When and as requested by the Company, each Member, at the Member’s own expense, shall preserve and furnish to the Company all documents and information (including, but not limited to, any change in mailing address or other contact information, any change in residency for any tax purpose, and any social security, employer identification or other taxpayer identification number), and shall take such other action (including, but not limited to, a Member’s filing of one or more amended tax returns) as may be necessary to enable the Company (or any Person on behalf of the Company) to (i) prepare, amend and/or file any tax return (including, but not limited to, any making, amendment, rescission or revocation of any election on or with respect to any tax return, subject to the provisions of Section 6.6), (ii) eliminate, settle, limit, reduce, modify or otherwise determine any liability for any Underpayment Amount (including, but not limited to, any “imputed underpayment amount” under Code Section 6225(c)), (iii) register to do business, collect tax, or comply with any similar prerequisite to doing business or conducting any other activity in any jurisdiction, or (iv) pursue, defend, settle or otherwise respond to any proceeding. In the case of any Non-Transition Year with respect to which an election under Code Section 6226 (or under any other similar or corresponding provisions of any state tax) is or will be in effect, each Member shall comply with all provisions of Code Section 6226 (and any other similar or corresponding provisions of any state tax), including, but not limited to, taking such Member’s share of any adjustment under Code Section 6226 into account on any separate tax return of such Member, the amendment of all tax returns affected by such adjustment, and the payment of any increased or additional tax resulting therefrom.

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(i)            No Member shall take any action (including, but not limited to, converting from an entity described in Code Section 6221(b)(1)(C) to an entity not described in Code Section 6221(b)(1)(C) and any gift, bequest or other Transfer) that, either alone or in conjunction with any other action or other circumstance, can or will revoke, amend, terminate or otherwise adversely affect any election under Code Section 6221(b) or the Company’s present or future ability or eligibility to make any election under Code Section 6221(b).

7.6            Partnership Representative.

(a)            This Section 7.6 shall only apply with respect to Non-Transition Years and to any tax proceedings for any Non-Transition Year.

(b)            The Partnership Representative shall serve as the “partnership representative” within the meaning of Code Section 6223 and, if and to the extent permitted by an applicable state tax, as the “partnership representative” or “tax matters partner” or in any other similar capacity for purposes of such state tax. If the Partnership Representative for federal income tax purposes cannot also serve in the capacity of a “partnership representative” or “tax matters partner” or in any other similar capacity for purposes of a state tax, the Partnership Representative designated by the Board for purposes of such state tax shall act in such capacity for purposes of such state tax (and only for purposes of such state tax).

(c)            Within ten (10) days after the receipt of any notice from the Internal Revenue Service (or other tax authority) relating to any tax proceeding, the Company shall mail or cause to be mailed a copy of such notice to each Member. Thereafter, the Company shall deliver or cause to be delivered to each Member in writing (or in such other form as may be necessary to preserve any applicable attorney-client privilege) a report setting forth in reasonable detail the status of the tax proceeding, no later than ten (10) days after the close of each calendar quarter or an occurrence of any significant change, progress or other development in the tax proceeding (including, but not limited to, copies of all material written communications relating to the tax proceeding that the Company, any Manager or any officer may send or receive).

(d)            Neither the Company, any Manager nor any officer, either directly or through any of their respective Affiliates, shall take any material direct or indirect action or make any material decision with respect to any tax proceeding, any of Code Sections 6221 through 6241 (as in effect with respect to any Non-Transition Year) or any of Code Sections 6221 through 6234 (as in effect with respect to any Transition Year), unless (i) the Company has first given the Members written notice of the contemplated action or decision at least ten (10) business days prior to the taking such action and (ii) the Company has received the written consent of each of the Members to such contemplated action or decision. Neither the Company, any Manager nor any officer shall bind any Member to a settlement agreement with respect to any tax without first obtaining the written consent of such Member.

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(e)            To the extent permitted by a state tax, the Company shall take such actions as may be reasonably necessary to reduce, prevent or otherwise mitigate the Company’s liability for any Underpayment Amount under the state tax, including, but not limited to, making elections similar to and in the same order of preference as the elections described in each of Section 7.5(c) and Section 7.5(d).

7.7            Tax Matters Partner for Transition Years.

(a)            This Section 7.7 shall apply only with respect to Transition Years and to any tax proceedings for any Transition Year. All Code sections referenced in and other applicable tax law otherwise relating to implementation of this Section 7.7 shall be applied as in effect with respect to a Transition Year.

(b)            The Partnership Representative shall serve as the “tax matters partner” within the meaning of Code Section 6231(a)(7) and, if and to the extent permitted by an applicable state tax, as the “partnership representative” or “tax matters partner” or in any other similar capacity for purposes of such state tax. If the Partnership Representative for federal income tax purposes cannot also serve in the capacity of a “partnership representative” or “tax matters partner” or in any other similar capacity for purposes of a state tax, the Partnership Representative designated by the Board for purposes of such state tax shall act in such capacity for purposes of such state tax (and only for purposes of such state tax).

(c)            Within ten (10) days after the receipt of any notice from the Internal Revenue Service (or other tax authority) relating to any tax proceeding for a Transition Year, the Company shall mail or cause to be mailed a copy of such notice to each Member and shall take such action as may be necessary to cause each Member to become a “notice partner” within the meaning of Code Section 6231(a)(8). Thereafter, the Company shall deliver or cause to be delivered to each Member in writing (or in such other form as may be necessary to preserve any applicable attorney-client privilege) a report setting forth in reasonable detail the status of the tax proceeding, no later than ten (10) days after the close of each calendar quarter or an occurrence of any significant change, progress or other development in the tax proceeding (including, but not limited to, copies of all material written communications relating to the tax proceeding that the Company, any Manager or any officer may send or receive).

(d)            Neither the Company, any Manager nor any officer, either directly or through any of their respective Affiliates, shall take any material direct or indirect action or make any material decision with respect to any tax proceeding, any of Code Sections 6221 through 6241 (as in effect with respect to any Non-Transition Year) or any of Code Sections 6221 through 6234 (as in effect with respect to any Transition Year), unless (i) the Company has first given the Members written notice of the contemplated action or decision at least ten (10) business days prior to the taking such action and (ii) the Company has received the written consent of each of the Members to such contemplated action or decision. Neither the Company, any Manager nor any officer shall bind any Member to a settlement agreement with respect to any tax without first obtaining the written consent of such Member.

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7.8            Survival. If a Person, in whole or in part, makes a Transfer of a Membership Interest or otherwise ceases to be a Member, then such Person shall remain obligated and subject to the terms and conditions of each of Sections 7.5 through 7.8, along with any other provisions of this Agreement necessary or ancillary to implementation of any of Sections 7.5 through 7.8, in the same manner as if such Transfer or cessation never occurred.

ARTICLE VIII

DISSOLUTION; CONTINUATION OF COMPANY

8.1            Dissolution of the Company.

(a)            The happening of any one of the following events shall cause the dissolution of the Company, in which event the Company shall be wound up in accordance with the provisions of this Article VIII:

(i)            the sale, transfer, assignment or other disposition of all or substantially all of the Operations;

(ii)           the agreement in writing by all of the Preferred Members to dissolve the Company; or

(iii)          the entry of an order of a court of competent jurisdiction dissolving the Company.

(b)            In the event of the dissolution of the Company for any reason, the Board of Managers shall proceed promptly and continue with reasonable expedition to wind up the affairs of the Company. The Members shall continue to share Net Income and Net Losses during the period of winding up in accordance with the provisions of Article III hereof and to receive distributions as provided in Section 8.3 hereof. The Board of Managers shall, acting in good faith, determine the time, manner and terms of any sale or sales of Company property pursuant to such winding up, having due regard for the activity and condition of the relevant market and general financial and economic conditions (subject, in the case of any dissolution of the Company in circumstances which constitute a Liquidation, to the provisions of Section 8.3 hereof).

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8.2            Continuation. The death, legal incapacity, retirement, resignation, termination of employment, expulsion, bankruptcy or dissolution of a Member shall not cause a dissolution of the Company and in all such events, the Company shall continue. Upon the happening of such an event with respect to any Member, all rights of a Member under this Agreement, including the rights to share in the Net Income and Net Losses of the Company, to receive distributions of Company funds and to assign a Membership Interest, shall devolve on its successors and assigns, subject to the terms and conditions of this Agreement; provided, however, in no event shall any of such successors or assigns (other than a Permitted Transferee) become a substitute Member, except with the consent of the Members as provided in Section 6.6 hereof and the Board of Managers as provided in Section 10.1(b) hereof.

8.3            Distributions on Liquidation.

(a)            Notwithstanding any other provision of this Agreement, in the event of a Liquidation, the Company shall make liquidating distributions within the time period prescribed in, and otherwise in accordance with, the Treasury Regulations under Section 704(b) of the Code. After any Net Income or Net Losses have been allocated pursuant to Section 3.1 and after paying or making reasonable provision for the payment of all debts, liabilities and obligations of and all claims against the Company, all expenses of winding up, and subject to the right of the Board of Managers to set up such reserves as it may deem reasonably necessary for any contingent or unforeseen liabilities or obligations of the Company, the remaining assets of the Company shall be distributed, subject to the provisions of Section 8.3(b) hereof, in cash or property, or both, in the discretion of the Board of Managers, to the Members in the same manner as set forth in Section 4.1(b).

(b)            In the case of any Liquidation, the Company shall have the right (in addition to any other rights it may have under this Agreement, the LLC Act or otherwise), to make any liquidating distributions in cash, Company notes or property, or any combination thereof, in the discretion of the Board of Managers; provided that the ratio of cash, notes or other property included as part of any distribution made to Members under this Section 8.3 shall be the same for all Members; and provided, further, that any distribution of notes issued by the Company to any Member hereunder shall bear interest at the rate prescribed by the Treasury Regulations under Section 704(b) of the Code and shall be on terms consistent with the Treasury Regulations under Section 704(b) of the Code.

(c)            To the extent that at the time of payment of any distributions under Section 8.3(a), the amount to be distributed is insufficient to satisfy the entire amounts described in Section 8.3(a), then such funds that are available for distribution shall be distributed in accordance with the priorities set forth in Section 8.3(a). If more than one Member shall be entitled to equal priority with respect to the amount of any distribution, then such funds available for distribution with respect to such priority shall be applied to each Member in proportion to the amount payable to such Member with respect to such priority.

8.4            Termination. The Board of Managers shall have the authority to execute and record any and all documents required in connection with the dissolution, winding up and Termination of the Company.

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8.5            Final Statement. Within a reasonable time following Termination, the Board of Managers shall cause to be supplied to each Member a statement setting forth the assets and liabilities of the Company as of the date of Termination and the distributions made or to be made to each Member as of such date and shall prepare and deliver to each Member a report setting forth in sufficient detail all such information and data with respect to the business transactions effected by or involving the Company during the last Fiscal Year of the Company as shall enable each Member to prepare all its tax returns in accordance with the laws, rules and regulations then prevailing.

8.6            Company Sale. If a Company Sale shall occur, the Company shall cause to be paid to the Members (or their equity holders, as applicable) amounts equal to the amounts they would be entitled to receive pursuant to, and in accordance with, Section 8.3 hereof if the Company liquidated on the date of such Company Sale and had assets equal to the aggregate consideration payable or deliverable in connection with such Company Sale.

ARTICLE IX

LIABILITY, EXCULPATION AND INDEMNIFICATION

9.1            Liability.

(a)            Except as otherwise provided by this Agreement or the LLC Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Covered Person shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Covered Person.

(b)            Except as otherwise expressly required by this Agreement or the LLC Act, a Member, in its capacity as Member, shall have no liability in excess of (i) its Capital Contributions made to the Company, (ii) its obligation to make other payments expressly provided for in this Agreement, and (iii) the amount of any distributions distributed to it in violation of applicable law. Any deficit in a Member’s Capital Account does not have to be restored and shall not be treated as an obligation of the Member for any purpose whatsoever.

9.2            Exculpation.

(a)            No Covered Person shall be liable to the Company or any other Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that a Covered Person shall be liable for any such loss, damage or claim incurred by reason of such Covered Person’s actual fraud or willful misconduct with respect to the Company.

(b)            A Covered Person shall be fully protected in relying in good faith upon the records of the Company and upon such information, opinions, reports or statements presented to the Company by any Person as to matters the Covered Person reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits, losses, or any other facts pertinent to the existence and amount of assets from which distributions to Members might properly be paid.

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(c)            No Manager shall be liable to any Member for (i) any action lawfully taken or omitted to be taken by him in accordance with this Agreement, or (ii) any action taken or omitted to be taken by him at, and in accordance with, the direction of the required Membership Interests of the Members.

9.3            Duties and Liabilities of Covered Persons.

(a)            To the extent that, at law or in equity, a Covered Person has duties (including fiduciary duties) and liabilities relating thereto to the Company or to any other Covered Person, a Covered Person acting under this Agreement shall not be liable to the Company or to any other Covered Person for its good faith reliance on the provisions of this Agreement. Notwithstanding anything to the contrary in this Agreement or the LLC Act, to the fullest extent permitted by law, the Company and the Members hereby eliminate any and all fiduciary duties stated or implied by applicable law or equity that any Covered Person may have (in such capacity) to any other Covered Person (in such capacity) or the Company (including in connection with the exercise of rights hereunder).

(b)            The Members expressly acknowledge and agree that no Covered Person is under any obligation to consider the separate interests of any other Covered Person in deciding whether to cause the Company to take (or omit to take) any actions, and that no Covered Person shall be liable, at law or in equity, for losses sustained, liabilities incurred or benefits not derived by any other Covered Person in connection with such decisions.

(c)            Whenever in this Agreement a Covered Person is permitted or required to make a decision (i) in its “discretion” or under a grant of similar authority or latitude, the Covered Person shall be entitled to consider only such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company or any other Person, or (ii) in its “good faith” or under another express standard, the Covered Person shall act under such express standard and shall not be subject to any other or different standard imposed by this Agreement or other applicable law.

9.4            Indemnification. To the fullest extent permitted by applicable law, and after exhausting all coverage under any applicable insurance policy, each Covered Person, including without limitation, each of the Managers, shall be entitled to indemnification from the Company for any loss, damage, claim or liability incurred by such Covered Person by reason of any act or omission performed, or omitted to be performed, or alleged to be performed or omitted to be performed, by such Covered Person in good faith on behalf of the Company and in a manner reasonably believed to be within the scope of authority conferred on such Covered Person by this Agreement, except that no Covered Person shall be entitled to be indemnified in respect of any loss, damage, claim or liability incurred by such Covered Person by reason of his or its actual fraud or willful misconduct with respect to the Company.

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9.5            Expenses. To the fullest extent permitted by applicable law, reasonable expenses (including reasonable legal fees and disbursements) incurred by a Covered Person in defending any claim, demand, action, suit or proceeding shall, from time to time, be advanced by the Company prior to the final disposition of such claim, demand, action, suit or proceeding upon receipt by the Company of an undertaking by or on behalf of the Covered Person to repay such amount if it shall be determined, in a final, non-appealable judgment, that the Covered Person is not entitled to be indemnified as authorized in Section 9.4 hereof.

9.6            Limitation on Indemnification. Any indemnification of a Covered Person under this Article IX shall be satisfied solely out of the assets of the Company, and no Member shall have any liability whatsoever with respect to any such claim for indemnity or reimbursement. In addition, the indemnification provided by the Company pursuant to this Article IX shall be net of the proceeds of any insurance or other indemnification that the Covered Person shall receive in respect of any matter giving rise to the Company’s obligation to indemnify such Covered Person. The Board of Managers may obtain, at the Company’s expense, such policies of insurance providing such coverage as is customary in the case of enterprises of established reputation engaged in the same or similar business as, and similarly situated with, the Company and naming such of the Covered Persons as insureds as the Board of Managers may determine from time to time in its discretion; provided, that, if any Covered Person (e.g., a Manager) is covered by any such insurance policy, then all Covered Persons in the same category (e.g., all Managers) shall be so covered.

9.7            Non Exclusivity. The right of any Covered Person to the indemnification provided in this Article IX shall be cumulative with, and in addition to, and shall not be required to be exhausted in priority to, any and all rights to which such Covered Person may otherwise be entitled by contract or as a matter of law or equity and shall extend to the successors, assigns and legal representatives of such Covered Person. If the Company shall indemnify any Covered Person, it shall be subrogated to the right of such Covered Person against any third party, including any insurance company, to recover the amount of such indemnification after the Covered Person shall have been fully and completely indemnified in respect of the matter which gave rise to such indemnification. The Board of Managers shall pursue such rights of recovery if it would be in the best interests of the Company to do so.

9.8            Amendments. Any amendment or modification of any provision of this Article IX that adversely affects any right of a Covered Person under this Article IX shall be prospective only, and shall not adversely affect any right or protection conferred on a Covered Person pursuant to this Article IX and existing at the time of such amendment or modification.

ARTICLE X

TRANSFER

10.1            Transfer.

(a)            Except as otherwise required by law, or permitted under this Article X, neither this Agreement nor any interest of any Member in this Agreement or in the Company, including any interests in undistributed moneys belonging to, or which may accrue to, such Member may be Transferred; provided, however, that any Member may Transfer all or a portion of its interest in this Agreement or in the Company to (i) any entity providing financing to the Company, (ii) any Permitted Transferee of such Member, (iii) to Regional or to the Company in accordance with the provisions of 6.7 or 10.6 hereof or (iv) any other Person, but only, in the case of this clause (iii), with the prior written consent of the Board of Managers and Preferred Members holding at least a majority of the then outstanding Preferred Membership Interests, in their respective absolute discretion, which consent may be conditioned upon the satisfaction of all conditions set forth in Section 10.2 hereof and the receipt of such legal opinions and other documents as the Board of Managers shall deem to be appropriate. Any Transfer pursuant to this Article X shall be effected in accordance with the provisions of Section 10.2(b) hereof.

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(b)            Notwithstanding the provisions of Section 10.1(a) hereof, no transferee of any interest of any Member in this Agreement or in the Company (“Transferee”), other than a Permitted Transferee of a Member, shall become a Member hereunder unless the Board of Managers and Preferred Members holding at least a majority of the then outstanding Preferred Membership Interests, in their respective absolute discretion, consent to the admission of such Transferee as a Member of the Company. The admission of any such Transferee as a substitute Member may be conditioned on such Transferee providing such legal opinions and other documents as the Board of Managers shall deem to be appropriate. Any substitute Member admitted to the Company pursuant to the provisions of this Section 10.1(b) will succeed to all of the rights and be subject to all the obligations of the assigning Member with respect to the interest to which such Member was substituted.

(c)            The transferor and Transferee of any interest hereunder will, jointly and severally, be obligated to reimburse the Company for all reasonable expenses (including legal fees and disbursements) of any Transfer or proposed Transfer of the Member’s interest in the Company or the admission of any Transferee as a Member.

(d)            Except as otherwise permitted by this Article X, no Member shall have the right to voluntarily withdraw as a Member of the Company.

(e)            Notwithstanding anything to the contrary contained herein, no Transfer or assignment of any interest of any Member in this Agreement or in the Company shall be effective if, in the opinion of counsel for the Company, such Transfer or assignment would cause the Company to (i) lose its status as a partnership for federal income tax purposes, (ii) cause the Company to be considered a publicly traded partnership under Section 7704(b) of the Code, or (iii) be terminated for tax purposes pursuant to Section 708 of the Code.

10.2            Restrictions on Transfer.

(a)            General Restrictions. No Membership Interest now owned or hereafter acquired by any of the Members may be Transferred unless:

(i)            such Transfer of a Membership Interest shall be made in accordance with the provisions of this Agreement;

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(ii)           the proposed recipient of such Membership Interest, if such recipient is to be admitted as a substitute Member, shall deliver to the Company a signed counterpart of this Agreement or a written acknowledgment that the Membership Interest to be received in such proposed Transfer is subject to this Agreement and that the proposed recipient and its successors in interest are bound hereby and agree to comply with this Agreement, each such document to be in form and substance reasonably satisfactory to the Company; and

(iii)          such Transfer shall be made pursuant to an effective registration under the Securities Act and any applicable state securities laws, or an exemption from such registration, and prior to any such Transfer the Member proposing to Transfer a Membership Interest shall give the Company (A) notice describing the manner and circumstances of the proposed Transfer (copies of which the Company shall furnish to each Member following receipt thereof by the Company) and (B) if such Transfer is to be made pursuant to an exemption from such registration and if reasonably requested by the Company, a written opinion of counsel, who shall be reasonably satisfactory to the Company and its counsel, such opinion to be in form and substance reasonably satisfactory to the Company and its counsel, to the effect that the proposed Transfer of Membership Interest may be effected without registration under the Securities Act and any applicable state securities laws.

Upon the Transfer of a Membership Interest in accordance with this Agreement, the recipient of such Membership Interest shall be deemed a “Transferee” hereunder and shall not be made a Member except in accordance with Section 10.1(b) hereof. Any attempted Transfer of a Membership Interest other than in accordance with this Agreement shall be null and void and the Company shall refuse to recognize any such Transfer and shall not reflect on its records any change in record ownership of a Membership Interest pursuant to any such Transfer.

(b)            Transfers. The closing of any Transfer of a Membership Interest shall take place at the offices of the Company unless otherwise agreed by the parties involved in the Transfer. Any Member who Transfers a Membership Interest shall (i) do all things and execute and deliver all such papers as may be necessary or reasonably requested by the Company in order to consummate the Transfer of such Membership Interest, (ii) pay to the Company such amounts as may be required for any applicable Transfer taxes incurred by the Company and (iii) pay to the Company any reasonable expenses incurred by the Company in connection with such Transfer (including reasonable attorney’s fees and disbursements).

10.3            Additional Restrictions on Transfer. In the event any Member (a “Transferring Member”) wishes to Transfer any Membership Interest, either directly or indirectly, to any Person (such Person being hereinafter referred to as a “Third Party”), other than to a Permitted Transferee or an entity providing financing to the Company in compliance with Sections 10.1 and 10.2, such Transferring Member must first comply with the following provisions of this Article X.

10.4            Right of First Refusal.

(a)            If a Transferring Member receives an offer from a Third Party to purchase any or all of its Membership Interest, such Transferring Member shall deliver to the Company and the other Members written notice of the proposed transaction setting forth (i) the name and address of the Third Party, (ii) the Membership Interest to be Transferred, (iii) the purchase price and form of consideration and terms and conditions of payment and (iv) the other material terms and conditions of the transaction (collectively, the “Third Party Terms”), and such notice shall be accompanied by a copy of a binding bona fide offer to purchase such Membership Interest signed by such Third Party (collectively, the “First Refusal Notice”). The First Refusal Notice shall be delivered to the Company and the other Members at least forty-five (45) days prior to the expected date of such Transfer. The offer contained in the First Refusal Notice shall be deemed an offer by such Transferring Member to the other Members that may be accepted in writing (which shall state the Membership Interest elected to be purchased) by the other Members or any of them (pro rata based on each such other Member’s Pro Rata Interest or in such other proportion as the accepting Members (each a “Participating Member”) may determine), in whole or in part, within 10 days after the receipt of such First Refusal Notice, on the Third Party Terms.

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(b)            If the other Members do not timely, or elect not to, accept the offer set forth in the First Refusal Notice to purchase the entire Membership Interest pursuant to Section 10.4(a), then the Transferring Member shall promptly deliver to each Participating Member a written notice (the “Overallotment Notice”), at least thirty (30) days prior to the expected date of such Transfer, which shall set forth the names of the Participating Members and the Membership Interest not elected to be purchased in accordance with Section 10.4(a) (the “Unsubscribed Interest”), and shall offer such Participating Members the right to purchase the Unsubscribed Interest on the same terms and conditions as set forth in the First Refusal Notice. The offer contained in the Overallotment Notice shall be deemed an offer by such Transferring Member of the Unsubscribed Interest to the Participating Members, which offer may be accepted in writing (which shall state the Unsubscribed Interest elected to be purchased) by the Participating Members or any of them (pro rata based on each Participating Member’s Pro Rata Interest or in such other proportion as the accepting Participating Members may determine), in whole or in part, within five days after the receipt of such Overallotment Notice, on the Third Party Terms.

(c)            In the event that the Third Party Terms provide for the payment to the Transferring Member of consideration other than cash, the value of such non-cash consideration shall be determined in good faith by the Board of Managers and shall be paid in cash at the closing of the transaction; provided, however, that if the Third Party offers the Transferring Member (i) securities that are traded on a recognized securities exchange, then the value of such consideration shall be computed based on the average closing sale prices of such securities for the ten (10) consecutive trading days preceding the date of the offer, or (ii) securities that are traded on the over-the-counter market, the value of such consideration shall be computed based on the average of the closing bid and closing asked prices of such securities for the 10 consecutive trading days preceding the date of the offer, in each case as reported by Bloomberg. Any dispute regarding the determination of the fair market value of non-cash consideration will be settled by a reasonable process determined by the Board of Managers. All costs of any appraisal shall be borne by the Company.

(d)            The closing of the purchase of the Membership Interest on the Third Party Terms shall be held as promptly as practicable following full compliance with all applicable provisions in this Section 10.4, but in no event later than twenty (20) days thereafter. If (i) the provisions of this Section 10.4 have been complied with in all respects, and (ii) the Participating Members have not elected to purchase the entire Membership Interest being Transferred by the Transferring Member on the Third Party Terms, then such Transferring Member shall comply with Section 10.5 as provided below.

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10.5            Tag-Along Right.

(a)            In the event that the Participating Members do not timely, or elect not to, accept, in whole, the offer contained in the First Refusal Notice pursuant to the terms of Section 10.4, each of the Members other than the Transferring Member (each, a “Tagging Member”) shall then have the right to require the Third Party to purchase from such Tagging Member up to the amount of such Tagging Member’s Membership Interest (and the Transferring Member shall reduce the Membership Interest to be sold by it by a corresponding amount) that is equal to the product of (i) the Membership Interest to be purchased by the Third Party and (ii) such Tagging Member’s Pro Rata Interest.

(b)            Any Membership Interest purchased from a Tagging Member pursuant to this Section 10.5 shall be purchased at the same price and same type of consideration and on the same terms and conditions as the Transfer by the Transferring Member. It shall be an express condition to the sale of Membership Interests by each Tagging Member that such Tagging Member execute and deliver to the Third Party any and all documents required to be executed and delivered by the Transferring Member to effect such sale.

(c)            The Transferring Member shall notify the Members in writing of the proposed Transfer not less than twenty (20) days prior to the date of such proposed Transfer (the “Transferor Tag-Along Notice”). The Transferor Tag-Along Notice shall contain the same information as set forth in the First Refusal Notice.

(d)            The tag-along right provided for in this Section 10.5 may be exercised by any Tagging Member by delivery of a written notice to the Company, the Transferring Member and the Third Party (the “Tag-Along Notice”) within 10 days following receipt of the Transferor Tag-Along Notice (the “Tag-Along Period”). The Tag-Along Notice shall state the Membership Interest that a Tagging Member wishes to include in such Transfer to the Third Party. The failure of a Member to deliver a Tag-Along Notice meeting the requirements of this Section 10.5(d) within the Tag-Along Period shall constitute a waiver of such Member’s tag-along rights with respect to such proposed Transfer.

(e)            Upon the giving of its Tag-Along Notice, a Tagging Member shall be obligated to sell to the Third Party the Membership Interest set forth in its Tag-Along Notice on the Third Party Terms (or, if a Tagging Member is not entitled to sell all such Membership Interest under the terms of this Section 10.5, such Tagging Member shall be obligated to sell the maximum amount of such Membership Interest such Tagging Member is permitted to sell hereunder on the Third Party Terms); provided, however, that neither the Transferring Member nor any Tagging Member shall consummate the sale of any Membership Interests unless the Third Party purchases, on the Third Party Terms, all of the Membership Interests contained in the Tag-Along Notices that the Tagging Members are entitled to sell under the terms of this Section 10.5. If the Third Party does not purchase Membership Interests entitled to be sold by any Tagging Member that has complied with the terms of this Section 10.5, then any Transfer by the Transferring Member and any other Tagging Members to such Third Party shall be null and void and of no effect whatsoever.

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(f)            After expiration of the Tag-Along Period, if any, if the provisions of Section 10.4 and this Section 10.5 have been complied with in all respects and no Tag-Along Notice has been given, the Transferring Member shall have the right for 60 days to Transfer its Membership Interest to the Third Party on the Third Party Terms without further notice to the Company or the other Members, but after such sixty (60) days no such Transfer may be made without again complying with all of the requirements of Section 10.4 and this Section 10.5. If the terms of such proposed Transfer are different in any material respect from the Third Party Terms, the Transferring Member shall deliver to the Company and the other Members a revised First Refusal Notice, and shall again comply with all of the requirements of Section 10.4 and, to the extent required, this Section 10.5.

10.6            Put/Call Right.

(a)            Notwithstanding anything to the contrary contained in this Agreement (including, without limitation, Section 6.7 or any actions that may have been taken under such Section), in the event that (i) the Management Services Agreement has been terminated for any reason and Regional elects to exercise its rights under this Section 10.6 or (ii) the Management Services Agreement has been terminated by Regional and Lorraine elects to exercise its rights under this Section 10.6, Regional or Lorraine, as applicable, may, at any time, give written notice (a “Put/Call Notice”) to the Company and the other Member of its desire to have the Company repurchase the Lorraine Parties’ entire Membership Interest for the fair market value thereof as determined below (the “Put/Call Price”). The Put/Call Price shall be determined by the Independent Appraiser, without regard to any discount for minority equity position or restriction of marketability, and shall be set forth in a written report delivered by such Independent Appraiser (the “Appraisal Report”) to the Company, Regional and Lorraine within thirty (30) days after the date of its appointment; provided, however, that if a Qualified Offer is then outstanding as described in Section 6.7(a) hereof, the Put/Call Price shall instead be determined based upon the purchase price for the Company Sale set forth in such Qualified Offer. The costs of such Independent Appraiser shall be borne by the Company.

(b)            Within thirty (30) days after the date of the Appraisal Report or the date of the Put/Call Notice in the event a Qualified Offer is then outstanding, as applicable (the “Put/Call Price Due Date”), the Company and Regional shall redeem all the Membership Interests held by the Lorraine Parties for the amount of the Put/Call Price and Regional shall use commercially reasonable efforts either to finance (or cause the Company to finance) the consideration required for the redemption or contribute additional equity capital necessary to finance the consideration required for the redemption. The Lorraine Parties will take, and cause the Managers nominated by Lorraine to take, all actions and will do, and cause the Managers nominated by Lorraine to do, all things necessary, proper or advisable to consummate the redemption of its Membership Interest in accordance with this Section 10.6. The closing of the redemption of Lorraine Parties’ Membership Interests shall be subject to (i) the resignation of all of Lorraine’s nominees from the Board of Managers, (ii) the termination of any and all agreements between the Company, on the one hand, and any of the Lorraine Parties or any of their respective Affiliates, on the other hand, including the Management Services Agreement, and (iii) the execution by the Company, on the one hand, and the Lorraine Parties, on the other hand, of purchase documentation (containing customary representations and warranties from the Lorraine Parties regarding such sale (including non-contravention, and ownership of, and authority to sell, such Membership Interests free and clear of all liens, encumbrances and adverse claims of any nature whatsoever)), a non-competition and non-solicitation agreement, and a general release and discharge of the Company, its Affiliates and all present and former directors, officers, managers, members, agents, representatives, employees, their respective successors and assigns and their respective direct or indirect equity holders, each in form and substance reasonably satisfactory to Regional and Lorraine.

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(c)            If the Lorraine Parties have not been paid the amount of the Put/Call Price by the Put/Call Price Due Date, the Lorraine Parties shall also become entitled to receive, in addition to the Put/Call Price, (i) an amount equal to the accrued interest on the Put/Call Price at the Default Rate (compounded quarterly), measured from the Put/Call Price Due Date to and including the date of payment in full of the Put/Call Price and such additional accrued amount (ii) a penalty equal to 3% of the Put/Call Price and (iii) an amount equal to the amount of any reasonable, documented, out-of-pocket expenses, including, without limitation, reasonable attorneys’ fees incurred to enforce the collection of the Put/Call Price and any amount of default interest accrued thereon.

(d)            Until the Put/Call Price Due Date, Lorraine hereby agrees to conduct the Operations in the ordinary course of business consistent with the historical practices of the Company and to consult with, and cause the Managers designated by Lorraine to consult with, Regional and to obtain Regional’s consent on any material changes related to the Operations. Unless extended in writing by Lorraine, the rights conferred on Regional under this Section 10.6(d) shall automatically terminate thirty (30) days after the date of the Put/Call Notice. 

ARTICLE XI

ISSUANCE OF MEMBERSHIP CERTIFICATES

11.1            No Issuance of Membership Certificates. The Membership Interest of each Member in the Company shall be uncertificated.

11.2            Transfer of Membership Interests. An interest in the Company which is Transferred in accordance with the terms of Article X of this Agreement shall be transferable on the books of the Company by the Record Holder thereof in person or by such Record Holder’s duly authorized attorney. Except as otherwise required by law, the Company shall be entitled to treat the Record Holder of a Membership Interest on its books as the owner thereof for all purposes regardless of any notice or knowledge to the contrary.

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ARTICLE XII

GENERAL

12.1            Relationship of Members.

(a)            The relationship between the Members shall be that of members in a limited liability company as set forth in this Agreement. Nothing in this Agreement shall be construed as authorizing any Member to obligate legally or otherwise act as agent for the other Members, except within the scope of the business of the Company (including, without limitation, the authorization granted to the Partnership Representative pursuant to Section 6.9 hereof) to the extent expressly set forth herein.

(b)            Except as otherwise expressly provided in any other agreement entered into in connection with the consummation of the transactions contemplated herein (including the Management Services Agreement), each Member and each officer, director, stockholder, member, manager, partner, employee and Affiliate of each Member may have other business interests and investments (whether or not in competition with the business and/or investments of the Company) and may engage in any other business, trade, profession, or employment whatsoever (whether or not in competition with the business and/or investments of the Company), on its or his own account or in partnership, or as a consultant, advisor or equity holder or in any other capacity. Neither the Company nor any other Member shall have any right or interest in any such business, investment, trade, profession or employment by reason of this Agreement. The Members hereby waive any conflicts of interest arising from any such activity on the part of any Member or any officer, director, stockholder, member, manager, partner, employee or Affiliate of any Member. Notwithstanding the above, if an investment, acquisition or other business opportunity related to the Operations is presented to a Manager in his or her capacity as such, and such opportunity is of a character that if presented to the Company could be taken by the Company, then the Member that nominated such Manager shall cause such opportunity to be presented to the Board for its consideration.

12.2            Waiver of Jury Trial. EACH OF THE MEMBERS HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTES ARISING UNDER OR RELATING TO THIS AGREEMENT AND AGREES THAT ANY SUCH DISPUTE SHALL BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY.

12.3            Amendment. No provision of this Agreement may be amended or modified except by an instrument in writing executed by each of the Members. Any such written amendment or modification will be binding upon the Company and each Member; provided, that an amendment or modification modifying the rights or obligations of any Member in a manner that is materially and disproportionately adverse to such Member relative to the rights or obligations of other Members shall be effective only with that Member’s consent. Notwithstanding the foregoing, amendments to the Schedules hereto following any new issuance, redemption, repurchase or Transfer of Membership Interests in accordance with this Agreement may be made by the Board of Managers without the consent of or execution by the Members.

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12.4            Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAW OF THE STATE OF DELAWARE, WITHOUT REGARD TO THE PRINCIPLES OF THE CONFLICT OF LAWS THEREOF.

12.5            Consent to Jurisdiction, Etc. Each party to this Agreement hereby irrevocably consents and agrees that any action, suit, arbitration or proceeding arising in connection with any disagreement, dispute, controversy or claim arising out of or relating to this Agreement (a “Legal Dispute”) shall be brought only to the exclusive jurisdiction of the courts of the State of New York or the federal courts located in the State of New York sitting in New York County, New York, and each party hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by applicable federal, state or local laws, rules or regulations (“Regulations”), any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding that is brought in any such court has been brought in an inconvenient forum. During the period a Legal Dispute is pending before a court, all actions, suits or proceedings with respect to such Legal Dispute or any other Legal Dispute, including any counterclaim, cross-claim or interpleader, shall be subject to the exclusive jurisdiction of such court. Each party hereby waives, and shall not assert as a defense in any Legal Dispute, that (a) such party is not subject thereto, (b) such action, suit or proceeding may not be brought or is not maintainable in such court, (c) such party’s property is exempt or immune from execution, (d) such action, suit or proceeding is brought in an inconvenient forum or (e) the venue of such action, suit or proceeding is improper. A final judgment in any action, suit or proceeding described in this Section 12.5 following the expiration of any period permitted for appeal and subject to any stay during appeal shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by applicable Regulation. Each Member hereby waives personal service of any process in connection with any such action or proceeding and agrees that the service thereof may be made by certified or registered mail directed to the Member, and its counsel, at the address of such Member, and its counsel, set forth on Schedule B hereto, or at such other addresses of which the Member has given notice as provided in Section 12.7 hereof. In the alternative, any Member may effect service upon any other Member in any other form or manner permitted by law.

12.6            Intentionally Omitted.

12.7            Notices. All notices, designations, consents, offers, acceptances and other communications required or permitted by this Agreement shall be in writing and shall be sent by registered or certified mail, postage prepaid, or shall be delivered personally or by overnight courier, or shall be sent by telecopy, e-mail or similar means of simultaneous transmission and receipt, to the Company or to any Member at the address, telecopy number or e-mail address set forth for the Company or such Member. Notices shall be deemed to have been given on the fifth day after being so mailed, the next business day after delivery to such overnight courier, when sent by telecopier or e-mail (provided that in the case of e-mail the e-mail is not returned with an undeliverable, delayed or similar message) or upon receipt when delivered personally. A copy of any notice given pursuant to this Section 12.7 shall also be given to counsel for the party receiving such notice, at the address, e-mail address or telecopy number set forth for such counsel on Schedule B hereto. Any Member may change its address or its counsel or counsel’s address by giving written notice to the Company and the other Members in a manner conforming to the notice provisions hereof. All notices and other communications received by Lorraine under the Purchase Agreement will be promptly provided by Lorraine to Regional and its counsel in accordance with this Section 12.7.

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12.8            Severability. If any provision of this Agreement or the application of any such provision to any party or circumstances shall be determined by any court of competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this Agreement or the application of such provision to such Person or circumstances other than those to which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each provision hereof shall be validated and shall be enforced to the fullest extent permitted by law.

12.9            Title to Company Property. All property and assets owned by the Company, whether real or personal, tangible or intangible, shall be deemed to be owned by the Company as an entity and no Member individually, shall have any ownership of such property and assets.

12.10          Partition. No Member nor any successor in interest to any Member shall have the right while this Agreement remains in effect to have the property of the Company partitioned, or to file a complaint or institute any proceeding at law or in equity to have the property of the Company partitioned, and each Member, on behalf of itself, and its successors, successors in title, executors, administrators, representatives, heirs and assigns, hereby waives any such right. It is the intention of the Members that during the term of this Agreement, the rights of the Members and their successors in interest, as among themselves, shall be governed by the terms of this Agreement and that the right of any Member or successor in interest to assign, Transfer, sell or otherwise dispose of such Member’s interest in the Company shall be subject to the limitations and restrictions of this Agreement.

12.11         Captions. The Article and Section titles or captions contained in this Agreement are inserted only as a matter of convenience and for reference and in no way define, limit, extend or describe the scope of this Agreement or the intent of any provision hereof.

12.12         Pronouns and Plurals. Whenever the context may require, any pronoun used herein shall include the corresponding masculine, feminine or neuter forms and the singular form of nouns, pronouns and verbs shall include the plural and vice versa.

12.13         Payment. All payments required or permitted under this Agreement, including payments of distributions shall be made in lawful money of the United States, except as otherwise expressly permitted under Section 8.3 hereof.

12.14         Counterparts. This Agreement may be executed in counterparts (and by facsimile and .pdf format), each of which shall be deemed to be an original and all of such counterparts together shall constitute one and the same instrument.

12.15         Confidentiality. The Members shall, and shall direct their directors, officers, partners, members, managers, employees, attorneys, accountants, advisers and representatives that have access to confidential or proprietary information of the Company or the Operations to, keep confidential and not disclose any such confidential or proprietary information of the Company or the Operations to any other Person without the express consent of the Company, except to the extent such disclosure shall be required by applicable law, legal process, governmental rule or regulation, court order or administrative proceeding; provided, that, after putting in place appropriate confidentiality limitations with relevant third parties, each Member shall be permitted to disclose such information as it reasonably deems necessary in connection with a transaction or proposed transaction contemplated by Article X. Each Member’s obligations under this Section 12.15 shall survive the Transfer of such Member’s Membership Interest in the Company or any other event or occurrence that results in such Member ceasing to be a Member for any reason.

43

12.16         Further Assurances. From time to time after the execution hereof, the Members agree to execute and deliver said instruments, including amendments to this Agreement, and take such other action as may be necessary to more clearly set forth the agreements of the Members with respect to the subject matter hereof. If an election is made available to treat the Company as a partnership for federal, state or local income tax purposes, each Member agrees to take all action, and to execute and deliver all documents, necessary to elect to treat the Company as a partnership and to maintain and continue such election.

12.17         Directors and Officers Liability Insurance. The Company may provide, in such amounts and at such times as the Board of Managers may determine in its sole discretion, at the Company’s expense, coverage under a directors and officers liability insurance policy for employees of the Company and Managers of the Company.

12.18         No Third Party Rights. The provisions of this Agreement are for the exclusive benefit of the Company and the Members, and except as otherwise expressly provided herein, no other Person (including, without limitation, any creditor of the Company) shall have any right or claim against the Company or any Manager or Member by reason of those provisions or be entitled to enforce any of those provisions against the Company or any Manager or Member.

12.19         Successors and Assigns. Subject to the restrictions on Transfer set forth herein, this Agreement, and each and every provision hereof, shall be binding upon and shall inure to the benefit of the Members, their respective successors, successors in title, executors, administrators, representatives, heirs and assigns. Each and every successor in interest to any Member, whether such successor acquires such interest by way of gift, purchase, foreclosure, Transfer or by any other method, shall hold such interest subject to all of the terms and provisions of this Agreement.

12.20         Power of Attorney. Each Member does hereby constitute and appoint the Partnership Representative, with full power of substitution, as its true and lawful representative and attorney in fact, in its name, place and stead, to make, execute, sign, acknowledge and deliver or file (a) all instruments, documents and certificates which may from time to time be required by any law to effectuate, implement and continue the valid and subsisting existence of the Company and maintain its tax status as a partnership; and (b) all instruments, documents and certificates which may be required in order to qualify the Company to do business in any state; provided, however, that nothing contained in this Section 12.20 shall be deemed to expand the power of the Partnership Representative beyond that which is granted pursuant to the express provisions of this Agreement. The powers of attorney granted herein will be deemed to be coupled with an interest, will be irrevocable and will survive the death, incompetency, disability, bankruptcy or dissolution of the Member.

44

12.21         Equitable Relief. Each Member agrees that (a) if any Member breaches any provision of this Agreement, the damage to the Company will be substantial, although difficult to ascertain, and money damages will not afford the Company an adequate remedy, and (b) if any Member breaches or threatens a breach of any provision of this Agreement, the Company and each of the other Members shall be entitled, in addition to all other rights and remedies as may be provided by law, to specific performance, injunctive and other equitable relief to prevent or restrain a breach or threatened breach of this Agreement, without any requirement to post bond or other security.

12.22         Waiver. No failure or delay on the part of the Members or any of them in exercising any right, power or privilege hereunder, and no course of dealing between the Company and the Members or any of them shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege hereunder preclude the simultaneous or later exercise of any other right, power or privilege. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies which the Members or any of them would otherwise have. No notice to or demand on the Company in any case shall entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Members or any of them to take any other or further action in any circumstances without notice or demand.

12.23         Entire Agreement. This Agreement, together with the Management Services Agreement constitutes the entire agreement of the parties hereto with respect to the subject matter hereof, and this Agreement supersedes all prior written and oral agreements, understandings, negotiations or representations among the parties with respect to such subject matter.

12.24         Certain Expenses. The Company hereby agrees to reimburse Regional for the reasonable cost (as determined by Regional) of the legal fees and disbursements of its counsel, Olshan Frome Wolosky LLP, promptly upon receipt of a written invoice therefor.

[Signature page follows]

45

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

MEMBERS:
LORRAINE CAPITAL, LLC
By:	/s/ Justin M. Reich
Name:  Justin M. Reich
Title:    Member
REGIONAL BRANDS INC.
By:	/s/ Brian Hopkins
Name:  Brian Hopkins
Title:  Chairman and Chief Executive Officer
BRJ ACQUISITION PARTNERS, LLC
By:	/s/ Justin M. Reich
Name:   Justin M. Reich
Title:     Manager

46

SCHEDULE A

MEMBER CAPITAL CONTRIBUTIONS AND MEMBERSHIP INTERESTS

MEMBER	CAPITAL CONTRIBUTION		PERCENTAGE INTERESTS
	Common Capital	Preferred Capital	Common	Preferred
Regional Brands Inc.	-	$3,808,696	76.17%	95.22%
Lorraine Capital, LLC	-	-	20.00%	-
BRJ Acquisition Partners, LLC	-	$191,304	3.83%	4.78%

SCHEDULE B

NOTICE INFORMATION

COMPANY:

B.R. Johnson, LLC 591 Delaware Ave.
Buffalo, NY 14203
Attention: Justin M. Reich
Fax: (940) 382-9966 jreich@lorrainecapital.com   and   c/o Regional Brands Inc. 6060 Parkland Boulevard Cleveland, OH 44124 Attention: Brian Hopkins Fax: (216) 825-4001 Attention: Brian Hopkins brian@ancora.net

With a copy to:

Brian J. Bocketti, Esq.
Lippes Mathias Wexler Friedman, LLP
665 Main Street, Suite 300
Buffalo, NY 14203
bbocketti@lippes.com
Fax: (716) 853-5100   and   Olshan Frome Wolosky LLP 1325 Avenue of the Americas New York, NY 10019 Attention: Michael R. Neidell, Esq. Fax: (212) 451-2222 mneidell@olshanlaw.com

MEMBERS:

Lorraine Capital, LLC	591 Delaware Ave. Buffalo, NY 14203 Attention: Justin M. Reich Fax: (940) 382-9966 jreich@lorrainecapital.com
BRJ Acquisition Partners, LLC	Same as above.
Regional Brands Inc.	6060 Parkland Boulevard Cleveland, OH 44124 Attention: Brian Hopkins Fax: (216) 825-4001 Attention: Brian Hopkins brian@ancora.net With a copy to: Olshan Frome Wolosky LLP 1325 Avenue of the Americas New York, NY 10019 Attention: Michael R. Neidell, Esq. Fax: (212) 451-2222 mneidell@olshanlaw.com

EX-21.1

Exhibit 21.1

Subsidiaries

Name	Jurisdiction of Organization
B.R. Johnson, LLC(1)	Delaware

(1) 76.17% of common membership interests and 95.22% of preferred membership interests owned.

EX-99.1

Exhibit 99.1

B.R. Johnson, Inc.

Financial Statements

For the Six Months Ended June 30, 2016 and June 30, 2015 (unaudited)

And For the Years Ended December 31, 2015 and December 31, 2014 (as restated)

TABLE OF CONTENTS

  Page  

Report of Independent Registered Public Accounting Firm	1
Financial Statements
Balance Sheets as of June 30, 2016 (unaudited), December 31, 2015 and December 31, 2014 (as restated)	2
Statements of Income and Retained Earnings for the Six Months Ended June 30, 2016 and June 30, 2015 (unaudited) and for the Years Ended December 31, 2015 and December 31, 2014 (as restated)	3
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2016 and June 30, 2015 (unaudited) and for the Years Ended December 31, 2015 and December 31, 2014 (as restated)	4
Notes to Financial Statements	5-10

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

B.R. Johnson, Inc.

East Syracuse, New York

We have audited the accompanying balance sheets of B.R. Johnson, Inc. as of December 31, 2015 and 2014, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of B.R. Johnston, Inc. at December 31, 2015 and 2014, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 2, certain restatements have been made to the previously issued financial statements for the years ended December 31, 2015 and 2014 to correct a misstatement.

/s/ FREED MAXICK CPAs, P.C.

Buffalo, New York

November 7, 2016

1

B.R. JOHNSON, INC.
Balance Sheets
	As of June 30,		As of December 31,
Assets	2016		2015		2014
	(unaudited)		(as restated)		(as restated)
Current assets:
Cash	$	—	$	903,607	$	3,129,607
Accounts receivable, net of allowance for doubtful accounts of
$150,000 at June 30,2016 and December 31, 2015; $175,000 at December 31, 2014		7,760,722		6,129,890		4,199,618
Inventories, net		1,350,855		1,302,878		1,082,895
Costs and estimated earnings in excess of billings on uncompleted contracts		656,987		380,544		606,657
Prepaid expenses and other current assets		328,438		89,766		88,087
Total current assets		10,097,002		8,806,685		9,106,864
Equipment, net		435,313		403,035		352,905
Other assets		181,826		85,160		74,412
Total assets	$	10,714,141	$	9,294,880	$	9,534,181
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit	$	99,810	$	—	$	—
Accounts payable		1,129,762		862,014		597,537
Accrued expenses and other current liabilities		425,635		524,232		870,826
Accrued distributions to stockholders		684,200		1,384,200		1,556,000
Billings in excess of costs and estimated earnings on uncompleted  contracts		534,443		325,663		92,172
Total current liabilities		2,873,850		3,096,109		3,116,535
Total liabilities		2,873,850		3,096,109		3,116,535
Commitments (note 8)
Stockholders' equity:
Common stock:
Class A, voting, $100 par value, 200 shares authorized,100 shares issued and outstanding		10,000		10,000		10,000
Class B, non-voting, $0.01 par value, 200 shares authorized,100 shares issued and outstanding		1		1		1
Additional paid-in capital		311,686		311,686		311,686
Retained earnings		7,518,604		5,877,084		6,095,959
Total stockholders' equity		7,840,291		6,198,771		6,417,646
Total liabilities and stockholders' equity	$	10,714,141	$	9,294,880	$	9,534,181
See accompanying notes

2

B.R. JOHNSON, INC.

Statements of Income and Retained Earnings

	Six months ended June 30,						Years ended December 31,
	2016			2015			2015			2014
	(unaudited)			(unaudited)			(as restated)			(as restated)
Net sales	$	17,835,664		$	11,842,593		$	27,612,825		$	29,697,461
Cost of sales		12,687,111			8,239,735			19,234,166			21,553,011
Gross profit		5,148,553			3,602,858			8,378,659			8,144,450
Operating expenses:
Selling		2,016,740			1,753,327			3,960,768			3,638,096
General and administrative		1,397,875			1,390,571			2,709,955			2,781,790
Total operating expenses		3,414,615			3,143,898			6,670,723			6,419,886
Operating income		1,733,938			458,960			1,707,936			1,724,564
Other income (expense), net		7,582			1,668			(11,811	)		17,441
Net income`		1,741,520			460,628			1,696,125			1,742,005
Retained earnings at beginning of period		5,877,084			6,095,959			6,095,959			6,504,954
Distributions to stockholders		(100,000	)		(160,000	)		(1,915,000	)		(2,151,000	)
Retained earnings at end of period	$	7,518,604		$	6,396,587		$	5,877,084		$	6,095,959
Earnings per share, basic and fully diluted	$	8,708		$	2,303		$	8,481		$	8,710
Weighted average shares outstanding for basic and fully diluted earnings per share		200			200			200			200

See accompanying notes

3

B.R. JOHNSON, INC.

Statements of Cash Flows

	Six months ended June 30,						Years ended December 31,
	2016			2015			2015			2014
	(unaudited)			(unaudited)			(as restated)			(as restated)
Cash flows from operating activities:
Net income	$	1,741,520		$	460,628		$	1,696,125		$	1,742,005
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		85,000			84,068			168,137			164,684
Allowance for doubtful accounts		—			—			(25,000	)		—
Changes in operating assets and liabilities:
Accounts receivable		(1,630,832	)		(1,575,644	)		(1,905,272	)		1,461,173
Inventories		(47,977	)		(158,698	)		(219,983	)		485,370
Costs and estimated earnings in excess of billings on uncompleted contracts		(276,443	)		38,182			215,365			(398,760	)
Prepaid expenses and other assets		(335,338	)		2,297			(1,679	)		(39,102	)
Accounts payable		267,748			405,572			264,477			(656,723	)
Accrued expenses and other liabilities		(98,597	)		(598,271	)		(346,594	)		391,256
Billings in excess of costs and estimated earnings on uncompleted contracts		208,780			478,882			233,491			(43,648	)
Net cash provided by (used in) operating activities		(86,139	)		(862,984	)		79,067			3,106,255
Cash flows from investing activities:
Purchases of equipment		(117,278	)		(117,792	)		(218,267	)		(198,497	)
Cash flows used in investing activities		(117,278	)		(117,792	)		(218,267	)		(198,497	)
Cash flows from financing activities:
Borrowings on line of credit		99,810			—			—			—
Payment of stockholders’ distributions		(800,000	)		(1,716,000	)		(2,086,800	)		(1,795,000	)
Repayment of long-term debt		—			—			—			(77,381	)
Net cash used in financing activities		(700,190	)		(1,716,000	)		(2,086,800	)		(1,872,381	)
Increase (decrease) in cash		(903,607	)		(2,696,776	)		(2,226,000	)		1,035,377
Cash at beginning of period		903,607			3,129,607			3,129,607			2,094,230
Cash at end of period	$	—		$	432,831		$	903,607		$	3,129,607

See accompanying notes.

4

Notes to Financial Statements of

B.R. Johnson, Inc.

(1) Summary of Significant Accounting Policies

(a)     Nature of Operations

B.R. Johnson, Inc. (the “Company”) markets residential and commercial building material products, consisting mostly of windows and doors; we also engage in the installation and service of these products. We grant credit to our customers; the majority are in New York State and include construction contractors, residential homebuilders, colleges and universities, health care institutions, municipalities, private developers, performance contractors and individual homeowners. On November 1, 2016, substantially all of the assets of the Company were sold for $15,400,000 which included a seller’s note of $2,500,000.     

(b)     Basis of Presentation

The accompanying Financial Statements (“Financial Statements”) are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

(c)     Unaudited Interim Financial Information

The accompanying interim balance sheet as of June 30, 2016, the interim statements of income and retained earnings and statements of cash flows for the six months ended June 30, 2016 and 2015 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements, and, in the opinion of our management, reflect all adjustments, which only include normal recurring adjustments, necessary to present fairly the consolidated balance sheet as of June 30, 2016 and the statements of income and retained earnings and statements of cash flows for the six months ended June 30, 2016 and 2015. The financial data disclosed in these notes to the financial statements related to the six months ended June 30, 2016 and 2015 are also unaudited. The results of operations for the six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the entire year ending December 31, 2016, or for any other future annual or interim period.

(d)     Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We believe the most significant estimates and judgments are associated with revenue recognition for our contracts, including estimating costs and the recognition of unapproved change orders and claims.

(e)     Revenue Recognition

A portion of our revenue is derived from long-term contracts and is recognized using the percentage of completion (“POC”) method, primarily based on the percentage that actual costs-to-date bear to total estimated costs to complete each contract. We follow the guidance of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Revenue Recognition Topic 605-35 for accounting policies relating to our use of the POC method, estimating costs, and revenue recognition, including the recognition of incentive fees, unapproved change orders and claims, and combining and segmenting contracts. We utilize the cost-to-cost approach to estimate POC as we believe this method is less subjective than relying on assessments of physical progress. Under the cost-to-cost approach, the use of estimated costs to complete each contract is a significant variable in the process of determining recognized revenue and is a significant factor in the accounting for contracts. Significant estimates that impact the cost to complete each contract are costs of materials, components, equipment, labor and subcontracts; labor productivity; schedule durations, including subcontractor or supplier progress; liquidated damages; contract disputes, including claims; achievement of contractual performance requirements; and contingency, among others. The cumulative impact of revisions in total cost estimates during the progress of work is reflected in the period in which these changes become known, including, to the extent required, the reversal of profit recognized in prior periods and the recognition of losses expected to be incurred on contracts in progress. Due to the various estimates inherent in our contract accounting, actual results could differ from those estimates.

5

Notes to Financial Statements of

B.R. Johnson, Inc.

Costs incurred on jobs in process include all direct material and labor costs and certain indirect costs. General and administrative costs are charged to expense as incurred.

The balance of our revenue is related to fulfilling orders for the products we distribute which do not meet the criteria for revenue recognition under the POC method; revenue for these orders is recognized at the time of shipment.

(f)     Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded at their invoiced amount, net of any allowance for doubtful accounts, and do not bear interest. Our billed and unbilled revenue may be exposed to potential credit risk if our customers should encounter financial difficulties, and we maintain reserves for specifically-identified potential uncollectible receivables. As of June 30, 2016, December 31, 2015 and 2014 we had retainage receivable of $410,261, $305,857, and $536,591, respectively, included in accounts receivable in the accompanying balance sheets.

(g)     Precontract Costs

Precontract costs are charged to operations as incurred.

(h)     Inventories, net

Inventory is valued at the lower of cost (first-in, first-out) or market. Inventory is comprised of purchased materials and other materials that have been assigned to a job deemed to be work-in-process. As of June 30, 2016, December 31, 2015 and 2014, the work-in-process inventory was $700,276, $687,566, and $450,690, respectively, included in inventories in the accompanying balance sheets. We maintain an inventory allowance for slow-moving and unused inventories based on the historical trend and estimates. The allowance was $60,000 as of June 30, 2016, December 31, 2015 and 2014.

(i)      Equipment, net

Equipment is stated at cost. Depreciation and amortization is computed using straight-line methods at rates adequate to amortize the cost of the various classes of assets over their estimated service lives, ranging from two to fifteen years. Depreciation and amortization expense for the six months ended June 30, 2016 and 2015 was $85,000 and 84,068, respectively, and $168,137 and $164,684 for the years ended December 31, 2015 and 2014, respectively.

(j)      Fair Value of Financial Instruments

Financial instruments consist of accounts receivable, accounts payable, and line of credit. Accounts receivable and accounts payable are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment. The line of credit is stated at the carrying value as the stated interest rate approximates market rates currently available to the Company. As of June 30, 2016 and December 31, 2015 and 2014, the Company has not elected the fair value option for any financial assets and liabilities for which such an election would have been permitted.

(k)     Concentrations

We maintain our cash balances at a commercial bank in New York State. The accounts are insured by the Federal Deposit Insurance Corporation. While the Company attempts to limit any financial exposure, its deposit balances may exceed federally insured limits.

We had one customer that accounted for approximately 11% of accounts receivable at December 31, 2014.

6

Notes to Financial Statements of

B.R. Johnson, Inc.

(l)      Income Taxes

We elected effective 1989 to be taxed as an S corporation for federal and state income tax purposes. Our earnings are included on the individual stockholders’ income tax returns. Historically, the we have made distributions to our stockholders in amounts sufficient to satisfy their income tax liabilities resulting from including our income in their personal tax returns.

(m)    Earnings Per Share (“EPS”)

Basic EPS is calculated by dividing net income by the weighted average number of common shares outstanding for the period. We have no dilutive securities outstanding.

(n)     New Accounting Standards

In May 2014, the FASB issued ASU 2014-9 “Revenue from Contracts with Customers”. The new guidance requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Subsequently, the FASB has issued the following standards related to ASU 2014-09: ASU No. 2016-08, “Revenue from Contracts with Customers (Topic 606): Principal versus Agent Considerations” (“ASU 2016-08”); ASU No. 2016-10, “Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing” (“ASU 2016-10”); and ASU No. 2016-12, “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”). The Company must adopt ASU 2016-08, ASU 2016-10 and ASU 2016-12 with ASU 2014-09 (collectively, the “new revenue standards”). The new revenue standards will replace most existing revenue recognition guidance in U.S. GAAP when they become effective and permit the use of either a retrospective or cumulative effect transition method. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2017. We have not yet selected a transition method and are currently evaluating the effect that the new revenue standards will have on our financial statements and related disclosures.

In July 2015, the FASB issued ASU 2015-11, “Inventory (Topic 330): Simplifying the Measurement of Inventory.” The guidance requires that certain inventory, including inventory measured using the first-in-first-out method, be measured at the lower of cost or net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The guidance is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We are currently evaluating the effect that the updated standard will have on our financial statements and related disclosures.

In February 2016, the FASB issued an accounting standard update ASU 2016-02, “Leases”, which requires that lease arrangements longer than 12 months result in an entity recognizing an asset and liability. ASU 2016-02 is effective for interim and annual periods beginning after December 15, 2018, and early adoption is permitted. We have not yet evaluated or determined the effect of the standard on our ongoing financial reporting. 

(2) Restatements of Previously Issued Financial Statements

We restated our financial statements as of December 31, 2015 and 2014 to correct for the following errors:

· We determined that the sales and cost of sales were overstated by $1,633,528 and $1,252,067, respectively, for the year ending December 31, 2015 due to misapplication in the calculation of percentage of completion revenue recognition and presentation of related asset and liability. The correction of these errors collectively changed current assets and current liabilities by a net increase of $228,730 and decreased retained earnings by $610,191. We have recorded additional adjustments in the 2015 financial statements in order to correct other errors which were determined not to be material individually or in the aggregate, which included a decrease to revenue for premature recognition of shipments of doors and decreases to inventory for supplies that should have been expensed.

7

Notes to Financial Statements of

B.R. Johnson, Inc.

· We determined that the sales and cost of sales were overstated by $4,660,447 and $3,815,428, respectively, for the year ending December 31, 2014 due to misapplication in the calculation of percentage of completion revenue recognition and presentation of related asset and liability. The correction of these errors collectively changed current assets and current liabilities by a net increase of $610,191 and decreased retained earnings by $1,455,210. We have recorded additional adjustments in the 2014 financial statements in order to correct other errors which were determined not to be material individually or in the aggregate, which included a decrease to revenue for premature recognition of shipments of doors, decreases to inventory for supplies that should have been expensed and an increase to customer deposits for amounts received in advance of work performed.

The following tables presents the impact of the restatement adjustments on our balance sheet and statements of income as of and for the years ended December 31, 2015 and 2014:

	Year Ended December 31, 2015
	As Previously Reported		Effect of Restatement			As restated
Net sales	$	29,293,353		(1,680,528	)		27,612,825
Cost of sales		20,494,009		(1,259,843	)		19,234,166
Total operating expenses		6,670,723		—			6,670,723
Operating income		2,128,621		(420,685	)		1,707,936
Net income		2,116,810		(420,685	)		1,696,125
Earnings per share, basic and fully diluted		10,584		(2,103	)		8,481
Total current assets		8,378,401		428,284			8,806,685
Total assets		8,866,596		428,284			9,294,880
Total current liabilities		2,663,446		432,663			3,096,109
Total stockholders’ equity		6,203,150		(4,379	)		6,198,771
Total liabilities and stockholders’ equity		8,866,596		428,284			9,294,880

	Year Ended December 31, 2014
	As Previously Reported		Effect of Restatement			As restated
Net sales	$	34,417,907		(4,720,446	)		29,697,461
Cost of sales		25,325,341		(3,772,330	)		21,553,011
Total operating expenses		6,419,886		—			6,419,886
Operating income		2,672,680		(948,116	)		1,724,564
Net income		2,690,121		(948,116	)		1,742,005
Earnings per share, basic and fully diluted		13,451		(4,741	)		8,710
Total current assets		8,538,386		568,478			9,106,864
Total assets		8,965,703		568,478			9,534,181
Total current liabilities		2,964,363		152,172			3,116,535
Total stockholders’ equity		6,001,340		416,306			6,417,646
Total liabilities and stockholders’ equity		8,965,703		568,478			9,534,181

(3) Contracts in Process

Cost of revenue for our long-term contracts includes direct contract costs, such as materials and labor, and indirect costs that are attributable to contract activity. The timing of when we bill our customers is generally dependent upon advance billing terms, milestone billings based on the completion of certain phases of the work, or when services are provided. Projects with costs and estimated earnings recognized to date in excess of cumulative billings are reported on the accompanying balance sheet as an asset as costs and estimated earnings in excess of billings. Projects with cumulative billings in excess of costs and estimated earnings recognized to date are reported on the accompanying balance sheet as a liability as billings in excess of costs and estimated earnings. The following is information with respect to uncompleted contracts:

8

Notes to Financial Statements of

B.R. Johnson, Inc. 

		June 30, 2016 (unaudited)		December 31, 2015		December 31, 2014
Costs incurred on uncompleted contracts	$	6,499,421		760,868		1,494,590
Estimated earnings		1,839,207		52,464		35,801
		8,338,628		813,332		1,530,391
Less: billings to date		(8,216,084	)	(758,451	)	(1,015,906	)
	$	122,544		54,881		514,485

Included on the balance sheet as follows:

Under current assets
Costs and estimated earnings in excess of billings on uncompleted contracts
Under current liabilities	$	656,987			380,544			606,657
Billings in excess of costs and estimated earnings on uncompleted contracts		(534,443	)		(325,663	)		(92,172	)
	$	122,544		$	54,881		$	514,485

(4) Equipment, net

Equipment is summarized as follows:

					December 31, 2015		December 31, 2014
	Estimated Useful Life		June 30, 2016 (unaudited)
Vehicles	3 years	$	520,568		508,014		465,370
Warehouse and shop tools and equipment	2 – 15 years		393,693		390,703		362,701
Office and showroom furniture and computer equipment	2 – 7 years		325,387		323,298		281,155
Computer software	2 – 5 years		143,069		132,707		132,199
			1,382,717		1,354,722		1,241,425
Less accumulated depreciation and amortization			(947,404	)	(951,687	)	(888,520	)
		$	435,313		403,035		352,905

(5) Line of Credit - Bank

We have a $4,000,000 demand line of credit with a bank. The line is secured by the Company’s assets and interest is charged at the bank’s prime rate. The bank’s prime rate was 3.5% at June 31, 2016 and December 31, 2015 (3.25% at December 31, 2014).

9

Notes to Financial Statements of

B.R. Johnson, Inc.

(6) Employee Retirement Plan

We maintain a defined contribution retirement plan under Section 401(k) of the Internal Revenue Code. All full-time employees are eligible to participate. The total plan expense was $102,094 and $36,075 for the years ended December 31, 2015 and 2014, respectively. The total plan expense was $55,850 and $41,851 for the six month periods ended June 31, 2016 and 2015, respectively. During 2015, we increased the employer 401(k) match from 1.5% to 3.0%.

(7) Related-Party Transactions

Our shareholders are owners of approximately 57% of the common stock of an affiliated company named Airways Door Service, Inc. (ADSI). The remaining common stock is owned by three of our employees. ADSI provides us installation and repair services. The Company paid ADSI approximately $640,000 during the six months ended June 30, 2016 and $1,395,520 and $1,599,950 for these services during the years ended December 31, 2015 and 2014, respectively. We provide ADSI services utilizing an agreed-upon fee schedule. These services include accounting, warehousing, equipment use, employee benefit administration, risk management coordination and clerical functions. The fee for these services was approximately $23,000 for the six months ended June 30, 2016 and $47,350 and $44,200 during the years ended December 31, 2015 and 2014, respectively. As of December 31, 2014, $20,940 was included within accounts payable on the accompanying balance sheet.

(8) Commitments

We lease our primary facility in East Syracuse, NY from an entity that is owned by our shareholders. Rent expense for the facility amounted to $356,400 in 2015 and 2014. The rental payments are pursuant to a lease agreement with this related entity that provides for monthly rent payments totaling $356,400 per year through 2015. Effective January 1, 2016, the Company has executed a five year lease extension through 2020 with monthly rent payments totaling $276,000 per year.

We also lease automobiles and delivery vehicles under noncancellable operating leases that expire in 2018. The minimum lease payments under the vehicle leases are as follows: 

2016	$ 61,099
2017	$ 59,318
2018	$ 36,579

During the six months ended June 30, 2016, we entered into a captive insurance entity, to provide for the potential liabilities for certain risks including workers’ compensation, general liability, and automotive. Liabilities associated with the risks that are retained by the Company are not discounted and are estimated, in part, by considering historical claims experience, demographic factors and severity factors. As of June 30 2016 no liability has been recorded because a material liability for additional costs is considered remote. As a member of the captive insurance entity, the Company was required to provide an equity contribution of $30,000 and a dividend pool contribution of $66,667, which are included in other assets on the accompanying balance sheets as of June 30, 2016.

(9) Statements of Cash Flows - Supplemental Disclosure

	June 30, 2016 (Unaudited)			June 30, 2015 (Unaudited)			December 31, 2015			December 31, 2014
Schedule of non-cash financing activities for the periods ended:
(Decrease) increase in accrued stockholder distributions	$	(700,000	)	$	(1,556,000	)	$	(171,800	)	$	356,000

10

EX-99.2

Exhibit 99.2

Unaudited Pro Forma Combined Consolidated Financial Information

On November 1, 2016, Regional Brands Inc. (“Regional Brands”) acquired a majority interest in B.R. Johnson, LLC (“BRJ LLC”) by contributing $3,808,696 in exchange for 95.22% of BRJ LLC’s preferred membership interest and 76.17% of its common membership interest. In addition, Regional Brands loaned to BRJ LLC $7,141,304 under a senior subordinated term note which bears interest at 6% per annum and has scheduled annual principal payments with the balance due at maturity in five years. BRJ LLC’s minority members contributed $191,304 for the remaining preferred and common membership interests and loaned to BRJ LLC $358,696 on the same terms as the Regional Brands senior subordinated loan pursuant to a participation agreement.

On November 1, 2016, Regional Brands issued 894,393 of its common shares for $13.50 per share in a private placement. Regional Brands’ per share data has been restated to reflect its 1-for-1,000 reverse stock split effective July 2016.

BRJ LLC, on November 1, 2016, acquired substantially all of the assets and assumed specific liabilities of B.R. Johnson, Inc. (“BRJ Inc.”) in an asset purchase transaction in exchange for cash of $12,900,000 and a subordinated note of $2,500,000 (the “Acquisition”). BRJ LLC will operate the business of BRJ Inc. as a consolidated subsidiary of Regional Brands. The Acquisition is being accounted for under the acquisition method of accounting. This results in BRJ LLC allocating the total consideration issued in the Acquisition to the fair value of BRJ Inc.’s assets acquired and liabilities assumed as of the Acquisition date, with any excess purchase consideration being recorded as goodwill.

The unaudited pro forma combined consolidated balance sheet is presented to show how Regional Brands might have looked at June 30, 2016 had the Acquisition occurred as of that date. The unaudited pro forma combined consolidated statements of operations for the year ended December 31, 2015 and the six-month period ended June 30, 2016 are presented to show how Regional Brands might have looked had the Acquisition occurred as of January 1, 2015, the beginning of the presented period.

This pro forma combined consolidated financial information is based on, and should be read in conjunction with, the following:

· The historical audited financial statements of BRJ Inc. as of and for the fiscal year ended December 31, 2015, included as Exhibit 99.1 to this Form 8-K;

· The historical unaudited financial statements of BRJ Inc. as of and for the six months ended June 30, 2016, included as Exhibit 99.1 to this Form 8-K;

· The historical audited financial statements of Regional Brands as of and for the fiscal year ended September 30 2015, included in a Form 10-K filed on January 6, 2016;

· The historical unaudited financial statements of Regional Brands as of and for the six months ended March 31, 2016, included in a Form 10-Q filed on May 13, 2016; and

· The historical unaudited financial statements of Regional Brands as of and for the nine months ended June 30, 2016, included in a Form 10-Q filed on August 15, 2016.

The unaudited pro forma combined consolidated balance sheet was derived from BRJ Inc.’s and Regional Brands’ unaudited financial statements as of June 30, 2016. The unaudited pro forma combined consolidated statement of operations for the fiscal year ended December 31, 2015 was derived from the audited financial statements of BRJ Inc. for the year ended December 31, 2015 and Regional Brands’ audited financial statements for the fiscal year ended September 30, 2015. The unaudited pro forma combined consolidated statement of operations for the six months ended June 30, 2016 was derived from BRJ Inc.’s unaudited financial statements for the six months ended June 30, 2016 and Regional Brands’ unaudited financial statements for the six months ended March 31, 2016.

The unaudited pro forma combined consolidated financial information was prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The unaudited pro forma adjustments reflecting the Acquisition have been prepared in accordance with the business combination accounting guidance and reflect the preliminary allocation of the purchase price to the acquired assets and liabilities based upon the preliminary estimate of fair values, using the assumptions set forth in the notes to the unaudited pro forma combined consolidated financial information. The detailed assumptions used to prepare the unaudited pro forma combined consolidated financial information are contained in the notes hereto and such assumptions should be reviewed in their entirety.

The unaudited pro forma combined consolidated financial information is provided for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Acquisition had been completed during the periods presented above, nor is it indicative of the future results or financial position of the combined company. In connection with the unaudited pro forma combined consolidated financial information, the total purchase consideration was allocated based on the best estimates of fair value. The allocation is dependent upon certain valuation and other analyses that are not yet final. Accordingly, the pro forma acquisition price adjustments are preliminary and subject to further adjustments as additional information becomes available and as additional analyses are performed. There can be no assurances that the final valuations will not result in material changes to the preliminary estimated purchase price allocation. The unaudited pro forma combined consolidated financial information also does not give effect to the potential impact of current financial conditions, any anticipated synergies, operating efficiencies or cost savings that may result from the transaction or any integration costs.

2

UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET REGIONAL BRANDS INC.

June 30, 2016

	B.R. Johnson, Inc.		Regional Brands Inc.			Adjustment Note 1		Adjustment Note 2			Pro Forma
Assets
Current Assets:
Cash and cash equivalents	$	—	$	3,781,361		$	12,074,306	$	(10,950,000	)	$	4,905,667
Investments		—		927,729			—		—			927,729
Accounts Receivable, net		7,760,722		—			—		—			7,760,722
Inventories, net		1,350,855		—			—		—			1,350,855
Costs and estimated earnings in excess of billings on uncompleted contracts		656,987		—			—		—			656,987
Prepaid expenses and other current assets		328,438		—			—		—			328,438
Total current assets		10,097,002		4,709,090			12,074,306		(10,950,000	)		15,930,398
Equipment, net		435,313		—			—		12,399			447,712
Unbilled back log acquired		—		—			—		1,178,033			1,178,033
Goodwill		—		—			—		8,760,255			8,760,255
Other assets		181,826		—			—		(85,160	)		96,666
Total assets	$	10,714,141	$	4,709,090		$	12,074,306	$	(1,084,473	)	$	26,413,064
Liabilities and Stockholders' Equity
Current liabilities:
Line of credit	$	99,810	$	—			—	$	1,450,190		$	1,550,000
Accounts payable		1,129,762		—			—		—			1,129,762
Accrued expenses and other current liabilities		425,635		—			—		530,000			955,635
Working capital liability to Seller				—			—		3,089,828			3,089,828
Accrued distributions to stockholders		684,200		—			—		(684,200	)		—
Billings in excess of costs and estimated earning on uncompleted contracts		534,443		—			—		—			534,443
Total current liabilities		2,873,850		—			—		4,385,818			7,259,668
Senior subordinated note		—		—			—		358,696			358,696
Subordinated term note		—		—			—		2,500,000			2,500,000
Total liabilities		2,873,850		—			—		7,244,514			10,118,364
Stockholders' equity
Class A voting, $100 par value, 200 shares authorized,
100 shares issued and outstanding		10,000		—			—		(10,000	)		—
Class B non-voting, $0.01par value, 200 shares authorized,
100 shares issued and outstanding		1		—			—		(1	)		—
Preferred stock, $0.01 par value; 5,000,000 shares authorized,
none issued and outstanding
Common stock, $0.00001 par value; 50,000,000 shares authorized,
379,702 issued and outstanding		—		4			9		—			13
Additional paid-in capital		311,686		8,207,402			12,074,297		(311,686	)		20,281,699
Non controlling interest consolidated subsidiary		—		—			—		191,304			191,304
Retained earnings		7,518,604		(3,493,929	)		—		(8,198,604	)		(4,173,929	)
Accumulated other comprehensive loss		—		(4,387	)		—		—			(4,387	)
Total stockholders' equity		7,840,291		4,709,090			12,074,306		(8,328,987	)		16,294,700
Total liabilities and stockholders' equity	$	10,714,141	$	4,709,090		$	12,074,306	$	(1,084,473	)	$	26,413,064

Note 1- Reflects the issuance of 894,393 shares of Regional Brands common stock at $13.50 per share in cash in a private placement.

Note 2- Reflects the acquisition of a controlling interest in the business of B.R. Johnson, Inc.

3

UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS

REGIONAL BRANDS INC.

Year ended December 31, 2015

	B.R. Johnson, Inc.			Regional Brands Inc.			Adjustment Note 1			Pro Forma
		(as restated)
Net sales	$	27,612,825			—			—		$	27,612,825
Cost of sales		19,234,166			—			—			19,234,166
Gross profit		8,378,659			—			—			8,378,659
Operating expenses:
Selling		3,960,768			—			—			3,960,768
Amortization of unbilled backlog acquired					—		$	942,426			942,426
General and administrative		2,709,955			22,744			—			2,732,699
Total operating expenses		6,670,723			22,744			942,426			7,635,893
Operating income		1,707,936			(22,744	)		(942,426	)		742,766
Other income (expense), net		(11,811	)		(650	)		—			(12,461	)
Interest expense		—			(16,366	)		(199,892	)		(216,258	)
Net income		1,696,125			(39,760	)		(1,142,318	)		514,047
Less earnings attributable to non controlling interest		—			—			(7,652	)		(7,652	)
Net income attributable to common shareholders	$	1,696,125		$	(39,760	)	$	(1,149,970	)	$	506,395
Earnings per share basic and fully diluted	$	8,481		$	(4.29	)		—		$	0.56
Weighted average shares outstanding for basic and fully
diluted earnings per share		200			9,261			894,393			903,654
Note 1- Reflects the issuance of  894,383 shares of Regional Brands common stock in a private placement, the amortization and interest expense resulting from the acquisition of a controlling interest in the business of B.R. Johnson, Inc. and the allocation of net income to the non-controlling interest.

4

UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENT OF OPERATIONS REGIONAL BRANDS INC.
Six months ended June 30, 2016

	B.R. Johnson, Inc.		Regional Brands Inc.			Adjustment Note 1			Pro Forma
Net sales	$	17,835,664		—			—		$	17,835,664
Cost of sales		12,687,111		—			—			12,687,111
Gross profit		5,148,553		—			—			5,148,553
Operating expenses:
Selling		2,016,740		—			—			2,016,740
Amortization of unbilled backlog acquired		—		—			706,820			706,820
General and administrative		1,397,875		10,410						1,408,285
Total operating expenses		3,414,615		10,410			706,820			4,131,845
Operating income		1,733,938		(10,410	)		(706,820	)		1,016,708
Other income (expense), net		7,582		666			—			8,248
Interest and debt expense		—		(9,126	)		(99,946	)		(109,072	)
Net income		1,741,520		(18,870	)		(806,766	)		915,884
Less earnings attributable to non controlling interest		—		—			(113,307	)		(113,307	)
Net income attributable to common shareholders	$	1,741,520	$	(18,870	)	$	(920,072	)	$	802,578
Earnings per share basic and fully diluted	$	8,708	$	(2.04	)		—		$	0.89
Weighted average shares outstanding for basic and fully
diluted earnings per share		200		9,261			894,393			903,654
Note 1- Reflects the issuance of  894,383 shares of Regional Brands common stock in a private placement, the amortization and interest expense resulting from the acquisition of a controlling interest in the business of B.R. Johnson, Inc. and the allocation of net income to the non-controlling interest.

5

EX-99.3

Exhibit 99.3

Regional Brands Inc. Partners with Private Equity Firm Lorraine Capital, LLC to Acquire B.R. Johnson

Regional Brands Inc. (“Regional”; OTC: RGBD) today announced that it has partnered with Lorraine Capital, LLC (“Lorraine”) and members of senior management of B.R. Johnson Inc. (“B.R. Johnson”) to complete the acquisition of the operating business and assets of B.R. Johnson on November 1, 2016 through a newly formed entity, B.R. Johnson, LLC (together with B.R. Johnson, “BRJ”). Senior management of BRJ is expected to remain in their roles going forward and will continue to run the company.

BRJ is based in Syracuse, NY and is a regional distributor and installer of high quality windows, doors, hardware and specialty products with a focus on complex, commercial projects. BRJ has been in business since 1928 and meets Regional’s acquisition requirements of being a high quality, historically profitable business with a strong core position in its regional markets and the ability to grow.

Key elements of the transaction include the following:

- BRJ will be an operating subsidiary of Regional post-closing. Regional will own 76.2% of BRJ’s common equity post-closing, and Lorraine and members of senior management of BRJ will own 23.8% of the common equity post-closing;

- BRJ will continue to be headquartered in Syracuse and will operate as an autonomous business managed by the current BRJ team with oversight of a management committee controlled by Lorraine. Lorraine will also provide management, financial and reporting services to BRJ pursuant to a management services agreement in exchange for a management fee based on BRJ’s EBITDA;

- Regional has issued and sold 894,393 shares of its common stock for an aggregate purchase price of $12,074,305.50 in a private placement to finance the acquisition as well as potential future acquisitions;

- Carl Grassi, current Chairman of law firm McDonald Hopkins LLC, has joined Regional as Chairman of the Board and Fred DiSanto, Chairman and CEO of Ancora Advisors, LLC, has joined Regional as CEO. Brian Hopkins, former Chairman and CEO of Regional, will remain on the Board of Directors, as will current director Jeff Anderson;

- Regional’s representatives on the management committee of BRJ will be Mr. DiSanto and Louis Joseph. Mr. Joseph is the President & CEO of The Brewer-Garrett Company, a professional building and engineering services company;

- Subject to customary working capital adjustments, total consideration for the acquisition of B.R. Johnson (including transaction fees and expenses) is approximately $16.0 million. The EBITDA multiple based on BRJ’s last twelve months income statement amounts to 5.2x. Regional will be providing $10.95 million in debt and equity financing (consisting of $7.14 million in a senior subordinated term note and $3.81 million in preferred equity of BRJ), with the remainder coming from bank financing, a seller’s note and entities affiliated with Lorraine;

- BRJ’s year to date bookings through September 2016 are up 17.8% versus September 2015. Bookings are a key measure of future revenues for BRJ.

“We are excited to be part of the next phase of BRJ’s growth,” said Carl Grassi, Chairman of Regional. “We recognize the industry expertise and high quality solutions that BRJ brings to its clients and we look forward to working to assist management and Lorraine in continuing that strong tradition.”

“I’m pleased that Lorraine and senior management of BRJ have agreed to partner with us,” said Fred DiSanto, CEO of Regional. “As we move forward, we believe BRJ’s focus on continuing to provide the best quality service to its customers and partners while maintaining local control and ownership will serve the company well. We are enthusiastic about providing capital to make their vision a reality.”

About B.R. Johnson, LLC

B.R. Johnson, LLC (“BRJ”) is a building products distributor and contractor specializing in windows, doors, hardware, and specialty products. The company was founded in 1928 and has maintained a reputation of representing products that are considered to be among the best in their product category. BRJ services numerous markets, primarily in the commercial segment, including educational buildings, multifamily housing, health care, historic conversions, and energy performance contracting.

About Regional Brands Inc.

Regional Brands is a publicly traded holding company seeking to acquire substantial ownership in regional companies with strong brand recognition, stable revenues and profitability. For more information, please visit: www.regionalbrandsinc.com.

About Lorraine Capital, LLC

Lorraine Capital, LLC is a private investment firm formed by Western New Yorkers that is focused on Upstate New York companies. With no pre-determined hold period or structure, Lorraine can custom tailor each opportunity to fit the needs of each company and/or their selling shareholders. For more information, please visit: www.lorrainecapital.com.

Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that reflect Regional’s current expectations and projections about its future results, performance, prospects and opportunities. Regional has tried to identify these forward-looking statements by using words such as “may,” “should,” “expect,” “hope,” “anticipate,” “expect,” “believe,” “intend,” “plan,” “estimate” and similar expressions. These forward-looking statements are based on information currently available to Regional and are subject to a number of risks, uncertainties and other factors that could cause its actual results, performance, prospects or opportunities to differ materially from those expressed in, or implied by, these forward-looking statements. Although Regional believes that the expectations reflected in these forward-looking statements are reasonable and achievable, such statements involve significant risks and uncertainties, and no assurance can be given that the actual results will be consistent with these forward-looking statements. Investors should read carefully Regional’s filings with the SEC for information regarding risk factors that could affect Regional’s results. Except as otherwise required by federal securities laws, Regional undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.