FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT AND WAIVER OF DEFAULT
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
AND WAIVER OF DEFAULT
THIS FIRST AMENDMENT (this “Amendment”), dated as of March 11, 2009, is entered into by and
between GLOBAL EMPLOYMENT SOLUTIONS, INC., a Colorado corporation (“Global”), EXCELL PERSONNEL
SERVICES CORPORATION, an Illinois corporation (“Excell”), FRIENDLY ADVANCED SOFTWARE TECHNOLOGY,
INC., a New York corporation (“Friendly”), TEMPORARY PLACEMENT SERVICE, INC., f/k/a Michaels &
Associates, Inc. and successor by merger to Temporary Placement Service, Inc., a Georgia
corporation (“TPS”), GLOBAL EMPLOYMENT SOLUTIONS PEO INC., f/k/a Southeastern Staffing, Inc., a
Florida corporation (“Southeastern”), GLOBAL EMPLOYMENT SOLUTIONS PEO V INC., f/k/a Southeastern
Personnel Management, Inc., a Florida corporation (“SPM”), MAIN LINE PERSONNEL SERVICES, INC., a
Pennsylvania corporation (“Main Line”), GLOBAL EMPLOYMENT SOLUTIONS PEO III INC., f/k/a Bay HR,
Inc., a Florida corporation (“BHR”), GLOBAL EMPLOYMENT SOLUTIONS PEO IV INC., f/k/a Southeastern
Georgia HR, Inc., a Georgia corporation (“SGHR”), GLOBAL EMPLOYMENT SOLUTIONS PEO II INC., f/k/a
Southeastern Staffing II, Inc., a Florida corporation (“SEII”), GLOBAL EMPLOYMENT SOLUTIONS PEO VI
INC., f/k/a Southeastern Staffing III, Inc., a Florida corporation (“SEIII”), GLOBAL EMPLOYMENT
SOLUTIONS PEO VII INC., f/k/a Southeastern Staffing IV, Inc., a Florida corporation (“SEIV”),
GLOBAL EMPLOYMENT SOLUTIONS PEO VIII INC., f/k/a Southeastern Staffing V, Inc., a Florida
corporation (“SEV”), GLOBAL EMPLOYMENT SOLUTIONS PEO IX INC., f/k/a Southeastern Staffing VI, Inc.,
a Florida corporation (“SEVI”), and KEYSTONE ALLIANCE, INC., a Florida corporation (Global, Excell,
Friendly, TPS, Southeastern, SPM, Main Line, BHR, SGHR, SEII, SEIII, SEIV, SEV, SEVI, and Keystone
are each referred to herein as a “Borrower” and collectively as the “Borrowers”), and XXXXX FARGO
BANK, NATIONAL ASSOCIATION (the “Lender”), acting through its Xxxxx Fargo Business Credit operating
division.
RECITALS
The Borrowers and the Lender are parties to a Credit and Security Agreement dated as of April
29, 2008 (as amended from time to time, the “Credit Agreement”). Capitalized terms used in these
recitals have the meanings given to them in the Credit Agreement unless otherwise specified.
The Borrowers have requested that certain amendments be made to the Credit Agreement, which
the Lender is willing to make pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants and agreements
herein contained, it is agreed as follows:
1. Defined Terms. Capitalized terms used in this Amendment which are defined in the
Credit Agreement shall have the same meanings as defined therein, unless otherwise defined
herein. In addition, Section 1.1 of the Credit Agreement is amended by adding or amending, as
the case may be, the following definitions:
“Daily Three Month LIBOR” means, for any day, the rate of interest equal to
LIBOR then in effect for delivery for a three (3) month period. When interest is determined
in relation to Daily Three Month LIBOR, each change in the interest rate shall become
effective each Business Day that the Lender determines that Daily Three Month LIBOR has
changed.
“Floating Rate” means, (i) with respect to Revolving Advances evidenced by the
Revolving Note, an annual interest rate equal to the WFBC Base Rate plus one half of one
percent (0.50%), and (ii) with respect to Term Advances evidenced by the Term Note, an
annual interest rate equal to the sum of the WFBC Base Rate plus two and three quarters of
one percent (2.75%), which interest rate shall, in each case, change when and as the Prime
Rate changes.
“LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest
whole 1/8th of one percent (1%)) determined pursuant to the following formula:
LIBOR =
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Base LIBOR
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(a) “Base LIBOR” means the rate per annum for United States dollar
deposits quoted by the Lender (i) for the purpose of calculating the effective
Floating Rate for loans making reference to Daily Three Month LIBOR as the
Inter-Bank Market Offered Rate in effect from time to time for three (3) month
delivery of funds in amounts approximately equal to the principal amount of such
loans, or (ii) for the purpose of calculating the effective LIBOR Advance Rate for
loans making reference to LIBOR as the Inter-Bank Market Offered Rate on the first
day of an Interest Period for delivery of funds on said date for a period of time
approximately equal to the number of days in the Interest Period and in an amount
approximately equal to the principal amount to which the Interest Period applies.
The Borrower understands and agrees that the Lender may base its quotation of the
Inter-Bank Market Offered Rate upon such offers or other market indicators of the
Inter-Bank Market as the Lender in its discretion deems appropriate, including but
not limited to the rate offered for U.S. dollar deposits on the London Inter-Bank
Market.
(b) “LIBOR Reserve Percentage” means the reserve percentage prescribed
by the Board of Governors of the Federal Reserve System (or any successor) for
“Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board,
as amended), adjusted by the Lender for expected changes in such reserve percentage
during the applicable term of the Revolving Note and Term Note.
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“Maximum Line Amount” means (a) prior to April 30, 2009, $20,000,000 and (b) on
and after April 30, 2009, $15,000,000, unless, in each case, this amount is reduced pursuant
to Section 2.11, in which event it means such lower amount.
“Subordinated Creditor” means Victory Park Management, LLC, in its capacity as
collateral agent for the Subordinated Creditors, together with any replacement or successor
collateral agent; each Buyer; and every other Person now or in the future who agrees to
subordinate indebtedness of any Borrower held by that Person to the payment of the
Indebtedness.
“TPS Acquisition” means the execution of the TPS Acquisition Document and the
consummation of the transaction contemplated thereby.
“TPS Acquisition Document” means that certain Asset Purchase and Sale Agreement
by and among Public Parent, TPS and Eastern Staffing, LLC, a California limited liability
company, d/b/a Select Staffing, dated as of March 9, 2009.
“WFBC Base Rate” means, for any day, a fluctuating rate equal to the higher of:
(a) the Prime Rate in effect on such day, or (b) a rate determined by the Lender to be one
and one-half percent (1.50%) above Daily Three Month LIBOR.
2. Section 2.3 of the Credit Agreement is hereby amended by adding a new subsection (e) to
read in its entirety as follows:
“(e) LIBOR Advances Restricted. Notwithstanding any other provisions contained in this
Agreement, beginning March 11, 2009, and thereafter, unless otherwise specified by the
Borrowers and approved in writing by the Lender in its sole discretion, (i) all Advances
shall be Floating Rate Advances, and (ii) the Borrowers shall not be permitted to (A)
request LIBOR Advances, (B) convert all or any part of the principal amount of any
outstanding Floating Rate Advance into a LIBOR Advance or (C) cause all or any part of any
maturing LIBOR Advance to be renewed as a new LIBOR Advance, in each case until such time,
if any, that the Lender approves such requests in writing, as the Lender shall determine in
its sole discretion.”
3. Section 2.6(a) of the Credit Agreement is hereby amended to read in its entirety as
follows:
“(a) Beginning on May 30, 2008, and on the last day of each month thereafter, in
substantially equal monthly installments equal to $170,833.33 plus, upon the second Term
Advance, if any, an amount sufficient to fully amortize the principal amount of the second
Term Advance over an assumed term ending on the date that is 24 months after the date of
such second Term Advance plus, beginning on June 1, 2009 and on the last day of each quarter
thereafter, $20,000; provided, however, that such $20,000 quarterly payments shall only be
required after the receipt by TPS of each payment owed to TPS under that certain Promissory
Note by Eastern Staffing, LLC, dated March 9, 2009, in the original principal amount of
$250,000; and”
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4. Section 6.2(d) of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
“(d) Capital Expenditures. The Borrowers will not incur or contract to incur Capital
Expenditures of more than (i) $500,000 in the aggregate during fiscal year 2009 and (ii)
$200,000 thereafter until new Financial Covenants are set pursuant to Section 6.2(f).”
5. Section 6.6 of the Credit Agreement is hereby amended by (i) deleting the word “and” at the
end of subsection (c), (ii) replacing the “.” at the end of subsection (d) with “; and” and (iii)
adding a new subsection (e) to read in its entirety as follows:
“(e) At all times after March 11, 2009, new loans and advances made to TPS and new
investments and interests acquired in TPS, including the amount of fees and expenses
incurred by TPS and the Public Parent in connection with the TPS Acquisition and the amount
of working capital expenses and other liabilities retained by TPS following the TPS
Acquisition, not exceeding (i) an aggregate of $1,000,000 in 2009 and (ii) an aggregate of
$150,000 annually thereafter.”
6. No Other Changes. Except as explicitly amended by this Amendment, all of the terms
and conditions of the Credit Agreement shall remain in full force and effect and shall apply to any
advance or letter of credit thereunder.
7. Waiver of Default. The Borrowers are in default of Section 7.1(t) of the Credit
Agreement (the “Existing Default”). Upon the terms and subject to the conditions set forth in this
Amendment, the Lender hereby waives the Existing Default. This waiver shall be effective only in
this specific instance and for the specific purpose for which it is given, and this waiver shall
not entitle the Borrowers to any other or further waiver in any similar or other circumstances.
8. No Advances to TPS. Beginning March 11, 2009, and thereafter, the Lender shall not
be required to make any Advances to TPS.
9. Prepayment Fee. The Borrowers are hereby excused from the payment of prepayment
fees otherwise due under Section 2.8(f) of the Credit Agreement solely as a result of the reduction
of the Maximum Line Amount on April 30, 2009.
10. Conditions Precedent. This Amendment, and the waiver set forth in Paragraph 7
hereof, shall be effective when the Lender shall have received an executed original hereof,
together with each of the following, each in substance and form acceptable to the Lender in its
sole discretion:
(a) The Acknowledgment and Agreement of Guarantor and the Acknowledgment and Agreement of
Subordinated Creditor set forth at the end of this Amendment, duly executed by the Guarantor and
Subordinated Creditor.
(b) The Joinder Agreement, duly executed by Capital Resources Growth, Inc., Victory Park
Management, LLC and acknowledged by the other existing Subordinated Creditors.
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(c) (i) The Promissory Note, dated as of March 9, 2009, made by Eastern Staffing, LLC payable
to the order of TPS, in the original principal amount of $250,000 and a corresponding Assignment
Separate from Note duly executed by TPS, (ii) the Promissory Note, dated as of March 9, 2009, made
by Eastern Staffing, LLC payable to the order of TPS, in the original principal amount of $700,000
and a corresponding Assignment Separate from Note duly executed by TPS, and (iii) an updated
Schedule I to the Pledge Agreement dated April 29, 2008, made by TPS in favor of the Lender.
(d) Such other matters as the Lender may require.
11. Representations and Warranties. Each Borrower hereby represents and warrants to
the Lender as follows:
(a) Each Borrower has all requisite power and authority to execute this Amendment and any
other agreements or instruments required hereunder and to perform all of its obligations hereunder
and thereunder, and this Amendment and all such other agreements and instruments have been duly
executed and delivered by such Borrower and constitute the legal, valid and binding obligation of
such Borrower, enforceable in accordance with its terms.
(b) The execution, delivery and performance by each Borrower of this Amendment and any other
agreements or instruments required hereunder have been duly authorized by all necessary corporate
action and do not (i) require any authorization, consent or approval by any governmental
department, commission, board, bureau, agency or instrumentality, domestic or foreign, (ii) violate
any provision of any law, rule or regulation or of any order, writ, injunction or decree presently
in effect, having applicability to such Borrower, or the articles of incorporation or by-laws of
such Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan
or credit agreement or any other agreement, lease or instrument to which such Borrower is a party
or by which it or its properties may be bound or affected.
(c) All of the representations and warranties contained in Article V of the Credit Agreement
are correct on and as of the date hereof as though made on and as of such date, except to the
extent that such representations and warranties relate solely to an earlier date.
12. References. All references in the Credit Agreement to “this Agreement” shall be
deemed to refer to the Credit Agreement as amended hereby; and any and all references in the
Security Documents to the Credit Agreement shall be deemed to refer to the Credit Agreement as
amended hereby.
13. No Other Waiver. Except as provided in Paragraph 7 hereof, the execution of this
Amendment and the acceptance of all other agreements and instruments related hereto shall not be
deemed to be a waiver of any Default or Event of Default under the Credit Agreement or a waiver of
any breach, default or event of default under any Loan Document or other document held by the
Lender, whether or not known to the Lender and whether or not existing on the date of this
Amendment.
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14. Release. Each Borrower, and the Guarantor by signing the Acknowledgment and
Agreement of Guarantor set forth below, each hereby absolutely and unconditionally releases
and forever discharges the Lender, and any and all participants, parent entities, subsidiary
entities, affiliated entities, insurers, indemnitors, successors and assigns thereof, together with
all of the present and former directors, officers, agents and employees of any of the foregoing,
from any and all claims, demands or causes of action of any kind, nature or description, whether
arising in law or equity or upon contract or tort or under any state or federal law or otherwise,
which such Borrower or the Guarantor has had, now has or has made claim to have against any such
Person for or by reason of any act, omission, matter, cause or thing whatsoever arising from the
beginning of time to and including the date of this Amendment, whether such claims, demands and
causes of action are matured or unmatured or known or unknown.
15. Costs and Expenses. Each Borrower hereby reaffirms its agreement under the Credit
Agreement to pay or reimburse the Lender on demand for all costs and expenses incurred by the
Lender in connection with the Loan Documents, including without limitation all reasonable fees and
disbursements of legal counsel. Without limiting the generality of the foregoing, each Borrower
specifically agrees to pay all fees and disbursements of counsel to the Lender for the services
performed by such counsel in connection with the preparation of this Amendment and the documents
and instruments incidental hereto. Each Borrower hereby agrees that the Lender may, at any time or
from time to time in its sole discretion and without further authorization by any Borrower, make a
loan to any Borrower under the Credit Agreement, or apply the proceeds of any loan, for the purpose
of paying any such fees, disbursements, costs and expenses.
16. Miscellaneous. This Amendment, the Acknowledgment and Agreement of Guarantor, and
the Acknowledgment and Agreement of Subordinated Creditor may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an original and all of
which counterparts, taken together, shall constitute one and the same instrument.
17. Joint and Several Liability. All obligations of each Borrower under this
Amendment shall be joint and several. All references to the term “Borrower” herein shall refer to
each of them separately and to all of them jointly and all such Persons shall be bound both
severally and jointly with the other. Each Borrower is responsible for all of the Borrower
obligations under this Amendment. Notices from the Lender to any Borrower shall constitute notice
to all Borrowers. Directions, instructions, representations, warranties or covenants made by any
Borrower to the Lender shall be binding on all Borrowers.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed as of
the date first above written.
| XXXXX FARGO BANK, NATIONAL ASSOCIATION |
GLOBAL EMPLOYMENT SOLUTIONS, INC. | |||||||||
By:
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/s/ Xxxx X. Xxxxxxx-Xxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Vice President | Its: Chief Financial Officer | |||||||||
| EXCELL PERSONNEL SERVICES CORPORATION | FRIENDLY ADVANCED SOFTWARE TECHNOLOGY, INC. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
| TEMPORARY PLACEMENT SERVICE, INC., f/k/a Michaels & Associates, Inc. and successor by merger to Temporary Placement Service, Inc. | GLOBAL EMPLOYMENT SOLUTIONS PEO INC., f/k/a Southeastern Staffing, Inc. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
| GLOBAL EMPLOYMENT SOLUTIONS PEO V INC., f/k/a Southeastern Personnel Management, Inc. | MAIN LINE PERSONNEL SERVICES, INC. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
| GLOBAL EMPLOYMENT SOLUTIONS PEO III INC., f/k/a Bay HR, Inc. | GLOBAL EMPLOYMENT SOLUTIONS PEO IV INC., f/k/a Southeastern Georgia HR, Inc. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
Signature Page 1 to First Amendment to Credit Agreement
| GLOBAL EMPLOYMENT SOLUTIONS PEO II INC., f/k/a Southeastern Staffing II, Inc. | GLOBAL EMPLOYMENT SOLUTIONS PEO VI INC., f/k/a Southeastern Staffing III, Inc. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
| GLOBAL EMPLOYMENT SOLUTIONS PEO VII INC., f/k/a Southeastern Staffing IV, Inc. | GLOBAL EMPLOYMENT SOLUTIONS PEO VIII INC., f/k/a Southeastern Staffing V, Inc. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
| GLOBAL EMPLOYMENT SOLUTIONS PEO IX INC., f/k/a Southeastern Staffing VI, Inc. | KEYSTONE ALLIANCE, INC. | |||||||||
By:
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/s/ Xxxxxx X. Xxxxxxxxxx
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By: | /s/ Xxxxxx X. Xxxxxxxxxx
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|||||||
| Its: Executive Vice President | Its: Executive Vice President | |||||||||
Signature Page 2 to First Amendment to Credit Agreement
ACKNOWLEDGMENT AND AGREEMENT OF GUARANTOR
The undersigned, a guarantor of the indebtedness of the Borrowers (as more fully defined in
the introductory paragraph of this Amendment, the “Borrowers”) to Xxxxx Fargo Bank, National
Association (the “Lender”), pursuant to a Guaranty dated April 29, 2008 (the “Guaranty”), hereby
(i) acknowledges receipt of the foregoing Amendment; (ii) consents to the terms (including without
limitation the release set forth in Paragraph 14 of the Amendment) and execution thereof; (iii)
reaffirms all obligations to the Lender pursuant to the terms of the Guaranty; and (iv)
acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Credit
Agreement and any indebtedness or agreement of the Borrowers, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the liability of the undersigned under the Guaranty for all of
the Borrowers’ present and future indebtedness to the Lender.
| GLOBAL EMPLOYMENT HOLDINGS, INC. |
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| By: | /s/ Xxxxxx X. Xxxxxxxxxx | |||
| Name: | Xxxxxx X. Xxxxxxxxxx | |||
| Its: Chief Financial Officer | ||||
Acknowledgment and Agreement of Guarantor
ACKNOWLEDGMENT AND AGREEMENT OF SUBORDINATED CREDITORS
Victory Park Management, LLC, as collateral agent for the subordinated creditors of the
Borrowers (as more fully defined in the introductory paragraph of this Amendment, the “Borrowers”),
to Xxxxx Fargo Bank, National Association (the “Lender”), pursuant to a Subordination Agreement
dated April 29, 2008, and a Joinder Agreement dated March 11, 2009 (collectively, the
“Subordination Agreement”), hereby (i) acknowledges receipt of the foregoing Amendment; (ii)
reaffirms all obligations to the Lender pursuant to the terms of the Subordination Agreement; and
(iii) acknowledges that the Lender may amend, restate, extend, renew or otherwise modify the Loan
Documents and any indebtedness or agreement of the Borrowers, or enter into any agreement or extend
additional or other credit accommodations, without notifying or obtaining the consent of the
undersigned and without impairing the obligations of the undersigned under the Subordination
Agreement. Victory Park Management, LLC, for itself and on behalf of each Subordinated Creditor,
hereby absolutely and unconditionally releases and forever discharges the Lender, and any and all
participants, parent entities, subsidiary entities, affiliated entities, insurers, indemnitors,
successors and assigns thereof, together with all of the present and former directors, officers,
agents and employees of any of the foregoing, from any and all claims, demands or causes of action
of any kind, nature or description related to or arising out of the Loan Documents and the
transactions governed thereby, whether arising in law or equity or upon contract or tort or under
any state or federal law or otherwise, which Victory Park Management, LLC and each Subordinated
Creditor has had, now has or has made claim to have against any such Person for or by reason of any
act, omission, matter, cause or thing whatsoever arising from the beginning of time to and
including the date of this Amendment, whether such claims, demands and causes of action are matured
or unmatured or known or unknown.
| VICTORY PARK MANAGEMENT, LLC, as collateral agent for the subordinated creditors identified in the Subordination Agreement |
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| By: | /s/ Xxxxxxx Xxx | |||
| Name: | Xxxxxxx Xxx | |||
| Its: Manager | ||||
Acknowledgment and Agreement of Subordinated Creditor
