SECOND REVISED INDICATIVE TERM SHEET

SECOND REVISED INDICATIVE TERM SHEET
BORROWER'S ANNOTATED REDLINE
Proposed $40,000,000 Asset-Based Revolving Credit Facility
BORROWER: Meridian Consumer Brands LLC
LENDER: Ridgeline National Bank, National Association
April 8, 2022
Base Document: Further Revised Indicative Term Sheet dated March 28, 2022, as prepared by Ridgeline National Bank, National Association and circulated by its counsel, Whitfield Ames LLP
Markup Prepared By: Calderwood & Harkness LLP
Daniel Obi, Associate Lisa Morrow, Associate Under the supervision of Stephanie Okafor, Responsible Partner, Banking & Finance Group
Delivered To:
Catherine Royce, Partner Benjamin Nakamura, Associate Whitfield Ames LLP 1585 Broadway, 34th Floor New York, NY 10036
Copies To:
Raymond Chu, General Counsel Meridian Consumer Brands LLC 401 West 33rd Street, Suite 1200 New York, NY 10001
C&H Matter Number: 1011-00001
Convention Note: Throughout this markup, text from Ridgeline National Bank, N.A.'s Further Revised Indicative Term Sheet dated March 28, 2022 appears in plain type. Borrower's proposed revisions appear as tracked changes, with insertions marked as  and deletions marked as . Borrower's substantive comments, questions, and objections appear in [bold bracketed annotations] and do not constitute proposed drafting language. All section and paragraph references are to the corresponding provisions of Ridgeline's Further Revised Term Sheet unless otherwise indicated.
PREFATORY NOTE FROM BORROWER'S COUNSEL
This annotated markup reflects the comments of Meridian Consumer Brands LLC (the "Borrower") on the Further Revised Indicative Term Sheet (the "Revised Term Sheet") circulated by Ridgeline National Bank, National Association (the "Lender") on March 28, 2022. The Revised Term Sheet was received by Calderwood & Harkness LLP ("C&H") from Whitfield Ames LLP on behalf of Lender on March 28, 2022 and has been reviewed by C&H together with Borrower's management and in-house counsel, Raymond Chu, General Counsel.
This is the second round of Borrower's comments on the proposed term sheet. The first C&H annotated markup was delivered on February 14, 2022 (the "First C&H Markup"), in response to the Initial Indicative Term Sheet received from Lender on January 28, 2022 (the "Initial Term Sheet"). Lender thereafter circulated a revised term sheet dated February 28, 2022, and subsequently the current Further Revised Term Sheet dated March 28, 2022, which introduced additional material changes. This markup responds to the March 28 document in its entirety and, where relevant, restates and incorporates by reference positions taken in the First C&H Markup to the extent those positions have not been adequately addressed.
Borrower has significant concerns with the material changes introduced in the Revised Term Sheet. In particular, Borrower objects to the following revisions, each of which is addressed in detail in the body of this markup:
(a) The tightening of the receivables aging threshold from ninety (90) days to sixty (60) days past the date of the original invoice (Section 4.2(b));
(b) The introduction of a new seasonal/slow-moving inventory exclusion criterion (Section 4.3(f)), apparently arising from Bellweather Appraisal Group LLC's preliminary field examination dated March 21, 2022;
(c) The imposition of a new $25,000,000 inventory sublimit (Section 4.1(ii)(B)) not previously included in any draft;
(d) The introduction of a new exclusivity provision (Section 14.2); and
(e) The cumulative impact of the foregoing changes on the Borrowing Base, which reduces aggregate borrowing capacity by approximately $11,410,000, or 20.1%, from the levels originally contemplated by the parties.
Reservation of Rights. This markup is non-binding and does not constitute an acceptance, agreement, or commitment by Borrower to any of the terms set forth in the Revised Term Sheet, whether marked up or not. All terms remain subject to further negotiation and approval by Borrower's board of managers and its equity sponsor, Brindoval Partners Fund III, LP. Borrower's silence on, or failure to comment upon, any particular provision of the Revised Term Sheet shall not be construed as acceptance thereof. All rights are expressly reserved.
Concurrent Delivery. A detailed Borrowing Base Analysis Memorandum dated April 8, 2022, prepared by Lisa Morrow and Daniel Obi of C&H, is being delivered concurrently to Whitfield Ames LLP under separate cover. That memorandum contains detailed sensitivity tables modeling the borrowing base under various advance rate and eligibility scenarios, and should be reviewed in connection with the comments set forth herein.
SECTION 1: PARTIES
1.1 Borrower.  Meridian Consumer Brands LLC, a Delaware limited liability company.
Principal Office: 401 West 33rd Street, Suite 1200, New York, NY 10001.
Employer Identification Number: 84-3291057.
[Borrower's Comment: No comments. Accepted as stated.]
1.2 Lender / Administrative Agent
Ridgeline National Bank, National Association.
Headquarters: 200 Tryon Street, Charlotte, NC 28202.
Ridgeline National Bank, N.A. shall serve as the sole lender and administrative agent under the proposed Facility. In the event of any future syndication, Ridgeline National Bank, N.A. shall serve as lead arranger and administrative agent, with syndication terms to be mutually agreed.
[Borrower's Comment: No comments. Accepted as stated.]
1.3 Guarantors.  Each existing and future direct and indirect domestic subsidiary of the Borrower (collectively, the "Guarantors") shall unconditionally guarantee all obligations of the Borrower under the Facility. The guarantee shall be a continuing guarantee of payment and performance, not merely of collection.
[Borrower's Comment: Borrower notes this language is unchanged from the Initial Term Sheet and remains acceptable in principle, subject to review of the specific subsidiary list in definitive documentation. Borrower currently maintains three domestic subsidiaries: Meridian Personal Care Inc., Meridian Household Products Inc., and Meridian Distribution Services LLC. Borrower reserves the right to request exclusion of any immaterial subsidiaries or special-purpose entities formed after the Closing Date, and to negotiate de minimis thresholds for the inclusion of future subsidiaries as Guarantors.]
SECTION 2: FACILITY
2.1 Type.  Senior secured asset-based revolving credit facility (the "ABL Revolver" or the "Facility").
[Borrower's Comment: No comments. Accepted as stated.]
2.2 Commitment Amount
$40,000,000 (the "Commitment").
[Borrower's Comment: Borrower notes that the Commitment Amount remains at $40,000,000, which is unchanged from the Initial Term Sheet dated January 28, 2022. Borrower confirms that the full $40,000,000 commitment is required to support Borrower's working capital needs, seasonal inventory build-outs, and ongoing operational requirements. Meridian's consumer products business (personal care and household goods) is characterized by significant seasonal demand fluctuations, with peak inventory accumulation occurring in Q3 and Q4 of each fiscal year in advance of the fall and holiday retail seasons. During peak periods, Borrower's seasonal working capital requirements have historically reached approximately $32,000,000 to $36,000,000. Borrower will not agree to any reduction of the Commitment Amount. See further comments at Section 4 (Borrowing Base) below regarding the critical relationship between the borrowing base and actual availability under the Commitment.]
2.3 Purpose.  The proceeds of the Facility shall be used for (a) working capital and general corporate purposes of the Borrower and its subsidiaries, and (b) seasonal inventory financing in connection with Borrower's consumer products (personal care, household goods) and retail distribution operations.
[Borrower's Comment: No comments. Accepted as stated.]
2.4 Maturity.  Four (4) years from the date of closing of the Facility (the "Closing Date"). Based on the currently anticipated Closing Date of the second quarter of 2022, the maturity date is anticipated to fall in the second quarter of 2026 (the "Maturity Date").
[Borrower's Comment: No comments. Accepted as stated.]
2.5 Availability.  Availability under the Facility shall be subject to the Borrowing Base (as defined in Section 4 below) minus any reserves established by Lender in its  .
[Borrower's Comment: Borrower objects to the "Permitted Discretion" standard for reserves. See Section 4.1(c) below for Borrower's detailed comments regarding reserves. The term "Permitted Discretion" is undefined in this term sheet and, as commonly used, grants Lender excessively broad unilateral authority to reduce availability through the imposition of reserves without substantive standards or borrower protections.]
SECTION 3: INTEREST RATE AND FEES
3.1 Interest Rate
Borrowings under the Facility shall bear interest at a rate per annum equal to Term SOFR (as published by CME Group Benchmark Administration Limited or a successor administrator) plus   basis points (2.00%).
SOFR Floor: Term SOFR shall be subject to a floor of 25 basis points (0.25%).
Step-Down: The applicable margin shall step down to Term SOFR plus 175 basis points (1.75%) if the average daily Excess Availability during the immediately preceding fiscal quarter exceeds 50% of the Commitment (i.e., $20,000,000).
[Borrower's Comment: No comments on the interest rate, margin, or SOFR floor. Accepted as stated. Borrower notes, however, that the step-down calculation depends critically on the Borrowing Base mechanics and resulting Excess Availability, both of which are the subject of significant dispute between the parties. Under Lender's revised eligibility criteria and borrowing base (total borrowing base of approximately $45,460,000), Excess Availability under full utilization of the Commitment would be only approximately $5,460,000 — well below the $20,000,000 threshold required to achieve the step-down. By contrast, under Borrower's counter-proposal (total borrowing base of approximately $60,650,000), Excess Availability under full utilization would be approximately $20,650,000, which would satisfy the step-down threshold. The pricing benefit of the step-down is therefore directly contingent on resolution of the borrowing base issues addressed in Section 4.]
3.2 Unused Line Fee
Borrower shall pay an unused line fee equal to 37.5 basis points (0.375%) per annum on the daily average undrawn and uncredited portion of the Commitment, payable quarterly in arrears.
[Borrower's Comment: No comments. Accepted as stated.]
3.3 Upfront Fee
Borrower shall pay a one-time upfront fee equal to 50 basis points (0.50%) of the Commitment ($40,000,000 × 0.50% = $200,000), payable in full on the Closing Date.
[Borrower's Comment: No comments. Accepted as stated, subject to Closing occurring on mutually agreed terms.]
3.4 Other Fees
Customary agent fees, collateral monitoring fees, and field examination fees shall be as agreed between the parties. Lender reserves the right to charge Borrower for the reasonable costs of field examinations and appraisals, including fees and expenses of Bellweather Appraisal Group LLC ("Bellweather") and any successor appraiser retained by Lender.
[Borrower's Comment: Borrower requests the following limitations on field examination and appraisal costs, to be set forth in the definitive credit agreement:
(a) Frequency Cap: During any period in which no Trigger Event (as defined in Section 10 below) has occurred and is continuing, Lender shall conduct no more than two (2) field examinations and/or appraisals per calendar year. During any period in which a Trigger Event has occurred and is continuing, Lender shall conduct no more than four (4) field examinations and/or appraisals per calendar year.
(b) Cost Cap: Aggregate annual costs of field examinations and appraisals chargeable to Borrower shall not exceed $75,000 during any calendar year in which no Trigger Event has occurred and is continuing. No annual cost cap shall apply during the continuance of a Trigger Event, but all costs must be reasonable and documented.
(c) Appraiser Selection: Borrower acknowledges Lender's current retention of Bellweather Appraisal Group LLC (55 Church Street, Suite 700, New Haven, CT 06510; lead appraiser Thomas Varga), but reserves the right to request that Lender consider alternative appraisers if Borrower has a good-faith basis to question the objectivity or methodology of Bellweather's work.
These provisions are to be addressed in definitive documentation.]
SECTION 4: BORROWING BASE
NOTE TO WHITFIELD AMES LLP: This section contains the most significant areas of disagreement between the parties. Borrower's comments are extensive and should be reviewed in conjunction with the Borrowing Base Analysis Memorandum being delivered concurrently under separate cover. Borrower requests that a call be scheduled among counsel at the earliest opportunity to discuss the issues raised herein.
4.1 Borrowing Base Formula
Availability under the Facility at any time shall not exceed the lesser of (a) the Commitment ($40,000,000) and (b) the Borrowing Base, calculated as follows:
(i)   of Eligible Receivables (as defined in Section 4.2 below); plus
(ii) the lesser of (A)   of the Net Orderly Liquidation Value ("NOLV") of Eligible Inventory (as defined in Section 4.3 below) ; minus
(iii) Reserves (as established by Lender in its  ).
[Borrower's Comment — SIGNIFICANT OBJECTION TO MULTIPLE CHANGES: Borrower objects to three elements of the revised borrowing base formula: (1) the reduction of the inventory advance rate from the level Borrower has consistently requested (75% of NOLV) to 65% of NOLV; (2) the introduction of a new $25,000,000 inventory sublimit not present in any prior draft; and (3) the use of "Permitted Discretion" as the standard for establishment of reserves. Each is addressed in detail below.]
4.1(a) Borrower's Comment on Inventory Advance Rate.  Borrower restates its position from the First C&H Markup (February 14, 2022): the inventory advance rate should be 75% of NOLV, not 65% of NOLV.
Borrower notes the following in support of this position:
(1) Market Standard. An advance rate of 75% of NOLV is squarely within the market range for asset-based lending facilities secured by consumer products inventory. C&H's survey of comparable ABL transactions in the personal care and household goods sectors over the 2019–2022 period reveals inventory advance rates ranging from 70% to 85% of NOLV, with a median of approximately 75%. The 65% advance rate proposed by Lender is at the low end of the observed range and is more typical of facilities secured by highly specialized or fashion-sensitive inventory with greater liquidation risk — neither of which characterizes Meridian's product portfolio.
(2) Materiality of the Difference. Based on Bellweather's preliminary NOLV estimate of 70% of cost, and using the current eligible inventory base of $42,000,000 (under Lender's revised eligibility criteria, which Borrower separately contests), the difference between a 65% and 75% advance rate is significant:
•  At 65% advance rate: $42,000,000 × 70% (NOLV) × 65% = $19,110,000
•  At 75% advance rate: $42,000,000 × 70% (NOLV) × 75% = $22,050,000
•  Difference: $2,940,000 in borrowing capacity
(3) Nature of Borrower's Inventory. Meridian's consumer products inventory consists primarily of personal care items (shampoos, conditioners, body washes, lotions) and household goods (cleaning products, paper goods, storage solutions). These products have long shelf lives, stable consumer demand profiles, and well-established retail distribution channels. Liquidation risk is meaningfully lower than for seasonal fashion goods, perishable items, or highly specialized industrial inventory. A 75% advance rate appropriately reflects the liquidation profile of this inventory.
(4) Proposed Redline. Borrower requests deletion of "65%" and insertion of "75%" in Section 4.1(ii)(A).
4.1(b) Borrower's Comment on Inventory Sublimit.  [Borrower's Comment — OBJECTION TO NEW TERM:]
The $25,000,000 inventory sublimit set forth in Section 4.1(ii)(B) is new language that was not present in the Initial Term Sheet dated January 28, 2022, nor in the revised term sheet dated February 28, 2022. This provision was introduced for the first time in the March 28 Revised Term Sheet without advance notice to Borrower or its counsel. Lender has not provided any rationale for the introduction of this sublimit.
Borrower objects to the inventory sublimit as unnecessary and unduly restrictive, for the following reasons:
(1) The borrowing base formula already limits the contribution of inventory to the borrowing base through the NOLV calculation and the applicable advance rate. The NOLV percentage (currently estimated at 70% of cost) and the advance rate (65% under Lender's proposal, 75% under Borrower's counter-proposal) together function as a built-in limitation on inventory exposure. Adding a dollar-amount sublimit on top of these percentage-based limitations is redundant and creates an unnecessarily complex cap-within-a-cap structure.
(2) As Borrower's business grows and inventory levels increase, the sublimit would become increasingly constraining and could artificially reduce availability below levels supported by the underlying collateral value. This is inconsistent with the fundamental purpose of an asset-based facility, which is to provide availability that tracks the actual value of the borrowing base collateral.
(3) The sublimit was not discussed during the initial term sheet negotiations or the February 2022 call among counsel and principals, and no commercial justification has been offered by Lender.
Borrower's primary position: Deletion of the inventory sublimit in its entirety. The clause "and (B) $25,000,000" should be deleted from Section 4.1(ii).
Borrower's alternative position: If Lender insists on an inventory sublimit as a condition to the transaction, Borrower proposes a sublimit of not less than $30,000,000, which would provide meaningful headroom above the current inventory component of the borrowing base and accommodate seasonal inventory build-outs. A sublimit at the $25,000,000 level would effectively bind during precisely the peak seasonal periods when Borrower most requires the availability that this Facility is designed to provide.
4.1(c) Borrower's Comment on Reserves.  [Borrower's Comment — OBJECTION TO "PERMITTED DISCRETION" STANDARD:]
The use of "Permitted Discretion" as the standard governing Lender's establishment of reserves is too broad and, in Borrower's view, inconsistent with market practice for asset-based lending facilities of this type and size. The term "Permitted Discretion" is not defined in the Revised Term Sheet but, as commonly understood in ABL documentation, grants the lender essentially unfettered discretion to impose availability reserves for any reason the lender deems appropriate, without advance notice, without substantive standards, and without recourse by the borrower. Borrower is unwilling to accept this formulation.
Borrower proposes the following alternative framework for reserves:
(a) Any reserve established by Lender must be based on a reasonable determination by Lender, exercised in good faith and in a manner consistent with its customary business practices for similarly situated asset-based borrowers.
(b) Lender shall provide Borrower with prior written notice of at least ten (10) business days before establishing any new reserve or increasing any existing reserve (other than in connection with an Event of Default or an event that, with notice or the passage of time, would constitute an Event of Default), specifying in reasonable detail the basis for the proposed reserve and the amount thereof.
(c) During such notice period, Borrower shall have a reasonable opportunity to address the underlying concern giving rise to the proposed reserve, including by providing supplemental collateral information, third-party reports, or other data, and Lender shall consider such information in good faith before finalizing the reserve.
(d) Lender shall not use discretionary availability reserves as a substitute for properly negotiated eligibility criteria. Eligibility criteria are the appropriate mechanism for addressing collateral quality concerns and should be established in the definitive credit agreement through arm's-length negotiation, not imposed unilaterally through the reserve mechanism after closing.
(e) In the definitive credit agreement, the parties shall negotiate specific categories of permitted reserves (e.g., rent reserves, dilution reserves, seasonal reserves) and the circumstances under which each may be established.
Borrower's proposed redline to Section 4.1(iii) is reflected above.
4.2 Eligible Receivables — Definition
"Eligible Receivables" means accounts receivable of Borrower that satisfy all of the following criteria:
(a) Arising from bona fide sale of goods or rendition of services by Borrower in the ordinary course of Borrower's business;
(b) Not more than   days past the date of the original invoice;
(c) Owing by an account debtor organized and located in the United States (with such exceptions for Canadian or other foreign account debtors as may be agreed in the definitive credit agreement);
(d) Not subject to any dispute, offset, counterclaim, or defense asserted by or on behalf of the account debtor;
(e) Not owing by an account debtor that is insolvent, has filed or had filed against it any petition in bankruptcy, or is the subject of any insolvency proceeding;
(f) Not owing by any affiliate of Borrower;
(g) Subject to a concentration limit such that no more than 15% of total Eligible Receivables shall consist of amounts owing by any single account debtor (excluding major national retailers as agreed by the parties in the definitive credit agreement);
(h) Not evidenced by a promissory note, chattel paper, or other instrument;
(i) Subject to a perfected first-priority security interest and lien in favor of Lender under Article 9 of the Uniform Commercial Code; and
(j) Satisfying such other customary eligibility criteria as may be agreed by the parties in the definitive credit agreement.
[Borrower's Comment — SIGNIFICANT OBJECTION TO AGING THRESHOLD CHANGE (Section 4.2(b)):]
Borrower strongly objects to the reduction of the receivables aging threshold from ninety (90) days past the date of the original invoice to sixty (60) days past the date of the original invoice. This is a material and adverse change from the Initial Term Sheet dated January 28, 2022, and was not previewed or discussed in the revised term sheet dated February 28, 2022, which addressed only inventory eligibility issues. The aging threshold change appears for the first time in the March 28 Revised Term Sheet.
Borrower's detailed objections are as follows:
(1) Market Standard. The ninety (90)-day aging threshold is the widely accepted market standard for asset-based lending facilities extended to consumer products companies, particularly those selling through retail distribution channels. Consumer products manufacturers and distributors routinely extend payment terms of net-45, net-60, and net-75 days to their retail customers. A 60-day aging threshold effectively excludes receivables from the borrowing base before many of those receivables are even contractually due, which is both commercially unreasonable and inconsistent with the purpose of the Facility.
(2) Meridian's Payment Terms. Meridian's major retail customers operate on the following contractual payment terms:
•  Large national retailers (representing approximately 40% of revenues): Net-60 to Net-75 days
•  Regional and mid-market retailers (representing approximately 35% of revenues): Net-45 to Net-60 days
•  Specialty and independent retailers (representing approximately 15% of revenues): Net-30 to Net-45 days
•  Direct-to-consumer and e-commerce channels (representing approximately 10% of revenues): Immediate or Net-15 days
Under the foregoing payment terms, a significant percentage of Meridian's receivables are contractually not due until between 45 and 75 days from the date of invoice. A 60-day aging threshold would exclude from the borrowing base a material portion of receivables that are fully current, performing, and not yet contractually past due.
(3) Historical Aging Data. Meridian's historical receivables aging data for the twelve-month period ended December 31, 2021 demonstrates that receivables in the 60–90 day aging bucket represent a significant portion of performing, collectible accounts. Specifically:
•  Current (0–30 days): approximately $18,500,000 (48.7% of total receivables)
•  31–60 days: approximately $12,500,000 (32.9% of total receivables)
•  61–90 days: approximately $7,000,000 (18.4% of total receivables)
•  Over 90 days: approximately $2,200,000 (5.8% of total receivables — substantially all of which is subject to reserve or charge-off)
The $7,000,000 in receivables aged 61–90 days consists overwhelmingly of amounts owed by creditworthy national and regional retailers under contractual net-60 and net-75 payment terms. Meridian's historical loss rate on receivables in this aging bucket is less than 0.3% — fully consistent with performing, investment-quality trade receivables.
(4) Quantitative Impact. Tightening the aging threshold from 90 days to 60 days reduces Eligible Receivables from approximately $38,000,000 to approximately $31,000,000, a reduction of approximately $7,000,000 (18.4%). This reduction flows directly through to the borrowing base, reducing the receivables component from $32,300,000 (85% × $38,000,000) to $26,350,000 (85% × $31,000,000), a loss of $5,950,000 in borrowing capacity attributable solely to this single change.
(5) Borrower's Primary Position. Borrower requests restoration of the 90-day aging threshold as set forth in the Initial Term Sheet. No change in Borrower's receivables portfolio, customer credit quality, or aging profile has occurred since January 28, 2022 that would justify the tightening proposed by Lender.
(6) Borrower's Alternative Position. In the alternative, and solely for purposes of advancing negotiations, Borrower would consider a compromise aging threshold of seventy-five (75) days past the date of the original invoice, which would capture the substantial majority of Meridian's contractual net-60 and net-75 payment terms while excluding only those receivables that are significantly past due. Under a 75-day threshold, Borrower estimates that Eligible Receivables would be approximately $35,500,000, yielding a receivables component of approximately $30,175,000 (85% × $35,500,000).
(7) Supplemental Data. Borrower will provide supplemental receivables aging reports and detailed account debtor payment history covering the 24-month period ended December 31, 2021 to support its position. Such data will be compiled and transmitted by Borrower's accounting department under the direction of Raymond Chu, General Counsel, with copies to Whitfield Ames LLP.
Borrower's proposed redline to Section 4.2(b) — deletion of "sixty (60)" and insertion of "ninety (90)" — is reflected above.
4.3 Eligible Inventory — Definition
"Eligible Inventory" means inventory of Borrower that satisfies all of the following criteria:
(a) Finished goods and raw materials (excluding work-in-process) held for sale in the ordinary course of Borrower's business;
(b) Located at Borrower's owned or leased premises in the United States (with landlord waivers or bailee letters obtained from applicable landlords and warehousemen, as applicable);
(c) Not subject to any lien, security interest, or other encumbrance other than Lender's first-priority lien and such permitted liens as are agreed in the definitive credit agreement;
(d) Not consignment inventory or inventory held for the account of a third party;
(e) Not obsolete, damaged, defective, or unmerchantable;
(f) 
(g) Valued at the lower of cost (determined on a first-in, first-out (FIFO) basis) or market;
(h) Subject to a perfected first-priority security interest and lien in favor of Lender under Article 9 of the Uniform Commercial Code; and
(i) Satisfying such other customary eligibility criteria as may be agreed by the parties in the definitive credit agreement.
[Borrower's Comment — SIGNIFICANT OBJECTION TO NEW SEASONAL/SLOW-MOVING EXCLUSION (Section 4.3(f)):]
Criterion (f) is entirely new and was not present in the Initial Term Sheet dated January 28, 2022, the revised term sheet dated February 28, 2022, or any prior draft or discussion between the parties. Borrower understands that this criterion arises from the preliminary field examination and appraisal summary prepared by Bellweather Appraisal Group LLC and delivered to Lender on March 21, 2022 (the "Bellweather Preliminary Report"), which reportedly flagged approximately $12,000,000 in inventory (at cost) as seasonal or slow-moving SKUs warranting exclusion from the eligible inventory pool.
Borrower objects to criterion (f) in its entirety and requests its deletion. Borrower's detailed objections are as follows:
(1) Scope of Exclusion is Disproportionate. The $12,000,000 in inventory flagged by Bellweather as seasonal or slow-moving represents approximately 22% of Meridian's total eligible inventory at cost ($54,000,000). An exclusion of this magnitude is grossly disproportionate and, if implemented, would dramatically reduce the borrowing base in a manner that undermines the commercial viability of the Facility.
(2) Seasonal Inventory Build-Out is a Core Feature of Borrower's Business. Meridian's consumer products business — encompassing personal care items and household goods sold through national, regional, and independent retail channels — is inherently seasonal. Borrower's historical sales patterns demonstrate peak demand in Q4 (holiday season) and, to a lesser extent, Q1 (post-holiday restocking and spring promotions). To service this demand, Borrower begins building inventory in Q2 and Q3 of each fiscal year, with seasonal inventory levels peaking in October and November before drawdown through holiday-season sell-through.
Holding seasonal inventory for build-out prior to peak selling periods is not merely incidental to Borrower's business — it is a core feature of the business model and, indeed, the very purpose for which the proposed ABL Facility is being arranged. The seasonal inventory financing purpose is expressly acknowledged in Section 2.3 of the Revised Term Sheet. Excluding seasonal inventory from the borrowing base during precisely the periods when Borrower's working capital needs are greatest is fundamentally inconsistent with the economic rationale of the Facility.
(3) The 180-Day Turnover Test is Arbitrary. The 180-day turnover test for "slow-moving" inventory is arbitrary and does not account for the product lifecycle characteristics of Meridian's inventory. Many of Meridian's household goods SKUs — including cleaning products, paper goods, and storage solutions — have shelf lives of 18 to 36 months and exhibit stable, predictable demand patterns with turnover cycles that may extend beyond 180 days without any indication of obsolescence or impaired value. A 180-day threshold would incorrectly characterize as "slow-moving" a significant volume of inventory that is fully merchantable, readily saleable, and supported by existing purchase orders or contractual commitments from retail customers.
(4) Borrower Has Not Reviewed the Bellweather Preliminary Report. The Bellweather Preliminary Report has not been shared with Borrower or its counsel. Borrower has not had the opportunity to review the underlying data, methodology, or specific SKU-level exclusions relied upon by Bellweather in reaching its preliminary conclusions. Without access to the Bellweather Preliminary Report, Borrower is unable to evaluate the reasonableness of the proposed exclusions or to identify specific errors or methodological deficiencies. Borrower requests immediate access to the full Bellweather Preliminary Report, including all supporting data, and a reasonable period to review and respond before any eligibility criteria based on Bellweather's findings are finalized.
(5) Bellweather's Examination was Preliminary. Lender's own Revised Term Sheet acknowledges (at Section 6.3) that Bellweather's field examination is "preliminary only" and that "a full appraisal will be required prior to Closing." It is inappropriate to incorporate the findings of a preliminary, incomplete examination into binding eligibility criteria at the term sheet stage. If Bellweather's final appraisal reaches different conclusions regarding seasonal or slow-moving inventory, the eligibility criteria would need to be revised in any event.
Borrower's Primary Position: Deletion of criterion (f) in its entirety.
Borrower's Alternative Position: If Lender insists on a seasonal/slow-moving inventory exclusion as a condition to the transaction, Borrower proposes the following modifications:
(i) Seasonal Inventory: The exclusion for seasonal inventory should apply only to inventory that has been held for more than two (2) full selling seasons (not one), to account for the multi-season lifecycle of many of Meridian's consumer products;
(ii) Slow-Moving Inventory: The turnover threshold for "slow-moving" inventory should be 270 days (not 180 days), consistent with the product lifecycle and turnover characteristics of Meridian's household goods portfolio;
(iii) Rebuttal Right: Borrower should have the right to provide supplemental sales data, demand forecasts, and purchase order documentation to rebut any specific SKU-level exclusion proposed by Lender or Bellweather, and Lender shall consider such data in good faith before finalizing any exclusion;
(iv) Aggregate Cap on Exclusions: Inventory exclusions attributable to criterion (f) shall not exceed $5,000,000 in aggregate at any time, regardless of the amount of inventory identified as seasonal or slow-moving under the applicable tests; and
(v) Periodic Review: Inventory that has been excluded under criterion (f) shall be re-evaluated at least quarterly, and any inventory that no longer meets the exclusion criteria shall be promptly restored to the eligible inventory pool.
[Borrower's Comment — Cumulative Impact on Borrowing Base:]
Borrower notes that the reduction of eligible inventory from approximately $54,000,000 to approximately $42,000,000 at cost (a reduction of $12,000,000 attributable to the new seasonal/slow-moving exclusion), combined with the receivables aging tightening from 90 days to 60 days (reducing eligible receivables from $38,000,000 to $31,000,000), combined with the inventory advance rate of 65% (versus Borrower's requested 75%) and the new $25,000,000 inventory sublimit, reduces the total borrowing base from the level originally contemplated at the time of the Initial Term Sheet to a level that provides dangerously thin excess availability.
Specifically, under Lender's revised terms, the total borrowing base is approximately $45,460,000, providing only approximately $5,460,000 (approximately 13.7%) of excess availability over the $40,000,000 Commitment. This margin is:
(a) Insufficient to absorb normal seasonal and month-to-month fluctuations in collateral values without triggering the springing FCCR test and weekly reporting requirements;
(b) Inconsistent with the parties' original understanding of the facility structure, which contemplated a borrowing base meaningfully in excess of the Commitment to provide comfortable availability headroom; and
(c) Likely to result in frequent periods of restricted availability during seasonal inventory build-out periods, precisely when Borrower's working capital needs — and draw requests under the Facility — are at their peak.
The cumulative impact of Lender's revisions represents a fundamental alteration of the economic terms of the proposed Facility. See Section 4.5 below for a detailed impact summary.
4.4 NOLV Determination
Net Orderly Liquidation Value ("NOLV") of Eligible Inventory shall be determined by periodic appraisals conducted by an independent appraiser acceptable to Lender. The current appraiser retained by Lender is Bellweather Appraisal Group LLC, 55 Church Street, Suite 700, New Haven, CT 06510 (lead appraiser: Thomas Varga). Bellweather's preliminary appraisal summary dated March 21, 2022 estimates NOLV at approximately 70% of cost.
[Borrower's Comment: Borrower requests the following provisions regarding NOLV determination, to be included in the definitive credit agreement:]
(a) Initial NOLV Percentage. The initial NOLV percentage used in the borrowing base shall be fixed at 70% of cost (as estimated in Bellweather's preliminary appraisal summary) until a full (not preliminary) appraisal is completed by Bellweather or another appraiser acceptable to both parties. The preliminary NOLV estimate shall not be revised downward based on interim or supplemental analyses without Borrower's consent (not to be unreasonably withheld) or completion of a full appraisal.
(b) Appraisal Frequency. Subsequent appraisals shall occur no more frequently than once per calendar year during any period in which no Trigger Event has occurred and is continuing. During the continuance of a Trigger Event, Lender may require appraisals no more frequently than twice per calendar year. This provision is consistent with, and supplements, the field examination frequency caps requested by Borrower in Section 3.4 above.
(c) Borrower Access and Comment Rights. Borrower shall be provided a complete copy of any appraisal report (including all supporting data, methodologies, assumptions, and SKU-level analyses) within five (5) business days of Lender's receipt thereof. Borrower shall have a period of not less than fifteen (15) business days from receipt of the appraisal report to review, comment on, or dispute any findings, conclusions, or NOLV estimates contained therein. During such review period, the existing NOLV percentage shall remain in effect for borrowing base purposes and shall not be adjusted pending resolution of Borrower's comments. Lender shall consider Borrower's comments in good faith before making any adjustment to the NOLV percentage or the borrowing base.
4.5 Borrowing Base Impact Summary — Borrower's Analysis
[Borrower's Comment — Summary Table Illustrating Cumulative Impact of Lender's Revisions:]
The following table summarizes the borrowing base under three scenarios: (1) the Initial Term Sheet, (2) the Revised Term Sheet (Lender's current position), and (3) Borrower's counter-proposal. All figures are approximate and based on Meridian's receivables and inventory data as of December 31, 2021, and Bellweather's preliminary NOLV estimate of 70% of cost.
Scenario 1: Initial Borrowing Base (per January 28, 2022 Initial Term Sheet)
Scenario 2: Revised Borrowing Base (per March 28, 2022 Revised Term Sheet — Lender's Current Position)
Scenario 3: Borrower's Counter-Proposal (restore 90-day receivables threshold, 75% inventory advance rate, eliminate seasonal/slow-moving exclusion)
[Borrower's Comment: Borrower notes the dramatic deterioration of the borrowing base from $56,870,000 under the Initial Term Sheet to $45,460,000 under Lender's revised terms — a reduction of $11,410,000 (20.1%). This reduction is attributable to the cumulative effect of Lender's three principal changes:
(i) Receivables aging tightening (90 days → 60 days): reduction of approximately $5,950,000 in borrowing capacity;
(ii) Seasonal/slow-moving inventory exclusion ($12M in inventory excluded): reduction of approximately $5,460,000 in borrowing capacity (at 65% advance rate and 70% NOLV); and
(iii) The inventory sublimit of $25,000,000 does not further reduce the base at current levels but would become binding if the seasonal exclusion is reduced or eliminated.
Under Borrower's counter-proposal, the borrowing base would be $60,650,000, providing robust excess availability of $20,650,000 (51.6%) — a level consistent with the parties' original understanding of the facility and appropriate for a well-collateralized ABL facility of this size.
Additional sensitivity analyses are provided in the concurrently delivered Borrowing Base Analysis Memorandum dated April 8, 2022.]
SECTION 5: COLLATERAL
5.1 ABL Priority Collateral (First-Priority Lien)
The Facility shall be secured by a first-priority perfected security interest and lien (subject to permitted liens) on all of the following assets of the Borrower and the Guarantors (collectively, the "ABL Priority Collateral"):
(a) All accounts receivable, whether now existing or hereafter arising;
(b) All inventory, including raw materials, work-in-process, and finished goods, whether now owned or hereafter acquired;
(c) All deposit accounts and securities accounts;
(d) All cash and cash equivalents; and
(e) All proceeds and products of the foregoing.
[Borrower's Comment: Consistent with the Initial Term Sheet and the contemplated intercreditor structure. Accepted.]
5.2 Term Loan Priority Collateral (Second-Priority Lien)
The Facility shall be secured by a second-priority perfected security interest and lien (subordinate to the first-priority lien of Greystone Capital Finance LLC under the existing first lien term loan) on all other assets of the Borrower and the Guarantors not constituting ABL Priority Collateral (the "Term Loan Priority Collateral"), including:
(a) All real property;
(b) All equipment and fixtures;
(c) All intellectual property (trademarks, patents, copyrights, and trade secrets);
(d) All equity interests in subsidiaries; and
(e) All general intangibles (other than those constituting ABL Priority Collateral).
[Borrower's Comment: Consistent with the Initial Term Sheet. Borrower notes that an intercreditor agreement between Lender (Ridgeline National Bank, N.A.) and Greystone Capital Finance LLC (the existing first lien term loan lender under the credit agreement dated December 15, 2019, reference number GCF-MCB-2019-1215) will be required to establish the relative lien priorities and enforcement rights of the ABL and term loan lenders. Greystone has informally confirmed its willingness to negotiate the intercreditor arrangement, per email from Alan Fitzpatrick, Director, Portfolio Management, Greystone Capital Finance LLC, to Raymond Chu, General Counsel, Meridian Consumer Brands LLC, dated February 8, 2022. Formal intercreditor negotiations have not yet commenced pending resolution of the term sheet issues addressed herein. Borrower reserves the right to comment further on the terms and conditions of the intercreditor agreement once negotiations commence, and notes that the intercreditor agreement will need to address, among other things, the "silent second" lien structure, standstill periods, lien release mechanics, proceeds sharing, DIP financing rights, and adequate protection waivers.]
5.3 Existing Indebtedness
Meridian Consumer Brands LLC is the borrower under an existing $75,000,000 first lien term loan with Greystone Capital Finance LLC, dated as of December 15, 2019, maturing December 15, 2025. As of January 31, 2022, the outstanding principal balance under the Greystone term loan was approximately $61,500,000, subject to scheduled quarterly amortization.
[Borrower's Comment: Accepted as factual. Borrower confirms that the existing Greystone term loan will remain outstanding and is not being refinanced in connection with this Facility. The proposed ABL Revolver is intended to be a supplemental working capital and seasonal inventory financing facility, distinct from and in addition to the Greystone term loan.]
SECTION 6: CONDITIONS PRECEDENT TO CLOSING
6.1 Documentation.  Execution and delivery of a definitive credit agreement, security agreements (including account control agreements), guarantees, intercreditor agreement, and all other related loan documents (collectively, the "Loan Documents"), all in form and substance  .
[Borrower's Comment: Borrower requests insertion of "reasonably" before "satisfactory" and addition of "and Borrower" to reflect the mutual nature of the documentation process. Documentation standards in non-binding term sheets should reflect the expectation that definitive agreements will be negotiated on a bilateral basis. One-sided "satisfactory to Lender" formulations are inconsistent with this expectation.]
6.2 Intercreditor Agreement
Execution and delivery of an intercreditor agreement between Lender (Ridgeline National Bank, N.A.) and Greystone Capital Finance LLC, in form and substance satisfactory to Lender and Greystone.
[Borrower's Comment: Accepted in principle. As noted in Section 5.2 above, Greystone has informally confirmed its willingness to enter into an intercreditor agreement. Borrower reserves all rights regarding the form and substance of the intercreditor agreement, which must be acceptable to Borrower as well. Borrower requests that "and Borrower" be added to this provision to clarify that the intercreditor agreement must be satisfactory to all three parties.]
6.3 Appraisal and Field Examination
Completion of a field examination and inventory appraisal satisfactory to Lender. Lender notes that Bellweather Appraisal Group LLC's preliminary field examination (commenced March 7, 2022; preliminary appraisal summary delivered March 21, 2022) is preliminary only, and a full appraisal will be required prior to Closing.
[Borrower's Comment: Borrower requests that (a) the results of the final appraisal be shared with Borrower within five (5) business days of Lender's receipt thereof, and (b) Borrower shall have a reasonable opportunity (not less than fifteen (15) business days) to review, comment on, and, if appropriate, challenge any findings or conclusions in the appraisal before Lender finalizes any eligibility determinations or borrowing base adjustments based thereon. See also Borrower's comments at Section 4.4 above.]
6.4 Financial Statements and Diligence
(a) Delivery of audited financial statements of Borrower and its subsidiaries for the fiscal year ended December 31, 2021, audited by Pemberton & Locke CPAs LLP (engagement partner: Diane Sorrento), together with an unqualified opinion thereon.
(b) Delivery of interim unaudited financial statements for any subsequent period ended more than 45 days prior to the Closing Date.
(c) Completion of Lender's due diligence review (legal, financial, and business) of the Borrower and its subsidiaries, the results of which shall be satisfactory to Lender.
[Borrower's Comment: Accepted. Borrower confirms that the FY2021 audited financial statements are available and will be delivered promptly upon request. For reference, key financial metrics for FY2021 (audited by Pemberton & Locke CPAs LLP) are as follows:]
•  Revenue: approximately $185,000,000
•  EBITDA: approximately $22,400,000
•  Total Assets: approximately $142,000,000
•  Total Debt (including Greystone term loan): approximately $61,500,000
•  Net Leverage Ratio: approximately 2.75x
6.5 Other Conditions
(a) UCC financing statement and lien searches (national and local) confirming no adverse liens on the ABL Priority Collateral;
(b) Evidence of insurance satisfactory to Lender, naming Lender as loss payee and additional insured, as applicable;
(c) Legal opinions from Borrower's counsel, Calderwood & Harkness LLP, in form and substance satisfactory to Lender, addressing enforceability, due organization, authorization, perfection, and such other matters as Lender's counsel may reasonably request;
(d) Good standing certificates for Borrower and each Guarantor from their respective states of organization and qualification;
(e) Copies of organizational documents (operating agreements, certificates of formation/incorporation) for Borrower and each Guarantor, together with evidence of board/member authorization of the Facility;
(f) Beneficial ownership certification and "Know Your Customer" documentation as required by applicable law and Lender's compliance policies.
[Borrower's Comment: Accepted as customary. Borrower notes that its Delaware registered agent is Capitol Registered Agents Inc., 1209 Orange Street, Wilmington, DE 19801, and will facilitate delivery of good standing certificates and organizational documents through such registered agent and Borrower's in-house legal department.]
SECTION 7: REPRESENTATIONS AND WARRANTIES
The definitive credit agreement shall contain customary representations and warranties by the Borrower and the Guarantors, including without limitation representations and warranties regarding:
(a) due organization, valid existence, and good standing; (b) power and authority; (c) due authorization and enforceability; (d) no conflicts with organizational documents, applicable law, or material agreements; (e) compliance with applicable law; (f) accuracy and completeness of financial statements; (g) no material adverse change since December 31, 2021; (h) absence of material litigation (other than as disclosed); (i) taxes; (j) ERISA and employee benefit matters; (k) environmental compliance; (l) insurance; (m) intellectual property; (n) subsidiaries; (o) real property and leases; (p) material contracts; (q) collateral matters (ownership, perfection, priority); and (r) such other customary representations as may be agreed.
[Borrower's Comment: Subject to review and negotiation in definitive documentation. Borrower requests that all representations and warranties be qualified by materiality and/or knowledge qualifiers where appropriate, consistent with market practice for asset-based lending transactions of this type. Representations should be subject to customary exceptions and carve-outs, and Borrower shall have the right to deliver disclosure schedules updating and qualifying the representations at or prior to closing. Borrower's counsel will provide detailed comments on representations and warranties in the context of the definitive credit agreement drafting process.]
SECTION 8: AFFIRMATIVE COVENANTS
The definitive credit agreement shall contain customary affirmative covenants applicable to the Borrower and the Guarantors, including without limitation:
(a) Delivery of annual audited financial statements within 120 days of fiscal year-end;
(b) Delivery of quarterly unaudited financial statements within 45 days of quarter-end;
(c) Delivery of monthly unaudited financial statements within   of month-end;
(d) Delivery of monthly borrowing base certificates within   of month-end (or weekly borrowing base certificates if Excess Availability falls below the Trigger Threshold (as defined below));
(e) Monthly accounts receivable aging reports and inventory reports;
(f) Compliance certificates delivered concurrently with quarterly and annual financial statements;
(g) Maintenance of insurance in amounts and with carriers satisfactory to Lender;
(h) Maintenance and preservation of properties and assets in good working order;
(i) Payment of taxes when due (subject to permitted contests);
(j) Preservation of corporate existence and rights; and
(k) Such other customary affirmative covenants as may be agreed.
[Borrower's Comment: Generally acceptable, with the following comments:
(1) Monthly Financial Statements. Borrower requests that the delivery deadline for monthly unaudited financial statements be 30 calendar days after month-end (not 20 calendar days as proposed by Lender). A 20-calendar-day deadline is unduly burdensome for a company of Meridian's size and would strain Borrower's accounting and finance resources, particularly during peak seasonal periods.
(2) Monthly Borrowing Base Certificates. Borrower requests that the delivery deadline for monthly borrowing base certificates be 20 business days after month-end (not 15 calendar days as proposed by Lender). Preparation of accurate borrowing base certificates requires reconciliation of receivables and inventory data, review of eligibility criteria, and calculation of reserves, all of which require adequate preparation time.
(3) Trigger Threshold for Weekly Reporting. Borrower requests that the threshold triggering the shift from monthly to weekly borrowing base reporting (the "Trigger Threshold") be set at Excess Availability falling below 15% of the Commitment (i.e., $6,000,000), rather than the 12.5% ($5,000,000) threshold proposed by Lender. Given the reduced borrowing base under Lender's revised eligibility criteria (approximately $45,460,000, yielding Excess Availability of only approximately $5,460,000 at full utilization), a 12.5% trigger at $5,000,000 would mean that Borrower could be subject to weekly reporting obligations essentially at all times during peak seasonal draw periods. A 15% trigger at $6,000,000 provides marginally more headroom and reduces the likelihood of unnecessarily burdensome reporting requirements during normal business operations.
Borrower's proposed redlines to paragraphs (c) and (d) are reflected above.]
SECTION 9: NEGATIVE COVENANTS
The definitive credit agreement shall contain customary negative covenants applicable to the Borrower and the Guarantors, including without limitation restrictions on:
(a) Incurrence of additional indebtedness;
(b) Creation of liens;
(c) Investments, loans, and advances;
(d) Restricted payments, including dividends and distributions to equity holders;
(e) Sales, transfers, or other dispositions of assets;
(f) Mergers, consolidations, and acquisitions;
(g) Transactions with affiliates; and
(h) Changes in the nature of the business.
[Borrower's Comment: Subject to detailed review and negotiation in the context of definitive documentation. Borrower requests the following customary carve-outs and baskets:
(a) General Lien and Indebtedness Baskets. Borrower requests general lien baskets and general indebtedness baskets of not less than $5,000,000 each, to provide flexibility for ordinary course commercial activities and incidental obligations.
(b) Permitted Acquisitions. Borrower requests a permitted acquisitions basket, subject to customary conditions (including pro forma compliance with financial covenants, minimum Excess Availability requirements, absence of defaults, and delivery of pro forma borrowing base and financial projections).
(c) Permitted Distributions. Borrower requests the ability to make distributions to its equity sponsor, Brindoval Partners Fund III, LP, subject to availability-based conditions. Specifically, Borrower proposes that distributions be permitted so long as (i) no Default or Event of Default exists or would result therefrom, (ii) pro forma Excess Availability after giving effect to such distribution is not less than 20% of the Commitment ($8,000,000), and (iii) the trailing twelve-month Fixed Charge Coverage Ratio (pro forma) is not less than 1.10:1.00.
(d) Coordination with Existing Greystone Covenants. Borrower notes that the negative covenants in the ABL credit agreement must be carefully coordinated with the negative covenants in the existing Greystone Capital Finance LLC term loan agreement to avoid inconsistency, overlap, or inadvertent cross-default situations. Borrower will provide a covenant comparison matrix in connection with the definitive documentation process.
]
SECTION 10: FINANCIAL COVENANTS
10.1 Springing Fixed Charge Coverage Ratio
Minimum fixed charge coverage ratio ("FCCR") of 1.00 to 1.00, calculated as the ratio of (a) EBITDA minus unfinanced capital expenditures minus cash taxes paid minus cash restricted payments to (b) the sum of scheduled debt service payments (principal and interest) plus cash restricted payments, in each case for the trailing twelve-month period, tested monthly. The FCCR shall be a "springing" financial covenant, tested only upon Excess Availability falling below the greater of (a)   of the Commitment ( ) and (b)   (the "FCCR Trigger Threshold").
[Borrower's Comment: Borrower requests that the FCCR Trigger Threshold be reduced from the greater of (a) 12.5% of the Commitment ($5,000,000) and (b) $5,000,000 (i.e., a single trigger at $5,000,000 under Lender's proposal) to the greater of (a) 10.0% of the Commitment ($4,000,000) and (b) $4,000,000.
Borrower's objection is as follows:
The $5,000,000 FCCR Trigger Threshold proposed by Lender is too high, particularly in light of the reduced borrowing base under Lender's revised eligibility criteria. Under the revised borrowing base of approximately $45,460,000, the FCCR would be triggered whenever Excess Availability falls below $5,000,000 — leaving a margin of only $460,000 between the Excess Availability at full utilization ($5,460,000) and the FCCR trigger point ($5,000,000). This is an unacceptably thin cushion that would subject Borrower to the risk of a covenant test being triggered by routine fluctuations in receivables and inventory levels, seasonal drawdown patterns, or minor timing differences in collections.
Even under Borrower's counter-proposal for the borrowing base (approximately $60,650,000), a $4,000,000 FCCR trigger provides adequate protection for Lender while affording Borrower reasonable headroom. At full utilization, Excess Availability under Borrower's proposed base would be approximately $20,650,000 — far above the proposed $4,000,000 trigger — and the springing FCCR would function as intended: as a true early-warning mechanism triggered only in periods of genuine financial stress.
The difference between $4,000,000 and $5,000,000 is particularly significant because, if the FCCR is triggered, Borrower may be required to demonstrate compliance on a backward-looking trailing twelve-month basis at a time when liquidity is already constrained. A premature or unnecessary trigger could precipitate covenant violations, restrict borrowing capacity, and undermine the very working capital support the Facility is designed to provide.
Borrower's proposed redline is reflected above.]
10.2 No Maintenance Financial Covenants
Confirmed: No maintenance-based financial covenants shall be required other than the springing FCCR described in Section 10.1 above. The Facility shall not include any maintenance-based leverage ratio, interest coverage ratio, or minimum EBITDA covenant.
[Borrower's Comment: Accepted. The absence of maintenance-based financial covenants is appropriate for an asset-based revolving facility and is consistent with market practice.]
SECTION 11: EVENTS OF DEFAULT
The definitive credit agreement shall contain customary events of default, including without limitation:
(a) Payment default (failure to pay principal, interest, or fees when due);
(b) Breach of representations and warranties in any material respect;
(c) Covenant default (with cure periods for certain affirmative covenants as described below);
(d) Cross-default to other material indebtedness (including the Greystone Capital Finance LLC first lien term loan);
(e) Bankruptcy, insolvency, or receivership of Borrower or any Guarantor;
(f) Entry of judgments against Borrower or any Guarantor in excess of a specified threshold;
(g) Change of control of Borrower;
(h) Material adverse effect;
(i) Invalidity of security documents or impairment of Lender's liens; and
(j) Such other customary events of default as may be agreed.
[Borrower's Comment: Subject to review and negotiation in definitive documentation. Borrower requests the following:
(a) Cure Periods. Customary cure periods for non-payment defaults, including a cure period of 30 days for affirmative covenant defaults (other than financial covenant defaults and certain specified covenants for which no cure period is appropriate, such as compliance with law and maintenance of insurance). Payment defaults should be subject to a cure period of not less than three (3) business days for administrative or technical failures.
(b) Cross-Default Threshold. The cross-default threshold for