Dixie Group

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 28, 2024
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to ________.
Commission File Number 0-2585
The Dixie Group, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
62-0183370
(State or other jurisdiction of incorporation of organization)
(I.R.S. Employer Identification No.)
475 Reed Road, Dalton, GA 30720
(706) 876-5800
(Address of principal executive offices and zip code)
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Trading Symbol
Name of each exchange on which registered
Common Stock, $3.00 par value
DXYN
OTCQB
Securities registered pursuant to Section 12(g) of the Act:
Title of class
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ¨ Yes þ No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. ¨ Yes þ No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  þ Yes ¨ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulations S-T (Section 232.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit such files). þ Yes ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See definitions of "large accelerated filer,"
"accelerated filer," "smaller reporting company," in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company þ     Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section
13(a) of the Exchange Act.
Indicate by check mark whether the registrant has filed a report on attestation to its management's assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act
(15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ¨
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial
statements. ¨
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant
recovery period pursuant to Section 240.10D-1(b). ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ¨ Yes þ No
The aggregate market value of the Common Stock held by non-affiliates of the registrant on June 28, 2024 (the last business day of the registrant's most recently completed fiscal second quarter) was $8,969,820. The
aggregate market value was computed by reference to the closing price of the Common Stock on such date. In making this calculation, the registrant has assumed, without admitting for any purpose, that all executive officers,
directors, and holders of more than 10% of a class of outstanding Common Stock, and no other persons, are affiliates. No market exists for the shares of Class B Common Stock, which is neither registered under Section 12 of
the Act nor subject to Section 15(d) of the Act.
Indicate the number of shares outstanding of each of the registrant's classes of Common Stock as of the latest practicable date.
Class
Outstanding as of March 27, 2025
Common Stock, $3.00 Par Value
13,997,446 
shares
Class B Common Stock, $3.00 Par Value
1,249,302 
shares
Class C Common Stock, $3.00 Par Value
— 
shares
DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the following document are incorporated by reference:
Proxy Statement of the registrant for annual meeting of shareholders to be held May 7, 2025 (Part III).
Table of Contents    1

THE DIXIE GROUP, INC.
Index to Annual Report
on Form 10-K for
Year Ended December 28, 2024
PART I
Page
Item 1.
Business
4
Item 1A.
Risk Factors
6
Item 1B.
Unresolved Staff Comments
11
Item 1C.
Cybersecurity
11
Item 2.
Properties
12
Item 3.
Legal Proceedings
12
Item 4.
Mine Safety Disclosures
13
 
Executive Officers of the Registrant
13
PART II
 
Item 5.
Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
14
Item 6.
Reserved
15
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations
15
Item 7A.
Quantitative and Qualitative Disclosures About Market Risk
22
Item 8.
Financial Statements and Supplementary Data
22
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
22
Item 9A.
Controls and Procedures
22
Item 9B.
Other Information
23
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
21
PART III
 
Item 10.
Directors, Executive Officers and Corporate Governance
24
Item 11.
Executive Compensation
24
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
24
Item 13.
Certain Relationships and Related Transactions, and Director Independence
25
Item 14.
Principal Accounting Fees and Services
25
PART IV
 
Item 15.
Exhibits and Financial Statement Schedules
25
Item 16.
Form 10-K Summary
25
Signatures
26
CONSOLIDATED FINANCIAL STATEMENTS
 
 
Report of Independent Registered Public Accounting Firm
29
 
Consolidated Balance Sheets - December 28, 2024 and December 30, 2023
31
 
Consolidated Statements of Operations - Years ended December 28, 2024 and December 30, 2023
32
Consolidated Statements of Comprehensive Income (Loss) - Years ended December 28, 2024 and December 30, 2023
33
 
Consolidated Statements of Cash Flows - Years ended December 28, 2024 and December 30, 2023
34
 
Consolidated Statements of Stockholders' Equity - December 28, 2024 and December 30, 2023
35
 
Notes to Consolidated Financial Statements
35
 
Exhibit Index
63
Table of Contents    2

FORWARD-LOOKING INFORMATION
This Report contains statements that may be considered 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. Such statements include the use of terms or phrases such as "expects," "estimates,"
"projects," "believes," "anticipates," "intends," and similar terms and phrases. Such forward-looking statements relate to, among other matters, our future financial
performance, business prospects, growth strategies or liquidity. The following important factors may affect our future results and could cause those results to differ
materially from our historical results; these factors include, in addition to those "Risk Factors" detailed in Item 1A of this report, and described elsewhere in this
document, the cost and availability of capital, raw material and transportation costs related to petroleum price levels, the cost and availability of energy supplies,
the loss of a significant customer or group of customers, the ability to attract, develop and retain qualified personnel, materially adverse changes in economic
conditions generally in carpet, rug and floorcovering markets we serve and other risks detailed from time to time in our filings with the Securities and Exchange
Commission.
Table of Contents    3

PART I.
Item 1.    BUSINESS
General
Our business consists principally of marketing, manufacturing and selling floorcovering products to high-end residential customers through our various sales forces
and brands. We focus exclusively on the upper-end of the floorcovering market where we believe we have strong brands and competitive advantages with our
style and design capabilities and customer relationships. Our Fabrica, Masland, DH Floors and TRUCOR™ brands have a significant presence in the high-end
residential floorcovering markets. Our business participates in markets for soft floorcoverings, which include broadloom carpet and rugs, and hard surfaces, which
include luxury vinyl flooring (LVF) and engineered wood.
We have one reportable segment, Floorcovering.
Our Brands
Our brands are well known, highly regarded and offer meaningful alternatives to the discriminating customer.
Fabrica markets and manufactures luxurious residential carpet, custom rugs, and engineered wood at selling prices that we believe are approximately five times
the average for the residential soft floorcovering industry. Its primary customers are interior decorators and designers, selected retailers and furniture stores, luxury
home builders and manufacturers of luxury motor coaches and yachts. Fabrica is among the leading premium brands in the domestic marketplace and is known
for styling innovation and unique colors and patterns. Fabrica consists of extremely high quality carpets and area rugs in both nylon and wool, with a wide variety
of patterns and textures. Fabrica is viewed by the trade as the premier quality brand for very high-end carpet and enjoys an established reputation as a styling
trendsetter and a market leader in providing both custom and designer products to the very high-end residential sector.
Masland, founded in 1866, markets and manufactures design-driven specialty carpets and rugs for the high-end residential marketplace. In addition, it offers
luxury vinyl flooring products to the marketplace it serves. Its residential broadloom carpet products are marketed at selling prices that we believe are over three
times the average for the residential soft floorcovering industry. Its products are marketed through the interior design community, as well as to consumers through
specialty floorcovering retailers. Masland Residential has strong brand recognition within the upper-end residential market. Masland Residential competes through
innovative styling, color, product design, quality and service.
DH Floors provides stylishly designed, differentiated products that offer affordable fashion to residential consumers. DH Floors markets an array of residential
tufted broadloom carpet and rugs to selected retailers and home centers under the DH Floors and private label brands. In addition, it offers luxury vinyl flooring
products to the marketplace it serves. Its objective is to make the DH Floors brand the choice for styling, service and quality in the more moderately priced sector
of the high-end residential market. Its products are marketed at selling prices which we believe average two times the soft floorcovering industry's average selling
price.
TRUCOR™ delivers rigid vinyl flooring options that capture the beauty of hardwood and stone, yet are designed to take the demands of active home and work
environments at a fraction of the cost. With a 100% waterproof core each design is engineered to perform in both residential or commercial environments. With our
TRUWEAR™ acrylic coating, each design is protected against dirt, moisture, stains and scratches. TRUCOR™ is engineered to provide warmth underfoot as well
as a cushioned feel. TRUCOR's advanced performance IXPE attached pad also helps to insulate sound, providing the perfect solution for high traffic areas.
Industry
We are a flooring manufacturer in an industry composed of a wide variety of companies from small privately held firms to large multinationals. In 2023, according
to the most recent information available, the U.S. floorcovering industry reported $34.1 billion in sales, down approximately 7.4% from the 2022 sales total. In
2023, the primary categories of flooring in the U.S., based on sales dollars, were carpet and rug (33%), luxury vinyl flooring (LVF) (28%), wood (12%), ceramic tile
(13%), stone (6%), vinyl (4%), and laminate and other (4%). In 2023, the primary categories of flooring in the U.S., based on square feet, were carpet and rug
(39%), luxury vinyl flooring (LVF) (31%), ceramic tile (11%), vinyl (7%), wood (5%), laminate (3%), and stone and other (3%). Each of these categories is
influenced by the residential construction, commercial construction, and residential remodeling markets. These markets are influenced by many factors including
consumer confidence, spending for durable goods, turnover in housing and the overall strength of the economy.
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The carpet and rug category has two primary markets, residential and commercial, with the residential market making up the largest portion of the industry's sales.
A substantial portion of industry shipments is made in response to replacement demand. Residential products consist of broadloom carpets and rugs in a broad
range of styles, colors and textures and hard surface products such as wood, luxury vinyl flooring, stone and ceramic tile. Commercial products consist primarily of
broadloom carpet and modular carpet tile for a variety of institutional applications such as office buildings, restaurant chains, schools and other commercial
establishments. The carpet industry also manufactures carpet for the automotive, recreational vehicle, small boat and other industries.
The Carpet and Rug Institute (the "CRI") is the national trade association representing carpet and rug manufacturers. Information compiled by the CRI suggests
that the domestic carpet and rug industry is comprised of fewer than 100 manufacturers, with a significant majority of the industry's production concentrated in a
limited number of manufacturers focused on the lower end of the price curve. We believe that this industry focus provides us with opportunities to capitalize on our
competitive strengths in selected markets where innovative styling, design, product differentiation, focused service and limited distribution add value.
Competition
The floorcovering industry is highly competitive. We compete with other carpet, rug and hard surface manufacturers. In addition, the industry provides multiple
floorcovering surfaces such as luxury vinyl tile and wood. Though soft floorcovering is still the dominant floorcovering surface, it has gradually lost market share to
hard floorcovering surfaces over the last 25 years. We believe our products are among the leaders in styling and design in the high-end residential carpet markets.
However, a number of manufacturers produce competitive products and some of these manufacturers have greater financial resources than we do.
We believe the principal competitive factors in our primary floorcovering markets are styling, color, product design, quality and service. In the high-end residential
markets, we compete with various other floorcovering suppliers. Nevertheless, we believe we have competitive advantages in several areas. We have an attractive
portfolio of brands that we believe are well known, highly regarded by customers and complementary; by being differentiated, we offer meaningful alternatives to
the discriminating customer. We believe our investment in new yarns and innovative tufting and dyeing technologies, strengthens our ability to offer product
differentiation to our customers. In addition, we have established longstanding relationships with key suppliers of luxury vinyl flooring and with significant
customers in most of our markets. Finally, our reputation for innovative design excellence and our experienced management team enhance our competitive
position. See "Risk Factors" in Item 1A of this report.
Backlog
Sales order backlog is not material to understanding our business, due to relatively short lead times for order fulfillment in the markets for the vast majority of our
products.
Trademarks
Our floorcovering businesses own a variety of trademarks under which our products are marketed.  Among such trademarks, the names "Fabrica", "Masland", "DH
Floors" and TRUCOR™ are of greatest importance to our business. We believe that we have taken adequate steps to protect our interest in all significant
trademarks.
Customer and Product Concentration
No customer was more than 10 percent of our net sales during the periods presented. During 2024, sales to our top ten customers accounted for approximately
7% of our sales and our top 20 customers accounted for approximately 10% of our sales. We do not have a material amount of sales in foreign countries.
We do not have any single class of products that accounts for more than 10% of our sales.
Seasonality
Our sales historically have normally reached their highest level in the second quarter (approximately 26% of our annual sales) and their lowest levels in the first
quarter (approximately 24% of our annual sales), with the remaining sales being distributed relatively equally between the third and fourth quarters. Working capital
requirements have normally reached their highest levels in the second and third quarters of the fiscal year.
Environmental
Our operations are subject to federal, state and local laws and regulations relating to the generation, storage, handling, emission, transportation and discharge of
materials into the environment. The costs of complying with environmental protection laws and regulations have not had a material adverse impact on our financial
condition or results of operations in the past. See "Risk Factors” in Item 1A of this report.
Table of Contents    5

Raw Materials
Our primary raw material is continuous filament yarn. Nylon is the primary yarn we utilize and, to a lesser extent, wool and polyester yarn is used. Additionally, we
utilize polypropylene carpet backing, latex, dyes and chemicals, and man-made topical applications in the construction of our products. The volatility of petroleum
prices could adversely affect our supply and cost of synthetic fibers. Our synthetic yarns are purchased primarily from domestic fiber suppliers and wool is
purchased from a number of international sources. Our other raw materials are purchased primarily from domestic suppliers, although the majority of our luxury
vinyl tile is sourced outside the United States. Normally, we pass raw material price increases through to our customers; however, there can be no assurance that
cost increases can be passed through to customers and that increases in raw material prices will not have an adverse effect on our profitability. See "Risk Factors”
in Item 1A of this report.  There are multiple sources of nylon yarn; however, an unanticipated termination or interruption of our supply arrangements could
adversely affect our supplies of raw materials and could have a material effect on our operations. See "Risk Factors” in Item 1A of this report.
Utilities
We use electricity as our principal energy source, with oil or natural gas used in some facilities for dyeing and finishing operations as well as heating. We have not
experienced any significant problems or issues in obtaining adequate supplies of electricity, natural gas or oil. Energy shortages of extended duration could have
an adverse effect on our operations, and price volatility could negatively impact future earnings. See "Risk Factors” in Item 1A of this report.
Working Capital
We are required to maintain significant levels of inventory in order to provide the enhanced service levels demanded by the nature of our business and our
customers, and to ensure timely delivery of our products. Consistent and dependable sources of liquidity are required to maintain such inventory levels. Failure to
maintain appropriate levels of inventory could materially adversely affect our relationships with our customers and adversely affect our business. See "Risk
Factors” in Item 1A of this report.
Human Capital Resources
At December 28, 2024, our total employed associates was 951.
As stated in the Company's Code of Ethics, Company policy is to promote diversity, prohibit discrimination and harassment in the workplace and to provide a safe
and healthy workplace for Company associates.
Available Information
Our internet address is www.thedixiegroup.com. We make the following reports filed by us with the Securities and Exchange Commission available, free of charge,
on our website under the heading "Investor Relations":
1.
annual reports on Form 10-K;
2.    quarterly reports on Form 10-Q;
3.    current reports on Form 8-K; and
4.    amendments to the foregoing reports.
The contents of our website are not a part of this report.
Item 1A.    Risk Factors
In addition to the other information provided in this Report, the following risk factors should be considered when evaluating the results of our
operations, future prospects and an investment in shares of our Common Stock. Any of these factors could cause our actual financial results to differ
materially from our historical results, and could give rise to events that might have a material adverse effect on our business, financial condition and
results of operations.
We have significant levels of indebtedness that includes covenants that we must comply with and if unable to comply with such covenants, it could
cause us to be unable to continue as a going concern.
We have a significant amount of indebtedness relative to our equity. Insufficient cash flow, profitability, or the value of our assets securing our loans could have a
material adverse effect on our ability to generate sufficient funds to satisfy the terms of our senior loan agreements and other debt obligations. Our senior loan
agreement and term loans include certain compliance, affirmative, and financial covenants. The impact of continued operating losses on our liquidity position could
affect our ability to comply with these covenants by our primary lenders and could cause us to be unable to continue to operate as a going concern. Additionally,
the inability to access debt or equity markets at competitive rates in sufficient amounts to satisfy our obligations could adversely impact our business. Significant
increases in interest rates tied to our floating rate debt could have a material
Table of Contents    6

adverse effect on our financial results. Further, our trade relations depend on our economic viability and insufficient capital could harm our ability to attract and
retain customers and or supplier relationships.
The floorcovering industry is sensitive to changes in general economic conditions and a decline in residential activity or home remodeling and
refurbishment could have a material adverse effect on our business.
The floorcovering industry, in which we participate, is highly dependent on general economic conditions, such as interest rate levels, consumer confidence and
income, corporate and government spending, availability of credit and demand for housing. We derive a majority of our sales from the replacement segment of the
market. Therefore, unfavorable economic changes, such as an economic recession, could result in a significant or prolonged decline in spending for remodeling
and replacement activities which could have a material adverse effect on our business and results of operations.
The residential floorcovering market is highly dependent on housing activity, including remodeling. The U.S. and global economies, along with the residential
markets in such economies, can negatively impact the floorcovering industry and our business. Although the impact of a decline in new housing activity is typically
accompanied by an increase in remodeling and replacement activity, these activities typically lag during a cyclical downturn. Additional or extended downturns
could cause prolonged deterioration. A significant or prolonged decline in residential housing activity could have a material adverse effect on our business and
results of operations.
Our Common Stock was delisted from the Nasdaq Stock Market, which could make trading in our Common Stock more difficult for investors,
potentially leading to declines in our share price and liquidity and could limit our ability to raise additional capital.
Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received
notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted,
an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the
Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date
and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was
suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we
were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with
the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025.
Our delisting from Nasdaq could make trading in our common stock more difficult for investors, potentially leading to declines in our share price and liquidity.
Shareholders may have a difficult time getting a quote for the sale or purchase of our stock, the sale or purchase of our stock will likely be made more difficult and
the trading volume and liquidity of our stock could decline. Our delisting from Nasdaq could also result in negative publicity and could also make it more difficult for
us to raise additional capital. The absence of such a listing may adversely impact the acceptance of our Common Stock as currency or the value accorded by
other parties.
Uncertainty in the credit market or downturns in the economy and our business could affect our overall availability and cost of credit.
Economic factors, including an economic recession, could have a material adverse effect on demand for our products and on our financial condition and operating
results. Uncertainty in the credit markets could affect the availability and cost of credit. If banks and financial institutions with whom we have banking relationships
enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash and cash equivalents to the
extent those funds are not insured or otherwise protected by the FDIC. Market conditions could impact our ability to obtain financing in the future, including any
financing necessary to refinance existing indebtedness. The cost and terms of such financing is uncertain. Continued operating losses could affect our ability to
continue to access the credit markets under our current terms and conditions.
Our stock price has been and could remain volatile, which could further adversely affect the market price of our stock, our ability to raise additional
capital.
The market price of our common stock has historically experienced and may continue to experience significant volatility. Our progress in restructuring our
business, our quarterly operating results, our perceived prospects, lack of securities analysts’ recommendations or earnings estimates, changes in general
conditions in the economy or the financial markets, adverse events related to our strategic relationships, significant sales of our common stock by existing
stockholders, and other developments affecting us or our competitors could cause the market price of our common stock to fluctuate substantially. In addition, in
recent years, the stock market has experienced significant price and volume fluctuations. This volatility has affected the market prices of securities issued by many
companies for reasons unrelated to their operating performance and may adversely affect the price of our common stock. Such market price volatility could
adversely affect our ability to raise additional capital.
Table of Contents    7

We face intense competition in our industry, which could decrease demand for our products and could have a material adverse effect on our
profitability.
The floorcovering industry is highly competitive. We face competition from a number of domestic manufacturers and independent distributors of floorcovering
products and, in certain product areas, foreign manufacturers. Significant consolidation within the floorcovering industry has caused a number of our existing and
potential competitors to grow significantly larger and have greater access to resources and capital than we do. Maintaining our competitive position may require us
to make substantial additional investments in our product development efforts, manufacturing facilities, distribution network and sales and marketing activities.
These additional investments may be limited by our access to capital, as well as restrictions set forth in our credit facilities. Competitive pressures and the
accelerated growth of hard surface alternatives have resulted in decreased demand for our soft floorcovering products and in the loss of market share to hard
surface products. As a result, competition from providers of other soft surfaces has intensified and may result in lower demand for our products. In addition, we
face, and will continue to face, competitive pressures on our sales prices and cost of our products. As a result of any of these factors, there could be a material
adverse effect on our sales and profitability.
If we are unable to anticipate consumer preferences and successfully develop and introduce new, innovative and updated products, we may not be
able to maintain or increase our net revenues and profitability.
Our success depends on our ability to identify and originate product trends as well as to anticipate and react to changing consumer demands in a timely manner.
All of our products are subject to changing consumer preferences that cannot be predicted with certainty. In addition, long lead times for certain products may
make it hard for us to quickly respond to changes in consumer demands. New products may not receive consumer acceptance as consumer preferences could
shift rapidly to different types of flooring products or away from these types of products altogether, and our future success depends in part on our ability to
anticipate and respond to these changes. Failure to anticipate and respond in a timely manner to changing consumer preferences could lead to, among other
things, lower sales and excess inventory levels, which could have a material adverse effect on our financial condition.
Raw material prices will vary and the inability to either offset or pass on such cost increases or avoid passing on decreases larger than the cost
decrease to our customers could have a material adverse effect on our business, results of operations and financial condition.
We require substantial amounts of raw materials to produce our products, including nylon and polyester yarn, as well as wool yarns, synthetic backing, latex, and
dyes. Substantially all of the raw materials we require are purchased from outside sources. The prices of raw materials and fuel-related costs have increased
significantly due to market conditions and inflationary pressures, the duration and extent of which is difficult to predict. The fact that we source a significant amount
of raw materials means that several months of raw materials and work in process are moving through our supply chain at any point in time. We are sourcing the
majority of our new luxury vinyl flooring and wood product lines from overseas. We are not able to predict whether commodity costs will significantly increase or
decrease in the future. If commodity costs continue to increase in the future and we are not able to reduce or eliminate the effect of the cost increases by reducing
production costs or implementing price increases, our profit margins could decrease. If commodity costs decline, we may experience pressures from customers to
reduce our selling prices. The timing of any price reductions and decreases in commodity costs may not align. As a result, our margins could be affected.
Disruption to suppliers of raw materials could have a material adverse effect on us.
Nylon yarn is the principal raw material used in our floorcovering products. The supply of all nylon yarn and yarn systems has been negatively impacted by a
variety of overall market factors. The cost of nylon yarns has risen significantly and availability of nylon yarns has been restricted. An interruption in the supply of
these or other raw materials or sourced products used in our business or in the supply of suitable substitute materials or products would disrupt our operations,
which could have a material adverse effect on our business. Supply constraints may impact our ability to successfully develop products and effectively service our
customers. We have developed and are developing products and product offerings using fiber systems from multiple external fiber suppliers as well as from
vertically integrated production of our yarn supply through dedicated internal extrusion operations. There can be no certainty as to the success of our efforts to
develop and market such products. We continually evaluate our sources of yarn and other raw materials for competitive costs, performance characteristics, brand
value, and diversity of supply.
We rely on information systems in managing our operations and any system failure, cyber incident or deficiencies of such systems may have an
adverse effect on our business.
Our businesses rely on sophisticated systems to obtain, rapidly process, analyze and manage data. We rely on these systems to, among other things, facilitate the
purchase, manufacture and distribution of our products; receive, process and ship orders on a timely basis; and to maintain accurate and up-to-date operating and
financial data for the compilation of management information. We rely on our computer hardware, software and network for the storage, delivery and transmission
of data to our sales and distribution systems, and certain of our production processes are managed and conducted by computer. Any damage by unforeseen
events or system failure which causes interruptions to the input, retrieval and transmission of data or increase in the service time, whether caused by human error,
natural disasters, power loss, computer viruses, intentional acts of vandalism,
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various forms of cyber crimes including and not limited to hacking, ransomware, intrusions and malware or otherwise, could disrupt our normal operations.
Depending upon the severity of the incident, there can be no assurance that we can effectively carry out our disaster recovery plan to handle a failure of our
information systems, or that we will be able to restore our operational capacity within sufficient time to avoid material disruption to our business. The occurrence of
any of these events could cause unanticipated disruptions in service, decreased customer service and customer satisfaction and harm to our reputation, which
could result in loss of customers, increased operating expenses and financial losses. Any such events could in turn have a material adverse effect on our business,
financial condition, results of operations, and prospects.
The long-term performance of our business relies on our ability to attract, develop and retain qualified personnel.
To be successful, we must attract, develop and retain qualified and talented personnel in management, sales, marketing, product design and operations. We
compete with other floorcovering companies for these employees and invest resources in recruiting, developing, motivating and retaining them. The failure to
attract, develop, motivate and retain key employees could negatively affect our business, financial condition and results of operations.
We are subject to various governmental actions that may interrupt our supply of materials.
We import most of our luxury vinyl flooring ("LVF"), some of our wood offering, some of our rugs and broadloom offerings. Though currently a small part of our
business, the growth in LVF products is an important product offering to provide our customers a complete selection of flooring alternatives. There have been trade
proposals that threatened these product categories with added tariffs which would make our offerings less competitive compared to those manufactured in other
countries or produced domestically. These proposals, if enacted, or if expanded, or imposed for a significant period of time, would materially interfere with our
ability to successfully enter into these product categories and could have a material adverse effect upon our cost of sales and results of operations.
Regulatory efforts to monitor political, social, and environmental conditions in foreign countries that produce products or components of products purchased by us
will necessarily add complexity and cost to our products and processes and may reduce the availability of certain products. Regulatory efforts to prevent or reduce
the risk that certain flooring products or elements of such products are produced in regions where forced or involuntary labor are known or believed to occur will
result in increased cost to us as we attempt to ensure that none of our products or components of our products are produced in such regions. Such increased cost
may make our products less competitive.
We may experience certain risks associated with internal expansion, acquisitions, joint ventures and strategic investments.
We continually look for strategic and tactical initiatives, including internal expansion, acquisitions and investment in new products, to strengthen our future and to
enable us to return to sustained growth and to achieve profitability. Growth through expansion and acquisition involves risks, many of which may continue to affect
us after the acquisition or expansion. An acquired company, operation or internal expansion may not achieve the levels of revenue, profitability and production that
we expect. The combination of an acquired company’s business with ours involves risks. Further, internally generated growth that involves expansion involves
risks as well. Such risks include the integration of computer systems, alignment of human resource policies and the retention of valued talent. Reported earnings
may not meet expectations because of goodwill and intangible asset impairment, other asset impairments, increased interest costs and issuance of additional
securities or debt as a result of these acquisitions. We may also face challenges in consolidating functions and integrating our organizations, procedures,
operations and product lines in a timely and efficient manner.
The diversion of management attention and any difficulties encountered in the transition and integration process could have a material adverse effect on our
revenues, level of expenses and operating results. Failure to successfully manage and integrate an acquisition with our existing operations or expansion of our
existing operations could lead to the potential loss of customers of the acquired or existing business, the potential loss of employees who may be vital to the new
or existing operations, the potential loss of business opportunities or other adverse consequences that could have a material adverse effect on our business,
financial condition and results of operations. Even if integration occurs successfully, failure of the expansion or acquisition to achieve levels of anticipated sales
growth, profitability or productivity, or otherwise perform as expected, may have a material adverse effect on our business, financial condition and results of
operations.
We are subject to various environmental, safety and health regulations that may subject us to costs, liabilities and other obligations, which could have
a material adverse effect on our business, results of operations and financial condition.
We are subject to various environmental, safety and health and other regulations that may subject us to costs, liabilities and other obligations which could have a
material adverse effect on our business. The applicable requirements under these laws are subject to amendment, to the imposition of new or additional
requirements and to changing interpretations of agencies or courts. We could incur material expenditures to comply with new or existing regulations, including
fines and penalties and increased costs of our operations. Additionally, future laws, ordinances, regulations or regulatory guidelines could give rise to additional
compliance or remediation costs that could have a material adverse effect on our business, results of operations and financial
Table of Contents    9

condition. For example, producer responsibility regulations regarding end-of-life disposal could impose additional cost and complexity to our business.
The Environmental Protection Agency ("EPA") has declared an intent to focus on perceived risks posed by certain chemicals (principally PFOA and PFOAS)
previously used by the carpet industry. Recently, such chemicals have been declared to be hazardous substances by the EPA. New or revised regulatory actions
could result in requirements that industry participants, including us, incur costs related to testing and cleanup of areas affected by such chemical usage. Other
chemicals or materials historically used by the industry and us could become the focus of similar governmental action.
Various federal, state and local environmental laws govern the use of our current and former facilities. These laws govern such matters as:
•
Discharge to air and water;
•
Handling and disposal of solid and hazardous substances and waste, and
•
Remediation of contamination from releases of hazardous substances in our facilities and off-site disposal locations.
We are a manufacturer and distributor of flooring products which require processes and materials that necessarily utilize substantial amounts of carbon-based
energy and accordingly involve the emission of “greenhouse gasses.” Regulatory monitoring, reporting and, more generally, efforts to eliminate or substantially
reduce “greenhouse gasses” will necessarily add complexity and cost to our products and processes decreasing profitability and consumer demand. Additionally,
consumer preferences may be affected by publicly announced issues related to “greenhouse gasses” which may negatively affect demand for our products. There
can be no assurance that we can cost effectively respond to any such regulatory efforts or that demand for our products can be sustained under such pressures.
Our operations also are governed by laws relating to workplace safety and worker health, which, among other things, establish noise standards and regulate the
use of hazardous materials and chemicals in the workplace. We have taken, and will continue to take, steps to comply with these laws. If we fail to comply with
present or future environmental or safety regulations, we could be subject to future liabilities. However, we cannot ensure that complying with these environmental
or health and safety laws and requirements will not adversely affect our business, results of operations and financial condition.
We may be exposed to litigation, claims and other legal proceedings in the ordinary course of business relating to our products or business, which
could have a material adverse effect on our business, results of operations and financial condition.
In the ordinary course of business, we are subject to a variety of work-related and product-related claims, lawsuits and legal proceedings, including those relating
to product liability, product warranty, product recall, personal injury, and other matters that are inherently subject to many uncertainties regarding the possibility of a
loss to our business. Such matters could have a material adverse effect on our business, results of operations and financial condition if we are unable to
successfully defend against or resolve these matters or if our insurance coverage is insufficient to satisfy any judgments against us or settlements relating to these
matters. Although we have product liability insurance, the policies may not provide coverage for certain claims against us or may not be sufficient to cover all
possible liabilities. Further, we may not be able to maintain insurance at commercially acceptable premium levels. Additionally, adverse publicity arising from claims
made against us, even if the claims are not successful, could adversely affect our reputation or the reputation and sales of our products.
Our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.
Many of our business activities involve substantial investments in manufacturing facilities and many products are produced at a limited number of locations. These
facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes and earthquakes, or by fire or other unexpected events such as
adverse weather conditions or other disruptions to our facilities, supply chain or our customer's facilities. 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 financial condition and results of operations have been and could likely be adversely impacted in the future by COVID-19 or other pandemics and
the related negative impact on economic conditions.
Global and/or local pandemics, such as COVID-19, have negatively impacted areas where we operate and sell our products and services. The COVID-19 outbreak
in the second quarter of 2020 had a material adverse effect on our ability to operate and our results of operations as public health organizations recommended,
and many governments implemented, measures to slow and limit the transmission of the virus, including shelter in place and social distancing ordinances.
Although the accessibility of vaccines and other preventive measures have lessened the impact, new variants or other pandemics may necessitate a return of such
restrictive, preventive measures which may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of
certain locations, decreased employee availability, disruptions to the businesses of our selling channel partners, and others. Our suppliers and customers may also
face these and other challenges, which could lead to a
Table of Contents    10

disruption in our supply chain as well as decreased construction and renovation spending and consumer demand for our products and services. These issues may
also materially affect our current and future access to sources of liquidity, particularly our cash flows from operations, and access to financing. The long-term
economic impact and near-term financial impacts of the COVID-19 pandemic or other pandemics, including but not limited to, potential near term or long-term risk
of asset impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.
Item 1B.
UNRESOLVED STAFF COMMENTS
None.
Item 1C. CYBERSECURITY
Cybersecurity Risk Management and Strategy
We recognize cybersecurity as a critical aspect of our overall risk management program and are committed to maintaining a cybersecurity program to protect our
information assets, systems, and operations. Our cybersecurity risk management program is integrated into our overall enterprise risk management program and
shares common methodologies, reporting channels and governance processes that apply across the enterprise risk management program to other legal,
compliance, strategic, operational and financial risks areas. We continuously evaluate and enhance our cybersecurity program based on lessons learned, industry
best practices and feedback from internal and external stakeholders.
Key aspects of our cybersecurity risk management program include:
•
risk assessments designed to help identify, prioritize and mitigate potential material cybersecurity risks to our critical systems and information;
•
an internal Information Technology staff responsible for managing our cybersecurity risk assessment processes, our security controls and our response to
cybersecurity incidents;
•
the use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security controls;
•
cybersecurity awareness training of our associates, incident response personnel and senior management;
•
a cybersecurity incident response plan that includes procedures for responding to cybersecurity incidents; and
•
a third-party risk management process for key service providers, suppliers, and vendors.
We did not experience a material cybersecurity incident during the year ended December 28, 2024; however, the scope and impact of any future incident cannot
be predicted. See "Item 1A. Risk Factors" for more information on our cybersecurity-related risks.
Cybersecurity Governance
Our Board of Directors (the "Board") has oversight responsibility for cybersecurity risk management. The Board oversees management's ongoing activities related
to our cybersecurity risk management program. The management team is responsible for the implementation and execution of our cybersecurity program. In
addition, the management team provides guidance and direction on cybersecurity priorities, resource allocation and risk tolerance levels. The Board receives
quarterly updates from the management team on cybersecurity matters.
Table of Contents    11

Item 2.    PROPERTIES
The following table lists our facilities according to location, type of operation and approximate total floor space as of March 10, 2025:
Location
Type of Operation
Approximate Square Feet
Administrative:
Saraland, AL*
Administrative
29,000 
Santa Ana, CA*
Administrative
4,000 
Calhoun, GA
Administrative
10,600 
Dalton, GA*
Administrative
50,800 
Total Administrative
94,400 
Manufacturing and Distribution:
Atmore, AL
Distribution / Warehouse
610,000 
Roanoke, AL
Carpet Yarn Processing
204,000 
Saraland, AL*
Warehouse
384,000 
Porterville, CA*
Carpet Yarn Processing
249,000 
Santa Ana, CA*
Carpet and Rug Manufacturing, Distribution
200,000 
Adairsville, GA*
Samples and Rug Manufacturing, Distribution
292,000 
Calhoun, GA
Carpet Dyeing & Processing
193,300 
Eton, GA
Carpet Manufacturing, Distribution
408,000 
Chatsworth, GA*
Samples Warehouse and Distribution
161,400 
Total Manufacturing and Distribution
2,701,700 
* Leased properties
TOTAL
2,796,100 
In our opinion, our manufacturing facilities are well maintained and our machinery is efficient and competitive. Operations of our facilities generally vary between
120 and 168 hours per week. Substantially all of our owned properties are subject to mortgages, which secure the outstanding borrowings under these mortgages.
Item 3.     LEGAL PROCEEDINGS
We have been sued together with 15 other defendants in a civil action filed January 22, 2024, in the Superior Court of Gordon County Georgia. The case is styled:
Moss Land Company, LLC and Revocable Living Trust of William Darryl Edwards, by and through William Darryl Edwards, Trustee vs. City of Calhoun et al. Civil
Action Number 24CV73929. The plaintiffs are two landowners located in Gordon County Georgia. The relief sought is compensation for alleged damages to the
plaintiffs’ real property, an injunction from alleged further damage to their property and abatement of alleged nuisance related to the presence of PFAS and related
chemicals on their property. The Plaintiffs allege that such chemicals have been deposited on their property by the City of Calhoun as a byproduct of treating water
containing such chemicals used by manufacturing operations in and around Calhoun Georgia. The defendants include the City of Calhoun Georgia, several other
carpet manufacturers, and certain manufacturers and sellers of chemicals containing PFAS. No specific amount of damages has been demanded. We have denied
liability and are vigorously defending the matter.
On March 1, 2024, the City of Calhoun Georgia served an answer and crossclaim for Damages and injunctive relief in the pending matter styled: In re: Moss Land
Company, LLC and Revocable living Trust of William Darryl Edwards by and through William Darryl Edwards, Trustee v. The Dixie Group, Inc. In the Superior
Court of Gordon County Georgia, case Number: 24CV73929. In its Answer and Crossclaim defendant Calhoun sues The Dixie Group, Inc. and other named carpet
manufacturing defendants for unspecified monetary damages and other injunctive relief based on injury claimed to have resulted from defendant’s use and
disposal of chemical wastewater containing PFAS chemicals. We have filed an answer denying liability and are vigorously defending the matter.
On May 7, 2024, we were sued, together with 15 other named defendants, in a matter styled William Hartwell Brooks, et al v the City of Calhoun Georgia, In the
Superior Court of Gordon County Georgia, civil action number 24CV74289. The case seeks unspecified monetary and other damages alleged to have been
suffered by plaintiffs as landowners by the discharge of PFAS chemicals in proximity to or directly adjacent to their properties. We have filed an answer denying
liability and are vigorously defending the matter.
On February 14, 2025, we were sued along with 15 other named defendants in a matter styled: Stephens v the Dixie Group, Inc. et al. In the Superior Court of
Gordon County, Georgia, case no 25CV7507. The case seeks unspecified monetary and other damages alleged to have been suffered by plaintiffs as landowners
by the discharge of PFOA, PFOS and related chemicals in
Table of Contents    12

proximity to or directly adjacent to their property. We intend to file an answer to the complaint, denying liability, and to vigorously defend the matter.
Item 4.    MINE SAFETY DISCLOSURES
Not applicable.
Pursuant to instruction G of Form 10-K the following is included as an unnumbered item to PART I.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions and offices held by the executive officers of the registrant as of March 10, 2025, are listed below along with their business experience
during the past five years.
Name, Age and Position
Business Experience During Past Five Years
Daniel K. Frierson, 83
Chairman of the Board, and Chief
Executive Officer, Director
Director since 1973, Chairman of the Board since 1987 and Chief Executive Officer since 1980. He is the Chairman
of the Company's Executive Committee. He is past Chairman of The Carpet and Rug Institute.
D. Kennedy Frierson, Jr., 58
Vice President and Chief Operating
Officer, Director
Director since 2012 and Vice President and Chief Operating Officer since August 2009. Vice President and President
Masland Residential from February 2006 to July 2009. President Masland Residential from December 2005 to
January 2006. Executive Vice President and General Manager, Dixie Home, 2003 to 2005. Business Unit Manager,
Bretlin, 2002 to 2003.
Allen L. Danzey, 55
Vice President and Chief Financial Officer
Chief Financial Officer since January 2020. Director of Accounting from May 2018 to December 2019. Commercial
Division Controller from July 2009 to May 2018. Residential Division Controller and Senior Accountant from February
2005 to July 2009.
Thomas M. Nuckols, Jr., 57
Vice President and President, Dixie
Residential
Vice President and President of Dixie Residential since November 2017. Executive Vice President, Dixie Residential
from February 2017 to November 2017. Dupont/Invista, from 1989 to 2017, Senior Director of Mill Sales and Product
Strategy from 2015 to 2017.
W. Derek Davis, 74
Senior Vice President, Human Resources
and Corporate Secretary
Vice President of Human Resources since January 1991 and Corporate Secretary since January 2016. Corporate
Employee Relations Director, 1988 to 1991.
The executive officers of the registrant are generally elected annually by the Board of Directors at its first meeting held after each annual meeting of our
shareholders.
Table of Contents    13

PART II.
Item 5.
MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES
Effective at the opening of business on October 3, 2024, our Common Stock was suspended and delisted from Nasdaq and began trading on the Over-the-
Counter Market pink sheets under the stock symbol "DXYN". Effective October 4, 2024, we were upgraded to the Over-the-Counter OTCQB Market ("the
OTCQB") trading under the same symbol "DXYN". Before October 3, 2024, our Common Stock traded on Nasdaq under the ticker symbol "DXYN". No market
exists for our Class B Common Stock.
As of March 10, 2025, the total number of holders of our Common Stock was approximately 2,500 including an estimated 2,050 shareholders who hold our
Common Stock in nominee names. The total number of holders of our Class B Common Stock was 10.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
Fiscal Month Ending
Total Number of
Shares Purchased
(1)
Average Price Paid
Per Share
Total Number of
Shares Purchased as
Part of Publicly
Announced Plans or
Programs
Maximum Number (or
approximate dollar
value) of Shares That
May Yet Be Purchased
Under Plans or
Programs
November 2, 2024
— 
$
— 
— 
— 
November 30, 2024
— 
— 
— 
— 
December 28, 2024
4,726 
0.64 
— 
— 
Three Fiscal Months Ended December 28, 2024
4,726 
$
0.64 
— 
$
— 
(1)
During the three months ended December 28, 2024, 4,726 shares were withheld from an employee in lieu of cash payments for withholding taxes due for a total amount of
$3,034 pursuant to the terms of the applicable incentive plans.
Dividends and Price Range of Common Stock
There is a restriction on the payment of dividends under our revolving credit facility and we have not paid any dividends in the years ended December 28, 2024
and December 30, 2023.
The following table provides the price range of common stock for the four fiscal quarterly periods in the years ended December 28, 2024 and December 30, 2023.
Since October 3, 2024, our Common Stock has been traded on the OTC markets. Any over-the-counter market quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission, and may not necessarily represent actual transactions.
FISCAL QUARTER
2024
1ST
2ND
3RD
4TH
Common Stock Prices:
 
 
 
 
High
$
0.74 
$
1.00 
$
0.94 
$
1.05 
Low
0.50 
0.47 
0.54 
0.45 
2023
1ST
2ND
3RD
4TH
Common Stock Prices:
 
 
 
 
High
$
1.06 
$
1.36 
$
1.34 
$
0.98 
Low
0.70 
0.67 
0.62 
0.46 
Table of Contents    14

Shareholder Return Performance Presentation
We compare our performance to two different industry indices published by Dow Jones, Inc. The first of these is the Dow Jones US Furnishings Index, which is
composed of publicly traded companies classified by Dow Jones in the furnishings industry. The second is the Dow Jones US Building Materials & Fixtures Index,
which is composed of publicly traded companies classified by Dow Jones in the building materials and fixtures industry.
Set forth below is a line graph comparing the yearly change in the cumulative total shareholder return on our Common Stock against the total return of the
Standard & Poor's Small Cap 600 Stock Index, plus both the Dow Jones US Furnishings Index and the Dow Jones US Building Materials & Fixtures Index, in each
case for the five year period ended December 28, 2024. The comparison assumes that $100.00 was invested on December 28, 2019, in our Common Stock, the
S&P Small Cap 600 Index, and each of the two Peer Groups, and assumes the reinvestment of dividends.
The foregoing shareholder performance presentation shall not be deemed "soliciting material" or to be "filed" with the Commission subject to Regulation 14A, or
subject to the liabilities of Section 18 of the Exchange Act.
Item 6.    [RESERVED]
Table of Contents    15

Item 7.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this
report.
OVERVIEW
Our business consists principally of marketing, manufacturing and selling floorcovering products to high-end customers through our various sales forces and
brands. We focus primarily on the upper end of the floorcovering market where we believe we have strong brands and competitive advantages with our style and
design capabilities and customer relationships. Our Fabrica, Masland, DH Floors and TRUCOR brands have a significant presence in the high-end residential
floorcovering markets. Dixie International sells all of our brands outside of the North American market.
Our business is sensitive to macroeconomic events in the United States. High interest rates, delayed consumer discretionary spending due to inflationary
pressures, and other macroeconomic factors continue to impact new home construction and residential renovation and remodeling activity. Residential remodeling
is a primary sales driver of flooring products, and most flooring is replaced before a home is listed for sale or just after a home purchase is completed. The current
housing market conditions have suppressed remodeling activity as home sales remain soft. Housing turnover rates remain suppressed due to high home mortgage
rates and consumers continue to face a higher cost of living and delay discretionary spending on large durable goods purchases such as flooring. We have, to
some extent, offset the impact of a soft housing market and decreased renovation activity through cost containment, productivity and lower input costs. Due to low
housing availability, aging stock and greater household formation, we believe demand in our markets will accelerate when interest rates decline. We believe that a
number of circumstances may continue to influence trends in 2025, including the impact of inflation and high interest rates, but the extent and duration of such
impact cannot be predicted.
Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received
notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted,
an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the
Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date
and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was
suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we
were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with
the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025.
RESULTS OF OPERATIONS
Fiscal Year Ended December 28, 2024 Compared with Fiscal Year Ended December 30, 2023
 
Fiscal Year Ended (amounts in thousands)
December 28,
2024
% of Net
Sales
December 30,
2023
% of Net
Sales
Increase
(Decrease)
% Change
Net sales
$
265,026 
100.0 %
$
276,343 
100.0 %
$
(11,317)
(4.1)%
Cost of sales
199,515 
75.3 %
202,464 
73.3 %
(2,949)
(1.5)%
Gross profit
65,511 
24.7 %
73,879 
26.7 %
(8,368)
(11.3)%
Selling and administrative expenses
69,850 
26.4 %
74,136 
26.8 %
(4,286)
(5.8)%
Other operating (income) expense, net
200 
— %
(9,172)
(3.3)%
9,372 
(102.2)%
Facility consolidation and severance expenses, net
1,327 
0.5 %
3,867 
1.4 %
(2,540)
(65.7)%
Operating income (loss)
(5,866)
(2.2)%
5,048 
1.8 %
(10,914)
(216.2)%
Interest expense
6,380 
2.4 %
7,217 
2.6 %
(837)
(11.6)%
Other (income) expense, net
(7)
— %
(431)
(0.2)%
424 
(98.4)%
Loss from continuing operations before taxes
(12,239)
(4.6)%
(1,738)
(0.6)%
(10,501)
604.2 %
Income tax provision (benefit)
(29)
— %
214 
0.1 %
(243)
(113.6)%
Loss from continuing operations
(12,210)
(4.6)%
(1,952)
(0.7)%
(10,258)
525.5 %
Loss from discontinued operations, net of tax
(790)
(0.3)%
(766)
(0.3)%
(24)
3.1 %
Net loss
$
(13,000)
(4.9)%
$
(2,718)
(1.0)%
$
(10,282)
378.3 %
Table of Contents    16

Net Sales. Net sales for the year ended December 28, 2024 were $265.0 million compared with $276.3 in the prior period, a decrease of 4.1% for the year-over-
year comparison. The lower net sales were attributed to lower demand within the floorcovering industry and related markets driven by continued high interest rates
and inflation.
Gross Profit. Gross profit, as a percentage of net sales, decreased 2.0 percentage points in 2024 compared with 2023. The decrease in gross profit percentage in
2024 was primarily driven by lower sales volume, higher healthcare and utility costs and additional lease expense due to the sale and leaseback of the Adairsville
distribution center in December 2023.
Selling and Administrative Expenses. Selling and administrative expenses were $69.9 million in 2024 compared with $74.1 million in 2023. Selling and
administrative expenses as a percent of the net sales for 2024 and 2023 were 26.4% and 26.8% respectively. The decrease in selling and administrative expenses
was primarily due to lower samples and marketing costs in 2024 compared to 2023 and lower administrative compensation expenses in 2024 compared to 2023.
Other Operating (Income) Expense, Net. Net other operating (income) expense was an expense of $200 thousand in 2024 compared with income of $9.2 million
in 2023. In 2023, we completed a sale and leaseback of our Adairsville, Georgia distribution center resulting in a gain of $8.2 million. In addition, we leased out
excess space in our Saraland, Alabama facility and our Atmore, Alabama facility resulting in a net lease expense of $113 thousand in 2024 compared with lease
income of $705 thousand in 2023. In 2024, we allocated expenses associated with the leases to other operating expense which was netted with the lease income.
Facility Consolidation and Severance Expenses, Net. Facility consolidation expenses were $1.3 million in 2024 compared with $3.9 million in 2023. The facility
consolidation expenses incurred during 2024 and 2023 were primarily related to our plan for the consolidation of our east coast manufacturing to better align our
production capacity with our sales volume and concentrate production into our lower cost facility.
Operating Income (Loss). The operating loss in 2024 was $5.9 million compared to an operating income of $5.0 million in 2023. In 2024, we had higher
healthcare, utility and rent costs which were offset by lower selling and administrative expenses. The operating income in 2023 included a gain of $8.2 million from
the sale and leaseback of our Adairsville, Georgia distribution center.
Interest Expense. Interest expense was $6.4 million in 2024 compared with $7.2 million in 2023. The decrease is the result of lower levels of debt through out
2024 compared to 2023 due to the sale of the Adairsville, Georgia distribution center in December 2023.
Other Income, Net. Net other income was income of $7 thousand in 2024 compared with income of $431 thousand in 2023. The 2023 income included a gain of
$625 thousand related to an extinguishment of a debt arrangement offset by an expense of $206 thousand related to the write-off of previously deferred financing
costs related to our Adairsville, Georgia note payable.
Income Tax Provision (Benefit). Our effective income tax rate was a benefit of 0.2% in 2024. The provision relates to federal and state cash taxes paid offset by
certain federal and state credits. In 2024, we increased our valuation allowance by $3.8 million related to our net deferred tax asset and specific federal and state
net operating losses and federal and state tax credit carryforwards.
Our effective income tax rate was a provision of 12.3% in 2023. The provision relates to federal and state cash taxes paid offset by certain federal and state
credits. In 2023, we decreased our valuation allowance by $384 thousand related to our net deferred tax asset and specific federal and state net operating losses
and federal and state tax credit carryforwards.
Net Loss. Continuing operations reflected a loss of $12.2 million, or $0.83 per diluted share in 2024, compared with a loss from continuing operations of $2.0
million, or $0.13 per diluted share in 2023. Our discontinued operations reflected a loss of $790 thousand, or $0.05 per diluted share in 2024 compared with a loss
of $766 thousand, or $0.05 per diluted share in 2023. Including discontinued operations, we had a net loss of $13.0 million, or $0.88 per diluted share, in 2024
compared with net loss of $2.7 million, or $0.18 per diluted share, in 2023.
Table of Contents    17

LIQUIDITY, CAPITAL RESOURCES AND GOING CONCERN
During the year ended December 28, 2024, cash provided by continuing operations was $3.6 million. A reduction in inventories generated $9.4 million offset by a
$618 thousand decrease in accounts payable and accrued expenses.
Net cash used in investing activities was $2.0 million during the year ended December 28, 2024. This amount was primarily the result of purchases of property,
plant and equipment of $2.1 million.
During the year ended December 28, 2024, cash used in financing activities was $1.3 million. We had net borrowings of $2.4 million on the revolving credit facility.
We had payments of $1.9 million on building and other term loans and payments on notes payable, net of borrowings was $1.1 million and payments on finance
leases of $70 thousand. We had repurchases of our Common Stock that resulted in cash used of $585 thousand.
Nasdaq Marketplace Rule 5550(a)(2) requires that, for continued listing on the exchange, we must maintain a minimum bid price of $1 per share. We received
notice from Nasdaq on September 27, 2023 that our closing bid price was below $1 per share for 30 consecutive business days. We requested, and were granted,
an additional 180 calendar days from March 25, 2024 to September 24, 2024 to meet the applicable minimum bid price requirement. On September 24, 2024, the
Company received a letter from Nasdaq notifying the Company that it had not regained compliance with the bid price requirement by the required compliance date
and, as a result, the Company's Common Stock was subject to delisting. Effective at the opening of business on October 3, 2024, our Common Stock was
suspended and delisted from Nasdaq and began trading on the Over-the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, we
were upgraded to the Over-the-Counter OTCQB Market ("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with
the SEC notifying the SEC of Nasdaq's determination to remove our securities from listing on Nasdaq. The delisting was effective February 21, 2025. Our delisting
from Nasdaq could make it more difficult for us to raise additional capital if needed.
As described in Note 9 to the consolidated financial statements, we had $50.0 million of outstanding indebtedness under our senior credit facility as of December
28, 2024 which matures on October 30, 2025. As of the date of our financial statements, our existing cash and cash equivalents were not sufficient to satisfy this
debt in whole and meet our operating needs for at least one year after the issuance of these financial statements. Subsequent to the reporting date, we refinanced
our senior credit facility. On February 25, 2025, we entered into a new three-year $75.0 million senior secured credit facility with MidCap Financial IV Trust. Our
new facility requires compliance with financial covenants on a monthly basis - See Note 22 to the consolidated financial statements for additional information
regarding our debt refinancing.
We have evaluated our liquidity position over the next twelve months. In our evaluation we considered the impact of past operating losses on our liquidity position,
the continuing impact of cost reductions implemented under our East Coast Consolidation Plan, lower planned sample investments, additional cost savings
expected to be generated from the operations of our extrusion equipment and other cost reductions. We believe, after having reviewed various financial scenarios,
our operating cash flows, credit availability under our revolving credit facility and other sources of financing are adequate to finance our anticipated liquidity
requirements under current operating conditions. However, our current forecast projects we may not be able to maintain compliance with certain of our financial
covenants under our loan agreements. We have been able to obtain waivers in the past for such violations but it cannot be assured that such waivers will be
obtained in the future. Refer to Note 1 in our consolidated financial statements for detail regarding our assessment as a going concern.
Availability under our MidCap Financial Senior Secured Revolving Credit Facility on February 25, 2025 was $8.1 million which is subject to a $6.0 million minimum
excess availability requirement. Significant additional cash expenditures above our normal liquidity requirements, significant deterioration in economic conditions or
continued operating losses could affect our business and require supplemental financing or other funding sources.
Debt Facilities
Fifth Third Bank Revolving Credit Facility. On October 30, 2020, we entered into a $75.0 million Senior Secured Revolving Credit Facility with Fifth Third Bank
National Association as lender. The loan is secured by a first priority security interest on all accounts receivable, cash, and inventory, and provides for borrowing
limited by certain percentages of values of the accounts receivable and inventory. The revolving credit facility matures on October 30, 2025. On February 25, 2025,
we entered into a new three-year $75,000 senior secured credit facility with MidCap Financial IV Trust. See Note 22 for more information regarding the debt
refinancing.
At our election, advances of the existing revolving credit facility bear interest at annual rates equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1 or 3
month periods, as defined with a floor of 0.75% or published SOFR and previously LIBOR, plus an applicable margin ranging between 1.50% and 2.00%, or (b) the
higher of the prime rate plus an applicable margin ranging between 0.50% and 1.00%. The applicable margin is determined based on availability under the
revolving credit facility with margins increasing as availability decreases. The applicable margin can be increased by 0.50% if the fixed charge coverage ratio is
below a 1.10 to 1.00 ratio. As of December 28, 2024, the applicable margin on our revolving credit facility was 2.50% for SOFR and 1.50% for Prime due to the
fixed charge coverage ratio being below 1.10 to 1.00. We pay an unused line fee on the average amount by which the aggregate commitments exceed utilization
of the revolving credit facility equal to 0.25% per
Table of Contents    18

annum. The weighted-average interest rate on borrowings outstanding under the revolving credit facility was 7.18% at December 28, 2024 and 8.15% for
December 30, 2023.
The agreement is subject to customary terms and conditions and annual administrative fees with pricing varying on excess availability and a fixed charge coverage
ratio. The agreement is also subject to certain compliance, affirmative, and financial covenants. We are only subject to the financial covenants if borrowing
availability is less than $8.0 million, which is equal to 12.5% of the lesser of the total loan availability of $75.0 million or total collateral available, and remains until
the availability is greater than 12.5% for thirty consecutive days. As of December 28, 2024, the unused borrowing availability under the revolving credit facility was
$9.9 million.
Term Loans. Effective October 28, 2020, we entered into a $10.0 million principal amount USDA Guaranteed term loan with AmeriState Bank as lender. The term
of the loan is 25 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset every 5 years at 3.5% above 5-year treasury. The
loan is secured by a first mortgage on our Atmore, Alabama and Roanoke, Alabama facilities. The loan requires certain compliance, affirmative, and financial
covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.
Effective October 29, 2020, we entered into a $15.0 million principal amount USDA Guaranteed term loan with the Greater Nevada Credit Union as lender. The
term of the loan is 10 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset after 5 years at 3.5% above 5-year treasury.
Payments on the loan are interest only over the first three years and principal and interest over the remaining seven years. The loan is secured by a first lien on a
substantial portion of our machinery and equipment, a certificate of deposit and a second lien on our Atmore and Roanoke facilities. The loan requires certain
compliance, affirmative, and financial covenants and, as of the reporting date, we are in compliance with or have received waivers for all such financial covenants.
Notes Payable - Other. On January 14, 2019, we entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Saraland Industrial,
LLC, an Alabama limited liability company (the “Purchaser”). Pursuant to the terms of the Purchase and Sale Agreement, we sold our Saraland facility, and
approximately 17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11.5 million. Concurrent
with the sale of the Property, we and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby we leased back the Property at
an annual rental rate of $977 thousand, subject to annual rent increases of 1.25%. Under the Lease Agreement, we have two (2) consecutive options to extend the
term of the Lease by ten years for each such option. This transaction was recorded as a failed sale and leaseback. We recorded a liability for the amounts
received, continued to depreciate the asset, and imputed an interest rate so that the net carrying amount of the financial liability and remaining assets will be zero
at the end of the lease term.
Our other financing notes have terms up to 1 year, bear interest ranging from 6.50% to 6.75% and are due in monthly installments through their maturity dates. Our
other notes do not contain any financial covenants.
Finance Lease Obligations. Our finance lease obligations are due in monthly installments through their maturity dates. Our finance lease obligations are secured
by the specific equipment leased. (See Note 9 to our Consolidated Financial Statements).
Stock-Based Awards
We recognize compensation expense related to share-based stock awards based on the fair value of the equity instrument over the period of vesting for the
individual stock awards that were granted. At December 28, 2024, the total unrecognized compensation expense related to unvested restricted stock awards was
$868 thousand with a weighted-average vesting period of 7.0 years.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements at December 28, 2024 or December 30, 2023.
Income Tax Considerations
For the year ended December 28, 2024, we increased our valuation allowances by $3.8 million related to our net deferred tax asset and specific federal and state
net operating losses and federal and state credit carryforwards.
During 2025 and 2026, we do not anticipate cash outlays for income taxes to exceed $200 thousand. This is due to our tax loss carryforwards and tax credit
carryforwards that will be used to partially offset taxable income. At December 28, 2024, we were in a net deferred tax liability position of $91 thousand, which was
included in other long-term liabilities in our Consolidated Balance Sheets.
Table of Contents    19

Discontinued Operations - Environmental Contingencies
We have reserves for environmental obligations established at four previously owned sites that were associated with our discontinued textile businesses. We have
a reserve of $2.2 million for environmental liabilities at these sites as of December 28, 2024. The liability established represents our best estimate of loss and is the
reasonable amount to which there is any meaningful degree of certainty given the periods of estimated remediation and the dollars applicable to such remediation
for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such remediation through these remediation efforts, may differ
significantly from our estimates. Pre-tax cost for environmental remediation obligations classified as discontinued operations were primarily a result of specific
events requiring action and additional expense in each period.
Fair Value of Financial Instruments
At December 28, 2024, we had no assets or liabilities measured at fair value that fall under a level 3 classification in the hierarchy (those subject to significant
management judgment or estimation).
Recent Accounting Pronouncements
See Note 2 to our Consolidated Financial Statements of this Form 10-K for a discussion of new accounting pronouncements which is incorporated herein by
reference.
Critical Accounting Policies
Certain estimates and assumptions are made when preparing our consolidated financial statements. Estimates involve judgments with respect to, among other
things, future economic factors that are difficult to predict. As a result, actual amounts could differ from estimates made when our financial statements are
prepared.
The Securities and Exchange Commission requires management to identify its most critical accounting policies, defined as those that are both most important to
the portrayal of our financial condition and operating results and the application of which requires our most difficult, subjective, and complex judgments. Although
our estimates have not differed materially from our experience, such estimates pertain to inherently uncertain matters that could result in material differences in
subsequent periods.
We believe application of the following accounting policies require significant judgments and estimates and represent our critical accounting policies. Other
significant accounting policies are discussed in Note 1 to our Consolidated Financial Statements.
•
Revenue recognition. We derive our revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized
when control of these products or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in
exchange for those products and services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from
revenue. Shipping and handling fees charged to customers are reported within revenue. When we transfer control of our products to the customer prior to
the related shipping and handling activities, we have adopted a policy of accounting for shipping and handling activities as a fulfillment cost rather than a
performance obligation. Incidental items that are immaterial in the context of the contract are recognized as expense. While we pay sales commissions to
certain personnel, we have not capitalized these costs as costs to obtain a contract as we have elected to expense costs as incurred when the expected
amortization period is one year or less. We do not have any significant financing components as payment is received at or shortly after the point of sale.
We determine revenue recognition through the following steps:
▪
Identification of the contract with a customer
▪
Identification of the performance obligations in the contract
▪
Determination of the transaction price
▪
Allocation of the transaction price to the performance obligations in the contract
▪
Recognition of revenue when, or as, the performance obligation is satisfied
•
Variable Consideration. The nature of our business gives rise to variable consideration, including rebates, allowances, and returns that generally
decrease the transaction price, which reduces revenue. These variable amounts are generally credited to the customer, based on achieving certain levels
of sales activity, product returns, or price concessions.
Variable consideration is estimated at the most likely amount using a portfolio approach that is expected to be earned. Estimated amounts are included in
the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated
with the variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends.
Table of Contents    20

•
Customer claims and product warranties. We generally provide product warranties related to manufacturing defects and specific performance
standards for our products for a period of up to two years. We accrue for estimated future assurance warranty costs in the period in which the sale is
recorded. The costs are included in Cost of Sales in the Consolidated Statements of Operations and the product warranty reserve is included in accrued
expenses in the Consolidated Balance Sheets. We calculate our accrual using the portfolio approach based upon historical experience and known trends.
We do not provide an additional service-type warranty.
•
Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out method (LIFO), which generally matches
current costs of inventory sold with current revenues, for substantially all inventories. Reserves are also established to adjust inventories that are off-
quality, aged or obsolete to their lower of cost or market. Additionally, rates of recoverability per unit of off-quality, aged or obsolete inventory are
estimated based on historical rates of recoverability and other known conditions or circumstances that may affect future recoverability. Actual results could
differ from assumptions used to value our inventory.
•
Self-insured accruals. We estimate costs required to settle claims related to our self-insured medical, dental and workers' compensation plans. These
estimates include costs to settle known claims, as well as incurred and unreported claims. The estimated costs of known and unreported claims are
based on historical experience. Actual results could differ from assumptions used to estimate these accruals.
•
Income taxes. Our effective tax rate is based on income, statutory tax rates and tax planning opportunities available in the jurisdictions in which we
operate. Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities. Deferred tax assets
represent amounts available to reduce income taxes payable on taxable income in a future period. We evaluate the recoverability of these future tax
benefits by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted
operating earnings and available tax planning strategies. These sources of income inherently rely on estimates, including business forecasts and other
projections of financial results over an extended period of time. In the event that we are not able to realize all or a portion of our deferred tax assets in the
future, a valuation allowance is provided. We recognize such amounts through a charge to income in the period in which that determination is made or
when tax law changes are enacted. We had valuation allowances of $24.7 million at December 28, 2024 and $21.0 million at December 30, 2023. At
December 28, 2024, we were in a net deferred tax liability position of $91 thousand. For further information regarding our valuation allowances, see Note
13 to the Consolidated Financial Statements.
•
Loss contingencies. We routinely assess our exposure related to legal matters, environmental matters, product liabilities or any other claims against our
assets that may arise in the normal course of business. If we determine that it is probable a loss has been incurred, the amount of the loss, or an amount
within the range of loss, that can be reasonably estimated will be recorded.
Table of Contents    21

Item 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK (Dollars in thousands)
Our earnings, cash flows and financial position are exposed to market risks relating to interest rates, among other factors. It is our policy to minimize our exposure
to adverse changes in interest rates and manage interest rate risks inherent in funding our Company with debt. We address this financial exposure through a risk
management program that includes maintaining a mix of fixed and floating rate debt and the occasional use of interest rate swap agreements.
At December 28, 2024, $71,960, or approximately 86% of our total debt, was subject to floating interest rates. A one-hundred basis point fluctuation in the variable
interest rates applicable to this floating rate debt would have an annual pre-tax impact of approximately $720. Included in the $71,960, is the amount outstanding
for term loans of $21,960. Both loans are currently set to bear interest of 5% for five years. Every five years, these rates will be reset to reflect the then current 5-
year treasury rate plus a margin. A one-hundred basis point fluctuation in the interest rates applicable to the term loans debt would have an annual pre-tax impact
of approximately $220. See Note 9 for further discussion of these loans.
Item 8.
 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The supplementary financial information required by ITEM 302 of Regulation S-K is included in PART II, ITEM 5 of this report and the Financial Statements are
included in a separate section of this report.
Item 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
Item 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms and is accumulated and communicated to
management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure. Our management, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”), evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such terms are defined in Rules
13(a)-15(e) and 15(d)-15(e)) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of December 28, 2024, the date of the financial
statements included in this Form 10-K (the “Evaluation Date”). Based on that evaluation, our CEO and CFO concluded that, as of the Evaluation Date, that due to
the existence of a material weakness in our internal control over financial reporting described below, that our disclosure controls and procedures were not effective.
However, giving full consideration to the deficiency, we have concluded that that the Consolidated Financial Statements included in this annual report present fairly,
in all material respects our financial position, results of operations and cash flows for the periods disclosed in conformity with U.S. generally accepted principles.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) under
the Securities Exchange Act of 1934, as amended.
Internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from
human failures, as well as diverse interpretation of U. S. generally accepted accounting principles by accounting professionals. It is also possible that internal
control over financial reporting can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that material
misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. Furthermore, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate. These inherent limitations are known features of the financial reporting process; therefore, while it is possible to
design into the process safeguards to reduce such risk, it is not possible to eliminate all risk.
Management, including our principal executive officer and principal financial officer, has used the criteria set forth in the report entitled “Internal Control - Integrated
Framework” published by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) to evaluate the effectiveness of its internal
control over financial reporting. Management has concluded that, during the period covered by this Report, its internal control over financial reporting was not
effective as of December 28, 2024, based on those criteria.
Table of Contents    22

Material Weakness in Internal Control Over Financial Reporting
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a
material misstatement of our annual financial statements will not be prevented or detected on a timely basis. During our assessment of internal control over
financial reporting as of December 28, 2024, we identified the following material weaknesses:
•
Inadequate presentation and disclosure requirements of debt - Our revolving credit facility required a reclassification to a current liability as the refinanced
credit facility subsequent to year-end included a subjective acceleration clause and lockbox arrangement which required the financial statement
presentation as current. We originally calculated a covenant in a method that differed from the contractual terms, which is included in the our going
concern assessment. In preparing the fair value of debt disclosure, we did not formally re-evaluate our credit rating. With the refinance of the revolving
credit facility, we had an observable transaction to provide supporting evidence. The current conditions and this transaction indicated a credit rating that
was different than was originally used by us and resulted in a re-evaluation of our credit rating used and an adjustment to the disclosure.
•
Inadequate evidence of a formal evaluation of lessor accounting - We did not retain a formal assessment of our lessor lease classification evaluation, and
associated support, for the operating lease classification determinations under Topic 842 for a lease arrangement. We subsequently performed
procedures that included a valuation for the net present value considerations. While the subsequent procedures did not change the lease classification
determination, the change in presentation, if necessary, would have resulted in a materially different accounting result.
Remediation Efforts
We are committed to maintaining a strong internal control environment. In response to the material weaknesses described above, we will enhance our processes
to evaluate and review debt transactions as it relates to the presentation and disclosure requirements of debt by designating an individual to be responsible for the
review who has the expertise in these matters or will consult with outside professionals with the expertise. In addition, the designated individual will perform the
necessary formal documentation as it relates to lessor accounting transactions. We continue to evaluate and work to improve our disclosure controls and
procedures and internal control over financial reporting. We plan to continue the implementation of these and other remediation efforts to address the identified
material weaknesses in the future.
Changes in Internal Control over Financial Reporting
Other than the material weaknesses and the remediation plan described above, there were no changes in our internal control over financial reporting during the
most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B.
OTHER INFORMATION
None.
Item 9C.
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS
Not Applicable.
Table of Contents    23

PART III.
Item 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The section entitled "Information about Nominees for Director" in the Proxy Statement of the registrant for the annual meeting of shareholders to be held May 7,
2025 is incorporated herein by reference. Information regarding the executive officers of the registrant is presented in PART I of this report.
We adopted a Code of Business Conduct and Ethics (the "Code of Ethics") which applies to our principal executive officer, principal financial officer and principal
accounting officer or controller, and any persons performing similar functions. A copy of the Code of Ethics is incorporated by reference herein as Exhibit 14 to this
report.
We adopted insider trading policies and procedures governing transactions in our securities that are designed to promote compliance with applicable insider
trading laws, rules and regulations. A copy of the policy is incorporated by reference therein as Exhibit 19.1 to this report.
Audit Committee Financial Expert
The Board has determined that Michael L. Owens is an audit committee financial expert as defined by Item 407 (e)(5) of Regulation S-K of the Securities
Exchange Act of 1934, as amended, and is independent within the meaning of the applicable Securities and Exchange Commission rules and NASDAQ
standards. For a brief listing of Mr. Owens' relevant experience, please refer to the "Election of Directors" section of the Company's Proxy Statement.
Audit Committee
We have a standing audit committee.  At December 28, 2024, members of our audit committee are Michael L. Owens, Chairman, William F. Blue, Jr., Charles E.
Brock, and Hilda S. Murray.
Item 11.
EXECUTIVE COMPENSATION
The sections entitled "Compensation Discussion and Analysis", "Executive Compensation Information" and "Director Compensation" in the Proxy Statement of the
registrant for the annual meeting of shareholders to be held May 7, 2025 are incorporated herein by reference.
Item 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The section entitled "Principal Shareholders", as well as the beneficial ownership table (and accompanying notes), in the Proxy Statement of the registrant for the
annual meeting of shareholders to be held May 7, 2025 are incorporated herein by reference.
Equity Compensation Plan Information as of December 28, 2024
The following table sets forth information as to our equity compensation plans as of the end of the 2024 fiscal year:
 
(a)
 
(b)
 
(c)
Plan Category
Number of securities to
be issued upon
exercise of the
outstanding options,
warrants and rights
 
Weighted-average
exercise price of
outstanding options,
warrants and rights
 
Number of securities remaining
available for future issuance under
equity compensation plans
(excluding securities reflected in
column (a)
Equity Compensation Plans approved by security holders
473,819  (1)
$
1.59  (2)
619,000 
(3)
(1)
Includes the options to purchase 381,000 shares of Common Stock under our Omnibus Equity Incentive Plan and 92,819 Performance Units issued under the 2016 Incentive
Compensation Plan, each unit being equivalent to one share of Common Stock. Does not include shares of Common Stock issued but not vested pursuant to outstanding
restricted stock awards.
(2)
Includes the aggregate weighted-average of (i) the exercise price per share for outstanding options to purchase 381,000 shares of Common Stock under our Omnibus Equity
Incentive Plan and (ii) the price per share of the Common Stock on the grant date for each of 92,819 Performance Units issued under the 2016 Incentive Compensation Plan
(each unit equivalent to one share of Common Stock).
(3)
Includes 224,351 shares remaining to be issued under the 2016 Incentive Compensation Plan and 394,649 shares remaining to be issued under the Omnibus Equity Incentive
Plan.
Table of Contents    24

Item 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The sections entitled "Certain Transactions Between the Company and Directors and Officers" and "Independent Directors" in the Proxy Statement of the registrant
for the annual meeting of shareholders to be held May 7, 2025 are incorporated herein by reference.
Item 14.
PRINCIPAL ACCOUNTING FEES AND SERVICES
The section entitled "Audit Fees Discussion" in the Proxy Statement of the Registrant for the Annual Meeting of Shareholders to be held May 7, 2025 is
incorporated herein by reference. The independent registered public accounting firm is Forvis Mazars, LLP (PCAOB Firm ID No. 686) located in Atlanta, Georgia.
PART IV.
Item 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) (1) Financial Statements - The response to this portion of Item 15 is submitted as a separate section of this report.
(2) Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report.
(3) Exhibits - Please refer to the Exhibit Index which is attached hereto.
(b) Exhibits - The response to this portion of Item 15 is submitted as a separate section of this report.  See Item 15(a)(3) above.
(c)
Financial Statement Schedules - The response to this portion of Item 15 is submitted as a separate section of this report. See Item 15(a)(2).
Item 16. FORM 10-K SUMMARY
None.
Table of Contents    25

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: April 7, 2025
The Dixie Group, Inc.
/s/ DANIEL K. FRIERSON      
By: Daniel K. Frierson
Chairman of the Board and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature
Capacity
Date
/s/ DANIEL K. FRIERSON
Chairman of the Board, Director and Chief Executive Officer
April 7, 2025
Daniel K. Frierson
/s/ ALLEN L. DANZEY
Vice President, Chief Financial Officer
April 7, 2025
Allen L. Danzey
/s/ D. KENNEDY FRIERSON, JR.
Vice President, Chief Operating Officer and Director
April 7, 2025
D. Kennedy Frierson, Jr.
/s/ WILLIAM F. BLUE, JR.
Director
April 7, 2025
William F. Blue, Jr.
/s/ CHARLES E. BROCK
Director
April 7, 2025
Charles E. Brock
/s/ HILDA S. MURRAY
Director
April 7, 2025
Hilda S. Murray
/s/ MICHAEL L. OWENS
Director
April 7, 2025
Michael L. Owens
 
Table of Contents    26

ANNUAL REPORT ON FORM 10-K
ITEM 8 AND ITEM 15(a)(1) AND ITEM 15(a)(2)
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
FINANCIAL STATEMENTS
FINANCIAL STATEMENT SCHEDULES
YEAR ENDED DECEMBER 28, 2024
THE DIXIE GROUP, INC.
DALTON, GEORGIA
Table of Contents    27

FORM 10-K - ITEM 8 and ITEM 15(a)(1) and (2)
THE DIXIE GROUP, INC. AND SUBSIDIARIES
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
The following consolidated financial statements and financial statement schedules of The Dixie Group, Inc. and subsidiaries are included in Item 8 and Item 15(a)(1) and 15(c):
Table of Contents
Page
Report of independent registered public accounting firm
29
 
 
Consolidated balance sheets - December 28, 2024 and December 30, 2023
31
 
 
Consolidated statements of operations - Years ended December 28, 2024 and December 30, 2023
32
Consolidated statements of comprehensive income (loss) - Years ended December 28, 2024 and December 30, 2023
33
 
 
Consolidated statements of cash flows - Years ended December 28, 2024 and December 30, 2023
34
 
 
Consolidated statements of stockholders' equity - Years ended December 28, 2024 and December 30, 2023
35
 
 
Notes to consolidated financial statements
35
Schedule II - Valuation and Qualifying Accounts
62
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the
related instructions, or are inapplicable, or the information is otherwise shown in the financial statements or notes thereto, and therefore such schedules have been
omitted.
Table of Contents    28

Report of Independent Registered Public Accounting Firm
To the Shareholders, Board of Directors, and Audit Committee of
The Dixie Group, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of The Dixie Group, Inc. (the “Company”) as of December 28, 2024 and December 30, 2023, the
related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the years in the two-year period
ended December 28, 2024, and the related notes and schedule listed in the Index at Item 15 (collectively referred to as the “financial statements”). In our opinion,
the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 28, 2024 and
December 30, 2023, and the results of its operations and its cash flows for each of the years in the two-year period ended December 28, 2024, in conformity with
accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Going Concern
The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As described in Note 1 to the financial
statements, the Company has identified certain conditions as relating to its outstanding debt obligations that are outside the control of the Company. In addition,
the Company has generated recent losses from operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
Management’s plans in regard to these matters are described in Note 1. The financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements
based on our audits.
We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent
with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were
we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control
over financial reporting 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.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing
procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially
challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the financial statements,
taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or
disclosures to which it relates.
Critical Audit Matter – LIFO Reserve
As disclosed in Notes 1 and 5 to the financial statements, the Company recognizes its inventory using the last-in, first-out (“LIFO”) method, which requires a
reserve to adjust the historical cost carrying value of inventory to the lower of LIFO or market. As of December 28, 2024, the LIFO reserve was approximately
$21,553,000. There is inherent complexity in the accounting for the LIFO reserve including complex calculations based on inventory pools, changes in those pools,
and lower of cost or market adjustments.
Table of Contents    29

We identified the LIFO reserve as a critical audit matter. The principal considerations for that determination included the complexity of the calculations, the
judgment required for market adjustments, and the nature and extent of audit effort required to address the matter.
Our audit procedures to test the appropriateness of the LIFO Reserve, among others:
•
We tested the completeness of the LIFO reserve by evaluating whether all appropriate inventory items were included in the LIFO reserve calculation and
in the appropriate category. This included reconciling the inventory used to calculate the LIFO reserve to the inventory subledger.
•
We independently recalculated management’s LIFO pool calculation, including pool increases or inventory liquidations.
•
We tested the aggregation of the pools used to arrive at the LIFO reserve, and considered whether methodologies were consistently applied, or that
changes, if any, were in accordance with U.S. GAAP.
•
We tested a sample of inventory items and tested whether the lower of cost or market adjustments made by management were in accordance with U.S.
GAAP.
/s/ Forvis Mazars, LLP
We have served as the Company's auditor since 2013.
Atlanta, GA
April 7, 2025
Table of Contents    30

THE DIXIE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share data)
 
December 28,
2024
December 30,
2023
ASSETS
CURRENT ASSETS
Cash and cash equivalents
$
19 
$
79 
Receivables, net of allowances for expected credit losses of $454 and $440
23,325 
23,686 
Inventories, net
66,852 
76,211 
Prepaid expenses
5,643 
12,154 
Current assets of discontinued operations
— 
265 
TOTAL CURRENT ASSETS
95,839 
112,395 
 
 
PROPERTY, PLANT AND EQUIPMENT, NET
33,747 
31,368 
OPERATING LEASE RIGHT-OF-USE ASSETS
25,368 
28,962 
OTHER ASSETS
19,854 
17,130 
LONG-TERM ASSETS OF DISCONTINUED OPERATIONS
1,064 
1,314 
TOTAL ASSETS
$
175,872 
$
191,169 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
CURRENT LIABILITIES
 
 
Accounts payable
$
14,884 
$
13,935 
Accrued expenses
15,057 
16,598 
Current portion of long-term debt
53,818 
4,230 
Current portion of operating lease liabilities
3,804 
3,654 
Current liabilities of discontinued operations
1,156 
1,137 
TOTAL CURRENT LIABILITIES
88,719 
39,554 
LONG-TERM DEBT, NET
28,530 
78,290 
OPERATING LEASE LIABILITIES
22,295 
25,907 
OTHER LONG-TERM LIABILITIES
16,712 
14,591 
LONG-TERM LIABILITIES OF DISCONTINUED OPERATIONS
3,398 
3,536 
TOTAL LIABILITIES
159,654 
161,878 
COMMITMENTS AND CONTINGENCIES (See Note 17)
STOCKHOLDERS' EQUITY
 
 
Common Stock ($3 par value per share):  Authorized 80,000,000 shares, issued and outstanding - 13,997,446
shares for 2024 and 14,409,281 shares for 2023
41,992 
43,228 
Class B Common Stock ($3 par value per share): Authorized 16,000,000 shares, issued and outstanding -
1,249,302 shares for 2024 and 1,121,129 shares for 2023
3,748 
3,363 
Additional paid-in capital
159,892 
159,132 
Accumulated deficit
(189,700)
(176,700)
Accumulated other comprehensive income
286 
268 
TOTAL STOCKHOLDERS' EQUITY
16,218 
29,291 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$
175,872 
$
191,169 
See accompanying notes to the consolidated financial statements.
Table of Contents    31

THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
 
Year Ended
 
December 28,
2024
December 30,
2023
NET SALES
$
265,026 
$
276,343 
Cost of sales
199,515 
202,464 
GROSS PROFIT
65,511 
73,879 
Selling and administrative expenses
69,850 
74,136 
Other operating (income) expense, net
200 
(9,172)
Facility consolidation and severance expenses, net
1,327 
3,867 
OPERATING INCOME (LOSS)
(5,866)
5,048 
Interest expense
6,380 
7,217 
Other income, net
(7)
(431)
LOSS FROM CONTINUING OPERATIONS BEFORE TAXES
(12,239)
(1,738)
Income tax provision (benefit)
(29)
214 
LOSS FROM CONTINUING OPERATIONS
(12,210)
(1,952)
Loss from discontinued operations, net of tax
(790)
(766)
NET LOSS
$
(13,000)
$
(2,718)
BASIC EARNINGS (LOSS) PER SHARE:
 
 
Continuing operations
$
(0.83)
$
(0.13)
Discontinued operations
(0.05)
(0.05)
Net loss
$
(0.88)
$
(0.18)
BASIC SHARES OUTSTANDING
14,639 
14,783 
DILUTED EARNINGS (LOSS) PER SHARE:
 
 
Continuing operations
$
(0.83)
$
(0.13)
Discontinued operations
(0.05)
(0.05)
Net loss
$
(0.88)
$
(0.18)
DILUTED SHARES OUTSTANDING
14,639 
14,783 
DIVIDENDS PER SHARE:
 
 
Common Stock
$
— 
$
— 
Class B Common Stock
— 
— 
See accompanying notes to the consolidated financial statements. 
Table of Contents    32

THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(amounts in thousands)
 
Year Ended
 
December 28,
2024
December 30,
2023
NET LOSS
$
(13,000)
$
(2,718)
OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX:
Unrecognized net actuarial gain on postretirement benefit plans
52 
75 
Income taxes
— 
— 
Unrecognized net actuarial gain on postretirement benefit plans, net
52 
75 
Reclassification of net actuarial gain into earnings from postretirement benefit plans (1)
(34)
(26)
Income taxes
— 
— 
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net
(34)
(26)
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX
18 
49 
COMPREHENSIVE LOSS
$
(12,982)
$
(2,669)
(1) Amounts for postretirement plans reclassified from accumulated other comprehensive income to net loss were included in selling and administrative expenses in the Company's
Consolidated Statements of Operations.
See accompanying notes to the consolidated financial statements.
Table of Contents    33

THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
 
Year Ended
 
December 28,
2024
December 30,
2023
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
Loss from continuing operations
$
(12,210)
$
(1,952)
Loss from discontinued operations
(790)
(766)
Net loss
(13,000)
(2,718)
Adjustments to reconcile net loss to net cash provided by operating activities:
 
 
Depreciation and amortization
6,542 
7,331 
Net gain loss on property, plant and equipment disposals
(24)
(8,198)
Impairment of assets
238 
— 
Stock-based compensation expense
494 
687 
Expense for expected credit losses
194 
31 
     Net gain on extinguishment of debt
— 
(419)
Changes in operating assets and liabilities:
 
 
Receivables
167 
1,094 
Inventories
9,359 
7,488 
Prepaid and other current assets
(20)
(1,987)
Accounts payable and accrued expenses
(618)
(506)
Other operating assets and liabilities
(496)
645 
NET CASH PROVIDED BY OPERATING ACTIVITIES
3,626 
4,214 
NET CASH USED IN OPERATING ACTIVITIES - DISCONTINUED OPERATIONS
(394)
(1,595)
CASH FLOWS FROM INVESTING ACTIVITIES
 
 
Net proceeds from sales of property, plant and equipment
60 
16,055 
Purchase of property, plant and equipment
(2,094)
(980)
Joint venture capital distributions
43 
— 
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES
(1,991)
15,075 
NET CASH PROVIDED BY INVESTING ACTIVITIES - DISCONTINUED OPERATIONS
— 
8 
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
Net borrowings (payments) on revolving credit facility
2,381 
(4,175)
Payments on notes payable - buildings and other term loans
(1,915)
(11,424)
Borrowings on notes payable - other
1,453 
1,542 
Payments on notes payable - other
(2,591)
(2,364)
Payments on finance leases
(70)
(256)
Change in outstanding checks in excess of cash
26 
(1,266)
Repurchases of Common Stock
(585)
(43)
NET CASH USED IN FINANCING ACTIVITIES
(1,301)
(17,986)
DECREASE IN CASH AND CASH EQUIVALENTS
(60)
(284)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
79 
363 
CASH AND CASH EQUIVALENTS AT END OF PERIOD
$
19 
$
79 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
Interest paid
$
6,195 
$
7,020 
Income taxes paid, net of (tax refunds)
94 
(786)
Right-of-use assets obtained in exchange for new operating lease
411 
10,765 
Equipment purchased under finance leases
395 
133 
Commission accrued on sale of building
— 
433 
Deposits utilized on purchased equipment, net
6,530 
— 
See accompanying notes to the consolidated financial statements.
Table of Contents    34

THE DIXIE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(amounts in thousands, except share data)
 
Common
Stock
Class B
Common
Stock
Additional
Paid-In Capital
Accumulated
Deficit
Accumulated Other
Comprehensive
Income
Total Stockholders'
Equity
Balance at December 31, 2022
$
43,360 
$
3,388 
$
158,331 
$
(173,784)
$
219 
$
31,514 
Repurchases of Common Stock - 55,994 shares
(168)
— 
125 
— 
— 
(43)
Restricted stock grants issued - 55,000 shares
165 
— 
(165)
— 
— 
— 
Restricted stock grants forfeited - 51,220 shares
(154)
— 
107 
— 
— 
(47)
Class B converted into Common Stock- 8,029 shares
25 
(25)
— 
— 
— 
— 
Stock-based compensation expense
— 
— 
734 
— 
— 
734 
Net loss
— 
— 
— 
(2,718)
— 
(2,718)
Cumulative effect of CECL adoption
— 
— 
— 
(198)
— 
(198)
Other comprehensive income
— 
— 
— 
— 
49 
49 
Balance at December 30, 2023
$
43,228 
$
3,363 
$
159,132 
$
(176,700)
$
268 
$
29,291 
Common Stock issued - 37,501 shares
113 
— 
(113)
— 
— 
— 
Repurchases of Common Stock - 732,888 shares
(2,199)
— 
1,614 
— 
— 
(585)
Restricted stock grants issued - 443,537 shares
928 
403 
(1,331)
— 
— 
— 
Restricted stock grants forfeited - 31,812 shares
(96)
— 
96 
— 
— 
— 
Class B converted into Common Stock - 5,980 shares
18 
(18)
— 
— 
— 
— 
Stock-based compensation expense
— 
— 
494 
— 
— 
494 
Net loss
— 
— 
— 
(13,000)
— 
(13,000)
Other comprehensive income
— 
— 
— 
— 
18 
18 
Balance at December 28, 2024
$
41,992 
$
3,748 
$
159,892 
$
(189,700)
$
286 
$
16,218 
See accompanying notes to the consolidated financial statements.
Table of Contents    35

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
The Company's businesses consist principally of marketing, manufacturing and selling finished carpet, rugs, luxury vinyl flooring and engineered wood flooring in
the domestic floorcovering market. Additionally, the Company provides manufacturing support to its carpet businesses through its separate processing operations.
Basis of Presentation
The Consolidated Financial Statements include the accounts of The Dixie Group, Inc. and its wholly-owned subsidiaries (the "Company") and have been prepared
in accordance with U.S. GAAP on the going concern basis of accounting, which assumes the Company will continue to operate as a going concern and which
contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. All intercompany balances and
transactions have been eliminated in consolidation.
Unless specifically noted otherwise, footnote disclosures reflect the results of continuing operations only. The results of discontinued operations are presented in
Note 20.
Going Concern
In connection with preparing consolidated financial statements, the Company is required to evaluate whether there are conditions or events, considered in
aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are
issued. Substantial doubt exists when conditions and events, considered in aggregate, indicate that it is probable that the Company will be unable to meet its
obligations as they become due within one year after the date that the consolidated financial statements are issued. This evaluation initially does not take into
consideration the potential mitigating effect of management’s plans and actions that have not been fully implemented as of the date that the financial statements
are issued.
The assessment of the liquidity and going concern requires the Company to make estimates of future activity and judgments about whether the Company will be
compliant with financial covenant calculations under its debt and other agreements and has adequate liquidity to operate. The Company has sustained net losses
for the years ended December 28, 2024 and December 30, 2023. Also as described in Note 9, the Company had $50,000 of outstanding indebtedness under its
senior credit facility as of December 28, 2024 which matures on October 30, 2025. As of the date of these financial statements, the Company’s existing cash and
cash equivalents were not sufficient to satisfy this debt in whole and meet the Company’s operating needs for at least one year after the issuance of these financial
statements. Subsequent to the reporting date, the Company refinanced the senior credit facility. On February 25, 2025, the Company entered into a new three-
year $75,000 senior secured credit facility with MidCap Financial IV Trust. This new facility requires compliance with financial covenants on a monthly basis - See
Note 22 for additional information regarding the debt refinancing.
In the current period, the Company was not in compliance with certain financial covenants and obtained appropriate waivers. The Company's current forecast
projects the Company may not be able to maintain compliance with certain of its financial covenants under its credit agreements in the next twelve months.
Management's plans include implementing cost reductions to improve gross margins and the results of operations, pursuing potentially additional financing for
certain assets, and obtaining waivers from lenders. While the Company has been able to obtain waivers in the past for such violations, it cannot be assured that
such waivers will be obtained in the future.
These conditions raise substantial doubt about the ability of the Company to continue as a going concern within one year after the date that the financial
statements are issued. The Company’s consolidated financial statements do not include adjustments, if any, that may arise from the outcome of this uncertainty.
Variable Interest Entities
The Company determines at the inception of each arrangement whether an entity in which it has made an investment or in which the Company has other variable
interests is considered a variable interest entity (“VIE”). The Company consolidates VIEs when it is the primary beneficiary. The Company is the primary
beneficiary of a VIE when it has the power to direct activities that most significantly affect the economic performance of the VIE and have the obligation to absorb
the majority of their losses or benefits. If the Company is not the primary beneficiary in a VIE, the Company accounts for the investment or other variable interests
in a VIE in accordance with applicable GAAP. At each reporting period, the Company assesses whether any changes in our interest or relationship with the entity
affect our determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary.
Table of Contents    36

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
The Company entered into an arrangement to pool extrusion machinery whereby the Company and an independent entity, "the Entity", separately purchased
machinery to concurrently produce fiber to reduce manufacturing costs. The entity purchases the raw materials, employs the staff and owns and manages the
facility and the production of the fiber. The Company receives all fiber produced on its own machines and pays the entity an amount equal to the cost of raw
materials and an agreed upon allocation of direct and indirect production and overhead costs of the fiber operations. The Company accounts for all amounts paid
to the entity as the cost of raw material inventory.
The Company determined that the entity is a VIE and the Company's arrangement represents a variable interest in the entity. The Company has determined that
the governance and operating structures of this VIE do not allow it to direct the activities that would significantly affect the Entity's economic performance. In
addition, the Company does not have an obligation to absorb losses of the Entity. Therefore, the Company is not the primary beneficiary, and the results of
operations and financial position of this VIE are not included in the Company's consolidated condensed financial statements. The Company believes its maximum
exposure of this unconsolidated VIE is the current carrying value of the equipment at the Entity's location. The carrying value and maximum exposure of this
unconsolidated VIE was $7,409 as of December 28, 2024, and is included within property, plant and equipment, net on the Company’s consolidated condensed
balance sheets. Any additional potential losses cannot be determined.
Nasdaq Delisting Notification or Failure to Satisfy a Continued Listing Rule or Standard
Effective at the opening of business on October 3, 2024, the Company's Common Stock was suspended and delisted from Nasdaq and began trading on the Over-
the-Counter Market pink sheets under the stock symbol DXYN. Effective October 4, 2024, the Company was upgraded to the Over-the-Counter OTCQB Market
("the OTCQB") trading under the same symbol DXYN. On February 12, 2025, Nasdaq filed a Form 25 with the SEC notifying the SEC of Nasdaq's determination to
remove the Company's securities from listing on Nasdaq. The delisting was effective February 21, 2025.
Use of Estimates in the Preparation of Financial Statements
The preparation of consolidated financial statements in conformity with U.S. generally accepted accounting principles ("U.S. GAAP") requires management to
make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those
estimates and these differences could be material.
Fiscal Year
The Company ends its fiscal year on the last Saturday of December. All references herein to "2024" and "2023" mean the fiscal years ended December 28, 2024
and December 30, 2023 respectively. Both fiscal year 2024 and fiscal 2023 contained 52 weeks.
Discontinued Operations
The consolidated financial statements separately report discontinued operations and the results of continuing operations (See Note 20).
Cash and Cash Equivalents
Highly liquid investments with original maturities of three months or less when purchased are reported as cash equivalents.
Market Risk
The Company sells carpet to floorcovering retailers, the interior design, architectural and specifier communities and supplies carpet yarn and carpet dyeing and
finishing services to certain manufacturers. The Company's customers are located principally throughout the United States.
Table of Contents    37

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Receivables and Allowance for Expected Credit Losses
The Company grants credit to its customers with defined payment terms, performs ongoing evaluations of the credit worthiness of its customers and generally
does not require collateral. Accounts receivable are carried at their outstanding principal amounts, less an anticipated amount for discounts and an allowance for
expected credit losses, which management believes is sufficient to cover potential credit losses based on historical experience and periodic evaluation of the
financial condition of the Company's customers. The Company's allowance for expected credit losses is computed using a number of factors including past credit
loss experience and the aging of amounts due from our customers, in addition to other customer-specific factors. The Company also considered recent trends and
developments related to the current macroeconomic environment such as unemployment rates, interest rates and inflation in determining its ending allowance for
credit losses for accounts receivable. If the financial condition of the Company's customers were to deteriorate, resulting in a change in their ability to make
payments, or additional changes in macroeconomic factors occur, additional allowances may be required.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using the last-in, first-out ("LIFO") method, which generally matches current costs of
inventory sold with current revenues, for substantially all inventories.
Property, Plant and Equipment
Property, plant and equipment are stated at the lower of cost or impaired value. Provisions for depreciation and amortization of property, plant and equipment have
been computed for financial reporting purposes using the straight-line method over the estimated useful lives of the related assets, ranging from 10 to 40 years for
buildings and improvements, and 3 to 10 years for machinery and equipment. Costs to repair and maintain the Company's equipment and facilities are expensed
as incurred. Such costs typically include expenditures to maintain equipment and facilities in good repair and proper working condition.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment when circumstances indicate that the carrying value of an asset may not be fully recoverable. When the carrying
value of the asset exceeds the value of its estimated undiscounted future cash flows, an impairment charge is recognized equal to the difference between the
asset's carrying value and its fair value. Fair value is estimated using discounted cash flows, prices for similar assets or other valuation techniques.
Self-Insured Benefit Programs
The Company records liabilities to reflect an estimate of the ultimate cost of claims related to its self-insured medical and dental benefits and workers'
compensation. The amounts of such liabilities are based on an analysis of the Company's historical experience for each type of claim.
Income Taxes
The Company recognizes deferred income tax assets and liabilities for the future tax consequences of the differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. The Company evaluates the recoverability of these future tax benefits by assessing the
adequacy of future expected taxable income from all sources. In the event that the Company is not able to realize all or a portion of the deferred tax assets in the
future, a valuation allowance is provided. The Company recognizes such amounts through a charge to income in the period in which that determination is made or
when tax law changes are enacted. The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions.
The Company recognizes interest and penalties related to uncertain tax positions, if any, in income tax expense.
Treasury Stock
The Company classifies treasury stock as a reduction to Common Stock for the par value of such shares acquired and the difference between the par value and
the price paid for each share recorded either entirely to retained earnings or to additional paid-in-capital for periods in which the Company does not have retained
earnings. This presentation reflects the repurchased shares as authorized but unissued as prescribed by state statute.
Revenue Recognition
The Company derives its revenues primarily from the sale of floorcovering products and processing services. Revenues are recognized when control of these
products or services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those
products and services. Sales, value add, and other taxes the
Table of Contents    38

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Company collects concurrent with revenue-producing activities are excluded from revenue. Shipping and handling fees charged to customers are reported within
revenue. When the Company transfers control of its products to the customer prior to the related shipping and handling activities, the Company has adopted a
policy of accounting for shipping and handling activities as a fulfillment cost rather than a performance obligation. Incidental items that are immaterial in the context
of the contract are recognized as expense. While the Company pays sales commissions to certain personnel, the Company has not capitalized these costs as
costs to obtain a contract as the Company has elected to expense costs as incurred when the expected amortization period is one year or less. The Company
does not have any significant financing components as payment is received at or shortly after the point of sale. The Company determined revenue recognition
through the following steps:
•
Identification of the contract with a customer
•
Identification of the performance obligations in the contract
•
Determination of the transaction price
•
Allocation of the transaction price to the performance obligations in the contract
•
Recognition of revenue when, or as, the performance obligation is satisfied
Performance Obligations
For performance obligations related to residential floorcovering products, control transfers at a point in time. To indicate the transfer of control, the Company must
have a present right to payment, legal title must have passed to the customer and the customer must have the significant risks and rewards of ownership. The
Company’s principal terms of sale are FOB Shipping Point and FOB Destination and the Company transfers control and records revenue for product sales either
upon shipment or delivery to the customer, respectively. Revenue is allocated to each performance obligation based on its relative stand-alone selling prices.
Stand-alone selling prices are based on observable prices at which the Company separately sells the products or services.
Variable Consideration
The nature of the Company’s business gives rise to variable consideration, including rebates, allowances, and returns that generally decrease the transaction
price, which reduces revenue. These variable amounts are generally credited to the customer, based on achieving certain levels of sales activity, product returns,
or price concessions.
Variable consideration is estimated at the most likely amount using a portfolio approach that is expected to be earned. Estimated amounts are included in the
transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the
variable consideration is resolved. Estimates of variable consideration are estimated based upon historical experience and known trends.
Advertising Costs
The Company engages in promotional and advertising programs. Expenses relating to these programs are charged to results of operations during the period of the
related benefits. These arrangements do not require significant estimates of costs. Costs related to cooperative advertising programs are normally recorded as
selling and administrative expenses when the Company can reasonably identify the benefit associated with the program and can reasonably estimate that the fair
value of the benefit is equal to or greater than its cost. The amount of advertising and promotion expenses included in selling and administrative expenses was not
significant for the years 2024 and 2023.
Warranties
The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products for a period of up to two
years. The Company accrues for estimated future assurance warranty costs in the period in which the sale is recorded. The costs are included in cost of sales in
the Consolidated Statements of Operations and the product warranty reserve is included in accrued expenses in the Consolidated Balance Sheets. The Company
calculates its accrual using the portfolio approach based upon historical experience and known trends (See Note 8). The Company does not provide an additional
service-type warranty.
Cost of Sales
Cost of sales includes all costs related to manufacturing the Company's products, including purchasing and receiving costs, inspection costs, warehousing costs,
freight costs, internal transfer costs or other costs of the Company's distribution network.
Table of Contents    39

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Selling and Administrative Expenses
Selling and administrative expenses include all costs, not included in cost of sales, related to the sale and marketing of the Company's products and general
administration of the Company's business.
Operating Leases
The Company determines if an arrangement is an operating lease or a financing lease at inception. A lease exists if the Company obtains substantially all of the
economic benefits of, and has the right to control the use of, an asset for a period of time. Right-of-use assets represent the Company's right to use an underlying
asset for the lease term, and lease liabilities represent the Company's obligation to make lease payments arising from the lease agreement. Lease assets and
obligations are recognized at the lease commencement date based on the present value of lease payments over the term of the lease. Right-of-use assets may
also be adjusted to reflect any prepayments made or any incentive payments received. Generally, the Company's leases do not provide a readily determinable
implicit interest rate, therefore, the Company uses its incremental borrowing rate, which is based on information available at the lease commencement date, to
determine the present value of lease payments.
The Company has operating leases primarily for real estate and equipment used in manufacturing. Operating lease expense is recognized in continuing operations
on a straight-line basis over the lease term within cost of sales and selling and administrative expenses. Financing lease expense is comprised of both interest
expense, which is recognized using the effective interest method, and amortization of the right-of-use assets. These expenses are presented consistently with the
presentation of other interest expense and amortization or depreciation of similar assets. In determining lease asset values, the Company considers fixed and
variable payment terms, prepayments, incentives, and options to extend, terminate or purchase. Renewal, termination, or purchase options affect the lease term
used for determining lease asset value only if the option is reasonably certain to be exercised. The Company does not recognize a right-of-use asset and lease
liability for leases with a term of twelve months or less.
Stock-Based Compensation
The Company recognizes compensation expense relating to stock-based payments based on the fair value of the equity or liability instrument issued. Restricted
stock grants with pro-rata vesting are expensed using the straight-line method. (Terms of the Company's awards are specified in Note 15). The Company accounts
for forfeitures when they actually occur.
NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS
Adopted Accounting Standards
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280):
Improvements to Reportable Segment Disclosures, which enhances reporting requirements under Topic 280. The enhanced disclosure requirements include: title
and position of the Chief Operating Decision Maker ("CODM"), significant segment expenses provided to the CODM, extending certain annual disclosures to
interim periods, clarifying single reportable segment entities must apply ASC 280 in its entirety, and permitting more than one measure of segment profit or loss to
be reported under certain circumstances. This change is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after
December 15, 2024. This change will apply retrospectively to all periods presented. The adoption of this ASU did not have a material impact on its financial
statements (See Note 21).
Accounting Standards Yet to Be Adopted
In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures (Topic 740), which establishes new income tax disclosure
requirements in addition to modifying and eliminating certain existing requirements. The new guidance requires consistent categorization and greater
disaggregation of information in the rate reconciliation, as well as further disaggregation of income taxes paid. This change is effective for annual periods
beginning after December 15, 2024. This change will apply on a prospective basis to annual financial statements for periods beginning after the effective date.
However, retrospective application in all prior periods presented is permitted. The Company does not expect the adoption of this ASU to have a material impact on
its financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-
40): Disaggregation of Income Statement Expenses, which requires disclosures about certain categories of expenses (including purchases of inventory, employee
compensation, depreciation and intangible asset amortization) that are included in the expense captions presented on the face of the income statement, as well as
disclosures about selling expenses. This new guidance is intended to provide investors with more detailed expense information in order to better understand an
entity's cost structure and forecast future cash flows. This ASU is effective for annual reporting periods
Table of Contents    40

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
beginning after December 15, 2026, and interim reporting periods within annual reporting periods beginning after December 15, 2027 on a prospective basis. Early
adoption and retrospective application is permitted. The Company is currently evaluating the impact of the new guidance on its financial statements and related
disclosures.
NOTE 3 - REVENUE
Disaggregation of Revenue from Contracts with Customers
The following table disaggregates the Company’s revenue by end-user markets:
2024
2023
Residential floorcovering products
$
261,108 
$
272,210 
Other services
3,918 
4,133 
Total net sales
$
265,026 
$
276,343 
Residential floorcovering products. Residential floorcovering products include broadloom carpet, rugs, luxury vinyl flooring and engineered hardwood. These
products are sold into the designer, retailer, mass merchant and builder markets.
Other services. Other services include carpet yarn processing and carpet dyeing services.
Contract Balances
Other than receivables that represent an unconditional right to consideration, which are presented separately (See Note 4), the Company does not recognize any
contract assets which give conditional rights to receive consideration, as the Company does not incur costs to obtain customer contracts that are recoverable. The
Company may receive cash payments from customers in advance of the Company’s performance for limited production run orders resulting in contract liabilities.
These contract liabilities are classified in accrued expenses in the Consolidated Balance Sheets based on the timing of when the Company expects to recognize
revenue, which is typically less than a year. The net decrease or increase in the contract liabilities is primarily driven by order activity for limited runs requiring
deposits offset by the recognition of revenue and application of deposit on the receivables ledger for such activity during the period. The activity in the advanced
deposits for continuing operations are as follows:
2024
2023
Beginning contract liability
$
966 
$
1,055 
Revenue recognized from contract liabilities included in the beginning balance
(808)
(881)
Increases due to cash received, net of amounts recognized in revenue during the period
570 
792 
Ending contract liability
$
728 
$
966 
NOTE 4 - RECEIVABLES, NET
Receivables are summarized as follows:
2024
2023
Customers, trade
$
22,195 
$
22,461 
Other receivables
1,584 
1,665 
Gross receivables
23,779 
24,126 
Less: allowance for expected credit losses (1)
(454)
(440)
Receivables, net
$
23,325 
$
23,686 
(1)
The Company recognized an expense to the provision for the expected credit losses of $194 and $31 and recognized write-offs, net of recoveries of $180 and $90 in 2024 and
2023, respectively.
Table of Contents    41

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 5 - INVENTORIES, NET
Inventories are summarized as follows:
2024
2023
Raw materials
$
22,093 
$
24,368 
Work-in-process
11,587 
12,275 
Finished goods
54,631 
60,553 
Supplies and other
94 
112 
LIFO reserve
(21,553)
(21,097)
Inventories, net
$
66,852 
$
76,211 
Reduction of inventory quantities in 2024 and 2023 resulted in liquidations of LIFO inventories carried at prevailing costs established in prior years and decreased
cost of sales by $494 and $1,145 in 2024 and 2023, respectively.
NOTE 6 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consists of the following:
2024
2023
Land and improvements
$
3,434 
$
3,402 
Buildings and improvements
41,619 
41,484 
Machinery and equipment
163,839 
155,312 
Assets under construction
327 
574 
209,219 
200,772 
Accumulated depreciation
(175,472)
(169,404)
Property, plant and equipment, net
$
33,747 
$
31,368 
Depreciation of property, plant and equipment, including amounts for finance leases, totaled $6,366 in 2024 and $7,122 in 2023.
NOTE 7 - ACCRUED EXPENSES
Accrued expenses are summarized as follows:
2024
2023
Compensation and benefits (1)
$
4,418 
$
5,720 
Provision for customer rebates, claims and allowances
6,921 
6,199 
Advanced customer deposits
728 
966 
Outstanding checks in excess of cash
470 
444 
Other
2,520 
3,269 
Accrued expenses
$
15,057 
$
16,598 
(1)
Includes a liability related to the Company's self-insured Workers' Compensation program.  This program is collateralized by letters of credit in the aggregate amount of $3,252.
The Company has other letters of credit outstanding totaling $852.
Table of Contents    42

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 8 - PRODUCT WARRANTY RESERVES
The Company generally provides product warranties related to manufacturing defects and specific performance standards for its products. Product warranty
reserves are included in accrued expenses in the Company's Consolidated Balance Sheets. The following is a summary of the Company's product warranty
activity for continuing operations:
 
2024
2023
Product warranty reserve at beginning of period
$
735 
$
942 
Warranty liabilities accrued
624 
716 
Warranty liabilities settled
(761)
(923)
Product warranty reserve at end of period
$
598 
$
735 
NOTE 9 - LONG-TERM DEBT AND CREDIT ARRANGEMENTS
Long-term debt consists of the following:
2024
2023
Revolving credit facility
$
50,000  $
47,619 
Term loans
21,960 
23,875 
Notes payable - other
11,163 
12,300 
Finance lease obligations
456 
131 
Deferred financing costs, net
(1,231)
(1,405)
Total debt
82,348 
82,520 
Less: current portion of long-term debt
53,818 
4,230 
Long-term debt
$
28,530  $
78,290 
Revolving Credit Facility
On October 30, 2020, the Company entered into a $75,000 Senior Secured Revolving Credit Facility with Fifth Third Bank National Association as lender. The loan
is secured by a first priority security interest on all accounts receivable, cash, and inventory, and provides for borrowing limited by certain percentages of values of
the accounts receivable and inventory. The revolving credit facility matures on October 30, 2025 and has been classified as a current liability.
At the Company's election, advances of the revolving credit facility bear interest at annual rates equal to either (a) SOFR (plus a 0.10% SOFR adjustment) for 1 or
3 month periods, as defined with a floor of 0.75% or published SOFR, plus an applicable margin ranging between 1.50% and 2.00%, or (b) the higher of the prime
rate plus an applicable margin ranging between 0.50% and 1.00%. The applicable margin is determined based on availability under the revolving credit facility with
margins increasing as availability decreases. The applicable margin can be increased by 0.50% if the fixed charge coverage ratio is below a 1.10 to 1.00 ratio. As
of December 28, 2024, the applicable margin on the Company's revolving credit facility was 2.50% for SOFR and 1.50% for Prime due to the fixed charge
coverage ratio being below 1.10 to 1.00. The Company pays an unused line fee on the average amount by which the aggregate commitments exceed utilization of
the revolving credit facility equal to 0.25% per annum. The weighted-average interest rate on borrowings outstanding under the revolving credit facility was 7.18%
at December 28, 2024 and 8.15% for December 30, 2023.
The agreement is subject to customary terms and conditions and annual administrative fees with pricing varying on excess availability and a fixed charge coverage
ratio. The agreement is also subject to certain compliance, affirmative, and financial covenants including the restriction on payment of dividends. The Company is
only subject to the financial covenants if borrowing availability is less than $8,006, which is equal to 12.5% of the lesser of the total loan availability of $75,000 or
total collateral available, and remains until the availability is greater than 12.5% for thirty consecutive days.
On February 25, 2025, the Company entered into a new $75,000 Senior Secured Revolving Credit Facility with MidCap Financial IV Trust to replace its $75,000
Senior Secured Revolving Credit Facility with Fifth Third Bank, National Association (See Note 22). The revolving credit facility requires a lockbox arrangement,
which provides for all cash receipts to be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective
acceleration clause” (as defined by U.S. GAAP) in the revolving credit facility, requires the balance on the revolving credit facility to be classified as a current
liability. The “subjective acceleration clause” allows the lender to declare an event of default if there is a material adverse change in the Company's business or
financial condition. Upon the occurrence of an event of default, the lender may, among other things, declare all obligations payable in full.
Table of Contents    43

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Term Loans
Effective October 28, 2020, the Company entered into a $10,000 principal amount USDA Guaranteed term loan with AmeriState Bank as lender. The term of the
loan is 25 years and bears interest at a minimum 5.00% rate or 4.00% above 5-year treasury, to be reset every 5 years at 3.5% above 5-year treasury. The loan is
secured by a first mortgage on the Company’s Atmore, Alabama and Roanoke, Alabama facilities.
Effective October 29, 2020, the Company entered into a $15,000 principal amount USDA Guaranteed term loan with the Greater Nevada Credit Union as lender.
The term of the loan is 10 years and bears interest at a minimum 5.00% rate or 4.00% above 5- year treasury, to be reset after 5 years at 3.5% above 5-year
treasury. Payments on the loan are interest only over the first three years and principal and interest over the remaining seven years. The loan is secured by a first
lien on a substantial portion of the Company’s machinery and equipment and a second lien on the Company’s Atmore and Roanoke facilities.
Debt Covenant Compliance
The Company's agreements for its Revolving Credit Facility and its term loans include certain compliance, affirmative, and financial covenants and, as of the
reporting date, the Company is in compliance with or has received waivers for all such applicable financial covenants.
Notes Payable - Buildings
On March 16, 2022, the Company entered into a twenty-year $11,000 note payable to refinance an existing note payable on its distribution center in Adairsville,
Georgia (the "Property"). The refinanced note payable bore interest at a fixed annual rate of 3.81%. On December 14, 2023, the Company sold the Property and
completed a successful sale and leaseback of the Property. The Company paid off the existing note in the amount of $10,368. As a result of the debt
extinguishment, the Company recognized an expense of $206 for previously deferred financing costs on the note. The note had been secured by the Property and
a guarantee of the Company. (See Note 10.)
Notes Payable - Other
On January 14, 2019, the Company, entered into a purchase and sale agreement (the “Purchase and Sale Agreement”) with Saraland Industrial, LLC, an Alabama
limited liability company (the “Purchaser”). Pursuant to the terms of the Purchase and Sale Agreement, the Company sold its Saraland facility, and approximately
17.12 acres of surrounding property located in Saraland, Alabama (the “Property”) to the Purchaser for a purchase price of $11,500. Concurrent with the sale of the
Property, the Company and the Purchaser entered into a twenty-year lease agreement (the “Lease Agreement”), whereby the Company will lease back the
Property at an annual rental rate of $977, subject to annual rent increases of 1.25%. Under the Lease Agreement, the Company has two (2) consecutive options to
extend the term of the Lease by ten years for each such option. This transaction was recorded as a failed sale and leaseback. The Company recorded a liability for
the amounts received, will continue to depreciate the asset, and has imputed an interest rate of 7.07% so that the net carrying amount of the financial liability and
remaining assets will be zero at the end of the twenty-year lease term.
On September 15, 2023, the Company modified a note payable on equipment which had previously been recorded as a failed sale and leaseback. The note
payable bore interest at fixed interest rate of 7.84% and matured on December 1, 2024. In 2023, the Company recognized a gain of $625 related to an
extinguishment of debt on the note payable.
The Company's other financing notes have terms up to 1 year, bear interest ranging from 6.50% to 6.75% and are due in monthly installments through their
maturity dates. The Company's other notes do not contain any financial covenants.
Finance Lease Obligations
The Company's financed lease obligations are due in monthly installments through their maturity dates. The Company's finance lease obligations are secured by
the specific equipment leased.
Table of Contents    44

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Debt Maturities
Maturities of long-term debt for periods following December 28, 2024 are as follows:
 
Long-Term
Debt
Finance Leases (See
Note 10)
Total
2025
$
53,676 
$
142 
$
53,818 
2026
2,657 
160 
2,817 
2027
2,837 
136 
2,973 
2028
3,221 
18 
3,239 
2029
3,196 
— 
3,196 
Thereafter
17,536 
— 
17,536 
Total maturities of long-term debt
$
83,123 
$
456 
$
83,579 
Deferred financing costs, net
(1,231)
— 
(1,231)
Total long-term debt
$
81,892 
$
456 
$
82,348 
NOTE 10 - LEASES
Leases as Lessee
Balance sheet information related to right-of-use assets and liabilities is as follows:
Balance Sheet Location
2024
2023
Operating Leases:
Operating lease right-of-use assets
Operating lease right-of-use assets
$
25,368 
$
28,962 
Current portion of operating lease liabilities
Current portion of operating lease liabilities
$
3,804 
$
3,654 
Noncurrent portion of operating lease liabilities
Operating lease liabilities
22,295 
25,907 
Total operating lease liabilities
$
26,099 
$
29,561 
Finance Leases:
Finance lease right-of-use assets
Property, plant, and equipment, net
$
498 
$
138 
Current portion of finance lease liabilities
Current portion of long-term debt
$
142 
$
29 
Noncurrent portion of finance lease liabilities
Long-term debt
314 
102 
Total financing lease liabilities
$
456 
$
131 
Lease cost recognized in the consolidated financial statements is summarized as follows:
2024
2023
Operating lease cost
$
5,803 
$
4,115 
Finance lease cost:
     Amortization of lease assets
$
54 
$
174 
     Interest on lease liabilities
14 
10 
Total finance lease costs
$
68 
$
184 
Table of Contents    45

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Other supplemental information related to leases is summarized as follows:
2024
2023
Weighted average remaining lease term (in years):
     Operating leases
6.35
7.25
     Finance leases
2.96
4.51
Weighted average discount rate:
     Operating leases
6.82 %
6.81 %
     Finance leases
5.58 %
6.65 %
Cash paid for amounts included in the measurement of lease liabilities:
     Operating cash flows from operating leases
$
5,789 
$
4,080 
     Operating cash flows from finance leases
14 
10 
     Financing cash flows from finance leases
70 
256 
The following table summarizes the Company's undiscounted future minimum lease payments under non-cancellable contractual obligations for operating and
financing lease liabilities as of year end:
Fiscal Year
Operating Leases
Finance Leases
2025
$
5,473  $
162 
2026
5,188 
174 
2027
5,358 
141 
2028
5,334 
19 
2029
4,679 
— 
Thereafter
6,670 
— 
Total future minimum lease payments (undiscounted)
32,702 
496 
Less: Present value discount
(6,603)
(40)
Total lease liability
$
26,099  $
456 
On December 15, 2023, the Company sold its Adairsville, Georgia distribution center. The sales price was $16,250. The gain on the sale transaction was $8,198
and is included in other operating (income) expense, net in the consolidated statements of operations. The transaction was accounted for as a successful sale and
leaseback transaction.
Concurrent with the sale of the Adairsville, Georgia distribution center, the Company entered into an operating lease to lease back the property for a term of 10
years with two 5 year renewal options. The Company concluded it was not reasonably certain to exercise the renewal options and therefore, did not include in the
lease liability or right of use asset. The initial annual rent is $1,496 for the first five years increasing to an annual amount of $1,585 for the second five years. The
Company is responsible for normal maintenance of the building and facilities.
Leases as Lessor
The Company leases or subleases certain excess space in its facilities to third parties, which are included as fixed assets. The leases are accounted for as
operating leases and the lease or sublease income is included in other operating (income) expense, net. The Company recognizes lease income on a straight-line
basis as collectability is probable, including any escalation or lease incentives, as applicable, and the Company continues to recognize the underlying asset which
is included in property, plant and equipment, net on the Company's consolidated balance sheets The leases do not have any residual value guarantees. The
Company has elected the practical expedient to combine all non-lease components as a combined component. The nature of the Company’s sublease
agreements do not provide for variable lease payments or options to purchase.
Table of Contents    46

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Lease income and sublease income related to fixed lease payments is recognized in other operating (income) expense, net in the in the consolidated statements
of operations because they are not ordinary activities of the Company and is summarized as follows:
2024
2023
Operating lease income
$
1,879 
$
705 
The following table summarizes the Company's undiscounted lease payments to be received under operating leases including amounts to be paid by the
Company to the head lessor for the next five years and thereafter as of 2024:
Fiscal Year
Gross Lease Payments
Payments to Head Lessor
Net Lease Payments
2025
$
2,364  $
421  $
1,943 
2026
$
2,411  $
430  $
1,981 
2027
$
2,460  $
438  $
2,022 
2028
$
2,509  $
447  $
2,062 
2029
$
2,311  $
456  $
1,855 
Thereafter
$
11,832  $
2,273  $
9,559 
Total
$
23,887  $
4,465  $
19,422 
NOTE 11 - FAIR VALUE MEASUREMENTS
Fair value is defined as the exchange value of an asset or a liability in an orderly transaction between market participants. The fair value guidance outlines a
valuation framework and establishes a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and disclosures. The
hierarchy consists of three levels as follows:
Level 1 - Quoted market prices in active markets for identical assets or liabilities as of the reported date;
Level 2 - Other than quoted market prices in active markets for identical assets or liabilities, quoted prices for similar assets and liabilities in active markets, quoted
prices for identical or similar assets or liabilities in markets that are not active, and other than quoted prices for assets or liabilities and prices that are derived
principally from or corroborated by market data by correlation or other means; and
Level 3 - Measurements using management's best estimate of fair value, where the determination of fair value requires significant management judgment or
estimation.
The carrying amounts and estimated fair values of the Company's financial instruments are summarized as follows:
 
2024
2023
 
Carrying
Fair
Carrying
Fair
 
Amount
Value
Amount
Value
Financial assets:
 
 
 
 
Cash and cash equivalents
$
19 
$
19 
$
79 
$
79 
Financial liabilities:
 
 
Long-term debt, including current portion
81,892 
73,249 
82,389 
79,225 
Finance leases, including current portion
456 
434 
131 
130 
The fair values of the Company's long-term debt and finance leases were estimated using market rates the Company believes would be available for similar types
of financial instruments and represent level 2 measurements. The fair values of cash and cash equivalents approximate their carrying amounts due to the short-
term nature of the financial instruments.
Table of Contents    47

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 12 - EMPLOYEE BENEFIT PLANS
Defined Contribution Plans
The Company sponsors a 401(k) defined contribution plan that covers a significant portion, or approximately 98% of the Company's associates. This plan includes
a mandatory Company match on the first 1% of participants' contributions. The Company matches the next 2% of participants' contributions if the Company meets
prescribed earnings levels. The plan also provides for additional Company contributions above the 3% level if the Company attains certain additional performance
targets. Matching contribution expense for this 401(k) plan was $335 in 2024 and $652 in 2023.
Additionally, the Company sponsors a 401(k) defined contribution plan that covers those associates at one facility who are under a collective-bargaining
agreement, or approximately 2% of the Company's associates. Under this plan, the Company generally matches participants' contributions, on a sliding scale, up
to a maximum of 2.75% of the participant's earnings. Matching contribution expense for the collective-bargaining 401(k) plan was $5 in 2024 and $11 in 2023.
Non-Qualified Retirement Savings Plan
The Company sponsors a non-qualified retirement savings plan that allows eligible associates to defer a specified percentage of their compensation. The
obligations for continuing operations owed to participants under this plan were $16,411 at December  28, 2024 and $14,289 at December  30, 2023 and are
included in other long-term liabilities in the Company's Consolidated Balance Sheets. The obligations are unsecured general obligations of the Company and the
participants have no right, interest or claim in the assets of the Company, except as unsecured general creditors. The Company utilizes a Rabbi Trust to hold,
invest and reinvest deferrals and contributions under the plan. Amounts are invested in Company-owned life insurance in the Rabbi Trust and the cash surrender
value of the policies for continuing operations was $16,537 at December 28, 2024 and $14,836 at December 30, 2023 and is included in other assets in the
Company's Consolidated Balance Sheets.
Multi-Employer Pension Plan
The Company contributes to a multi-employer pension plan under the terms of a collective-bargaining agreement that covers its union-represented employees.
These union-represented employees represented approximately 2% of the Company's total employees. The risks of participating in multi-employer plans are
different from single-employer plans. If a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining
participating employers. If the Company chooses to stop participating in the multi-employer plan, the Company may be required to pay the plan an amount based
on the underfunded status of the plan, referred to as a withdrawal liability.
The Company's participation in the multi-employer pension plan for 2024 is provided in the table below. The "EIN/Pension Plan Number" column provides the
Employee Identification Number (EIN) and the three digit plan number. The most recent Pension Protection Act (PPA) zone status available in 2024 and 2023 is for
the plan's year-end at 2023 and 2022, respectively. The zone status is based on information that the Company received from the plan and is certified by the plan's
actuary. Among other factors, plans in the red zone are generally less than 65% funded, plans in the yellow zone are less than 80% funded and plans in the green
zone are at least 80% funded. The "FIP/RP Status Pending/Implemented" column indicates a plan for which a financial improvement plan (FIP) or a rehabilitation
plan (RP) is either pending or has been implemented. The last column lists the expiration date of the collective-bargaining agreement to which the plan is subject.
Pension Fund
EIN/Pension Plan Number
Pension Protection
Act Zone Status
FIP/RP Status
Pending/Implemented
(1)
Contributions (2)
Surcharge
Imposed (1)
Expiration Date
of Collective-
Bargaining
Agreement
2024
2023
2024
2023
2022
The Pension Plan of the National
Retirement Fund
13-6130178 - 001
Red
Red
Implemented
$
26  $
23  $
151 
Yes
6/6/2026
(1) The collective-bargaining agreement requires the Company to contribute to the plan at the rate of $0.47 per compensated hour for each covered employee. The Company will make
additional contributions, as mandated by law, in accordance with the fund's 2010 Rehabilitation Plan which required a surcharge equal to $0.03 per hour (from $0.47 to $0.50)
effective June 1, 2014 to May 31, 2015, a surcharge equal to $0.03 per hour (from $0.50 to $0.53) effective June 1, 2015 to May 31, 2016, a surcharge equal to $0.02 per hour
(from $0.53 to $0.55) effective June 1, 2016 to May 31, 2017, a surcharge equal to $0.03 per hour (from $0.55 to $0.58) effective June 1, 2017 to May 31, 2018, a surcharge equal
to $0.02 per hour (from $0.58 to $0.60) effective June 1, 2018 to May 31, 2019, a surcharge equal to $0.03 per hour (from $0.60 to $0.63) effective June 1, 2019 to May 31, 2020,
a surcharge equal to $0.03 per hour (from $0.63 to $0.66) effective June 1, 2020 to May 31, 2021, a surcharge equal to $0.03 per hour (from $0.66 to $0.69) effective June 1, 2021
to May 31, 2022, a surcharge equal to $0.03 per hour (from $0.69 to $0.72) effective June 1, 2022 to May 31, 2023, a surcharge equal to $0.03 per hour (from $0.72 to $0.75)
effective June 1, 2023 to May 31, 2024 and a surcharge equal to $0.03 per hour (from $0.75 to $0.78) effective June 1, 2024 to May 31, 2025. Based upon current employment
and benefit levels, the Company's contributions to the multi-employer pension plan are expected to be approximately $28 for 2025.
Table of Contents    48    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
(2) The Company's contributions to the plan do not represent more than 5% of the total contributions to the plan for the most recent plan year available.
Postretirement Plans
The Company sponsors a postretirement benefit plan that provides life insurance to a limited number of associates upon retirement as part of a collective
bargaining agreement.
Information about the benefit obligation and funded status of the Company's postretirement benefit plan is summarized as follows:
 
2024
2023
Change in benefit obligation:
 
 
Benefit obligation at beginning of year
$
324 
$
379 
Service cost
1 
5 
Interest cost
13 
16 
Actuarial gain
(52)
(75)
Benefits paid
(1)
(1)
Benefit obligation at end of year
285 
324 
Change in plan assets:
 
 
Fair value of plan assets at beginning of year
— 
— 
Employer contributions
1 
1 
Benefits paid
(1)
(1)
Fair value of plan assets at end of year
— 
— 
Unfunded amount
$
(285)
$
(324)
The balance sheet classification of the Company's liability for the postretirement benefit plan is included in discontinued operations and is summarized as follows:
 
2024
2023
Current liabilities of discontinued operations
$
22 
$
23 
Long-term liabilities of discontinued operations
263 
301 
Total liability
$
285 
$
324 
Benefits expected to be paid on behalf of associates for the postretirement benefit plan during the period 2025 through 2034 are summarized as follows:
Years
Postretirement
Plan
2025
$
22 
2026
20 
2027
19 
2028
18 
2029
18 
2030-34
85 
Assumptions used to determine the benefit obligation of the Company's postretirement benefit plan are summarized as follows:
 
2024
2023
Weighted-average assumptions as of year-end:
 
 
Discount rate (benefit obligation)
4.00 %
4.00 %
Table of Contents    49    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Components of net periodic benefit cost (credit) for the postretirement plan are summarized as follows:
 
2024
2023
Service cost
$
1 
$
5 
Interest cost
13 
16 
Recognized net actuarial gains
(34)
(26)
Net periodic benefit cost (credit)
$
(20)
$
(5)
Pre-tax amounts included in accumulated other comprehensive income for the Company's postretirement benefit plan at 2024 are summarized as follows:
 
Postretirement Benefit Plan
 
Balance at 2024
2025 Expected
Amortization
Unrecognized actuarial gains
$
387 
$
19 
Totals
$
387 
$
19 
NOTE 13 - INCOME TAXES
The provision (benefit) for income taxes on income (loss) from continuing operations consists of the following:
 
2024
2023
Current
 
 
Federal
$
(51)
$
208 
State
22 
6 
Total current
(29)
214 
Deferred
 
 
Federal
— 
— 
State
— 
— 
Total deferred
— 
— 
Income tax provision (benefit)
$
(29)
$
214 
Table of Contents    50    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Differences between the provision (benefit) for income taxes and the amount computed by applying the statutory federal income tax rate to income (loss) from
continuing operations before taxes are summarized as follows:
 
2024
2023
Federal statutory rate
21 %
21 %
Statutory rate applied to loss from continuing operations before taxes
$
(2,570)
$
(365)
Plus state income taxes, net of federal tax effect
17 
5 
Total statutory provision (benefit)
(2,553)
(360)
Effect of differences:
 
 
Nondeductible meals and entertainment
38 
31 
Executive compensation limitation
24 
— 
Federal tax credits
(220)
(343)
State tax credits
(22)
(74)
Reserve for uncertain tax positions
5 
37 
Change in valuation allowance
2,573 
797 
Stock-based compensation
125 
105 
Other items
1 
21 
Income tax provision (benefit)
$
(29)
$
214 
The Company has a full valuation allowance against its deferred tax assets. The Company intends to maintain this position until there is sufficient evidence to
support the reversal of all or some portion of these allowances. The Company also has certain assets with indefinite lives for which the basis is different for book
and tax. In accordance with ASC 740-10-30-18, the deferred tax liability related to these intangible assets cannot be used to offset deferred tax assets when
determining the amount of the valuation allowance for deferred tax assets which are not more-likely-than-not to be realized. The result is that the Company is in a
net deferred tax liability position of $91 at December 28, 2024 and December 30, 2023, which is recorded in other long-term liabilities in the Company's
Consolidated Balance Sheets.
Due to its full valuation allowance against its deferred tax balances, the Company is only able to recognize refundable credits and a small amount of federal and
state taxes in the tax provision (benefit) for 2024 and 2023.
Significant components of the Company's deferred tax assets and liabilities are as follows:
 
2024
2023
Deferred tax assets:
 
 
Inventories
$
1,916 
$
1,649 
Retirement benefits
436 
322 
State net operating losses
3,502 
4,014 
Federal net operating losses
6,309 
2,840 
State tax credit carryforwards
— 
1,669 
Federal tax credit carryforwards
4,778 
4,579 
Allowances for bad debts, claims and discounts
1,806 
1,663 
Other
8,597 
7,246 
Total deferred tax assets
27,344 
23,982 
Valuation allowance
(24,737)
(20,961)
Net deferred tax assets
2,607 
3,021 
Deferred tax liabilities:
 
Property, plant and equipment
2,698 
3,112 
Total deferred tax liabilities
2,698 
3,112 
Net deferred tax liability
$
(91)
$
(91)
Table of Contents    51    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
At December 28, 2024, the Company had approximately $30,045 of federal net operating loss carryforwards and approximately $63,275 of state net operating loss
carryforwards available from both continuing and discontinued operations. In addition, $4,778 of federal tax credit carryforwards were available to the Company.
The federal tax credit carryforwards will expire between 2030 and 2045. The federal net operating loss carryforwards have no expiration date. The state net
operating loss carryforwards will expire between 2024 and 2044. A valuation allowance is recorded to reflect the estimated amount of deferred tax assets
attributable to continuing operations that are estimated not to be realizable based on the available evidence. At December 28, 2024, the Company is in a net
deferred tax liability position of $91 which is included in other long-term liabilities in the Company's Consolidated Balance Sheets.
Beginning in 2022, the Tax Cuts and Jobs Act (the "TCJA") amended Section 174 to eliminate current year deductibility of research and experimentation ("R&E")
expenditures and software development costs (collectively, "R&E expenditures") and instead requires taxpayers to charge their R&E expenditures to a capital
account amortized over 5 years. For the 2024 and 2023 tax years, the Company capitalized $4,282 and $4,642 of research and development expenses
respectively.
Tax Uncertainties
The Company accounts for uncertainty in income tax positions according to FASB guidance relating to uncertain tax positions. Unrecognized tax benefits, if
recognized, would affect the Company's effective tax rate. There were no significant interest or penalties accrued as of December 28, 2024 or December 30, 2023.
The following is a summary of the change in the Company's unrecognized tax benefits:
 
2024
2023
Balance at beginning of year
$
555 
$
518 
Additions based on tax positions taken during a current period
5 
37 
Balance at end of year
$
560 
$
555 
The Company and its subsidiaries are subject to United States federal income taxes, as well as income taxes in a number of state jurisdictions. The tax years
subsequent to 2020 remain open to examination for U.S. federal income taxes. The majority of state jurisdictions remain open for tax years subsequent to 2020. A
few state jurisdictions remain open to examination for tax years subsequent to 2019.
NOTE 14 - COMMON STOCK AND EARNINGS (LOSS) PER SHARE
Common & Preferred Stock
The Company's charter authorizes 80,000,000 shares of Common Stock with a $3 par value per share and 16,000,000 shares of Class B Common Stock with a $3
par value per share. Holders of Class B Common Stock have the right to twenty votes per share on matters that are submitted to Shareholders for approval and to
dividends in an amount not greater than dividends declared and paid on Common Stock. Class B Common Stock is restricted as to transferability and may be
converted into Common Stock on a one share for one share basis. The Company's charter also authorizes 200,000,000 shares of Class C Common Stock, $3 par
value per share, and 16,000,000 shares of Preferred Stock. No shares of Class C Common Stock or Preferred Stock have been issued.
Repurchases of Common Stock
On May 1, 2024, the Company's Board of Directors approved the repurchase of up to $2,800 of the Company's Common Stock. The repurchases were made
pursuant to that authorization, and under a plan restructured to mee the requirements of Rule 10b-5-1 of the Securities and Exchange Act ("Plan"). The Company
repurchased 676,071 shares under the Plan at a cost of $549 in 2024. The Plan was terminated on August 22, 2024. In addition, during fiscal 2024, 56,817 shares
were withheld from employees in lieu of cash payments for withholding taxes due for a total amount of $35 pursuant to the terms of the applicable incentive plans.
Earnings (Loss) Per Share
The Company's unvested stock awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are considered participating
securities and are included in the computation of earnings per share. The Company calculates basic and diluted earnings per common share using the two-class
method. The accounting guidance requires disclosure of EPS for common stock and unvested share-based payment awards, separately disclosing distributed and
undistributed earnings. Undistributed earnings represent earnings that were available for distribution but were not distributed.
Table of Contents    52    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Common stock and unvested share-based payment awards earn dividends equally. All earnings were undistributed in all periods presented.
The following table sets forth the computation of basic and diluted earnings (loss) per share from continuing operations:
 
2024
2023
Basic earnings (loss) per share:
Loss from continuing operations
$
(12,210)
$
(1,952)
Less: Allocation of earnings to participating securities
— 
— 
Loss from continuing operations available to common shareholders - basic
$
(12,210)
$
(1,952)
Basic weighted-average shares outstanding (1)
14,639 
14,783 
Basic earnings (loss) per share - continuing operations
$
(0.83)
$
(0.13)
Diluted earnings (loss) per share:
Loss from continuing operations available to common shareholders - basic
$
(12,210)
$
(1,952)
Add: Undistributed earnings reallocated to unvested shareholders
— 
— 
Loss from continuing operations available to common shareholders - basic
$
(12,210)
$
(1,952)
Basic weighted-average shares outstanding (1)
14,639 
14,783 
Effect of dilutive securities:
 
Stock options (2)
— 
— 
Directors' stock performance units (2)
— 
— 
Diluted weighted-average shares outstanding (1)(2)
14,639 
14,783 
Diluted earnings (loss) per share - continuing operations
$
(0.83)
$
(0.13)
(1)
Includes Common and Class B Common shares, excluding 880 and 706 unvested participating securities, in thousands, for 2024 and 2023, respectively.
(2)
Shares issuable under stock option plans where the exercise price is greater than the average market price of the Company's Common Stock during the relevant period and
directors' stock performance units have been excluded to the extent they are anti-dilutive. Aggregate shares, in thousands, excluded were 474 in 2024 and 549 in 2023.
NOTE 15 - STOCK PLANS AND STOCK COMPENSATION EXPENSE
The Company recognizes compensation expense relating to share-based payments based on the fair value of the equity instrument issued and records such
expense in selling and administrative expenses in the Company's Consolidated Statements of Operations. The Company's stock compensation expense was $494
in 2024 and $687 in 2023.
Omnibus Equity Incentive Plan
On May 4, 2022, the Company's shareholders' approved and adopted the Company's Omnibus Equity Incentive Plan (the "Omnibus Equity Incentive Plan" or the
"2022 Plan") which provides for the issuance of a maximum of 1,300,000 shares of Common Stock and/or Class B Common Stock for the grant of options, and/or
other stock-based or stock-denominated awards to employees, officers, directors and agents of the Company and its participating subsidiaries. There are 394,649
shares remaining under the 2022 Plan.
2016 Incentive Compensation Plan
On May 3, 2016, the Company's shareholders' approved and adopted the Company's 2016 Incentive Compensation Plan (the "2016 Incentive Compensation
Plan") which provided for the issuance of a maximum of 800,000 shares of Common Stock and/or Class B Common Stock for the grant of options, and/or other
stock-based or stock-denominated awards to employees, officers, directors, and agents of the Company and its participating subsidiaries. The 2016 Incentive
Compensation Plan and the allocation of shares thereunder superseded and replaced The Dixie Group, Inc. Stock Awards Plan, as amended (the "2006 Plan")
and the allocation of shares thereunder. Awards previously granted under the 2006 Plan continue to be governed by the terms of that plan and are not affected by
its termination. On May 6, 2020, the board approved an amendment of the Company's 2016 Incentive Compensation Plan to increase the original number of
shares by an additional 500,000. There are 224,351 shares remaining under the 2016 Incentive Plan due to forfeiture or cancellation of unvested awards
outstanding under that plan.
Table of Contents    53    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Restricted Stock Awards
Pursuant to the Company's Omnibus Equity Incentive Plan, the Company's practice has been to adopt an annual incentive plan which provides for the grant of
restricted stock awards denominated as Long-Term Incentive Stock Awards and Career Share awards. Under the plan adopted for 2023, each executive officer
has the opportunity to earn a Primary Long-Term Incentive Award of restricted stock and separately receive an award of restricted stock denominated as “Career
Shares.” The number of shares issued, if any, is based on the market price of the Company’s Common Stock at the time of grant of the award, subject to a $5.00
per share minimum value. Primary Long-Term Incentive Awards vest over three years. For participants over age 60, Career Shares awards fully vest when the
participant becomes (i) qualified to retire from the Company and (ii) has retained such shares two years following the grant date. For the participants under age 60,
Career Shares vest ratably over five years beginning on the participant's 61st birthday.
Restricted stock activity for the two years ended are summarized as follows:
 
Number of Shares
Weighted-Average
Grant-Date Fair Value
Outstanding at December 31, 2022
943,706 
$
3.14 
Granted
55,000 
0.69 
Vested
(241,211)
2.89 
Forfeited
(51,220)
2.62 
Outstanding at December 30, 2023
706,275 
$
3.07 
Granted
443,537 
0.60 
Vested
(237,557)
2.41 
Forfeited
(31,812)
1.92 
Outstanding at December 28, 2024
880,443 
$
2.05 
As of December  28, 2024, unrecognized compensation cost related to unvested restricted stock was $868. That cost is expected to be recognized over a
weighted-average period of 7.0 years. The total fair value of shares vested was approximately $147 and $197 during 2024 and 2023, respectively.
Stock Performance Units
Prior to 2021, the Company's non-employee directors received an annual retainer of $18 in cash and $18 in value of Stock Performance Units (subject to a $5.00
minimum per unit). If market value at the date of the grants was above $5.00 per share; there was no reduction in the number of units issued. However, if the
market value at the date of the grants was below $5.00, units would be reduced to reflect the $5.00 per share minimum. Upon retirement, the Company will issue
the number of shares of Common Stock equivalent to the number of Stock Performance Units held by non-employee directors at that time. As of December 28,
2024, there were 92,819 Stock Performance Units were outstanding under this plan. As of December 28, 2024, there was no unrecognized compensation cost
related to Stock Performance Units.
Stock Options
Options granted under the Company's Omnibus Equity Incentive Plan were exercisable for periods determined at the time the awards are granted. Effective 2009,
the Company established a $5.00 minimum price for calculating the number of options to be granted.
On May 25, 2023, the Company granted 444,000 options with a market condition to certain key employees of the Company at a weighted-average exercise price
of $1.00. The grant-date fair value of these options was $186. These options vest over a two-year period and require the Company's stock to trade at or above
$3.00 for five consecutive trading days during the term of the option to meet the market condition.
The fair value of each option was estimated on the date of grant using a lattice model. Expected volatility was based on historical volatility of the Company's stock,
using the most recent period equal to the expected life of the options. The risk-free interest rate was based on the U.S. Treasury yield for a term equal to the
expected life of the option at the time of grant. The Company used historical exercise behavior data of similar employee groups to determine the expected lives of
options.
Table of Contents    54    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
The following weighted-average assumptions were used to estimate the fair value of stock options granted during the years ended 2024 and 2023.
2024
2023
Risk-free interest rate
— %
3.80 %
Expected volatility
— %
97.96 %
Expected dividends
— %
— %
Expected life of options
0 years
5 years
Option activity for the two years ended is summarized as follows:
 
Number of
Shares
Weighted-Average
Exercise Price
Weighted-Average
Remaining Contractual
Life (in years)
Weighted-Average Fair
Value of Options
Granted During the Year
Outstanding at December 31, 2022
— 
$
— 
0.00
$
— 
Granted
444,000 
1.00 
— 
0.42 
Expired
(25,000)
1.00 
— 
— 
Outstanding at December 30, 2023
419,000 
1.00 
4.40
— 
Granted
— 
— 
— 
— 
Forfeited
(38,000)
1.00 
— 
— 
Outstanding at December 28, 2024
381,000 
$
1.00 
3.40
$
— 
Options exercisable at December 28, 2024
— 
$
— 
— 
$
— 
At December 28, 2024, there was no intrinsic value of outstanding stock options and no intrinsic value of exercisable stock options. At December 28, 2024, there
was $32 unrecognized compensation expense related to unvested stock options and is expected to be recognized over a weighted-average period of 0.4 years.
NOTE 16 - ACCUMULATED OTHER COMPREHENSIVE INCOME
Components of accumulated other comprehensive income, net of tax, are as follows:
Post-Retirement
Liabilities
Total
Balance at December 31, 2022
$
219 
$
219 
Unrecognized net actuarial gain on postretirement benefit plans, net of tax of $0
75 
75 
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $0
(26)
(26)
Balance at December 30, 2023
$
268 
$
268 
Unrecognized net actuarial gain on postretirement benefit plans, net of tax of $0
52 
52 
Reclassification of net actuarial gain into earnings from postretirement benefit plans, net of tax of $0
(34)
(34)
Balance at December 28, 2024
$
286 
$
286 
NOTE 17 - COMMITMENTS AND CONTINGENCIES
Commitments
The Company had purchase commitments of $371 at December 28, 2024, primarily related to machinery and equipment. The Company enters into fixed-price
contracts with suppliers to purchase natural gas to support certain manufacturing processes. The Company had contract purchases of $743 in 2024 and $441 in
2023. At December 28, 2024, the Company has commitments to purchase natural gas of $717 for 2025 and $124 for 2026.
Table of Contents    55    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Contingencies
The Company assesses its exposure related to legal matters, including those pertaining to product liability, safety and health matters and other items that arise in
the regular course of its business. If the Company determines that it is probable a loss has been incurred, the amount of the loss, or an amount within the range of
loss, that can be reasonably estimated will be recorded. The Company does not accrue for legal costs relating to loss contingencies. The Company has not
identified any legal matters that could have a material adverse effect on its consolidated results of operations, financial position or cash flows.
Environmental Remediation
The Company accrues for losses associated with environmental remediation obligations when such losses are probable and estimable. Remediation obligations
are accrued based on the latest available information and are recorded at undiscounted amounts. The Company regularly monitors the progress of environmental
remediation. If studies indicate that the cost of remediation has changed from the previous estimate, an adjustment to the liability would be recorded in the period
in which such determination is made. (See Note 20).
Legal Proceedings
The Company has been sued together with 15 other defendants in a civil action filed January 22, 2024, in the Superior Court of Gordon County Georgia. The case
is styled: Moss Land Company, LLC and Revocable Living Trust of William Darryl Edwards, by and through William Darryl Edwards, Trustee vs. City of Calhoun et
al. Civil Action Number 24CV73929. The plaintiffs are two landowners located in Gordon County Georgia. The relief sought is compensation for alleged damages
to the plaintiffs’ real property, an injunction from alleged further damage to their property and abatement of alleged nuisance related to the presence of PFAS and
related chemicals on their property. The Plaintiffs allege that such chemicals have been deposited on their property by the City of Calhoun as a byproduct of
treating water containing such chemicals used by manufacturing operations in and around Calhoun Georgia. The defendants include the City of Calhoun Georgia,
several other carpet manufacturers, and certain manufacturers and sellers of chemicals containing PFAS. No specific amount of damages has been demanded.
The Company has denied liability and is vigorously defending the matter.
On March 1, 2024, the City of Calhoun Georgia served an answer and crossclaim for Damages and injunctive relief in the pending matter styled: In re: Moss Land
Company, LLC and Revocable living Trust of William Darryl Edwards by and through William Darryl Edwards, Trustee v. The Dixie Group, Inc. In the Superior
Court of Gordon County Georgia, case Number: 24CV73929. In its Answer and Crossclaim defendant Calhoun sues The Dixie Group, Inc. and other named carpet
manufacturing defendants for unspecified monetary damages and other injunctive relief based on injury claimed to have resulted from defendant’s use and
disposal of chemical wastewater containing PFAS chemicals. The Company has filed an answer denying liability and is vigorously defending the matter.
On May 7, 2024, the Company was sued, together with 15 other named defendants, in a matter styled William Hartwell Brooks, et al v the City of Calhoun Georgia,
In the Superior Court of Gordon County Georgia, civil action number 24CV74289. The case seeks unspecified monetary and other damages alleged to have been
suffered by plaintiffs as landowners by the discharge of PFAS chemicals in proximity to or directly adjacent to their properties. The Company has filed an answer
denying liability and is vigorously defending the matter.
On February 14, 2025, the Company was sued along with 15 other named defendants in a matter styled: Stephens v the Dixie Group, Inc. et al. In the Superior
Court of Gordon County, Georgia, case no 25CV7507. The case seeks unspecified monetary and other damages alleged to have been suffered by plaintiffs as
landowners by the discharge of PFOA, PFOS and related chemicals in proximity to or directly adjacent to their property. The Company intends to file an answer to
the complaint, denying liability, and to vigorously defend the matter.
Table of Contents    56    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
NOTE 18 - OTHER (INCOME) EXPENSE, NET
Other operating (income) expense, net is summarized as follows:
 
2024
2023
Other operating (income) expense, net:
 
Lease income
$
(1,879)
$
(705)
Lease expense
1,992 
— 
Insurance proceeds
(161)
(616)
Loss on property, plant and equipment disposals
(24)
2 
Gain on sale of building
— 
(8,198)
Loss on currency exchanges
136 
36 
Retirement expenses
148 
195 
Miscellaneous (income) expense
(12)
114 
Other operating (income) expense, net
$
200 
$
(9,172)
Beginning in fiscal 2024, the Company began to allocate direct expenses associated with the leases to lease expenses in other operating (income) expense. The
2023 insurance proceeds includes reimbursement for claims filed for building flood in 2023 and cyber event from 2021.
Other income, net is summarized as follows:
2024
2023
Other income, net:
Gain on extinguishment of debt, net
$
— 
$
(419)
Miscellaneous income
(7)
(12)
Other income, net
$
(7)
$
(431)
NOTE 19 - FACILITY CONSOLIDATION AND SEVERANCE EXPENSES, NET
2022 Consolidation of East Coast Manufacturing Plan
During 2022, the Company implemented a plan to consolidate its East Coast manufacturing in order to reduce its manufacturing costs. Under this plan, the
Company will consolidate its East Coast tufting operations into one plant in North Georgia and relocate the distribution of luxury vinyl flooring from its Saraland,
Alabama facility to its Atmore, Alabama facility. Costs for the plan will include machinery and equipment relocation, inventory relocation, staff reductions and
unabsorbed fixed costs during conversion of the Atmore facility. Costs related to the facility consolidation plan is summarized as follows:
As of December 28, 2024
Accrued Balance
at December 30,
2023
2024
Expenses (1)
2024 Cash
Payments
Accrued Balance
at December 28,
2024
Total Costs
Incurred to
Date
Total Expected
Costs
Consolidation of East Coast Manufacturing Plan
$
36 
$
418 
$
454 
$
— 
$
8,133 
$
8,460 
Asset Impairments/Non-cash items
$
— 
$
909 
$
— 
$
— 
$
2,626 
$
2,912 
Accrued Balance
at December 31,
2022
2023
Expenses (1)
2023 Cash
Payments
Accrued Balance
at December 30,
2023
Consolidation of East Coast Manufacturing Plan
$
1,011 
$
2,886 
$
3,861 
$
36 
Asset Impairments/Non-cash items
$
— 
$
981 
$
— 
$
— 
Table of Contents    57    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
(1)
Costs incurred under these plans are classified as "facility consolidation and severance expenses, net" in the Company's Consolidated Statements of Operations.
NOTE 20 - DISCONTINUED OPERATIONS
The Company has either sold or discontinued certain operations that are accounted for as "Discontinued Operations" under applicable accounting guidance.
Discontinued operations are summarized as follows:
 
2024
2023
Workers' compensation costs from former textile operations
$
(94)
$
(87)
Environmental remediation costs from former textile operations
— 
(49)
Commercial business operations
(696)
(718)
Loss from discontinued operations, before taxes
$
(790)
$
(854)
Income tax benefit
— 
(88)
Loss from discontinued operations, net of tax
$
(790)
$
(766)
Workers' compensation costs from former textile operations
Undiscounted reserves are maintained for the self-insured workers' compensation obligations related to the Company's former textile operations. These reserves
are administered by a third-party workers' compensation service provider under the supervision of Company personnel. Such reserves are reassessed on a
quarterly basis. Pre-tax cost incurred for workers' compensation as a component of discontinued operations primarily represents a change in estimate for each
period from unanticipated medical costs associated with the Company's obligations.
Environmental remediation costs from former textile operations
Reserves for environmental remediation obligations are established on an undiscounted basis. The Company has an accrual for environmental remediation
obligations related to discontinued operations of $2,174 as of December 28, 2024 and $2,205 as of December 30, 2023. The liability established represents the
Company's best estimate of possible loss and is the reasonable amount to which there is any meaningful degree of certainty given the periods of estimated
remediation and the dollars applicable to such remediation for those periods. The actual timeline to remediate, and thus, the ultimate cost to complete such
remediation through these remediation efforts, may differ significantly from the Company's estimates. Pre-tax cost for environmental remediation obligations
classified as discontinued operations were primarily a result of specific events requiring action and additional expense in each period.
Table of Contents    58

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
Commercial business operations
In accordance with the Asset Purchase Agreement dated September 13, 2021, the Company sold assets that include certain inventory, certain items of machinery
and equipment used exclusively in the Commercial Business, and related intellectual property. Additionally, the Company agreed not to compete with the specified
commercial business and the Atlas|Masland markets for a period of five years following September 13, 2021. The agreement allowed for the Company to sell the
commercial inventory retained by the company after the divestiture.
The Company reclassified the following assets and liabilities for discontinued operations in the accompanying Consolidated Balance Sheets:
2024
2023
Current Assets of Discontinued Operations:
  Receivables, net
$
— 
$
158 
  Inventories, net
— 
107 
Current Assets Held for Discontinued Operations
$
— 
$
265 
Long Term Assets of Discontinued Operations:
  Property, plant and equipment, net
$
— 
$
176 
  Other assets
1,064 
1,138 
Long Term Assets Held for Discontinued Operations
$
1,064 
$
1,314 
Current Liabilities of Discontinued Operations:
  Accounts payable
$
121 
$
128 
  Accrued expenses
1,035 
1,009 
Current Liabilities Held for Discontinued Operations
$
1,156 
$
1,137 
Long Term Liabilities of Discontinued Operations:
  Other long term liabilities
$
3,398 
$
3,536 
Long Term Liabilities Held for Discontinued Operations
$
3,398 
$
3,536 
For the twelve months ended December  28, 2024 and December  30, 2023, the Company reclassified the following operations of the Commercial business
included in discontinued operations in the accompanying Consolidated Statements of Operations:
2024
2023
Net sales
$
— 
$
199 
Cost of sales
554 
624 
Gross profit (loss)
(554)
(425)
Selling and administrative expenses
(34)
178 
Other operating expense, net
176 
115 
Loss from discontinued Commercial business before taxes
$
(696)
$
(718)
NOTE 21 - SEGMENT REPORTING
Based on applicable accounting standards, the Company has determined that it has one reportable segment, Floorcovering. The Floorcovering segment derives
revenues from customers through the sale of residential floorcovering products which include broadloom carpet, rugs, luxury vinyl flooring and engineered
hardwood. These products are sold into the designer, retailer, mass merchant and builder markets. The Company derives revenues primarily in the United States
and Canada and manages the business activities on a consolidated basis. No customer accounted for more than 10% of net sales in 2024 or 2023, nor did the
Company make a significant amount of sales to foreign countries outside of Canada during 2024 or 2023.
The accounting policies of the Floorcovering segment are the same as those described in the summary of significant accounting policies. The chief operating
decision maker ("CODM"), which is the Company's Chief Executive Officer, assesses performance
Table of Contents    59    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
of the Floorcovering segment and decides how to allocate resources based on segment operating income (loss). The CODM uses segment operating income
(loss) to monitor budget versus actual results and is used in assessing the performance of the segment. The measure of segment assets is reported on the
balance sheet as total assets.
The following table outlines information about the reported segment including net sales, significant segment expenses, and segment operating income (loss) for
fiscal years 2024 and 2023.
Floorcovering
2024
2023
Net sales
$
265,026 
$
276,343 
Less: significant segment expenses (1)
Cost of sales
199,515 
202,464 
Selling expenses
50,508 
52,176 
Administrative expenses
19,342 
21,960 
Segment operating income (loss)
(4,339)
(257)
Reconciliation of segment operating income (loss) to operating income (loss)
Other operating income (expense), net
200 
(9,172)
Facility consolidation and severance expenses, net
1,327 
3,867 
Operating income (loss)
$
(5,866)
$
5,048 
(1)
Significant segment expense categories and amounts align with information that is regularly provided to the CODM, included in the measure of segment profit, and
considered to be significant. Amounts include the allocation of corporate overhead.
Geographical Disclosures
2024
2023
Geographic net sales:
United States
$
261,729 
$
273,032 
Canada
2,438 
2,554 
Other
859 
757 
Total
$
265,026 
$
276,343 
Long-lived assets: (1)
United States
$
59,115 
$
60,330 
Other
— 
— 
Total
$
59,115 
$
60,330 
(1) Long-lived assets are comprised of property, plant and equipment - net and operating lease right-of-use assets.
NOTE 22 - SUBSEQUENT EVENT
On February 25, 2025, the Company entered into a new $75,000 revolving credit agreement with MidCap Financial IV Trust, as agent, and lenders from time-to-
time party thereto (collectively, “MidCap”). At close, proceeds from the credit facility were used to retire the Company’s existing revolving credit facility with Fifth
Third Bank National Association (“Fifth Third”), as well as to post cash collateral to Fifth Third for the Company’s ongoing contingent letter of credit obligations
issued by Fifth Third and to pay certain debt issuance costs, including fees to MidCap and legal and other expenses directly associated with the financing
transaction. The credit agreement is secured by a security interest on all accounts receivable, inventory, and other assets other than certain excluded assets,
including a deed to secure debt lien on the Company’s Calhoun and Chatsworth, Georgia facilities.
Table of Contents    60    

THE DIXIE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(amounts in thousands, except per share data)
The Company’s borrowing capacity is based on certain percentages of values/sub-limits of the accounts receivable, inventory, and other assets (including the real
properties serving as collateral for the loan). As of February 25, 2025, the unused borrowing availability under the MidCap revolving credit facility was $8,113 which
is subject to a $6,000 minimum excess availability requirement. The revolving credit facility requires a lockbox arrangement, which provides for all cash receipts to
be swept daily to reduce the balance outstanding. This arrangement, combined with the existence of a “subjective acceleration clause” (as defined by U.S. GAAP)
in the revolving credit facility, requires the balance on the revolving credit facility to be classified as a current liability. The “subjective acceleration clause” allows
the lender to declare an event of default if there is a material adverse change in the Company's business or financial condition. Upon the occurrence of an event of
default, the lender may, among other things, declare all obligations payable in full.
Advances under the revolving credit facility bear interest at annual rates equal to SOFR (plus a 0.11448% SOFR adjustment) for a 1 month period, as defined with
a floor of 1.00% or published SOFR, plus an applicable margin ranging between 3.75% and 4.25%. The applicable margin is determined based on the revolving
loan availability percentage under the revolving credit facility with margins increasing as availability decreases. The Company is subject to a minimum excess
availability covenant that is based upon a fixed charge coverage ratio and must be above a 1.10 to 1.00 ratio. The Company is subject to a monthly rolling
minimum EBITDA requirement if availability is under 20% of the loan. The credit agreement is subject to customary terms and conditions and annual administrative
and unused line fees with pricing varying based on excess availability. The agreement matures on February 25, 2028. The previous outstanding letters of credit
now require a restricted cash deposit to serve as collateral for our self-insured workers' compensation program, a lease on one of our facilities and an electricity
deposit.
Effective February 25, 2025, and simultaneous with closing the MidCap agreement, the Company’s existing revolving credit facility with Fifth Third was terminated
in accordance with its terms.
Table of Contents    61    

Item 15(a)(2)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
THE DIXIE GROUP, INC.
(dollars in thousands)
Description
Balance at
Beginning of
Year
Additions -
Charged to
Costs and
Expenses
Additions -
Charged to
Other Account -
Describe
Deductions -
Describe
Balance at End
of Year
Year ended December 28, 2024:
Reserves deducted from asset accounts:
Allowance for expected credit losses
$
440 
$
194 
$
— 
$
180 
(1)
$
454 
Reserves classified as liabilities:
Provision for claims, allowances and warranties
$
3,478 
$
8,023 
$
— 
$
7,772 
(2)
$
3,729 
Year ended December 30, 2023:
Reserves deducted from asset accounts:
Allowance for expected credit losses
$
111 
$
31 
$
388 
(3) $
90 
(1)
$
440 
Reserves classified as liabilities:
Provision for claims, allowances and warranties
$
3,383 
$
8,256 
$
— 
$
8,161 
(2)
$
3,478 
(1)
Uncollectible accounts written off, net of recoveries. The Allowance for Expected Credit Losses is included in Receivables, net on the Consolidated Balance Sheet. See Note
4 - Receivables, Net for further information.
(2)
Net reserve reductions for claims, allowances and warranties settled. The provision for claims, allowances and warranties is included in Accrued Expenses under Current
Liabilities on the Consolidated Balance Sheet and included, along with the accrual of rebates, within the Provision for customer rebates, claims and allowances in Note 7 -
Accrued Expenses.
(3)
The Company adopted the new standard , ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, on
January 1, 2023 using a modified retrospective transition approach, with the cumulative impact being $388 for continuing operations.
Table of Contents    62    

ANNUAL REPORT ON FORM 10-K
ITEM 15(b)
EXHIBITS
YEAR ENDED DECEMBER 28, 2024
THE DIXIE GROUP, INC.
DALTON, GEORGIA
Exhibit Index
EXHIBIT NO.
DESCRIPTION
(3.1)*
Text of Restated Charter of The Dixie Group, Inc. as Amended - Blackline Version. (Incorporated by Reference to Exhibit (3.4) to Dixie's
Annual Report on Form 10-K for the year ended December 27, 2003.)
(3.2)*
Amended By-Laws of The Dixie Group, Inc. as of February 22, 2007. (Incorporated by Reference to Exhibit 3.1 to Dixie's Current Report on
Form 8-K dated February 26, 2007.)
(5.1)*
Shelf Registration Statement on Form S-3. (Incorporated by Reference to Exhibit (5.1) to Dixie's Current Report on Form 8-K dated May 20,
2014.)
(10.1)*
The Dixie Group, Inc. New Non-qualified Retirement Savings Plan effective August 1, 1999. (Incorporated by Reference to Exhibit (10.1) to
Dixie's Quarterly Report on Form 10-Q for the quarter ended June 26, 1999.)**
(10.2)*
Thornton Edge LLC Lease for Reed Road Facility. (Incorporated by Reference to Exhibit (10.1) to Dixie's Current Report on Form 10-Q dated
November 4, 2015.)
(10.3)*
Thornton Edge LLC First Lease Amendment for Reed Road Facility. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on
Form 10-Q dated November 4, 2015.)
(10.4)*
Thornton Edge LLC Second Lease Amendment for Reed Road Facility. (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report
on Form 10-Q dated November 4, 2015.)
(10.5)*
2016 Incentive Compensation Plan. (Incorporate by Reference to Appendix A to Dixie's Proxy Statement for the Registrant's Annual Meeting
of Shareholders held May 3, 2016.)**
(10.6)*
Long Term Incentive Plan Award B Shareholder. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated
March 11, 2016.)**
(10.7)*
Long Term Incentive Plan Award Common. (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March
11, 2016.)**
(10.8)*
Career Shares B Shareholder. (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 11, 2016.)**
(10.9)*
Career Shares Common. (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 11, 2016.)**
(10.10)*
Form of Stock Option Agreement - Class B Holder - 2016 Stock Plan. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report
on Form 8-K dated May 31, 2017.)**
(10.11)*
Long Term Incentive Plan Award B Shareholder. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated
March 9, 2018.)**
(10.12)*
Long Term Incentive Plan Award Common. (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March 9,
2018.)**
(10.13)*
Career Shares B Shareholder. (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 9, 2018.)**
(10.14)*
Career Shares Common. (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 9, 2018.)**
(10.15)*
Agreement for the Purchase and Sale of Real Property between Saraland Industrial, LLC and TDG Operations, LLC and Lease Agreement
between Saraland Industrial, LLC and TDG Operations. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K
dated January 17, 2019.)
(10.16)*
Long Term Incentive Plan Award B Shareholder. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated
March 8, 2019.)**
(10.17)*
Long Term Incentive Plan Award Common. (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March 8,
2019.)**
(10.18)*
Career Shares B Shareholder. (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 8, 2019.)**
(10.19)*
Career Shares Common. (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 8, 2019.)**
(10.20)*
Agreement For the Purchase and Sale of Real Property between CenterPoint Properties Trust and TDG Operations, LLC. (Incorporated by
Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated October 22, 2019.)
(10.21)*
Form of Lease between CenterPoint Properties Trust and TDG Operations, LLC. (Incorporated by Reference to Exhibit (10.3) to Dixie's
Current Report on Form 8-K dated October 22, 2019.)
Table of Contents    63

(10.22)*
Long Term Incentive Plan Award B Shareholder. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated
March 13, 2020.)**
(10.23)*
Long Term Incentive Plan Award Common. (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March
13, 2020.)**
(10.24)*
Career Shares B Shareholder. (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 13, 2020.)**
(10.25)*
Career Shares Common. (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 13, 2020.)**
(10.26)*
Fifteenth Amendment to Credit Agreement. (Incorporated by Reference to Exhibit (10.1) to Dixie's Current Report on Form 8-K dated October
1, 2020.)
(10.27)*
Loan Agreement dated effective as of October 26, 2020 entered into by and between The Dixie Group, a Tennessee corporation, and TDG
Operations, LLC, a Georgia limited liability company, and AmeriState Bank, an Oklahoma state banking corporation. (Incorporated by
Reference to Exhibit (10.1) to Dixie's Current Report on Form 8-K dated November 2, 2020.)
(10.28)*
Real Estate Mortgage, Security Agreement, Assignment of Rents and Fixture Filing for Atmore, Alabama facility dated effective as of October
26, 2020 entered into by and between The Dixie Group, a Tennessee corporation, and TDG Operations, LLC, a Georgia limited liability
company, and AmeriState Bank, an Oklahoma state banking corporation. (Incorporated by Reference to Exhibit (10.2) to Dixie's Current
Report on Form 8-K dated November 2, 2020.)
(10.29)*
Real Estate Mortgage, Security Agreement, Assignment of Rents and Fixture Filing for Roanoke, Alabama facility dated effective as of
October 26, 2020 entered into by and between The Dixie Group, a Tennessee corporation, and TDG Operations, LLC, a Georgia limited
liability company, and AmeriState Bank, an Oklahoma state banking corporation. (Incorporated by Reference to Exhibit (10.3) to Dixie's
Current Report on Form 8-K dated November 2, 2020.)
(10.30)*
Loan Agreement dated effective as of October 29, 2020 entered into by and between The Dixie Group, a Tennessee corporation, and TDG
Operations, LLC, a Georgia limited liability company (collectively, the "Borrowers"), and Greater Nevada Credit Union, a non-profit cooperative
corporation organized under the laws of the State of Nevada. (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form
8-K dated November 2, 2020.)
(10.31)*
Security Agreement dated effective as of October 29, 2020 entered into by and between The Dixie Group, a Tennessee corporation, and TDG
Operations, LLC, a Georgia limited liability company, and Greater Nevada Credit Union, a non-profit cooperative corporation organized under
the laws of the State of Nevada. (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated November 2,
2020.)
(10.32)*
Credit Agreement dated as of October 30, 2020, among The Dixie Group, Inc., and TDG Operations, LLC and Fifth Third Bank, National
Association, a national banking association. (Incorporated by Reference to Exhibit (10.6) to Dixie's Current Report on Form 8-K dated
November 2, 2020.)
(10.33)*
Guaranty and Security Agreement dated as of October 28, 2020, among The Dixie Group, Inc., and TDG Operations, LLC in favor of Fifth
Third Bank, National Association, a national banking association. (Incorporated by Reference to Exhibit (10.7) to Dixie's Current Report on
Form 8-K dated November 2, 2020.)
(10.34)*
Long-Term Incentive Plan Award (Class B Shareholder). (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K
dated March 12, 2021.)**
(10.35)*
Long-Term Incentive Plan Award (Common). (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March
12, 2021.)**
(10.36)*
Career Shares (Class B Shareholder). (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 12,
2021.)**
(10.37)*
Career Shares (Common). (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 12, 2021.)**
(10.38)*
Omnibus Equity Incentive Plan as adopted by shareholders on May 4, 2022. (Incorporated by Reference to Appendix A to Dixie's Proxy
Statement for the Registrant's Annual Meeting of Shareholders held May 4, 2022.)**
(10.39)*
Long-Term Incentive Plan Award (Class B Shareholder). (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K
dated March 16, 2022.)**
(10.40)*
Long-Term Incentive Plan Award (Common). (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March
16, 2022.)**
(10.41)*
Career Shares (Class B Shareholder). (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 16,
2022.)**
(10.42)*
Career Shares (Common). (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 16, 2022.)**
(10.43)*
Long-Term Incentive Plan Award (Class B Shareholder). (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K
dated March 13, 2023.)**
(10.44)*
Long-Term Incentive Plan Award (Common). (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March
13, 2023.)**
(10.45)*
Career Shares (Class B Shareholder). (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated March 13,
2023.)**
Table of Contents    64

(10.46)*
Career Shares (Common). (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March 13, 2023.)**
(10.47)*
Form of Stock Option Agreement (Common) Options Granted Under the Omnibus Equity Incentive Plan Granted May 25, 2023. (Incorporated
by Reference to Exhibit (10.47) to Dixie's Annual Report on Form 10-K for year ended December 30, 2023.)**
(10.48)*
Form of Stock Option Agreement (Class B Shareholder) Options Granted Under the Omnibus Equity Incentive Plan Granted May 25, 2023.
(Incorporated by Reference to Exhibit (10.48) to Dixie's Annual Report on Form 10-K for year ended December 30, 2023.)**
(10.49)*
First Amendment to Credit Agreement dated September 10, 2021, among The Dixie Group, Inc. and TDG Operations, LLC and Fifth Third
Bank, National Association. (Incorporated by Reference to Exhibit (10.49) to Dixie's Annual Report on Form 10-K for year ended December
30, 2023.)
(10.50)*
Second Amendment to Credit Agreement dated July 29, 2022, among The Dixie Group, Inc. and TDG Operations, LLC and Fifth Third Bank,
National Association. (Incorporated by Reference to Exhibit (10.50) to Dixie's Annual Report on Form 10-K for year ended December 30,
2023.)
(10.51)*
Third Amendment to Credit Agreement dated June 9, 2023, among The Dixie Group, Inc. and TDG Operations, LLC and Fifth Third Bank,
National Association. (Incorporated by Reference to Exhibit (10.51) to Dixie's Annual Report on Form 10-K for year ended December 30,
2023.)
(10.52)*
Agreement for the Purchase and Sale of Real Property between Cannon Commercial, Inc. and TDG Adairsville, LLC. (Incorporated by
Reference to Exhibit (10.52) to Dixie's Annual Report on Form 10-K for year ended December 30, 2023.)
(10.53)*
Form of Lease between Adairsville GA, LLC and TDG Operations, LLC. (Incorporated by Reference to Exhibit (10.53) to Dixie's Annual
Report on Form 10-K for year ended December 30, 2023.)
(10.54)*
Summary of Annual Incentive Compensation Plan Applicable to 2024. (Incorporated by Reference to Exhibit (10.1) to Dixie's Current Report
on Form 8-K dated March 13, 2024.)**
(10.55)*
Form of PLTI award (B shareholder). (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated March 13,
2024.)**
(10.56)*
Form of PLTI award (common only). (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March 13,
2024.)**
(10.57)*
Form of Career Share award (B shareholder). (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated
March 13, 2024.)**
(10.58)*
Form of Career Share award (common only). (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report on Form 8-K dated March
13, 2024.)**
(10.59)*
Sublease Agreement between TDG Operations, LLC and Austal USA, LLC dated August 1, 2024. (Incorporated by Reference to Exhibit (10.1)
to Dixie's Quarterly Report on Form 10-Q for the quarter ended September 28, 2024.)
(10.60)
Credit, Security and Guaranty Agreement dated as of February 25, 2025 by and among TDG Operations, LLC and The Dixie Group., and
MidCap Funding IV Trust, as Agent and The Lenders from time to time party hereto. (Filed herewith.)
(10.61)*
Summary of Annual Incentive Compensation Plan Applicable to 2025. (Incorporated by Reference to Exhibit (10.1) to Dixie's Current Report
on Form 8-K dated March 31, 2025.)**
(10.62)*
Form of PLTI award (B shareholder). (Incorporated by Reference to Exhibit (10.2) to Dixie's Current Report on Form 8-K dated March 31,
2025.)**
(10.63)*
Form of PLTI award (common only). (Incorporated by Reference to Exhibit (10.3) to Dixie's Current Report on Form 8-K dated March 31,
2025.)**
(10.64)*
Form of Career Share award (B shareholder). (Incorporated by Reference to Exhibit (10.4) to Dixie's Current Report on Form 8-K dated
March 31, 2025.)**
(10.65)*
Form of Career Share award (common only). (Incorporated by Reference to Exhibit (10.5) to Dixie's Current Report of Form 8-K dated March
31, 2025.)**
(14)*
Code of Ethics, as amended and restated, February 15, 2010. (Incorporated by Reference to Exhibit (14) to Dixie's Annual Report on Form
10-K for year ended December 26, 2009.)
(16)*
Letter from FORVIS, LLP regarding change in certifying accountant. (Incorporated by Reference to Exhibit (16.1) to Dixie's Form 8-K dated
June 3, 2022.)
(19.1)*
Insider Trading Policies and Procedures. (Incorporated by Reference to Exhibit (19.1) to Dixie's Annual Report on Form 10-K for year ended
December 30, 2023.)
(21)
Subsidiaries of the Registrant. (Filed herewith.)
(23)
Consent of Forvis Mazars, LLP Independent Registered Public Accounting Firm. (Filed herewith.)
(31.1)
CEO Certification pursuant to Securities Exchange Act Rule 13a-14(a). (Filed herewith.)
(31.2)
CFO Certification pursuant to Securities Exchange Act Rule 13a-14(a). (Filed herewith.)
(32.1)
CEO Certification pursuant to Securities Exchange Act Rule 13a-14(b). (Filed herewith.)
(32.2)
CFO Certification pursuant to Securities Exchange Act Rule 13a-14(b). (Filed herewith.)
(97)*
Recoupment Policy. (Incorporated by Reference to Exhibit (97) to Dixie's Annual Report on Form 10-K for year ended December 31, 2022.)
(101.INS)
XBRL Instance Document. (Filed herewith.)
Table of Contents    65

(101.SCH)
XBRL Taxonomy Extension Schema Document. (Filed herewith.)
(101.CAL)
XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
(101.DEF)
XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
(101.LAB)
XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
(101.PRE)
XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
* Commission File No. 0-2585.
** Indicates a management contract or compensatory plan or arrangement.
Table of Contents    66

Execution Version
CREDIT, SECURITY AND GUARANTY AGREEMENT
dated as of February 25, 2025
by and among
TDG OPERATIONS, LLC,
and
THE DIXIE GROUP INC.,
and any additional borrower that hereafter becomes party hereto,
each as a Borrower, and collectively as Borrowers,
and any guarantor that hereafter becomes party hereto,
each as Guarantor, and collectively as Guarantors,
and
MIDCAP FUNDING IV TRUST,
as Agent,
and
THE LENDERS
FROM TIME TO TIME PARTY HERETO

TABLE OF CONTENTS
Page
Section 1.1    Certain Defined Terms    1
Section 1.2    Accounting Terms and Determinations    46
Section 1.3    Other Definitional and Interpretive Provisions    46
Section 1.4    Settlement and Funding Mechanics    47
Section 1.5    Time is of the Essence    47
Section 1.6    Time of Day    47
ARTICLE 2 - LOANS    47
Section 2.1    Loans    47
Section 2.2    Interest, Interest Calculations and Certain Fees    48
Section 2.3    Notes    51
Section 2.4    [Reserved]    51
Section 2.5    Letters of Credit and Letter of Credit Fees.    51
Section 2.6    General Provisions Regarding Payment; Loan Account    54
Section 2.7    Maximum Interest    54
Section 2.8    Taxes; Capital Adequacy; Increased Costs; Inability to Determine Rates; Illegality    55
Section 2.9    Appointment of Borrower Representative    59
Section 2.10    Joint and Several Liability; Rights of Contribution; Subordination and Subrogation    60
Section 2.11    Collections and Lockbox Account    62
Section 2.12    Termination; Restriction on Termination    64
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES    64
Section 3.1    Existence and Power    64
Section 3.2    Organization and Governmental Authorization; No Contravention    65
Section 3.3    Binding Effect    65
Section 3.4    Capitalization    65
Section 3.5    Financial Information    65
Section 3.6    Litigation    66
Section 3.7    Ownership of Property    66

Section 3.8    No Default    66
Section 3.9    Labor Matters    66
Section 3.10    Investment Company Act    66
Section 3.11    Margin Regulations    66
Section 3.12    Compliance With Laws; Anti-Terrorism Laws    67
Section 3.13    Taxes    67
Section 3.14    Compliance with ERISA    67
Section 3.15    Brokers    68
Section 3.16    [Reserved]    68
Section 3.17    Material Contracts    68
Section 3.18    Compliance with Environmental Requirements; No Hazardous Materials    68
Section 3.19    Intellectual Property    69
Section 3.20    Solvency    69
Section 3.21    Full Disclosure    69
Section 3.22    Senior Indebtedness Status    70
Section 3.23    Subsidiaries    70
Section 3.24    [Reserved]    70
Section 3.25    Borrowing Base Collateral    70
ARTICLE 4 - AFFIRMATIVE COVENANTS    70
Section 4.1    Financial Statements and Other Reports and Notices    70
Section 4.2    Payment and Performance of Obligations    72
Section 4.3    Maintenance of Existence    72
Section 4.4    Maintenance of Property; Insurance    72
Section 4.5    Compliance with Laws and Material Contracts    73
Section 4.6    Inspection of Property, Books and Records    74
Section 4.7    Use of Proceeds    74
Section 4.8    [Reserved]    74
Section 4.9    Notices of Material Contracts, Litigation and Defaults    74
Section 4.10    Hazardous Materials; Remediation    75
Section 4.11    Further Assurances    75
Section 4.12    [Reserved]    76

Section 4.13    Power of Attorney    76
Section 4.14    Borrowing Base Collateral Administration    77
Section 4.15    Schedule Updates    77
ARTICLE 5 - NEGATIVE COVENANTS    77
Section 5.1    Debt; Contingent Obligations    77
Section 5.2    Liens    78
Section 5.3    Distributions    78
Section 5.4    Restrictive Agreements    78
Section 5.5    Payments and Modifications of Subordinated Debt    78
Section 5.6    Consolidations, Mergers and Sales of Assets    79
Section 5.7    Purchase of Assets, Investments    79
Section 5.8    Transactions with Affiliates    79
Section 5.9    Modification of Organizational Documents    80
Section 5.10    Modification of Certain Agreements    80
Section 5.11    Conduct of Business    80
Section 5.12    [Reserved]    80
Section 5.13    Limitation on Sale and Leaseback Transactions    80
Section 5.14    Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts    80
Section 5.15    Compliance with Anti-Terrorism Laws    81
Section 5.16    Agreements Regarding Receivables    81
Section 5.17    Permitted Activities of Holdings    82
ARTICLE 6 - FINANCIAL COVENANTS    82
Section 6.1    Minimum Excess Availability    82
Section 6.2    Minimum EBITDA    82
Section 6.3    Evidence of Compliance    82
ARTICLE 7 - CONDITIONS    83
Section 7.1    Conditions to Closing    83
Section 7.2    Conditions to Each Loan, Support Agreement and Lender Letter of Credit. :    83
Section 7.3    Searches    84
Section 7.4    Post-Closing Requirements    84

ARTICLE 8 - [RESERVED]    84
ARTICLE 9 - SECURITY AGREEMENT    84
Section 9.1    Generally    84
Section 9.2    Representations and Warranties and Covenants Relating to Collateral    85
ARTICLE 10 - EVENTS OF DEFAULT    88
Section 10.1    Events of Default    88
Section 10.2    Acceleration and Suspension or Termination of Revolving Loan Commitment    91
Section 10.3    UCC Remedies    91
Section 10.4    Protective Advances..    93
Section 10.5    Default Rate of Interest    93
Section 10.6    Setoff Rights    93
Section 10.7    Application of Proceeds    94
Section 10.8    Waivers    94
Section 10.9    Injunctive Relief    96
Section 10.10    Marshalling; Payments Set Aside    96
ARTICLE 11 - AGENT    96
Section 11.1    Appointment and Authorization    97
Section 11.2    Agent and Affiliates    97
Section 11.3    Action by Agent    97
Section 11.4    Consultation with Experts    97
Section 11.5    Liability of Agent    97
Section 11.6    Indemnification    98
Section 11.7    Right to Request and Act on Instructions    98
Section 11.8    Credit Decision    98
Section 11.9    Collateral Matters    98
Section 11.10    Agency for Perfection    99
Section 11.11    Notice of Default    99
Section 11.12    Assignment by Agent; Resignation of Agent; Successor Agent    99
Section 11.13    Payment and Sharing of Payment    100
Section 11.14    Right to Perform, Preserve and Protect    102

Section 11.15    Additional Titled Agents    102
Section 11.16    Amendments and Waivers    103
Section 11.17    Assignments and Participations    103
Section 11.18    Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist    106
Section 11.19    Buy-Out Upon Refinancing    107
Section 11.20    Erroneous Payments    107
ARTICLE 12 – GUARANTY    109
Section 12.1    Guaranty    109
Section 12.2    Payment of Amounts Owed    110
Section 12.3    Certain Waivers by Guarantor    110
Section 12.4    Guarantor’s Obligations Not Affected by Modifications of Financing Documents    111
Section 12.5    Reinstatement; Deficiency    112
Section 12.6    Subordination of Borrowers’ Obligations to Guarantors; Claims in Bankruptcy.    112
Section 12.7    Maximum Liability    113
Section 12.8    Guarantor’s Investigation    113
Section 12.9    Termination    113
Section 12.10    Representative    114
Section 12.11    Guarantor Acknowledgement    114
ARTICLE 13 - MISCELLANEOUS    114
Section 13.1    Survival    114
Section 13.2    No Waivers    114
Section 13.3    Notices    114
Section 13.4    Severability    116
Section 13.5    Headings    116
Section 13.6    Reserved    116
Section 13.7    Waiver of Consequential and Other Damages    116
Section 13.8    GOVERNING LAW; SUBMISSION TO JURISDICTION    116
Section 13.9    WAIVER OF JURY TRIAL    117
Section 13.10    Publication; Advertisement    118
Section 13.11    Counterparts; Integration    118

Section 13.12    No Strict Construction    119
Section 13.13    Lender Approvals    119
Section 13.14    Expenses; Indemnity    119
Section 13.15    [Reserved]    121
Section 13.16    Reinstatement    121
Section 13.17    Successors and Assigns    121
Section 13.18    USA PATRIOT Act Notification    121
Section 13.19    Acknowledgement and Consent to Bail-In of Affected Financial Institutions    121

CREDIT, SECURITY AND GUARANTY AGREEMENT
THIS CREDIT, SECURITY AND GUARANTY AGREEMENT (as the same may be amended, supplemented, restated or otherwise
modified from time to time, the “Agreement”) is dated as of February 25, 2025 by and among TDG Operations, LLC, a Georgia limited liability
company (“TDG”), The Dixie Group, Inc., a Tennessee corporation (“Holdings”), each additional borrower that may hereafter be added to this
Agreement (together with each of their successors and permitted assigns, each individually as a “Borrower”, and collectively as “Borrowers”),
each guarantor that may hereafter be added to this Agreement (together with each of their successors and permitted assigns, each individually as a
“Guarantor”, and collectively as “Guarantors”), MIDCAP FUNDING IV TRUST, a Delaware statutory trust, as Agent, and the financial
institutions or other entities from time to time parties hereto, each as a Lender.
RECITALS
The Credit Parties have requested that Lenders make available to Borrowers the financing facilities as described herein. Lenders are
willing to extend such credit to Borrowers under the terms and conditions herein set forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the agreements, provisions and covenants herein contained, Credit Parties,
Lenders and Agent agree as follows:
Article 1
 - DEFINITIONS
Section 1.1
Certain Defined Terms. The following terms have the following meanings:
“Acceleration Event” means the occurrence of an Event of Default (a) in respect of which Agent has declared all or any portion of the
Obligations to be immediately due and payable pursuant to Section 10.2, (b) pursuant to Section 10.1(a), and in respect of which Agent has
suspended or terminated the Revolving Loan Commitment pursuant to Section  10.2, and/or (c)  pursuant to either Section  10.1(e) and/or
Section 10.1(f).
“Account Debtor” means “account debtor”, as defined in Article 9 of the UCC, and any other obligor in respect of an Account.
“Accounts” means, collectively, (a) any right to payment of a monetary obligation, whether or not earned by performance, (b) without
duplication, any “account” (as defined in the UCC), any accounts receivable (whether in the form of payments for services rendered or goods sold,
rents, license fees or otherwise), any “payment intangibles” (as defined in the UCC) and all other rights to payment and/or reimbursement of every
kind and description, whether or not earned by performance, (c) all accounts, “general intangibles” (as defined in the UCC), Intellectual Property,
rights, remedies, Guarantees, “supporting obligations” (as defined in the UCC), “letter-of-credit rights” (as defined in the UCC) and security
interests in respect of the foregoing, all rights of enforcement and collection, all books and records evidencing or related to the foregoing, and all
rights under the Financing Documents in respect of the foregoing, (d) all information and data compiled or derived by any Borrower or to which
any Borrower is entitled in respect of or related to the foregoing, and (e) all proceeds of any of the foregoing.
1

“Accruals Reserve” means a reserve established by the Agent in the amount of the Credit Parties’ aggregate claims accruals and rebate
accruals, as adjusted from time to time by Agent in its Permitted Discretion.
“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 substantially all of the assets of a Person, or of any business, line of business or division or other unit of operation of a Person,
(b) the acquisition of fifty percent (50%) or more of the Equity Interests of any Person, whether or not involving a merger or consolidation with
such other Person, or otherwise causing any Person to become a Subsidiary of a Credit Party, (c)  any merger or consolidation or any other
combination with another Person or (d) the acquisition (including through licensing) of any product, product line or Intellectual Property of or
from any other Person.
“Additional Tranche” means an additional amount of Revolving Loan Commitment equal to $25,000,000 (it being acknowledged that
multiple Additional Tranches are permitted pursuant to Section 2.1(c) in minimum amounts of $5,000,000 each for a total of up to $25,000,000 in
the aggregate).
“Affected Financial Institution” means (a) any EEA Financial Institution or (b) any UK Financial Institution.
“Affiliate” means, with respect to any Person, (a) any Person that directly or indirectly controls such Person, (b) any Person which is
controlled by or is under common control with such controlling Person, and (c) each of such Person’s (other than, with respect to any Lender, any
Lender’s) officers or directors (or Persons functioning in substantially similar roles). As used in this definition, the term “control” of a Person
means the possession, directly or indirectly, of the power to vote ten percent (10%) or more of any class of voting securities of such Person or to
direct or cause the direction of the management or policies of a Person, whether through the ownership of voting securities, by contract or
otherwise.
“Agent” means MCF, in its capacity as administrative agent for itself and for Lenders hereunder, as such capacity is established in, and
subject to the provisions of, Article 11, and the successors and assigns of MCF in such capacity.
“Agent Assignee” has the meaning set forth in Section 11.20(d).
“Aggregate Borrowing Base Inventory Amount” means an amount equal to the sum of the Borrowing Base availability generated
pursuant to clauses (b) through (e) of the definition of “Borrowing Base” (before giving effect to any percentage limitations therein).
“AmeriState Debt” means Debt incurred by the Credit Parties in an aggregate principal amount not to exceed $10,000,000 in the
aggregate at any time outstanding, incurred pursuant to the AmeriState Debt Documents.
“AmeriState Debt Documents” means that certain Loan Agreement, dated as of October 26, 2020 by and between Credit Parties and
AmeriState Bank, as amended from time to time.
“AmeriState Liens” means Liens, solely in respect of the Atmore Property and the Roanoke Property, granted by Credit Parties in favor
of AmeriState Bank and securing the AmeriState Debt.
2

“Anti-Terrorism Laws” means any Laws relating to terrorism or money laundering, including, without limitation, Executive Order
No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the Laws comprising or implementing the Bank Secrecy Act, and the Laws
administered by OFAC.
“Applicable Margin” means with respect to Revolving Loans and all other Obligations, (i) until the first Pricing Date, the rates shown
opposite of Level III in the pricing grid (as set forth below) and (ii) thereafter, from one Pricing Date to the next, the rate per annum determined in
accordance with the pricing grid (as set forth below).
Pricing Level
Revolving Loan Availability
Percentage
Applicable Margin
I
> 25.0%
3.75%
II
≤ 25.0%
4.00%
III
≤ 12.5%
4.25%
The Applicable Margin will be established by Agent based upon the Revolving Loan Availability Percentage for the most recently
completed calendar month of the Credit Parties, effective on the Pricing Date immediately following such calendar month (and Agent will notify
the Borrower Representative thereof), and the Applicable Margin established on a Pricing Date will remain in effect until the next Pricing Date.  If
the Credit Parties have not delivered a Borrowing Base Certificate for any calendar month by the date on which they are required to be delivered
under this Agreement, until such Borrowing Base Certificate is delivered, the Applicable Margin will be the highest Applicable Margin (i.e., the
Revolving Loan Availability Percentage will be deemed to be less than 12.5%) then in effect.  If the Credit Parties subsequently deliver such
Borrowing Base Certificate before the next Pricing Date, the Applicable Margin established based on such late delivered Borrowing Base
Certificate pursuant to the preceding sentence will take effect from the date that is five (5) Business Days after such delivery until the next Pricing
Date.  In all other circumstances, the Applicable Margin based on a Borrowing Base Certificate will be in effect from the Pricing Date that occurs
immediately after the end of the calendar month covered by such Borrowing Base Certificate until the next Pricing Date.  Each determination of
the Applicable Margin made by Agent in accordance with the foregoing will be conclusive and binding on the Credit Parties and the Lenders
absent manifest error.   Notwithstanding the foregoing, (a)  during the existence of an Event of Default, at the election of Agent or Required
Lenders, the Applicable Margin will not decrease in accordance with the pricing grid (as set forth below); provided that if such Event(s) of Default
are waived pursuant to the terms herein, such decrease of the Applicable Margin, which did not occur at the election of Required Lenders, shall
automatically occur as of the date on which all such Events of Default are waived, and, (b) if, as a result of any restatement of or other adjustment
to any Borrowing Base Certificate, Agent determines that (i) the Revolving Loan Availability Percentage as calculated on any Pricing Date was
inaccurate and (ii) a proper calculation of the Revolving Loan Availability Percentage would have resulted in a higher Applicable Margin for any
period, then Credit Parties will automatically and retroactively be obligated to pay to Agent for the benefit of the Lenders, promptly on demand by
Agent, an amount equal to the excess of the amount of interest and fees that should have been paid for such period over the amount of interest and
fees actually paid for such period.
“Approved Fund” means any (a) investment company, fund, trust, securitization vehicle or conduit 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 business, or (b) any
Person (other than a
3

natural person) which temporarily warehouses loans for any Lender or any entity described in the preceding clause (a) and that, with respect to
each of the preceding clauses (a) and (b), is administered or managed by (i) a Lender, (ii) an Affiliate of a Lender, or (iii) a Person (other than a
natural person) or an Affiliate of a Person (other than a natural person) that administers or manages a Lender.
“Asset Disposition” means any sale, lease, license, transfer, assignment or other consensual disposition (including by merger,
amalgamation, allocation of assets (including allocation of assets to any series of a limited liability company), division, consolidation or
amalgamation) by any Credit Party or any Subsidiary thereof of any asset of such Credit Party or Subsidiary.
“Assignment Agreement” means an assignment agreement in form and substance acceptable to Agent.
“Atmore Property” means the property commonly known as 209 Carpet Drive, Atmore, Escambia County, Alabama, with tax parcel
numbers 30 27 07 25 1 003 001.001 and 30 27 07 25 1 003 001.003.
“Availability Reserve” means a reserve established by the Agent in the amount of the then-applicable Minimum Excess Availability
Amount as of any date of determination.
“Available Tenor” means, as of any date of determination with respect to the then-current Benchmark, (a) if such Benchmark is a term
rate, any tenor for such Benchmark (or component thereof) that is or may be used for determining the length of an interest period pursuant to this
Agreement or (b) otherwise, any payment period for interest calculated with reference to such Benchmark (or component thereof) that is or may be
used for determining any frequency of making payments of interest calculated with reference to such Benchmark pursuant to this Agreement, in
each case, as of such date and not including, for the avoidance of doubt, any tenor for such Benchmark that is then-removed from the definition of
“Interest Period” or similar term pursuant to Section 2.2(o).
“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable Resolution Authority in respect of any
liability of an Affected Financial Institution.
“Bail-In Legislation” means (a) with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the
European Parliament and of the Council of the European Union, the implementing law, regulation, rule or requirement for such EEA Member
Country from time to time which is described in the EU Bail-In Legislation Schedule and (b) with respect to the United Kingdom, Part I of the
United Kingdom Banking Act 2009 (as amended from time to time) and any other law, regulation or rule applicable in the United Kingdom
relating to the resolution of unsound or failing banks, investment firms or other financial institutions or their affiliates (other than through
liquidation, administration or other insolvency proceedings).
“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as the same may be amended, modified or
supplemented from time to time, and any successor statute thereto.
“Base Rate” means a per annum rate of interest equal to the greater of (a) the Floor and (b) the per annum rate of interest equal to the rate
of interest announced, from time to time, within Wells Fargo Bank, National Association (“Wells Fargo”) at its principal office in San Francisco as
its “prime rate,” with the understanding that the “prime rate” is one of Wells Fargo’s base rates (not necessarily the lowest of such rates) and serves
as the basis upon which effective rates of interest are calculated for those loans making reference thereto and is evidenced by the recording thereof
after its announcement in such
4

internal publications as Wells Fargo may designate; provided, however, that Agent may, upon prior written notice to Borrower Representative,
choose a reasonably comparable index or source to use as the basis for the Base Rate.
“Base Rate Loan” means a Loan that bears interest at a rate based on the Base Rate.
“Benchmark” means, initially, Term SOFR; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date
have occurred with respect to Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement to the
extent that such Benchmark Replacement has replaced such prior benchmark rate pursuant to Section 2.2(o).
“Benchmark Replacement” means, with respect to any Benchmark Transition Event, the sum of: (a) the alternate benchmark rate that has
been selected by Agent giving due consideration to (i) any selection or recommendation of a replacement benchmark rate or the mechanism for
determining such a rate by the Relevant Governmental Body or (ii) any evolving or then-prevailing market convention for determining a
benchmark rate as a replacement to the then-current Benchmark for Dollar-denominated syndicated credit facilities at such time and (b) the related
Benchmark Replacement Adjustment; provided that, if such Benchmark Replacement as so determined would be less than the Floor, such
Benchmark Replacement will be deemed to be the Floor for the purposes of this Agreement and the other Financing Documents.
“Benchmark Replacement Adjustment” means, with respect to any replacement of the then-current Benchmark with an Unadjusted
Benchmark Replacement for any applicable Available Tenor, the spread adjustment, or method for calculating or determining such spread
adjustment (which may be a positive or negative value or zero) that has been selected by Agent giving due consideration to any selection or
recommendation by the Relevant Governmental Body, or any evolving or then-prevailing market convention at such time, for determining a spread
adjustment, or method for calculating or determining such spread adjustment, for such type of replacement for U.S. dollar-denominated syndicated
credit facilities at such time.
“Benchmark Replacement Date” means the earlier to occur of the following events with respect to the then-current Benchmark: (a) in
the case of clause (a) or (b) of the definition of “Benchmark Transition Event”, the later of (i) the date of the public statement or publication of
information referenced therein and (ii) the date on which the administrator of such Benchmark (or the published component used in the calculation
thereof) permanently or indefinitely ceases to provide all Available Tenors of such Benchmark (or such component thereof); or (b) in the case of
clause (c) of the definition of “Benchmark Transition Event”, the first date on which such Benchmark (or the published component used in the
calculation thereof) has been determined and announced by the regulatory supervisor for the administrator of such Benchmark (or such component
thereof) to be no longer representative; provided, that such non-representativeness will be determined by reference to the most recent statement or
publication referenced in such clause (c) even if any Available Tenor of such Benchmark (or such component thereof) continues to be provided on
such date. For the avoidance of doubt, the “Benchmark Replacement Date” will be deemed to have occurred in the case of clause (a) or (b) with
respect to any Benchmark upon the occurrence of the applicable event or events set forth therein with respect to all then-current Available Tenors
of such Benchmark (or the published component used in the calculation thereof).
“Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current
Benchmark: (a) a public statement or publication of information by or on behalf of the administrator of such Benchmark (or the published
component used in the calculation
5

thereof) announcing that such administrator has ceased or will cease to provide all Available Tenors of such Benchmark (or such component
thereof), permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will
continue to provide any Available Tenor of such Benchmark (or such component thereof); (b) a public statement or publication of information by
the regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof), the Federal
Reserve Board, the Federal Reserve Bank of New York, an insolvency official or resolution authority with jurisdiction over the administrator for
such Benchmark (or such component), or a court or an entity with similar insolvency or resolution authority, which states that the administrator of
such Benchmark (or such component) has ceased or will cease to provide all Available Tenors of such Benchmark (or such component thereof)
permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to
provide any Available Tenor of such Benchmark (or such component thereof); or (c) a public statement or publication of information by the
regulatory supervisor for the administrator of such Benchmark (or the published component used in the calculation thereof) announcing that all
Available Tenors of such Benchmark (or such component thereof) are no longer, or as of a specified future date will no longer be, representative.
For the avoidance of doubt, a “Benchmark Transition Event” will be deemed to have occurred with respect to any Benchmark if a public statement
or publication of information set forth above has occurred with respect to each then-current Available Tenor of such Benchmark (or the published
component used in the calculation thereof).
“Benchmark Transition Start Date” means, in the case of a Benchmark Transition Event, the earlier of (a) the applicable Benchmark
Replacement Date and (b) if such Benchmark Transition Event is a public statement or publication of information of a prospective event, the 90th
day prior to the expected date of such event as of such public statement or publication of information (or if the expected date of such prospective
event is fewer than 90 days after such statement or publication, the date of such statement or publication).
“Benchmark Unavailability Period” means the period (if any) (a) beginning at the time that a Benchmark Replacement Date pursuant to
clauses (a) or (b) of that definition has occurred if, at such time, no Benchmark Replacement has replaced the then-current Benchmark for all
purposes hereunder and under any Financing Document in accordance with Section 2.2(o) and (b) ending at the time that a Benchmark
Replacement has replaced the then-current Benchmark for all purposes hereunder and under any Financing Document in accordance with Section
2.2(o).
“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224,
(b) 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,
Executive Order No. 13224, (c) with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism
Law, (d) that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, (e) that is named a
“specially designated national” or “blocked person” on the most current list published by OFAC or other similar list or is named as a “listed
person” or “listed entity” on other lists made under any Anti-Terrorism Law or (f) any Person resident in, organized under the laws of or
incorporated in a Sanctioned Country.
“Borrower” and “Borrowers” has the meaning set forth in the introductory paragraph of this Agreement.
“Borrower Notice” has the meaning set forth in the definition of “Real Property Collateral Requirements”.
6

“Borrower Representative” means TDG, in its capacity as Borrower Representative pursuant to the provisions of Section 2.9, or any
successor Borrower Representative selected by Borrowers and approved by Agent.
“Borrowing Base” means the sum of:
(a)
the product of (i) ninety percent (90%) multiplied by (ii) the aggregate net amount at such time of the Eligible Accounts;
plus
(b)
the lesser of (i)  ninety percent (90%) multiplied by the Net Orderly Liquidation Value of the Eligible Inventory, or
(ii) seventy percent (70%) multiplied by the value of the Eligible Inventory, valued at the lower of first-in-first-out cost or market cost, and after
factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable Inventory; plus
(c)
the lesser of (i)  ninety percent (90%) multiplied by the Net Orderly Liquidation Value of the Eligible Non-Prime
Inventory, or (ii) seventy percent (70%) multiplied by the value of the Eligible Non-Prime Inventory, valued at the lower of first-in-first-out cost or
market cost, and after factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable Inventory;
provided that Borrowing Base availability generated by Eligible Non-Prime Inventory shall not exceed 10% of the Aggregate Borrowing Base
Inventory Amount as of any date of determination; plus
(d)
the lesser of (x) ninety percent (90%) of the NOLV of Eligible Work-In-Process Inventory and (y) seventy percent (70%)
of the lower of cost or market value of Eligible Work-In-Process Inventory; provided, that that Borrowing Base availability generated by Eligible
Work-In-Process Inventory shall not exceed 10% of the Aggregate Borrowing Base Inventory Amount as of any date of determination; plus
(e)
the lesser of (x) ninety percent (90%) of the NOLV of Eligible Raw Materials Inventory and (y) seventy percent (70%) of
the lower of cost or market value of Eligible Raw Materials Inventory; provided, that that Borrowing Base availability generated by Eligible Raw
Materials Inventory shall not exceed 20% of the Aggregate Borrowing Base Inventory Amount as of any date of determination; plus
(f)
the lesser of (i) ninety percent (90%) multiplied by the Net Orderly Liquidation Value of the Eligible Domestic In-Transit
Inventory, or (ii) seventy percent (70%) multiplied by the value of the Eligible Domestic In-Transit Inventory, valued at the lower of first-in-first-
out cost or market cost, and after factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable
Inventory; provided that the Borrowing Base availability generated under this clause (f), when aggregated with the Borrowing Base availability
generated under clause (g) of this definition shall not exceed $4,000,000 as of any date of determination; plus
(g)
the lesser of (i) ninety percent (90%) multiplied by the Net Orderly Liquidation Value of the Eligible Foreign In-Transit
Inventory, or (ii) seventy percent (70%) multiplied by the value of the Eligible Foreign In-Transit Inventory, valued at the lower of first-in-first-out
cost or market cost, and after factoring in all rebates, discounts and other incentives or rewards associated with the purchase of the applicable
Inventory; provided that the Borrowing Base availability generated under this clause (g), when aggregated with the Borrowing Base availability
generated under clause (f) of this definition shall not exceed $4,000,000 as of any date of determination; plus
(h)
the then-applicable Real Estate Availability, if any; minus
(i)
the amount of the Overdue Accounts Payable Reserve, the In-Transit Inventory Reserve, the Accruals Reserve, the
Availability Reserve, the Dilution Reserve, the Rent Reserve and any other reserves and/or adjustments established from time to time by Agent in
its Permitted Discretion.
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“Borrowing Base Certificate” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately
completed and substantially in the form of Exhibit C hereto.
“Borrowing Base Collateral” means accounts, inventory and all other Collateral which is part of, or is of a type which could be included
in, the Borrowing Base.
“Business Day” means any day except a Saturday, Sunday or other day on which either the New York Stock Exchange is closed, or on
which commercial banks in New York, New York are authorized by Law to close; provided, however, that when used in the context of a SOFR
Loan, the term “Business Day” shall also exclude any day that is not also a SOFR Business Day.
“Calhoun Property” means the real property commonly known as 200 Fair Street, Calhoun, Gordon County, Georgia, with tax parcel
numbers C13 018A and C13 019.
“Capital Expenditures” means any expenditure that would be classified as a capital expenditure on a statement of cash flow of Borrowers
prepared in accordance with GAAP.
“Capital Lease” of any Person means any lease of any property by such Person as lessee which would, in accordance with GAAP, be
required to be accounted for as a capital lease or finance lease on the balance sheet of such Person.
“Cash Equivalents” means, as of any date of determination, any of the following: (a) marketable securities (i) issued or directly and
unconditionally guaranteed as to interest and principal by the United States government, or (ii) issued by any agency of the United States the
obligations of which are backed by the full faith and credit of the United States, in each case maturing within one (1) year after such date; (b)
marketable direct obligations issued by any state of the United States or any political subdivision of any such state or any public instrumentality
thereof, in each case maturing within one (1) year after such date and having, at the time of the acquisition thereof, a rating of at least A-1 from
S&P or at least P-1 from Moody’s; (c) commercial paper maturing no more than one (1) year from the date of creation thereof and having, at the
time of the acquisition thereof, a rating of at least A-1 from S&P or at least P-1 from Moody’s, or carrying an equivalent rating by a nationally
recognized rating agency, if both of the two named rating agencies cease publishing ratings of commercial paper issuers generally; (d) certificates
of deposit or bankers’ acceptances maturing within one (1) year after such date and issued or accepted by any Lender or by any commercial bank
organized under the laws of the United States or any state thereof or the District of Columbia that (i) is at least “adequately capitalized” (as defined
in the regulations of its primary federal banking regulator), and (ii) has Tier 1 capital (as defined in such regulations) of not less than
$100,000,000; and (e) shares of any money market mutual fund that (i) has substantially all of its assets invested continuously in the types of
investments referred to in clauses (a) and (b) above, (ii) has net assets of not less than $500,000,000, and (iii) has the highest rating obtainable
from either S&P or Moody’s.
“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C.A. § 9601 et seq., as
the same may be amended from time to time.
“Change in Control” means any of the following that occurs after the Closing Date: (a) any “person” or “group” (as such terms are used
in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934) (other than a Permitted Holder) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a person or group shall be deemed to have “beneficial ownership”
of all securities that such person or group has the right to acquire, whether such right is exercisable immediately or only after the passage of time
(such right, an “option right”)), directly
8

or indirectly, of fifty and 01/100 percent (50.01%) or more of the combined voting power of all voting stock of Holdings on a fully-diluted basis
(and taking into account all such securities that such person or group has the right to acquire pursuant to any option right); (b)  any pledge,
assignment or hypothecation of or Lien or encumbrance on any of the legal or beneficial equity interests in the applicable Person; (c) any change
in the legal or beneficial ownership or control of the outstanding voting Equity Interests of the applicable Person necessary at all times to elect a
majority of the board of directors (or similar governing body) of Holdings and to direct the management policies and decisions of Holdings, each
other Credit Party and each Subsidiary of Holdings; (d) Holdings shall cease to, directly or indirectly own, in the aggregate, 100% of each class of
the outstanding Equity Interests of its Subsidiaries; or (e) the occurrence of any “Change of Control”, “Change in Control” or terms of similar
import under any document or instrument governing or relating to Debt of or equity in such Person or under any Subordinated Debt Document.
“Closing Date” means the date of this Agreement.
“Code” means the Internal Revenue Code of 1986, as amended from time to time, any successor statutes thereto, and applicable U.S.
Department of Treasury regulations issued pursuant thereto in temporary or final form.
“Collateral” means all property, other than Excluded Property, now existing or hereafter acquired, mortgaged or pledged to, or purported
to be subjected to a Lien in favor of, Agent, for the benefit of Agent and Lenders, pursuant to this Agreement and the Security Documents,
including, without limitation, all of the property described in Schedule 9.1 hereto.
“Commitment Annex” means Annex A to this Agreement.
“Compliance Certificate” means a certificate, duly executed by a Responsible Officer of Borrower Representative, appropriately
completed and substantially in the form of Exhibit B hereto.
“Conforming Changes” means, with respect to either the use or administration of Term SOFR or any Benchmark Replacement (as
defined in Section 2.2(o)), any technical, administrative or operational changes (including (a) changes to the definition of “Base Rate,” “Business
Day”, “Interest Period,” “Reference Time” or other definitions, (b) the addition of concepts such as “interest period”, (c) changes to timing and/or
frequency of determining rates, making interest payments, giving borrowing requests, prepayment, conversion or continuation notices, or length of
lookback periods, (d) the applicability of Section 2.8 and (e) other technical, administrative or operational matters) that Agent decides may be
appropriate to reflect the adoption and implementation of Term SOFR or such Benchmark Replacement and to permit the administration thereof by
Agent in a manner substantially consistent with market practice (or, if Agent decides that adoption of any portion of such market practice is not
administratively feasible or determines that no such market practice exists, in such other manner as Agent decides is reasonably necessary in
connection with the administration of this Agreement and the other Financing Documents).
“Consolidated Subsidiary” means, at any date, any Subsidiary the accounts of which would be consolidated with those of Holdings (or
any other Person, as the context may require hereunder) in its consolidated financial statements if such statements were prepared as of such date.
“Contingent Obligation” means, with respect to any Person, any direct or indirect liability of such Person: (a) with respect to any Debt of
another Person (a “Third Party Obligation”) if the purpose or intent of such Person incurring such liability, or the effect thereof, is to provide
assurance to the
9

obligee of such Third Party Obligation that such Third Party Obligation will be paid or discharged, or that any agreement relating thereto will be
complied with, or that any holder of such Third Party Obligation will be protected, in whole or in part, against loss with respect thereto, except in
the case of a Credit Party providing such assurances to any such obligee or holder of the other Credit Party; (b) with respect to any undrawn
portion of any letter of credit issued for the account of such Person or as to which such Person is otherwise liable for the reimbursement of any
drawing; (c) under any Swap Contract, to the extent not yet due and payable; (d) to make take-or-pay or similar payments if required regardless of
nonperformance by any other party or parties to an agreement; or (e) for any obligations of another Person pursuant to any Guarantee or pursuant
to any agreement to purchase, repurchase or otherwise acquire any obligation or any property constituting security therefor, to provide funds for
the payment or discharge of such obligation or to preserve the solvency, financial condition or level of income of another Person. The amount of
any Contingent Obligation shall be equal to the amount of the obligation so Guaranteed or otherwise supported or, if not a fixed and determinable
amount, the maximum amount so Guaranteed or otherwise supported.
“Control” means the possession, directly or indirectly, of the power to direct or case the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or otherwise. “Controlling” and “Controlled” have meanings correlative
thereto.
“Controlled Group” means all members of any group of corporations and all members of a group of trades or businesses (whether or not
incorporated) under common control which, together with any Credit Party, are treated as a single employer under Section 414(b), (c), (m) or (o)
of the Code or Section 4001(b) of ERISA and, solely for purposes of Section 412 and 436 of the Code, Section 414(m) or (o) of the Code.
“Credit Exposure” means, at any time, any portion of the Revolving Loan Commitment or any other Obligations that remains
outstanding, or any Reimbursement Obligation or other Obligation that remains unpaid or any Letter of Credit or Support Agreement not
supported with cash collateral required by this Agreement that remains outstanding; provided, however, that no Credit Exposure shall be deemed to
exist solely due to the existence of contingent indemnification liability, absent the assertion of a claim, or the known existence of a claim
reasonably likely to be asserted, with respect thereto.
“Credit Party” means each Borrower and Guarantor; and “Credit Parties” means all such Persons, collectively.
“Credit Party Unrestricted Cash” means unrestricted cash and Cash Equivalents of the Credit Parties that (a) are held in the name of a
Credit Party in a Deposit Account or Securities Account located in the United States that is subject to a Deposit Account Control Agreement or
Securities Account Control Agreement, as applicable, in favor of Agent at bank or financial institution located in the United States and are
otherwise subject to Agent’s first priority perfected security interest, (b) is not subject to any Lien (other than Permitted Liens), and (c) are not
funds for the payment of a drawn or committed but unpaid draft, ACH or EFT transaction.
“Debt” of a Person means at any date, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations of
such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all obligations of such Person to pay the deferred purchase
price of property or services, except trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business, (d) all
Capital Leases of such Person, (e) all non-contingent obligations of such Person to reimburse any bank or other Person in respect of amounts paid
under a letter of credit, banker’s
10

acceptance, surety bond or similar instrument, (f) Disqualified Equity Interests, (g) all obligations secured by a Lien on any asset of such Person,
whether or not such obligation is otherwise an obligation of such Person, (h) “earnouts”, purchase price adjustments, profit sharing arrangements,
deferred purchase money amounts and similar payment obligations or continuing obligations of any nature of such Person arising out of purchase
and sale contracts, (i) all Debt of others Guaranteed by such Person, (j) off-balance sheet liabilities and/or Pension Plan or Multiemployer Plan
liabilities of such Person, (k) obligations arising under non-compete agreements, and (l) obligations arising under bonus, deferred compensation,
incentive compensation or similar arrangements, other than those arising in the Ordinary Course of Business. Without duplication of any of the
foregoing, Debt of Credit Parties shall include any and all Loans and Letter of Credit Liabilities.
“Default” means any condition or event which with the giving of notice or lapse of time or both would, unless cured or waived, become
an Event of Default.
“Defaulted Lender” means, (i) so long as such failure shall remain in existence and uncured, any Lender which shall have failed to make
any Loan or other credit accommodation, disbursement, settlement or reimbursement required pursuant to the terms of any Financing Document,
(ii) any Lender that has notified the Credit Parties or Agent in writing that it does not intend to comply with its funding obligations hereunder, or
has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and
states that such position is based on such Lender's determination that a condition precedent to funding (which condition precedent, together with
any applicable Default or Event of Default, shall be specifically identified in such writing or public statement) cannot be satisfied), or (iii) any
Lender that has, or has a direct or indirect parent company that has, (a) become the subject of any proceeding under the Bankruptcy Code or any
other insolvency, debtor relief or debt adjustment or similar law (whether state, provincial, territorial, federal or foreign), or (b) had appointed for it
a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or
liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in
such a capacity; provided, that a Lender shall not be a Defaulted Lender solely by virtue of the ownership or acquisition of any equity interest in
that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or
provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of
attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or
agreements made with such Lender. Any determination by Agent that a Lender is a Defaulted Lender under any one or more of clauses (i) through
(iii) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulted Lender upon delivery of
written notice of such determination to Agent and each Lender.
“Defined Period” means, for purposes of calculating (i) EBITDA and (ii) the Fixed Charge Coverage Ratio (and any component thereof)
for any given Fiscal Month, the twelve (12) Fiscal Month period immediately preceding any such Fiscal Month.
“Deposit Account” means a “deposit account” (as defined in Article 9 of the UCC), an investment account, or other account in which
funds are held or invested for credit to or for the benefit of any Credit Party.
“Deposit Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any Credit Party
and each financial institution in which such Credit Party
11

maintains a Deposit Account (which is not an Excluded Account), which agreement provides that such financial institution shall comply with
instructions originated by Agent directing disposition of the funds in such Deposit Account without further consent by the applicable Credit Party,
including as to any such agreement pertaining to any Lockbox Account, providing that such financial institution shall, at the direction of Agent,
wire, or otherwise transfer, in immediately available funds, on a daily basis to the Payment Account all funds received or deposited into such
Lockbox or Lockbox Account.
“Dilution” means, as of any date of determination, a percentage, based upon the experience during any prior period selected from time to
time by Agent in its sole discretion, that is the result of dividing the Dollar amount of (a) bad debt write-downs, discounts, advertising allowances,
credits, or other dilutive items with respect to each Borrower’s Accounts during such period, by (b) each Borrower’s billings with respect to
Accounts during such period.
“Dilution Reserve” means, as of any date of determination, an amount sufficient to reduce the advance rate against Eligible Accounts by
one (1) percentage point for each percentage point by which Dilution is in excess of two and one half (2.50%) percent.
“Disqualified Equity Interests” means any Equity Interest that, by its terms (or by the terms of any security or any other Equity Interest
into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (a) matures (excluding any maturity
as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable (other than for Equity Interests that are not otherwise
Disqualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale, liquidation
or similar event), (b) is redeemable at the option of the holder thereof (other than for Equity Interests that are not otherwise Disqualified Equity
Interests), in whole or in part (except as a result of a change of control or asset sale, liquidation or similar event), (c) provides for and requires
scheduled payments of dividends in cash, or (d) is or becomes convertible into or exchangeable for Debt or any other Equity Interest that would
constitute Disqualified Equity Interests, in each case, prior to the date that is 91 days after the Maturity Date in effect at the time of issuance.
“Distribution” means as to any Person (a) any dividend or other distribution or payment (whether in cash, securities or other property) on,
or in respect of, any Equity Interest in such Person (except those payable solely in its Equity Interests other than Disqualified Equity Interests),
(b)  any payment by such Person on account of (i)  the purchase, redemption, retirement, defeasance, surrender, cancellation, termination or
acquisition of any Equity Interests in such Person or any claim respecting the purchase or sale of any Equity Interest in such Person, or (ii) any
option, warrant or other right to acquire any Equity Interests in such Person, (c) any management fees, salaries or other fees or compensation to
any Person holding an Equity Interest in a Credit Party or a Subsidiary of a Credit Party (other than reasonable and customary (i) payments of
salaries to individuals, (ii) directors fees, and (iii) advances and reimbursements to employees or directors, all in the Ordinary Course of Business),
an Affiliate of a Credit Party or an Affiliate of any Subsidiary of a Credit Party, (d) any lease or rental payments to an Affiliate or Subsidiary of a
Credit Party (which is not itself a Credit Party), or (e) repayments of or debt service on loans or other indebtedness (other than conversion to
Equity Interests other than Disqualified Equity Interests) held by any Person holding an Equity Interest in a Credit Party or a Subsidiary of a Credit
Party, an Affiliate of a Credit Party or an Affiliate of any Subsidiary of a Credit Party unless permitted under and made pursuant to a Subordination
Agreement applicable to such loans or other indebtedness.
“Dollars” or “$” means the lawful currency of the United States of America.
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“EBITDA” means for the applicable Defined Period:
(a) Net income (or loss) for the Defined Period of Borrowers and their Consolidated Subsidiaries, but excluding: (a) the income (or loss)
of any Person (other than Subsidiaries of Borrowers) in which Borrowers or any of their Subsidiaries has an ownership interest unless
received by Borrower or their Subsidiary in a cash distribution; and (b) the income (or loss) of any Person accrued prior to the date it
became a Subsidiary of Borrowers or is merged into or consolidated with Borrowers; plus
(b) any provision for (or minus any benefit from) income and franchise taxes deducted in the determination of net income for the Defined
Period; plus
(c) interest expense, net of interest income, deducted in the determination of net income for the Defined Period; plus
(d) amortization and depreciation deducted in the determination of net income for the Defined Period; plus
(e) any non-cash compensation charge or expense, including any such charge or expense arising from the grants of stock appreciation or
similar rights, stock options, restricted stock or other rights or equity incentive programs or any other equity-based compensation; plus
(f) any expenses attributable to the restructuring and consolidation of the Credit Parties’ east coast manufacturing operations; provided,
however, the amounts increasing EBITDA pursuant to this clause (f) shall not exceed the lesser of (x) $500,000 and (y) 10.0% of
EBITDA (in each case, calculated after giving effect to any adjustment pursuant to this clause (f) of this definition for any Defined
Period); plus
(g) any net losses not resulting from the operations of the Credit Parties; plus
(h) non-cash expenses, charges and losses (including reserves, impairment charges or asset write-offs, write-offs of deferred financing
fees, losses from investments recorded using the equity method, non-cash rent expense and non-cash lease accretion expense), in each
case other than (A) any non-cash charge representing amortization of a prepaid cash item that was paid and not expensed in a prior
period and (B) any non-cash charge relating to write-offs, write-downs or reserves with respect to accounts receivable or inventory;
provided that if any non-cash charges referred to in this clause (h) represents an accrual or reserve for potential cash items in any
future period, (1) Borrower Representative may elect not to add back such non-cash charge in the current period and (2) to the extent
Borrower Representative elects to add back such non-cash charge, the cash payment in respect thereof in such future period shall be
subtracted from EBITDA in such future period to such extent paid; provided further that no expenses, charges or losses in respect of
write-offs or write-downs shall be permitted to be added back in reliance on this clause (h) if arising from write-offs or write-downs of
assets included in the Borrowing Base; less
(i) without duplication, (i) non-cash gains (excluding any non-cash gain to the extent it represents the reversal of an accrual or reserve for
a potential cash item that reduced EBITDA in any prior period), (ii) any net income or gains not resulting from the operations of the
Credit Parties and (iii) any net income or gains resulting from disposed, abandoned or discontinued operations (excluding held-for-sale
discontinued operations until actually
13

disposed of); provided that, for the avoidance of doubt, any gain representing the reversal of any non-cash charge referred to in clause
(h) above for a prior period shall be added (together with, without duplication, any amounts received in respect thereof to the extent
not increasing EBITDA) to EBITDA in any subsequent period to such extent so reversed (or received).
Notwithstanding the foregoing, in the case of Borrowers and their Consolidated Subsidiaries, EBITDA of Borrowers and their
Consolidated Subsidiaries, on a consolidated basis for the Fiscal Month ended February 3, 2024; March 2, 2024; March 30, 2024; May 4, 2024;
June 1, 2024; June 29, 2024; August 3, 2024; August 31, 2024; September 28, 2024; November 2, 2024; November 30, 2024; and December 28,
2024 shall be deemed to be $(581,419); $70,076; $1,566,373; $2,549,079; $962,905; $832,842; $871,329; $263,815; $(1,107,056); $554,818;
$(979,494); and $(1,554,014), respectively.
“EBITDA Covenant Testing Period” means the period (a) commencing on any day after March 1, 2025 upon which a EBITDA
Covenant Trigger Event occurs and (b) ending on the first day of the Fiscal Month immediately following the day on which Revolving Loan
Availability has been greater than the EBITDA Covenant Trigger Threshold for twenty (20) consecutive days.
“EBITDA Covenant Trigger Event” means, at any time, Revolving Loan Availability is less than the EBITDA Covenant Trigger
Threshold.
“EBITDA Covenant Trigger Threshold” means an amount equal to the product of (a) 20.0% multiplied by (b) the Revolving Loan
Commitment.
“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is
subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an
institution described in clause (a) of this definition, or (c) any financial institution established in an EEA Member Country which is a subsidiary of
an institution described in clauses (a) or (b) of this definition and is subject to consolidated supervision with its parent.
“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.
“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of
any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.
“Eligible Account” means, subject to the criteria below, an account receivable of a Borrower, which was generated in the Ordinary Course
of Business, which was generated originally in the name of a Borrower and not acquired via assignment or otherwise, and which Agent, in its
Permitted Discretion, deems to be an Eligible Account. The net amount of an Eligible Account at any time shall be the face amount of such
Eligible Account as originally billed minus all cash collections and other proceeds of such Account received from or on behalf of the Account
Debtor thereunder as of such date and any and all returns, rebates, discounts (which may, at Agent’s option, be calculated on shortest terms),
credits, allowances or excise taxes of any nature at any time issued, owing, claimed by Account Debtors, granted, outstanding or payable in
connection with such Accounts at such time. Without limiting the generality of the foregoing, no Account shall be an Eligible Account if:
(a)
the Account remains unpaid more than sixty (60) days past the due date therefor (but in no event more than ninety (90)
days after the invoice date thereof);
14

(b)
the Account is subject to any defense, set-off, recoupment, counterclaim, deduction, discount, credit, chargeback, freight
claim, allowance, or adjustment of any kind (but only to the extent of such defense, set-off, recoupment, counterclaim, deduction, discount, credit,
chargeback, freight claim, allowance, or adjustment), or the applicable Borrower is not able to bring suit or otherwise enforce its remedies against
the Account Debtor through judicial process;
(c)
if the Account arises from the sale of goods, any part of any goods the sale of which has given rise to the Account has
been returned, rejected, lost, or damaged (but only to the extent that such goods have been so returned, rejected, lost or damaged);
(d)
if the Account arises from the sale of goods, the sale was not an absolute, bona fide sale, or the sale was made on
consignment or on approval or on a sale-or-return or bill-and-hold or progress billing basis, or the sale was made subject to any other repurchase or
return agreement, or the goods have not been shipped to the Account Debtor or its designee or the sale was not made in compliance with applicable
Laws;
(e)
if the Account arises from the performance of services, (i) the services have not actually been performed or the services
were undertaken in violation of any Law, or (ii) the Account represents a progress billing for which services have not been fully and completely
rendered;
(f)
the Account is subject to a Lien (other than Liens in favor of Agent or other Permitted Liens that do not have priority over
Agent’s Lien), or Agent does not have a first priority, perfected Lien on such Account;
(g)
the Account is evidenced by Chattel Paper or an Instrument of any kind, or has been reduced to judgment, unless such
Chattel Paper or Instrument has been delivered to Agent;
(h)
the Account Debtor is an Affiliate or Subsidiary of a Credit Party, or if the Account Debtor holds any Debt of a Credit
Party;
(i)
more than fifty percent (50%) of the aggregate balance of all Accounts owing from the Account Debtor obligated on the
Account are ineligible under subclause (a) above (in which case all Accounts from such Account Debtor shall be ineligible);
(j)
without limiting the provisions of clause (i) above, fifty percent (50%) or more of the aggregate unpaid Accounts from the
Account Debtor obligated on the Account are not deemed Eligible Accounts under this Agreement for any reason;
(k)
the total unpaid Accounts of the Account Debtor obligated on the Account exceed twenty percent (20%) of the net amount
of all Eligible Accounts owing from all Account Debtors (but only the amount of the Accounts of such Account Debtor exceeding such twenty
percent (20%) limitation shall be considered ineligible);
(l)
any covenant, representation or warranty contained in the Financing Documents with respect to such Account has been
breached in any respect;
(m)
the Account is unbilled or has not been invoiced to the Account Debtor in accordance with the procedures and
requirements of the applicable Account Debtor;
(n)
the Account is an obligation of an Account Debtor that is the federal, state or local government or any political subdivision
thereof, unless Agent has agreed to the contrary in writing and Agent has received from the Account Debtor the acknowledgement of Agent’s
notice of assignment of such obligation pursuant to this Agreement and, if such Account is owing by the federal government, Borrowers shall have
complied to the reasonable satisfaction of Agent with all applicable requirements of the Assignment of Claims Act, 31 USC §3727, with respect
thereto;
15

(o)
the Account is an obligation of an Account Debtor that has suspended business, made a general assignment for the benefit
of creditors, is unable to pay its debts as they become due or as to which a petition has been filed (voluntary or involuntary) under any law relating
to bankruptcy, insolvency, reorganization or relief of debtors, or the Account is an Account as to which any facts, events or occurrences exist which
would reasonably be expected to impair the validity, enforceability or collectability of such Account or reduce the amount payable or delay
payment thereunder;
(p)
the Account Debtor has its principal place of business or executive office outside the United States;
(q)
the Account is payable in a currency other than Dollars;
(r)
the Account Debtor is an individual;
(s)
except with respect to Account Debtors that, as of the Closing Date, have previously been directed by a Borrower to make
payment to the applicable Lockbox Account, the Borrower owning such Account has not signed and delivered to Agent notices, in the form
requested by Agent, directing the Account Debtors to make payment to the applicable Lockbox Account;
(t)
the Account includes late charges or finance charges (but only such portion of the Account shall be ineligible);
(u)
the Account arises out of the sale of any Inventory upon which any other Person holds, claims or asserts a Lien (other than
Permitted Liens that do not have priority over Agent’s Lien);
(v)
credits in past due; or
(w)
the Account or Account Debtor fails to meet such other specifications and requirements which may from time to time be
established by Agent in its Permitted Discretion.
For the avoidance of doubt, all Accounts that are at any time excluded from Eligible Accounts by virtue of any one or more of the
exclusionary criteria set forth above shall nevertheless constitute Collateral.
“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 Agent; provided, however, that notwithstanding the foregoing, (x) “Eligible Assignee” shall not include any Borrower or any
of a Borrower’s Affiliates, and (y) no proposed assignee intending to assume all or any portion of the Revolving Commitment shall be an Eligible
Assignee unless such proposed assignee either already holds a portion of such Revolving Loan Commitment, or has been approved as an Eligible
Assignee by Agent.
“Eligible Domestic In-Transit Inventory” means those items of Inventory that do not qualify as Eligible Inventory solely because they
do not comply with clauses (b)(ii) or (j)(ii) of the definition of “Eligible Inventory” in Section 1.1 hereto and a Borrower does not have actual and
exclusive possession thereof, but (a) such Inventory has been shipped from a location of any Borrower or from the manufacturer or wholesale
distributor thereof within the continental United States for receipt at a location of any Borrower within the continental United States, within thirty
(30) days of shipment, but in either case, which has not yet been delivered to such Borrower, (b) for which the purchase order is in the name of a
Borrower, (c) title has passed to such Borrower (and Agent has received such evidence thereof as it has requested), and (d) which is insured in
accordance with the terms of this Agreement.
“Eligible Foreign In-Transit Inventory” means those items of Inventory that do not qualify as Eligible Inventory solely because they do
not comply with clauses (b)(ii) or (j) of the definition of
16

“Eligible Inventory” in Section 1.1 hereto and a Borrower does not have actual and exclusive possession thereof, but as to which:
(a)
such Inventory currently is in transit (whether by vessel, air, or land) from a location outside of the continental United States to a
location inside the continental United States;
(b)
title to such Inventory has passed to a Borrower and Agent shall have received such evidence thereof as it may from time to time
require;
(c)
such Inventory is insured against types of loss, damage, hazards, and risks, and in amounts, satisfactory to Agent in its Permitted
Discretion, and Agent shall have received a copy of the certificate of marine cargo insurance in connection therewith in which it has been named as
an additional insured and loss payee in a manner acceptable to Agent;
(d)
such Inventory either:
(i)
is the subject of a negotiable bill of lading governed by the laws of a state within the United States (x) that is consigned to
Agent or a customs brokers, designated by Agent, (either directly or by means of endorsements), (y) that was issued by the carrier
(including a non-vessel operating common carrier) in possession of the Inventory that is subject to such bill of lading, and (z) that either is
in the possession of Agent or a customs broker, designated by Agent (in each case in the continental United States);
(ii)
is the subject of a negotiable forwarder’s cargo receipt governed by the laws of a state within the United States and is not
the subject of a bill of lading (other than a negotiable bill of lading consigned to, and in the possession of, a consolidator or Agent, or their
respective agents) and such negotiable cargo receipt on its face indicates the name of the customs broker, designated by Agent, as a carrier
or multimodal transport operator and has been signed or otherwise authenticated by it in such capacity or as a named agent for or on behalf
of the carrier or multimodal transport operator, in any case respecting such Inventory (x) consigned to Agent or a customs brokers,
designated by Agent, that is handling the importing, shipping and delivery of such Inventory (either directly or by means of
endorsements), (y) that was issued by a consolidator respecting the subject Inventory, and (z) that is in the possession of Agent or a
customs broker, designated by Agent, (in each case in the continental United States); or
(iii)
is subject to a non-negotiable seaway bill, airway bill or other bill of lading that (a) is issued by a common carrier or
freight forwarder that is (x) not an Affiliate of any Credit Party, (y) is in actual possession of such Inventory and (z) has entered into a
bailee agreement with Agent (and in form and substance satisfactory to Agent) with respect to such inventory, (b) is issued to the order of a
Borrower or, if so requested by Agent after the occurrence and during the continuance of an Event of Default, to the order of Agent, and
(c) is not subject to any Lien (other than Liens in favor of Agent), and (d) is on terms otherwise reasonably acceptable to Agent (the
documents of title set forth in clause (i) to (iii) being “Acceptable Documents of Title”);
(e)
such Inventory is in the possession of a common carrier (including any non-vessel operating common carrier or freight forwarder)
that has issued an Acceptable Document of Title with respect thereto or a customs broker, designated by Agent, is handling the importing, shipping
and delivery of such Inventory;
(f)
the Acceptable Documents of Title related thereto are subject to the valid and perfected first priority Lien of Agent;
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(g)
(i) Agent reasonably believes that such Inventory is not subject to (x) any Person’s right of reclamation, repudiation, stoppage in
transit or diversion or (y) any other right or claim of any other Person which is (or is capable of being) senior to, or pari passu with, the Lien of
Agent or (ii) Agent determines that no other Person’s right or claim impairs, or interferes with, directly or indirectly, the ability of Agent to realize
on, or reduces the amount that Agent may realize from the sale or other disposition of such Inventory;
(h)
Borrower has provided, upon request of Agent, (i) a certificate to Agent that certifies that, to the best knowledge of such Borrower,
such Inventory meets all of Borrowers’ representations and warranties contained in the Loan Documents concerning Eligible Foreign In-Transit
Inventory, that it knows of no reason why such Inventory would not be accepted by such Borrower when it arrives in the continental United States
and that the shipment as evidenced by the documents conforms to the related order documents, and (ii) a copy of the invoice, packing slip and
manifest with respect thereto; and
(i)
 such Inventory shall not have been in transit for more than ninety (90) days.
“Eligible Inventory” means, Inventory owned by a Borrower and acquired and dispensed by such Borrower in the Ordinary Course of
Business that Agent, in its Permitted Discretion, deems to be Eligible Inventory. Without limiting the generality of the foregoing, no Inventory
shall be Eligible Inventory if:
(a)
such Inventory is not owned by a Borrower free and clear of all Liens and rights of any other Person (including the rights
of a purchaser that has made progress payments and the rights of a surety that has issued a bond to assure such Borrower’s performance with
respect to that Inventory);
(b)
such Inventory is (i) placed on consignment or (ii) in transit;
(c)
such Inventory is covered by a negotiable document of title, unless such document has been delivered to Agent with all
necessary endorsements, free and clear of all Liens except those in favor of Agent;
(d)
such Inventory is excess, obsolete, unsalable, shopworn, seconds, damaged, unfit for sale, unfit for further processing, is
of substandard quality or is not of good and merchantable quality, free from any defects;
(e)
such Inventory consists of marketing materials, display items and samples, or packing or shipping materials,
manufacturing supplies or Work-In-Process;
(f)
such Inventory is not subject to a first priority Lien in favor of Agent;
(g)
such Inventory consists of goods that can be transported or sold only with licenses that are not readily available or of any
substances defined or designated as hazardous or toxic waste, hazardous or toxic material, hazardous or toxic substance, or similar term, by any
environmental law or any Governmental Authority applicable to Borrowers or their business, operations or assets;
(h)
such Inventory is not covered by casualty insurance acceptable to Agent;
(i)
any covenant, representation or warranty contained in the Financing Documents with respect to such Inventory has been
breached in any material respect;
(j)
such Inventory is located (i) outside of the continental United States or (ii) on premises where the aggregate amount of all
Inventory (valued at cost) of Borrowers located thereon is less than $10,000;
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(k)
such Inventory is located on premises with respect to which Agent has not received a landlord, warehouseman, bailee or
mortgagee letter acceptable in form and substance to Agent, unless Agent has established a Rent Reserve in respect of such premises;
(l)
such Inventory consists of (A) discontinued items, (B) slow-moving or excess items held in inventory, or (C) used items
held for resale;
(m)
such Inventory does not consist of finished goods;
(n)
such Inventory does not meet all standards imposed by any Governmental Authority, including with respect to its
production, acquisition or importation (as the case may be);
(o)
such Inventory has not been designated as “Prime” on the most recent inventory appraisal received by Agent;
(p)
[reserved];
(q)
such Inventory is held for rental or lease by or on behalf of Borrowers;
(r)
such Inventory is subject to any licensing, patent, royalty, trademark, trade name or copyright agreement with any third
parties, which agreement restricts the ability of Agent or any Lender to sell or otherwise dispose of such Inventory; or
(s)
such Inventory fails to meet such other specifications and requirements which may from time to time be established by
Agent in its Permitted Discretion.
Agent and Borrowers agree that Inventory shall be subject to periodic appraisal by Agent and that valuation of Inventory shall be subject
to adjustment pursuant to the results of such appraisal. Notwithstanding the foregoing, the valuation of Inventory shall be subject to any legal
limitations on sale and transfer of such Inventory. For the avoidance of doubt, all Inventory that is at any time excluded from Eligible Inventory by
virtue of any one or more of the exclusionary criteria set forth above shall nevertheless constitute Collateral.
“Eligible Non-Prime Inventory” means Inventory that constitutes Eligible Inventory but for failing to satisfy the requirements of
subsection (o) of the definition of Eligible Inventory.
“Eligible Raw Materials Inventory” means Inventory consisting of raw materials owned by a Credit Party and acquired and dispensed
by such Credit Party in the ordinary course of business which the Agent determines in its Permitted Discretion, following consultation with the
Borrower Representative (but without any requirement for the Borrower Representative’s consent), is eligible for inclusion in the Borrowing Base.
“Eligible Real Properties” means each of the Calhoun Property and the Eton Property.
“Eligible Work-In-Process Inventory” means Inventory owned by a Credit Party that would be Eligible Inventory if it were not Work-In-
Process.
“Environmental Laws” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, standards,
policies and other governmental directives or requirements, as well as common law, pertaining to the environment, natural resources, pollution,
health (including any environmental clean-up statutes and all regulations adopted by any local, state, federal or other Governmental Authority, and
any statute, ordinance, code, order, decree, law rule or regulation all of which pertain to or impose liability or standards of conduct concerning
medical waste or medical
19

products, equipment or supplies), safety or clean-up that apply to any Credit Party and relate to Hazardous Materials, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C. § 9601 et seq.), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. § 6901 et seq.), the Federal Water Pollution Control Act (33 U.S.C. § 1251 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. § 5101 et seq.), the Clean Air Act (42 U.S.C. § 7401 et seq.), the Federal Insecticide, Fungicide and Rodenticide Act
(7 U.S.C. § 136 et seq.), the Emergency Planning and Community Right-to-Know Act (42 U.S.C. § 11001 et seq.), the Occupational Safety and
Health Act (29 U.S.C. § 651 et seq.), the Residential Lead-Based Paint Hazard Reduction Act (42 U.S.C. § 4851 et seq.), any analogous state or
local laws, any amendments thereto, and the regulations promulgated pursuant to said laws, together with all amendments from time to time to any
of the foregoing and judicial interpretations thereof.
“Equity Interests” means, with respect to any Person, all shares of capital stock, partnership interests, membership interests in a limited
liability company or other ownership in participation or equivalent interests (however designated, whether voting or non-voting) of such Person’s
equity capital (including any warrants, options or other purchase rights with respect to the foregoing), whether now outstanding or issued after the
Closing Date.
“ERISA” means the Employee Retirement Income Security Act of 1974, as the same may be amended, modified or supplemented from
time to time, and any successor statute thereto, and any and all rules or regulations promulgated from time to time thereunder.
“ERISA Plan” means any “employee benefit plan”, as such term is defined in Section 3(3) of ERISA (other than a Multiemployer Plan),
which any Credit Party maintains, sponsors or contributes to, or, in the case of an employee benefit plan which is subject to Section 412 of the
Code or Title IV of ERISA, to which any Credit Party or any member of the Controlled Group may have any liability, including any liability by
reason of having been a substantial employer within the meaning of Section 4063 of ERISA at any time during the preceding five (5) years, or by
reason of being deemed to be a contributing sponsor under Section 4069 of ERISA.
“Erroneous Payment” has the meaning specified therefor in Section 11.20.
“Erroneous Payment Deficiency Assignment” has the meaning specified therefor in Section 11.20.
“Erroneous Payment Impacted Loans” has the meaning specified therefor in Section 11.20.
“Erroneous Payment Return Deficiency” has the meaning specified therefor in Section 11.20.
“Eton Property” means the real property commonly known as 3641 US Highway 411, Chatsworth, Georgia, with tax parcel numbers
0064A 044 and 0064A 045.
“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any
successor person), as in effect from time to time.
“Event of Default” has the meaning set forth in Section 10.1.
“Excluded Accounts” means (a) segregated Deposit Accounts into which there is deposited no funds other than those intended solely to
cover wages and payroll for employees of a Credit Party for a period of service no longer than two weeks at any time (and related contributions to
be made on behalf of
20

such employees to health and benefit plans) plus balances for outstanding checks for wages and payroll from prior periods, (b) segregated Deposit
Accounts constituting employee withholding accounts and contain only funds deducted from pay otherwise due to employees for services rendered
to be applied toward the tax obligations of such employees, (c) segregated Deposit Accounts constituting trust, fiduciary and escrow accounts in
which there is not maintained at any point in time funds on deposit greater than $25,000 in the aggregate for all such accounts, and (d) segregated
Deposit Accounts or Securities Accounts holding cash or Cash Equivalents described in clauses (o), (p) and (q) of the definition of Permitted Liens
(and subject to the caps set forth therein); provided that the accounts described in clauses (a) through (d) above shall be used solely for the
purposes described in such clauses.
“Excluded Property” means, collectively:
(a)
any lease, license, contract, permit, letter of credit, purchase money arrangement, instrument or agreement to which any
Credit Party is a party or any of its rights or interests thereunder if and to the extent that the grant of such security interest shall constitute a
result in (i) the abandonment, invalidation or unenforceability of any right, title or interest of any Credit Party therein or (ii) result in a breach or
termination pursuant to the terms of, or default under, any such lease, license, contract, permit, letter of credit, purchase money arrangement,
instrument or agreement;
(b)
any governmental licenses or state or local franchises, charters and authorizations, to the extent that Agent may not validly
possess a security interest in any such license, franchise, charter or authorization under applicable Law;
(c)
Excluded Accounts;
(d)
any “intent-to-use” trademarks or service mark applications for which an amendment to allege use or statement of use has
not been filed under 15 U.S.C. § 1051 Section 1(c) or Section 1(d), respectively or if filed, has not been deemed in conformance with 15 U.S.C.
§ 1051(a) or examined and accepted, respectively by the United States Patent and Trademark Office;
(e)
any asset which is subject to a purchase money Lien or Capital Lease permitted hereunder to the extent the granting of a
security interest in such asset is prohibited pursuant to the terms of the contract governing such purchase money Lien or Capital Lease;
(f)
the Atmore Property, the Roanoke Property and any Real Property Asset other than a Material Real Property;
(g)
the Rabbi Trust used to hold, invest, and reinvest contributions from the Credit Parties’ retirement savings plan;
(h)
the personal property described as “Collateral” in the GNCU Financing Statements as of the date of this Agreement and
any and all claims, rights and interests therein and all substitutions for, additions, attachments, accessories, accessions and improvements to and
replacements, products, proceeds and insurance proceeds thereof; and
(i)
motor vehicles.
(j)
provided that (x) any such limitation described in the foregoing clauses (a) and (b) on the security interests granted hereunder shall apply
only to the extent that any such prohibition could not be rendered ineffective pursuant to the UCC or any other applicable Law (including
Sections 9-406, 9-407 and 9-408
21

of the UCC) or principles of equity, (y) in the event of the termination or elimination of any such prohibition or the requirement for any consent
contained in such contract, agreement, permit, lease or license or in any applicable Law, to the extent sufficient to permit any such item to become
Collateral hereunder, or upon the granting of any such consent, or waiving or terminating any requirement for such consent, a security interest in
such contract, agreement, permit, lease, license, franchise, authorization or asset shall be automatically and simultaneously granted hereunder and
shall be included as Collateral hereunder, and (z) all rights to payment of money due or to become due pursuant to, and all products and proceeds
(and rights to the proceeds) from the sale of, any Excluded Property shall be and at all times remain subject to the security interests created by this
Agreement (unless such proceeds would independently constitute Excluded Property); provided, further, that upon the consummation of a
Permitted Real Estate Financing, and for so long as the security interest granted in favor of the lender thereunder remains effective, the applicable
Eligible Real Property securing such Permitted Real Estate Financing shall be deemed to constitute Excluded Property and Agent shall file such
mortgage releases or other release documentation as may be required to terminate its security interest in such Eligible Real Property; provided,
further, that upon Borrower Representative delivering written notice (a “Specified M&E Financing Notice”) to Agent certifying that Borrower
Representative believes, in reasonable good faith, that it will consummate a Permitted M&E Financing within one hundred and eighty (180) days
of such notice (each such financing, a “Specified M&E Financing”), the applicable M&E intended to secure such Permitted M&E Financing
shall be deemed to constitute Excluded Property and Agent shall file such financing statement amendments or other release documentation as may
be required to terminate its security interest in such M&E; provided further that if such Specified M&E Financing is not consummated within one
hundred and eighty (180) days following Agent’s receipt of such Specified M&E Financing Notice, such M&E shall cease to be Excluded
Property and shall become part of the Collateral, and Agent shall be permitted to file such financing statement amendments or other
documentation as it deems reasonably necessary in order to perfect its security interest in such M&E.
(k)
“Excluded Taxes” means any of the following Taxes imposed on or with respect to Agent, any Lender or any other recipient of any
payment to be made by or on behalf of any obligation of Credit Parties hereunder or the Obligations or required to be withheld or deducted from a
payment to Agent, such Lender or such recipient (including any interest and penalties thereon): (a) Taxes to the extent imposed on or measured by
Agent’s, any Lender’s or such recipient’s net income (however denominated), branch profits Taxes, and franchise Taxes and similar Taxes, in each
case, (i) imposed by the jurisdiction (or any political subdivision thereof) under which Agent, such Lender or such recipient is organized, has its
principal office or conducts business with respect to entering into any of the Financing Documents or taking any action thereunder or (ii) that are
Other Connection Taxes; (b) in the case of a Lender, United States withholding Taxes imposed on amounts payable to or for the account of such
Lender with respect to an applicable interest in the Loans pursuant to a Law in effect on the date on which (i) such Lender becomes a party to this
Agreement other than as a result of an assignment requested by a Credit Party under the terms hereof or (ii) such Lender changes its lending office
for funding its Loan, except in each case to the extent that, pursuant to Section 2.8, amounts with respect to such Taxes were payable either to such
Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Revolving Loan Commitment, or to such Lender
immediately before it changed its lending office; (c) Taxes attributable to such Lender’s failure to comply with Section 2.8(c); and (d) any U.S.
federal withholding taxes imposed in respect of a Lender under FATCA.
22

“Extrusion Line” means collectively, those machinery and equipment - including Oerlikon BCF S8 2x2 Extrusion Machine Number
44.3639 – that are owned by Borrower located at HD Fibers, 15 McDaniel Station Road, Calhoun, Georgia.
“FATCA” means Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is
substantively comparable and not materially more onerous to comply with), any current or future Treasury regulations or official interpretations
thereof and any agreement entered into pursuant to the implementation of Section 1471(b)(1) of the Code, and any intergovernmental agreement
between the United States Internal Revenue Service, the U.S. Government and any governmental or taxation authority under any other jurisdiction
which agreement’s principal purposes deals with the implementation of such sections of the Code.
“Federal Funds Rate” means, for any day, the rate of interest per annum (rounded upwards, if necessary, to the nearest whole multiple of
1/100 of 1%) equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such
day, provided, however, that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on
the next preceding Business Day, and (b) if no such rate is so published on such next preceding Business Day, the Federal Funds Rate for such day
shall be the average rate quoted to Agent on such day on such transactions as determined by Agent.
“Fee Letter” means each agreement (if any) between Agent and Borrower relating to fees payable to Agent and/or Lenders in connection
with this Agreement.
“Financing Documents” means this Agreement, any Notes, each Fee Letter (if any), the Security Documents, each Subordination
Agreement and any other subordination or intercreditor agreement pursuant to which any Debt and/or any Liens securing such Debt is
subordinated to all or any portion of the Obligations and all other documents, instruments and agreements related to the Obligations and heretofore
executed, executed concurrently herewith or executed at any time and from time to time hereafter, as any or all of the same may be amended,
supplemented, restated or otherwise modified from time to time.
“Fiscal Month” means a “month” beginning at the applicable Start Date and ending at the applicable End Date listed on Annex B to this
Agreement.
“Fixed Charge Coverage Ratio” means the ratio of Operating Cash Flow to Fixed Charges for each Defined Period.
“Fixed Charges” means for the applicable Defined Period:
(a) interest expense paid in cash, net of interest income, interest paid in kind and amortization of capitalized fees and expenses incurred to
consummate the transactions contemplated by the Financing Documents and included in interest expense, included in the
determination of net income of Borrowers and their Consolidated Subsidiaries for the Defined Period; plus
(b) any cash payment of (or minus any cash refund with respect to) income or franchise taxes included in the determination of net income
for the Defined Period; plus
(c) payments of principal and interest for the Defined Period with respect to all Debt (including the portion of scheduled payments under
Capital Leases allocable to principal and excluding
23

scheduled repayments of Revolving Loans and other Debt subject to reborrowing to the extent not accompanied by a concurrent and
permanent reduction of the Revolving Loan Commitment (or equivalent loan commitment)); plus
(d) Permitted Distributions paid in cash in the Defined Period.
“Floor” means the rate per annum of interest equal to one percent (1.00%).
“Foreign Lender” has the meaning set forth in Section 2.8(c)(i).
“GAAP” means generally accepted accounting principles set forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board (or agencies with similar functions of comparable stature and authority within the United States accounting
profession), which are applicable to the circumstances as of the date of determination.
“General Intangible” means any “general intangible” as defined in Article 9 of the UCC, and any personal property, including things in
action, other than accounts, chattel paper, commercial tort claims, deposit accounts, documents, goods, instruments, investment property, letter-of-
credit rights, letters of credit, money, and oil, gas or other minerals before extraction, but including payment intangibles and software.
“GNCU Debt” means Debt incurred by Credit Parties in an aggregate principal amount not to exceed $15,000,000 in the aggregate at any
time outstanding, incurred pursuant to the GNCU Debt Documents.
“GNCU Debt Documents” means that certain Loan Agreement, dated as of October 29, 2020 by and between Credit Parties and Greater
Nevada Credit Union, as amended from time to time.
“GNCU Financing Statements” means each of (a) that certain UCC-1 financing statement filed with the Georgia Secretary of State on
November 2, 2020, numbered 1552020001103 and naming TDG Operations, LLC as debtor and Greater Nevada Credit Union as secured party
and (b) that certain UCC-1 financing statement filed with the Tennessee Secretary of State on October 30, 2020, numbered 433545480 and naming
The Dixie Group, Inc. as debtor and Greater Nevada Credit Union as secured party, in each case, together with all UCC-3 amendments thereto
filed prior to the Closing Date.
“GNCU Liens” means Liens granted by Credit Parties (and perfected pursuant to the GNCU Financing Statements) prior to the Closing
Date in respect of certain M&E, fixtures and the proceeds thereof, in favor of Greater Nevada Credit Union and securing the GNCU
Debt.“Governmental Authority” means any nation or government, any state, local or other political subdivision thereof, and any agency,
department or Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any
corporation or other Person owned or controlled (through stock or capital ownership or otherwise) by any of the foregoing, whether domestic or
foreign.
“Guarantee” by any Person means any obligation, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or
other obligation of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or
otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation
(whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or
24

otherwise), or (b) entered into for the purpose of assuring in any other manner the obligee of such Debt or other obligation of the payment thereof
or to protect such obligee against loss in respect thereof (in whole or in part), provided, however, that the term Guarantee shall not include
endorsements for collection or deposit in the Ordinary Course of Business. The term “Guarantee” used as a verb has a corresponding meaning.
“Guarantor” and “Guarantors” has the meaning set forth in the introductory paragraph of this Agreement.
“Hazardous Materials” means (a) any “hazardous substance” as defined in CERCLA, (b) any “hazardous waste” as defined by the
Resource Conservation and Recovery Act, (c) asbestos, (d) polychlorinated biphenyls, (e) petroleum and its derivatives, by-products and other
hydrocarbons, and (f) any other pollutant, toxic, radioactive, caustic or otherwise hazardous substance regulated under Environmental Laws.
“Hazardous Materials Contamination” means contamination (whether now existing or hereafter occurring) of the improvements,
buildings, facilities, personalty, soil, groundwater, air or other elements on or of the relevant property by Hazardous Materials, or any derivatives
thereof, or on or of any other property as a result of Hazardous Materials, or any derivatives thereof, generated on, emanating from or disposed of
in connection with the relevant property.
“Holdings” has the meaning set forth in the introductory paragraph of this Agreement.
“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of
any obligation of Borrowers or any other Credit Party under any Financing Documents and (b) to the extent not otherwise described in (a), Other
Taxes.
“Instrument” means “instrument”, as defined in Article 9 of the UCC.
“Intellectual Property” means, with respect to any Person, all patents, patent applications and like protections, including improvements
divisions, continuation, renewals, reissues, extensions and continuations in part of the same, trademarks, trade names, trade styles, trade dress,
service marks, logos and other business identifiers and, to the extent permitted under applicable law, any applications therefor, whether registered
or not, and the goodwill of the business of such Person connected with and symbolized thereby, copyright rights, copyright applications, copyright
registrations and like protections in each work of authorship and derivative works, whether published or unpublished, technology, know-how and
processes, operating manuals, trade secrets, computer hardware and software, rights to unpatented inventions and all applications and licenses
therefor, used in or necessary for the conduct of business by such Person and all claims for damages by way of any past, present or future
infringement of any of the foregoing.
“Interest Period” means any period commencing on the first day of a calendar month and ending on the last day of such calendar month.
“In-Transit Inventory Reserve” means, as of any date of determination, those reserves that Agent deems necessary or appropriate to
establish and maintain, in its good faith credit judgment, with respect to Eligible Domestic In-Transit Inventory and/or Eligible Foreign In-Transit
Inventory, including without limitation (i) for the estimated costs relating to unpaid freight charges, warehousing or storage charges, taxes, duties,
and other similar unpaid costs associated with the acquisition of such Inventory, plus (ii) for the estimated reclamation claims of unpaid sellers of
such Inventory.
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“Inventory” means “inventory” as defined in Article 9 of the UCC.
“Investment” means, with respect to any Person, directly or indirectly, (a) to purchase or acquire any stock or stock equivalents, or any
obligations or other securities of, or any interest in, any Person, including the establishment or creation of a Subsidiary, (b) to make or commit to
make any Acquisition, or (c) make or purchase any advance, loan, extension of credit or capital contribution to, or any other investment in, any
Person. The amount of any Investment shall be the original cost of such Investment plus the cost of all additions thereto, without any adjustments
for increases or decreases in value, or write-ups, write-downs or write-offs with respect thereto.
“IRS” has the meaning set forth in Section 2.8(c)(i).
“Joinder Requirements” has the meaning set forth in Section 4.11(c).
“LC Cash Collateral Accounts” means, collectively, each segregated Deposit Account from time to time identified to Agent in writing
established by Borrower for the sole purpose of securing Borrower’s obligations under clause (h) of the definition Permitted Contingent
Obligations and containing only such cash or Cash Equivalents that have been required to be pledged to secure such obligations of Borrower;
provided, that the aggregate amount of cash or Cash Equivalents deposited in all such LC Cash Collateral Accounts does not, at any time, exceed
the face amount of letters of credit permitted pursuant to clause (h) of the definition of Permitted Contingent Obligations.
“LC Issuer” means one or more banks, trust companies or other Persons in each case expressly identified by Agent from time to time, in
its sole discretion, as an LC Issuer for purposes of issuing one or more Letters of Credit hereunder. Without limitation of Agent’s discretion to
identify any Person as an LC Issuer, no Person shall be designated as an LC Issuer unless such Person maintains reporting systems acceptable to
Agent with respect to letter of credit exposure and agrees to provide regular reporting to Agent satisfactory to it with respect to such exposure.
“Laws” means any and all federal, state, provincial, territorial, local and foreign statutes, laws, judicial decisions, regulations, ordinances,
rules, judgments, orders, decrees, codes, injunctions, permits, governmental agreements and governmental restrictions, whether now or hereafter in
effect, which are applicable to any Credit Party in any particular circumstance. “Laws” includes, without limitation, Healthcare Laws,
Environmental Laws and applicable U.S. and non-U.S. export control laws and regulations, including without limitation the Export Administration
Regulations.
“Lender” means each of (a) MCF, in its capacity as a lender hereunder, (b) each other Person party hereto in its capacity as a lender
hereunder, (c) each other Person that becomes a party hereto as Lender pursuant to Section 11.17, and (d) the respective successors of all of the
foregoing, and “Lenders” means all of the foregoing.
“Lender Letter of Credit” means a Letter of Credit issued by an LC Issuer that is also, at the time of issuance of such Letter of Credit, a
Lender.
“Letter of Credit” means a standby letter of credit issued for the account of any Borrower by an LC Issuer which expires by its terms
within one year after the date of issuance and in any event at least thirty (30) days prior to the Maturity Date. Notwithstanding the foregoing, a
Letter of Credit may provide for automatic extensions of its expiry date for one or more successive one (1) year periods, provided, however, that
the LC Issuer that issued such Letter of Credit has the right to terminate such Letter of Credit on each such annual expiration date and no renewal
term may extend the term of the Letter of
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Credit to a date that is later than the thirtieth (30th) day prior to the Maturity Date. Each Letter of Credit shall be either a Lender Letter of Credit or
a Supported Letter of Credit.
“Letter of Credit Liabilities” means, at any time of calculation, the sum of (a) without duplication, the amount then available for drawing
under all outstanding Lender Letters of Credit and all Supported Letters of Credit, in each case without regard to whether any conditions to
drawing thereunder can then be met, plus (b) without duplication, the aggregate unpaid amount of all reimbursement obligations in respect of
previous drawings made under all such Lender Letters of Credit and Supported Letters of Credit.
“Lien” means, with respect to any asset, any mortgage, lien, pledge, charge, security interest or encumbrance of any kind, in respect of
such asset. For the purposes of this Agreement and the other Financing Documents, any Credit Party or any Subsidiary shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, Capital
Lease or other title retention agreement relating to such asset.
“Liquidity” means the sum of (a) Revolving Loan Availability plus (b) Credit Party Unrestricted Cash.
“Litigation” means any action, suit or proceeding before any court, mediator, arbitrator or Governmental Authority.
“Loan Account” has the meaning set forth in Section 2.6(b).
“Loan(s)” means the Revolving Loans.
“Lockbox” has the meaning set forth in Section 2.11.
“Lockbox Account” means one or more segregated accounts maintained at the Lockbox Bank into which collections of Accounts are paid,
which account or accounts shall be, if requested by Agent, opened in the name of Agent (or a nominee of Agent).
“Lockbox Bank” has the meaning set forth in Section 2.11.
“M&E” means machinery or equipment now owned or hereafter acquired by the Credit Parties, including without limitation the Extrusion
Line and the Tailored Loop Tufting Machine.
“Margin Stock” means “margin stock” as such term is defined in Regulation T, U, or X of the Board of Governors of the Federal Reserve
System.
“Material Adverse Effect” means with respect to any event, act, condition or occurrence of whatever nature (including any adverse
determination in any litigation, arbitration, or governmental investigation or proceeding), whether singly or in conjunction with any other event or
events, act or acts, condition or conditions, occurrence or occurrences, whether or not related, a material adverse change in, or a material adverse
effect upon, any of (a) the condition (financial or otherwise), operations, business, or properties of the Credit Parties, taken as a whole, (b) the
rights and remedies of Agent or Lenders under any Financing Document or the ability of Agent or Lenders to enforce the Obligations or realize
upon the Collateral, or the ability of any Credit Party to pay or perform any of its obligations under any Financing Document to which it is a party,
(c) the legality, validity or enforceability of any Financing Document, (d) the existence, perfection or priority of any security interest granted in
any Financing Document,
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(e) the value of any material portion of the Collateral or (f) a material impairment of the prospect of repayment of any portion of the Obligations.
“Material Contracts” means (a) the Financing Documents, (b) the agreements listed on Schedule 3.17, and (c) each other agreement or
contract to which such Credit Party or its Subsidiaries is a party, the termination of which would reasonably be expected to result in a Material
Adverse Effect.
“Material Real Property” means (a) the Calhoun Property, (b) the Eton Property and (c) any other real property that is owned in fee by
any Credit Party together with any improvements thereon, with a fair market value (as reasonably agreed between Borrower Representative and
Agent) in excess of $1,000,000 individually or in the aggregate as of the date of the acquisition thereof (but excluding, for the avoidance of doubt,
the Roanoke Property and the Atmore Property).
“Maturity Date” means the date that is three (3) years following the Closing Date.
“Maximum Lawful Rate” has the meaning set forth in Section 2.7.
“MCF” means MidCap Funding IV Trust, a Delaware statutory trust, and its successors and assigns.
“Minimum EBITDA Threshold” means, for each Defined Period, the minimum EBITDA set forth below for such Defined Period.
Defined Period Ending
Minimum EBITDA Threshold
March 29, 2025
$3,091,042
May 3, 2025
$2,321,569
May 31, 2025
$1,865,270
June 28, 2025
$1,694,035
August 2, 2025
$2,121,312
August 30, 2025
$2,560,103
September 27, 2025
$4,306,766
November 1, 2025
$5,600,554
November 29, 2025
$6,997,654
December 27, 2025 and each Defined Period
ending thereafter
$8,969,275
“Minimum Excess Availability Amount” means, as of any date of determination, the amount of Revolving Loan Availability required to
be maintained by the Credit Parties in accordance with Section 6.1.
“Minimum Excess Availability Event” means the earliest to occur of (a) the occurrence and continuance of any Event of Default as a
result of Credit Parties’ failure to timely deliver to Agent the financial reporting or Compliance Certificate required pursuant to Sections 4.1(a), (b)
or (h) hereof, or (b)
 Note to Miller Martin: Table specifies these figures are for the applicable Defined Period, which is defined on a TTM standard.
1
1
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the date that the Credit Parties timely deliver to Agent a Compliance Certificate evidencing a Fixed Charge Coverage Ratio for the applicable
Defined Period of less than 1.10 to 1.00.
“Minimum Excess Availability Period” means any period (a) beginning immediately upon the date of occurrence of a Minimum Excess
Availability Event and (b) ending on the date that both (i) no Event of Default described in clause (a) of the definition of “Minimum Excess
Availability Event” is continuing and (b) the Credit Parties have timely delivered to Agent a Compliance Certificate evidencing a Fixed Charge
Coverage Ratio for the applicable Defined Period of no less than 1.10 to 1.00.
“Mortgaged Property” means each Material Real Property.
“Mortgages” means the mortgages, deeds of trust, deeds to secure debt, leasehold mortgages, leasehold deeds of trust or leasehold deeds
to secure debt and other similar security documents delivered pursuant to Section 4.11 or 7.4, each in customary form and substance reasonably
acceptable to Agent, including as may be required to account for local law matters.
“Multiemployer Plan” means a multiemployer plan within the meaning of Section 4001(a)(3) of ERISA to which any Credit Party or any
other member of the Controlled Group (or any Person who in the last five years was a member of the Controlled Group) is making or accruing an
obligation to make contributions or has within the preceding five plan years (as determined on the applicable date of determination) made
contributions.
“Net Orderly Liquidation Value” means the net amount (after all costs of sale), expressed in terms of money, which Agent, in its good
faith discretion, estimates can be realized from a sale, as of a specific date, given a reasonable period to find a purchaser(s), with the seller being
compelled to sell on an as-is/where-is basis, as reflected in the most recent appraisal delivered hereunder.
“NFIP” has the meaning set forth in the definition of “Real Property Collateral Requirements”.
“Notes” has the meaning set forth in Section 2.3.
“Notice of Borrowing” means a notice of a Responsible Officer of Borrower Representative, appropriately completed and substantially in
the form of Exhibit D hereto.
“Notice of LC Credit Event” means a notice from a Responsible Officer of Borrower Representative to Agent with respect to any
issuance, increase or extension of a Letter of Credit specifying: (a) the date of issuance or increase of a Letter of Credit; (b) the identity of the LC
Issuer with respect to such Letter of Credit, (c) the expiry date of such Letter of Credit; (d) the proposed terms of such Letter of Credit, including
the face amount; and (e) the transactions that are to be supported or financed with such Letter of Credit or increase thereof.
“Obligations” means all obligations, liabilities and indebtedness (monetary (including, without limitation, the payment of interest and
other amounts arising after the commencement of any case with respect to any Credit Party under the Bankruptcy Code or any similar statute
which would accrue and become due but for the commencement of such case, whether or not such amounts are allowed or allowable in whole or in
part in such case) or otherwise) of each Credit Party under this Agreement or any other Financing Document, in each case howsoever created,
arising or evidenced, whether direct or indirect, absolute or contingent, now or hereafter existing, or due or to become due. In addition to, but
without duplication of, the foregoing, the Obligations shall include, without limitation, all obligations,
29

liabilities and indebtedness arising from or in connection with all Support Agreements and all Lender Letters of Credit.
“OFAC” means the U.S. Department of Treasury Office of Foreign Assets Control.
“OFAC Lists” means, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to
Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant
to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.
“Operating Cash Flow” means for the applicable Defined Period:
(a) EBITDA for the Defined Period; minus
(b) unfinanced Capital Expenditures for the Defined Period; minus
(c) to the extent not already reflected in the calculation of EBITDA, other capitalized costs, defined as the gross amount paid in cash and
capitalized during the Defined Period, as long term assets, other than amounts capitalized during the Defined Period as Capital
Expenditures for property, plant and equipment or similar fixed asset accounts.
“Ordinary Course of Business” means, in respect of any transaction involving any Credit Party or any Subsidiary, the ordinary course of
business of such Credit Party or Subsidiary, as conducted by such Credit Party in accordance with past practices and undertaken by such Person in
good faith and not for purposes of evading any covenant or restriction in any Financing Document.
“Organizational Documents” means, with respect to any Person other than a natural person, the documents by which such Person was
organized (such as a certificate of incorporation, certificate of limited partnership or articles of organization, and including, without limitation, any
certificates of designation for preferred stock or other forms of preferred equity) and which relate to the internal governance of such Person (such
as by-laws, a partnership agreement or an operating, limited liability company or members agreement), including any and all shareholder
agreements or voting agreements relating to the capital stock or other Equity Interests of such Person.
“Other Connection Taxes” means taxes imposed as a result of a present or former connection between Agent or any Lender and the
jurisdiction imposing such tax (other than connections arising from Agent or such Lender having executed, delivered, become a party to,
performed its obligations under, received payments under, engaged in any other transaction pursuant to or enforced any Financing Document, or
sold or assigned an interest in any Loans or any Financing Document).
“Other Taxes” means all present or future stamp, court or documentary, intangible, recording, filing or similar taxes that arise from any
payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest
under, or otherwise with respect to, any Financing Document, except any such taxes that are Other Connection Taxes imposed with respect to an
assignment (other than an assignment made pursuant to Section 2.8(i)).
“Overdue Accounts Payable Reserve” means a reserve established by the Agent in the amount of the Credit Parties’ accounts payable
owing to vendors which are more than sixty (60) calendar days past due their original due date, as adjusted from time to time by Agent in its
Permitted Discretion.
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“Participant Register” has the meaning set forth in Section 11.17(a)(iii).
“Payment Account” means the account specified on the signature pages hereof into which all payments by or on behalf of each Borrower
to Agent under the Financing Documents shall be made, or such other account as Agent shall from time to time specify by notice to Borrower
Representative.
“Payment Recipient” has the meaning specified therefor in Section 11.20 of this Agreement.
“PBGC” means the Pension Benefit Guaranty Corporation and any Person succeeding to any or all of its functions under ERISA.
“Pension Plan” means any ERISA Plan that is subject to Section 412 of the Code or Title IV of ERISA.
“Permits” means all governmental licenses, authorizations, supplier numbers, registrations, permits, certificates, franchises, qualifications,
accreditations, consents and approvals of a Credit Party required under all applicable Laws and required for such Credit Party in order to carry on
its business as now conducted.
“Permitted Asset Dispositions” means the following Asset Dispositions:
(a) dispositions of Inventory in the Ordinary Course of Business and not pursuant to any bulk sale;
(b) dispositions of furniture, fixtures and equipment in the Ordinary Course of Business that the applicable Borrower or Subsidiary
determines in good faith is no longer used or useful in the business of such Borrower and its Subsidiaries and with a fair salable value not to
exceed $250,000 in the aggregate for all such furniture, fixtures and equipment in any calendar year;
(c) abandonment of immaterial Intellectual Property that is, in the reasonable good faith judgment of a Borrower, no longer useful in
the conduct of the business of the Borrowers or any of their Subsidiaries;
(d) dispositions consisting of the use or payment of cash or Cash Equivalents in the Ordinary Course of Business for equivalent value
and in a manner that is not prohibited by the terms of this Agreement or the other Financing Documents;
(e)  (i) Asset Dispositions from a Credit Party to any other Credit Party (other than Holdings), (ii) Asset Dispositions from any
Subsidiary that is not a Credit Party to any Credit Party, (iii) Asset Dispositions among any Subsidiaries that are not Credit Parties;
(f) sales, forgiveness or discounting, on a non-recourse basis and in the Ordinary Course of Business, of past due Accounts (other
than Eligible Accounts included in the Borrowing Base) in connection with the settlement of delinquent Accounts or in connection with the
bankruptcy or reorganization of suppliers or customers in accordance with the applicable terms of this Agreement;
(g) to the extent constituting an Asset Disposition, the granting of Permitted Liens;
(h) (i) any termination of any lease, sublease, license or sub-license (other than any licenses constituting Material Contracts) in the
Ordinary Course of Business (and any related Asset Disposition of
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improvements made to leased real property resulting therefrom), (ii) any expiration of any option agreement in respect of real or personal property,
and (iii) any surrender or waiver of contractual rights or the settlement, release or surrender of contractual rights or litigation claims (including in
tort) in the Ordinary Course of Business; and
(i) dispositions of tangible personal property (and not, for the avoidance of doubt, any Intellectual Property, Equity Interests or other
intangible assets) so long as (i) the assets subject to such Asset Dispositions are sold for fair value, as determined by the Borrowers in good faith,
(ii) at least 75% of the consideration therefor is cash or Cash Equivalents, (iii) no Event of Default has occurred and is continuing at the time such
Assets Dispositions are made or would result therefrom, and (iv) the aggregate amount of such Asset Dispositions in any twelve (12) month period
does not exceed $500,000.
“Permitted Contest” means, with respect to any tax obligation or other obligation allegedly or potentially owing from any Credit Party or
its Subsidiary to any governmental tax authority or other third party, a contest maintained in good faith by appropriate proceedings promptly
instituted and diligently conducted and with respect to which such reserve or other appropriate provision, if any, as shall be required in conformity
with GAAP shall have been made on the books and records and financial statements of the applicable Credit Party(ies); provided, however, that
(a) compliance with the obligation that is the subject of such contest is effectively stayed during such challenge; (b) Credit Parties’ and their
Subsidiaries’ title to, and its right to use, the Collateral is not adversely affected thereby and Agent’s Lien and priority on the Collateral are not
adversely affected, altered or impaired thereby; (c) Credit Parties have given prior written notice to Agent of a Credit Party’s or its Subsidiary’s
intent to so contest the obligation; (d) the Collateral or any part thereof or any interest therein shall not be in any danger of being sold, forfeited or
lost by reason of such contest by Credit Parties or their Subsidiaries; (e) Credit Parties have given Agent notice of the commencement of such
contest and upon request by Agent, from time to time, notice of the status of such contest by Credit Parties and/or confirmation of the continuing
satisfaction of this definition; and (f) upon a final determination of such contest, Credit Parties and their Subsidiaries shall promptly comply with
the requirements thereof.
“Permitted Contingent Obligations” means:
(a) Contingent Obligations arising in respect of the Debt under the Financing Documents;
(b) Contingent Obligations resulting from endorsements for collection or deposit in the Ordinary Course of Business;
(c) Contingent Obligations outstanding on the Closing Date and set forth on Schedule  5.1 (but not including any refinancings,
extensions, increases or amendments to the indebtedness underlying such Contingent Obligations other than extensions of the maturity thereof
without any other change in terms);
(d) Contingent Obligations incurred in the Ordinary Course of Business with respect to surety and appeal bonds, performance bonds
and other similar obligations not to exceed $100,000 in the aggregate at any time outstanding;
(e) Contingent Obligations arising under indemnity agreements with title insurers to cause such title insurers to issue to Agent
mortgagee title insurance policies;
(f) Contingent Obligations arising with respect to customary indemnification obligations in favor of purchasers in connection with
dispositions of personal property assets permitted under
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Section 5.6 or in connection with any other commercial agreement entered into by a Credit Party or a Subsidiary thereof in the Ordinary Course of
Business;
(g) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction,
Contingent Obligations existing or arising under any other Swap Contract, provided, however, that such obligations are (or were) entered into by
Credit Party, Subsidiary or an Affiliate in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities,
commitments, investments, assets, or property held or reasonably anticipated by such Person and not for purposes of speculation;
(h) Contingent Obligations existing or arising in connection with any letter of credit in the Ordinary Course of Business, provided that
the aggregate amount of all such letter of credit reimbursement obligations, when aggregated with the Letter of Credit Liabilities, does not at any
time exceed Six Million Dollars ($6,000,000) outstanding; and
(i) other Contingent Obligations not permitted by clauses (a) through (h) above, not to exceed $250,000 in the aggregate at any time
outstanding.
“Permitted Debt” means:
(a) Credit Parties’ Debt to Agent and each Lender under this Agreement and the other Financing Documents;
(b) Debt incurred as a result of endorsing negotiable instruments received in the Ordinary Course of Business;
(c) purchase money Debt not to exceed $1,000,000 at any time (whether in the form of a loan or a lease) used solely to acquire
equipment used in the Ordinary Course of Business and secured only by such equipment;
(d) Debt existing on the date of this Agreement and described on Schedule  5.1 (but not including any refinancings, extensions,
increases or amendments to such Debt other than extensions of the maturity thereof without any other change in terms);
(e) so long as there exists no Event of Default both immediately before and immediately after giving effect to any such transaction,
Debt existing or arising under any Swap Contract, provided, however, that such obligations are (or were) entered into by Borrower or an Affiliate
in the Ordinary Course of Business for the purpose of directly mitigating risks associated with liabilities, commitments, investments, assets, or
property held or reasonably anticipated by such Person and not for purposes of speculation;
(f) Debt in the form of insurance premiums financed through the applicable insurance company;
(g) trade accounts payable arising and paid on a timely basis and in the Ordinary Course of Business;
(h) to the extent constituting Debt (without duplication) Permitted Contingent Obligations;
(i) Subordinated Debt;
33

(j) Debt in respect of netting services, overdraft protections and other like services, in each case incurred in the Ordinary Course of
Business;
(k) Debt, in an aggregate amount not to exceed $50,000 at any time outstanding, in respect of credit cards, credit card processing
services, debit cards, stored value cards, purchase cards (including so-called “procurement cards” or “P-cards”) or other similar cash management
or merchant services, in each case, incurred in the Ordinary Course of Business; provided that, to the extent such Debt is secured, it is secured
solely by cash collateral held in a Credit Card Cash Collateral Account;
(l) other unsecured Debt not to exceed $250,000 in the aggregate at any time at any time outstanding;
(m) Permitted Real Estate Financings;
(n) the AmeriState Debt;
(o) the GNCU Debt; and
(p) Permitted M&E Financings.
“Permitted Discretion” means a determination made in the exercise of reasonable (from the perspective of a secured asset-based
lender) business judgment.
“Permitted Distributions” means the following Distributions:
(a) dividends by any Subsidiary of any Borrower to such parent Borrower;
(b) Distributions payable solely in the Equity Interests (other than Disqualified Equity Interests) of such Person;
(c)  repurchases of stock of current and former employees, directors or consultants pursuant to stock purchase agreements so long as
an Event of Default does not exist at the time of such repurchase and would not exist after giving effect to such repurchase, provided, however, that
such repurchase does not exceed $400,000 in the aggregate per fiscal year;
(d) Distributions of cash to Holdings to permit such Person to pay the costs and expenses of such Person’s respective board of
directors (or other similar governing body), including observer’s fees and expenses, provided that any directors’ fees shall only be paid to
independent directors in an aggregate amount not to exceed $400,000 in any fiscal year; and
(e) Distributions of cash to Holdings to permit such Person to (i) pay corporate overhead expenses and legal, accounting and other
professional fees and expenses incurred in the Ordinary Course of Business and (ii) permit Holdings to pay the consolidated, combined, unitary or
other federal, state and local income, profits, franchise and capital Taxes then due and owing by Holdings in respect of such Borrower, so long as
the amount of such Taxes shall not be greater, nor the receipt by such Borrower of Tax benefits less, than they would have been had such Borrower
not filed consolidated income tax returns with Holdings.
“Permitted Holder” means each of Daniel K. Frierson, an individual, D. Kennedy Frierson, Jr., an individual, and any Person that is
directly or indirectly Controlled by a Permitted Holder.
34

“Permitted Investments” means:
(a) Investments shown on Schedule 5.7 and existing on the Closing Date;
(b) To the extent constituting and Investment, cash and Cash Equivalents owned by such Person;
(c) Investments consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the
Ordinary Course of Business;
(d) Investments consisting of (i)  travel advances and employee relocation loans and other employee loans and advances in the
Ordinary Course of Business, and (ii) loans to employees, officers or directors relating to the purchase of equity securities of Borrowers or their
Subsidiaries pursuant to employee stock purchase plans or agreements approved by Borrowers’ Board of Directors (or other governing body), but
the aggregate of all such loans and advances outstanding pursuant to this clause (d) may not exceed $250,000 at any time;
(e) Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers
and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the Ordinary Course of Business;
(f) Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are
not Affiliates, in the Ordinary Course of Business, provided, however, that this subpart (f) shall not apply to Investments of any Credit Party in any
Subsidiary;
(g) Investments consisting of Deposit Accounts or Securities Accounts in which Agent has received a Deposit Account Control
Agreement or Securities Account Control Agreement, as applicable;
(h) Investments by any Credit Party in (i) any Borrower, or (ii) any Guarantor to the extent such Guarantor has granted a Lien to
Agent in all or substantially all of its property of the type described in Schedule 9.1 hereto and otherwise made in compliance with Section 4.11(c);
and
(i) other Investments in an amount not exceeding $250,000 in the aggregate.
“Permitted Liens” means:
(a) deposits or pledges of cash to secure obligations under workmen’s compensation, social security or similar laws, or under
unemployment insurance (but excluding Liens arising under ERISA, or with respect to any Pension Plan or Multiemployer Plan, the Code)
pertaining to a Borrower’s or its Subsidiary’s employees, if any;
(b) deposits or pledges of cash to secure bids, tenders, contracts (other than contracts for the payment of money or the deferred
purchase price of property or services), leases, statutory obligations, surety and appeal bonds and other obligations of like nature arising in the
Ordinary Course of Business;
(c) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like Liens arising by operation of law in the ordinary
course of business that are not overdue for a period of more than 60 days or, if overdue for a period of more than 60 days, they are being contested
pursuant to a Permitted Contest (provided that nothing in this clause (c) shall be deemed to be consent or permission
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given by Agent or Lenders to the transfer of inventory or other property to any carrier, warehousemen, mechanic, materialmen, repairment or other
like Person as security for the payment of the obligations due to such a Person or to any such Person’s Lien taking priority over the Liens granted
to Agent hereunder);
(d) Liens on Collateral, other than Borrowing Base Collateral, for taxes or other governmental charges not at the time delinquent or
thereafter payable without penalty or the subject of a Permitted Contest;
(e) attachments, appeal bonds, judgments and other similar Liens on Collateral other than Borrowing Base Collateral, for sums not
exceeding $100,000 in the aggregate arising in connection with court proceedings; provided, however, that the execution or other enforcement of
such Liens is effectively stayed and the claims secured thereby are the subject of a Permitted Contest;
(f) Liens and encumbrances in favor of Agent under the Financing Documents;
(g) Liens on Collateral existing on the date hereof and set forth on Schedule 5.2;
(h) any Lien on any equipment securing Debt permitted under clause (c) of the definition of Permitted Debt, provided, however, that
such Lien attaches concurrently with or within twenty (20) days after the acquisition thereof;
(i) Liens with respect to real estate, easements, rights of way, restrictions, minor defects or irregularities of title, none of which,
individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Security Documents,
materially affect the value or marketability of the Collateral, impair the use or operation of the Collateral for the use currently being made thereof
or impair Borrowers’ ability to pay the Obligations in a timely manner or impair the use of the Collateral or the ordinary conduct of the business of
any Borrower or any Subsidiary and which, in the case of any real estate that is part of the Collateral, are set forth as exceptions to or subordinate
matters in the title insurance policy accepted by Agent insuring the lien of the Security Documents;
(j) Liens that are rights of set-off, bankers’ liens or similar non-consensual Liens relating to deposit or securities accounts in favor of
banks, other depositary institutions and securities intermediaries solely to secure payment of fees and similar costs and expenses and arising in the
Ordinary Course of Business;
(k) purported Liens evidenced by the filing of precautionary UCC financing statements relating solely to operating leases or
consignments of personal property entered into the Ordinary Course of Business;
(l) Liens granted in the Ordinary Course of Business on the unearned portion of insurance premiums securing the financing of
insurance premiums to the extent the financing is permitted under clause (f) of the definition of Permitted Debt;
(m) Liens that are rights of set-off, bankers’ liens or similar non-consensual Liens relating to Deposit Accounts or Securities Accounts
in favor of banks, other depositary institutions and securities intermediaries solely to secure payment of fees and similar costs and expenses and
arising in the Ordinary Course of Business
(n) Leases or subleases of real property granted in the Ordinary Course of Business;
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(o) Liens, deposits and pledges encumbering cash and Cash Equivalents with a value not to exceed $250,000 in the aggregate at any
time, to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), public or statutory obligations, surety,
indemnity, performance or other similar bonds or other similar obligations arising in the Ordinary Course of Business;
(p) Liens solely in respect of the Credit Card Cash Collateral Accounts and amounts deposited therein to the extent securing
obligations permitted pursuant to clause (k) of the definition of Permitted Debt;
(q) Liens solely in respect of the LC Cash Collateral Accounts and amounts deposited therein to the extent securing obligations
permitted pursuant to clause (h) of the definition of Permitted Contingent Obligations;
(r)  Liens in favor of customs and revenue authorities arising as a matter of Law to secure payment of customs duties in connection
with the importation of goods in the Ordinary Course of Business; and
(s) (i) Liens on any Eligible Real Property securing a Permitted Real Estate Financing, (ii) the AmeriState Liens, (iii) the GNCU
Liens and (iv) Liens on any M&E securing a Permitted M&E Financing.
“Permitted M&E Financing” means (i) Debt incurred by the Credit Parties in an aggregate principal amount not to exceed $10,000,000,
in respect of the Extrusion Line and/or the Tailored Loop Tufting Machine, and (ii) Debt incurred by the Credit Parties in an aggregate principal
amount not to exceed $10,000,000, in respect of any now owned or hereinafter acquired M&E (other than the Extrusion Line and the Tailored
Loop Tufting Machine); provided that, in the case of both clause (i) and (ii) of this definition, (x) the Borrower Representative shall provide Agent
with ten (10) Business Days’ notice of such Permitted M&E Financing, (y) promptly upon Agent’s request, the Borrower Representative shall
provide Agent with copies of all documentation evidencing such Permitted M&E Financing and (z) such Debt shall be secured solely by the
applicable M&E being financed and shall not be guaranteed by any other Credit Party or any Subsidiary thereof.
“Permitted Modifications” means (a)  such amendments or other modifications to a Credit Party’s or Subsidiary’s Organizational
Documents as are required under this Agreement or by applicable Law and fully disclosed to Agent within thirty (30) days after such amendments
or modifications have become effective, and (b) such amendments or modifications to a Credit Party’s or Subsidiary’s Organizational Documents
(other than those involving a change in the name of a Credit Party or Subsidiary or involving a reorganization of a Credit Party or Subsidiary under
the laws of a different jurisdiction) that would not adversely affect the rights and interests of Agent or Lenders and fully disclosed to Agent within
thirty (30) days after such amendments or modifications have become effective.
“Permitted Real Estate Financing” means Debt incurred by the Credit Parties in respect of the Calhoun Property and/or the Eton
Property; provided that (w) such Debt shall be secured solely by the Calhoun Property and/or the Eton Property (as applicable) and shall not be
guaranteed by any other Credit Party or any Subsidiary thereof, except pursuant to commercially reasonable non-recourse “bad boy” carveout
guaranties and environmental indemnity agreements, (x) the Borrower Representative shall provide Agent with ten (10) Business Days’ notice of
such Permitted Real Estate Financing, (y) the Borrower Representative shall provide Agent with an updated Borrowing Base Certificate as of the
date of such Permitted Real Estate Financing after giving effect thereto and (z) promptly upon Agent’s request,
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the Borrower Representative shall provide Agent with copies of all documentation evidencing such Permitted Real Estate Financing.
“Permitted Real Estate Financing Trigger Date” means the first date on which either a Permitted Real Estate Financing or Permitted
Sale/Leaseback with respect to each of the Calhoun Property and the Eton Property has been consummated.
“Permitted Sale/Leasebacks” means any arrangement with any Person whereby, in a substantially contemporaneous transaction, a Credit
Party sells or transfers all or substantially all of its right, title and interest in a Permitted Sale/Leaseback Asset and, in connection therewith,
acquires or leases back the right to use such Permitted Sale/Leaseback Asset; provided that (v) with respect to any Permitted Sale/Leaseback Asset
that consists of M&E, the sum of the payments to be made by a Credit Party over the term of such Sale/Leaseback shall not exceed the amount of
any Permitted M&E Financing that the Credit Parties otherwise would have been permitted to incur in respect of such M&E pursuant to the
definition of “Permitted M&E Financing”, (w) such Sale/Leaseback shall not be guaranteed by any other Credit Party or any Subsidiary thereof,
(x) the Borrower Representative shall provide Agent with ten (10) Business Days’ notice of such Permitted Sale/Leaseback, (y) with respect to a
Permitted Sale/Leaseback of the Calhoun Property or the Eton Property, the Borrower Representative shall provide Agent with an updated
Borrowing Base Certificate as of the date of such Permitted Sale/Leaseback after giving effect thereto and (z) promptly upon Agent’s request, the
Borrower Representative shall provide Agent with copies of all documentation evidencing such Permitted Sale/Leaseback.
“Permitted Sale/Leaseback Assets” means (i) the Tailored Loop Tufting Machine, (ii) the Extrusion Line, (iii) the Calhoun Property, and
(iv) the Eton Property.
“Person” means any natural person, corporation, limited liability company, professional association, limited partnership, general
partnership, joint stock company, joint venture, association, company, trust, bank, trust company, land trust, business trust or other organization,
whether or not a legal entity, and any Governmental Authority.
“Phase I” has the meaning set forth in the definition of “Real Property Collateral Requirements”.
“Pledge Agreement” means that certain Pledge Agreement, executed by Holdings and the other pledgors named therein in favor of the
Agent, for the benefit of the Lenders, on the Closing Date, as amended, restated, supplemented or otherwise modified from time to time.
“Pricing Date” means, for any calendar month, the date that is five (5) Business Days after the date on which Agent is in receipt of the
Borrower’s most recent monthly Borrowing Base Certificate.
“Pro Rata Share” means (a) with respect to a Lender’s obligation to make Revolving Loans, such Lender’s right to receive the unused
line fee described in the Fee Letter, such Lender’s obligation to purchase interests and participations in Letters of Credit and related Support
Agreement liabilities and obligations, and such Lender’s obligation to share in Letter of Credit Liabilities and to receive the related Letter of Credit
fee described in Section  2.5(b), the Revolving Loan Commitment Percentage of such Lender, (b)  with respect to a Lender’s right to receive
payments of principal and interest with respect to Revolving Loans, such Lender’s Revolving Loan Exposure with respect thereto; and (c) for all
other purposes (including, without limitation, the indemnification obligations arising under Section  11.6) with respect to any Lender, the
percentage obtained by dividing (i) the sum of the Revolving Loan Commitment Amount of such Lender (or, in the event the Revolving Loan
Commitment shall have been terminated, such Lender’s then existing Revolving Loan Outstandings), by (ii) the sum of the Revolving
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Loan Commitment (or, in the event the Revolving Loan Commitment shall have been terminated, the then existing Revolving Loan Outstandings)
of all Lenders.
“Protective Advance” means all sums expended by Agent in accordance with the provisions of Section 10.4 to (a) protect the priority,
validity and enforceability of any lien on, and security interests in, any Collateral and the instruments evidencing and securing the Obligations, (b)
prevent the value of any Collateral from being diminished, or (c) protect any of the Collateral from being materially damaged, impaired,
mismanaged or taken.
“Real Estate Availability” means the lesser of (a) eighty percent (80%) multiplied by the aggregate fair market value of the Eligible Real
Properties as reasonably determined by Agent in consultation with Borrower Representative and (b) $2,000,000; provided that, (x) until such time
as the Agent shall have received from the applicable Credit Party a Mortgage and each of the other Real Property Collateral Requirements and/or
(y) upon the occurrence of a Permitted Real Estate Financing or any other incurrence of a Lien (other than Permitted Liens of the types described
in clauses (c), (f) and (i) of the definition thereof) in respect of either of the Eligible Real Properties, in each case, the Real Estate Availability shall
be $0.
“Real Property Asset” means, at any time of determination, all right, title and interest (fee, leasehold or otherwise) of any Credit Party or
a Subsidiary thereof in and to real property (including, but not limited to, land, improvements and fixtures thereon).
“Real Property Collateral Requirements” means the requirement that Agent shall have received (with respect to any Mortgaged
Property existing as of the Closing Date, within the time period provided under Section 7.4 and, with respect to any Mortgaged Property acquired
after the Closing Date, within 60 days of the acquisition thereof (or such later date as Agent may agree)), a duly executed Mortgage from the
applicable Credit Party for each Mortgaged Property in form and substance reasonably acceptable to Agent and suitable for recording or filing,
together, with respect to each Mortgage for any property located in the United States, with the following documents:
(a) a fully paid policy of title insurance (i) in a form reasonably approved by Agent insuring the Lien of the Mortgage encumbering such
property as a valid first priority Lien, free and clear of all defects and other encumbrances, subject only to the exceptions set forth on the schedules
thereto, (ii) in an amount reasonably satisfactory to Agent based on an appraisal of such property performed pursuant to subsection (d) below (not
to exceed the fair market value of the Mortgaged Property covered thereby (as reasonably determined by Borrower Representative)), (iii) issued by
a nationally recognized title insurance company reasonably satisfactory to Agent (the “Title Company”) and (iv) that includes (A) such insurance
and direct access reinsurance as Agent may reasonably deem necessary or desirable and (B) such endorsements or affirmative insurance reasonably
required by Agent (including, if applicable without limitation, endorsements on matters relating to usury, zoning, mechanic’s liens, variable rate,
address, separate tax lot, subdivision, tie in or cluster, contiguity, access and so-called comprehensive coverage over covenants and restrictions)
and available in the applicable jurisdiction at commercially reasonable rates,
(b) with respect to any property located in any jurisdiction in which a zoning endorsement is not available (or for which a zoning
endorsement is not available at a premium that is not excessive as reasonably determined by Agent), if requested by Agent, a zoning compliance
letter from the applicable municipality or a zoning report from Planning and Zoning Resource Corporation (or another Person reasonably
acceptable to Agent), in each case, satisfactory to Agent,
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(c) (i) a Survey or (ii) an “affidavit of no change” reasonably satisfactory to the Title Company such that the Title Company issues survey-
related coverages and removes the so-called “survey exceptions” from the applicable policy of title insurance,
(d) an appraisal complying with the requirements of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, by a third-
party appraiser selected by Agent in its reasonable discretion,
(e) a customary favorable opinion from each local counsel where the applicable Mortgaged Properties are located, reasonably acceptable
to Agent and in form and substance reasonably satisfactory to Agent which includes, without limitation, the due execution and delivery and
enforceability of each applicable Mortgage, the corporate formation, existence and good standing of the applicable mortgagor, and such other
customary matters as may be reasonably requested by Agent,
(f) no later than three (3) Business Days (or such later date as Agent may agree in its sole discretion) prior to the delivery of the Mortgage,
the following documents and instruments, in order to comply with the National Flood Insurance Reform Act of 1994 and related legislation
(including the regulations of the Board of Governors of the Federal Reserve System): (A) a completed standard flood hazard determination form
and (B) if the improvement(s) to the improved real property is located in a special flood hazard area, a notification to Agent (“Borrower Notice”)
and, if applicable, notification to Agent that flood insurance coverage under the National Flood Insurance Program (“NFIP”) is not available
because the community does not participate in the NFIP, documentation evidencing Agent’s receipt of the Borrower Notice and (C) if the Borrower
Notice is required to be given and flood insurance is available in the community in which the property is located, a copy of the flood insurance
policy, Agent’s application for a flood insurance policy plus proof of premium payment, a declaration page confirming that flood insurance has
been issued, or such other evidence of flood insurance satisfactory to Agent,
(g) at Borrowers’ sole cost and expense, Phase I environmental site assessment reports prepared in accordance with the current ASTM
E1527 standard (“Phase I”) (to the extent not already provided) and reliance letters for such Phase I (if such Phase I were not performed on behalf
of, or addressed to, Agent), which Phase I and reliance letters shall be in form and substance reasonably acceptable to Agent and any other
environmental information, assessments or reports as Agent shall reasonably request and, to the extent such Phase I identified conditions that are in
violation of, or require sampling under, Environmental Laws, such other environmental assessments as Agent may reasonably require,
(h) an environmental indemnity agreement from Borrowers in form and substance reasonably satisfactory to Agent, and
(i) such other agreements, instruments and documents (including, without limitation, guarantees, subordination or pari passu
confirmations, consulting engineer’s reports and lien searches) as Agent shall reasonably require, and with respect to each Mortgage for any
property located outside the United States, equivalent documents available in the applicable jurisdiction and required by Agent.
Notwithstanding any provision of any Financing Document to the contrary, if any mortgage recording tax or similar tax or charge is owed
on the entire amount of the Obligations evidenced hereby, then, to the extent permitted by, and in accordance with, applicable Law, the amount of
such mortgage recording tax or similar tax or charge shall be calculated based on the lesser of (x) the maximum aggregate principal amount of the
Obligations and (y) a multiple (not to exceed 125%) of the fair market value of the applicable Mortgaged Property at the time the Mortgage is
entered into and determined in an
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amount and manner reasonably acceptable to the Agent, which in the case of clause (y) will result in a limitation of the Obligations secured by the
Mortgage to such amount.
“Reference Time” means approximately a time substantially consistent with market practice two (2) SOFR Business Days prior to the
first day of each calendar month. If by 5:00 pm (New York City time) on any interest lookback day, Term SOFR in respect of such interest
lookback day has not been published on the SOFR Administrator’s Website, then Term SOFR for such interest lookback day will be Term SOFR as
published in respect of the first preceding SOFR Business Day for which Term SOFR was published on the SOFR Administrator’s Website;
provided that such first preceding SOFR Business Day is not more than three (3) SOFR Business Days prior to such interest lookback day.
“Reimbursement Obligations” means, at any date, the obligations of each Borrower then outstanding to reimburse (a)  Agent for
payments made by Agent under a Support Agreement, and/or (b) any LC Issuer, for payments made by such LC Issuer under a Lender Letter of
Credit.
“Relevant Governmental Body” means the Federal Reserve Board and/or the Federal Reserve Bank of New York, or a committee
officially endorsed or convened by the Federal Reserve Board and/or the Federal Reserve Bank of New York or any successor thereto.
“Rent Reserve” means a reserve established by Agent in respect of each location at which Inventory of a Credit Party is located that is not
subject to a satisfactory landlord waiver or bailee letter (in an initial amount, as of the Closing Date, equal to the sum (as determined by Agent in
its Permitted Discretion) of three (3) months’ rent, charges or fees), as applicable, as adjusted from time to time by Agent in its Permitted
Discretion.
“Required Lenders” means at any time Lenders holding (a) fifty percent (50%) or more of the Revolving Loan Commitment, or (b) if the
Revolving Loan Commitment has been terminated, fifty percent (50%) or more of the sum of (x) the then aggregate outstanding principal balance
of the Loans plus (y) the then aggregate amount of Letter of Credit Liabilities.
“Resolution Authority” means an EEA Resolution Authority or, with respect to any UK Financial Institution, a UK Resolution Authority.
“Responsible Officer” means any of the Chief Executive Officer, Chief Financial Officer, President/Chief Manager, VP/Manager, or any
other officer of the applicable Credit Party as designated by and reasonably acceptable to Agent.
“Revolving Lender” means each Lender having a Revolving Loan Commitment Amount in excess of Zero Dollars ($0) (or, in the event
the Revolving Loan Commitment shall have been terminated at any time, each Lender at such time having Revolving Loan Outstandings in excess
of Zero Dollars ($0)).
“Revolving Loan Availability” means, at any time, the Revolving Loan Limit minus the Revolving Loan Outstandings.
“Revolving Loan Availability Percentage” means, at any time, the quotient of (i) the Revolving Loan Availability divided by (ii) the
Revolving Loan Limit.
“Revolving Loan Borrowing” means a borrowing of a Revolving Loan.
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“Revolving Loan Commitment” means, as of any date of determination, the aggregate Revolving Loan Commitment Amounts of all
Lenders as of such date.
“Revolving Loan Commitment Amount” means, as to any Lender, the dollar amount set forth opposite such Lender’s name on the
Commitment Annex under the column “Revolving Loan Commitment Amount” (if such Lender’s name is not so set forth thereon, then the dollar
amount on the Commitment Annex for the Revolving Loan Commitment Amount for such Lender shall be deemed to be $0), as such amount may
be adjusted from time to time by (a)  any amounts assigned (with respect to such Lender’s portion of Revolving Loans outstanding and its
commitment to make Revolving Loans) pursuant to the terms of any and all effective assignment agreements to which such Lender is a party, and
(b)  any Additional Tranches activated by Borrowers. For the avoidance of doubt, the aggregate Revolving Loan Commitment Amount of all
Lenders on the Closing Date shall be $75,000,000 and if the Additional Tranche is fully activated by Borrowers pursuant to the terms of the
Agreement such amount shall increase to $100,000,000.
“Revolving Loan Commitment Percentage” means, as to any Lender, (a) on the Closing Date, the percentage set forth opposite such
Lender’s name on the Commitment Annex under the column “Revolving Loan Commitment Percentage” (if such Lender’s name is not so set forth
thereon, then, on the Closing Date, such percentage for such Lender shall be deemed to be zero), and (b) on any date following the Closing Date,
the percentage equal to the Revolving Loan Commitment Amount of such Lender on such date divided by the Revolving Loan Commitment on
such date.
“Revolving Loan Exposure” means, with respect to any Lender on any date of determination, the percentage equal to the amount of such
Lender’s Revolving Loan Outstandings on such date divided by the aggregate Revolving Loan Outstandings of all Lenders on such date.
“Revolving Loan Limit” means, at any time, the lesser of (a) the Revolving Loan Commitment and (b) the Borrowing Base.
“Revolving Loan Outstandings” means, at any time of calculation, (a)  the sum of the then existing aggregate outstanding principal
amount of Revolving Loans plus the then existing Letter of Credit Liabilities, and (b) when used with reference to any single Lender, the sum of
then existing outstanding principal amount of Revolving Loans advanced by such Lender plus the then existing Letter of Credit Liabilities for the
account of such Lender.
“Revolving Loans” has the meaning set forth in Section 2.1(b).
“Roanoke Property” means the real property commonly known as 1130 Lafayette Hwy, Roanoke, Randolph County, Alabama, with tax
parcel number 56 21 01 02 0 001 009.000 0.
“Sanctioned Country” means any country or territory that is itself subject to comprehensive sanctions maintained by OFAC including at
the time of this Agreement, Cuba, Iran, North Korea, Syria and the Crimea, and the so-called Donetsk People’s Republic and Luhansk People’s
Republic regions.
“SEC” means the United States Securities and Exchange Commission.
“Securities Account” means a “securities account” (as defined in Article 9 of the UCC), an investment account, or other account in which
investment property or securities are held or invested for credit to or for the benefit of any Credit Party.
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“Securities Account Control Agreement” means an agreement, in form and substance satisfactory to Agent, among Agent, any
applicable Credit Party and each securities intermediary in which such Credit Party maintains a Securities Account pursuant to which Agent shall
obtain “control” (as defined in Article 9 of the UCC) over such Securities Account.
“Security Document” means this Agreement, the Pledge Agreement, each Mortgage, and any other agreement, document or instrument
executed concurrently herewith or at any time hereafter pursuant to which one or more Credit Parties or any other Person either (a) Guarantees
payment or performance of all or any portion of the Obligations, and/or (b) provides, as security for all or any portion of the Obligations, a Lien on
any of its assets in favor of Agent for its own benefit and the benefit of the Lenders, as any or all of the same may be amended, supplemented,
restated or otherwise modified from time to time.
“SOFR” means, with respect to any SOFR Business Day, a rate per annum equal to the secured overnight financing rate for such SOFR
Business Day.
“SOFR Administrator” means CME Group Benchmark Administration Limited (CBA) (or a successor administrator of Term SOFR
selected by Agent in its reasonable discretion).
“SOFR Administrator’s Website” means the website of the SOFR Administrator, currently at https://www.cmegroup.com/market-
data/cme-group-benchmark-administration/term-sofr.html, or any successor source for Term SOFR identified by the SOFR Administrator from
time to time.
“SOFR Business Day” means any day other than a Saturday or Sunday or a day on which the Securities Industry and Financial Markets
Association recommends that the fixed income departments of its members be closed for the entire day for purposes of trading in United States
government securities.
“SOFR Interest Rate” means, with respect to each day during which interest accrues on a Loan, the rate per annum (expressed as a
percentage) equal to (a) Term SOFR for the applicable Interest Period for such day; or (b) if the then-current Benchmark has been replaced with a
Benchmark Replacement pursuant to Section 2.2(o), such Benchmark Replacement for such day. Notwithstanding the foregoing, the SOFR
Interest Rate shall not at any time be less the Floor.
“SOFR Loan” means a Loan that bears interest at a rate based on Term SOFR.
“Solvent” means, with respect to any Person, that such Person (a) owns and will own assets the fair saleable value of which are (i) greater
than the total amount of its debts and liabilities (including subordinated and Contingent Obligations), and (ii) greater than the amount that will be
required to pay the probable liabilities of its then existing debts as they become absolute and matured considering all financing alternatives and
potential asset sales reasonably available to it; (b) has capital that is not unreasonably small in relation to its business as presently conducted or
after giving effect to any contemplated transaction; and (c) does not intend to incur and does not believe that it will incur debts beyond its ability to
pay such debts as they become due.
“Specified Equity Contribution” has the meaning set forth in Section 6.3.
“Specified M&E Financing” has the meaning set forth in the definition of Excluded Property.
“Specified M&E Financing Notice” has the meaning set forth in the definition of Excluded Property.
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“Stated Rate” has the meaning set forth in Section 2.7.
“Subordinated Debt” means any Debt of Credit Parties incurred pursuant to the terms of the Subordinated Debt Documents and with the
prior written consent of Agent, all of which documents must be in form and substance acceptable to Agent in its sole discretion, provided, that in
each case the applicable Subordinated Debt remains subject to a Subordination Agreement.
“Subordinated Debt Documents” means any documents evidencing and/or securing Debt governed by a Subordination Agreement, all of
which documents must be in form and substance acceptable to Agent in its sole discretion.
“Subordination Agreement” means each agreement between Agent and another creditor of Credit Parties, as the same may be amended,
supplemented, restated or otherwise modified from time to time in accordance with the terms thereof, pursuant to which the Debt owing from any
Credit Party and/or the Liens securing such Debt granted by any Credit Party to such creditor are subordinated in any way to the Obligations and
the Liens created under the Security Documents, the terms and provisions of such Subordination Agreements to have been agreed to by and be
acceptable to Agent in the exercise of its sole discretion.
“Subsidiary” means, with respect to any Person, (a) any corporation (or any foreign equivalent thereof) of which an aggregate of fifty
percent (50%) or more of the outstanding Equity Interests having ordinary voting power to elect a majority of the board of directors of such
corporation (irrespective of whether, at the time, Equity Interests of any other class or classes of such corporation shall have or might have voting
power by reason of the happening of any contingency) is at the time, directly or indirectly, owned legally or beneficially by such Person or one or
more Subsidiaries of such Person, or with respect to which any such Person has the right to vote or designate the vote of more than fifty percent
(50%) of such Equity Interests whether by proxy, agreement, operation of law or otherwise, and (b) any partnership or limited liability company
(or any foreign equivalents thereof) in which such Person and/or one or more Subsidiaries of such Person shall have an interest (whether in the
form of voting or participation in profits or capital contribution) of more than fifty percent (50%) or of which any such Person is a general partner
or may exercise the powers of a general partner. Unless the context otherwise requires, each reference to a Subsidiary shall be a reference to a
Subsidiary of a Credit Party.
“Support Agreement” has the meaning set forth in Section 2.5(a).
“Supported Letter of Credit” means a Letter of Credit issued by an LC Issuer in reliance on one or more Support Agreements.
“Survey” means a survey of any Mortgaged Property (and all improvements thereon) which is (i) prepared by a surveyor or engineer
licensed to perform surveys in the jurisdiction where such Mortgaged Property is located, (ii) dated (or redated) not earlier than one (1) year (or
such earlier date as Agent may agree in its reasonable discretion) prior to the date of delivery thereof unless there shall have occurred within six
months prior to such date of delivery any exterior construction on the site of such Mortgaged Property or any easement, right of way or other
interest in the Mortgaged Property has been granted or become effective through operation of law or otherwise with respect to such Mortgaged
Property which, in either case, can be depicted on a survey, in which events, as applicable, such survey shall be dated (or redated) after the
completion of such construction or if such construction shall not have been completed as of such date of delivery, not earlier than sixty (60) days
(or such earlier date as Agent may agree in its sole discretion) prior to such date of delivery, or after the grant or effectiveness of any such
easement,
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right of way or other interest in the Mortgaged Property, (iii) certified by the surveyor (in a manner reasonably acceptable to Agent) to Agent and
the Title Company, (iv) complying in all respects with the minimum detail requirements of the American Land Title Association as such
requirements are in effect on the date of preparation of such survey, and (v) sufficient for the Title Company to remove all standard survey
exceptions from the title policy relating to such Mortgaged Property and issue the endorsements of the type required by clause (a)(iv)(B) of the
definition of “Real Property Collateral Requirements”.
“Swap Contract” means any “swap agreement”, as defined in Section 101 of the Bankruptcy Code, that is obtained by Borrower to
provide protection against fluctuations in interest or currency exchange rates, but only if Agent provides its prior written consent to the entry into
such “swap agreement”.
“Tailored Loop Tufting Machine” means that certain CMC HSP 1620 Superspeed 1/8 Gauge Infinity Tailored Loop Machine with Serial
Number DC3-810320-2502 located at the Eton Property.
“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments,
fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
“TDG” has the meaning set forth in the preamble hereto.
“Term SOFR” means the greater of (a) the forward-looking term rate for a period comparable to such Interest Period based on SOFR that
is published by the SOFR Administrator and is displayed on the SOFR Administrator’s Website at approximately the Reference Time for such
Interest Period plus 0.11448% and (b) the Floor. Unless otherwise specified in any amendment to this Agreement entered into in accordance with
Section 2.2(o), in the event that a Benchmark Replacement with respect to Term SOFR is implemented, then all references herein to Term SOFR
shall be deemed references to such Benchmark Replacement.
“Termination Date” means the earliest to occur of (a) the Maturity Date, (b) any date on which the maturity of the Loans is accelerated
pursuant to Section 10.2, or (c) the termination date stated in any notice of termination of this Agreement provided by Borrowers in accordance
with Section 2.12.
“Title Company” has the meaning set forth in the definition of “Real Property Collateral Requirements”.
“UCC” means the Uniform Commercial Code of the State of New York or of any other state the laws of which are required to be applied
in connection with the perfection of security interests in any Collateral.
“UK Financial Institution” means any BRRD Undertaking (as such term is defined under the PRA Rulebook (as amended form time to
time) promulgated by the United Kingdom Prudential Regulation Authority) or any person falling within IFPRU 11.6 of the FCA Handbook (as
amended from time to time) promulgated by the United Kingdom Financial Conduct Authority, which includes certain credit institutions and
investment firms, and certain affiliates of such credit institutions or investment firms.
“UK Resolution Authority” means the Bank of England or any other public administrative authority having responsibility for the
resolution of any UK Financial Institution.
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“Unadjusted Benchmark Replacement” means the applicable Benchmark Replacement excluding the related Benchmark Replacement
Adjustment.
“United States” means the United States of America.
“U.S. Tax Compliance Certificate” has the meaning set forth in Section 2.8(c)(i).
“Withholding Agent” means each Credit Party or Agent.
“Work-In-Process” means Inventory that is not a product that is finished and approved by a Borrower in accordance with applicable
Laws and such Borrower’s normal business practices for release and delivery to customers.
“Write-Down and Conversion Powers” means, (a) with respect to any EEA Resolution Authority, the write-down and conversion powers
of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and
conversion powers are described in the EU Bail-In Legislation Schedule, and (b) with respect to the United Kingdom, any powers of the applicable
Resolution Authority under the Bail-In Legislation to cancel, reduce, modify or change the form of a liability of any UK Financial Institution or
any contract or instrument under which that liability arises, to convert all or part of that liability into shares, securities or obligations of that person
or any other person, to provide that any such contract or instrument is to have effect as if a right had been exercised under it or to suspend any
obligation in respect of that liability or any of the powers under that Bail-In Legislation that are related to or ancillary to any of those powers.
Section 1.2
Accounting Terms and Determinations. Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder (including, without limitation, determinations made pursuant to the exhibits hereto) shall be
made, and all financial statements required to be delivered hereunder shall be prepared on a consolidated basis in accordance with GAAP applied
on a basis consistent with the most recent audited consolidated financial statements of each Credit Party and its Consolidated Subsidiaries
delivered to Agent and each of the Lenders on or prior to the Closing Date. If at any time any change in GAAP would affect the computation of
any financial ratio or financial requirement set forth in any Financing Document, and either Borrowers or the Required Lenders shall so request,
Agent, the Lenders and Borrowers shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of
such change in GAAP (subject to the approval of the Required Lenders); provided, however, that until so amended, (a) such ratio or requirement
shall continue to be computed in accordance with GAAP prior to such change therein and (b) Borrowers shall provide to Agent and the Lenders
financial statements and other documents required under this Agreement which include a reconciliation between calculations of such ratio or
requirement made before and after giving effect to such change in GAAP. Any obligations of a Person under a lease (whether existing now or
entered into in the future) that is not (or would not be) a capital lease obligation under GAAP as in effect prior to giving effect to FASB
Accounting Standards Update No. 2016-02, Leases, shall not be treated as a capital lease obligation solely as a result of the adoption of changes in
GAAP, unless the parties hereto shall enter into a mutually acceptable amendment addressing such changes, as provided for above.
Section 1.3
Other Definitional and Interpretive Provisions. References in this Agreement to “Articles”, “Sections”, “Annexes”,
“Exhibits”, or “Schedules” shall be to Articles, Sections, Annexes, Exhibits or Schedules of or to this Agreement unless otherwise specifically
provided. Any term defined herein may be used in the singular or plural. “Include”, “includes” and “including” shall be deemed to be followed by
“without limitation”. Except as otherwise specified or limited herein, references to any Person include the successors and assigns of such Person.
References “from” or “through” any date mean, unless otherwise specified, “from and including” or “through and including”, respectively.
References to any statute or act shall include all related current regulations and all amendments and any successor statutes, acts and regulations.
All amounts used for purposes of financial calculations required
46

to be made herein shall be without duplication. References to any statute or act, without additional reference, shall be deemed to refer to federal
statutes and acts of the United States. References to any agreement, instrument or document shall include all schedules, exhibits, annexes and other
attachments thereto. References to capitalized terms that are not defined herein, but are defined in the UCC, shall have the meanings given them in
the UCC. All references herein to a merger, transfer, consolidation, amalgamation, assignment, sale or transfer, or analogous term, will be
construed to mean also a division of or by a limited liability company, as if it were a merger, transfer, consolidation, amalgamation, assignment,
sale or transfer, or similar term, as applicable. Any series of limited liability company shall be considered a separate Person.
Section 1.4
Settlement and Funding Mechanics. Unless otherwise specified herein, the settlement of all payments and fundings
hereunder between or among the parties hereto shall be made in lawful money of the United States and in immediately available funds.
Section 1.5
Time is of the Essence. Time is of the essence in Borrower’s and each other Credit Party’s performance under this
Agreement and all other Financing Documents.
Section 1.6
Time of Day. Unless otherwise specified, all references herein to times of day shall be references to Eastern time
(daylight savings or standard, as applicable).
Article 2
 - LOANS
Section 2.1
Loans.
(a)
[Reserved].
(b)
Revolving Loans.
(i)
Revolving Loans and Borrowings. On the terms and subject to the conditions set forth herein, each Lender
severally agrees to make loans to Borrowers from time to time as set forth herein (each a “Revolving Loan”, and collectively, “Revolving
Loans”) equal to such Lender’s Revolving Loan Commitment Percentage of Revolving Loans requested by Borrowers hereunder,
provided, however, that after giving effect thereto, the Revolving Loan Outstandings shall not exceed the Revolving Loan Limit.
Borrowers shall deliver to Agent a Notice of Borrowing with respect to each proposed Revolving Loan Borrowing, such Notice of
Borrowing to be delivered before 1:00 p.m. (Eastern time) two (2) Business Days prior to the date of such proposed borrowing. Each
Borrower and each Revolving Lender hereby authorizes Agent to make Revolving Loans on behalf of Revolving Lenders, at any time in
its sole discretion, (A) as provided in Section 2.5(c), with respect to obligations arising under Support Agreements and/or Lender Letters
of Credit, and (B) to pay principal owing in respect of the Loans and interest, fees, expenses and other charges payable by any Credit Party
from time to time arising under this Agreement or any other Financing Document. The Borrowing Base shall be determined by Agent
based on the most recent Borrowing Base Certificate delivered to Agent in accordance with this Agreement and such other information as
may be available to Agent. Without limiting any other rights and remedies of Agent hereunder or under the other Financing Documents,
the Revolving Loans shall be subject to Agent’s continuing right to withhold reserves from the Borrowing Base or Revolving Loan Limit,
and to increase and decrease such reserves from time to time, if and to the extent that in Agent’s Permitted Discretion, such reserves are
necessary.
(ii)
Mandatory Revolving Loan Repayments and Prepayments    .
(A)
The Revolving Loan Commitment shall terminate on the Termination Date. On such Termination Date,
there shall become due, and Borrowers shall pay, the entire outstanding principal amount of each Revolving Loan, together with
accrued and unpaid Obligations pertaining thereto incurred to, but excluding the
47

Termination Date; provided, however, that such payment is made not later than 12:00 Noon (Eastern time) on the Termination
Date.
(B)
If at any time the Revolving Loan Outstandings exceed the Revolving Loan Limit, then, on the next
succeeding Business Day, Borrowers shall repay the Revolving Loans or cash collateralize Letter of Credit Liabilities in the
manner specified in Section 2.5(e) or cause the cancellation of outstanding Letters of Credit, or any combination of the foregoing,
in an aggregate amount equal to such excess.
(C)
Principal payable on account of Revolving Loans shall be payable by Borrowers to Agent (I) immediately
upon the receipt by any Borrower or Agent of any payments on or proceeds from any of the Accounts, to the extent of such
payments or proceeds, as further described in Section 2.11 below, and (II) in full on the Termination Date.
(iii)
Optional Prepayments. Borrowers may from time to time prepay the Revolving Loans in whole or in part. For the
avoidance of doubt, nothing in this clause shall permit Borrowers to terminate or reduce the Revolving Loan Commitment other than in
connection with a prepayment of all Obligations in full and termination of the Revolving Loan Commitment and the Financing Documents
in accordance with Section 2.12(b).
(c)
Additional Tranches. After the Closing Date, so long as no Default or Event of Default exists and subject to the terms of
this Agreement, with the prior written consent of Agent and all Lenders in their sole discretion, the Revolving Loan Commitment may be increased
upon the written request of Borrower Representative (which such request shall state the aggregate amount of the Additional Tranche requested and
shall be made at least thirty (30) days prior to the proposed effective date of such Additional Tranche) to Agent to activate an Additional Tranche;
provided, however, that Agent and Lenders shall have no obligation to consent to any requested activation of an Additional Tranche and the written
consent of Agent and all Lenders shall be required in order to activate an Additional Tranche. Upon activating an Additional Tranche, each
Lender’s Revolving Loan Commitment shall increase by a proportionate amount so as to maintain the same Pro Rata Share of the Revolving Loan
Commitment as such Lender held immediately prior to such activation.
Section 2.2
Interest, Interest Calculations and Certain Fees.
(a)
Interest.
(i)
From and following the Closing Date, except as expressly set forth in this Agreement, Loans and the other
Obligations shall bear interest at the sum of the SOFR Interest Rate plus the Applicable Margin. Interest on the Loans shall be paid
monthly in arrears on the first (1st) day of each month and on the maturity of such Loans, whether by acceleration or otherwise.
Interest on all other Obligations shall be payable upon demand.
(ii)
In the event one or more of the following events occurs with respect to Term SOFR: (a) a public statement or
publication of information by or on behalf of the SOFR Administrator announcing that the SOFR Administrator has ceased or will
cease to provide Term SOFR for a 1-month period, permanently or indefinitely, provided that, at the time of such statement or
publication, there is no successor administrator that will continue to provide Term SOFR for a 1-month period; (b) a public
statement or publication of information by the regulatory supervisor for the SOFR Administrator, the Federal Reserve Board, the
Federal Reserve Bank of New York, an insolvency official or resolution authority with jurisdiction over the SOFR Administrator,
or a court or an entity
48

with similar insolvency or resolution authority, which states that the SOFR Administrator has ceased or will cease to provide Term
SOFR for a 1-month period permanently or indefinitely, provided that, at the time of such statement or publication, there is no
successor administrator that will continue to provide Term SOFR for a 1-month period; or (c) a public statement or publication of
information by the regulatory supervisor for the SOFR Administrator announcing that Term SOFR for a 1-month period is no
longer, or as of a specified future date will no longer be, representative and Agent has provided Borrower Representative with
notice of the same, any outstanding affected SOFR Loans will be deemed to have been converted to Base Rate Loan at the end of
the applicable Interest Period.
(iii)
 In connection with Term SOFR, Agent will have the right to make Conforming Changes from time to time and,
notwithstanding anything to the contrary herein or in any other Financing Document, any amendments implementing such
Conforming Changes will become effective without any further action or consent of any other party to this Agreement or any other
Financing Document. Agent will promptly notify Borrower Representative and the Lenders of the effectiveness of any
Conforming Changes.
Section 1.1
[Reserved].
Section 1.2
[Reserved].
Section 1.3
[Reserved].
Section 1.4
[Reserved].
Section 1.5
[Reserved].
(b)
[Reserved].
(c)
[Reserved].
(d)
Audit Fees. Borrowers shall pay to Agent, for its own account and not for the benefit of any other Lenders, all reasonable
fees and expenses in connection with audits and inspections of Borrowers’ books and records, audits, valuations or appraisals of the Collateral,
audits of Borrowers’ compliance with applicable Laws and such other matters as Agent shall deem appropriate, which shall be due and payable on
(i) the first Business Day of the month following the date of issuance by Agent of a written request for payment thereof to Borrowers included
within Agent’s normal monthly statement to Borrowers or (ii) thirty (30) days following the date of issuance by Agent of a separate written request
for payment thereof to Borrowers, subject to the limitations set forth in Section 4.6 (in the case of audits and field examinations) and Section
4.14(d) (in the case of valuations or appraisals of the Collateral).
(e)
Wire Fees. Borrowers shall pay to Agent, for its own account and not for the account of any other Lenders, on written
demand, fees for incoming and outgoing wires made for the account of Borrowers, such fees to be based on Agent’s then current wire fee
schedule (available upon written request of the Borrowers).
(f)
[Reserved].
(g)
Computation of Interest and Related Fees. All interest and fees under each Financing Document shall be calculated on the
basis of a 360-day year for the actual number of days
49

elapsed. The date of funding of a Loan shall be included in the calculation of interest. The date of payment of a Loan shall be excluded from the
calculation of interest. If a Loan is repaid on the same day that it is made, one (1) day’s interest shall be charged.
(h)
Automated Clearing House Payments. If Agent (or its designated servicer or trustee on behalf of a securitization vehicle)
so elects, monthly payments of principal, interest, fees, expenses or any other amounts due and owing from Borrower to Agent hereunder shall be
paid to Agent by Automated Clearing House debit of immediately available funds from the financial institution account designated by Borrower
Representative in the Automated Clearing House debit authorization executed by Borrowers or Borrower Representative in connection with this
Agreement, and shall be effective upon receipt. Borrowers shall execute any and all forms and documentation necessary from time to time to
effectuate such automatic debiting. In no event shall any such payments be refunded to Borrowers.
(i)
Fee Letter. In addition to the other fees set forth herein, the Borrowers agree to pay to Agent or Lenders, as applicable, the
fees set forth in each Fee Letter (if any).
(j)
Benchmark Replacement Setting; Conforming Changes.
(i)
Upon the occurrence of a Benchmark Transition Event, Agent and Borrowers may amend this Agreement to
replace the then-current Benchmark with a Benchmark Replacement. Any such amendment will become effective at 5:00 p.m. (New York
City time) on the fifth (5th) Business Day after Agent has posted such proposed amendment to all Lenders and Borrower so long as Agent
has not received, by such time, written notice of objection thereto from Lenders comprising the Required Lenders. No such replacement
will occur prior to the applicable Benchmark Transition Start Date. In connection with the implementation of a Benchmark Replacement,
Agent will have the right to make Conforming Changes from time to time and, notwithstanding anything to the contrary herein or in any
other Financing Document, any amendments implementing such Conforming Changes will become effective without any further action or
consent of any other party to this Agreement or any other Financing Document. Agent will promptly notify Borrower Representative and
the Lenders of the implementation of any Benchmark Replacement and the effectiveness of any Conforming Changes.
(ii)
Any determination, decision or election that may be made by Agent or, if applicable, any Lender (or group of
Lenders) pursuant to this Section will be conclusive and binding absent manifest error and may be made in its or their sole discretion and
without consent from any other party to this Agreement or any other Financing Document, except, in each case, as expressly required
pursuant to this Section. Notwithstanding anything to the contrary herein or in any other Financing Document, at any time, (a) if the then-
current Benchmark is a term rate (including Term SOFR) and either (i) any tenor for such Benchmark is not displayed on a screen or other
information service that publishes such rate from time to time as selected by Agent in its reasonable discretion or (ii) the regulatory
supervisor for the administrator of such Benchmark has provided a public statement or publication of information announcing that any
tenor for such Benchmark is or will be no longer representative, then Agent may modify the definition of “Interest Period” (or any similar
or analogous definition) for any Benchmark settings at or after such time to remove such unavailable or non-representative tenor, and (b) if
a tenor that was removed pursuant to clause (a) above either (i) is subsequently displayed on a screen or information service for a
Benchmark or (ii) is not, or is no longer, subject to an announcement that it is or will no longer be representative for a Benchmark, then
Agent may modify the definition of “Interest Period” (or any similar or analogous definition) for all Benchmark settings at or after such
time to reinstate such previously removed tenor. Agent will promptly notify Borrower Representative of the removal or reinstatement of
any tenor of a Benchmark pursuant to this Section.
50

(iii)
Upon Borrower Representative’s receipt of notice of the commencement of a Benchmark Unavailability Period,
any outstanding affected Loans will be deemed to have been converted into Base Rate Loans at the end of the applicable Interest Period.
Section 2.3
Notes. The portion of the Loans made by each Lender shall be evidenced, if so requested by such Lender, by one or more
promissory notes executed by Borrowers on a joint and several basis (each, a “Note”) in an original principal amount equal to such Lender’s
Revolving Loan Commitment Amount. Upon activation of an Additional Tranche in accordance with Section  2.1(c) hereof, Borrowers shall
deliver to each Lender to whom Borrowers previously delivered a Note, a restated Note evidencing such Lender’s Revolving Loan Commitment
Amount.
Section 2.4
[Reserved].
Section 2.5
Letters of Credit and Letter of Credit Fees.
(a)
Letter of Credit. On the terms and subject to the conditions set forth herein, the Revolving Loan Commitment may be used
by Borrowers, in addition to the making of Revolving Loans hereunder, for the issuance, prior to that date which is one year prior to the
Termination Date, by (i) Agent, of letters of credit, Guarantees or other agreements or arrangements (each, a “Support Agreement”) to induce an
LC Issuer to issue or increase the amount of, or extend the expiry date of, one or more Letters of Credit and (ii) a Lender, identified by Agent, as
an LC Issuer, of one or more Lender Letters of Credit, so long as, in each case:
(i)
Agent shall have received a Notice of LC Credit Event at least five (5) Business Days before the relevant date of
issuance, increase or extension; and
(ii)
after giving effect to such issuance, increase or extension, (A) the aggregate Letter of Credit Liabilities when
aggregated with the face amount of letters of credit obtained in reliance on clause (h) of the definition of Permitted Contingent
Obligations, do not exceed $4,000,000 and (B) the Revolving Loan Outstandings do not exceed the Revolving Loan Limit.
Nothing in this Agreement shall be construed to obligate any Lender to issue, increase the amount of or extend the expiry date of any
Letter of Credit, which act or acts, if any, shall be subject to agreements to be entered into from time to time between Borrowers and such Lender.
Each Lender that is an LC Issuer hereby agrees to give Agent prompt written notice of each issuance of a Lender Letter of Credit by such Lender
and each payment made by such Lender in respect of Lender Letters of Credit issued by such Lender.
Notwithstanding anything to the contrary set forth herein, Borrowers agree and acknowledge that no part of the Revolving Loan
Commitment will be available for the issuance of a Letter of Credit until such times as Agent notifies Borrower Representative that a Lender party
to this Agreement is an LC Issuer.
(b)
Letter of Credit Fee. Borrowers shall pay to Agent, for the benefit of the Revolving Lenders in accordance with their
respective Pro Rata Shares, a letter of credit fee with respect to the Letter of Credit Liabilities for each Letter of Credit, computed for each day
from the date of issuance of such Letter of Credit to the date that is the last day a drawing is available under such Letter of Credit, at a rate per
annum equal to the sum of the SOFR Interest Rate plus the Applicable Margin then applicable to Loans bearing interest based upon the SOFR
Interest Rate. Such fee shall be payable in arrears on the last day of each calendar month prior to the Termination Date and on such date. In
addition, Borrowers agree to pay promptly to the LC Issuer any fronting or other fees, spread, margin, or other costs and expenses, that it may
charge in connection with any Letter of Credit.
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(c)
Reimbursement Obligations of Borrowers. If either (i) Agent shall make a payment to an LC Issuer pursuant to a Support
Agreement, or (ii) any Lender shall notify Agent that it has made payment in respect of, a Lender Letter of Credit, (A) the applicable Borrower
shall reimburse Agent or such Lender, as applicable, for the amount of such payment by the end of the day on which Agent or such Lender shall
make such payment and (B) Borrowers shall be deemed to have immediately requested that Revolving Lenders make a Revolving Loan, in a
principal amount equal to the amount of such payment (but solely to the extent such Borrower shall have failed to directly reimburse Agent or,
with respect to Lender Letters of Credit, the applicable LC Issuer, for the amount of such payment). Agent shall promptly notify Revolving
Lenders of any such deemed request and each Revolving Lender hereby agrees to make available to Agent not later than noon (Eastern time) on
the Business Day following such notification from Agent such Revolving Lender’s Pro Rata Share of such Revolving Loan. Each Revolving
Lender hereby absolutely and unconditionally agrees to fund such Revolving Lender’s Pro Rata Share of the Loan described in the immediately
preceding sentence, unaffected by any circumstance whatsoever, including, without limitation, (x) the occurrence and continuance of a Default or
Event of Default, (y)  the fact that, whether before or after giving effect to the making of any such Revolving Loan, the Revolving Loan
Outstandings exceed or will exceed the Revolving Loan Limit, and/or (z) the non-satisfaction of any conditions set forth in Section 7.2. Agent
hereby agrees to apply the gross proceeds of each Revolving Loan deemed made pursuant to this Section 2.5(c) in satisfaction of Borrowers’
reimbursement obligations arising pursuant to this Section 2.5(c). Borrowers shall pay interest, on demand, on all amounts so paid by Agent
pursuant to any Support Agreement or to any applicable Lender in honoring a draw request under any Lender Letter of Credit for each day from
the date of such payment until Borrowers reimburse Agent or the applicable Lender therefor (whether pursuant to clause (A) or (B) of the first
sentence of this subsection (c)) at a rate per annum equal to the sum of two percent (2%) plus the interest rate applicable to Revolving Loans for
such day.
(d)
Reimbursement and Other Payments by Borrowers. The obligations of each Borrower to reimburse Agent and/or the
applicable LC Issuer pursuant to Section 2.5(c) shall be absolute, unconditional and irrevocable, and shall be performed strictly in accordance with
the terms of this Agreement, under all circumstances whatsoever, including the following:
(i)
any lack of validity or enforceability of, or any amendment or waiver of or any consent to departure from, any
Letter of Credit or any related document;
(ii)
the existence of any claim, set-off, defense or other right which any Borrower may have at any time against the
beneficiary of any Letter of Credit, the LC Issuer (including any claim for improper payment), Agent, any Lender or any other Person,
whether in connection with any Financing Document or any unrelated transaction, provided, however, that nothing herein shall prevent the
assertion of any such claim by separate suit or compulsory counterclaim;
(iii)
any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent,
invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect whatsoever;
(iv)
any affiliation between the LC Issuer and Agent; or
(v)
to the extent permitted under applicable law, any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing.
(e)
Deposit Obligations of Borrowers. In the event Agent notifies the Borrower Representative at the time of issuance of any
Letter of Credit that it will require cash collateral, Borrowers shall deposit with Agent for the benefit of all Revolving Lenders cash in an amount
equal to one hundred five percent (105%) of the aggregate outstanding Letter of Credit Liabilities to be available to Agent, for its benefit and the
benefit of issuers of Letters of Credit, to reimburse payments of drafts drawn under such Letters of Credit and pay any fees and expenses related
thereto In the event any Letters of Credit are outstanding at the time that Borrowers prepay in full or are required to repay the Obligations or the
Revolving Loan Commitment is terminated, Borrowers shall (i) if the Borrowers have not already made such deposit at the request of Agent
pursuant to the preceding sentence, deposit with Agent for the benefit
52

of all Revolving Lenders cash in an amount equal to one hundred five percent (105%) of the aggregate outstanding Letter of Credit Liabilities to
be available to Agent, for its benefit and the benefit of issuers of Letters of Credit, to reimburse payments of drafts drawn under such Letters of
Credit and pay any fees and expenses related thereto, and (ii) prepay the fee payable under Section 2.5(b) with respect to such Letters of Credit for
the full remaining terms of such Letters of Credit assuming that the full amount of such Letters of Credit as of the date of such repayment or
termination remain outstanding until the end of such remaining terms. Upon termination of any such Letter of Credit and so long as no Event of
Default has occurred and is continuing, the unearned portion of such prepaid fee attributable to such Letter of Credit shall be refunded to
Borrowers, together with the deposit described in the preceding clause (i) attributable to such Letter of Credit, but only to the extent not previously
applied by Agent in the manner described herein.
(f)
Participations in Support Agreements and Lender Letters of Credit.
(i)
Concurrently with the issuance of each Supported Letter of Credit, Agent shall be deemed to have sold and
transferred to each Revolving Lender, and each such Revolving Lender shall be deemed irrevocably and immediately to have purchased
and received from Agent, without recourse or warranty, an undivided interest and participation in, to the extent of such Lender’s Pro Rata
Share, Agent’s Support Agreement liabilities and obligations in respect of such Supported Letter of Credit and Borrowers’ Reimbursement
Obligations with respect thereto. Concurrently with the issuance of each Lender Letter of Credit, the LC Issuer in respect thereof shall be
deemed to have sold and transferred to each Revolving Lender, and each such Revolving Lender shall be deemed irrevocably and
immediately to have purchased and received from such LC Issuer, without recourse or warranty, an undivided interest and participation in,
to the extent of such Lender’s Pro Rata Share, such Lender Letter of Credit and Borrowers’ Reimbursement Obligations with respect
thereto. Any purchase obligation arising pursuant to the immediately two preceding sentences shall be absolute and unconditional and
shall not be affected by any circumstances whatsoever.
(ii)
If either (A) Agent makes any payment or disbursement under any Support Agreement and/or (B) an LC Issuer
makes any payment or disbursement under any Lender Letter of Credit, and (I) Borrowers have not reimbursed Agent or the applicable LC
Issuer, as applicable, in full for such payment or disbursement in accordance with Section 2.5(c), or (II) any reimbursement under any
Support Agreement or Lender Letter of Credit received by Agent or any LC Issuer, as applicable, from any Credit Party is or must be
returned or rescinded upon or during any bankruptcy or reorganization of any Credit Party or otherwise, each Revolving Lender shall be
irrevocably and unconditionally obligated to pay to Agent or the applicable LC Issuer, as applicable, its Pro Rata Share of such payment or
disbursement (but no such payment shall diminish the Obligations of Borrowers under Section 2.5(c)). To the extent any such Revolving
Lender shall not have made such amount available to Agent or the applicable LC Issuer, as applicable, before 12:00 Noon (Eastern time)
on the Business Day on which such Lender receives notice from Agent or the applicable LC Issuer, as applicable, of such payment or
disbursement, or return or rescission, as applicable, such Lender agrees to pay interest on such amount to Agent or the applicable LC
Issuer, as applicable, forthwith on demand accruing daily at the Federal Funds Rate, for the first three (3) days following such Lender’s
receipt of such notice, and thereafter at the Base Rate plus the Applicable Margin in respect of Revolving Loans. Any such Revolving
Lender’s failure to make available to Agent or the applicable LC Issuer, as applicable, its Pro Rata Share of any such payment or
disbursement, or return or rescission, as applicable, shall not relieve any other Lender of its obligation hereunder to make available such
other Revolving Lender’s Pro Rata Share of such payment, but no Revolving Lender shall be responsible for the failure of any other
Lender to make available such other Lender’s Pro Rata Share of any such payment or disbursement, or return or rescission.
Section 2.6
General Provisions Regarding Payment; Loan Account.
(a)
All payments to be made by each Borrower under any Financing Document, including payments of principal and interest
made hereunder and pursuant to any other Financing Document, and all fees, expenses, indemnities and reimbursements, shall be made without
set-off,
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recoupment or counterclaim. If any payment hereunder becomes due and payable on a day other than a Business Day, such payment shall be
extended to the next succeeding Business Day and, with respect to payments of principal, interest thereon shall be payable at the then applicable
rate during such extension (it being understood and agreed that, solely for purposes of calculating financial covenants and computations contained
herein and determining compliance therewith, if payment is made, in full, on any such extended due date, such payment shall be deemed to have
been paid on the original due date without giving effect to any extension thereto). Any payments received in the Payment Account before 12:00
Noon (Eastern time) on any date shall be deemed received by Agent on such date, and any payments received in the Payment Account at or after
12:00 Noon (Eastern time) on any date shall be deemed received by Agent on the next succeeding Business Day.
(b)
Agent shall maintain a loan account (the “Loan Account”) on its books to record Loans and other extensions of credit
made by the Lenders hereunder or under any other Financing Document, and all payments thereon made by each Borrower. All entries in the Loan
Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time. The balance in the Loan
Account, as recorded in Agent’s books and records at any time shall be conclusive and binding evidence of the amounts due and owing to Agent by
each Borrower absent manifest error; provided, however, that any failure to so record or any error in so recording shall not limit or otherwise affect
any Borrower’s duty to pay all amounts owing hereunder or under any other Financing Document. Agent shall endeavor to provide Borrowers with
a monthly statement regarding the Loan Account (but neither Agent nor any Lender shall have any liability if Agent shall fail to provide any such
statement). Unless any Borrower notifies Agent of any objection to any such statement (specifically describing the basis for such objection) within
ninety (90) days after the date of receipt thereof, it shall be deemed final, binding and conclusive upon Borrowers in all respects as to all matters
reflected therein.
Section 2.7
Maximum Interest. In no event shall the interest charged with respect to the Loans or any other Obligations of any
Borrower under any Financing Document exceed the maximum amount permitted under the laws of the State of New York or of any other
applicable jurisdiction. Notwithstanding anything to the contrary herein or elsewhere, if at any time the rate of interest payable hereunder or under
any Note or other Financing Document (the “Stated Rate”) would exceed the highest rate of interest permitted under any applicable law to be
charged (the “Maximum Lawful Rate”), then for so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable shall be
equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the Stated Rate is less than the Maximum Lawful Rate, each
Borrower shall, to the extent permitted by law, continue to pay interest at the Maximum Lawful Rate until such time as the total interest received is
equal to the total interest which would have been received had the Stated Rate been (but for the operation of this provision) the interest rate
payable. Thereafter, the interest rate payable shall be the Stated Rate unless and until the Stated Rate again would exceed the Maximum Lawful
Rate, in which event this provision shall again apply. In no event shall the total interest received by any Lender exceed the amount which it could
lawfully have received had the interest been calculated for the full term hereof at the Maximum Lawful Rate. If, notwithstanding the prior
sentence, any Lender has received interest hereunder in excess of the Maximum Lawful Rate, such excess amount shall be applied to the reduction
of the principal balance of the Loans or to other amounts (other than interest) payable hereunder, and if no such principal or other amounts are then
outstanding, such excess or part thereof remaining shall be paid to Borrowers. In computing interest payable with reference to the Maximum
Lawful Rate applicable to any Lender, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of
days in the year in which such calculation is made.
Section 2.8
Taxes; Capital Adequacy; Increased Costs; Inability to Determine Rates; Illegality.
(a)
All payments of principal and interest on the Loans and all other amounts payable hereunder shall be made free and clear
of and without deduction for any present or future Taxes, except as required by applicable Law. If any applicable law (as determined in the good
faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding
Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount
deducted or withheld to the relevant Governmental Authority in accordance with applicable Law and if any such withholding or deduction is
54

in respect of any Indemnified Taxes, then the Borrowers shall pay such additional amount or amounts as is necessary to ensure that the net amount
actually received by Agent and each Lender will equal the full amount Agent and such Lender would have received had no such withholding or
deduction been required (including, without limitation, such withholdings and deductions applicable to additional sums payable under this
Section 2.8). After payment of any Tax by a Borrower to a Governmental Authority pursuant to this Section 2.8, such Borrower shall promptly
forward to Agent the original or a certified copy of an official receipt, a copy of the return reporting such payment, or other documentation
satisfactory to Agent evidencing such payment to such authority. Borrowers shall timely pay to the relevant Governmental Authority in accordance
with applicable Law, or at the option of Agent timely reimburse it for the payment of, any Other Taxes.
(b)
The Borrowers shall indemnify Agent and Lenders, within ten (10) days after demand thereof, for the full amount of any
Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.8) payable or paid
by Agent or any Lender or required to be withheld or deducted from a payment to Agent or any Lender and any expenses arising therefrom or with
respect thereto, whether or not such Indemnified Taxes and Other Taxes were correctly or legally imposed or asserted by the relevant
Governmental Authority. A certificate in reasonable detail as to the amount of such payment or liability delivered to Borrowers by a Lender (with a
copy to Agent), or by Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.
(c)
Any Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments made under
any Financing Document shall deliver to Borrower Representative and Agent, at the time or times prescribed by applicable Law or reasonably
requested by Borrower Representative or Agent, such properly completed and executed documentation reasonably requested by Borrower
Representative or Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender,
if reasonably requested by Borrower Representative or Agent, shall deliver such other documentation prescribed by applicable Law or reasonably
requested by Borrowers or Agent as will enable Borrowers or Agent to determine whether or not such Lender is subject to backup withholding or
information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and
submission of such documentation (other than such documentation set forth in Sections 2.8(c)(i), 2.8(c)(ii) and 2.8(e) below) shall not be required
if in such Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost
or expense or would materially prejudice the legal or commercial position of such Lender.
(i)
Each Lender that is not a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for
U.S. federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to
Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) (each
such Lender a “Foreign Lender”) shall, to the extent permitted by Law, execute and deliver to Borrower Representative and Agent (in
such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender
under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or Agent) whichever
of the following is applicable: (A) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States
is a party, (x) with respect to payments of interest under any Financing Document, two (2) properly completed and executed originals of
United States Internal Revenue Service (“IRS”) Forms W-8BEN or W-8BEN-E (or successor form) establishing an exemption from, or
reduction of, U.S. federal withholding tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable
payments under any Financing Documents, two (2) properly completed and executed originals of IRS Forms W-8BEN or W-8BEN-E (or
successor form) establishing an exemption from, or reduction of, U.S. federal withholding tax pursuant to the “business profits” or “other
income” article of such tax treaty; (B) two (2) executed originals of IRS Form W-8ECI (or successor form); (C) in the case of a Foreign
Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the
form of Exhibit F-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10
percent shareholder” of any
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Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C)
of the Code (a “U.S. Tax Compliance Certificate”) and (y)  two (2) executed originals of IRS Forms W-8BEN or W-8BEN-E (or
successor form); (D)  to the extent a Foreign Lender is not the beneficial owner, two (2) executed originals of IRS Form W-8IMY,
accompanied by IRS Form W-8ECI, IRS Form W-8BEN or W-8BEN-E (or successor form), a U.S. Tax Compliance Certificate
substantially in the form of Exhibit F-2 or Exhibit F-3, IRS Form W-9 (or successor form), and/or other certification documents from each
beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such
Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate
substantially in the form of Exhibit F-4 on behalf of each such direct and indirect partner; or (E) other applicable forms, certificates or
documents prescribed by the IRS. Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete
or inaccurate in any respect, it shall update such form or certification or promptly notify Borrower Representative and Agent in writing of
its legal inability to do so. In addition, to the extent permitted by applicable Law, such forms shall be delivered by each Foreign Lender
upon the obsolescence or invalidity of any form previously delivered by such Foreign Lender. Each Foreign Lender shall promptly notify
Borrower Representative at any time it determines that it is no longer in a position to provide any previously delivered certificate to
Borrower Representative (or any other form of certification adopted by the U.S. taxing authorities for such purpose).
(ii)
Each Lender that is a “United States person” (as such term is defined in Section 7701(a)(30) of the Code) for U.S.
federal income tax purposes and is a party hereto on the Closing Date or purports to become an assignee of an interest pursuant to
Section 11.17(a) after the Closing Date (unless such Lender was already a Lender hereunder immediately prior to such assignment) shall,
to the extent permitted by Law, provide to Borrower Representative and Agent on or prior to the date on which such Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or Agent), a
properly completed and executed IRS Form W-9 or any successor form certifying as to such Lender’s entitlement to an exemption from
U.S. backup withholding and other applicable forms, certificates or documents prescribed by the IRS or reasonably requested by Borrower
Representative or Agent. Each such Lender shall promptly notify Borrowers at any time it determines that any certificate previously
delivered to Borrower Representative (or any other form of certification adopted by the U.S. governmental authorities for such purposes)
is no longer valid.
(iii)
Any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to Borrower Representative and
Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a
Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower Representative or Agent),
executed copies of any other form prescribed by applicable Law as a basis for claiming exemption from or a reduction in U.S. Federal
withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit
Borrowers or Agent to determine the withholding or deduction required to be made.
(d)
If any Lender determines, in its sole discretion exercised in good faith, that it has received a refund in respect of any Taxes
as to which it has been indemnified by any Borrower pursuant to this Section 2.8 (including by the payment of additional amounts pursuant to this
Section 2.8), then it shall promptly pay an amount equal to such refund to Borrowers, net of all reasonable out-of-pocket expenses of such Lender
or of Agent with respect thereto, including any Taxes; provided, however, that Borrowers, upon the written request of such Lender or Agent, agree
to repay any amount paid over to Borrowers to such Lender or to Agent (plus any related penalties, interest or other charges imposed by the
relevant Governmental Authority) in the event such Lender or Agent is required, for any reason, to disgorge or otherwise repay such refund.
Notwithstanding anything to the contrary in this Section  2.8, in no event will the indemnified party be required to pay any amount to an
indemnifying party pursuant to this Section  2.8(d) the payment of which would place the indemnified party in a less favorable net after-Tax
position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted,
withheld or otherwise imposed and the indemnification
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payments or additional amounts with respect to such Tax had never been paid. This Section 2.8 shall not be construed to require any indemnified
party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any
other Person.
(e)
If a payment made to a Lender under any Financing 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 Borrower Representative and Agent at the time or times
prescribed by Law and at such time or times reasonably requested by Borrower Representative 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
Borrower Representative or Agent as may be necessary for Borrowers 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 clause (e), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.
(f)
Each Lender shall severally indemnify Agent, within ten (10) days after demand therefor, for (i) any Indemnified Taxes
attributable to such Lender (but only to the extent that any Credit Party has not already indemnified Agent for such Indemnified Taxes and without
limiting the obligation of the Credit Parties to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section
11.17 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable
or paid by Agent in connection with any Financing Document, and any reasonable expenses arising therefrom or with respect thereto, whether or
not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such
payment or liability delivered to any Lender by Agent shall be conclusive absent manifest error. Each Lender hereby authorizes Agent to set off
and apply any and all amounts at any time owing to such Lender under any Financing Document or otherwise payable by Agent to such Lender
from any other source against any amount due to Agent under this paragraph (f).
(g)
If any Lender shall reasonably determine that the adoption or taking effect of, or any change in, any applicable Law
regarding capital adequacy, in each instance, after the Closing Date, or any change after the Closing Date in the interpretation, administration or
application thereof by any Governmental Authority, central bank or comparable agency charged with the interpretation, administration or
application thereof, or the compliance by any Lender or any Person controlling such Lender with any request, guideline or directive regarding
capital adequacy (whether or not having the force of Law) of any such Governmental Authority, central bank or comparable agency adopted or
otherwise taking effect after the Closing Date, has or would have the effect of reducing the rate of return on such Lender’s or such controlling
Person’s capital as a consequence of such Lender’s obligations hereunder to a level below that which such Lender or such controlling Person could
have achieved but for such adoption, taking effect, change, interpretation, administration, application or compliance (taking into consideration
such Lender’s or such controlling Person’s policies with respect to capital adequacy) then from time to time, upon demand by such Lender (which
demand shall be accompanied by a certificate setting forth the basis for such demand and a calculation of the amount thereof in reasonable detail, a
copy of which shall be furnished to Agent), Borrowers shall promptly pay to such Lender such additional amount as will compensate such Lender
or such controlling Person for such reduction, so long as such amounts have accrued on or after the day which is two hundred seventy (270) days
prior to the date on which such Lender first made demand therefor; provided that notwithstanding anything in this Agreement to the contrary,
(i)  the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in
connection therewith and (ii)  all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel
Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case
pursuant to Basel III, shall in each case be deemed to be a “change in applicable Law”, regardless of the date enacted, adopted or issued.
(h)
If any Lender shall reasonably determine that the adoption or taking effect of, or any change in, any applicable Law shall
(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of,
deposits with or for
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the account of, or credit extended or participated in by, any Lender, (ii) subject any Lender to any tax of any kind whatsoever with respect to this
Agreement, or any SOFR Loan made by it, or change the basis of taxation of payments to such Lender in respect thereof (except for Taxes covered
by Section 2.8); or (iii) impose on any Lender any other condition, cost or expense affecting this Agreement or SOFR Loans made by such Lender,
and the result of any of the foregoing shall be to increase the cost to such Lender of making or maintaining any Loan the interest on which is
determined by reference to Term SOFR (or of maintaining its obligation to make any such Loan), or to reduce the amount of any sum received or
receivable by such Lender (whether of principal, interest or any other amount) then, upon request of such Lender, the Borrowers will pay to such
Lender such additional amount or amounts as will compensate such Lender for such additional costs incurred or reduction suffered.
(i)
If any Lender requests compensation under any of the clauses in this Section 2.8, or requires Borrowers to pay any
additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8, then, upon the written
request of Borrower Representative, such Lender shall use reasonable efforts to designate a different lending office for funding or booking its
Loans hereunder or to assign its rights and obligations hereunder (subject to the provisions of Section 11.17) to another of its offices, branches or
affiliates, if, in the reasonable judgment of such Lender, such designation or assignment (i) would eliminate or materially reduce amounts payable
pursuant to any such Section, as the case may be, in the future, (ii) would not subject such Lender to any unreimbursed cost or expense and
(iii) would not otherwise be disadvantageous to such Lender (as determined in its sole good faith discretion). Without limitation of the provisions
of Section 13.14, each Borrower hereby agrees to pay all reasonable and documented, out-of-pocket costs and expenses incurred by any Lender in
connection with any such designation or assignment.
(j)
Subject to Section 2.2(o), if Agent determines (which determination shall be conclusive and binding absent manifest error)
that Term SOFR cannot be determined pursuant to the definition thereof on or prior to the first day of any Interest Period, Agent will promptly so
notify the Borrowers and each Lender. Upon notice thereof by Agent to Borrowers, any obligation of the Lenders to make SOFR Loans shall be
suspended until Agent revokes such notice. Upon receipt of such notice, any outstanding affected SOFR Loans will be deemed to have been
converted into Base Rate Loans at the end of the applicable Interest Period. Upon any such conversion, Borrower shall also pay any additional
amounts required pursuant to this Agreement.
(k)
If any Lender determines that any Law has made it unlawful, or that any Governmental Authority has asserted that it is
unlawful, for any Lender or its applicable lending office to make, maintain or fund SOFR Loans, or to determine or charge interest rates based
upon Term SOFR, then, upon notice thereof by such Lender to Borrowers (through Agent), any obligation of such Lender to make SOFR Loans
shall be suspended, in each case until such Lender notifies Agent and Borrower that the circumstances giving rise to such determination no longer
exist. Upon receipt of such notice, all SOFR Loans shall become Base Rate Loans. Upon any such conversion, Borrower shall also pay any
additional amounts required pursuant to this Agreement.
(l)
Each party’s obligations under this Section 2.8 shall survive the resignation or replacement of Agent or any assignment of
rights by, or the replacement of, a Lender, and the repayment, satisfaction or discharge of all Obligations hereunder.
Section 2.9
Appointment of Borrower Representative.
(a)
Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent and attorney-in-fact to
request and receive Loans in the name or on behalf of such Borrower and any other Borrowers, deliver Notices of Borrowing, Notices of LC
Credit Events and Borrowing Base Certificates, give instructions with respect to the disbursement of the proceeds of the Loans, requesting Letters
of Credit, giving and receiving all other notices and consents hereunder or under any of the other Financing Documents and taking all other actions
(including in respect of compliance with covenants) in the name or on behalf of any Borrower or Borrowers pursuant to this Agreement and the
other Financing Documents. Agent and Lenders may disburse the Loans to such bank account of Borrower Representative or a Borrower or
otherwise make such Loans to a Borrower, and LC
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Issuer may provide such Letters of Credit for the account of a Borrower, in each case as Borrower Representative may designate or direct, without
notice to any other Borrower. Notwithstanding anything to the contrary contained herein, Agent may at any time and from time to time require that
Loans to or for the account of any Borrower be disbursed directly to an operating account of such Borrower.
(b)
Borrower Representative hereby accepts the appointment by Borrowers to act as the agent and attorney-in-fact of
Borrowers pursuant to this Section 2.9. Borrower Representative shall ensure that the disbursement of any Loans that are at any time requested by
or to be remitted to or for the account of a Borrower, or the issuance of any Letter of Credit requested on behalf of a Borrower hereunder, shall be
remitted or issued to or for the account of such Borrower.
(c)
Each Borrower hereby irrevocably appoints and constitutes Borrower Representative as its agent to receive statements on
account and all other notices from Agent and Lenders and LC Issuer with respect to the Obligations or otherwise under or in connection with this
Agreement and the other Financing Documents.
(d)
Any notice, election, representation, warranty, agreement or undertaking made or delivered by or on behalf of any
Borrower by Borrower Representative shall be deemed for all purposes to have been made or delivered by such Borrower, as the case may be, and
shall be binding upon and enforceable against such Borrower to the same extent as if made or delivered directly by such Borrower.
(e)
No resignation by or termination of the appointment of Borrower Representative as agent and attorney-in-fact as aforesaid
shall be effective, except after ten (10) Business Days’ prior written notice to Agent. If the Borrower Representative resigns under this Agreement,
Borrowers shall be entitled to appoint a successor Borrower Representative (which shall be a Borrower and shall be reasonably acceptable to
Agent as such successor). Upon the acceptance of its appointment as successor Borrower Representative hereunder, such successor Borrower
Representative shall succeed to all the rights, powers and duties of the retiring Borrower Representative and the term “Borrower Representative”
means such successor Borrower Representative for all purposes of this Agreement and the other Financing Documents, and the retiring or
terminated Borrower Representative’s appointment, powers and duties as Borrower Representative shall be thereupon terminated.
Section 2.10
Joint and Several Liability; Rights of Contribution; Subordination and Subrogation.
(a)
Borrowers are defined collectively to include all Persons named as one of the Borrowers herein; provided, however, that
any references herein to “any Borrower”, “each Borrower” or similar references, shall be construed as a reference to each individual Person named
as one of the Borrowers herein. Each Person so named shall be jointly and severally liable for all of the obligations of Borrowers under this
Agreement. Each Borrower, individually, expressly understands, agrees and acknowledges, that the credit facilities would not be made available on
the terms herein in the absence of the collective credit of all of the Persons named as the Borrowers herein, the joint and several liability of all such
Persons, and the cross-collateralization of the collateral of all such Persons. Accordingly, each Borrower individually acknowledges that the
benefit to each of the Persons named as one of the Borrowers as a whole constitutes reasonably equivalent value, regardless of the amount of the
credit facilities actually borrowed by, advanced to, or the amount of collateral provided by, any individual Borrower. In addition, each entity
named as one of the Borrowers herein hereby acknowledges and agrees that all of the representations, warranties, covenants, obligations,
conditions, agreements and other terms contained in this Agreement shall be applicable to and shall be binding upon and measured and enforceable
individually against each Person named as one of the Borrowers herein as well as all such Persons when taken together. By way of illustration, but
without limiting the generality of the foregoing, the terms of Section 10.1 of this Agreement are to be applied to each individual Person named as
one of the Borrowers herein (as well as to all such Persons taken as a whole), such that the occurrence of any of the events described in
Section 10.1 of this Agreement as to any Person named as one of the Borrowers herein shall constitute an Event of Default even if such event has
not occurred as to any other Persons named as the Borrowers or as to all such Persons taken as a whole.
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(b)
Notwithstanding any provisions of this Agreement to the contrary, it is intended that the joint and several nature of the
liability of each Borrower for the Obligations and the Liens granted by Borrowers to secure the Obligations, not constitute a Fraudulent
Conveyance (as defined below). Consequently, Agent, Lenders and each Borrower agree that if the liability of a Borrower for the Obligations, or
any Liens granted by such Borrower securing the Obligations would, but for the application of this sentence, constitute a Fraudulent Conveyance,
the liability of such Borrower and the Liens securing such liability shall be valid and enforceable only to the maximum extent that would not cause
such liability or such Lien to constitute a Fraudulent Conveyance, and the liability of such Borrower and this Agreement shall automatically be
deemed to have been amended accordingly. For purposes hereof, the term “Fraudulent Conveyance” means a fraudulent conveyance under
Section 548 of Chapter 11 of Title II of the Bankruptcy Code or a fraudulent conveyance or fraudulent transfer under the applicable provisions of
any fraudulent conveyance or fraudulent transfer law or similar law of any state, nation or other governmental unit, as in effect from time to time.
(c)
Agent is hereby authorized, without notice or demand (except as otherwise specifically required under this Agreement)
and without affecting the liability of any Borrower hereunder, at any time and from time to time, to (i) renew, extend or otherwise increase the time
for payment of the Obligations; (ii) with the written agreement of all Borrowers, change the terms relating to the Obligations or otherwise modify,
amend or change the terms of any Note or other agreement, document or instrument now or hereafter executed by any Borrower and delivered to
Agent for any Lender; (iii) accept partial payments of the Obligations; (iv) take and hold any Collateral for the payment of the Obligations or for
the payment of any guaranties of the Obligations and exchange, enforce, waive and release any such Collateral; (v) apply any such Collateral and
direct the order or manner of sale thereof as Agent, in its sole discretion, may determine; and (vi) settle, release, compromise, collect or otherwise
liquidate the Obligations and any Collateral therefor in any manner, all guarantor and surety defenses being hereby waived by each Borrower.
Except as specifically provided in this Agreement or any of the other Financing Documents, Agent shall have the exclusive right to determine the
time and manner of application of any payments or credits, whether received from any Borrower or any other source, and such determination shall
be binding on all Borrowers. All such payments and credits may be applied, reversed and reapplied, in whole or in part, to any of the Obligations
that Agent shall determine, in its sole discretion, without affecting the validity or enforceability of the Obligations of any other Borrower.
(d)
Each Borrower hereby agrees that, except as hereinafter provided, the Obligations are unconditional, irrespective of (i) the
absence of any attempt to collect the Obligations from any obligor or other action to enforce the same; (ii) the waiver or consent by Agent with
respect to any provision of any instrument evidencing the Obligations, or any part thereof, or any other agreement heretofore, now or hereafter
executed by a Borrower and delivered to Agent; (iii) failure by Agent 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; (iv)  the institution of any proceeding under the Bankruptcy Code, or any similar
proceeding, by or against a Borrower or Agent’s election in any such proceeding of the application of Section 1111(b)(2) of the Bankruptcy Code;
(v) any borrowing or grant of a security interest by a Borrower as debtor-in-possession, under Section 364 of the Bankruptcy Code; (vi) the
disallowance, under Section 502 of the Bankruptcy Code, of all or any portion of Agent’s claim(s) for repayment of any of the Obligations; or
(vii) any other circumstance other than payment in full of the Obligations which might otherwise constitute a legal or equitable discharge or
defense of a guarantor or surety.
(e)
Borrowers hereby agree, as between themselves, that to the extent that Agent, on behalf of Lenders, shall have received
from any Borrower any Recovery Amount (as defined below), then the paying Borrower shall have a right of contribution against each other
Borrower in an amount equal to such other Borrower’s contributive share of such Recovery Amount; provided, however, that in the event any
Borrower suffers a Deficiency Amount (as defined below), then the Borrower suffering the Deficiency Amount shall be entitled to seek and
receive contribution from and against the other Borrowers in an amount equal to the Deficiency Amount; and provided, further, that in no event
shall the aggregate amounts so reimbursed by reason of the contribution of any Borrower equal or exceed an amount that would, if paid, constitute
or result in Fraudulent Conveyance. Until all Obligations have been paid and satisfied in full, no payment made by or for the account of a
Borrower including, without limitation, (i) a payment made by such Borrower on behalf of the liabilities of any other Borrower, or
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(ii) a payment made by any other Guarantor under any Guarantee, shall entitle such Borrower, by subrogation or otherwise, to any payment from
such other Borrower or from or out of such other Borrower’s property. The right of each Borrower to receive any contribution under this
Section 2.10(e) or by subrogation or otherwise from any other Borrower shall be subordinate in right of payment to the Obligations and such
Borrower shall not exercise any right or remedy against such other Borrower or any property of such other Borrower by reason of any performance
of such Borrower of its joint and several obligations hereunder, until the Obligations have been indefeasibly paid and satisfied in full, and no
Borrower shall exercise any right or remedy with respect to this Section 2.10(e) until the Obligations have been indefeasibly paid and satisfied in
full. As used in this Section 2.10(e), the term “Recovery Amount” means the amount of proceeds received by or credited to Agent from the
exercise of any remedy of the Lenders under this Agreement or the other Financing Documents, including, without limitation, the sale of any
Collateral. As used in this Section 2.10(e), the term “Deficiency Amount” means any amount that is less than the entire amount a Borrower is
entitled to receive by way of contribution or subrogation from, but that has not been paid by, the other Borrowers in respect of any Recovery
Amount attributable to the Borrower entitled to contribution, until the Deficiency Amount has been reduced to Zero Dollars ($0) through
contributions and reimbursements made under the terms of this Section 2.10(e) or otherwise.
Section 2.11
Collections and Lockbox Account.
(a)
Borrowers shall maintain a lockbox (the “Lockbox”) with a United States depository institution reasonably acceptable to
Agent (the “Lockbox Bank”), subject to the provisions of this Agreement, and shall execute with the Lockbox Bank a Deposit Account Control
Agreement and such other agreements related to such Lockbox as Agent may require. Borrowers shall ensure that all collections of Accounts and
proceeds of other Borrowing Base Collateral are paid directly from Account Debtors (i) into the Lockbox for deposit into the Lockbox Account
and/or (ii) directly into the Lockbox Account; provided, however; unless Agent shall otherwise direct by written notice to Borrowers, Borrowers
shall be permitted to cause Account Debtors who are individuals to pay Accounts directly to Borrowers, which Borrowers shall then administer
and apply in the manner required below. All funds deposited into a Lockbox Account shall be transferred into the Payment Account by the close of
each Business Day.
(b)
Notwithstanding anything in any lockbox agreement or Deposit Account Control Agreement to the contrary, Borrowers
agree that they shall be liable for any fees and charges in effect from time to time and charged by the Lockbox Bank in connection with the
Lockbox, the Lockbox Account, and that Agent shall have no liability therefor. Borrowers hereby indemnify and agree to hold Agent harmless
from any and all liabilities, claims, losses and demands whatsoever, including reasonable attorneys’ fees and expenses, arising from or relating to
actions of Agent or the Lockbox Bank pursuant to this Section  or any lockbox agreement or Deposit Account Control Agreement or similar
agreement, except to the extent of such losses arising solely from Agent’s gross negligence or willful misconduct.
(c)
Agent shall apply, on a daily basis, all funds transferred into the Payment Account pursuant to this Section 2.11 to reduce
the outstanding Revolving Loans in such order of application as Agent shall elect. If as the result of collections of Accounts pursuant to the terms
and conditions of this Section, a credit balance exists with respect to the Loan Account, such credit balance shall not accrue interest in favor of
Borrowers, but Agent shall transfer such funds into an account designated by Borrower Representative for so long as no Default or Event of
Default exists.
(d)
To the extent that any collections of Accounts or proceeds of other Borrowing Base Collateral are not sent directly to the
Lockbox or Lockbox Account but are received by any Borrower, such collections shall be held in trust for the benefit of Agent pursuant to an
express trust created hereby and immediately remitted, in the form received, to applicable Lockbox or Lockbox Account. No such funds received
by any Borrower shall be commingled with other funds of the Borrowers.
(e)
Borrowers acknowledge and agree that compliance with the terms of this Section is essential, and that Agent and Lenders
will suffer immediate and irreparable injury and have no adequate remedy at law, if any Borrower, through acts or omissions, causes or permits
Account Debtors to send payments other than to the Lockbox or Lockbox Accounts or if any Borrower fails to promptly
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deposit collections of Accounts or proceeds of other Borrowing Base Collateral in the Lockbox Account as herein required. Accordingly, in
addition to all other rights and remedies of Agent and Lenders hereunder, Agent shall have the right to seek specific performance of the Borrowers’
obligations under this Section, and any other equitable relief as Agent may deem necessary or appropriate, and Borrowers waive any requirement
for the posting of a bond in connection with such equitable relief.
(f)
Borrowers shall not, and Borrowers shall not suffer or permit any Credit Party to, (i) withdraw any amounts from any
Lockbox Account, (ii) change the procedures or sweep instructions under the agreements governing any Lockbox Accounts, or (iii) send to or
deposit in any Lockbox Account any funds other than payments made with respect to and proceeds of Accounts or other Borrowing Base
Collateral. Borrowers shall, and shall cause each Credit Party to, cooperate with Agent in the identification and reconciliation on a daily basis of all
amounts received in or required to be deposited into the Lockbox Accounts. If more than five percent (5%) of the collections of Accounts received
by Borrowers during any given fifteen (15) day period is not identified or reconciled to the reasonable satisfaction of Agent within ten (10)
Business Days of receipt, Agent shall not be obligated to make further advances under this Agreement until such amount is identified or is
reconciled to the reasonable satisfaction of Agent, as the case may be. In addition, if any such amount cannot be identified or reconciled to the
reasonable satisfaction of Agent, Agent may utilize its own staff or, if it deems necessary, engage an outside auditor, in either case at Borrowers’
expense (which in the case of Agent’s own staff shall be in accordance with Agent’s then prevailing customary charges (plus expenses)), to make
such examination and report as may be necessary to identify and reconcile such amount.
(g)
If any Borrower breaches its obligation to direct payments of the proceeds of the Borrowing Base Collateral to the
Lockbox Account, Agent, as the irrevocably made, constituted and appointed true and lawful attorney for Borrowers, may, by the signature or
other act of any of Agent’s authorized representatives (without requiring any of them to do so), direct any Account Debtor to pay proceeds of the
Borrowing Base Collateral to Borrowers by directing payment to the Lockbox Account.
Section 2.12
Termination; Restriction on Termination.
(a)
Termination by Lenders. In addition to the rights set forth in Section 10.2, Agent may, and at the direction of Required
Lenders shall, terminate this Agreement without further notice upon or after the occurrence and during the continuance of an Event of Default.
(b)
Termination by Borrowers. Upon at least ten (10) Business Days’ prior written notice and pursuant to payoff
documentation in form and substance satisfactory to Agent and Lenders, Borrowers may, at their option, terminate this Agreement; provided,
however, that no such termination shall be effective until Borrowers have (i) paid all of the Obligations (other than contingent indemnification
obligations for which no claim has been made) in cash, in full and in immediately available funds, (ii) all Letters of Credit and Support
Agreements have expired, terminated or have been cash collateralized to Agent’s satisfaction and (iii) complied with Section 2.12(c), the other
terms of this Agreement and the terms of any Fee Letter. Any notice of termination given by Borrowers shall be irrevocable unless all Lenders
otherwise agree in writing and no Lender shall have any obligation to make any Loans or issue or procure any Letters of Credit or Support
Agreements on or after the termination date stated in such notice. Borrowers may elect to terminate this Agreement in its entirety only. No section
of this Agreement or type of Loan available hereunder may be terminated singly.
(c)
Effectiveness of Termination. All of the Obligations shall be immediately due and payable upon the Termination Date. All
undertakings, agreements, covenants, warranties and representations of Borrowers contained in the Financing Documents shall survive any such
termination and Agent shall retain its Liens in the Collateral and Agent and each Lender shall retain all of its rights and remedies under the
Financing Documents notwithstanding such termination until all Obligations (other than contingent indemnification obligations for which no claim
has been made) have been discharged or paid, in full, in immediately available funds, including, without limitation, Obligations under Section 2.2
and the terms of any Fee Letter resulting from such termination. Notwithstanding the foregoing or the payment in full of the Obligations, Agent
shall not be required to terminate its Liens in the Collateral unless, with respect to any loss or damage Agent may incur as a result of dishonored
checks or other items of payment received by Agent from Borrower or any Account Debtor and applied to the
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Obligations, Agent shall have retained cash Collateral or other Collateral for such period of time as Agent, in its discretion, may deem necessary to
protect Agent and each Lender from any such loss or damage. Upon the payment in full, in cash in immediately available funds, of all Obligations
and the termination of the Revolving Loan Commitments, as Borrower may reasonably request, Agent shall, at Borrower’s sole cost and expense,
execute and deliver such documents evidencing the release and termination of the security interest in the Collateral granted under this Agreement
and the other Financing Documents pursuant to and in accordance with the terms of any applicable payoff documentation.
Article 3
 - REPRESENTATIONS AND WARRANTIES
To induce Agent and Lenders to enter into this Agreement and to make the Loans and other credit accommodations contemplated hereby,
each Credit Party hereby represents and warrants to Agent and each Lender, that:
Section 3.1
Existence and Power. Each Credit Party (a) is an entity as specified on Schedule 3.1, (b) is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its organization specified on Schedule 3.1, (c) has the same legal name as it
appears in such Credit Party’s Organizational Documents and an organizational identification number (if any), in each case as specified on
Schedule 3.1, (d) has all powers to own its assets and has powers and all Permits necessary or desirable in the operation of its business as presently
conducted or as proposed to be conducted, except where the failure to have such powers or Permits would not reasonably be expected to result in a
Material Adverse Effect, and (e) is qualified to do business as a foreign entity in each jurisdiction in which it is required to be so qualified, which
jurisdictions as of the Closing Date are specified on Schedule 3.1, except in the case of this clause (e), where the failure to be so qualified would
not reasonably be expected to have a Material Adverse Effect. Except as set forth on Schedule 3.1, no Credit Party (x) has had, over the five (5)
year period preceding the Closing Date, any name other than its current name, or (y)  was incorporated or organized under the laws of any
jurisdiction other than its current jurisdiction of incorporation or organization.
Section 3.2
Organization and Governmental Authorization; No Contravention. The execution, delivery and performance by each
Credit Party of the Financing Documents to which it is a party are (a) within its powers, (b) have been duly authorized by all necessary action
pursuant to its Organizational Documents, (c) require no further action by or in respect of, or filing with, any Governmental Authority other than
(i) recordings, filings and other perfection actions in connection with the Liens granted to Agent under this Agreement or any Security Document
and (ii) those obtained or made prior to the Closing Date and (d) do not violate, conflict with or cause a breach or a default under (i) any Law
applicable to any Credit Party, (ii) any of the Organizational Documents of any Credit Party, or (iii) any agreement or instrument binding upon it,
except for such violations, conflicts, breaches or defaults as would not, with respect to this clause (iii), reasonably be expected to have a Material
Adverse Effect.
Section 3.3
Binding Effect. Each of the Financing Documents to which any Credit Party is a party constitutes a valid and binding
agreement or instrument of such Credit Party, enforceable against such Credit Party in accordance with its respective terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other similar laws relating to the enforcement of creditors’ rights generally and
by general equitable principles. Each Financing Document has been duly executed and delivered by each Credit Party party thereto.
Section 3.4
Capitalization. The issued and outstanding equity securities of each of the Credit Parties are as set forth on Schedule 3.4
as of the date set forth on Schedule 3.4. All issued and outstanding equity securities of each of the Credit Parties are duly authorized and validly
issued, fully paid, nonassessable, free and clear of all Liens other than those in favor of Agent for the benefit of Agent and Lenders, and such
equity securities were issued in compliance with all applicable Laws. The identity of the holders of the equity securities of each of the Credit
Parties and the percentage of their fully-diluted ownership of the equity securities of each of the Credit Parties as of the date set forth on Schedule
3.4 is set forth on Schedule 3.4. No shares of the capital stock or other Equity Interests of any Credit Party, other than those described above, are
issued and outstanding as of the Closing Date. Except as set forth
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on Schedule  3.4, as of the Closing Date there are no preemptive or other outstanding rights, options, warrants, conversion rights or similar
agreements or understandings for the purchase or acquisition from any Credit Party of any equity securities of any such entity.
Section 3.5
Financial Information. All information delivered to Agent and pertaining to the financial condition of any Credit Party
fairly presents the financial position of such Credit Party as of such date in conformity with GAAP (and as to unaudited financial statements,
subject to normal year-end adjustments and the absence of footnote disclosures). Since December 31, 2023, there has been no material adverse
change in the business, operations, properties, prospects or condition (financial or otherwise) of any Credit Party. Since December 31, 2023,
nothing has occurred that has had, or would reasonably be expected to have, a Material Adverse Effect.
Section 3.6
Litigation. Except as set forth on Schedule 3.6 as of the Closing Date, and except as hereafter disclosed to Agent in
writing, there is no Litigation pending against, or to such Credit Party’s knowledge threatened in writing against or affecting, any Credit Party.
There is no Litigation pending in which an adverse decision would reasonably be expected to have a Material Adverse Effect or which in any
manner draws into question the validity of any of the Financing Documents.
Section 3.7
Ownership of Property. Each Credit Party and each of its Subsidiaries is the lawful sole owner of, has good and
marketable title to and is in lawful possession of, or has valid leasehold interests in, all properties, accounts and other assets (real or personal,
tangible, intangible or mixed) purported or reported to be owned or leased (as the case may be) by such Person, subject only to Permitted Liens.
Section 3.8
No Default. No Event of Default, or to such Credit Party’s knowledge, Default, has occurred and is continuing. To such
Credit Party’s knowledge, no Credit Party is in breach or default under or with respect to any contract, agreement, lease or other instrument to
which it is a party or by which its property is bound or affected, which breach or default would reasonably be expected to result in a Material
Adverse Effect.
Section 3.9
Labor Matters. As of the Closing Date, there are no strikes or other labor disputes pending or, to any Credit Party’s
knowledge, threatened in writing against any Credit Party, which would reasonably be expected to have a Material Adverse Effect. Hours worked
and payments made to the employees of the Credit Parties have not been in violation of the Fair Labor Standards Act or any other applicable Law
dealing with such matters. All payments due from the Credit Parties, or for which any claim may be made against any of them, on account of
wages and employee and retiree health and welfare insurance and other benefits have been paid or accrued as a liability on their books, as the case
may be. The consummation of the transactions contemplated by the Financing Documents will not give rise to a right of termination or right of
renegotiation on the part of any union under any collective bargaining agreement to which it is a party or by which it is bound, which would
reasonably be expected to have a Material Adverse Effect.
Section 3.10
Investment Company Act. No Credit Party is an “investment company” or a company “controlled” by an “investment
company” or a “subsidiary” of an “investment company,” all within the meaning of the Investment Company Act of 1940.
Section 3.11
Margin Regulations.
(a)
The Credit Parties and their Subsidiaries do not own any stock, partnership interest or other equity securities, except for
Permitted Investments. Without limiting the foregoing, the Credit Parties and their Subsidiaries do not own or hold any Margin Stock.
(b)
None of the proceeds from the Loans have been or will be used, directly or indirectly, for the purpose of purchasing or
carrying any “margin stock” (as defined in Regulation U of the Federal Reserve Board), for the purpose of reducing or retiring any indebtedness
which was originally incurred to purchase or carry any “margin stock” or for any other purpose which might cause any of the Loans to be
considered a “purpose credit” within the meaning of Regulation T, U or X of the Federal Reserve Board.
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Section 3.12
Compliance With Laws; Anti-Terrorism Laws.
(a)
Each Credit Party is in compliance with the requirements of all applicable Laws, except for such Laws the noncompliance
with which would not reasonably be expected to have a Material Adverse Effect.
(b)
None of the Credit Parties and, to the knowledge of the Credit Parties, none of their Affiliates (i) is in violation of any
Anti-Terrorism Law, (ii) 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, (iii) is a Blocked Person, or is controlled by a Blocked Person, (iv)
is acting or will act for or on behalf of a Blocked Person, (v) is associated with, or will become associated with, a Blocked Person or (vi) is
providing, or will provide, material, financial or technical support or other services to or in support of acts of terrorism of a Blocked Person. No
Credit Party nor, to the knowledge of any Credit Party, any of its Affiliates or agents acting or benefiting in any capacity in connection with the
transactions contemplated by this Agreement, (A) conducts any business or engages in making or receiving any contribution of funds, goods or
services directly or indirectly to or for the benefit of any Blocked Person or Sanctioned Country, or (B) deals in, or otherwise engages in any
transaction directly or indirectly relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar
executive order or other Anti-Terrorism Law.
Section 3.13
Taxes. All federal income and franchise tax returns, reports and statements, all state and local income and franchise tax
returns, reports and statements and all other material federal, state and local tax returns, reports and statements required to be filed by or on behalf
of each Credit Party have been filed with the appropriate Governmental Authorities in all jurisdictions in which such returns, reports and
statements are required to be filed and, except to the extent subject to a Permitted Contest, all Taxes (including real property Taxes) and other
charges shown to be due and payable in respect thereof have been timely paid prior to the date on which any fine, penalty, interest, late charge or
loss may be added thereto for nonpayment thereof. Except to the extent subject to a Permitted Contest, all state and local sales and use Taxes
required to be paid by each Credit Party have been paid. All federal and state returns have been filed by each Credit Party for all periods for which
returns were due with respect to employee income tax withholding, social security and unemployment taxes, and, except to the extent subject to a
Permitted Contest, the amounts shown thereon to be due and payable have been paid in full or adequate provisions therefor have been made.
Section 3.14
Compliance with ERISA.
(a)
Each ERISA Plan (and the related trusts and funding agreements) complies in form and in operation with, has been
administered in compliance with, and the terms of each ERISA Plan satisfy, the applicable requirements of ERISA and the Code in all material
respects. Each ERISA Plan which is intended to be qualified under Section 401(a) of the Code is so qualified, and the United States Internal
Revenue Service has issued a favorable determination letter with respect to each such ERISA Plan which may be relied on currently. No Credit
Party has incurred liability for any material excise tax under any of Sections 4971 through 5000 of the Code.
(b)
Except as would not reasonably be expected, individually or in the aggregate, to result in a Material Adverse Effect, each
Credit Party and each Subsidiary is in compliance with the applicable provisions of ERISA and the provision of the Code relating to ERISA Plans
and the regulations and published interpretations therein. During the thirty-six (36) month period prior to the Closing Date or the making of any
Loan or the issuance of any Letter of Credit, (i) no steps have been taken to terminate any Pension Plan, and (ii) no contribution failure has
occurred with respect to any Pension Plan sufficient to give rise to a Lien under Section 303(k) of ERISA or Section 430(k) of the Code and no
event has occurred that would give rise to a Lien under Section 4068 of ERISA. Except as described on Schedule 3.14, no condition exists or event
or transaction has occurred with respect to any Pension Plan which would result in the incurrence by any Credit Party of any material liability, fine
or penalty. No Credit Party has incurred liability to the PBGC (other than for current premiums) with respect to any employee Pension Plan. All
contributions (if any) have been made on a timely basis to any Multiemployer Plan that are required to be made by any Credit Party or any other
member of the Controlled Group under the terms of the plan or of any collective bargaining agreement or by applicable
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Law; no Credit Party nor any member of the Controlled Group has withdrawn or partially withdrawn from any Multiemployer Plan, incurred any
withdrawal liability with respect to any such plan or received notice of any claim or demand for withdrawal liability or partial withdrawal liability
from any such plan, and, except as provided on Schedule 3.14, no condition has occurred which, if continued, could result in a withdrawal or
partial withdrawal from any such plan, and except as provided on Schedule 3.14, no Credit Party nor any member of the Controlled Group has
received any notice that any Multiemployer Plan is in reorganization, that increased contributions may be required to avoid a reduction in plan
benefits or the imposition of any excise tax, that any such plan is or has been funded at a rate less than that required under Section 412 of the Code,
that any such plan is or may be terminated, or that any such plan is or may become insolvent.
Section 3.15
Brokers. Except for fees payable to Agent and/or Lenders, no broker, finder or other intermediary has brought about the
obtaining, making or closing of the transactions contemplated by the Financing Documents, and no Credit Party has or will have any obligation to
any Person in respect of any finder’s or brokerage fees, commissions or other expenses in connection herewith or therewith.
Section 3.16
[Reserved].
Section 3.17
Material Contracts. Except for the Financing Documents and the other agreements set forth on Schedule 3.17, as of the
Closing Date there are no Material Contracts. The consummation of the transactions contemplated by the Financing Documents will not give rise
to a right of termination in favor of any party to any Material Contract (other than any Credit Party).
Section 3.18
Compliance with Environmental Requirements; No Hazardous Materials. Except in each case as set forth on
Schedule 3.18:
(a)
no notice, notification, demand, request for information, citation, summons, complaint or order has been issued, no
complaint has been filed, no penalty has been assessed and no investigation or review is pending, or to such Credit Party’s knowledge, threatened
in writing by any Governmental Authority or other Person with respect to any (i) alleged violation by any Credit Party of any Environmental Law,
(ii) alleged failure by any Credit Party to have any Permits required in connection with the conduct of its business or to comply with the terms and
conditions thereof, (iii) any generation, treatment, storage, recycling, transportation or disposal of any Hazardous Materials, or (iv) release of
Hazardous Materials; and
(b)
no property now owned or leased by any Credit Party and, to the knowledge of each Credit Party, no such property
previously owned or leased by any Credit Party, to which any Credit Party has, directly or indirectly, transported or arranged for the transportation
of any Hazardous Materials, is listed or, to such Credit Party’s knowledge, proposed for listing, on the National Priorities List promulgated
pursuant to CERCLA, or CERCLIS (as defined in CERCLA) or any similar state list or is the subject of federal, state or local enforcement actions
or, to the knowledge of such Credit Party, other investigations which may lead to claims against any Credit Party for clean-up costs, remedial
work, damage to natural resources or personal injury claims, including, without limitation, claims under CERCLA.
For purposes of this Section 3.18, each Credit Party shall be deemed to include any business or business entity (including a corporation)
that is, in whole or in part, a predecessor of such Credit Party.
Section 3.19
Intellectual Property. Each Credit Party owns, is licensed to use or otherwise has the right to use, all Intellectual
Property that is material to the condition (financial or other), business or operations of such Credit Party. All Intellectual Property existing as of the
Closing Date which is issued, registered or pending with any United States or foreign Governmental Authority (including, without limitation, any
and all applications for the registration of any Intellectual Property with any such United States or foreign Governmental Authority) and all
licenses under which any Credit Party is the licensee of any such registered Intellectual Property (or any such application for the registration of
Intellectual Property) owned by another Person are set forth on Schedule 3.19. Such Schedule 3.19 indicates in each case whether such registered
Intellectual Property (or application therefor) is owned or
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licensed by such Credit Party, and in the case of any such licensed registered Intellectual Property (or application therefor), lists the name and
address of the licensor and the name and date of the agreement pursuant to which such item of Intellectual Property is licensed and whether or not
such license is an exclusive license and indicates whether there are any purported restrictions in such license on the ability to such Credit Party to
grant a security interest in and/or to transfer any of its rights as a licensee under such license. Except as indicated on Schedule 3.19, the applicable
Credit Party is the sole and exclusive owner of the entire and unencumbered right, title and interest in and to each such registered Intellectual
Property (or application therefor) purported to be owned by such Credit Party, free and clear of any Liens and/or licenses in favor of third parties
or agreements or covenants not to sue such third parties for infringement. All registered Intellectual Property of each Credit Party is duly and
properly registered, filed or issued in the appropriate office and jurisdictions for such registrations, filings or issuances, except where the failure to
do so would not reasonably be expected to have a Material Adverse Effect. No Credit Party is party to, nor bound by, any material license or other
agreement with respect to which any Credit Party is the licensee that prohibits or otherwise restricts such Credit Party from granting a security
interest in such Credit Party’s interest in such license or agreement or other property. To such Credit Party’s knowledge, each Credit Party conducts
its business without infringement or claim of infringement of any Intellectual Property rights of others and there is no infringement or claim of
infringement by others of any Intellectual Property rights of any Credit Party, which infringement or claim of infringement could reasonably be
expected to have a Material Adverse Effect.
Section 3.20
Solvency. After giving effect to the Loan advance and the liabilities and obligations of each Credit Party under the
Financing Documents, each Borrower and each additional Credit Party, on a consolidated basis, is Solvent.
Section 3.21
Full Disclosure. None of the written information (financial or otherwise) furnished by or on behalf of any Credit Party to
Agent or any Lender in connection with the consummation of the transactions contemplated by the Financing Documents, contains any untrue
statement of a material fact or omits to state a material fact necessary to make the statements contained herein or therein not misleading in light of
the circumstances under which such statements were made. All financial projections delivered to Agent and the Lenders by Credit Parties (or their
agents) have been prepared on the basis of the assumptions stated therein. Such projections represent each Credit Party’s best estimate of such
Credit Party’s future financial performance and such assumptions are believed by such Borrower to be fair and reasonable in light of current
business conditions; provided, however, that Credit Parties can give no assurance that such projections will be attained. Agent and each Lender
acknowledges and agrees that all financial performance projections delivered to Agent represent Borrowers’ best good faith estimate of future
financial performance and are based on assumptions believed by Credit Parties to be fair and reasonable in light of current market conditions, it
being acknowledged and agreed by Agent and Lenders that projections as to future events are not to be viewed as facts and that the actual results
during the period or periods covered by such projections may differ from the projected results.
Section 3.22
Senior Indebtedness Status. The Obligations of each Credit Party under this Agreement and each of the other Financing
Documents ranks and shall continue to rank at least senior in priority of payment to all Debt that is contractually subordinated to the Obligations of
each such Person under this Agreement and is designated as “Senior Indebtedness” (or an equivalent term) under all instruments and documents,
now or in the future, relating to all Debt that is contractually subordinated to the Obligations under this Agreement of each such Person.
Section 3.23
Subsidiaries. Credit Parties do not own any stock, partnership interests, limited liability company interests or other equity
securities or Subsidiaries except for Permitted Investments.
Section 3.24
[Reserved].
Section 3.25
Borrowing Base Collateral.
(a)
As to each Account that is identified by Borrowers as an Eligible Account in a Borrowing Base Certificate submitted to
Agent, such Account is (i) a bona fide existing payment obligation of the applicable Account Debtor created by the sale and delivery of Inventory
or the rendition
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of services to such Account Debtor in the Ordinary Course of Business of the applicable Borrower, (ii) owed to the applicable Borrower without
any known defenses, disputes, offsets, counterclaims, or rights of return or cancellation, and (iii) not excluded as ineligible by virtue of one or
more of the excluding criteria set forth in the definition of Eligible Account.
(b)
As to each item of Inventory that is identified by the applicable Borrowers as Eligible Inventory, Eligible Non-Prime
Inventory, Eligible Raw Materials Inventory, Eligible Work-in-Process, Eligible Domestic In-Transit Inventory or Eligible Foreign In-Transit
Inventory in a Borrowing Base Certificate submitted to Agent, such Inventory is (a) of good and merchantable quality, free from known defects,
(b) not excluded as ineligible by virtue of one or more of the excluding criteria (set forth in the definition of Eligible Inventory, Eligible Non-
Prime Inventory, Eligible Raw Materials Inventory, Eligible Work-in-Process, Eligible Domestic In-Transit Inventory or Eligible Foreign In-
Transit Inventory), and (c)  otherwise constitutes Eligible Inventory, Eligible Non-Prime Inventory, Eligible Raw Materials Inventory, Eligible
Work-in-Process, Eligible Domestic In-Transit Inventory or Eligible Foreign In-Transit Inventory under such definition.
Article 4
 - AFFIRMATIVE COVENANTS
Each Credit Party agrees that:
Section 4.1
Financial Statements and Other Reports and Notices. Each Credit Party will deliver to Agent:
(a)
as soon as available, but no later than thirty (30) days after the last day of each Fiscal Month, a company prepared
consolidated and consolidating balance sheet, cash flow and income statement (including year-to-date results) covering Credit Parties’ and their
Consolidated Subsidiaries’ consolidated and consolidating operations during the period, prepared under GAAP (subject to normal year-end
adjustment and the absence of footnote disclosures), consistently applied, setting forth in comparative form the corresponding figures as at the end
of the corresponding Fiscal Month of the previous fiscal year and the projected figures for such period based upon the projections required
hereunder, all in reasonable detail, certified by a Responsible Officer and in a form reasonably acceptable to Agent;
(b)
as soon as available, but no later than ninety (90) days after the last day of Credit Party’s fiscal year, audited consolidated
and consolidating financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to Agent in its reasonable discretion ;
(c)
within five (5) days of delivery or filing thereof, copies of all statements, reports and notices made available to Credit
Parties’ security holders or to any holders of Subordinated Debt and copies of all reports and other filings made by Credit Party with any stock
exchange on which any securities of any Credit Party are traded and/or the SEC;
(d)
a prompt, but in no event later than when the next Compliance Certificate is required to be delivered, written report of any
legal actions pending or threatened against any Credit Party or any of its Subsidiaries that could reasonably be expected to result in damages or
costs to any Credit Party or any of its Subsidiaries of One Million Dollars ($1,000,000) or more or could otherwise reasonably be expected to
result in a Material Adverse Effect;
(e)
prompt written notice of an event that materially and adversely affects the value of any Intellectual Property;
(f)
within forty-five (45) days after the start of each fiscal year, projections for the forthcoming two fiscal years, on a
quarterly basis for the current year and on an annual basis for the subsequent year;
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(g)
promptly (and in any event within ten (10) days of any request therefor) such readily available other budgets, sales
projections, operating plans and other financial information and information, reports or statements regarding the Credit Parties, their business and
the Collateral as Agent may from time to time reasonably request;
(h)
together with each delivery of financial statements pursuant to clause (a) above, deliver to Agent a duly completed
Compliance Certificate signed by a Responsible Officer setting forth calculations showing (i) compliance with the financial covenants set forth in
Article 6, as applicable, and (ii) Fiscal Month cash and Cash Equivalents of the Credit Parties, taken as a whole, as of the last day of the Fiscal
Month being reported;
(i)
within ten (10) Business Days after the last day of each month, deliver to Agent a duly completed Borrowing Base
Certificate signed by a Responsible Officer, with aged listings of accounts receivable and accounts payable (by invoice date);
(j)
every ninety (90) days on a schedule to be designated by Agent, and at such other times as Agent shall request, deliver to
Agent a schedule of Eligible Accounts denoting, for the thirty (30) largest Account Debtors during such quarter, such Account Debtor’s credit
rating(s), if any, as rated by A.M. Best Company, Standard & Poor’s Corporation, Moody’s Investors Service, Inc., FITCH, Inc., Allianz SE Credit
Rating or other applicable rating agent;
(k)
promptly after the request by any Lender, all documentation and other information that such Lender reasonably requests in
order to comply with its ongoing obligations under applicable “know your customer” and anti-money laundering rules and regulations, including,
without limitation, the USA PATRIOT Act; and
(l)
promptly, but in any event within five (5) Business Days, after any Responsible Officer of any Credit Party obtains
knowledge of the occurrence of any event or change that has resulted or would reasonably be expected to result in, either in any case or in the
aggregate, a Material Adverse Effect, a certificate of a Responsible Officer specifying the nature and period of existence of any such event or
change, or specifying the notice given or action taken by such holder or Person and the nature of such event or change, and what action the
applicable Credit Party or Subsidiary has taken, is taking or proposes to take with respect thereto.
Notwithstanding the foregoing, any disclosure, notice or delivery obligations set forth in Sections 4.1(b) or 4.1(c) may be satisfied with respect to
information filed by Holdings with any securities exchange or with the SEC or any analogous governmental or private regulatory authority with
jurisdiction over matters relating to securities (including Form 10-Q Reports and Form 10-K reports) and shall be deemed to have been delivered
on the date on which such items have been made available on the SEC website or the website of the relevant analogous governmental or private
regulatory authority or securities exchange (including, for the avoidance of doubt, by way of “EDGAR”).
Section 4.2
Payment and Performance of Obligations. Each Credit Party (a) will pay and discharge, and cause each Subsidiary to
pay and discharge, on a timely basis as and when due, all of their respective obligations and liabilities, except for such obligations and/or liabilities
(i) that may be the subject of a Permitted Contest, and (ii) the nonpayment or nondischarge of which would not reasonably be expected to result in
a Material Adverse Effect or result in a Lien against any Collateral, except for Permitted Liens, (b) without limiting anything contained in the
foregoing clause (a), pay all amounts due and owing in respect of (i) all federal Taxes (including without limitation, payroll and withholdings tax
liabilities) and (ii) all material foreign and state Taxes and other local Taxes (including without limitation, payroll and withholdings tax liabilities),
in each case, on a timely basis as and when due, and in any case prior to the date on which any fine, penalty, interest, late charge or loss may be
added thereto for nonpayment thereof, (c) will maintain, and cause each Subsidiary to maintain, in accordance with GAAP, appropriate reserves
for the accrual of all of their respective obligations and liabilities, and (d) will not breach or permit any Subsidiary to breach, or permit to exist any
default under, the terms of any lease, commitment, contract, instrument or obligation to which it is a party, or by which its properties or assets
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are bound, except for such breaches or defaults which would not reasonably be expected to result in a Material Adverse Effect.
Section 4.3
Maintenance of Existence. Each Credit Party will preserve, renew and keep in full force and effect and in good standing,
and will cause each Subsidiary to preserve, renew and keep in full force and effect and in good standing, (a) their respective existence and (b) their
respective rights, privileges and franchises necessary or desirable in the normal conduct of business, unless, solely in the case of this clause (b), a
failure to do so would not reasonably be expected to have a Material Adverse Effect.
Section 4.4
Maintenance of Property; Insurance.
(a)
Each Credit Party will keep, or cause to be kept, all property used and necessary in its business in good working order and
condition in all material respects, ordinary wear and tear and casualty event excepted.
(b)
Each Credit Party will maintain, or cause to be maintained, (i) casualty insurance on all real and personal property on an
all risks basis (including the perils of flood, windstorm and quake), covering the repair and replacement cost of all such property and coverage,
business interruption and rent loss coverages with extended period of indemnity (for a 12-month period) and indemnity for extra expense, in each
case without application of coinsurance and with agreed amount endorsements, (ii)  general and professional liability insurance (including
products/completed operations liability coverage), and (iii)  such other insurance coverage in each case against loss or damage of the kinds
customarily insured against by Persons engaged in the same or similar business of such types and in such amounts as are customarily carried under
similar circumstances by such other Persons; provided, however, that, in no event shall such insurance be in amounts or with coverage less than, or
with carriers with qualifications inferior to, any of the insurance or carriers in existence as of the Closing Date (or required to be in existence after
the Closing Date under a Financing Document). All such insurance shall be provided by insurers having an A.M. Best policyholders rating
reasonably acceptable to Agent.
(c)
On or prior to the Closing Date, and at all times thereafter, each Credit Party will cause Agent to be named as an
additional insured, assignee and lender loss payee (which shall include, as applicable, identification as mortgagee), as applicable, on each
insurance policy required to be maintained pursuant to this Section 4.4 pursuant to endorsements in form and substance acceptable to Agent. Credit
Parties shall deliver to Agent and the Lenders (i) on the Closing Date, a certificate from Credit Parties’ insurance broker dated such date showing
the amount of coverage as of such date, and that such policies will include effective waivers (whether under the terms of any such policy or
otherwise) by the insurer of all claims for insurance premiums against all loss payees and additional insureds and all rights of subrogation against
all loss payees and additional insureds, and that if all or any part of such policy is canceled, terminated or expires, the insurer will forthwith give
notice thereof to each additional insured, assignee and loss payee and that no cancellation, reduction in amount or material change in coverage
thereof shall be effective until at least thirty (30) days after receipt by each additional insured, assignee and loss payee of written notice thereof,
(ii) on an annual basis, and upon the request of any Lender through Agent from time to time full information as to the insurance carried, (iii) within
five (5) days of receipt of notice from any insurer, a copy of any notice of cancellation, nonrenewal or material change in coverage from that
existing on the date of this Agreement, (iv) forthwith, notice of any cancellation or nonrenewal of coverage by any Credit Party, and (v) at least
thirty (30) days prior to expiration of any policy of insurance, evidence of renewal of such insurance upon the terms and conditions herein
required.
(d)
In the event any Credit Party fails to provide Agent with evidence of the insurance coverage required by this Agreement,
Agent may purchase insurance at Credit Parties’ expense to protect Agent’s interests in the Collateral. This insurance may, but need not, protect
such Credit Party’s interests. The coverage purchased by Agent may not pay any claim made by such Credit Party or any claim that is made against
such Credit Party in connection with the Collateral. Such Credit Party may later cancel any insurance purchased by Agent, but only after providing
Agent with evidence that such Credit Party has obtained insurance as required by this Agreement. If Agent purchases insurance for the Collateral,
Credit Parties will be responsible for the costs of that insurance to the fullest extent provided by law, including interest and other charges imposed
by Agent in connection with the placement of the
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insurance, until the effective date of the cancellation or expiration of the insurance. The costs of the insurance may be added to the Obligations.
The costs of the insurance may be more than the cost of insurance such Credit Party is able to obtain on its own.
Section 4.5
Compliance with Laws and Material Contracts. Each Credit Party will comply, and cause each Subsidiary to comply,
with the requirements of all applicable Laws and Material Contracts, except to the extent that failure to so comply would not reasonably be
expected to (a) result in a Material Adverse Effect, or (b) result in any Lien upon either (i) a material portion of the assets of any such Person in
favor of any Governmental Authority, or (ii) any Borrowing Base Collateral.
Section 4.6
Inspection of Property, Books and Records. Each Credit Party will keep, and will cause each Subsidiary to keep, proper
books of record substantially in accordance with GAAP in which full, true and correct entries shall be made of all dealings and transactions in
relation to its business and activities; and will permit, and will cause each Subsidiary to permit, at the sole cost of the applicable Credit Party or
any applicable Subsidiary, representatives of Agent and of any Lender to visit and inspect any of their respective properties, to examine and make
abstracts or copies from any of their respective books and records, to conduct a collateral audit and analysis of their respective operations and the
Collateral, evaluate and make physical verifications and appraisals of the Inventory and other Collateral in any manner and through any medium
that Agent considers advisable, to verify the amount and age of the Accounts, the identity and credit of the respective Account Debtors, to review
the billing practices of Credit Parties and to discuss their respective affairs, finances and accounts with their respective officers, employees and
independent public accountants as often as may reasonably be desired. Notwithstanding the foregoing, unless a Default or Event of Default has
occurred and is continuing, such collateral audits shall not occur more than two (2) times during such twelve-month period. In the absence of a
Default or an Event of Default, Agent or any Lender exercising any rights pursuant to this Section 4.6 shall give the applicable Credit Party or any
applicable Subsidiary commercially reasonable prior notice of such exercise. No notice shall be required during the existence and continuance of
any Default or any time during which Agent reasonably believes a Default exists.
Section 4.7
Use of Proceeds. Borrowers shall use the proceeds of Revolving Loans solely (a)  for transaction fees incurred in
connection with the Financing Documents and the refinancing on the Closing Date of Debt, (b) for working capital needs of Borrowers and their
Subsidiaries, and (c) as otherwise permitted in this Agreement. No portion of the proceeds of the Loans will be used, whether directly or indirectly,
and whether immediately, incidentally or ultimately, for purchasing or carrying Margin Stock or for any other purpose that entails a violation of, or
that is inconsistent with, the provisions of the regulations of the Board of Governors of the Federal Reserve System, including Regulation T, U, or
X of the Federal Reserve Board.
Section 4.8
[Reserved].
Section 4.9
Notices of Material Contracts, Litigation and Defaults.
(a)
(i) Credit Parties shall promptly (but in any event within five (5) Business Days) provide written notice to Agent after any
Credit Party or Subsidiary receives or delivers any notice of termination or default (or similar notice) in connection with any Material Contract,
and (ii) Credit Parties shall provide, together with the next Compliance Certificate required to be delivered under this Agreement, written notice to
Agent after any Credit Party or Subsidiary (1) executes and delivers any material amendment, consent, waiver or other modification to any
Material Contract or (2) enters into any new Material Contract and shall, upon request of Agent, promptly provide Agent a copy thereof.
(b)
Credit Parties shall promptly (but in any event within five (5) Business Days) provide written notice to Agent (i) of any
litigation or governmental proceedings pending or threatened (in writing) against Borrowers or other Credit Party which would reasonably be
expected to have a Material Adverse Effect with respect to Borrowers or any other Credit Party or which in any manner calls into question the
validity or enforceability of any Financing Document, (ii) upon any Borrower becoming aware of the existence of any Default or Event of Default,
(iii)  of any strikes or other labor disputes pending or, to any Borrower’s knowledge, threatened against any Credit Party, (iv)  if there is any
infringement or claim of infringement by any other Person with respect to any Intellectual Property rights
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of any Credit Party that could reasonably be expected to have a Material Adverse Effect, or if there is any claim by any other Person that any
Credit Party in the conduct of its business is infringing on the Intellectual Property rights of others, and (v) of all returns, recoveries, disputes and
claims that involve more than $250,000. Credit Parties represent and warrant that Schedule 4.9 sets forth a complete list of all matters existing as
of the Closing Date for which notice would be required under this Section and all litigation or governmental proceedings pending or threatened (in
writing) against any Credit Party, which would reasonably be expected to have a Material Adverse Effect, as of the Closing Date.
Section 4.10
Hazardous Materials; Remediation.
(a)
If any release or disposal of Hazardous Materials shall occur or shall have occurred on any real property or any other
assets of any Credit Party (except as disclosed on Schedule 3.18), such Credit Party will cause, or direct the applicable Credit Party to cause, the
prompt containment and removal of such Hazardous Materials and the remediation of such real property or other assets as is necessary to comply
with all Environmental Laws and to preserve the value of such real property or other assets to the extent that the failure to act accordingly would
have a Material Adverse Effect. Without limiting the generality of the foregoing, each Credit Party shall, and shall cause each other Credit Party to,
comply with each Environmental Law requiring the performance at any real property by any Credit Party of activities in response to the release or
threatened release of a Hazardous Material to the extent that the failure to act accordingly would have a Material Adverse Effect.
(b)
Credit Parties will provide Agent within thirty (30) days after written demand therefor with a bond, letter of credit or
similar financial assurance evidencing to the reasonable satisfaction of Agent that sufficient funds are available to pay the cost of removing,
treating and disposing of any Hazardous Materials or Hazardous Materials Contamination and discharging any assessment which may be
established on any property as a result thereof, such demand to be made, if at all, upon Agent’s reasonable business determination that the failure
to remove, treat or dispose of any Hazardous Materials or Hazardous Materials Contamination, or the failure to discharge any such assessment
would reasonably be expected to have a Material Adverse Effect.
Section 4.11
Further Assurances.
(a)
Each Credit Party will, and will cause each Subsidiary to, at its own cost and expense, promptly and duly take, execute,
acknowledge and deliver all such further acts, documents and assurances as may from time to time be necessary or as Agent or the Required
Lenders may from time to time reasonably request in order to carry out the intent and purposes of the Financing Documents and the transactions
contemplated thereby, including all such actions to (i) establish, create, preserve, protect and perfect a first priority Lien (subject only to Permitted
Liens) in favor of Agent for itself and for the benefit of the Lenders on the Collateral (including Collateral acquired after the date hereof), and
(ii) unless Agent shall agree otherwise in writing, cause all Subsidiaries of Credit Parties to be jointly and severally obligated with the other Credit
Parties under all covenants and obligations under this Agreement, including the obligation to repay the Obligations. Without limiting the generality
of the foregoing, (x) Credit Parties shall, at the time of the delivery of any Compliance Certificate disclosing the acquisition by an Credit Party of
any registered Intellectual Property or application for the registration of Intellectual Property, deliver to Agent a duly completed and executed
supplement to the applicable Credit Party’s Patent Security Agreement or Trademark Security Agreement in the form of the respective
Exhibit thereto, and (y) at the request of Agent, following the disclosure by Credit Parties on any Compliance Certificate of the acquisition by any
Credit Party of any rights under a license as a licensee with respect to any registered Intellectual Property or application for the registration of any
Intellectual Property owned by another Person, Credit Parties shall execute any documents requested by Agent to establish, create, preserve,
protect and perfect a first priority lien in favor of Agent, to the extent legally possible, in such Credit Party’s rights under such license and shall use
their commercially reasonable best efforts to obtain the written consent of the licensor which such license to the granting in favor of Agent of a
Lien on such Credit Party’s rights as licensee under such license.
(b)
Upon receipt of an affidavit of an authorized representative of Agent or a Lender as to the loss, theft, destruction or
mutilation of any Note or any other Financing Document which is not of public record, and, in the case of any such mutilation, upon surrender and
cancellation of such Note or
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other applicable Financing Document, Credit Parties will issue, in lieu thereof, a replacement Note or other applicable Financing Document, dated
the date of such lost, stolen, destroyed or mutilated Note or other Financing Document in the same principal amount thereof and otherwise of like
tenor.
(c)
Each Credit Party shall provide Agent with at least ten (10) Business Days (or such shorter period as Agent may accept in
its sole discretion) prior written notice of its intention to create (or to the extent permitted under this Agreement, acquire) a new Subsidiary. Upon
the formation (or, to the extent permitted under this Agreement, acquisition) of a new Subsidiary, Credit Parties shall, within thirty (30) days
thereof: (i) pledge, have pledged, or cause to be pledged to Agent pursuant to a pledge agreement in form an substance satisfactory to Agent, all of
the outstanding Equity Interests of such new Subsidiary owned directly or indirectly by any Credit Party, along with undated stock or equivalent
powers for such certificate, executed in blank; (ii) unless Agent shall agree otherwise in writing, cause the new Subsidiary to take such other
actions (including entering into or joining any Security Documents) as are necessary or advisable in the reasonable opinion of Agent in order to
grant Agent, acting on behalf of the Lenders, a first priority Lien on all real and personal property (other than Excluded Property) of such
Subsidiary in existence as of such date and in all after acquired property, which first priority Liens are required to be granted pursuant to the
Security Documents; (iii) unless Agent shall agree otherwise in writing, cause such new Subsidiary to either (at the election of Agent) become a
Borrower hereunder with joint and several liability for all obligations of Borrowers hereunder and under the other Financing Documents pursuant
to a joinder agreement or other similar agreement in form and substance satisfactory to Agent or to become a Guarantor of the obligations of
Borrowers hereunder and under the other Financing Documents pursuant to a guaranty and suretyship agreement in form and substance
satisfactory to Agent; and (iv) cause the new Subsidiary to deliver certified copies of such Subsidiary’s certificate or articles of incorporation,
together with good standing certificates, by-laws (or other operating agreement or governing documents), resolutions of the Board of Directors or
other governing body, approving and authorizing the execution and delivery of the Security Documents, incumbency certificates and to execute
and/or deliver such other documents and legal opinions or to take such other actions as may be requested by Agent, in each case, in form and
substance satisfactory to Agent (the requirements set forth in clauses (i) through (iv), the “Joinder Requirements”).
Section 4.12
[Reserved].
Section 4.13
Power of Attorney. Each of the authorized representatives of Agent is hereby irrevocably made, constituted and
appointed the true and lawful attorney for each of the Credit Parties (without requiring any of them to act as such) with full power of substitution
to do the following: (a) endorse the name of such Credit Party upon any and all checks, drafts, money orders, and other instruments for the
payment of money that are payable to such Credit Party and constitute collections on such Credit Parties’ Accounts; (b) so long as Agent has
provided not less than five (5) Business Days’ prior written notice to such Credit Party to perform the same and such Credit Party has failed to take
such action, execute in the name of such Credit Party any schedules, assignments, instruments, documents, and statements that the Credit Parties
are obligated to give Agent under this Agreement; (c) after the occurrence and during the continuance of an Event of Default, take any action the
Credit Parties are required to take under this Agreement; (d) so long as Agent has provided not less than five (5) Business Days’ prior written
notice to such Credit Party to perform the same and such Credit Party has failed to take such action, do such other and further acts and deeds in the
name of such Credit Party that Agent may deem necessary or desirable to enforce any Account or other Collateral or perfect Agent’s security
interest or Lien in any Collateral; and (e) after the occurrence and during the continuance of an Event of Default, do such other and further acts and
deeds in the name of the Credit Parties that Agent may deem necessary or desirable to enforce its rights with regard to any Account or other
Collateral. This power of attorney shall be irrevocable and coupled with an interest.
Section 4.14
Borrowing Base Collateral Administration.
(a)
All data and other information relating to Accounts or other intangible Collateral shall at all times be kept by Borrowers,
at their respective principal offices and shall not be moved from such locations without (i)  providing prior written notice to Agent, and
(ii) obtaining the prior written consent of Agent, which consent shall not be unreasonably withheld.
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(b)
Borrowers shall provide prompt written notice to each Person who either is currently an Account Debtor or becomes an
Account Debtor at any time following the date of this Agreement that directs each Account Debtor to make payments into the Lockbox, and hereby
authorizes Agent, upon Borrowers’ failure to send such notices within ten (10) days after the date of this Agreement (or ten (10) days after the
Person becomes an Account Debtor), to send any and all similar notices to such Person. Agent reserves the right to notify Account Debtors that
Agent has been granted a Lien upon all Accounts.
(c)
Borrowers will maintain recurring cycle counts of Inventory with a complete cycle count of each facility being completed
each fiscal quarter, and Borrowers shall provide to Agent a written accounting of such cycle count in form and substance satisfactory to Agent.
Each Borrower will use commercially reasonable efforts to at all times keep its Inventory in good and marketable condition. In addition to the
foregoing, from time to time, Agent may require Borrowers to obtain and deliver to Agent appraisal reports in form and substance and from
appraisers reasonably satisfactory to Agent stating the then current fair market values of all or any portion of Inventory owned by each Borrower
or any Subsidiaries.
(d)
Agent shall receive, at Borrowers’ expense, updated appraisals with respect to the Inventory, in each case reporting the
current Net Orderly Liquidation Value of such Inventory and prepared by an appraisal firm satisfactory to Agent; provided, that, so long as no
Default or Event of Default has occurred and is continuing, such appraisals shall not occur more than two (2) times during such twelve-month
period; and provided further that Agent may require such updated appraisals more frequently, at Borrowers’ expense, if any Default or Event of
Default has occurred and is continuing under the Financing Documents.
Section 4.15
Schedule Updates. The Credit Parties shall, in the event of any information in the Schedule 3.19, Schedule 5.14,
Schedule 9.2(b) or Schedule 9.2(d) becoming outdated, inaccurate, incomplete or misleading, deliver to Agent, together with the next Compliance
Certificate required to be delivered under this Agreement after such event a proposed update to such Schedule correcting all outdated, inaccurate,
incomplete or misleading information.
Article 5
- NEGATIVE COVENANTS
Each Credit Party agrees that:
Section 5.1
Debt; Contingent Obligations.
(a)
No Credit Party will, or will permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee or otherwise
become or remain directly or indirectly liable with respect to, any Debt, except for Permitted Debt.
(b)
No Credit Party will, or will permit any Subsidiary to, directly or indirectly, create, assume, incur or suffer to exist any
Contingent Obligations, except for Permitted Contingent Obligations.
(c)
No Credit Party will, or will permit any Subsidiary to, directly or indirectly, purchase, redeem, defease or prepay any
principal of, premium, if any, interest or other amount payable in respect of any Debt prior to its scheduled date for payment (except (i) with
respect to the Obligations permitted under this Agreement, (ii) for Capital Lease obligations and (iii) for Subordinated Debt solely to the extent
permitted by Section 5.5).
Section 5.2
Liens. No Credit Party will, or will permit any Subsidiary to, directly or indirectly, create, assume or suffer to exist any
Lien on any asset now owned or hereafter acquired by it, except for Permitted Liens.
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Section 5.3
Distributions. No Credit Party will, or will permit any Subsidiary to, directly or indirectly, declare, order, pay, make or set
apart any sum for any Distribution, except for Permitted Distributions.
Section 5.4
Restrictive Agreements. No Credit Party will, or will permit any Subsidiary to, directly or indirectly:
(a)
enter into or assume any agreement (other than the Financing Documents and any agreements for purchase money debt
and Capital Leases permitted under clause (c) of the definition of Permitted Debt) prohibiting the creation or assumption of any Lien upon its
properties or assets, whether now owned or hereafter acquired; or
(b)
create or otherwise cause or suffer to exist or become effective any consensual encumbrance or restriction of any kind
(except as provided by the Financing Documents) on the ability of any Subsidiary to: (i) pay or make Distributions to any Credit Party or any
Subsidiary; (ii) pay any Debt owed to any Credit Party or any Subsidiary; (iii) make loans or advances to any Credit Party or any Subsidiary; or
(iv) transfer any of its property or assets to any Credit Party or any Subsidiary.
Section 5.5
Payments and Modifications of Subordinated Debt. No Credit Party will, or will permit any Subsidiary to, directly or
indirectly:
(a)
declare, pay, make or set aside any amount for payment in respect of Subordinated Debt, except for payments made in full
compliance with and expressly permitted under the applicable Subordination Agreement;
(b)
amend or otherwise modify the terms of any Subordinated Debt, except for amendments or modifications made in full
compliance with the applicable Subordination Agreement;
(c)
declare, pay, make or set aside any amount for payment in respect of any Debt hereinafter incurred that, by its terms, or by
separate agreement, is subordinated to the Obligations, except for payments made in full compliance with and expressly permitted under the
subordination provisions applicable thereto; or
(d)
amend or otherwise modify the terms of any such Debt referred to in clauses (a) through (c) above, if the effect of such
amendment or modification is to (i) increase the interest rate or fees on, or change the manner or timing of payment of, such Debt if in any way
adverse to Agent or Lenders, (ii) accelerate or shorten the dates upon which payments of principal or interest are due on, or the principal amount
of, such Debt, (iii) change in a manner adverse to any Credit Party or Agent any event of default or add or make more restrictive any covenant with
respect to such Debt, (iv) change the prepayment or redemption provisions of such Debt or any of the defined terms related thereto in a manner
adverse to Agent or Lenders, (v) change the subordination provisions thereof (or the subordination terms of any guaranty thereof), or (vi) change
or amend any other term if such change or amendment would materially increase the obligations of the obligor or confer additional material rights
on the holder of such Debt in a manner adverse to Credit Parties, any Subsidiaries, Agent or Lenders. Credit Parties shall, prior to entering into any
such amendment or modification, deliver to Agent reasonably in advance of the execution thereof, any final or execution form copy thereof.
Section 5.6
Consolidations, Mergers and Sales of Assets. No Credit Party will, or will permit any Subsidiary to, directly or
indirectly:
(a)
 consolidate or merge or amalgamate with or into any other Person, other than (i) consolidations or mergers among
Borrowers so long as a Borrower is the surviving entity, (ii) consolidations or mergers among a Guarantor (other than Holdings) and a Borrower so
long as the Borrower is the surviving entity, (iii) consolidations or mergers among Guarantors so long as in any consolidation or merger involving
Holdings, Holdings is the surviving entity, (iv) consolidations or mergers among Subsidiaries that are not Credit Parties, and (v) so long as no
Event of Default has
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occurred and is continuing, dissolutions or liquidations of any non-Credit Party Subsidiary so long as any assets of such dissolved or liquidated
Person are transferred to a Credit Party; or
(b)
consummate any Asset Dispositions other than Permitted Asset Dispositions.
Section 5.7
Purchase of Assets, Investments. No Credit Party will, or will permit any Subsidiary to, directly or indirectly:
(a)
acquire or own or enter into any agreement to acquire or own any Investment or Acquisitions other than Investments and
Acquisitions constituting Permitted Investments,
(b)
except as permitted in clause (a), acquire or enter into any agreement to acquire any assets other than in the Ordinary
Course of Business; or
(c)
engage or enter into any agreement to engage in any joint venture or partnership with any other Person.
Without limiting the foregoing, no Credit Party shall, nor will any Credit Party permit any Subsidiary to, purchase or carry Margin Stock.
Section 5.8
Transactions with Affiliates. No Credit Party will, or will permit any Subsidiary to, directly or indirectly, enter into or
permit to exist any transaction (including the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate
of any Credit Party, except for:
(a)
transactions disclosed on Schedule 5.8 on the Closing Date;
(b)
transactions that are disclosed to Agent in advance of being entered into and which contain terms that are not materially
less favorable to the applicable Credit Party or any Subsidiary, as the case may be, than those which might be obtained from a third party not an
Affiliate of any Credit Party;
(c)
transactions that are expressly permitted by this Agreement to be conducted between Credit Parties;
(d)
Permitted Distributions;
(e)
Permitted Investments made pursuant to clause (h) of the definition thereof; and
(f)
employment, indemnity and severance arrangements between any Credit Party or its Subsidiaries and their officers,
directors and managers in the Ordinary Course of Business.
Section 5.9
Modification of Organizational Documents. No Credit Party will, or will permit any Subsidiary to, directly or indirectly,
amend or otherwise modify any Organizational Documents of such Person, except for Permitted Modifications.
Section 5.10
Modification of Certain Agreements. No Credit Party will, or will permit any Subsidiary to, directly or indirectly, amend
or otherwise modify any Material Contract, which amendment or modification in any case: (a) is contrary to the terms of this Agreement or any
other Financing Document; (b) would reasonably be expected to be adverse to the rights, interests or privileges of Agent or the Lenders or their
ability to enforce the same; or (c) would otherwise be reasonably expected to result in a Material Adverse Effect.
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Section 5.11
Conduct of Business. No Credit Party will, or will permit any Subsidiary to, directly or indirectly, engage in any line of
business other than those businesses engaged in on the Closing Date and described on Schedule 5.11 and businesses reasonably related thereto. No
Credit Party will, or will permit any Subsidiary to, other than in the Ordinary Course of Business, change its normal billing payment and
reimbursement policies and procedures with respect to its Accounts (including, without limitation, the amount and timing of finance charges, fees
and write-offs).
Section 5.12
[Reserved].
Section 5.13
Limitation on Sale and Leaseback Transactions. No Credit Party will, or will permit any Subsidiary to, directly or
indirectly, enter into any arrangement with any Person whereby, in a substantially contemporaneous transaction, any Credit Party or any
Subsidiaries sells or transfers all or substantially all of its right, title and interest in an asset and, in connection therewith, acquires or leases back
the right to use such asset, other than Permitted Sale/Leasebacks.
Section 5.14
Deposit Accounts and Securities Accounts; Payroll and Benefits Accounts.
(a)
Each Credit Party will, and will cause its Subsidiaries to, cause each Deposit Account and Securities Account (other than
Excluded Accounts) to be subject to a Deposit Account Control Agreement or Securities Account Control Agreement, as applicable;
(b)
Without limiting clause (a), no Credit Party will, or will permit any Subsidiary to, directly or indirectly, establish any new
Deposit Account or Securities Account without prior written notice to Agent, and unless Agent shall otherwise consent or such Deposit Account or
Securities Account constitutes an Excluded Account, such Credit Party or such Subsidiary and the bank, financial institution or securities
intermediary at which the account is to be opened enter into a Deposit Account Control Agreement or Securities Account Control Agreement prior
to or concurrently with the establishment of such Deposit Account or Securities Account;
(c)
As of the Closing Date and each date that a Compliance Certificate is required to be delivered pursuant to Section 4.1
hereof, Credit Parties represent and warrant that Schedule 5.14 lists all of the Deposit Accounts and Securities Accounts of each Credit Party. The
provisions of this Section requiring Deposit Account Control Agreements shall not apply to Excluded Accounts; and
(d)
At all times that any Obligations remain outstanding, Credit Parties shall maintain one or more separate Deposit Accounts
to hold any and all amounts to be used for payroll, payroll taxes and other employee wage and benefit payments, and shall not commingle any
monies allocated for such purposes with funds in any other Deposit Account; provided, however, that the aggregate balance in such accounts does
not exceed the amount necessary to make the immediately succeeding payroll, payroll tax or benefit payment (or such minimum amount as may be
required by any requirement of Law with respect to such accounts).
Section 5.15
Compliance with Anti-Terrorism Laws. Agent hereby notifies Credit Parties that pursuant to the requirements of Anti-
Terrorism Laws, and Agent’s policies and practices, Agent is required to obtain, verify and record certain information and documentation that
identifies Credit Parties and their principals, which information includes the name and address of each Credit Party and its principals and such
other information that will allow Agent to identify such party in accordance with Anti-Terrorism Laws. No Credit Party will, or will permit any
Subsidiary to, directly or indirectly, knowingly enter into any contracts or agreements or otherwise engage in transactions directly or indirectly
with or related to any Blocked Person or any Person listed on the OFAC Lists or any Sanctioned Country. Each Credit Party shall immediately
notify Agent if such Credit Party has knowledge that any Borrower, any additional Credit Party or any of their respective Affiliates or agents acting
or benefiting in any capacity in connection with the transactions contemplated by this Agreement is or becomes a Blocked Person or (a)  is
convicted on, (b) enters into a settlement agreement with a U.S.
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government agency, (c) pleads nolo contendere to, (d) is indicted on, or (e) is arraigned and held over on charges involving money laundering or
predicate crimes to money laundering, Anti-Terrorism Laws or export control laws. No Credit Party will, or will permit any Subsidiary to, directly
or indirectly, (i) conduct any business or engage in any transaction or dealing directly or indirectly with or related to any Blocked Person or
Sanctioned Country, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of
any Blocked Person or Sanctioned Country, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property
blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law, 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 or other Anti-Terrorism Law.
Section 5.16
Agreements Regarding Receivables. No Credit Party may backdate, postdate or redate any of its invoices. No Credit
Party may make any sales on extended dating or credit terms beyond that customary in such Credit Party’s industry and consented to in advance by
Agent. In addition to the Borrowing Base Certificate to be delivered in accordance with this Agreement, Borrower Representative shall notify
Agent promptly upon any Credit Party’s learning thereof, in the event any Eligible Account becomes ineligible for any reason, other than the aging
of such Account, and of the reasons for such ineligibility. Borrower Representative shall also notify Agent promptly of all material disputes and
claims with respect to the Accounts of any Credit Party, and such Credit Party will settle or adjust such material disputes and claims at no expense
to Agent; provided, however, no Credit Party may, without Agent’s consent, grant (a) any discount, credit or allowance in respect of its Accounts (i)
which is outside the ordinary course of business or (ii) which discount, credit or allowance exceeds an amount equal to $250,000 in the aggregate
with respect to any individual Account or (b) any materially adverse extension, compromise or settlement to any customer or account debtor with
respect to any then Eligible Account. Nothing permitted by this Section 5.16, however, may be construed to alter in any the criteria for Eligible
Accounts, or Eligible Inventory provided in Section 1.1.
Section 5.17
Permitted Activities of Holdings. Holdings shall not engage in any material business activity other than, in each case, (i)
its business of marketing and manufacturing flooring products and activities related thereto, (ii) its ownership of the Equity Interests of its
Subsidiaries and activities incidental thereto, (iii) the entry into, and the performance of its obligations with respect to, the Financing Documents or
documentation relating to other Debt permitted to be incurred hereunder and other agreements contemplated hereby and thereby of indebtedness
for borrowed money, (iv) the payment of Permitted Distributions, the issuance of its own Equity Interests, the making of contributions to the
capital of its Subsidiaries and the incurrence of the Obligations, (v) maintaining deposit accounts in connection with the conduct of its business,
and paying Taxes and other customary obligations in the Ordinary Course of Business, (vi) complying with applicable Law, and (vii) activities
incidental to the foregoing.
Article 6
- FINANCIAL COVENANTS
Section 6.1
Minimum Excess Availability.
(a)
Prior to the Permitted Real Estate Financing Trigger Date, upon the occurrence and during the continuance of a Minimum
Excess Availability Period, the Credit Parties shall maintain at all times a minimum Revolving Loan Availability equal to $6,000,000.
(b)
On and after the Permitted Real Estate Financing Trigger Date, upon the occurrence and during the continuance of a
Minimum Excess Availability Period, the Credit Parties shall maintain at all times a minimum Revolving Loan Availability equal to 12.50% of
the then-applicable Revolving Loan Commitment.
Section 6.2
Minimum EBITDA. Commencing on the first Testing Date after the occurrence of a EBITDA Covenant Trigger Event
and on the last day of each Defined Period thereafter during an EBITDA Covenant Testing Period, the Company shall not permit EBITDA for any
applicable Defined
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Period, as tested monthly on the last day of the applicable Defined Period, to be less than the Minimum EBITDA Threshold for such Defined
Period.
Section 6.3
Evidence of Compliance. Credit Parties shall furnish to Agent, as required by Section  4.1 hereof, a Compliance
Certificate as evidence of (a) the monthly cash and Cash Equivalents of Credit Parties and their Subsidiaries, (b) a calculation of EBITDA and the
Fixed Charge Coverage Ratio and (c) Credit Parties’ compliance with the covenants in this Article and (c) that no Event of Default specified in this
Article has occurred. The Compliance Certificate shall include, without limitation, (i) a statement and report in form and substance reasonably
satisfactory to Agent, detailing Credit Parties’ calculations, and (ii) if requested by Agent, back-up documentation (including, without limitation,
bank statements, invoices, receipts and other evidence of costs incurred during such month as Agent shall reasonably require) evidencing the
propriety of the calculations. A breach of a financial covenant contained in this Article 6 shall be deemed to have occurred as of any date of
determination by Agent or as of the last day of any specified Defined Period, regardless of when the financial statements reflecting such breach are
delivered to Agent.
Article 7
- CONDITIONS
Section 7.1
Conditions to Closing. The obligation of each Lender to make the initial Loans, of Agent to issue any Support
Agreements on the Closing Date and of any LC Issuer to issue any Lender Letter of Credit on the Closing Date shall be subject to the receipt by
Agent of each agreement, document and instrument set forth on the closing checklist attached hereto as Exhibit G prepared by Agent or its
counsel, each in form and substance satisfactory to Agent, and such other closing deliverables reasonably requested by Agent and Lenders, and to
the satisfaction of the following conditions precedent, each to the satisfaction of Agent and Lenders in their sole discretion:
(a)
the receipt by Agent of executed counterparts of this Agreement and the other Financing Documents;
(b)
the payment of all fees, expenses and other amounts due and payable under each Financing Document;
(c)
since December 31, 2023, the absence of any material adverse change in any aspect of the business, operations, properties,
prospects or condition (financial or otherwise) of any Credit Party or any seller of any assets or business to be purchased by any Credit Party
contemporaneous with the Closing Date, or any event or condition which would reasonably be expected to result in such a material adverse
change;
(d)
the receipt of the initial Borrowing Base Certificate, prepared as of the Closing Date; and
(e)
evidence that Liquidity of the Credit Parties is at least $7,000,000 after giving pro forma effect to the use of proceeds of
the Revolving Loans advanced hereunder on the Closing Date.
Each Lender, by delivering its signature page to this Agreement, shall be deemed to have acknowledged receipt of, and consented to and
approved, each Financing Document and each other document, agreement and/or instrument required to be approved by Agent, Required Lenders
or Lenders, as applicable, on the Closing Date.
Section 7.2
Conditions to Each Loan, Support Agreement and Lender Letter of Credit. The obligation of the Lenders to make a Loan
(other than Revolving Loans made pursuant to Section 2.5(c)) or an advance in respect of any Loan, of Agent to issue any Support Agreement or
of any LC Issuer to issue any Lender Letter of Credit (including on the Closing Date) is subject to the satisfaction of the following additional
conditions:
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(a)
(i) in the case of each borrowing of Revolving Loans, receipt by Agent of a Notice of Borrowing (or telephonic notice if
permitted by this Agreement) of an updated Borrowing Base Certificate and (ii) in the case of any Support Agreement or Lender Letter of Credit,
receipt by Agent of a Notice of LC Credit Event in accordance with Section 2.5(a);
(b)
the fact that, immediately after such borrowing and after application of the proceeds thereof or after such issuance, the
Revolving Loan Outstandings will not exceed the Revolving Loan Limit;
(c)
the fact that, immediately before and after such advance or issuance, no Event of Default shall have occurred and be
continuing;
(d)
for Loans made on the Closing Date, the fact that the representations and warranties of each Credit Party contained in the
Financing Documents shall be true, correct and complete on and as of the Closing Date, except to the extent that any such representation or
warranty relates to a specific date in which case such representation or warranty shall be true and correct as of such earlier date;
(e)
for Loans made after the Closing Date, the fact that the representations and warranties of each Credit Party contained in
the Financing Documents shall be true, correct and complete in all material respects on and as of the date of such borrowing or issuance, except to
the extent that any such representation or warranty relates to an earlier date, in which case such representation or warranty shall be true and correct
in all material respects as of such earlier date; provided, however, in each case, such materiality qualifier shall not be applicable to any
representations and warranties that are already qualified or modified by materiality in the text thereof; and
(f)
the fact that no adverse change in the condition (financial or otherwise), properties, business, prospects, or operations of
any Credit Party shall have occurred (and be continuing with respect to any Credit Party) since the date of this Agreement that would reasonably
be expected to have a Material Adverse Effect.
Each giving of a Notice of LC Credit Event hereunder, each giving of a Notice of Borrowing hereunder and each acceptance by
any Borrower of the proceeds of any Loan made hereunder shall be deemed to be (y) a representation and warranty by each Borrower on the date
of such notice or acceptance as to the facts specified in this Section, and (z) a restatement by each Borrower that each and every one of the
representations made by it in any of the Financing Documents is true and correct as of such date (except to the extent that such representations and
warranties expressly relate solely to an earlier date).
Section 7.3
Searches. Before the Closing Date, and thereafter (as and when determined by Agent in its discretion), Agent shall have
the right to perform, all at Credit Parties’ expense, the searches described in clauses (a), (b), and (c) below against each Credit Party, the results of
which are to be consistent with Credit Parties’ representations and warranties under this Agreement and the satisfactory results of which shall be a
condition precedent to all advances of Loan proceeds, all issuances of Lender Letters of Credit and all undertakings in respect of Support
Agreements: (a) UCC searches with the Secretary of State of the jurisdiction in which the applicable Person is organized; (b) judgment, pending
litigation, federal tax lien, personal property tax lien, and corporate and partnership tax lien searches, in each jurisdiction searched under clause (a)
above; and (c) searches of applicable corporate, limited liability company, partnership and related records to confirm the continued existence,
organization and good standing of the applicable Person and the exact legal name under which such Person is organized.
Section 7.4
Post-Closing Requirements. Credit Parties shall complete each of the post-closing obligations and/or provide to Agent
each of the documents, instruments, agreements and information listed on Schedule 7.4 attached hereto on or before the date set forth for each such
item thereon, each of which shall be completed or provided in form and substance satisfactory to Agent.
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Article 8
 - [RESERVED]
Article 9
 - SECURITY AGREEMENT
Section 9.1
Generally. As security for the payment and performance of the Obligations and without limiting any other grant of a Lien
and security interest in any Security Document, each Credit Party hereby assigns, grants and pledges to Agent, for the benefit of itself and Lenders,
subject only to Permitted Liens that may have priority as a matter of applicable Law, a continuing first priority Lien on and security interest in,
upon, and to the property set forth on Schedule 9.1 attached hereto and made a part hereof.
Section 9.2
Representations and Warranties and Covenants Relating to Collateral.
(a)
The security interest granted pursuant to this Agreement constitutes a valid and, to the extent such security interest is
required to be perfected by this Agreement and any other Financing Document, continuing perfected security interest in favor of Agent in all
Collateral subject, for the following Collateral, to the occurrence of the following: (i) in the case of all Collateral in which a security interest may
be perfected by filing a financing statement under the UCC, the completion of the filings and other actions specified on Schedule 9.2(b) (which, in
the case of all filings and other documents referred to on such schedule, have been delivered to Agent in completed and duly authorized form), (ii)
with respect to any Deposit Account for which Deposit Account Control Agreements are required pursuant to this Agreement, the execution of
Deposit Account Control Agreements, (iii) in the case of letter-of-credit rights that are not supporting obligations of Collateral, the execution of a
contractual obligation granting control to Agent over such letter-of-credit rights, (iv) in the case of electronic chattel paper, the completion of all
steps necessary to grant control to Agent over such electronic chattel paper, (v) in the case of all certificated stock, debt instruments and investment
property, the delivery thereof to Agent of such certificated stock, debt instruments and investment property consisting of instruments and
certificates, in each case properly endorsed for transfer to Agent or in blank, (vi) in the case of all investment property not in certificated form, the
execution of control agreements with respect to such investment property and (vii) in the case of all other instruments and tangible chattel paper
that are not certificated stock, debt instructions or investment property, the delivery thereof to Agent of such instruments and tangible chattel paper.
Such security interest shall be prior to all other Liens on the Collateral except for Permitted Liens. Except to the extent not required pursuant to the
terms of this Agreement, all actions by each Credit Party necessary or desirable to protect and perfect the Lien granted hereunder on the Collateral
have been duly taken.
(b)
Schedule 9.2(b) sets forth (i) each chief executive office and principal place of business of each Credit Party and each of
their respective Subsidiaries, and (ii) all of the addresses (including all warehouses) at which any of the Collateral is located and/or books and
records of Credit Parties regarding any Collateral or any of the Credit Parties’ assets, liabilities, business operations or financial condition are kept,
which such Schedule 9.2(b) indicates in each case which Credit Party(ies) have Collateral and/or books and records located at such address, and, in
the case of any such address not owned by one or more of the Credit Party(ies), indicates the nature of such location (e.g., leased business location
operated by Credit Party(ies), third party warehouse, consignment location, processor location, etc.) and the name and address of the third party
owning and/or operating such location.
(c)
Without limiting the generality of Section 3.2, except as indicated on Schedule 3.19 with respect to any rights of any
Credit Party as a licensee under any license of Intellectual Property owned by another Person, and except for the filing of financing statements
under the UCC, no authorization, approval or other action by, and no notice to or filing with, any Governmental Authority or consent of any other
Person is required for (i) the grant by each Credit Party to Agent of the security interests and Liens in the Collateral provided for under this
Agreement and the other Security Documents (if any), or (ii) the granting of the security interest or the exercise by Agent of its rights and remedies
with
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respect to the Collateral provided for under this Agreement and the other Security Documents or under any applicable Law, including the UCC and
neither any such grant of Liens in favor of Agent or exercise of rights by Agent shall violate or cause a default under any agreement between any
Credit Party and any other Person relating to any such collateral, including any license to which a Credit Party is a party, whether as licensor or
licensee, with respect to any Intellectual Property, whether owned by such Credit Party or any other Person.
(d)
As of the Closing Date, except as set forth on Schedule 9.2(d), no Credit Party has any ownership interest in any Chattel
Paper (as defined in Article  9 of the UCC), letter of credit rights, commercial tort claims, Instruments, documents or investment property
evidencing an obligation in excess of One Hundred Thousand Dollars ($100,000) individually or in excess of Two Hundred Fifty Thousand
Dollars in the aggregate for all such obligations (other than equity interests in any Subsidiaries of such Credit Party disclosed on Schedule 3.4) and
Credit Parties shall give notice to Agent promptly (but in any event not later than the delivery by Credit Parties of the next Compliance Certificate
required pursuant to Section 4.1 above) upon the acquisition by any Credit Party of any such Chattel Paper, letter of credit rights, commercial tort
claims, Instruments, documents, investment property evidencing an obligation in excess of One Hundred Thousand Dollars ($100,000)
individually or in excess of Two Hundred Fifty Thousand Dollars in the aggregate for all such obligations. No Person other than Agent or (if
applicable) any Lender has “control” (as defined in Article 9 of the UCC) over any Deposit Account, investment property (including Securities
Accounts and commodities account), letter of credit rights or electronic chattel paper in which any Credit Party has any interest (except for such
control arising by operation of law in favor of any bank or securities intermediary or commodities intermediary with whom any Deposit Account,
Securities Account or commodities account of any Credit Party is maintained).
(e)
Credit Parties shall not, and shall not permit any Subsidiary to, take any of the following actions or make any of the
following changes unless Credit Parties have given at least thirty (30) days prior written notice to Agent of Credit Parties’ intention to take any
such action (which such written notice shall include an updated version of any Schedule impacted by such change) and have executed any and all
documents, instruments and agreements and taken any other actions which Agent may request after receiving such written notice in order to
protect and preserve the Liens, rights and remedies of Agent with respect to the Collateral: (i)  change the legal name or organizational
identification number of any Credit Party as it appears in official filings in the jurisdiction of its organization, (ii) change the jurisdiction of
incorporation or formation of any Credit Party or Subsidiary or allow any Credit Party or Subsidiary to designate any jurisdiction as an additional
jurisdiction of incorporation for such Credit Party or Subsidiary, or change the type of entity that it is; provided that in no event shall a Credit Party
organized under the laws of the United States or any state thereof be reorganized under the laws of a jurisdiction other than the United States or
any State thereof, or (iii) change its chief executive office, principal place of business, or the location of its books and records or move any
Collateral to or place any Collateral on any location that is not then listed on the Schedules and/or establish any business location at any location
that is not then listed on the Schedules.
(f)
Subject to Section 5.16, Credit Parties shall not adjust, settle or compromise the amount or payment of any Account, or
release wholly or partly any Account Debtor, or allow any credit or discount thereon (other than adjustments, settlements, compromises, credits
and discounts in the Ordinary Course of Business, made while no Default exists and in amounts which are not material with respect to the Account
and which, after giving effect thereto, do not cause the Borrowing Base to be less than the Revolving Loan Outstandings) without the prior written
consent of Agent. Without limiting the generality of this Agreement or any other provisions of any of the Financing Documents relating to the
rights of Agent after the occurrence and during the continuance of an Event of Default, Agent shall have the right at any time after the occurrence
and during the continuance of an Event of Default to: (i) exercise the rights of Credit Parties with respect to the obligation of any Account Debtor
to make payment or otherwise render performance to Credit Parties and with respect to any property that secures the obligations of any Account
Debtor or any other Person obligated on the Collateral, and (ii) adjust, settle or compromise the amount or payment of such Accounts.
(g)
Without limiting the generality of Sections 9.2(c) and 9.2(e):
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(i)
Credit Parties shall deliver to Agent all tangible Chattel Paper and all Instruments and documents evidencing an
obligation in excess of One Hundred Thousand Dollars ($100,000) individually or in excess of Two Hundred Fifty Thousand Dollars in
the aggregate for all such obligations owned by any Credit Party and constituting part of the Collateral duly endorsed and accompanied by
duly executed instruments of transfer or assignment, all in form and substance satisfactory to Agent. Credit Parties shall provide Agent
with “control” (as defined in Article 9 of the UCC) of all electronic Chattel Paper evidencing an obligation in excess of One Hundred
Thousand Dollars ($100,000) individually or in excess of Two Hundred Fifty Thousand Dollars in the aggregate for all such obligations
owned by any Credit Party and constituting part of the Collateral by having Agent identified as the assignee on the records pertaining to
the single authoritative copy thereof and otherwise complying with the applicable elements of control set forth in the UCC. Credit Parties
also shall deliver to Agent all security agreements securing any such Chattel Paper and securing any such Instruments (other than those
with a value of less than One Hundred Thousand Dollars ($100,000) individually or Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate). Credit Parties will mark conspicuously all such Chattel Paper and all such Instruments and documents (other than those
with a value of less than One Hundred Thousand Dollars ($100,000) individually or Two Hundred Fifty Thousand Dollars ($250,000) in
the aggregate) with a legend, in form and substance satisfactory to Agent, indicating that such Chattel Paper and such instruments and
documents are subject to the security interests and Liens in favor of Agent created pursuant to this Agreement and the Security Documents.
Credit Parties shall comply with all the provisions of Section 5.14 with respect to the Deposit Accounts and Securities Accounts of Credit
Parties.
(ii)
Credit Parties shall deliver to Agent all letters of credit with a face amount in excess of One Hundred Thousand
Dollars ($100,000) individually or Two Hundred Fifty Thousand Dollars ($250,000) in the aggregate for all letters of credit on which any
Credit Party is the beneficiary and which give rise to letter of credit rights owned by such Credit Party which constitute part of the
Collateral in each case duly endorsed and accompanied by duly executed instruments of transfer or assignment, all in form and substance
satisfactory to Agent. Credit Parties shall take any and all actions as may be necessary or desirable, or that Agent may request, from time
to time, to cause Agent to obtain exclusive “control” (as defined in Article 9 of the UCC) of any such letter of credit rights in a manner
acceptable to Agent.
(iii)
Credit Parties shall promptly advise Agent upon any Credit Party becoming aware that it has any interests in any
commercial tort claim that is for at least, or would reasonably be expected to result in a payment in excess of, One Hundred Thousand
Dollars ($100,000) in the aggregate for all commercial tort claims and that constitutes part of the Collateral, which such notice shall
include descriptions of the events and circumstances giving rise to such commercial tort claim and the dates such events and circumstances
occurred, the potential defendants with respect such commercial tort claim and any court proceedings that have been instituted with
respect to such commercial tort claims, and Credit Parties shall, with respect to any such commercial tort claim, execute and deliver to
Agent such documents as Agent shall request to perfect, preserve or protect the Liens, rights and remedies of Agent with respect to any
such commercial tort claim or claims.
(iv)
Unless Agent shall otherwise consent, Credit Parties shall use commercially reasonable efforts to obtain a
landlord’s agreement, mortgagee agreement, or bailee agreement, as applicable, from the lessor of each leased property, the mortgagee of
owned property or the warehouseman, consignee, bailee at any business location, in each case, located in the United States and (a) which
is a such Credit Party’s chief executive office or (b) where any portion of the Collateral with a value in excess of $250,000, is located, in
each case, which agreement or letter shall be reasonably satisfactory in form and substance to Agent. In no event shall any Credit Party
maintain tangible Collateral (other than Eligible Domestic In-Transit Inventory, Eligible Foreign In-Transit Inventory or Inventory with
contract manufacturers and Inventory in transit in the Ordinary Course of Business) with a value in excess of $250,000 outside of the
United States without Agent’s prior consent.
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(v)
Credit Parties shall cause all material equipment and other material tangible personal property (other than
Inventory) to be maintained and preserved in the same condition, repair and in working order as when new, ordinary wear and tear
excepted, and shall promptly make or cause to be made all repairs, replacements and other improvements in connection therewith that are
necessary or desirable to such end. Upon request of Agent, other than with respect to Excluded Property, Credit Parties shall promptly
deliver to Agent any and all certificates of title, applications for title or similar evidence of ownership of all such tangible personal
property and shall cause Agent to be named as lienholder on any such certificate of title or other evidence of ownership. Credit Parties
shall not permit any such tangible personal property to become fixtures to real estate unless such real estate is subject to a Lien in favor of
Agent or subject to a landlord agreement allowing Agent to remove such tangible personal property.
(vi)
Each Credit Party hereby authorizes Agent to file without the signature of such Credit Party one or more UCC
financing statements relating to liens on personal property relating to all or any part of the Collateral, which financing statements may list
Agent as the “secured party” and such Credit Party as the “debtor” and which describe and indicate the collateral covered thereby as all or
any part of the Collateral under the Financing Documents (including an indication of the collateral covered by any such financing
statement as “all assets” of such Credit Party now owned or hereafter acquired), in such jurisdictions as Agent from time to time
determines are appropriate, and to file without the signature of such Credit Party any continuations of or corrective amendments to any
such financing statements, in any such case in order for Agent to perfect, preserve or protect the Liens, rights and remedies of Agent with
respect to the Collateral. Each Credit Party also ratifies its authorization for Agent to have filed in any jurisdiction any initial financing
statements or amendments thereto if filed prior to the date hereof.
(vii)
As of the Closing Date, no Credit Party holds, and after the Closing Date, Credit Parties shall promptly notify
Agent in writing upon creation or acquisition by any Credit Party of, any Collateral which constitutes a claim against any Governmental
Authority, including, without limitation, the federal government of the United States or any instrumentality or agency thereof, the
assignment of which claim is restricted by any applicable Law, including, without limitation, the federal Assignment of Claims Act and
any other comparable Law. Upon the request of Agent, Credit Parties shall take such steps as may be necessary or desirable, or that Agent
may request, to comply with any such applicable Law.
(viii)
Credit Parties shall furnish to Agent from time to time any statements and schedules further identifying or
describing the Collateral and any other information, reports or evidence concerning the Collateral as Agent may reasonably request from
time to time.
Article 10
- EVENTS OF DEFAULT
Section 10.1
Events of Default. For purposes of the Financing Documents, the occurrence of any of the following conditions and/or
events, whether voluntary or involuntary, by operation of law or otherwise, shall constitute an “Event of Default”:
(a)
(i)  any Credit Party shall fail to pay when due any payment of principal and/or interest due under any Financing
Document, to the extent such failure does not solely and directly arise from any act or omission of the Agent or any Lockbox Bank, (ii) any Credit
Party shall fail to pay within three (3) Business Days after written notice any other premiums, fees, or amounts payable under any Financing
Document, or (iii) there shall occur any default in the performance or compliance with any of the following sections of this Agreement, which has
not been cured within the earlier of (y) three (3) Business Days after a Responsible Officer becomes aware of the default condition or (z) three (3)
Business Days after written notice from Agent: Section 4.1, Section 4.2(b), or Section 4.6, or (iv) there shall occur any default in the performance
of or compliance with any of the following sections of this Agreement: Section 2.11, Section 4.4(c), Section 4.9, Section 4.11, Section 4.15,
Article 5, Article 6 or Section 7.4 of this Agreement;
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(b)
any Credit Party defaults in the performance of or compliance with any term contained in this Agreement or in any other
Financing Document (other than occurrences described in other provisions of this Section  10.1 for which a different grace or cure period is
specified or for which no grace or cure period is specified and thereby constitute immediate Events of Default) and such default has not been
remedied by such Credit Party or waived by Agent within thirty (30) days after the earlier of (i) receipt by Borrower Representative of notice from
Agent or Required Lenders of such default or (ii) actual knowledge of any Credit Party of such default;
(c)
any representation, warranty, certification or statement made by any Credit Party or any other Person in any Financing
Document or in any certificate, financial statement or other document delivered pursuant to any Financing Document is incorrect in any respect (or
in any material respect if such representation, warranty, certification or statement is not by its terms already qualified as to materiality) when made
(or deemed made);
(d)
(i)  failure of any Credit Party to pay when due or within any applicable grace period any principal, interest or other
amount on Debt (other than the Loans) or in respect of any Swap Contract, or the occurrence of any breach, default, condition or event with
respect to any Debt (other than the Loans) or in respect of any Swap Contract, if the effect of such failure or occurrence is to cause or to permit the
holder or holders of any such Debt, or the counterparty under any such Swap Contract, to cause, Debt or other liabilities having an individual
principal amount in excess of $250,000 (or any amount, solely with respect to Swap Contracts) or having an aggregate principal amount in excess
of $250,000 (or any amount, solely with respect to Swap Contracts) to become or be declared due prior to its stated maturity, or (ii) the occurrence
of any breach or default under any terms or provisions of any Subordinated Debt Document or under any agreement subordinating the
Subordinated Debt to all or any portion of the Obligations or the occurrence of any event requiring the prepayment of any Subordinated Debt;
(e)
any Credit Party or any Subsidiary of a Borrower shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or its debts under any bankruptcy, insolvency or other similar law (or any analogous
procedure or step is taken in any other jurisdiction) now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator,
custodian or other similar official of it or any substantial part of its property, or shall consent to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding commenced against it, or shall make a general assignment for the
benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing;
(f)
an involuntary case or other proceeding shall be commenced against any Credit Party or any Subsidiary of a Credit Party
seeking liquidation, reorganization or other relief with respect to it or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its
property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a period of forty-five (45) days; or an order for
relief shall be entered against any Credit Party or any Subsidiary of a Credit Party under applicable federal bankruptcy, insolvency or other similar
law in respect of (i)  bankruptcy, liquidation, winding-up, dissolution or suspension of general operations, (ii)  composition, rescheduling,
reorganization, arrangement or readjustment of, or other relief from, or stay of proceedings to enforce, some or all of the debts or obligations, or
(iii) possession, foreclosure, seizure or retention, sale or other disposition of, or other proceedings to enforce security over, all or any substantial
part of the assets of such Credit Party or Subsidiary;
(g)
(i) institution of any steps by any Person to terminate a Pension Plan if as a result of such termination any Credit Party or
any member of the Controlled Group could be required to make a contribution to such Pension Plan, or could incur a liability or obligation to such
Pension Plan, in excess of $250,000, (ii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under
Section 303(k) of ERISA or Section 430(k) of the Code or an event occurs that could reasonably be expected to give rise to a Lien under Section
4068 of ERISA, or (iii) there shall occur any withdrawal or partial withdrawal from a Multiemployer Plan and the withdrawal liability (without
unaccrued interest) to Multiemployer Plans as a result of such withdrawal (including any outstanding
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withdrawal liability that any Credit Party or any member of the Controlled Group have incurred on the date of such withdrawal) exceeds
$250,000; provided that no Event of Default shall be deemed to occur under clause (iii) above if the Credit Parties pay and satisfy such withdrawal
liability in full within thirty (30) calendar days of receiving notice thereof;
(h)
any judgment or order for the payment of money (not paid or fully covered by insurance maintained in accordance with
the requirements of this Agreement and as to which the relevant insurance company has acknowledged coverage) in excess of $250,000 shall be
rendered against any or all Credit Parties and either (i) enforcement proceedings against any of the Collateral shall have been commenced by any
creditor upon any such judgments or orders, or (ii) there shall be any period of twenty (20) consecutive days during which a stay of enforcement of
any such judgment or order, by reason of a pending appeal, bond or otherwise, shall not be in effect;
(i)
(i) any Lien created by any of the Security Documents shall at any time fail to constitute a valid and perfected Lien on all
of the Collateral purported to be encumbered thereby, subject to no prior or equal Lien except Permitted Liens, or any Credit Party shall so assert;
or (ii) any of the Financing Documents shall for any reason fail to constitute the valid and binding agreement of any party thereto, or any Credit
Party shall so assert, in each case, unless such Financing Document terminates pursuant to the terms and conditions thereof without any breach or
default thereunder by any Credit Party thereto;
(j)
the indictment of any Credit Party for (i) a felony, (ii) any financial crime or claim of fraud or misrepresentation or (iii)
other crime of moral turpitude;
(k)
an event of default occurs under any other Financing Document and any applicable grace period or notice and cure period
under such Financing Document has expired;
(l)
if any Credit Party is or becomes an entity whose equity is registered with the SEC, and/or is publicly traded on and/or
registered with a public securities exchange, such Credit Party’s equity fails to remain registered with the SEC in good standing, and/or such equity
fails to remain publicly traded on and registered with a public securities exchange;
(m)
the occurrence of any fact, event or circumstance that would reasonably be expected to result in a Material Adverse Effect;
or
(n)
The occurrence of a Change in Control.
All cure periods provided for in this Section 10.1 shall run concurrently with any cure period provided for in any applicable Financing
Documents under which the default occurred.
Section 10.2
Acceleration and Suspension or Termination of Revolving Loan Commitment . Upon the occurrence and during the
continuance of an Event of Default, Agent may, and shall if requested by Required Lenders, (a) by notice to Borrower Representative suspend or
terminate the Revolving Loan Commitment and the obligations of Agent and the Lenders with respect thereto, in whole or in part (and, if in part,
each Lender’s Revolving Loan Commitment shall be reduced in accordance with its Pro Rata Share), and/or (b)  by notice to Borrower
Representative declare all or any portion of the Obligations to be, and the Obligations shall thereupon become, immediately due and payable, with
accrued interest thereon, without presentment, further demand, protest or other notice of any kind, all of which are hereby waived by each Credit
Party and Credit Parties will pay the same; provided, however, that in the case of any of the Events of Default specified in Section 10.1(e) or
10.1(f) above, without any notice to any Credit Party or any other act by Agent or the Lenders, the Revolving Loan Commitment and the
obligations of Agent and the Lenders with respect thereto shall thereupon immediately and automatically terminate and all of the Obligations shall
become immediately and automatically due and payable without presentment, demand, protest or other notice of any kind, all of which are hereby
waived by each Credit Party and Credit Parties will pay the same.
Section 10.3
UCC Remedies.
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(a)
Upon the occurrence of and during the continuance of an Event of Default under this Agreement or the other Financing
Documents, Agent, in addition to all other rights, options, and remedies granted to Agent under this Agreement or at law or in equity, may exercise,
either directly or through one or more assignees or designees, all rights and remedies granted to it under all Financing Documents and under the
UCC in effect in the applicable jurisdiction(s) and under any other applicable law; including, without limitation:
(i)
the right to take possession of, send notices regarding, and collect directly the Collateral, with or without judicial
process;
(ii)
the right to (by its own means or with judicial assistance) enter any of Credit Parties’ premises and take possession
of the Collateral, or render it unusable, or to render it usable or saleable, or dispose of the Collateral on such premises in compliance with
subsection  (iii)  below and to take possession of Credit Parties’ original books and records, to obtain access to Credit Parties’ data
processing equipment, computer hardware and software relating to the Collateral and to use all of the foregoing and the information
contained therein in any manner Agent deems appropriate, without any liability for rent, storage, utilities, or other sums, and Credit Parties
shall not resist or interfere with such action (if Credit Parties’ books and records are prepared or maintained by an accounting service,
contractor or other third party agent, Credit Parties hereby irrevocably authorize such service, contractor or other agent, upon notice by
Agent to such Person that an Event of Default has occurred and is continuing, to deliver to Agent or its designees such books and records,
and to follow Agent’s instructions with respect to further services to be rendered);
(iii)
the right to require Credit Parties at Credit Parties’ expense to assemble all or any part of the Collateral and make
it available to Agent at any place designated by Agent;
(iv)
the right to notify postal authorities to change the address for delivery of Credit Parties’ mail to an address
designated by Agent and to receive, open and dispose of all mail addressed to any Credit Party; and/or
(v)
the right to enforce Credit Parties’ rights against Account Debtors and other obligors, including, without
limitation, (i) the right to collect Accounts directly in Agent’s own name (as agent for Lenders) and to charge the collection costs and
expenses, including attorneys’ fees, to Credit Parties, and (ii) the right, in the name of Agent or any designee of Agent or Credit Parties, to
verify the validity, amount or any other matter relating to any Accounts by mail, telephone, telegraph or otherwise, including, without
limitation, verification of Credit Parties’ compliance with applicable Laws. Credit Parties shall cooperate fully with Agent in an effort to
facilitate and promptly conclude such verification process. Such verification may include contacts between Agent and applicable federal,
state and local regulatory authorities having jurisdiction over the Credit Parties’ affairs, all of which contacts Credit Parties hereby
irrevocably authorize.
(b)
Each Credit Party agrees that a notice received by it at least ten (10) days before the time of any intended public sale, or
the time after which any private sale or other disposition of the Collateral is to be made, shall be deemed to be reasonable notice of such sale or
other disposition. If permitted by applicable law, any perishable Collateral which threatens to speedily decline in value or which is sold on a
recognized market may be sold immediately by Agent without prior notice to Credit Parties. At any sale or disposition of Collateral, Agent may (to
the extent permitted by applicable law) purchase all or any part of the Collateral, free from any right of redemption by Credit Parties, which right
is hereby waived and released. Each Credit Party covenants and agrees not to interfere with or impose any obstacle to Agent’s exercise of its rights
and remedies with respect to the Collateral. Agent shall have no obligation to clean-up or otherwise prepare the Collateral for sale. Agent may
comply with any applicable state or federal law requirements in connection with a disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of any sale of the Collateral. Agent may sell the Collateral without giving any
warranties as to the Collateral. Agent may specifically disclaim any warranties of title or the like. This procedure will not be considered to
adversely affect the commercial reasonableness of any sale of the Collateral. If Agent sells any of the Collateral
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upon credit, Credit Parties will be credited only with payments actually made by the purchaser, received by Agent and applied to the indebtedness
of the purchaser. In the event the purchaser fails to pay for the Collateral, Agent may resell the Collateral and Credit Parties shall be credited with
the proceeds of the sale. Credit Parties shall remain liable for any deficiency if the proceeds of any sale or disposition of the Collateral are
insufficient to pay all Obligations.
(c)
Without restricting the generality of the foregoing and for the purposes aforesaid, each Credit Party hereby appoints and
constitutes Agent its lawful attorney-in-fact with full power of substitution in the Collateral, upon the occurrence and during the continuance of an
Event of Default, to (i) use unadvanced funds remaining under this Agreement or which may be reserved, escrowed or set aside for any purposes
hereunder at any time, or to advance funds in excess of the Revolving Loan Commitment, (ii) pay, settle or compromise all existing bills and
claims, which may be Liens or security interests, or to avoid such bills and claims becoming Liens against the Collateral, (iii)  execute all
applications and certificates in the name of such Credit Party and to prosecute and defend all actions or proceedings in connection with the
Collateral, and (iv) do any and every act which such Credit Party might do in its own behalf; it being understood and agreed that this power of
attorney in this subsection (c) shall be a power coupled with an interest and cannot be revoked.
(d)
Upon the occurrence and during the continuance of an Event of Default, subject to any right of any third parties and/or
any agreement between any Borrower and any third party to the extent not granted or entered into in contravention of the terms of this Agreement,
Agent and each Lender is hereby granted a non-exclusive, royalty-free license or other right to use, upon the occurrence and during the
continuance of an Event of Default, without charge, Credit Parties’ labels, mask works, rights of use of any name, any other Intellectual Property
and advertising matter, and any similar property as it pertains to the Collateral, in completing production of, advertising for sale, and selling any
Collateral and, in connection with Agent’s exercise of its rights under this Article, Credit Parties’ rights under all licenses (whether as licensor or
licensee) and all franchise agreements inure to Agent’s and each Lender’s benefit, subject to any rights of third party licensors or licensees, as
applicable.
Section 10.4
Protective Advances. If any Credit Party fails to pay or perform any covenant or obligation under this Agreement or any
other Financing Document, Agent may pay or perform such covenant or obligation, and all amounts so paid by Agent are Protective Advances and
immediately due and payable, constituting principal and bearing interest at the rate for the Loans hereunder described in Section 10.5, and secured
by the Collateral. No such payments or performance by Agent shall be construed as an agreement to make similar payments or performance in the
future or constitute Agent’s waiver of any Event of Default. Without limiting the foregoing, each Lender and Borrower hereby authorizes Agent,
without the necessity of any notice or further consent from any Lender, from time to time prior to a Default, to make any Protective Advance with
respect to any Collateral or the Financing Documents which may be necessary to protect the priority, validity or enforceability of any lien on, and
security interest in, any Collateral and the instruments evidencing or securing the obligations of Borrower under the Financing Documents. Credit
Parties agree to pay on demand all Protective Advances. The Lenders must reimburse Agent for any Protective Advances (in accordance with their
Pro Rata Shares) to the extent not reimbursed by Credit Parties.
Section 10.5
Default Rate of Interest. At the election of Agent or Required Lenders, after the occurrence of an Event of Default and
for so long as it continues, (a) the Loans and other Obligations shall bear interest at rates that are two percent (2.0%) per annum in excess of the
rates otherwise payable under this Agreement, and (b) the fee described in Section 2.5(b) shall increase by a rate that is two percent (2.0%) in
excess of the rate otherwise payable under such Section; provided, however, that in the case of any Event of Default specified in Section 10.1(e) or
10.1(f) above, such default rates shall apply immediately and automatically without the need for any election or action of any kind on the part of
Agent or any Lender.
Section 10.6
Setoff Rights. During the continuance of any Event of Default, each Lender is hereby authorized by each Credit Party at
any time or from time to time, with reasonably prompt subsequent notice to such Credit Party (any prior or contemporaneous notice being hereby
expressly waived) to set off and to appropriate and to apply any and all (a) balances held by such Lender or any of such Lender’s Affiliates at any
of its offices for the account of such Credit Party or any of its Subsidiaries
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(regardless of whether such balances are then due to such Credit Party or its Subsidiaries), and (b) other property at any time held or owing by
such Lender to or for the credit or for the account of such Credit Party or any of its Subsidiaries, against and on account of any of the Obligations
(other than inchoate indemnification obligations for which no claim has yet been made); except that no Lender shall exercise any such right
without the prior written consent of Agent. Any Lender exercising a right to set off shall purchase for cash (and the other Lenders shall sell)
interests in each of such other Lender’s Pro Rata Share of the Obligations as would be necessary to cause all Lenders to share the amount so set off
with each other Lender in accordance with their respective Pro Rata Share of the Obligations. Each Credit Party agrees, to the fullest extent
permitted by law, that any Lender and any of such Lender’s Affiliates may exercise its right to set off with respect to the Obligations as provided in
this Section 10.6.
Section 10.7
Application of Proceeds.
(a)
Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of
an Event of Default, each Credit Party irrevocably waives the right to direct the application of any and all payments at any time or times thereafter
received by Agent from or on behalf of such Credit Party of all or any part of the Obligations, and, as between Credit Parties on the one hand and
Agent and Lenders on the other, Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received against
the Obligations in such manner as Agent may deem advisable notwithstanding any previous application by Agent.
(b)
Following the occurrence and continuance of an Event of Default, but absent the occurrence and continuance of an
Acceleration Event, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of Collateral
received by Agent, in such order as Agent may from time to time elect.
(c)
Notwithstanding anything to the contrary contained in this Agreement, if an Acceleration Event shall have occurred, and
so long as it continues, Agent shall apply any and all payments received by Agent in respect of the Obligations, and any and all proceeds of
Collateral received by Agent, in the following order: first, to all fees, costs, indemnities, liabilities, obligations and expenses incurred by or owing
to Agent with respect to this Agreement, the other Financing Documents or the Collateral; second, to all fees, costs, indemnities, liabilities,
obligations and expenses incurred by or owing to any Lender with respect to this Agreement, the other Financing Documents or the Collateral;
third, to accrued and unpaid interest on the Obligations (including any interest which, but for the provisions of the Bankruptcy Code, would have
accrued on such amounts); fourth, to the principal amount of the Obligations outstanding and to provide cash collateral to secure any and all Letter
of Credit Liability and future payment of related fees, as provided for in Section 2.5(e); and fifth to any other indebtedness or obligations of Credit
Parties owing to Agent or any Lender under the Financing Documents. Any balance remaining shall be delivered to Credit Parties or to whomever
may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct. In carrying out the foregoing, (y) amounts
received shall be applied in the numerical order provided until exhausted prior to the application to the next succeeding category, and (z) each of
the Persons entitled to receive a payment in any particular category shall receive an amount equal to its Pro Rata Share of amounts available to be
applied pursuant thereto for such category.
Section 10.8
Waivers.
(a)
Except as otherwise provided for in this Agreement and to the fullest extent permitted by applicable law, each Credit Party
waives: (i) presentment, demand and protest, and notice of presentment, dishonor, intent to accelerate, acceleration, protest, default, nonpayment,
maturity, release, compromise, settlement, extension or renewal of any or all Financing Documents, the Notes or any other notes, commercial
paper, accounts, contracts, documents, Instruments, Chattel Paper and Guarantees at any time held by Lenders on which any Credit Party may in
any way be liable, and hereby ratifies and confirms whatever Lenders may lawfully do in this regard; (ii) all rights to notice and a hearing prior to
Agent’s or any Lender’s taking possession or control of, or to Agent’s or any Lender’s replevy, attachment or levy upon, any Collateral or any
bond or security which might be required by any court prior to allowing Agent or any Lender to exercise any of its remedies; and (iii) the benefit
of all valuation, appraisal and exemption Laws. Each Credit Party acknowledges that it has been advised by counsel of its
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choices and decisions with respect to this Agreement, the other Financing Documents and the transactions evidenced hereby and thereby.
(b)
Each Credit Party for itself and all its successors and assigns, (i) agrees that its liability shall not be in any manner affected
by any indulgence, extension of time, renewal, waiver, or modification granted or consented to by Lender; (ii) consents to any indulgences and all
extensions of time, renewals, waivers, or modifications that may be granted by Agent or any Lender with respect to the payment or other
provisions of the Financing Documents, and to any substitution, exchange or release of the Collateral, or any part thereof, with or without
substitution, and agrees to the addition or release of any Credit Party, endorsers, guarantors, or sureties, or whether primarily or secondarily liable,
without notice to any other Credit Party and without affecting its liability hereunder; (iii) agrees that its liability shall be unconditional and without
regard to the liability of any other Credit Party, Agent or any Lender for any tax on the indebtedness; and (iv) to the fullest extent permitted by law,
expressly waives the benefit of any statute or rule of law or equity now provided, or which may hereafter be provided, which would produce a
result contrary to or in conflict with the foregoing.
(c)
To the extent that Agent or any Lender may have acquiesced in any noncompliance with any requirements or conditions
precedent to the closing of the Loans or to any subsequent disbursement of Loan proceeds, such acquiescence shall not be deemed to constitute a
waiver by Agent or any Lender of such requirements with respect to any future disbursements of Loan proceeds and Agent may at any time after
such acquiescence require Credit Parties to comply with all such requirements. Any forbearance by Agent or Lender in exercising any right or
remedy under any of the Financing Documents, or otherwise afforded by applicable law, including any failure to accelerate the maturity date of the
Loans, shall not be a waiver of or preclude the exercise of any right or remedy nor shall it serve as a novation of the Notes or as a reinstatement of
the Loans or a waiver of such right of acceleration or the right to insist upon strict compliance of the terms of the Financing Documents. Agent’s or
any Lender’s acceptance of payment of any sum secured by any of the Financing Documents after the due date of such payment shall not be a
waiver of Agent’s and such Lender’s right to either require prompt payment when due of all other sums so secured or to declare a default for
failure to make prompt payment. The procurement of insurance or the payment of taxes or other Liens or charges by Agent as the result of an
Event of Default shall not be a waiver of Agent’s right to accelerate the maturity of the Loans, nor shall Agent’s receipt of any condemnation
awards, insurance proceeds, or damages under this Agreement operate to cure or waive any Credit Party’s default in payment of sums secured by
any of the Financing Documents.
(d)
Without limiting the generality of anything contained in this Agreement or the other Financing Documents, each Credit
Party agrees that if an Event of Default is continuing (i) Agent and Lenders shall not be subject to any “one action” or “election of remedies” law
or rule, and (ii) all Liens and other rights, remedies or privileges provided to Agent or Lenders shall remain in full force and effect until Agent or
Lenders have exhausted all remedies against the Collateral and any other properties owned by Credit Parties and the Financing Documents and
other security instruments or agreements securing the Loans have been foreclosed, sold and/or otherwise realized upon in satisfaction of Credit
Parties’ obligations under the Financing Documents.
(e)
Nothing contained herein or in any other Financing Document shall be construed as requiring Agent or any Lender to
resort to any part of the Collateral for the satisfaction of any of Credit Parties’ obligations under the Financing Documents in preference or priority
to any other Collateral, and Agent may seek satisfaction out of all of the Collateral or any part thereof, in its absolute discretion in respect of Credit
Parties’ obligations under the Financing Documents. In addition, Agent shall have the right from time to time to partially foreclose upon any
Collateral in any manner and for any amounts secured by the Financing Documents then due and payable as determined by Agent in its sole
discretion, including, without limitation, the following circumstances: (i) in the event any Credit Party defaults beyond any applicable grace period
in the payment of one or more scheduled payments of principal and/or interest, Agent may foreclose upon all or any part of the Collateral to
recover such delinquent payments, or (ii) in the event Agent elects to accelerate less than the entire outstanding principal balance of the Loans,
Agent may foreclose all or any part of the Collateral to recover so much of the principal balance of the Loans as Lender may accelerate and such
other sums secured by one or more of the Financing Documents as Agent may elect. Notwithstanding one or more partial foreclosures, any
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unforeclosed Collateral shall remain subject to the Financing Documents to secure payment of sums secured by the Financing Documents and not
previously recovered.
(f)
To the fullest extent permitted by law, each Credit Party, for itself and its successors and assigns, waives in the event of
foreclosure of any or all of the Collateral any equitable right otherwise available to any Credit Party which would require the separate sale of any
of the Collateral or require Agent or Lenders to exhaust their remedies against any part of the Collateral before proceeding against any other part of
the Collateral; and further in the event of such foreclosure each Credit Party does hereby expressly consent to and authorize, at the option of Agent,
the foreclosure and sale either separately or together of each part of the Collateral.
Section 10.9
Injunctive Relief. The parties acknowledge and agree that, in the event of a breach or threatened breach of any Credit
Party’s obligations under any Financing Documents, Agent and Lenders may have no adequate remedy in money damages and, accordingly, shall
be entitled to an injunction (including, without limitation, a temporary restraining order, preliminary injunction, writ of attachment, or order
compelling an audit) against such breach or threatened breach, including, without limitation, maintaining any cash management and collection
procedure described herein. However, no specification in this Agreement of a specific legal or equitable remedy shall be construed as a waiver or
prohibition against any other legal or equitable remedies in the event of a breach or threatened breach of any provision of this Agreement. Each
Credit Party waives, to the fullest extent permitted by law, the requirement of the posting of any bond in connection with such injunctive relief. By
joining in the Financing Documents as a Credit Party, each Credit Party specifically joins in this Section as if this Section were a part of each
Financing Document executed by such Credit Party.
Section 10.10
Marshalling; Payments Set Aside. Neither Agent nor any Lender shall be under any obligation to marshal any assets in
payment of any or all of the Obligations. To the extent that any Credit Party makes any payment or Agent enforces its Liens or Agent or any
Lender exercises its right of set-off, and such payment or the proceeds of such enforcement or set-off is subsequently invalidated, declared to be
fraudulent or preferential, set aside, or required to be repaid by anyone, then to the extent of such recovery, the Obligations or part thereof
originally intended to be satisfied, and all Liens, rights and remedies therefor, shall be revived and continued in full force and effect as if such
payment had not been made or such enforcement or set-off had not occurred.
Section 10.11
Cash Collateral
Article 11
. If (a) any Event of Default specified in Section 10.1(e) or 10.1(f) shall occur, (b) the Obligations shall have
otherwise been accelerated pursuant to Section 10.2, or (c) the Revolving Loan Commitment and the obligations of Agent and the Lenders with
respect thereto shall have been terminated pursuant to Section 10.2, then without any request or the taking of any other action by Agent or the
Lenders, Credit Parties shall immediately comply with the provisions of Section 2.5(e) with respect to the deposit of cash collateral to secure the
existing Letter of Credit Liability and future payment of related fees.
Article 12
.
Article 13
 - AGENT
Section 13.1
Appointment and Authorization. Each Lender hereby irrevocably appoints and authorizes Agent to enter into each of
the Financing Documents to which it is a party (other than this Agreement) on its behalf and to take such actions as Agent on its behalf and to
exercise such powers under the Financing Documents as are delegated to Agent by the terms thereof, together with all such powers as are
reasonably incidental thereto. Subject to the terms of Section 11.16 and to the terms of the other Financing Documents, Agent is authorized and
empowered to amend, modify, or waive any provisions of this Agreement or the other Financing Documents on behalf of Lenders. The provisions
of this Article 11 are solely for the benefit of Agent and Lenders and no Credit Party shall have any rights as
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a third party beneficiary of any of the provisions hereof. In performing its functions and duties under this Agreement, Agent shall act solely as
agent of Lenders and does not assume and shall not be deemed to have assumed any obligation toward or relationship of agency or trust with or for
any Credit Party. Agent may perform any of its duties hereunder, or under the Financing Documents, by or through its agents, servicers, trustees,
investment managers or employees.
Section 13.2
Agent and Affiliates. Agent shall have the same rights and powers under the Financing Documents as any other Lender
and may exercise or refrain from exercising the same as though it were not Agent, and Agent and its Affiliates may lend money to, invest in and
generally engage in any kind of business with each Credit Party or Affiliate of any Credit Party as if it were not Agent hereunder.
Section 13.3
Action by Agent. The duties of Agent shall be mechanical and administrative in nature. Agent shall not have by reason of
this Agreement a fiduciary relationship in respect of any Lender. Nothing in this Agreement or any of the Financing Documents is intended to or
shall be construed to impose upon Agent any obligations in respect of this Agreement or any of the Financing Documents except as expressly set
forth herein or therein.
Section 13.4
Consultation with Experts. Agent may consult with legal counsel, independent public accountants and other experts
selected by it and shall not be liable for any action taken or omitted to be taken by it in good faith in accordance with the advice of such counsel,
accountants or experts.
Section 13.5
Liability of Agent. Neither Agent nor any of its directors, officers, agents, trustees, investment managers, servicers or
employees shall be liable to any Lender for any action taken or not taken by it in connection with the Financing Documents, except that Agent
shall be liable with respect to its specific duties set forth hereunder but only to the extent of its own gross negligence or willful misconduct in the
discharge thereof as determined by a final non-appealable judgment of a court of competent jurisdiction. Neither Agent nor any of its directors,
officers, agents, trustees, investment managers, servicers 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 Financing Document or any borrowing hereunder; (b) the performance
or observance of any of the covenants or agreements specified in any Financing Document; (c) the satisfaction of any condition specified in any
Financing Document; (d) the validity, effectiveness, sufficiency or genuineness of any Financing Document, any Lien purported to be created or
perfected thereby or any other instrument or writing furnished in connection therewith; (e) the existence or non-existence of any Default or Event
of Default; or (f) the financial condition of any Credit Party. Agent shall not incur any liability by acting in reliance upon any notice, consent,
certificate, statement, or other writing (which may be a bank wire, facsimile or electronic transmission or similar writing) believed by it to be
genuine or to be signed by the proper party or parties. Agent shall not be liable for any apportionment or distribution of payments made by it in
good faith and if any such apportionment or distribution is subsequently determined to have been made in error the sole recourse of any Lender to
whom payment was due but not made, shall be to recover from other Lenders any payment in excess of the amount to which they are determined
to be entitled (and such other Lenders hereby agree to return to such Lender any such erroneous payments received by them).
Section 13.6
Indemnification. Each Lender shall, in accordance with its Pro Rata Share, indemnify Agent (to the extent not reimbursed
by Credit Parties) upon demand against any cost, expense (including counsel fees and disbursements), claim, demand, action, loss or liability
(except such as result from Agent’s gross negligence or willful misconduct as determined by a final non-appealable judgment of a court of
competent jurisdiction) that Agent may suffer or incur in connection with the Financing Documents or any action taken or omitted by Agent
hereunder or thereunder. If any indemnity furnished to Agent for any purpose shall, in the opinion of Agent, be insufficient or become impaired,
Agent may call for additional indemnity and cease, or not commence, to do the acts indemnified against even if so directed by Required Lenders
until such additional indemnity is furnished. Each Lender further agrees to severally indemnify Agent for, within 10 days after demand therefor,
any Taxes attributable to such Lender’s failure to comply with the provisions of Section 11.17(a)(iii) relating to the maintenance of a Participant
Register that are payable or paid by Agent in connection with any Financing Document, and any reasonable expenses arising therefrom or with
respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. Each Lender
hereby
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authorizes Agent to set off and apply any and all amounts at any time owing to such Lender under any Financing Document or otherwise payable
by Agent to the Lender from any other source against any amount due to Agent under this Section 11.6.
Section 13.7
Right to Request and Act on Instructions. Agent may at any time request instructions from Lenders with respect to any
actions or approvals which by the terms of this Agreement or of any of the Financing Documents Agent is permitted or desires to take or to grant,
and if such instructions are promptly requested, Agent shall be absolutely entitled to refrain from taking any action or to withhold any approval and
shall not be under any liability whatsoever to any Person for refraining from any action or withholding any approval under any of the Financing
Documents until it shall have received such instructions from Required Lenders or all or such other portion of the Lenders as shall be prescribed
by this Agreement. Without limiting the foregoing, no Lender shall have any right of action whatsoever against Agent as a result of Agent acting or
refraining from acting under this Agreement or any of the other Financing Documents in accordance with the instructions of Required Lenders (or
all or such other portion of the Lenders as shall be prescribed by this Agreement) and, notwithstanding the instructions of Required Lenders (or
such other applicable portion of the Lenders), Agent shall have no obligation to take any action if it believes, in good faith, that such action would
violate applicable Law or exposes Agent to any liability for which it has not received satisfactory indemnification in accordance with the
provisions of Section 11.6.
Section 13.8
Credit Decision. Each Lender acknowledges that it has, independently and without reliance upon Agent or any other
Lender, and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Lender also acknowledges that it will, independently and without reliance upon Agent or any other Lender, 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 any action
under the Financing Documents.
Section 13.9
Collateral Matters. Lenders irrevocably authorize Agent, at its option and in its discretion, to (a) release any Lien granted
to or held by Agent under any Security Document (i) upon termination of the Revolving Loan Commitment and payment in full of all Obligations;
or (ii) constituting property sold or disposed of as part of or in connection with any disposition permitted under any Financing Document (it being
understood and agreed that Agent may conclusively rely without further inquiry on a certificate of a Responsible Officer as to the sale or other
disposition of property being made in full compliance with the provisions of the Financing Documents); and (b) subordinate any Lien granted to or
held by Agent under any Security Document to a Permitted Lien that is allowed to have priority over the Liens granted to or held by Agent
pursuant to the definition of “Permitted Liens”. Upon request by Agent at any time, Lenders will confirm Agent’s authority to release and/or
subordinate particular types or items of Collateral pursuant to this Section 11.9.
Section 13.10
Agency for Perfection. Agent and each Lender hereby appoint each other Lender as agent for the purpose of perfecting
Agent’s security interest in assets which, in accordance with the Uniform Commercial Code in any applicable jurisdiction, can be perfected by
possession or control. Should any Lender (other than Agent) obtain possession or control of any such assets, such Lender shall notify Agent
thereof, and, promptly upon Agent’s request therefor, shall deliver such assets to Agent or in accordance with Agent’s instructions or transfer
control to Agent in accordance with Agent’s instructions. Each Lender agrees that it will not have any right individually to enforce or seek to
enforce any Security Document or to realize upon any Collateral for the Loan unless instructed to do so by Agent (or consented to by Agent), it
being understood and agreed that such rights and remedies may be exercised only by Agent.
Section 13.11
Notice of Default. Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of
Default except with respect to defaults in the payment of principal, interest and fees required to be paid to Agent for the account of Lenders, unless
Agent shall have received written notice from a Lender or Borrower referring to this Agreement, describing such Default or Event of Default and
stating that such notice is a “notice of default”. Agent will notify each Lender of its receipt of any such notice. Agent shall take such action with
respect to such Default or Event of Default as may be requested by Required Lenders (or all or such other portion of the Lenders as shall be
prescribed by this Agreement) in accordance with the terms hereof. Unless and until Agent has
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received any such request, Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interests of Lenders.
Section 13.12
Assignment by Agent; Resignation of Agent; Successor Agent.
(a)
Agent may at any time assign its rights, powers, privileges and duties hereunder to (i) another Lender or an Affiliate of
Agent or any Approved Fund, or (ii) any Person to whom Agent, in its capacity as a Lender, has assigned (or will assign, in conjunction with such
assignment of agency rights hereunder) 50% or more of its Loan, in each case without the consent of the Lenders or Credit Parties. Following any
such assignment, Agent shall endeavor to give notice to the Lenders and Credit Parties. Failure to give such notice shall not affect such assignment
in any way or cause the assignment to be ineffective. An assignment by Agent pursuant to this subsection (a) shall not be deemed a resignation by
Agent for purposes of subsection (b) below.
(b)
Without limiting the rights of Agent to designate an assignee pursuant to subsection (a) above, Agent may at any time give
notice of its resignation to the Lenders and Credit Parties. Upon receipt of any such notice of resignation, Required Lenders shall have the right to
appoint a successor Agent. If no such successor shall have been so appointed by Required Lenders and shall have accepted such appointment
within ten (10) Business Days after the retiring Agent gives notice of its resignation, then the retiring Agent may on behalf of the Lenders, appoint
a successor Agent; provided, however, that if Agent shall notify Borrower Representative and the Lenders that no Person has accepted such
appointment, then such resignation shall nonetheless become effective in accordance with such notice from Agent that no Person has accepted such
appointment and, from and following delivery of such notice, (i) the retiring Agent shall be discharged from its duties and obligations hereunder
and under the other Financing Documents, and (ii) all payments, communications and determinations provided to be made by, to or through Agent
shall instead be made by or to each Lender directly, until such time as Required Lenders appoint a successor Agent as provided for above in this
paragraph.
(c)
Upon (i) an assignment permitted by subsection (a) above, or (ii) the acceptance of a successor’s appointment as Agent
pursuant to subsection (b) above, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the
retiring (or retired) Agent, and the retiring Agent shall be discharged from all of its duties and obligations hereunder and under the other Financing
Documents (if not already discharged therefrom as provided above in this paragraph). The fees payable by Credit Parties to a successor Agent shall
be the same as those payable to its predecessor unless otherwise agreed between Credit Parties and such successor. After the retiring Agent’s
resignation hereunder and under the other Financing Documents, the provisions of this Article and Section 11.12 shall continue in effect for the
benefit of such retiring Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while the retiring Agent was
acting or was continuing to act as Agent.
Section 13.13
Payment and Sharing of Payment.
(a)
Revolving Loan Advances, Payments and Settlements; Interest and Fee Payments.
(i)
Agent shall have the right, on behalf of Revolving Lenders to disburse funds to Borrowers for all Revolving
Loans requested or deemed requested by Borrowers pursuant to the terms of this Agreement. Agent shall be conclusively entitled to
assume, for purposes of the preceding sentence, that each Revolving Lender, other than any Non-Funding Lenders, will fund its Pro Rata
Share of all Revolving Loans requested by Borrowers. Each Revolving Lender shall reimburse Agent on demand, in accordance with the
provisions of the immediately following paragraph, for all funds disbursed on its behalf by Agent pursuant to the first sentence of this
clause (i), or if Agent so requests, each Revolving Lender will remit to Agent its Pro Rata Share of any Revolving Loan before Agent
disburses the same to a Borrower. If Agent elects to require that each Revolving Lender make funds available to Agent, prior to a
disbursement by Agent to a Borrower, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the amount of such
Revolving Lender’s Pro Rata Share of the Revolving
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Loan requested by such Borrower no later than noon (Eastern time) on the date of funding of such Revolving Loan, and each such
Revolving Lender shall pay Agent on such date such Revolving Lender’s Pro Rata Share of such requested Revolving Loan, in same day
funds, by wire transfer to the Payment Account, or such other account as may be identified by Agent to Revolving Lenders from time to
time. If any Lender fails to pay the amount of its Pro Rata Share of any funds advanced by Agent pursuant to the first sentence of this
clause (i) within one (1) Business Day after Agent’s demand, Agent shall promptly notify Borrower Representative, and Borrowers shall
immediately repay such amount to Agent. Any repayment required by Borrowers pursuant to this Section 11.13 shall be accompanied by
accrued interest thereon from and including the date such amount is made available to a Borrower to but excluding the date of payment at
the rate of interest then applicable to Revolving Loans. Nothing in this Section  11.13 or elsewhere in this Agreement or the other
Financing Documents shall be deemed to require Agent to advance funds on behalf of any Lender or to relieve any Lender from its
obligation to fulfill its commitments hereunder or to prejudice any rights that Agent or any Borrower may have against any Lender as a
result of any default by such Lender hereunder.
(ii)
On a Business Day of each week as selected from time to time by Agent, or more frequently (including daily), if
Agent so elects (each such day being a “Settlement Date”), Agent will advise each Revolving Lender by telephone, facsimile or e-mail of
the amount of each such Revolving Lender’s percentage interest of the Revolving Loan balance as of the close of business of the Business
Day immediately preceding the Settlement Date. In the event that payments are necessary to adjust the amount of such Revolving Lender’s
actual percentage interest of the Revolving Loans to such Lender’s required percentage interest of the Revolving Loan balance as of any
Settlement Date, the Revolving Lender from which such payment is due shall pay Agent, without setoff or discount, to the Payment
Account before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date the full amount necessary to make such
adjustment. Any obligation arising pursuant to the immediately preceding sentence shall be absolute and unconditional and shall not be
affected by any circumstance whatsoever. In the event settlement shall not have occurred by the date and time specified in the second
preceding sentence, interest shall accrue on the unsettled amount at the rate of interest then applicable to Revolving Loans.
(iii)
On each Settlement Date, Agent shall advise each Revolving Lender by telephone, facsimile or e-mail of the
amount of such Revolving Lender’s percentage interest of principal, interest and fees paid for the benefit of Revolving Lenders with
respect to each applicable Revolving Loan, to the extent of such Revolving Lender’s Revolving Loan Exposure with respect thereto, and
shall make payment to such Revolving Lender before 1:00 p.m. (Eastern time) on the Business Day following the Settlement Date of such
amounts in accordance with wire instructions delivered by such Revolving Lender to Agent, as the same may be modified from time to
time by written notice to Agent; provided, however, that, in the case such Revolving Lender is a Defaulted Lender, Agent shall be entitled
to set off the funding short-fall against that Defaulted Lender’s respective share of all payments received from any Credit party.
(iv)
On the Closing Date, Agent, on behalf of Lenders, may elect to advance to Borrowers the full amount of the initial
Loans to be made on the Closing Date prior to receiving funds from Lenders, in reliance upon each Lender’s commitment to make its Pro
Rata Share of such Loans to Borrowers in a timely manner on such date. If Agent elects to advance the initial Loans to Borrower in such
manner, Agent shall be entitled to receive all interest that accrues on the Closing Date on each Lender’s Pro Rata Share of such Loans
unless Agent receives such Lender’s Pro Rata Share of such Loans before 3:00 p.m. (Eastern time) on the Closing Date.
(v)
It is understood that for purposes of advances to Borrowers made pursuant to this Section 11.13, Agent will be
using the funds of Agent, and pending settlement, (A) all funds transferred from the Payment Account to the outstanding Revolving Loans
shall be applied first to advances made by Agent to Borrowers pursuant to this Section  11.13, and (B)  all interest accruing on such
advances shall be payable to Agent.
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(vi)
The provisions of this Section 11.13(a) shall be deemed to be binding upon Agent and Lenders notwithstanding
the occurrence of any Default or Event of Default, or any insolvency or bankruptcy proceeding pertaining to any Credit Party.
(b)
[Reserved].
(c)
Return of Payments.
(i)
If Agent pays an amount to a Lender under this Agreement in the belief or expectation that a related payment has
been or will be received by Agent from a Credit Party and such related payment is not received by Agent, then Agent will be entitled to
recover such amount from such Lender on demand without setoff, counterclaim or deduction of any kind, together with interest accruing
on a daily basis at the Federal Funds Rate.
(ii)
If Agent determines at any time that any amount received by Agent under this Agreement must be returned to any
Credit Party or paid to any other Person pursuant to any insolvency law or otherwise, then, notwithstanding any other term or condition of
this Agreement or any other Financing Document, Agent will not be required to distribute any portion thereof to any Lender. In addition,
each Lender will repay to Agent on demand any portion of such amount that Agent has distributed to such Lender, together with interest at
such rate, if any, as Agent is required to pay to any Credit Party or such other Person, without setoff, counterclaim or deduction of any
kind.
(d)
Defaulted Lenders. The failure of any Defaulted Lender to make any payment required by it hereunder shall not relieve
any other Lender of its obligations to make payment, but neither any other Lender nor Agent shall be responsible for the failure of any Defaulted
Lender to make any payment required hereunder. Notwithstanding anything set forth herein to the contrary, a Defaulted Lender shall not have any
voting or consent rights under or with respect to any Financing Document or constitute a “Lender” (or be included in the calculation of “Required
Lenders” hereunder) for any voting or consent rights under or with respect to any Financing Document.
(e)
Sharing of Payments. If any Lender shall obtain any payment or other recovery (whether voluntary, involuntary, by
application of setoff or otherwise) on account of any Loan (other than pursuant to the terms of Section 2.8(d)) in excess of its Pro Rata Share of
payments entitled pursuant to the other provisions of this Section 11.13, such Lender shall purchase from the other Lenders such participations in
extensions of credit made by such other Lenders (without recourse, representation or warranty) as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment
or other recovery is thereafter required to be returned or otherwise recovered from such purchasing Lender, such portion of such purchase shall be
rescinded and each Lender which has sold a participation to the purchasing Lender shall repay to the purchasing Lender the purchase price to the
ratable extent of such return or recovery, without interest. Each Credit Party agrees that any Lender so purchasing a participation from another
Lender pursuant to this clause (e) may, to the fullest extent permitted by law, exercise all its rights of payment (including pursuant to Section 10.6)
with respect to such participation as fully as if such Lender were the direct creditor of Credit Parties in the amount of such participation. If under
any applicable bankruptcy, insolvency or other similar law, any Lender receives a secured claim in lieu of a setoff to which this clause (e) applies,
such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the
Lenders entitled under this clause (e) to share in the benefits of any recovery on such secured claim.
Section 13.14
Right to Perform, Preserve and Protect. If any Credit Party fails to perform any obligation hereunder or under any other
Financing Document, Agent itself may, but shall not be obligated to, cause such obligation to be performed at Credit Parties’ expense. Agent is
further authorized by Credit Parties and the Lenders to make expenditures from time to time which Agent, in its reasonable business judgment,
deems necessary or desirable to (a) preserve or protect the business conducted by Credit Parties, the Collateral, or any portion thereof, and/or
(b) enhance the likelihood of, or maximize the amount of, repayment of the Loan and other Obligations. Each Credit Party hereby agrees to
reimburse Agent on demand for any and all costs, liabilities and obligations incurred by Agent pursuant to this
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Section 11.14. Each Lender hereby agrees to indemnify Agent upon demand for any and all costs, liabilities and obligations incurred by Agent
pursuant to this Section 11.14, in accordance with the provisions of Section 11.6.
Section 13.15
Additional Titled Agents. Except for rights and powers, if any, expressly reserved under this Agreement to any
bookrunner, arranger or to any titled agent named on the cover page of this Agreement, other than Agent (collectively, the “Additional Titled
Agents”), and except for obligations, liabilities, duties and responsibilities, if any, expressly assumed under this Agreement by any Additional
Titled Agent, no Additional Titled Agent, in such capacity, has any rights, powers, liabilities, duties or responsibilities hereunder or under any of
the other Financing Documents. Without limiting the foregoing, no Additional Titled Agent shall have nor be deemed to have a fiduciary
relationship with any Lender. At any time that any Lender serving as an Additional Titled Agent shall have transferred to any other Person (other
than any Affiliates) all of its interests in the Loan, such Lender shall be deemed to have concurrently resigned as such Additional Titled Agent.
Section 13.16
Amendments and Waivers.
(a)
No provision of this Agreement or any other Financing Document may be materially amended, waived or otherwise
modified unless such amendment, waiver or other modification is in writing and is signed or otherwise approved by Credit Parties, the Required
Lenders and any other Lender to the extent required under Section 11.16(b); provided, that any Fee Letter may be amended, or rights or privileges
thereunder waived, in a writing executed only by the parties thereto.
(b)
In addition to the required signatures under Section  11.16(a), no provision of this Agreement or any other Financing
Document may be amended, waived or otherwise modified unless such amendment, waiver or other modification is in writing and is signed or
otherwise approved by the following Persons:
(i)
if any amendment, waiver or other modification would increase a Lender’s funding obligations in respect of any
Loan, by such Lender; and/or
(ii)
if the rights or duties of Agent or LC Issuer are affected thereby, by Agent and LC Issuer, respectively, as the case
may be;
provided, however, that, in each of (i) and (ii) above, no such amendment, waiver or other modification shall, unless signed or otherwise approved
in writing by all the Lenders directly affected thereby, (A) reduce the principal of, rate of interest on or any fees with respect to any Loan or
Reimbursement Obligation or forgive any principal, interest (other than default interest) or fees (other than late charges) with respect to any Loan
or Reimbursement Obligation; (B)  postpone the date fixed for, or waive, any payment (other than any mandatory prepayment pursuant to
Section 2.1(b)(ii)) of principal of any Loan or of any Reimbursement Obligation, or of interest on any Loan or Reimbursement Obligation (other
than default interest) or any fees provided for hereunder (other than late charges) or postpone the date of termination of any commitment of any
Lender hereunder; (C) change the definition of the term Required Lenders or the percentage of Lenders which shall be required for Lenders to take
any action hereunder; (D)  release all or substantially all of the Collateral, authorize any Credit Party to sell or otherwise dispose of all or
substantially all of the Collateral, release any Guarantor of all or any portion of the Obligations or its Guarantee obligations with respect thereto or
consent to a transfer of any of the Intellectual Property, except, in each case with respect to this clause (D), as otherwise may be provided in this
Agreement or the other Financing Documents (including in connection with any disposition permitted hereunder); (E) amend, waive or otherwise
modify this Section 11.16(b) or the definitions of the terms used in this Section 11.16(b) insofar as the definitions affect the substance of this
Section 11.16(b); (F) consent to the assignment, delegation or other transfer by any Credit Party of any of its rights and obligations under any
Financing Document or release any Credit Party of its payment obligations under any Financing Document, except, in each case with respect to
this clause (F), pursuant to a merger or consolidation
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permitted pursuant to this Agreement; or (G)  amend any of the provisions of Section  10.7 or amend any of the definitions Pro Rata Share,
Revolving Loan Commitment, Revolving Loan Commitment Amount, Revolving Loan Commitment Percentage or that provide for the Lenders to
receive their Pro Rata Shares of any fees, payments, setoffs or proceeds of Collateral hereunder. It is hereby understood and agreed that all Lenders
shall be deemed directly affected by an amendment, waiver or other modification of the type described in the preceding clauses (C), (D), (E), (F)
and (G) of the preceding sentence.
Section 13.17
Assignments and Participations.
(a)
Assignments.
(i)
Any Lender may at any time assign to one or more Eligible Assignees all or any portion of such Lender’s Loan
together with all related obligations of such Lender hereunder. Except as Agent may otherwise agree, the amount of any such assignment
(determined as of the date of the applicable Assignment Agreement or, if a “Trade Date” is specified in such Assignment Agreement, as of
such Trade Date) shall be in a minimum aggregate amount equal to $1,000,000 or, if less, the assignor’s entire interests in the outstanding
Loan; provided, however, that, in connection with simultaneous assignments to two or more related Approved Funds, such Approved
Funds shall be treated as one assignee for purposes of determining compliance with the minimum assignment size referred to above.
Credit Parties and Agent shall be entitled to continue to deal solely and directly with such Lender in connection with the interests so
assigned to an Eligible Assignee until Agent shall have received and accepted an effective Assignment Agreement executed, delivered and
fully completed by the applicable parties thereto and a processing fee of $3,500 to be paid by the assigning Lender; provided, however, that
only one processing fee shall be payable in connection with simultaneous assignments to two or more related Approved Funds.
(ii)
From and after the date on which the conditions described above have been met, (A) such Eligible Assignee shall
be deemed automatically to have become a party hereto and, to the extent of the interests assigned to such Eligible Assignee pursuant to
such Assignment Agreement, shall have the rights and obligations of a Lender hereunder, and (B) the assigning Lender, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such Assignment Agreement, shall be released from its rights and
obligations hereunder (other than those that survive termination pursuant to Section 13.1). Upon the request of the Eligible Assignee (and,
as applicable, the assigning Lender) pursuant to an effective Assignment Agreement, each Borrower shall execute and deliver to Agent for
delivery to the Eligible Assignee (and, as applicable, the assigning Lender) Notes in the aggregate principal amount of the Eligible
Assignee’s Loan (and, as applicable, Notes in the principal amount of that portion of the principal amount of the Loan retained by the
assigning Lender). Upon receipt by the assigning Lender of such Note, the assigning Lender shall return to Borrower Representative any
prior Note held by it.
(iii)
Agent, acting solely for this purpose as an agent of Credit Parties, shall maintain at the office of its servicer
located in Bethesda, Maryland a copy of each Assignment Agreement delivered to it and a register for the recordation of the names and
addresses of each Lender, and the commitments of, and principal amount of the Loan owing to, such Lender pursuant to the terms hereof
(the “Register”). The entries in such Register shall be conclusive, absent manifest error, and Credit Parties, Agent and Lenders may treat
each Person whose name is recorded therein pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement,
notwithstanding notice to the contrary. Such Register shall be available for inspection by Credit Parties and any Lender, at any reasonable
time upon reasonable prior notice to Agent. Each Lender that sells a participation shall, acting solely for this purpose as an agent of Credit
Parties maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of
each participant’s interest in the Obligations (each, a “Participant Register”). The entries in the Participant Registers shall be conclusive,
absent manifest error. Each Participant Register shall be available for inspection by Credit Parties and Agent at any reasonable time upon
reasonable prior notice to the applicable Lender; provided,
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that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant
or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any
Financing Document) to any Person (including Credit Parties) except to the extent that such disclosure is necessary to establish that such
commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury
Regulations. For the avoidance of doubt, Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant
Register.
(iv)
Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, 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 any pledge or assignment to secure obligations to a Federal Reserve Bank; provided, however, 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.
(v)
Notwithstanding the foregoing provisions of this Section 11.17(a) or any other provision of this Agreement, Agent
has the right, but not the obligation, to effectuate assignments of Loan via an electronic settlement system acceptable to Agent as
designated in writing from time to time to the Lenders by Agent (the “Settlement Service”). At any time when Agent elects, in its sole
discretion, to implement such Settlement Service, each such assignment shall be effected by the assigning Lender and proposed assignee
pursuant to the procedures then in effect under the Settlement Service, which procedures shall be consistent with the other provisions of
this Section 11.17(a). Each assigning Lender and proposed Eligible Assignee shall comply with the requirements of the Settlement Service
in connection with effecting any assignment of Loan pursuant to the Settlement Service. With the prior written approval of Agent, Agent’s
approval of such Eligible Assignee shall be deemed to have been automatically granted with respect to any transfer effected through the
Settlement Service. Assignments and assumptions of the Loan shall be effected by the provisions otherwise set forth herein until Agent
notifies Lenders of the Settlement Service as set forth herein.
(b)
Participations. Any Lender may at any time, without the consent of, or notice to, any Credit Party or Agent, sell to one or
more Persons (other than any Credit Party or any Credit Party’s Affiliates) participating interests in its Loan, commitments or other interests
hereunder (any such Person, a “Participant”). In the event of a sale by a Lender of a participating interest to a Participant, (i) such Lender’s
obligations hereunder shall remain unchanged for all purposes, (ii) Credit Parties and Agent shall continue to deal solely and directly with such
Lender in connection with such Lender’s rights and obligations hereunder, and (iii) all amounts payable by each Credit Party shall be determined
as if such Lender had not sold such participation and shall be paid directly to such Lender. Each Credit Party agrees that if amounts outstanding
under this Agreement are due and payable (as a result of acceleration or otherwise), each Participant shall be deemed to have the right of set-off in
respect of its participating interest in amounts owing under this Agreement to the same extent as if the amount of its participating interest were
owing directly to it as a Lender under this Agreement; provided, however, that such right of set-off shall be subject to the obligation of each
Participant to share with Lenders, and Lenders agree to share with each Participant, as provided in Section 11.5.
(c)
Replacement of Lenders. Within thirty (30) days after: (i) receipt by Agent of notice and demand from any Lender for
payment of additional costs as provided in Section 2.8(d), which demand shall not have been revoked, (ii) any Borrower is required to pay any
additional amount to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.8(a) through (h), (iii) any
Lender is a Defaulted Lender, and the circumstances causing such status shall not have been cured or waived; or (iv) any failure by any Lender to
consent to a requested amendment, waiver or modification to any Financing Document in which Required Lenders have already consented to such
amendment, waiver or modification but the consent of each Lender, or each Lender affected thereby, is required with respect thereto (each relevant
Lender in the foregoing clauses (i) through (iv) being an “Affected Lender”) each of Borrower Representative and Agent may, at its option, notify
such Affected Lender and, in the case of Borrowers’ election, Agent, of such Person’s intention to obtain, at Borrowers’
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expense, a replacement Lender (“Replacement Lender”) for such Lender, which Replacement Lender shall be an Eligible Assignee and, in the
event the Replacement Lender is to replace an Affected Lender described in the preceding clause (iv), such Replacement Lender consents to the
requested amendment, waiver or modification making the replaced Lender an Affected Lender. In the event Borrowers or Agent, as applicable,
obtains a Replacement Lender within ninety (90) days following notice of its intention to do so, the Affected Lender shall sell, at par, and assign all
of its Loan and funding commitments hereunder to such Replacement Lender in accordance with the procedures set forth in Section 11.17(a);
provided, however, that (A) Borrowers shall have reimbursed such Lender for its increased costs and additional payments for which it is entitled to
reimbursement under Section 2.8(a) through (h), as applicable, of this Agreement through the date of such sale and assignment, and (B) Borrowers
shall pay to Agent the $3,500 processing fee in respect of such assignment. In the event that a replaced Lender does not execute an Assignment
Agreement pursuant to Section 11.17(a) within five (5) Business Days after receipt by such replaced Lender of notice of replacement pursuant to
this Section  11.17(c) and presentation to such replaced Lender of an Assignment Agreement evidencing an assignment pursuant to this
Section 11.17(c), such replaced Lender shall be deemed to have consented to the terms of such Assignment Agreement, and any such Assignment
Agreement executed by Agent, the Replacement Lender and, to the extent required pursuant to Section 11.17(a), Borrowers, shall be effective for
purposes of this Section 11.17(c) and Section 11.17(a). Upon any such assignment and payment, such replaced Lender shall no longer constitute a
“Lender” for purposes hereof, other than with respect to such rights and obligations that survive termination as set forth in Section 13.1.
(d)
Credit Party Assignments. No Credit Party may assign, delegate or otherwise transfer any of its rights or other obligations
hereunder or under any other Financing Document without the prior written consent of Agent and each Lender.
Section 13.18
Funding and Settlement Provisions Applicable When Non-Funding Lenders Exist.
So long as Agent has not waived the conditions to the funding of Revolving Loans set forth in Section 7.2 or Section 2.1, any Lender may
deliver a notice to Agent stating that such Lender shall cease making Revolving Loans due to the non-satisfaction of one or more conditions to
funding Loans set forth in Section 7.2 or Section 2.1, and specifying any such non-satisfied conditions. Any Lender delivering any such notice
shall become a non-funding Lender (a “Non-Funding Lender”) for purposes of this Agreement commencing on the Business Day following
receipt by Agent of such notice, and shall cease to be a Non-Funding Lender on the date on which such Lender has either revoked the effectiveness
of such notice or acknowledged in writing to each of Agent the satisfaction of the condition(s) specified in such notice, or Required Lenders waive
the conditions to the funding of such Loans giving rise to such notice by Non-Funding Lender. Each Non-Funding Lender shall remain a Lender
for purposes of this Agreement to the extent that such Non-Funding Lender has Revolving Loan Outstandings in excess of Zero Dollars ($0);
provided, however, that during any period of time that any Non-Funding Lender exists, and notwithstanding any provision to the contrary set forth
herein, the following provisions shall apply:
(a)
For purposes of determining the Pro Rata Share of each Revolving Lender under clause (c) of the definition of such term,
each Non-Funding Lender shall be deemed to have a Revolving Loan Commitment Amount as in effect immediately before such Lender became a
Non-Funding Lender.
(b)
Except as provided in clause (a) above, the Revolving Loan Commitment Amount of each Non-Funding Lender shall be
deemed to be Zero Dollars ($0).
(c)
The Revolving Loan Commitment at any date of determination during such period shall be deemed to be equal to the sum
of (i) the aggregate Revolving Loan Commitment Amounts of all Lenders, other than the Non-Funding Lenders as of such date plus (ii) the
aggregate Revolving Loan Outstandings of all Non-Funding Lenders as of such date.
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(d)
Agent shall have no right to make or disburse Revolving Loans for the account of any Non-Funding Lender pursuant to
Section 2.1(b)(i) to pay interest, fees, expenses and other charges of any Credit Party; other than reimbursement obligations that have arisen
pursuant to Section 2.5(c) in respect of Letters of Credit issued at the time such Non-Funding Lender was not then a Non-Funding Lender.
(e)
To the extent that Agent applies proceeds of Collateral or other payments received by Agent to repayment of Revolving
Loans pursuant to Section 10.7, such payments and proceeds shall be applied first in respect of Revolving Loans made at the time any Non-
Funding Lenders exist, and second in respect of all other outstanding Revolving Loans.
(f)
Agent shall have no right to (i) make or disburse Revolving Loans as provided in Section 2.1(b)(i) for the account of any
Revolving Lender that was a Non-Funding Lender at the time of issuance of any Letter of Credit for which funding or reimbursement obligations
have arisen pursuant to Section 2.5(c), or (ii) assume that any Revolving Lender that was a Non-Funding Lender at the time of issuance of such
Letter of Credit will fund any portion of the Revolving Loans to be funded pursuant to Section 2.5(c) in respect of such Letter of Credit. In
addition, no Revolving Lender that was a Non-Funding Lender at the time of issuance of any Letter of Credit for which funding or reimbursement
obligations have arisen pursuant to Section 2.5(c), shall have an obligation to fund any portion of the Revolving Loans to be funded pursuant to
Section 2.5(c) in respect to such Letter of Credit, or to make any payment to Agent or the LC Issuer, as applicable, under Section 2.5(f)(ii) in
respect of such Letter of Credit, or be deemed to have purchased any interest or participation in such Letter of Credit from Agent or the LC Issuer,
as applicable, under Section 2.5(f)(i).
Section 13.19
Buy-Out Upon Refinancing. MCF shall have the right to purchase from the other Lenders all of their respective interests
in the Loan at par in connection with any refinancing of the Loan upon one or more new economic terms, but which refinancing is structured as an
amendment and restatement of the Loan rather than a payoff of the Loan.
Section 13.20
Erroneous Payments.
(a)
Each Lender, and any other party hereto hereby severally agrees that if (i) the Agent notifies (which such notice shall be
conclusive absent manifest error) such Lender (or the Lender which is an Affiliate of a Lender) or any other Person that has received funds from
the Agent or any of its Affiliates, either for its own account or on behalf of a Lender (each such recipient, a “Payment Recipient”) that the Agent
has determined in its sole discretion that any funds received by such Payment Recipient were erroneously transmitted to, or otherwise erroneously
or mistakenly received by, such Payment Recipient (whether or not known to such Payment Recipient) or (ii) any Payment Recipient receives any
payment from the Agent (or any of its Affiliates) (x) that is in a different amount than, or on a different date from, that specified in a notice of
payment, prepayment or repayment sent by the Agent (or any of its Affiliates) with respect to such payment, prepayment or repayment, as
applicable, (y) that was not preceded or accompanied by a notice of payment, prepayment or repayment sent by the Agent (or any of its Affiliates)
with respect to such payment, prepayment or repayment, as applicable, or (z) that such Payment Recipient otherwise becomes aware was
transmitted or received in error or by mistake (in whole or in part) then, in each case, an error in payment shall be presumed to have been made
(any such amounts specified in clauses (i) or (ii) of this Section 11.20(a), whether received as a payment, prepayment or repayment of principal,
interest, fees, distribution or otherwise; individually and collectively, an “Erroneous Payment”), then, in each case, such Payment Recipient is
deemed to have knowledge of such error at the time of its receipt of such Erroneous Payment; provided that nothing in this Section shall require
the Agent to provide any of the notices specified in clauses (i) or (ii) above. Each Payment Recipient agrees that it shall not assert any right or
claim to any Erroneous Payment, and hereby waives any claim, counterclaim, defense or right of set-off or recoupment with respect to any
demand, claim or counterclaim by the Agent for the return of any Erroneous Payments, including without limitation waiver of any defense based
on “discharge for value” or any similar doctrine.
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(b)
Without limiting the immediately preceding clause (a), each Payment Recipient agrees that, in the case of clause (a)(ii)
above, it shall promptly notify the Agent in writing of such occurrence.
(c)
In the case of either clause (a)(i) or (a)(ii) above, such Erroneous Payment shall at all times remain the property of the
Agent and shall be segregated by the Payment Recipient and held in trust for the benefit of the Agent, and upon demand from the Agent such
Payment Recipient shall (or, shall cause any Person who received any portion of an Erroneous Payment on its behalf to), promptly, but in all
events no later than one Business Day thereafter, return to the Agent the amount of any such Erroneous Payment (or portion thereof) as to which
such a demand was made in same day funds and in the currency so received, together with interest thereon in respect of each day from and
including the date such Erroneous Payment (or portion thereof) was received by such Payment Recipient to the date such amount is repaid to the
Agent at the greater of the Federal Funds Rate and a rate determined by the Agent in accordance with banking industry rules on interbank
compensation from time to time in effect.
(d)
In the event that an Erroneous Payment (or portion thereof) is not recovered by the Agent for any reason, after demand
therefor by the Agent in accordance with immediately preceding clause (c), from any Lender that is a Payment Recipient or an Affiliate of a
Payment Recipient (such unrecovered amount as to such Lender, an “Erroneous Payment Return Deficiency”), then at the sole discretion of the
Agent and upon the Agent’s written notice to such Lender (i) such Lender shall be deemed to have made a cashless assignment of the full face
amount of the portion of its Loans (but not its Revolving Loan Commitment Amount) with respect to which such Erroneous Payment was made
(the “Erroneous Payment Impacted Loans”) to the Agent or, at the option of the Agent, the Agent’s applicable lending affiliate (such assignee,
the “Agent Assignee”) in an amount that is equal to the Erroneous Payment Return Deficiency (or such lesser amount as the Agent may specify)
(such assignment of the Loans (but not its Revolving Loan Commitment Amount) of the Erroneous Payment Impacted Loans, the “Erroneous
Payment Deficiency Assignment”) plus any accrued and unpaid interest on such assigned amount, without further consent or approval of any
party hereto and without any payment by the Agent Assignee as the assignee of such Erroneous Payment Deficiency Assignment. Without
limitation of its rights hereunder, following the effectiveness of the Erroneous Payment Deficiency Assignment, the Agent may make a cashless
reassignment to the applicable assigning Lender of any Erroneous Payment Deficiency Assignment at any time by written notice to the applicable
assigning Lender and upon such reassignment all of the Loans assigned pursuant to such Erroneous Payment Deficiency Assignment shall be
reassigned to such Lender without any requirement for payment or other consideration. The parties hereto acknowledge and agree that (1) any
assignment contemplated in this clause (d) shall be made without any requirement for any payment or other consideration paid by the applicable
assignee or received by the assignor, (2) the provisions of this clause (d) shall govern in the event of any conflict with the terms and conditions of
Section 11.17 and (3) the Agent may reflect such assignments in the Register without further consent or action by any other Person.
(e)
Each party hereto hereby agrees that (x) in the event an Erroneous Payment (or portion thereof) is not recovered from any
Payment Recipient that has received such Erroneous Payment (or portion thereof) for any reason, the Agent (1) shall be subrogated to all the rights
of such Payment Recipient and (2) is authorized to set off, net and apply any and all amounts at any time owing to such Payment Recipient under
any Financing Document, or otherwise payable or distributable by the Agent to such Payment Recipient from any source, against any amount due
to the Agent under this Section 11.20 or under the indemnification provisions of this Agreement, (y) the receipt of an Erroneous Payment by a
Payment Recipient shall not for the purpose of this Agreement be treated as a payment, prepayment, repayment, discharge or other satisfaction of
any Obligations owed by the Borrower or any other Credit
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Party, except, in each case, to the extent such Erroneous Payment is, and solely with respect to the amount of such Erroneous Payment that is,
comprised of funds received by the Agent from the Borrower or any other Credit Party for the purpose of making for a payment on the Obligations
and (z) to the extent that an Erroneous Payment was in any way or at any time credited as payment or satisfaction of any of the Obligations, the
Obligations or any part thereof that were so credited, and all rights of the Payment Recipient, as the case may be, shall be reinstated and continue
in full force and effect as if such payment or satisfaction had never been received.
(f)
Each party’s obligations under this Section 11.20 shall survive the resignation or replacement of the Agent or any transfer
of right or obligations by, or the replacement of, a Lender, the termination of the Revolving Loan Commitments or the repayment, satisfaction or
discharge of all Obligations (or any portion thereof) under any Financing Document.
(g)
The provisions of this Section 11.20 to the contrary notwithstanding, (i) nothing in this Section 11.20 will constitute a
waiver or release of any claim of any party hereunder arising from any Payment Recipient’s receipt of an Erroneous Payment and (ii) there will
only be deemed to be a recovery of the Erroneous Payment to the extent that Agent has received payment from the Payment Recipient in
immediately available funds the Erroneous Payment Return Deficiency, whether directly from the Payment Recipient, as a result of the exercise by
Agent of its rights of subrogation or set off as set forth above in clause (e) or as a result of the receipt by Agent Assignee of a payment of the
outstanding principal balance of the Loans assigned to Agent Assignee pursuant to an Erroneous Payment Deficiency Assignment, but excluding
any other amounts in respect thereof (it being agreed that any payments of interest, fees, expenses or other amounts (other than principal) received
by Agent Assignee in respect of the Loans assigned to Agent Assignee pursuant to an Erroneous Payment Deficiency Assignment shall be the sole
property of the Agent Assignee and shall not constitute a recovery of the Erroneous Payment).
Article 14
 – GUARANTY
Section 14.1
Guaranty. Each Guarantor hereby (a) unconditionally guarantees, as a primary obligor and not merely as a surety, jointly
and severally with each other Guarantor when and as due, whether at maturity, by acceleration, by notice of prepayment or otherwise, the due and
punctual performance of all of the Obligations, including payment in full of the principal, accrued but unpaid interest and all other amounts due
and owing to the Agent and Lenders under the Loans and (b) indemnifies each Lender immediately on demand against any cost, loss or liability
suffered by such Lender if any obligations guaranteed by it are or become unenforceable, invalid, voided, avoid or illegal, the amount of which
such cost, loss or liability shall be equal to the amount which such Lender would otherwise be entitled to recover. Each payment made by any
Guarantor pursuant to this Article 12 shall be made in lawful money of the United States in immediately available funds. Each Guarantor hereby
acknowledges and agrees that it is an Affiliate of a Borrower or other interested party and will derive significant economic benefit from the Loans.
Section 14.2
Payment of Amounts Owed. The Guarantee hereunder is an absolute, unconditional and continuing guarantee of the full
and punctual payment and performance of all of the Obligations and not of their collectability only and is in no way conditioned upon any
requirement that the Agent or any Lender first attempt to collect any of the Obligations from any Borrower or resort to any collateral security or
other means of obtaining payment. In the event of any default by Borrowers in the payment of the Obligations, after the expiration of any
applicable cure or grace period, each Guarantor agrees, on demand by Agent (which demand may be made concurrently with notice to Borrowers
that the Borrowers are in default of their obligations), to pay the Obligations, regardless of any defense, right of set-off or recoupment or claims
which any Borrower or Guarantor may have against Agent or Lenders or the holder of the Notes. All of the remedies set forth in this Agreement, in
any other Financing Document or at law or equity shall be equally available to Agent and Lenders, and the choice by Agent or Lenders of
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one such alternative over another shall not be subject to question or challenge by any Guarantor or any other person, nor shall any such choice be
asserted as a defense, setoff, recoupment or failure to mitigate damages in any action, proceeding, or counteraction by Agent or Lenders to recover
or seeking any other remedy under this Guarantee, nor shall such choice preclude Agent or Lenders from subsequently electing to exercise a
different remedy.
Section 14.3
Certain Waivers by Guarantor. To the fullest extent permitted by law, each Guarantor does hereby:
(a)
waive notice of acceptance of this Agreement by Agent and Lenders and any and all notices and demands of every kind
which may be required to be given by any statute, rule or law;
(b)
agree to refrain from asserting, until after repayment in full of the Obligations, any defense, right of set-off, right of
recoupment or other claim which such Guarantor may have against any Borrower;
(c)
waive any defense, right of set-off, right of recoupment or other claim which such Guarantor may have against Agent,
Lenders or the holder of the Notes;
(d)
waive any and all rights such Guarantor may have under any anti-deficiency statute or other similar protections;
(e)
waive all rights at law or in equity to seek subrogation, contribution, indemnification or any other form of reimbursement
or repayment from any Borrower, any other Guarantor or any other person or entity now or hereafter primarily or secondarily liable for any of the
Obligations until the Obligations have been paid in full;
(f)
waive presentment for payment, demand for payment, notice of nonpayment or dishonor, protest and notice of protest,
diligence in collection and any and all formalities which otherwise might be legally required to charge such Guarantor with liability;
(g)
waive the benefit of all appraisement, valuation, marshalling, forbearance, stay, extension, redemption, homestead,
exemption and moratorium laws now or hereafter in effect;
(h)
waive any defense based on the incapacity, lack of authority, death or disability of any other person or entity or the failure
of Agent or Lenders to file or enforce a claim against the estate of any other person or entity in any administrative, bankruptcy or other
proceeding;
(i)
waive any defense based on an election of remedies by Agent or Lenders, whether or not such election may affect in any
way the recourse, subrogation or other rights of such Guarantor against any Borrower, any other Guarantor or any other person in connection with
the Obligations;
(j)
waive any defense based on the failure of the Agent or Lenders to (i) provide notice to such Guarantor of a sale or other
disposition of any of the security for any of the Obligations, or (ii) conduct such a sale or disposition in a commercially reasonable manner;
(k)
waive any defense based on the negligence of Agent or Lenders in administering this Agreement or the other Financing
Documents (including, but not limited to, the failure to perfect any security interest in any Collateral), or taking or failing to take any action in
connection therewith, provided, however, that such waiver shall not apply to the gross negligence or willful misconduct of the Agent or Lenders,
as determined by the final, non-appealable decision of a court having proper jurisdiction;
(l)
waive the defense of expiration of any statute of limitations affecting the liability of such Guarantor hereunder or the
enforcement hereof;
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(m)
waive any right to file any Claim (as defined below) as part of, and any right to request consolidation of any action or
proceeding relating to a Claim with, any action or proceeding filed or maintained by Agent or Lenders to collect any Obligations of such
Guarantor to Agent or Lenders hereunder or to exercise any rights or remedies available to Agent or Lenders under the Financing Documents, at
law, in equity or otherwise;
(n)
agree that neither Agent nor Lenders shall have any obligation to obtain, perfect or retain a security interest in any
property to secure any of the Obligations (including any mortgage or security interest contemplated by the Financing Documents), or to protect or
insure any such property;
(o)
waive any obligation Agent or Lenders may have to disclose to such Guarantor any facts the Agent or Lenders now or
hereafter may know or have reasonably available to it regarding the Borrowers or Borrowers’ financial condition, whether or not the Agent or
Lenders have a reasonable opportunity to communicate such facts or have reason to believe that any such facts are unknown to such Guarantor or
materially increase the risk to such Guarantor beyond the risk such Guarantor intends to assume hereunder;
(p)
agree that neither Agent nor Lenders shall be liable in any way for any decrease in the value or marketability of any
property securing any of the Obligations which may result from any action or omission of the Agent or Lenders in enforcing any part of this
Agreement;
(q)
waive any defense based on any invalidity, irregularity or unenforceability, in whole or in part, of any one or more of the
Financing Documents;
(r)
waive any defense based on any change in the composition of Borrowers, and
(s)
waive any defense based on any representations and warranties made by such Guarantor herein or by any Borrower herein
or in any of the Financing Documents.
For purposes of this section, the term “Claim” shall mean any claim, action or cause of action, defense, counterclaim, set-off or right of
recoupment of any kind or nature against the Agent or Lenders, its officers, directors, employees, agents, members, actuaries, accountants, trustees
or attorneys, or any affiliate of the Agent or Lenders in connection with the making, closing, administration, collection or enforcement by the
Agent or Lenders of the Obligations.
Section 14.4
Guarantor’s Obligations Not Affected by Modifications of Financing Documents. Each Guarantor further agrees that
such Guarantor’s liability as guarantor shall not be impaired or affected by any renewals or extensions which may be made from time to time, with
or without the knowledge or consent of Guarantor for the time for payment of interest or principal or by any forbearance or delay in collecting
interest or principal hereunder, or by any waiver by Agent or Lenders under this Agreement or any other Financing Documents, or by Agent’s or
Lenders’ failure or election not to pursue any other remedies it may have against any Borrower or Guarantor, or by any change or modification in
the Notes, this Agreement or any other Financing Document, or by the acceptance by Agent or Lenders of any additional security or any increase,
substitution or change therein, or by the release by Agent or Lenders of any security or any withdrawal thereof or decrease therein, or by the
application of payments received from any source to the payment of any obligation other than the Obligations even though Agent or Lenders might
lawfully have elected to apply such payments to any part or all of the Obligations, it being the intent hereof that, subject to Agent’s or Lenders’
compliance with the terms of this Article 12 and the Financing Documents, each Guarantor shall remain liable for the payment of the Obligations,
until the Obligations have been paid in full, notwithstanding any act or thing which might otherwise operate as a legal or equitable discharge of a
surety. Each Guarantor further understands and agrees that Agent or Lenders may at any time enter into agreements with Borrowers to amend,
modify and/or increase the principal amount of, interest rate applicable to or other economic and non-economic terms of this Agreement or the
other Financing Documents, and may waive or release any provision or provisions of this Agreement or the other Financing Documents, and, with
reference to such instruments, may make and enter into any such agreement or agreements as Agent, Lenders and Borrowers may deem proper and
desirable, without in any manner impairing this Guarantee or any of
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Agent’s or Lenders’ rights hereunder or each Guarantor’s obligations hereunder, and each Guarantor’s obligations hereunder shall apply to the this
Agreement and other Financing Documents as so amended, modified, extended, renewed or increased.
Section 14.5
Reinstatement; Deficiency. This guaranty shall continue to be effective or be reinstated (as the case may be) if at any
time payment of all or any part of any sum payable pursuant to this Agreement or any other Financing Document is rescinded or otherwise
required to be returned by Agent or Lenders upon the insolvency, bankruptcy, dissolution, liquidation, or reorganization of any Borrower, or upon
or as a result of the appointment of a receiver, intervenor, custodian or conservator of or trustee or similar officer for, any Borrower or any
substantial part of its property, or otherwise, all as though such payment to Agent or Lenders had not been made, regardless of whether Agent or
Lenders contested the order requiring the return of such payment. In the event of the foreclosure of the Financing Documents and of a deficiency,
each Guarantor hereby promises and agrees forthwith to pay the amount of such deficiency notwithstanding the fact that recovery of said
deficiency against Borrowers would not be allowed by applicable law; however, the foregoing shall not be deemed to require that Agent or
Lenders institute foreclosure proceedings or otherwise resort to or exhaust any other collateral or security prior to or concurrently with enforcing
this guaranty.
Section 14.6
Subordination of Borrowers’ Obligations to Guarantors; Claims in Bankruptcy.
(a)
Any indebtedness of any Borrower to any Guarantor (including, but not limited to, any right of such Guarantor to a return
of any capital contributed to a Borrower), whether now or hereafter existing, is hereby subordinated to the payment of the Obligations. Each
Guarantor agrees that, until the Obligations have been paid in full, such Guarantor will not seek, accept, or retain for its own account, any
payment from any Borrower on account of such subordinated debt. Any payments to any Guarantor on account of such subordinated debt shall be
collected and received by such Guarantor in trust for Agent and Lenders and shall be immediately paid over to Agent, for the benefit of Agent and
Lenders, on account of the Obligations without impairing or releasing the obligations of such Guarantor hereunder.
(b)
Each Guarantor shall promptly file in any bankruptcy or other proceeding in which the filing of claims is required by law,
all claims and proofs of claims that such Guarantor may have against any Borrower or any other Guarantor and does hereby assign to Agent or its
nominee (and will, upon request of Agent, reconfirm in writing the assignment to Agent or its nominee of) all rights of such Guarantor under such
claims. If such Guarantor does not file any such claim, Agent, as attorney-in-fact for such Guarantor, is hereby irrevocably authorized to do so in
the name of such Guarantor, or in Agent’s discretion, to assign the claim to a designee and cause proof of claim to be filed in the name of Agent’s
designee. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to
Agent, for the benefit of Agent and Lenders, the full amount thereof and, to the full extent necessary for that purpose, each Guarantor hereby
assigns to the Lenders all of such Guarantor’s rights to any such payments or distributions to which such Guarantor would otherwise be entitled,
such assignment being a present and irrevocable assignment of all such rights.
Section 14.7
Maximum Liability. The provisions of this Article 12 are severable, and in any action or proceeding involving any state
corporate law, or any state, federal or foreign bankruptcy, insolvency, reorganization or other law affecting the rights of creditors generally, if the
obligations of any Guarantor under this Article 12 would otherwise be held or determined to be avoidable, invalid or unenforceable on account of
the amount of such Guarantor’s liability under this Article 12, then, notwithstanding any other provision of this Article 12 to the contrary, the
amount of such liability shall, without any further action by the Guarantors or the Agent or any Lender, be automatically limited and reduced to the
highest amount that is valid and enforceable as determined in such action or proceeding (such highest amount determined hereunder being the
relevant Guarantor’s “Maximum Liability”). This Section 12.7 with respect to the Maximum Liability of each Guarantor is intended solely to
preserve the rights of the Agent and the Lenders to the maximum extent not subject to avoidance under applicable law, and no Guarantor nor any
other Person shall have any right or claim under this Section 12.7 with respect to such Maximum Liability, except to the extent necessary so that
the obligations of any Guarantor
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hereunder shall not be rendered voidable under applicable law. Each Guarantor agrees that the Obligations may at any time and from time to time
exceed the Maximum Liability of each Guarantor without impairing this guaranty or affecting the rights and remedies of the Agent or the Lenders
hereunder, provided that, nothing in this sentence shall be construed to increase any Guarantor’s obligations hereunder beyond its Maximum
Liability.
Section 14.8
Guarantor’s Investigation. Each Guarantor acknowledges receipt of a copy of each of this Agreement and the other
Financing Documents. Each Guarantor has made an independent investigation of the other Credit Parties and of the financial condition of the other
Credit Parties. Neither Agent nor any Lender has made and neither Agent nor any Lender does make any representations or warranties as to the
income, expense, operation, finances or any other matter or thing affecting any Credit Party nor has Agent or any Lender made any representations
or warranties as to the amount or nature of the Obligations of any Credit Party to which this Article 12 applies as specifically herein set forth, nor
has Agent or any Lender or any officer, agent or employee of Agent or any Lender or any representative thereof, made any other oral
representations, agreements or commitments of any kind or nature, and each Guarantor hereby expressly acknowledges that no such
representations or warranties have been made and such Guarantor expressly disclaims reliance on any such representations or warranties.
Section 14.9
Termination. The provisions of this Article 12 shall remain in effect until this Agreement has terminated pursuant to its
terms and all Obligations (other than inchoate indemnity obligations for which no claim has been made and any other obligations which, by their
terms, are to survive the termination of this Agreement) have been paid and satisfied in full.
Section 14.10
Representative. Each Guarantor hereby designates Borrower Representative and its representatives and agents on its
behalf for the purpose of giving and receiving all notices and other consents hereunder or under any other Financing Document and taking all other
actions on behalf of such Guarantor under the Financing Documents. Borrower Representative hereby accepts such appointment.
Section 14.11
Guarantor Acknowledgement. Without limiting the generality of the foregoing, each Guarantor, by its acceptance of this
Guaranty, hereby confirms that, except for Holdings, it is a Subsidiary of a Borrower and each Guarantor further confirms that it will materially
benefit from the Loans made hereunder and the parties hereto intend that this Guaranty not constitute a fraudulent transfer or conveyance for
purposes of the Bankruptcy Law (as defined below), the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar
federal, state or foreign law to the extent applicable to this Guaranty. In furtherance of that intention, the liabilities of each Guarantor under this
Guaranty (the “Liabilities”) shall be limited to the maximum amount that will, after giving effect to such maximum amount and all other
contingent and fixed liabilities of such Guarantor that are relevant under such laws, and after giving effect to any collections from, rights to receive
contribution from or payments made by or on behalf of any other Person with respect to the Liabilities, result in the Liabilities of such Guarantor
under this Guaranty not constituting a fraudulent transfer or conveyance. For purposes hereof, “Bankruptcy Law” means the United States
Bankruptcy Code, or any similar federal, state or foreign law for the relief of debtors. This paragraph with respect to the maximum liability of each
Guarantor is intended solely to preserve the rights of the holders, to the maximum extent not subject to avoidance under applicable law, and neither
a Guarantor nor any other Person shall have any right or claim under this paragraph with respect to such maximum liability, except to the extent
necessary so that the obligations of a Guarantor hereunder shall not be rendered voidable under applicable law. Each Guarantor agrees that the
Obligations guaranteed hereunder may at any time and from time to time exceed the maximum liability of such Guarantor without impairing this
Guaranty or affecting the rights and remedies of the holders hereunder; provided that nothing in this sentence shall be construed to increase such
Guarantor’s obligations hereunder beyond its maximum liability.
Article 15
- MISCELLANEOUS
Section 15.1
Survival. All agreements, representations and warranties made herein and in every other Financing Document shall
survive the execution and delivery of this Agreement and the other Financing Documents. The provisions of Section 2.10 and Articles 11 and 12
shall survive the payment of the Obligations (both with respect to any Lender and all Lenders collectively) and any termination of
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this Agreement and any judgment with respect to any Obligations, including any final foreclosure judgment with respect to any Security
Document, and no unpaid or unperformed, current or future, Obligations will merge into any such judgment.
Section 15.2
No Waivers. No failure or delay by Agent or any Lender in exercising any right, power or privilege under any Financing
Document shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein and therein provided shall be cumulative and not exclusive of any
rights or remedies provided by law. Any reference in any Financing Document to the “continuing” nature of any Event of Default shall not be
construed as establishing or otherwise indicating that any Credit Party has the independent right to cure any such Event of Default, but is rather
presented merely for convenience should such Event of Default be waived in accordance with the terms of the applicable Financing Documents.
Section 15.3
Notices.
(a)
All notices, requests and other communications to any party hereunder shall be in writing (including prepaid overnight
courier, e-mail or similar writing) and shall be given to such party at its address or e-mail address set forth below or on the signature pages hereof
(or, in the case of any such Lender who becomes a Lender after the date hereof, in an assignment agreement or in a notice delivered to Borrower
Representative and Agent by the assignee Lender forthwith upon such assignment) or at such other address, facsimile number or e-mail address as
such party may hereafter specify for the purpose by notice to Agent and Borrower Representative; provided, however, that notices, requests or
other communications shall be permitted by electronic means only in accordance with the provisions of Section 13.3(b) and (c). Each such notice,
request or other communication shall be effective (i) if given by electronic means, in accordance with the provisions of Section 13.3(b) and (c), or
(ii) if given by mail, prepaid overnight courier or any other means, when received or when receipt is refused at the applicable address specified by
this Section 13.3(a).
If to any Credit Party:
TDG Operations LLC, as Borrower Representative
475 Reed Rd
Dalton, GA 30720
Attn: Allen Danzey, Chief Manager
Email: Allen.Danzey@dixiegroup.com
If to Agent or to MCF (or any of its Affiliates or Approved Funds) as a Lender:
MidCap Funding IV Trust
c/o MidCap Financial Services, LLC, as servicer
7255 Woodmont Ave, Suite 300
Bethesda, MD 20814
Attn: Account Manager for Dixie Group transaction
Email: notices@midcapfinancial.com
With a copy to:
MidCap Funding IV Trust
c/o MidCap Financial Services, LLC, as servicer
7255 Woodmont Ave, Suite 300
Bethesda, MD 20814
Attn: Legal
Email: legalnotices@midcapfinancial.com
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If to any Lender other than MidCap:
at the address set forth on the signature pages to this Agreement or provided as a notice address for such in connection with any
assignment hereunder.
(b)
Notices and other communications to the parties hereto may be delivered or furnished by electronic communication
(including e-mail and Internet or intranet websites) pursuant to procedures approved from time to time by Agent, provided, however, that the
foregoing shall not apply to notices sent directly to any Lender if such Lender has notified Agent that it is incapable of receiving notices by
electronic communication. Agent or Borrower Representative may, in their discretion, agree to accept notices and other communications to them
hereunder by electronic communications pursuant to procedures approved by it, provided, however, that approval of such procedures may be
limited to particular notices or communications.
(c)
Unless Agent otherwise prescribes, (i)  notices and other communications sent to an e-mail address shall be deemed
received upon the sender’s receipt of an acknowledgment from the intended recipient (such as by the “return receipt requested” function, as
available, return e-mail or other written acknowledgment), and (ii) notices or communications posted to an Internet or intranet website shall be
deemed received upon the deemed receipt by the intended recipient at its e-mail address as described in the foregoing clause (i) of notification that
such notice or communication is available and identifying the website address therefor, provided, however, that if any such notice or other
communication is not sent or posted during normal business hours, such notice or communication shall be deemed to have been sent at the opening
of business on the next Business Day.
Section 15.4
Severability. In case any provision of or obligation under this Agreement or any other Financing Document shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such
provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 15.5
Headings. Headings and captions used in the Financing Documents (including the Exhibits, Schedules and Annexes
hereto and thereto) are included for convenience of reference only and shall not be given any substantive effect.
Section 15.6
Reserved.
Section 15.7
Waiver of Consequential and Other Damages. To the fullest extent permitted by applicable law, no Borrower shall
assert, and each Borrower hereby waives, any claim against any Indemnitee (as defined below), on any theory of liability, for special, indirect,
consequential or punitive damages (as opposed to direct or actual damages) arising out of, in connection with, or as a result of this Agreement, any
other Financing Document or any agreement or instrument contemplated hereby or thereby, the transactions contemplated hereby or thereby, any
Loan or Letter of Credit or the use of the proceeds thereof. No Indemnitee shall be liable for any damages arising from the use by unintended
recipients of any information or other materials distributed by it through telecommunications, electronic or other information transmission systems
in connection with this Agreement or the other Financing Documents or the transactions contemplated hereby or thereby.
Section 15.8
GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a)
THIS AGREEMENT, EACH NOTE AND EACH OTHER FINANCING DOCUMENT, AND ALL DISPUTES AND
OTHER MATTERS RELATING HERETO OR THERETO OR ARISING THEREFROM (WHETHER SOUNDING IN CONTRACT LAW,
TORT LAW OR OTHERWISE), SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN SECTION 5-
1401 OF THE GENERAL OBLIGATIONS LAW).
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(b)
EACH PARTY HERETO HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE STATE OF NEW YORK IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN AND IRREVOCABLY
AGREES THAT, SUBJECT TO AGENT’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE OTHER FINANCING DOCUMENTS SHALL BE LITIGATED IN SUCH COURTS. EACH PARTY HERETO
EXPRESSLY SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF
FORUM NON CONVENIENS. EACH PARTY HERETO HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND
AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON SUCH PARTY BY CERTIFIED OR REGISTERED MAIL,
RETURN RECEIPT REQUESTED, ADDRESSED TO SUCH PARTY AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND
SERVICE SO MADE SHALL BE COMPLETE WHEN DELIVERED OR NOT DELIVERABLE.
Section 15.9
WAIVER OF JURY TRIAL.
(a)
EACH CREDIT PARTY, AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT
TO TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THE FINANCING DOCUMENTS
OR THE TRANSACTIONS CONTEMPLATED THEREBY AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY. EACH CREDIT PARTY, AGENT AND EACH LENDER ACKNOWLEDGES THAT
THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH HAS RELIED ON THE
WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER FINANCING DOCUMENTS, AND THAT EACH WILL CONTINUE
TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE DEALINGS. EACH CREDIT PARTY, AGENT AND EACH LENDER
WARRANTS AND REPRESENTS THAT IT HAS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER WITH LEGAL
COUNSEL, AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS.
(b)
In the event any such action or proceeding is brought or filed in any United States federal court sitting in the State of
California or in any state court of the State of California, and the waiver of jury trial set forth in Section 12.9(a) hereof is determined or held to be
ineffective or unenforceable, the parties agree that (i) actions or proceedings shall be resolved by reference to a private judge sitting without a jury,
pursuant to California Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected
by the Presiding Judge of Los Angeles County, California; (ii) such referee shall hear and determine all of the issues in any action or proceeding
(whether of fact or of law), including issues pertaining to a “provisional remedy” as defined in California Code of Civil Procedure Section 1281.8,
including without limitation, entering restraining orders, entering temporary restraining orders, issuing temporary and permanent injunctions and
appointing receivers, and shall report a statement of decision, provided that, if during the course of any Dispute any party desires to seek such a
“provisional remedy” but a referee has not been appointed, or is otherwise unavailable to hear the request for such provisional remedy, then such
party may apply to the Los Angeles County Superior Court for such provisional relief; and (iii) pursuant to California Code of Civil Procedure
Section 644, judgment may be entered upon the decision of such referee in the same manner as if such action or proceeding had been tried directly
by a court. Such proceeding shall be conducted in Los Angeles County, California, with California rules of evidence and discovery applicable to
such proceeding. In the event any actions or proceedings are to be resolved by judicial reference, any party may seek from any court having
jurisdiction thereover any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent
permitted by Law notwithstanding that all actions or proceedings are otherwise subject to resolution by judicial reference. Each Borrower, Agent
and the Lenders further represents and warrants and represents that it has reviewed this consent and agreement with legal counsel of its own
choosing, or has had an opportunity to do so, and that it knowingly and voluntarily gives this consent and enters into this Agreement having had
the opportunity to consult with legal counsel. This consent and agreement is irrevocable, meaning that it may not be modified either orally or in
writing, and this consent and agreement shall apply to any subsequent amendments, renewals, supplements, or modifications to this Agreement or
any other agreement or document entered into between the parties in connection with this Agreement. In the event of litigation,
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this Agreement may be filed as evidence of either or both parties’ consent and agreement to have any and all actions and proceedings heard and
determined by a referee under California Code of Civil Procedure Section 638. Notwithstanding anything to the contrary contained herein, the
parties acknowledge and agree that this provision shall have no application to any non-judicial foreclosure of all or any portion of the Collateral
constituting real property (whether pursuant to the provisions of the Financing Documents or applicable law).
(c)
Notwithstanding anything to the contrary contained in this Agreement, each Borrower, Agent and the Lenders understand,
acknowledge and agree that (i) the provisions of Section 13.9(b) of this Agreement above shall have no application to any non-judicial foreclosure
and/or private (i.e., non-judicial) sale under the California Commercial Code as to all or any portion of Collateral constituting real property
whether pursuant to the provisions of the Financing Documents or applicable law; provided, however, in the event Borrower contests the same,
then the provisions of Section 13.9(b) above shall apply to any actions or proceedings arising therefrom (but not the non-judicial foreclosure
proceeding, which may remain pending), and (ii) the provisions of Section 13.9(b) above shall not be deemed to be a waiver by, or a limitation
upon, the rights of Agent or the Lenders to proceed with a non-judicial foreclosure or private sale under said Commercial Code as a permitted
remedy hereunder or under applicable law.
Section 15.10
Publication; Advertisement.
(a)
Publication. Except for SEC filings, no Credit Party will directly or indirectly publish, disclose or otherwise use in any
public disclosure, advertising material, promotional material, press release or interview, any reference to the name, logo or any trademark of MCF
or any of its Affiliates or any reference to this Agreement or the financing evidenced hereby, in any case except (i) as required by Law, subpoena or
judicial or similar order, in which case the applicable Credit Party shall give Agent prior written notice of such publication or other disclosure, or
(ii) with MCF’s prior written consent.
(b)
Advertisement. Each Lender and each Credit Party hereby authorizes MCF to publish the name of such Lender and Credit
Party, the existence of the financing arrangements referenced under this Agreement, the primary purpose and/or structure of those arrangements,
the amount of credit extended under each facility, the title and role of each party to this Agreement, and the total amount of the financing
evidenced hereby in any “tombstone”, comparable advertisement or press release which MCF elects to submit for publication. In addition, each
Lender and each Credit Party agrees that MCF may provide lending industry trade organizations with information necessary and customary for
inclusion in league table measurements after the Closing Date. Notwithstanding the foregoing to the contrary, MCF shall provide Borrowers with
an opportunity to review and approve, in Borrowers’ sole discretion, the contents of any such tombstone, advertisement or information, as
applicable, prior to its submission for publication and, following such review period, MCF may, from time to time, publish such information in any
media form desired by MCF, until such time that Borrowers shall have requested MCF cease any such further publication.
Section 15.11
Counterparts; Integration. This Agreement and the other Financing Documents may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.
Signatures by facsimile or by electronic mail delivery of an electronic version of any executed signature page shall bind the parties hereto. In
furtherance of the foregoing, the words “execution”, “signed”, “signature”, “delivery” and words of like import in or relating to any document to
be signed in connection with this Agreement and the transactions contemplated hereby or thereby shall be deemed to include Electronic
Signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a
manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as
provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on the Uniform Electronic Transactions Act.   As used herein,
“Electronic Signature” means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a
Person with the intent to sign, authenticate or accept such contract or other record. This Agreement and
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the other Financing Documents constitute the entire agreement and understanding among the parties hereto and supersede any and all prior
agreements and understandings, oral or written, relating to the subject matter hereof.
Section 15.12
No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In
the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and
no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.
Section 15.13
Lender Approvals. Unless expressly provided herein to the contrary, any approval, consent, waiver or satisfaction of
Agent or Lenders with respect to any matter that is the subject of this Agreement, the other Financing Documents may be granted or withheld by
Agent and Lenders in their sole and absolute discretion and credit judgment.
Section 15.14
Expenses; Indemnity.
(a)
Except with respect to Indemnified Taxes, Other Taxes and Excluded Taxes, which shall be governed exclusively by
Section 2.8, Credit Parties hereby agree to promptly pay (i) all reasonable costs and expenses of Agent (including, without limitation, the fees,
costs and expenses of counsel to, and independent appraisers and consultants retained by Agent) in connection with the examination, review, due
diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated by the Financing Documents, in
connection with the performance by Agent of its rights and remedies under the Financing Documents and in connection with the continued
administration of the Financing Documents including (A)  any amendments, modifications, consents and waivers to and/or under any and all
Financing Documents, and (B) any periodic public record searches conducted by or at the request of Agent (including, without limitation, title
investigations, UCC searches, fixture filing searches, judgment, pending litigation and tax lien searches and searches of applicable corporate,
limited liability, partnership and related records concerning the continued existence, organization and good standing of certain Persons);
(ii) without limitation of the preceding clause (i), all reasonable costs and expenses of Agent in connection with the creation, perfection and
maintenance of Liens pursuant to the Financing Documents; (iii) without limitation of the preceding clause (i), all costs and expenses of Agent in
connection with (A) protecting, storing, insuring, handling, maintaining or selling any Collateral, (B) any litigation, dispute, suit or proceeding
relating to any Financing Document, and (C) any workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and
all of the Financing Documents; (iv) without limitation of the preceding clause (i), all costs and expenses of Agent in connection with Agent’s
reservation of funds in anticipation of the funding of the initial Loans to be made hereunder; and (v) all costs and expenses incurred by Lenders in
connection with any litigation, dispute, suit or proceeding relating to any Financing Document, other than disputes solely among Lenders and/or
Agent (other than any claims against such person in its capacity or in fulfilling its role as Agent, arranger or any similar role hereunder) to the
extent such disputes do not arise from any act or omission of any Credit Party or of any Affiliate of a Credit Party, and in connection with any
workout, collection, bankruptcy, insolvency and other enforcement proceedings under any and all Financing Documents, whether or not Agent or
Lenders are a party thereto. If Agent or any Lender uses in-house counsel for any of these purposes following the occurrence and during the
continuance of an Event of Default, Credit Parties further agree that the Obligations include reasonable charges for such work commensurate with
the fees that would otherwise be charged by outside legal counsel selected by Agent or such Lender for the work performed.
(b)
Each Credit Party hereby agrees to indemnify, pay and hold harmless Agent and Lenders and the officers, directors,
employees, trustees, agents, investment advisors and investment managers, collateral managers, servicers, and counsel of Agent and Lenders
(collectively called the “Indemnitees”) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and disbursements of any kind or nature whatsoever (including the documented out-of-pocket fees and disbursements of
counsel for such Indemnitee) in connection with any investigative, response, remedial, administrative or judicial matter or proceeding, whether or
not such Indemnitee shall be designated a party thereto and including any such proceeding initiated by or on behalf of a Credit Party, and the
reasonable expenses of investigation by engineers, environmental consultants
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and similar technical personnel and any commission, fee or compensation claimed by any broker (other than any broker retained by Agent or
Lenders) asserting any right to payment for the transactions contemplated hereby, which may be imposed on, incurred by or asserted against such
Indemnitee as a result of or in connection with the transactions contemplated hereby or by the other Financing Documents (including (i)(A) as a
direct or indirect result of the presence on or under, or escape, seepage, leakage, spillage, discharge, emission or release from, any property now or
previously owned, leased or operated by a Credit Party, any Subsidiary or any other Person of any Hazardous Materials, (B) arising out of or
relating to the offsite disposal of any materials generated or present on any such property, or (C) arising out of or resulting from the environmental
condition of any such property or the applicability of any governmental requirements relating to Hazardous Materials, whether or not occasioned
wholly or in part by any condition, accident or event caused by any act or omission of Credit Party or any Subsidiary, and (ii) proposed and actual
extensions of credit under this Agreement) and the use or intended use of the proceeds of the Loans and Letters of Credit, except that Credit Parties
shall have no obligation hereunder to an Indemnitee with respect to any liability resulting from the gross negligence or willful misconduct of such
Indemnitee, as determined by a final non-appealable judgment of a court of competent jurisdiction. To the extent that the undertaking set forth in
the immediately preceding sentence may be unenforceable, each Credit Party shall contribute the maximum portion which it is permitted to pay
and satisfy under applicable Law to the payment and satisfaction of all such indemnified liabilities incurred by the Indemnitees or any of them.
This Section 13.14(b) shall not apply with respect to Taxes other than any Taxes that represent liabilities, obligations, losses, damages, claims etc.
arising from any non-Tax claim.
(c)
Notwithstanding any contrary provision in this Agreement, the obligations of Credit Parties under this Section 13.14 shall
survive the payment in full of the Obligations and the termination of this Agreement. NO INDEMNITEE SHALL BE RESPONSIBLE OR
LIABLE TO THE CREDIT PARTIES OR TO ANY OTHER PARTY TO ANY FINANCING DOCUMENT, ANY SUCCESSOR, ASSIGNEE OR
THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR
INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT OF CREDIT
HAVING BEEN EXTENDED, SUSPENDED OR TERMINATED UNDER THIS AGREEMENT OR ANY OTHER FINANCING DOCUMENT
OR AS A RESULT OF ANY OTHER TRANSACTION CONTEMPLATED HEREUNDER OR THEREUNDER.
(d)
Each Borrower for itself and all endorsers, guarantors and sureties and their heirs, legal representatives, successors and
assigns, hereby further specifically waives any rights that it may have under Section 1542 of the California Civil Code (to the extent applicable),
which provides as follows: “A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER
MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR,” and further waives any similar rights under
applicable Laws.
Section 15.15
[Reserved].
Section 15.16
Reinstatement. This Agreement shall remain in full force and effect and continue to be effective should any petition or
other proceeding be filed by or against any Credit Party for liquidation or reorganization, should any Credit Party become insolvent or make an
assignment for the benefit of any creditor or creditors or should an interim receiver, receiver, receiver and manager or trustee be appointed for all
or any significant part of any Credit Party’s assets, and shall continue to be effective or to be reinstated, as the case may be, if at any time payment
and performance of the Obligations, or any part thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be
restored or returned by any obligee of the Obligations, whether as a fraudulent preference reviewable transaction or otherwise, all as though such
payment or performance had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the
Obligations shall be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.
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Section 15.17
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Credit Parties and Agent
and each Lender and their respective successors and permitted assigns.
Section 15.18
USA PATRIOT Act Notification. Agent (for itself and not on behalf of any Lender) and each Lender hereby notifies the
Credit Parties that pursuant to the requirements of the USA PATRIOT Act, it is required to obtain, verify and record certain information and
documentation that identifies the Credit Parties, which information includes the name and address of the Credit Parties and such other information
that will allow Agent or such Lender, as applicable, to identify the Credit Parties in accordance with the USA PATRIOT Act.
Section 15.19
Acknowledgement and Consent to Bail-In of Affected Financial Institutions. Notwithstanding anything to the contrary
in any Financing Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that
any liability of any Affected Financial Institution arising under any Financing Document, to the extent such liability is unsecured, may be subject
to the Write-Down and Conversion Powers of the applicable Resolution Authority and agrees and consents to, and acknowledges and agrees to be
bound by:
(a)
the application of any Write-Down and Conversion Powers by the applicable Resolution Authority to any such liabilities
arising hereunder which may be payable to it by any party hereto that is an Affected Financial Institution; and
(b)
the effects of any Bail-In Action on any such liability, including, if applicable:
(i)
a reduction in full or in part or cancellation of any such liability;
(ii)
a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such Affected
Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such
shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement
or any other Financing Document; or
(iii)
the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion
Powers of the applicable Resolution Authority.
[SIGNATURES APPEAR ON FOLLOWING PAGES]
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IN WITNESS WHEREOF, intending to be legally bound, each of the parties have caused this Agreement to be executed the day and
year first above mentioned.
BORROWERS:
TDG OPERATIONS, LLC, a Georgia limited liability company
By: ______________________________________
Name: ___________________________________
Title: ____________________________________
THE DIXIE GROUP, INC., a Tennessee corporation
By: ______________________________________
Name: ___________________________________
Title: ____________________________________

AGENT:
MIDCAP FUNDING IV TRUST
By:     Apollo Capital Management, L.P.,
         its investment manager
By:     Apollo Capital Management GP, LLC,
    its general partner
    By: ________________________________
    Name:                         
    Title:     Authorized Signatory
Payment Account Designation
Wells Fargo Bank, N.A. (McLean, VA)
ABA #: 121-000-248
Account Name: MidCap Funding IV Trust- Collections
Account #: 2000036282803
Attention: Dixie Group transaction

LENDER:
MIDCAP FINANCIAL TRUST
By:     Apollo Capital Management, L.P.,
         its investment manager
By:     Apollo Capital Management GP, LLC,
    its general partner
    By: ________________________________
    Name:                         
    Title:     Authorized Signatory
Address:
c/o MidCap Financial Services, LLC, as servicer
7255 Woodmont Avenue, Suite 300
Bethesda, Maryland 20814
Attn: Account Manager for Dixie Group transaction
Facsimile: 301-941-1450

ANNEXES, EXHIBITS AND SCHEDULES
ANNEXES
Annex A
Commitment Annex
Annex B
Fiscal Months
EXHIBITS
Exhibit A
[Reserved]
Exhibit B
Form of Compliance Certificate
Exhibit C
Borrowing Base Certificate
Exhibit D
Form of Notice of Borrowing
Exhibit E
[Reserved]
Exhibit F-1
Form of U.S. Tax Compliance Certificate
Exhibit F-2
Form of U.S. Tax Compliance Certificate
Exhibit F-3
Form of U.S. Tax Compliance Certificate
Exhibit F-4
Exhibit G
Form of U.S. Tax Compliance Certificate
Closing Checklist
SCHEDULES
Schedule 3.1
Existence, Organizational ID Numbers, Foreign Qualification, Prior Names
Schedule 3.4
Capitalization
Schedule 3.6
Litigation
Schedule 3.14
ERISA
Schedule 3.17
Material Contracts
Schedule 3.18
Environmental Compliance
Schedule 3.19
Intellectual Property
Schedule 4.9
Litigation, Governmental Proceedings and Other Notice Events
Schedule 5.1
Debt; Contingent Obligations
Schedule 5.2
Liens
Schedule 5.7
Permitted Investments
Schedule 5.8
Affiliate Transactions
Schedule 5.11
Business Description
Schedule 5.14
Deposit Accounts and Securities Accounts
Schedule 7.4
Post-Closing Obligations
Schedule 9.1
Collateral
Schedule 9.2(b)
Schedule 9.2(d)
Location of Collateral
Chattel Paper, Letters of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property

ANNEX A TO CREDIT AGREEMENT (COMMITMENT ANNEX)
Lender
Revolving Loan
Commitment Amount
Revolving Loan
Commitment
Percentage
MidCap Financial Trust
$75,000,000
100%
TOTALS
$75,000,000
100%

ANNEX B TO CREDIT AGREEMENT (FISCAL MONTHS)
Fiscal Month
Year
Start Date
End Date
January
2025
December 29, 2024
February 1, 2025
February
2025
February 2, 2025
March 1, 2025
March
2025
March 2, 2025
March 29, 2025
April
2025
March 30, 2025
May 3, 2025
May
2025
May 4, 2025
May 31, 2025
June
2025
June 1, 2025
June 28, 2025
July
2025
June 29, 2025
August 2, 2025
August
2025
August 3, 2025
August 30, 2025
September
2025
August 31, 2025
September 27, 2025
October
2025
September 28, 2025
November 1, 2025
November
2025
November 2, 2025
November 29, 2025
December
2025
November 30, 2025
December 27, 2025
January
2026
December 28, 2025
January 31, 2026
February
2026
February 1, 2026
February 28, 2026
March
2026
March 1, 2026
March 28, 2026
April
2026
March 29, 2026
May 2, 2026
May
2026
May 3, 2026
May 30, 2026
June
2026
May 31, 2026
June 27, 2026
July
2026
June 28, 2026
August 1, 2026
August
2026
August 2, 2026
August 29, 2026
September
2026
August 30, 2026
September 26, 2026
October
2026
September 27, 2026
October 31, 2026
November
2026
November 1, 2026
November 28, 2026
December
2026
November 29, 2026
December 26, 2026
January
2027
December 27, 2026
January 30, 2027
February
2027
January 31, 2027
February 27, 2027
March
2027
February 28, 2027
March 27, 2027
April
2027
March 28, 2027
May 1, 2027
May
2027
May 2, 2027
May 29, 2027
June
2027
May 30, 2027
June 26, 2027
July
2027
June 27, 2027
July 31, 2027
August
2027
August 1, 2027
August 28, 2027
September
2027
August 29, 2027
September 25, 2027
October
2027
September 26, 2027
October 30, 2027
November
2027
October 31, 2027
November 27, 2027

December
2027
November 28, 2027
December 25, 2027
January
2028
December 26, 2027
January 29, 2028
February
2028
January 30, 2028
February 26, 2028
March
2028
February 27, 2028
March 25, 2028
April
2028
March 26, 2028
April 29, 2028
May
2028
April 30, 2028
May 27, 2028
June
2028
May 28, 2028
June 24, 2028
July
2028
June 25, 2028
July 29, 2028
August
2028
July 30, 2028
August 26, 2028
September
2028
August 27, 2028
September 23, 2028
October
2028
September 24, 2028
October 28, 2028
November
2028
October 29, 2028
November 25, 2028
December
2028
November 26, 2028
December 30, 2028

EXHIBIT A TO CREDIT AGREEMENT (RESERVED)

EXHIBIT B TO CREDIT AGREEMENT (FORM OF COMPLIANCE CERTIFICATE)
COMPLIANCE CERTIFICATE
Date: __________, 202__
This Compliance Certificate is given by _____________________, a Responsible Officer of TDG OPERATIONS, LLC (the “Borrower
Representative”), pursuant to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025 among Borrower
Representative, The Dixie Group, Inc., any additional Borrower that may hereafter be added thereto (collectively, “Borrowers”), the Guarantors
party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial institutions or other entities from time to time
parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.
The undersigned Responsible Officer hereby certifies to Agent and Lenders that:
(a)
the financial statements delivered with this certificate in accordance with Section  4.1 of the Credit Agreement fairly
present in all material respects the results of operations and financial condition of Borrowers and their Consolidated Subsidiaries as of the dates
and the accounting period covered by such financial statements;
(b)
the representations and warranties of each Credit Party contained in the Financing Documents are true, correct and
complete in all material respects on and as of the date hereof, except to the extent that any such representation or warranty relates to a specific date
in which case such representation or warranty shall be true and correct in all material respects as of such earlier date; provided, however, in each
case, such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in
the text thereof;
(c)
no Default or an Event of Default has occurred and is continuing, except as set forth in Schedule 1 hereto, which includes
a description of the nature and period of existence of such Default or an Event of Default and what action Borrowers have taken, are undertaking
and propose to take with respect thereto;
(d)
except as noted on Schedule 2 attached hereto, Schedule 9.2(b) to the Credit Agreement contains a complete and accurate
list of all business locations of Borrowers and Guarantors and all names under which Borrowers and Guarantors currently conduct business and
required to be disclosed pursuant to Article 9 of the Credit Agreement; Schedule 2 specifically notes any changes in the names under which any
Borrower or Guarantors conduct business;
(e)
except as noted on Schedule 3 attached hereto, the undersigned has no knowledge of (i) any federal or state tax liens
having been filed against any Borrower, Guarantor or any Collateral or (ii) any failure of any Borrower or any Guarantors to make required
payments of withholding or other tax obligations of any Borrower or any Guarantors during the accounting period to which the attached statements
pertain or any subsequent period that are required to be made in accordance with Section 4.2;
(f)
except as noted on Schedule 4 attached hereto, or as the Borrower may have notified Agent on any Schedule 4 to any
previous Compliance Certificate, Schedule 5.14 to the Credit Agreement contains a complete and accurate statement of all deposit accounts and
investment accounts maintained by Borrowers and Guarantors;
Exhibit B – Page 1

(g)
except as noted on Schedule 5 attached hereto, or as the Borrower Representative may have notified Agent on any
Schedule 5 to any previous Compliance Certificate, Schedule 3.19 to the Credit Agreement is true and correct in all material respects;
(h)
except as noted on Schedule  6 attached hereto, or as the Borrower Representative may have notified Agent on any
Schedule 6 to any previous Compliance Certificate, no Borrower or Guarantor has acquired, by purchase or otherwise, any Chattel Paper,
Instruments, Documents or Investment Property that is required to be disclosed pursuant to Section 9.2 of the Credit Agreement;
(i)
except as noted on Schedule  7 attached hereto, or as the Borrower Representative may have notified Agent on any
Schedule 6 to any previous Compliance Certificate, no Borrower or Guarantor is aware of any commercial tort claim that that is required to be
disclosed pursuant to Section 9.2 of the Credit Agreement;
(j)
the aggregate amount of cash and Cash Equivalents held by Credit Parties (on a consolidated basis) as of the date hereof is
$[________];
(k)
EBITDA for the Defined Period ending as of the date hereof is $[____], as demonstrated by the calculations thereof in the
attached worksheets. Such calculations and the certifications contained therein are true, correct and complete; and
(l)
the Fixed Charge Coverage Ratio as of the date hereof is [___] to 1.00, as demonstrated by the calculations thereof in the
attached worksheets. Such calculations and the certifications contained therein are true, correct and complete.
The foregoing certifications and computations are made as of ________________, 202__ (end of Fiscal Month) and as of _____________,
202__.
Sincerely,
TDG OPERATIONS, LLC, a Georgia
limited liability company
By:
Name:
Title:
Exhibit B – Page 2

EBITDA Worksheet (Attachment to Compliance Certificate)
EBITDA for the applicable Defined Period is calculated as follows:
Net income (or loss) for the Defined Period of Borrowers and their Consolidated Subsidiaries, but excluding:
(a) the income (or loss) of any Person (other than Subsidiaries of Borrowers) in which Borrowers or any of their
Subsidiaries has an ownership interest unless received by Borrower or their Subsidiary in a cash distribution; and
(b) the income (or loss) of any Person accrued prior to the date it became a Subsidiary of Borrowers or is merged
into or consolidated with Borrowers
$___________
(1) Plus:    Any provision for (or minus any benefit from) income and franchise taxes deducted in the
determination of net income for the Defined Period
$___________
(2) Plus:    Interest expense, net of interest income, deducted in the determination of net income for the Defined
Period
$___________
(3) Plus:    Amortization and depreciation deducted in the determination of net income for the Defined Period
$___________
(4) Plus:    Any non-cash compensation charge or expense, including any such charge or expense arising from the
grants of stock appreciation or similar rights, stock options, restricted stock or other rights or equity
incentive programs or any other equity-based compensation
$___________
(5) Plus:    Any expenses attributable to the restructuring and consolidation of the Credit Parties’ east coast
manufacturing operations; provided, however, the amounts increasing EBITDA pursuant to this clause
shall not exceed the lesser of (x) $500,000 and (y) 10.0% of EBITDA (in each case, calculated after
giving effect to any adjustment pursuant to this clause for any Defined Period)
$___________
(6) Plus:    Any net losses not resulting from the operations of the Credit Parties
$___________
Exhibit B – Page 3

(7) Plus:    Any non-cash expenses, charges and losses (including reserves, impairment charges or asset write-
offs, write-offs of deferred financing fees, losses from investments recorded using the equity method,
non-cash rent expense and non-cash lease accretion expense), in each case other than (A) any non-cash
charge representing amortization of a prepaid cash item that was paid and not expensed in a prior period
and (B) any non-cash charge relating to write-offs, write-downs or reserves with respect to accounts
receivable or inventory; provided that if any non-cash charges referred to in this clause represents an
accrual or reserve for potential cash items in any future period, (1) Borrower Representative may elect
not to add back such non-cash charge in the current period and (2) to the extent Borrower Representative
elects to add back such non-cash charge, the cash payment in respect thereof in such future period shall
be subtracted from EBITDA in such future period to such extent paid; provided further that no expenses,
charges or losses in respect of write-offs or write-downs shall be permitted to be added back in reliance
on this clause if arising from write-offs or write-downs of assets included in the Borrowing Base
$___________
(8) Less:    Without duplication, (i) non-cash gains (excluding any non-cash gain to the extent it represents the
reversal of an accrual or reserve for a potential cash item that reduced EBITDA in any prior period), (ii)
any net income or gains not resulting from the operations of the Credit Parties and (iii) any net income or
gains resulting from disposed, abandoned or discontinued operations (excluding held-for-sale
discontinued operations until actually disposed of); provided that, for the avoidance of doubt, any gain
representing the reversal of any non-cash charge referred to in clause (7) above for a prior period shall be
added (together with, without duplication, any amounts received in respect thereof to the extent not
increasing EBITDA) to EBITDA in any subsequent period to such extent so reversed (or received)
$___________
EBITDA for the Defined Period:
$___________
Minimum EBITDA Threshold for the Defined Period:
$___________
In compliance?:
[Yes][No]
Exhibit B – Page 4

Fixed Charge Coverage Ratio Worksheet (Attachment to Compliance Certificate)
Fixed Charges for the applicable Defined Period is calculated as follows:
Interest expense, net of interest income, interest paid in kind and amortization of capitalized fees and expenses
incurred to consummate the transactions contemplated by the Financing Documents and included in interest
expense, included in the determination of net income of Borrowers and their Consolidated Subsidiaries for the
Defined Period
$___________
Plus:    any cash payment of (or minus any cash refund with respect to) income or franchise taxes included in the
determination of net income for the Defined Period
$___________
Plus:    Payments of principal and interest for the Defined Period with respect to all Debt (including the portion
of scheduled payments under Capital Leases allocable to principal and excluding scheduled repayments
of Revolving Loans and other Debt subject to reborrowing to the extent not accompanied by a concurrent
and permanent reduction of the Revolving Loan Commitment (or equivalent loan commitment))
$___________
Plus:    Permitted Distributions (including, without limitation, all Investment Management Fees and Support
Fees) paid in cash in the Defined Period
$___________
Fixed Charges for the applicable Defined Period:
$___________
Operating Cash Flow for the applicable Defined Period is calculated as follows:
EBITDA for the Defined Period (calculated pursuant to the EBITDA Worksheet)
$___________
Minus:    Unfinanced Capital Expenditures for the Defined Period
$___________
Minus:    To the extent not already reflected in the calculation of EBITDA, other capitalized costs, defined as the
gross amount paid in cash and capitalized during the Defined Period, as long term assets, other than
amounts capitalized during the Defined Period as Capital Expenditures for property, plant and
equipment or similar fixed asset accounts
$___________
Operating Cash Flow for the Defined Period:
$___________
Fixed Charge Coverage Ratio (Ratio of Operating Cash Flow to Fixed Charges) for the Defined Period
___ to 1.0
Exhibit B – Page 5

EXHIBIT C TO CREDIT AGREEMENT (FORM OF BORROWING BASE CERTIFICATE)
[See attached]
EXHIBIT D TO CREDIT AGREEMENT (FORM OF NOTICE OF BORROWING)
NOTICE OF BORROWING
This Notice of Borrowing is given by _____________________, a Responsible Officer of TDG OPERATIONS, LLC (the “Borrower
Representative”), pursuant to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025, among the Borrower
Representative, The Dixie Group, Inc., any additional Borrower that may be hereafter added thereto (collectively, “Borrowers”), the Guarantors
party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial institutions or other entities from time to time
parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented or otherwise modified from time to time, the
“Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set forth in the Credit Agreement.
The undersigned Responsible Officer hereby gives notice to Agent of Borrower Representative’s request to on _______________, 202__
borrow $_______________ of Loans on         , 202    . Attached is the most recent monthly Borrowing Base Certificate complying in all respects
with the Credit Agreement and confirming that, after giving effect to the requested advance, the Revolving Loan Outstandings will not exceed the
Revolving Loan Limit.
The undersigned officer hereby certifies that, both before and after giving effect to the request above (a) each of the conditions precedent
set forth in Section 7.2 have been satisfied, (b) all of the representations and warranties contained in the Credit Agreement and the other Financing
Documents are true, correct and complete as of the date hereof, except to the extent such representation or warranty relates to a specific date, in
which case such representation or warranty is true, correct and complete as of such earlier date, and (c)  no Default or Event of Default has
occurred and is continuing on the date hereof.
IN WITNESS WHEREOF, the undersigned officer has executed and delivered this Notice of Borrowing this ____ day of ___________,
202__.
Sincerely,
TDG OPERATIONS, LLC, a Georgia
limited liability company
By:
Name:
Title:

EXHIBIT E TO CREDIT AGREEMENT (RESERVED)

Exhibit F-1 to Credit Agreement (Form of U.S. Tax Compliance Certificate)
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025, among the TDG
Operations, LLC (the “Borrower Representative”), The Dixie Group, Inc., any additional Borrower that may hereafter be added thereto
(collectively, “Borrowers”), the Guarantors party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial
institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record
and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) it is not
a bank within the meaning of Section 881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of
Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of
the Code.
The undersigned has furnished Agent and the Borrower Representative with a certificate of its non-U.S. Person status on IRS
Form W-8BEN or IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower Representative and Agent, and (2) the undersigned shall have at all
times furnished the Borrower Representative and Agent with a properly completed and currently effective certificate in either the calendar year in
which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER]
By:    
Name:
Title:
Date: ________ __, 20[ ]

Exhibit F-2 to Credit Agreement (Form of U.S. Tax Compliance Certificate)
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025, among the TDG
Operations, LLC (the “Borrower Representative”), The Dixie Group, Inc., any additional Borrower that may hereafter be added thereto
(collectively, “Borrowers”), the Guarantors party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial
institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record
and beneficial owner of the participation in respect of which it is providing this certificate, (ii) it is not a bank within the meaning of Section
881(c)(3)(A) of the Code, (iii) it is not a ten percent shareholder of any Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (iv)
it is not a controlled foreign corporation related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN or
IRS Form W-8BEN-E. By executing this certificate, the undersigned agrees that (1) if the information provided on this certificate changes, the
undersigned shall promptly so inform such Lender in writing, and (2) the undersigned shall have at all times furnished such Lender with a properly
completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the
two calendar years preceding such payments.
[NAME OF PARTICIPANT]
By:    
Name:
Title:
Date: ________ __, 20[ ]

Exhibit F-3 to Credit Agreement (Form of U.S. Tax Compliance Certificate)
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025, among the TDG
Operations, LLC (the “Borrower Representative”), The Dixie Group, Inc., any additional Borrower that may hereafter be added thereto
(collectively, “Borrowers”), the Guarantors party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial
institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record
owner of the participation in respect of which it is providing this certificate, (ii) its direct or indirect partners/members are the sole beneficial
owners of such participation, (iii) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a
bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)
(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower within the meaning of Section
871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation related to any Borrower as
described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from
each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS
Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform such Lender and (2) the undersigned shall have at all times furnished such Lender
with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or
in either of the two calendar years preceding such payments.
[NAME OF PARTICIPANT]
By:    
Name:
Title:
Date: ________ __, 20[ ]

Exhibit F-4 to Credit Agreement (Form of U.S. Tax Compliance Certificate)
U.S. TAX COMPLIANCE CERTIFICATE
(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Reference is made to that certain Credit, Security and Guaranty Agreement dated as of February 25, 2025, among the TDG
Operations, LLC (the “Borrower Representative”), The Dixie Group, Inc., any additional Borrower that may hereafter be added thereto
(collectively, “Borrowers”), the Guarantors party from time to time thereto, MidCap Funding IV Trust, individually as Agent, and the financial
institutions or other entities from time to time parties hereto, each as a Lender (as such agreement may have been amended, restated, supplemented
or otherwise modified from time to time, the “Credit Agreement”). Capitalized terms used herein without definition shall have the meanings set
forth in the Credit Agreement.
Pursuant to the provisions of Section 2.8(c) of the Credit Agreement, the undersigned hereby certifies that (i) it is the sole record
owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (ii) its direct or indirect
partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (iii) with respect to the
extension of credit pursuant to this Credit Agreement or any other Financing Document, neither the undersigned nor any of its direct or indirect
partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the
meaning of Section 881(c)(3)(A) of the Code, (iv) none of its direct or indirect partners/members is a ten percent shareholder of any Borrower
within the meaning of Section 871(h)(3)(B) of the Code and (v) none of its direct or indirect partners/members is a controlled foreign corporation
related to any Borrower as described in Section 881(c)(3)(C) of the Code.
The undersigned has furnished Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from
each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or IRS Form W-8BEN-E or (ii) an IRS
Form W-8IMY accompanied by an IRS Form W-8BEN or IRS Form W-8BEN-E from each of such partner’s/member’s beneficial owners that is
claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (1) if the information provided on this
certificate changes, the undersigned shall promptly so inform the Borrower and Agent, and (2) the undersigned shall have at all times furnished the
Borrower and Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made
to the undersigned, or in either of the two calendar years preceding such payments.
[NAME OF LENDER]
By: _______________________    
Name: ________________________
Title: ________________________
Date: ________ __, 20[ ]

Exhibit G to Credit Agreement (Closing Checklist)
[See Attached.]

Schedule 3.1 – Existence, Organizational ID Numbers, Foreign Qualification, Prior Names



Schedule 3.4 – Credit Parties’ Organizational Chart
[SEE PAGE THAT FOLLOWS FOR CAP SCHEDULE & STOCK SUMMARY]
i

CAPITALIZATION SCHEDULE*
Class
Authorized
Outstanding as of October 25, 2024
Common Stock, $3 Par Value
80,000,000 shares
14,012,784 shares
Class B Common Stock, $3
Par Value
16,000,000 shares
1,249,302 shares
Class C Common Stock, $3
Par Value
200,000,000 shares
0 shares
Preferred Stock
16,000,000 shares
0 shares
Total
312,000,000 shares
15,262,086 shares
* Values derived from Dixie Group 10-Q Filing of October 28, 2024; Common Stock is publicly traded
STOCK SUMMARIES
Class C Common Stock
Dividends
Holders of Class C Common Stock and Common Stock are entitled to participate ratably (based on the number of shares held) in
dividends when the Board of Directors declares dividends on shares of Common Stock out of funds legally available for
dividends. No dividend may be declared and paid to holders of Class B Common Stock unless an equal or greater dividend per
share has been paid to holders of Class C Common Stock and Common Stock.
Voting Rights
Holders of Class C Common Stock are entitled to 1/20th vote per share.
Liquidation Rights
In the event of our liquidation, dissolution or winding-up, holders of Class C Common Stock, Common Stock and Class B
Common Stock have the right to a ratable portion of assets remaining after satisfaction in full of the prior rights of our creditors,
all liabilities, and any liquidation preferences of any outstanding shares of Preferred Stock.
Class B Common Stock**
Voting Rights
The charter provides that holders of Class B Common Stock are entitled to 20 votes per share.
**As of September 2024, the shares of Class B Common Stock outstanding were principally beneficially owned by Daniel K. Frierson, his son, D. Kennedy Frierson, Jr., and
members of their family, representing approximately 60% of the eligible number of votes that may be cast with respect to any matter to be voted on by shareholders. The Charter
restricts transfers of shares of Class B Common Stock to parties other than the Company or those having specified relationships to the current holders. As a result, holders of Class
B Common Stock, particularly Daniel K. Frierson, will have significant influence over the management and affairs of the Company and over all matters requiring shareholder
approval, including election of directors and significant corporate transactions, such as a merger or other sale of the Company or its assets, and further, holders of the Common
Stock and Class C Common Stock will have a limited ability to influence corporate matters for the foreseeable future.
ii

Schedule 3.6 – Litigation
The Borrower has been sued together with numerous other defendants in two civil actions related to alleged damages to the plaintiffs’ real
property due to the presence of per- and polyfluoroalkyl substances (“PFAS”) and related chemicals on those properties. The first lawsuit was filed
on January 22, 2024, in the Superior Court of Gordon County, Georgia, styled Moss Land Company, LLC and Revocable Living Trust of William
Darryl Edwards, by and through William Darryl Edwards, Trustee, et al. vs. City of Calhoun, Georgia et al., Civil Action Number 24CV73929.
The second lawsuit was filed on May 7, 2024, in the Superior Court of Gordon County, Georgia, styled William Hartwell Brooks, et al. v. City of
Calhoun, Georgia et al., Civil Action Number 24CV74289. The defendants include the City of Calhoun Georgia, several other carpet
manufacturers, and certain manufacturers and sellers of chemicals containing PFAS. In both cases, the City of Calhoun, Georgia has filed cross-
claims against numerous of the defendants, including the Borrower, related to alleged damages resulting from the treatment of wastewater
containing PFAS.
In both cases, the plaintiffs are landowners located in Gordon County Georgia seeking compensation for alleged damages to their real
property, injunctions from alleged further damage to their property, and abatement of alleged nuisance related to the presence of PFAS and related
chemicals on their property. The plaintiffs allege that such chemicals are found on their real property as a result of “sludge” deposits made directly
on their property or to adjacent property by the City of Calhoun as a byproduct of treating water containing such chemicals used by manufacturing
operations in and around Gordon County, Georgia. No specific amount of damages has been demanded. The Borrower has answered both
complaints; has denied liability and is defending the matters vigorously.
On January 28, 2025, a complaint was filed in the Superior Court of Gordon County, Georgia naming the Borrower, together with fifteen
other defendants including certain chemical manufacturers and the City of Calhoun Georgia seeking monetary and injunctive relief for alleged
damage to plaintiffs’ property because of contamination of that property with PFAS manufactured by or used by the defendants and, as alleged,
deposited on certain other property by defendant City of Calhoun. The complaint is styled: James A. Haley Stephens and Pamela J. Stephens,
Plaintiffs vs 3M Company et al; case no. 25CV75072] The complaint alleges several causes of action against the defendants based principally on
the alleged deposit of sludge containing PFAS on property near or adjacent to Plaintiff’s property. Service has been accepted on behalf of the
Borrower, and although no answer has yet been filed, the Borrower intends to deny liability and defend the matter vigorously.
On April 22, 2024, the Borrower was sued in the Circuit Court of Oakland County, Michigan by Joseph Gazdecki, an individual who
purchased certain company products through Huron Floor Covering, LLC, a third-party dealer. The plaintiff alleges, among other things, that the
products he purchased contain manufacturing defects, and that the Borrower’s description of the products he purchased was misleading. The
plaintiff has asserted claims for breach of contract, breach of the implied warranty of fitness, breach of the implied warranty of merchantability,
violation of the Michigan Consumer Protect Act, unjust enrichment, and negligence.  The plaintiff seeks an unspecified amount of compensatory
damages, punitive damages, treble damages, and attorney's fees. The Borrower disputes these allegations and is vigorously defending the lawsuit.
iii

Schedule 3.14 - ERISA
    Borrower contributes to two multi-employer pension plans under the terms of a collective-bargaining agreement that covers union-represented
employees – The Pension Plan of the National Retirement Fund (EIN/Pension Plan Number 13-6130178/001) (the “Legacy Plan”) and The
Pension Plan of the National Retirement Fund (EIN/Pension Plan Number 13-6130178/002) (the “Adjustable Plan”).
    Legacy Plan
    
        The Legacy Plan is subject to a rehabilitation plan that was adopted in 2010 (the “Rehabilitation Plan”) that provides for increases in
contribution rates and reduced benefits under two general schedules, the Preferred Schedule and the Default Schedule. The benefit reductions were
generally a 40% reduction in future benefit accruals under the Preferred Schedule effective January 1, 2011, and a “19” multiplier under the
Default Schedule (as compared to a “30” multiplier for most employers under the Preferred Schedule). In addition, most pre- and subsidized post-
retirement death benefits were eliminated prospectively at January 1, 2011, and lump sum payments in excess of $5,000 are not permitted.
    Benefit accruals under the Rehabilitation Plan have been frozen effective December 31, 2014.
    In an effort to improve the Rehabilitation Plan’s funding, the Rehabilitation Plan was amended in 2012, 2014, and 2018 to contain contribution
rate increases and future benefit accrual reductions.
    The funding status of the Rehabilitation Plan, according to the latest information Borrower has received, has gone from 84.1% in 2019 to 87.2%
in 2020 to 91.0% in 2021 to 92.4% in 2022 to 98.6% in 2023.
    As of 2023, despite being funded at 98.6%, the Rehabilitation Plan was still considered to be in critical status. It will be later in 2025 before the
Borrower is provided with the status for the 2024 year.
    Adjustable Plan
    The endangered, critical, and critical and declining status rules do not apply to the Adjustable Plan. These status rules apply to multiemployer
pension plans in effect on July 16, 2006. Since the Adjustable Plan was first effective January 1, 2015, the status rules to not apply to the
Adjustable Plan.
    Summary of Possible Liabilities
The risks of participating in a multi-employer plan are different from single-employer plans and are outlined in further detail in this
paragraph (collectively, “Contingent Pension Plan Liabilities”). If a participating employer stops contributing to the plan, the unfunded obligations
of the plan may be borne by the remaining participating employers. Additionally, if the Borrower chooses to stop participating in the multi-
employer plans, the Borrower may be required to pay the plan an amount based on the underfunded status of the plan, referred to as withdrawal
liability, the amount of which would be determined by the plans. The withdrawal liability, as determined by the plans, would be a function of
contribution rates, fund status, discount rates, and various other factors at the time of any such withdrawal.
iv

Schedule 3.17 – Material Contracts
Credit Party
Counterparty
Agreement Description
Real Estate Leases
TDG Operations, LLC
Adairsville GA, LLC
Lease Agreement (Credit Party is tenant of 400
Princeton Boulevard, Adairsville, Bartow County,
Georgia)
TDG Operations, LLC
NQE, LLC and GVN Group, Corp.
Lease Agreement, as amended by First Amendment (Credit
Party is landlord of 209 Carpet Drive, Atmore, Alabama)
TDG Operations, LLC
Thornton Edge LLC
Lease Agreement (Credit Party is tenant at 475 Reed Road,
Dalton, GA – HQ site)
TDG Operations, LLC
The Wareeth Group, LLC
Standard Industrial/ Commercial Single-Tenant Lease
Agreement (Credit Party is tenant at 600 South E Street,
Porterville, CA)
TDG Operations, LLC
Saraland Industrial, LLC
Lease Agreement (Credit Party is tenant 716 Bill Myles
Drive, Saraland, Mobile County, AL)
TDG Operations, LLC
Austal USA, LLC
Sublease Agreement (Credit Party is sublandlord of
100,000 SF of space at 716 Bill Myles Drive, Saraland,
Mobile County, AL)
TDG Operations, LLC
Centerpoint Properties Trust
Lease Agreement (Credit Party is tenant of 3201 S. Susan
Street, Santa Ana, CA)
TDG Operations, LLC
R.H. Church and Son, Inc.
Ground Sublease Agreement (Credit Party is sublandlord
in sublease of 32,643 SF to subtenant at 3201 S. Susan
Street, Santa Ana, CA)
Other Material Contracts
TDG Operations, LLC
Southern Region, Workers United
affiliated with SEIU
Collective bargaining agreement for minimal number of
remaining participants in Atmore, AL facility
v

Schedule 3.18 - Environmental
    
Surfactants formerly used in the Borrower’s carpet manufacturing process to impart stain resistance to carpeting included chemicals
commonly referred to as PFOA and PFOS. Those chemical substances were declared to be hazardous substances by the EPA in April 2024.
The Borrower does not currently use PFOA or PFOS in its manufacturing processes and has not done so since approximately 2015.
Usage of these and related chemicals was the subject of litigation in Alabama and Georgia which has been settled, and is the current
subject of litigation in Georgia as described below:
The Borrower has been sued together with numerous other defendants in two civil actions related to alleged damages to the plaintiffs’ real
property due to the presence of per- and polyfluoroalkyl substances (“PFAS”) and related chemicals on those properties. The first lawsuit was filed
on January 22, 2024, in the Superior Court of Gordon County, Georgia, styled Moss Land Company, LLC and Revocable Living Trust of William
Darryl Edwards, by and through William Darryl Edwards, Trustee, et al. vs. City of Calhoun, Georgia et al., Civil Action Number 24CV73929.
The second lawsuit was filed on May 7, 2024, in the Superior Court of Gordon County, Georgia, styled William Hartwell Brooks, et al. v. City of
Calhoun, Georgia et al., Civil Action Number 24CV74289. The defendants include the City of Calhoun Georgia, several other carpet
manufacturers, and certain manufacturers and sellers of chemicals containing PFAS. In both cases, the City of Calhoun, Georgia has filed cross-
claims against numerous of the defendants, including the Borrower, related to alleged damages resulting from the treatment of wastewater
containing PFAS.
In both cases, the plaintiffs are landowners located in Gordon County Georgia seeking compensation for alleged damages to their real
property, injunctions from alleged further damage to their property, and abatement of alleged nuisance related to the presence of PFAS and related
chemicals on their property. The plaintiffs allege that such chemicals are found on their real property as a result of “sludge” deposits made directly
on their property or to adjacent property by the City of Calhoun as a byproduct of treating water containing such chemicals used by manufacturing
operations in and around Gordon County, Georgia. No specific amount of damages has been demanded. The Borrower has answered both
complaints; has denied liability and is defending the matters vigorously.
On January 28, 2025, a complaint was filed in the Superior Court of Gordon County, Georgia naming the Borrower, together with fifteen
other defendants including certain chemical manufacturers and the City of Calhoun Georgia seeking monetary and injunctive relief for alleged
damage to plaintiffs’ property because of contamination of that property with per and polyfluroalkyl substances (“PFAS”) manufactured by or used
by the defendants and, as alleged, deposited on certain other property by defendant City of Calhoun. The complaint is styled: James A. Haley
Stephens and Pamela J. Stephens, Plaintiffs vs 3M Company et al; Civil Action Number 25CV75072. The complaint alleges several causes of
action against the defendants based principally on the alleged deposit of sludge containing PFAS on property near or adjacent to Plaintiff’s
property. No specific amount of damages has been demanded. Service has been accepted on behalf of the Borrower, and although no answer has
yet been filed, the Borrower intends to deny liability and defend the matter vigorously.
Calhoun Utilities, which supplies water to the Borrower’s Calhoun facility and permits the Borrower’s discharge of wastewater, has
requested that the Borrower sample and test its wastewater
vi

discharge to determine whether PFOA, PFOS and related chemicals are present in the Borrower’s wastewater discharge.
The Borrower’s sampling and testing show the presence of such chemicals in wastewater discharged from the Borrower’s Calhoun facility
at levels which appear to approximate the background level of those chemicals as shown by the utilities’ own periodic testing.
It is anticipated that the Borrower will continue to monitor its wastewater to determine whether PFOA and PFOS and related chemicals are
present, and that the Borrower will work with Calhoun Utilities to minimize or eliminate the presence of such chemicals.
vii

Schedule 3.19 – Intellectual Property
Credit Party
Patents / Registration or
Application Numbers
Trademarks / Registration
or Application Numbers
Copyrights / Registration
or Application Numbers
Security Interest
TDG Operations
TMA1,208,052
TDG Operations
TMA1245747
TDG Operations
7,485,943
None Recorded
TDG Operations
6259546
 The Dixie Group
7,250,021
None Recorded
 The Dixie Group
90/735,516
None Recorded
 The Dixie Group
4707178
All Released
 The Dixie Group
7296588
None Recorded
 The Dixie Group
98525165
None Recorded
 The Dixie Group
7,014,981
None Recorded
 The Dixie Group
6,177,492
None Recorded
 The Dixie Group
6592877
None Recorded
 The Dixie Group
7,076,236
None Recorded
 The Dixie Group
6,679,413
None Recorded
 The Dixie Group
6,475,249
None Recorded
 The Dixie Group
6944727
None Recorded
viii

TDG Operations
0534999
To Bankers Trust
Company; recorded
4/26/1990 at 709/673
To Fleet Capital
Corporation; recorded
5/16/2002 at 2510/475
To Fleet Capital
Corporation; recorded
7/23/2003 at 2783/762
To Wells Fargo Capital
Finance; recorded
9/23/2011 at 4629/305
 The Dixie Group
7,056,884
None Recorded
 The Dixie Group
7,056,883
None Recorded
 The Dixie Group
7,050,320
None Recorded
 The Dixie Group
4,675,326
All Released
 The Dixie Group
7,279,925
None Recorded
 The Dixie Group
6925914
None Recorded
 The Dixie Group
5353965
None Recorded
 The Dixie Group
5930193
None Recorded
 The Dixie Group
7,001,601
None Recorded
 The Dixie Group
6824352
None Recorded
ix

The Dixie Group, Inc.
1189372
To Fleet Capital
Corporation; recorded
5/16/2002 at 2510/475
To Wells Fargo Capital
Finance; recorded
9/23/2011 at 4629/305
The Dixie Group
90802963
None Recorded
The Dixie Group
7605819
None Recorded
The Dixie Group
98886455
None Recorded
The Dixie Group
98909592
None Recorded
The Dixie Group
98892156
None Recorded
The Dixie Group
98615010
None Recorded
The Dixie Group
7605820
None Recorded
The Dixie Group
5930600
None Recorded
x

Schedule 4.9 – Litigation, Governmental Proceedings and Other Notice Events
None.
xi

Schedule 5.1 – Debt; Contingent Obligations
Credit Party
Creditors
Loan Description
The Dixie Group, Inc. & TDG Operations,
LLC
Greater Nevada Credit Union
$15 million equipment loan to remain in place
The Dixie Group, Inc. & TDG Operations,
LLC
AmeriState Bank
$10 million real estate loan to remain in place
 Note to MM: Intention is that all LCs live within the $6mm Permitted Contingent Obligations/Permitted Debt baskets (see clause (h) in both definitions).
2
2
xii

Schedule 5.2 – Liens
TDG Operations, LLC
Secured Party
Original UCC #
History
Original Date
Filed
Notes
TOYOTA INDUSTRIES COMMERCIAL
FINANCE, INC.
P.O. BOX 9050
DALLAS, TX 750199050
ORIGINAL
FILE#: 007-
2021-056978
9/24/2021
HEWLETT-PACKARD FINANCIAL
SERVICES COMPANY
200 CONNELL DRIVE
BERKELEY HEIGHTS, NJ 07922
ORIGINAL
FILE#: 038-
2023-012086
5/31/2023
GREATER NEVADA CREDIT UNION
451 EAGLE STATION LANE
CARSON CITY, NV 89701
ORIGINAL
FILE#: 155-
2020-001103
Amendment
FILE#: 155-2021-
001028 FILED
ON: 9/13/2021
Amendment
FILE#: 067-2023-
000466 FILED
ON: 1/17/2023
Amendment
FILE#: 067-2023-
000467 FILED
ON: 1/17/2023
11/2/2020
FIFTH THIRD BANK, NATIONAL
ASSOCIATION, AS AGENT
38 FOUNTAIN SQUARE PLAZA, MD
10907P
CINCINNATI, OH 45263
ORIGINAL
FILE#: 155-
2020-001096
10/30/2020
To be released at closing
xiii

The Dixie Group, Inc.
Secured Party
Original UCC
#
History
Original Date
Filed
Notes
FIFTH THIRD BANK,
NATIONAL ASSOCIATION, AS
AGENT , 38 FOUNTAIN
SQUARE PLAZA MD 10907P,
CINCINNATI, OH 45263-0001
433542745
10/30/2020
LAPSES 10/30/2025
To be released at closing
GREATER NEVADA CREDIT
UNION, 451 EAGLE STATION
LANE, CARSON CITY, NV
89701
433545480
Amendment FILE#:
435320731 FILED ON:
09/16/2021
Amendment FILE#:
437934443 FILED ON:
01/25/2023
Amendment FILE#:
437934420 FILED ON:
01/25/2023
10/30/2020
LAPSES 10/30/2025
IBM CREDIT, LLC, ONE NORTH
CASTLE DRIVE, ARMONK, NY
10504
440937859
10/04/2024
LAPSES 10/04/2029
xiv

Schedule 5.7 – Permitted Investments
•
Investments by The Dixie Group, Inc. in TDG Operations, LLC.
xv

Schedule 5.8 – Affiliate Transactions
N/A
xvi

Schedule 5.11 - Business Description
Credit Party
Business Description
The Dixie Group, Inc. and TDG Operations,
LLC
The Dixie Group is a marketer and manufacturer of carpet and rugs to high-end
residential customers through the Fabrica International, Masland Residential and Dixie
Home brands. 
•
Fabrica supplies luxurious carpet and custom rugs to residential markets and is known
as a styling trendsetter, with superior patterns and color, in the very high-end
residential sector.
•
Masland Residential supplies design-driven carpet and rugs for the high-end
residential marketplace and is known for its innovative styling, color and design.
•
Dixie Home markets stylishly designed differentiated products that offer affordable
fashion in the more moderately priced sector of the high-end broadloom carpet
market.
xvii

Schedule 5.14 - Deposit Accounts and Securities Accounts
Credit Party
Financial Institution(s) where Accounts
Maintained
Account Numbers
Descriptions of Accounts
TDG Operations
Royal Bank of Canada
06056-1005578
Canadian Accounts Receivable
TDG Operations
Fifth Third Bank
7362762424
Accounts Receivable - Fabrica
TDG Operations
Fifth Third Bank
7362677309
Accounts Receivable
TDG Operations
Fifth Third Bank
7362739653
COBRA Reimbursement account
TDG Operations
Fifth Third Bank
7362677317
Master Disbursement account
TDG Operations
Fifth Third Bank
7481890247
Accounts Payable -Checks
TDG Operations
Wells Fargo
4122201064
Master Operating account
TDG Operations
Wells Fargo
4936742014
Payroll
TDG Operations
ABN-AMRO (Netherlands)
55.74.24.992
VAT Deposit
xviii

Schedule 7.4 – Post Closing Requirements
Credit Parties shall satisfy and complete each of the following obligations, or provide Agent each of the items listed below, as applicable,
on or before the date indicated below (or such later date as Agent may agree in writing (including via email of Agent’s counsel) in its reasonable
discretion), all to the satisfaction of Agent in its sole and absolute discretion:
1.    By the date that is sixty (60) days following the Closing Date, with respect to each of the Mortgaged Properties, Credit Parties shall deliver to
the Agent and Lenders all such documentation required by and take such actions in accordance with clauses (b), (d) and (g) of the Real Property
Collateral Requirements; provided that Credit Parties shall deliver a zoning report with respect to clause (b) of the Real Property Collateral
Requirements.
2.    Credit Parties shall use commercially reasonable, good faith efforts to assist Agent in obtaining intercreditor agreements with GNCU and
AmeriState.
3.    Credit Parties shall (i) by the date that is ten (10) days following the Closing Date, close the deposit account held with Royal Bank of Canada
(account number 06056-1005578) and (ii) by the date that is thirty (30) days following the Closing Date, establish with a bank or financial
institution reasonably acceptable to Agent, a deposit account with respect to any Canadian accounts receivables and subject to a Deposit Account
Control Agreement in favor of Agent.
4.    Credit Parties shall by the date that is thirty (30) days following the Closing Date, enter into a Deposit Account Control Agreement with Wells
Fargo in favor of Agent with respect to account number 4936742014.
Credit Parties’ failure to complete and satisfy any of the above obligations on or before the date indicated above, or Credit Parties’ failure
to deliver any of the above listed items on or before the date indicated above, shall constitute an immediate an automatic Event of Default.
xix

Schedule 9.1 – Collateral
The Collateral consists of all of each Credit Party’s assets other than the Excluded Property, including without limitation, all of each Credit
Party’s right, title and interest in and to the following, whether now owned or hereafter created, acquired or arising:
(a)    all goods, Accounts, equipment, Inventory, contracts, together with all contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles, Intellectual Property, commercial tort claims (including each such claim listed on Schedule
9.2(d)), documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, securities
accounts, fixtures, letter of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located;
(b)    all of Borrowers’ books and records relating to any of the foregoing and all rights of access thereto; and
(c)    any and all claims, rights and interests in any of the above and all substitutions for, additions, attachments, accessories, accessions
and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
xx

Schedule 9.2(b) – Location of Collateral
Credit Party
Address
Size
Owned/Leased/Operated by Third
Party
Name and Address of Owner (if
leased) or Third-Party Operator (if
operated by a third party)
The Dixie Group,
Inc.
3641 US Highway
41, Chatsworth,
Georgia 20705 (Eton
Plant)
175,000 SF
Building;
229,000 SF
Building
 
Owned
N/A
TDG Operations,
LLC
200 Fair Street,
Calhoun, Gordon
County, Georgia
(Colormaster Plant)
87,208 SF
Building; 108,673
SF Building
Owned
N/A
TDG Operations,
LLC
475 Reed Road,
Dalton, Whitfield
County, Georgia
(Headquarters
Location) *
42,790 square
feet
Leased
Thornton Edge LLC
P.O. Box 185
Lookout Mountain, TN 37350
TDG Operations,
LLC
400 Princeton
Boulevard,
Adairsville, Georgia
30103
294,020 square
feet
Leased
Adairsville GA, LLC
10850 Wilshire Blvd Ste 1000
Los Angeles, CA 90024
 
TDG Operations,
LLC; The Dixie
Group, Inc.
716 Bill Myles Drive,
Saraland, Mobile
County, Alabama
36571
396,941 SF
Building
Leased/Partially Subleased by Third
Party
Leased from:
Saraland Industrial, LLC
P.O. Box 10485
Kansas, City MO 64171
100,000 SF Subleased to:
Austal USA, LLC
100 Austal Way
Mobile, AL 36602
xxi

TDG Operations,
LLC
209 Carpet Drive,
Atmore, Escambia
County, Alabama
607,496 SF
Building
(41.99 acres of
land)
Owned/ Partially Subleased by Third
Party
60,000 SF Leased to:
NQE, LLC
30 N Gould St Ste 31099
Sheridan, WY 82801
GVN Group, Corp d/b/a Sharpertek
486 South Opdyke Rd
Pontiac, MI 48341
TDG Operations,
LLC
1130 Lafayette Hwy,
Roanoke, Randolph
County, Alabama
203,814 SF
Building
(24.784 acres of
land)
Owned
N/A
TDG Operations,
LLC
600 South E Street,
Porterville, CA
93257
248,853 SF
Building
(13.12 acres of
land)
Leased
The Wareeth Group, LLC
4224 West Shaw Avenue
Fresno, CA 93722
TDG Operations,
LLC
3201 S. Susan Street,
Santa Ana, CA
__ SF Building
 
(10.05 acres of
land)
Leased/ Partially Subleased by Third
Party
Landlord:
Centerpoint Properties Trust
1808 Swift Drive
Oak Brook, IL 60523
32,643 SF Subleased to:
R.H. Church and Son, Inc.
P.O. Box 794-92655
Midway City, CA 92655
The Dixie Group, Inc.
& TDG Operations,
LLC
15 McDaniel Station
Road, Calhoun, GA
30701
Warehouse Agreement
HD Fibers, LLC
xxii

Schedule 9.2(d) – Chattel Paper, Letter of Credit Rights, Commercial Tort Claims, Instruments, Documents, Investment Property
N/A
xxiii

EXHIBIT 21
SUBSIDIARIES OF THE DIXIE GROUP, INC.
SUBSIDIARY
STATE/COUNTRY OF INCORPORATION
TDG Operations, LLC
GA

EXHIBIT 23
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the Registration Statements on Forms S‑8 (Nos. 333‑134779, 333‑118504, 333‑168412,
333‑188321, 333‑211157, 333‑239208, and 333‑264856) of The Dixie Group, Inc. (the "Company") of our report dated April 7, 2025, with respect
to the consolidated financial statements of the Company, included in this Annual Report on Form 10‑K for the year ended December 28, 2024. Our
report contains an explanatory paragraph describing conditions that raise substantial doubt about the Company's ability to continue as a going
concern as described in Note 1 to the consolidated financial statements.
/s/ Forvis Mazars, LLP
Atlanta, GA
April 7, 2025

EXHIBIT 31.1
Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Daniel K. Frierson, certify that:
I have reviewed this annual report on Form 10-K of The Dixie Group, Inc.;
1.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
2.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
3.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
4.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: April 07, 2025
  /s/ DANIEL K. FRIERSON
Daniel K. Frierson
Chief Executive Officer
The Dixie Group, Inc.

EXHIBIT 31.2
Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Allen L. Danzey, certify that:
I have reviewed this annual report on Form 10-K of The Dixie Group, Inc.;
1.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
2.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
3.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
registrant and have:
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being prepared;
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c.
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d.
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent
fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial reporting; and
4.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the
registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably
likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control
over financial reporting.
Date: April 07, 2025
  /s/ ALLEN L. DANZEY
Allen L. Danzey
Chief Financial Officer
The Dixie Group, Inc.

EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Dixie Group, Inc. (the "Company") on Form 10-K for the year ended December 28, 2024, as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Daniel K. Frierson, the Chief Executive Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ DANIEL K. FRIERSON
Daniel K. Frierson, Chief Executive Officer
Date:
April 7, 2025
A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie
Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of The Dixie Group, Inc. (the "Company") on Form 10-K for the year ended December 28, 2024, as
filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Allen L. Danzey, the Chief Financial Officer of the
Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of
my knowledge:
(1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the
Company.
/s/ ALLEN L. DANZEY
Allen L. Danzey, Chief Financial Officer
Date:
April 7, 2025
A signed original of this written statement required by Section 906 has been provided to The Dixie Group, Inc. and will be retained by The Dixie
Group, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.