EACO Corporation
Annual Report 2012

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KEACO CORP - EACOFiled: November 26, 2012 (period: August 31, 2012)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, DC 20549 FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended August 31, 2012 ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission File No. 000-14311 EACO CORPORATION(Exact name of Registrant as specified in its charter) Florida 59-2597349(State of Incorporation) (I.R.S. Employer IdentificationNo.) 1500 North Lakeview AvenueAnaheim, California 92807(Address of Principal Executive Offices) Registrant's telephone number, including area code: (714) 876-2490 Securities registered pursuant to Section 12(b) of the Act:None Securities registered pursuant to Section 12(g) of the Act:Common Stock, $.01 Par Value(Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO x Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES ¨ NO x 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 duringthe 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 requirementsfor the past 90 days. YES x NO ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required tobe submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required tosubmit and post such files). YES x NO ¨ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the bestof registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form10-K. ¨ Indicate by check mark whether registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ¨Accelerated filer ¨Non-accelerated filer ¨Smaller reporting company xx Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES ¨ NO x The aggregate market value of the registrant’s common stock as of the last business day of the registrant’s most recently completed second fiscal quarter(based upon the closing sale price of the common stock on that date) held by non-affiliates of the registrant was approximately $16,276. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.As of October 31, 2012, 4,861,590 shares of the registrant’s common stock were outstanding. DOCUMENTS INCORPORATED BY REFERENCE No documents required to be listed hereunder are incorporated by reference in this report on Form 10-K. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Forward-Looking Information This report may contain forward-looking statements. Such statements can be identified by the use of terminology such as “anticipate,” “believe,” “could,”“estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “project,” “should,” “will” and similar words or expressions. These forward-lookingstatements include, but are not limited to, statements regarding our anticipated revenue, expenses, profits, capital needs, and potential transactions withaffiliates. Forward-looking statements are based on our current expectations, estimates and forecasts of future events and results and involve a number of risksand uncertainties that could cause actual results to differ materially including, among other things, the following: failure of facts to conform to managementestimates and assumptions; economic conditions, including the continuing recession and economic uncertainties; our ability to maintain an effective system ofinternal controls over financial reporting; potential losses from trading in securities; our ability to retain key personnel and relationships with suppliers; thewillingness of Zions Bank, GE Capital, Community Bank or other lenders to extend financing commitments and the availability of capital resources; repairsor similar expenditures required for existing properties due to weather or acts of God; and other risks identified from time to time in the Company’s reports andother documents filed with the Securities and Exchange Commission (the “SEC”), and in public announcements. It is not possible to foresee or identify allfactors that could cause actual results to differ materially from those anticipated. As such, investors should not consider any of such factors to be anexhaustive statement of all risks or uncertainties. No forward-looking statements can be guaranteed and actual results may vary materially. The Company undertakes no obligation to update any forward-looking statement except as required by law, but investors are advised to consult any further disclosures by the Company in its filings with the SEC,especially on Forms 10-K, 10-Q and 8-K, in which the Company discusses in more detail various important factors that could cause actual results to differfrom expected or historical results. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I ITEM 1 Business 1ITEM 1A. Risk Factors 3ITEM 1B. Unresolved Staff Comments 7ITEM 2. Properties 7ITEM 3. Legal Proceedings 8ITEM 4. Mine Safety Disclosures 8 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 8ITEM 6. Selected Financial Data 9ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 9ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 13ITEM 8. Financial Statements and Supplementary Data 13ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 13ITEM 9A. Controls and Procedures 13ITEM 9B. Other Information 14 PART III ITEM 10. Directors, Executive Officers and Corporate Governance 14ITEM 11. Executive Compensation 16ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 18ITEM 13. Certain Relationships and Related Transactions and Director Independence 19ITEM 14. Principal Accounting Fees and Services 20 PART IV ITEM 15. Exhibits and Financial Statement Schedules 20 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. PART I Item 1. Business Organization and Merger with Bisco Industries, Inc. From its inception through June 2005, EACO Corporation (“EACO”) operated restaurants in the State of Florida. On June 29, 2005, EACO sold all of itsoperating restaurants. From June 2005 until the acquisition of Bisco (described below), EACO’s operations principally consisted of managing five real estateproperties held for leasing located in Florida and California. On March 24, 2010, EACO completed the acquisition of Bisco Industries, Inc. (“Bisco”), a company under the common control of Glen Ceiley, EACO’sChairman of the Board, Chief Executive Officer and majority shareholder. Bisco is a distributor of electronic components and fasteners with 43 sales officesand six distribution centers located throughout the United States and Canada. Bisco supplies parts used in the manufacture of products in a broad range ofindustries, including the aerospace, circuit board, communication, computer, fabrication, instrumentation, industrial equipment and marine industries. EACO was incorporated in Florida in September 1985. Bisco commenced operations in Illinois in 1973 and was incorporated in 1974. Bisco’s principalexecutive offices are located at 1500 N. Lakeview Avenue, Anaheim, California 92807 which also serves as the principal executive offices of EACO. EACO’swebsite address is www.eacocorp.com and Bisco’s website address is www.biscoind.com. The inclusion of these website addresses in this annual report doesnot include or incorporate by reference into this annual report any information on or accessible through the websites. EACO, Bisco and Bisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited, are collectively referred to herein as the “Company”, “we”, “us”and “our.” Operations As a result of our acquisition of Bisco, the Company currently operates in two reportable segments, the Distribution Operations segment, which consists ofthe business of Bisco, including its subsidiary, and the Real Estate Rental Operations segment, which consists of managing the five rental properties inFlorida and California Bisco Industries, Inc. (Distribution Operations) Overview Bisco is a distributor of electronic components and fasteners. Through its 43 sales offices and six distribution centers located throughout the United States andCanada, Bisco supplies parts used in the manufacture of products in a broad range of industries, including the aerospace, circuit board, communication,computer, fabrication, instrumentation, industrial equipment and marine industries. Products and Services Bisco currently stocks over 87,000 items from more than 260 manufacturers, and is an authorized distributor for over 120 of these manufacturers. Bisco’sproducts include electronic components such as spacers and standoffs, card guides and ejectors, component holders and fuses, circuit board connectors, andcable components, as well as a large variety of fasteners and hardware. The breadth of Bisco’s products and extensive inventory provide a one-stop shoppingexperience for many customers. Bisco also provides customized services and solutions for a wide range of production needs, including special packaging, bin stocking, kitting and assembly,bar coding, electronic requisitioning, and integrated supply programs, among others. Bisco works with its customers to design and develop systems to meettheir specific needs. 1Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Divisions Bisco Industries As “Bisco Industries,” Bisco sells the full spectrum of products that it offers to all markets, but primarily sells to original equipment manufacturers(“OEMs”). While historically, the substantial majority of Bisco’s revenues have been derived from the Bisco division, Bisco has also established additionaldivisions that specialize in specific industries and products. Bisco believes that the focus by industry and/or product enhances Bisco’s ability to providesuperior service and devise tailored solutions for its customers. National-Precision The National-Precision division primarily sells electronic hardware and commercial fasteners to OEMs in the aerospace, fabrication and industrial equipmentindustries. National-Precision seeks to be the leading global distributor of mil-spec and commercial fasteners, hardware and distribution services used inproduction. Fast-Cor The Fast-Cor division was established to be a distributor’s source for a broad range of components and fasteners. Fast-Cor has access to the entire inventory ofproducts that Bisco offers but primarily focuses on selling to other distributors, not manufacturers. Customers and Sales Bisco’s customers operate in a wide variety of industries and range from large, global companies to small local businesses. Bisco strives to provide exceptionalservice to all customers, including smaller businesses, and continues to focus on growing its share of that market. As of August 31, 2012, Bisco had morethan 11,200 active customers; however, no single customer accounted for more than 10% of Bisco’s revenues for the year ended August 31, 2012. For thefiscal years ended August 31, 2012 and 2011, Bisco’s top 20 customers represented in the aggregate approximately 12% and 10%, respectively, of Bisco’sdistribution sales. Bisco generally sells its products through its sales representatives in its 43 sales offices located in the United States and Canada. Customers can also placeorders through Bisco’s website. Bisco currently maintains six distribution centers located in Anaheim and San Jose, California; Dallas, Texas; Chicago,Illinois; Boston, Massachusetts and Toronto, Canada. Each of Bisco’s selling facilities and distribution centers are linked to Bisco’s central computersystem, which provides Bisco’s salespersons with online, real-time data regarding inventory levels throughout Bisco and facilitates control of purchasing,shipping and billing. Bisco generally ships products to customers from one of its six distribution centers, based on the geographic proximity and theavailability of the ordered products. Bisco sells its products primarily in the United States and Canada. Bisco’s international sales represented 7% of its distribution sales for each of the fiscalyears ended August 31, 2012 and 2011, respectively. Sales to customers in Canada accounted for approximately 52% and 62% of such international sales ineach of those years, respectively. 2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Suppliers As of August 31, 2012, Bisco offered the products of over 260 manufacturers and is an authorized distributor for more than 120 manufacturers. Theauthorized distributor agreements with most manufacturers are typically cancelable by either party at any time or on short notice. While Bisco doesn’tmanufacture its products, it does provide kitting and packaging services for certain of its customers. Although Bisco sells more products of certain brands,Bisco believes that most of the products it sells are available from other sources at competitive prices. No single supplier accounted for more than 10% ofBisco’s purchases in fiscal 2012. EACO Corporation (Real Estate Rental Operations) At August 31, 2012, EACO owned three restaurant properties, one located in Orange Park, Florida (the “Orange Park Property”), one in Brooksville, Florida(the “Brooksville Property”) and one in Deland, Florida (the “Deland Property”). All three restaurant properties were leased at August 31, 2012. In addition,EACO owns two income producing real estate properties held for investment in Sylmar, California (the “Sylmar Property”) which, at August 31, 2012, isleased to two industrial tenants. In September 2012, we entered into an agreement to sell the Brooksville Property for $1,825,000. We anticipate that thistransaction will close in January 2013. During the year ended August 31, 2012 (“fiscal 2012”), the Company had five tenants that accounted for 100% of the Company’s rental revenue. Employees As of August 31, 2012, the Company had 400 employees, all of which were full time and of which 302 were in sales and marketing and 98 were inmanagement, administration and finance. Item 1A. Risk Factors Our business is subject to a number of risks, some of which are discussed below. Other risks are presented elsewhere in this report and in our otherfilings with the SEC, including our subsequent reports on Forms 10-Q and 8-K. If any of the risks actually occur, our business, financial condition, orresults of operations could be seriously harmed. In that event, the market price for shares of our common stock may decline, and you could lose all orpart of your investment. Changes and uncertainties in the economy have harmed and could continue to harm our operating results. As a result of the economic downturn and continuing economic uncertainties, our operating results, and the economic strength of our customers and suppliers,are increasingly difficult to predict. Our Distribution Operations sales are affected by many factors, including, among others, general economic conditions,interest rates, inflation, liquidity in the credit markets, unemployment trends, geopolitical events, and other factors. Although we sell our products tocustomers in a broad range of industries, the significant weakening of economic conditions on a global scale has caused some of our customers to experience aslowdown that has had adverse effects on our sales and operating results. Changes and uncertainties in the economy also increase the risk of uncollectibleaccounts receivable. The pricing we receive from suppliers may also be impacted by general economic conditions. Continued and future changes anduncertainties in the economic climate in the United States and elsewhere could have a similar negative impact on the rate and amounts of purchases by ourcurrent and potential customers, create price inflation for our products, or otherwise have a negative impact on our expenses, gross margins and revenues, andcould hinder our growth. 3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If we fail to maintain an effective system of internal controls over financial reporting or experience additional material weaknesses in our systemof internal controls, we may not be able to report our financial results accurately or timely or detect fraud, which could have a material adverseeffect on the market price of our common stock and our business. We have from time to time had material weaknesses in our internal controls over financial reporting due to deficiencies in the process related to the preparationof our financial statements, segregation of duties, sufficient control in the area of financial reporting oversight and review, and appropriate personnel to ensurethe complete and proper application of generally accepted accounting principles (“GAAP”) as it relates to certain routine accounting transactions. Although webelieve we have addressed these material weaknesses, we may experience material weaknesses in the future and may fail to maintain a system of internalcontrols over financial reporting that complies with the reporting requirements applicable to public companies in the United States. Our failure to address anydeficiencies or weaknesses in our internal control over financial reporting or to properly maintain an effective system of internal control over financial reportingcould impact our ability to prevent fraud or to issue our financial statements in a timely manner that presents fairly (in accordance with GAAP) our financialcondition and results of operations. The existence of any such deficiencies and/or weaknesses, even if cured, may also lead to the loss of investor confidencein the reliability of our financial statements, could harm our business and negatively impact the trading price of our common stock. Such deficiencies ormaterial weaknesses may also subject us to lawsuits, investigations and other penalties. We have incurred significant losses in the past from trading in securities, and we may incur such losses in the future, which may also cause us tobe in violation of covenants under our loan agreements. Bisco has historically funded its operations from cash generated from its operations and/or by trading in marketable domestic equity securities. Bisco’sinvestment strategy includes taking both long and short positions, as well as utilizing options to maximize return. This strategy can lead, and has led, tosignificant losses based on market conditions and trends. We may incur losses in future periods from such trading activities, which could materially andadversely affect our liquidity and financial condition. In addition, unanticipated losses from our trading activities may cause Bisco to be in violation of certain covenants under its loan agreements with CommunityBank. As of August 31, 2012 and 2011, Bisco had outstanding $7,450,000 and $8,500,000, respectively, under its revolving credit agreement, which loan issecured by substantially all of Bisco’s assets and is guaranteed by Mr. Ceiley, our Chairman and CEO. The agreement contains covenants which require that,on a quarterly basis, Bisco’s losses from trading in securities not exceed its pre-tax operating income. We cannot assure you that unanticipated losses from ourtrading activities will not cause us to violate the covenant in the future or that the bank will grant a waiver for any such default or that it will not exercise itsremedies, which could include the acceleration of the obligation’s maturity date and foreclosure on Bisco’s assets, with respect to any such noncompliance,which could have a material adverse effect on our business and operations. We rely heavily on our internal information systems, which, if not properly functioning, could materially and adversely affect our business. Our information systems have been in place for many years, and are subject to system failures as well as problems caused by human error, which could havea material adverse effect on our business. Many of our systems consist of a number of legacy or internally developed applications, which can be more difficultto upgrade to commercially available software. It may be time consuming and costly for us to retrieve data that is necessary for management to evaluate oursystems of control and information flow. In the future, management may decide to convert our information systems to a single enterprise solution. Such aconversion, while it would enhance the accessibility and reliability of our data, could be expensive and would not be without risk of data loss, delay orbusiness interruption. Maintaining and operating these systems requires continuous investments. Failure of any of these internal information systems ormaterial difficulties in upgrading these information systems could have material adverse effects on our business and our timely compliance with our reportingobligations. We may not be able to attract and retain key personnel. Our future performance will depend to a significant extent upon the efforts and abilities of certain key management and other personnel, including Glen Ceiley,our Chairman of the Board and Chief Executive Officer, as well as other executive officers and senior management. The loss of service of one or more of ourkey management members could have a material adverse effect on our business. 4Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. We do not have long-term supply agreements or guaranteed price or delivery arrangements with the majority of our suppliers. In most cases, we have no guaranteed price or delivery arrangements with our suppliers. Consequently, we may experience inventory shortages on certainproducts. Furthermore, our industry occasionally experiences significant product supply shortages and customer order backlogs due to the inability of certainmanufacturers to supply products as needed. We cannot assure you that suppliers will maintain an adequate supply of products to fulfill our orders on atimely basis, at a recoverable cost, or at all, or that we will be able to obtain particular products on favorable terms or at all. Additionally, we cannot assureyou that product lines currently offered by suppliers will continue to be available to us. A decline in the supply or continued availability of the products of oursuppliers, or a significant increase in the price of those products, could reduce our sales and negatively affect our operating results. Our supply agreements are generally terminable at the suppliers’ discretion. Substantially all of the agreements we have with our suppliers, including our authorized distributor agreements, are terminable with little or no notice andwithout any penalty. Suppliers that currently sell their products through us could decide to sell, or increase their sales of, their products directly or throughother distributors or channels. Any termination, interruption or adverse modification of our relationship with a key supplier or a significant number of othersuppliers would likely adversely affect our operating income, cash flow and future prospects. The competitive pressures we face could have a material adverse effect on our business. The market for our products and services is very competitive. we compete for customers with other distributors, as well as with many of our suppliers. Afailure to maintain and enhance our competitive position could adversely affect our business and prospects. Furthermore, our efforts to compete in themarketplace could cause deterioration of gross profit margins and, thus, overall profitability. Some of our competitors may have greater financial, personnel,capacity and other resources or a more extensive customer base than we do. Our strategy of expanding into new geographic areas could be costly. One of our primary growth strategies for our Distribution Operations segment is to grow our business through the opening of sales offices in new geographicmarkets. Based on our analysis of demographics in the United States, Canada and Mexico, we currently estimate there is potential market opportunity inNorth America to support additional sales offices. We cannot guarantee that our estimates are accurate or that we will open enough offices to capitalize on thefull market opportunity or that any new offices will be successful. In addition, a particular local market’s ability to support a sales office may change becauseof a change due to competition, or local economic conditions. We may be unable to meet our goals regarding new office openings. Our growth, in part, is primarily dependent on our ability to attract new customers. Historically, the most effective way to attract new customers has beenopening new sales offices. Our current business strategy focuses on opening a specified number of new sales offices each year, and quickly growing each newsales office. Although we have opened three new offices during the year ended August 31, 2012, we may not be able to continue to open or grow new offices atour projected rates or hire the qualified sales personnel necessary to make such new offices successful. Failure to do so could negatively impact our long-termgrowth and market share. 5Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Opening sales offices in new markets presents increased risks that may prevent us from being profitable in these new locations, and/or mayadversely affect our operating results. Our new sales offices do not typically achieve operating results comparable to our existing offices until after several years of operation. The added expensesrelating to payroll, occupancy and transportation costs can impact our ability to leverage earnings. In addition, offices in new geographic areas face additionalchallenges to achieving profitability. In new markets, we have less familiarity with local customer preferences and customers in these markets are less familiarwith our name and capabilities. Entry into new markets may also bring us into competition with new, unfamiliar competitors. These challenges associatedwith opening new offices in new markets may have an adverse effect on our business and operating results. We may not be able to identify new products and products lines, or obtain new product on favorable terms and prices or at all. Our success depends in part on our ability to develop product expertise and identify future products and product lines that complement existing products andproduct lines and that respond to our customers’ needs. We may not be able to compete effectively unless our product selection keeps up with trends in themarkets in which we compete. Our ability to successfully attract and retain qualified sales personnel is uncertain. Our success depends in large part on our ability to attract, motivate and retain a sufficient number of qualified sales employees, who understand andappreciate our strategy and culture and are able to adequately represent us to our customers. Qualified individuals of the requisite caliber and number needed tofill these positions may be in short supply in some areas, and the turnover rate in the industry is high. If we are unable to hire and retain personnel capable ofconsistently providing a high level of customer service, as demonstrated by their enthusiasm for our culture and product knowledge, our sales could bematerially adversely affected. Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number ofemployees. An inability to recruit and retain a sufficient number of qualified individuals in the future may also delay the planned openings of new offices. Anysuch delays, material increases in existing employee turnover rates, or increases in labor costs, could have a material adverse effect on our business, financialcondition or operating results. We generally do not have long-term sales contracts with our customers. Most of our sales are made on a purchase order basis, rather than through long-term sales contracts. A variety of conditions, both specific to each customerand generally affecting each customer’s industry, may cause customers to reduce, cancel or delay orders that were either previously made or anticipated, gobankrupt or fail, or default on their payments. Significant or numerous cancellations, reductions, delays in orders by customers, losses of customers, and/orcustomer defaults on payment could materially adversely affect our business. Increases in the costs of energy, shipping and raw materials used in our products could impact our cost of goods and distribution and occupancyexpenses, which would result in lower operating margins. Costs of raw materials used in our products and energy costs have been rising during the last several years, which has resulted in increased production costsfor our suppliers. These suppliers typically look to pass their increased costs along to us through price increases. The shipping costs for our distributionoperation have risen as well and may continue to rise. While we typically try to pass increased supplier prices and shipping costs through to our customers orto modify our activities to mitigate the impact, we may not be successful. Failure to fully pass these increased prices and costs through to our customers or tomodify our activities to mitigate the impact would have an adverse effect on our operating margins. The Company’s Chairman and CEO holds almost all of our voting stock and can control the election of directors and significant corporate actions. Glen Ceiley, our Chairman and CEO, owns approximately 99% of our outstanding voting stock. Mr. Ceiley is able to exert significant influence over theoutcome of almost all corporate matters, including significant corporate transactions requiring a shareholder vote, such as a merger or a sale of the Companyor our assets. This concentration of ownership and influence in management and board decision-making could also harm the price of our common stock by,among other things, discouraging a potential acquirer from seeking to acquire shares of our common stock (whether by making a tender offer or otherwise) orotherwise attempting to obtain control of the Company. 6Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Sales of our common stock by Glen Ceiley could cause the price of our common stock to decline. There is currently no established trading market for our common stock, and the volume of any sales is generally low. As of August 31, 2012, the number ofshares held by non-affiliates of Mr. Ceiley or Bisco is less than 60,000 shares. If Mr. Ceiley sells or seeks to sell a substantial number of his shares of ourcommon stock in the future, the market price of our common stock could decline. The perception among investors that these sales may occur could producethe same effect. Inclement weather and other disruptions to the transportation network could impact our distribution system. Our ability to provide efficient shipment of products to our customers is an integral component of our overall business strategy. Disruptions at distributioncenters or shipping ports may affect our ability to both maintain core products in inventory and deliver products to our customers on a timely basis, whichmay in turn adversely affect our results of operations. In addition, severe weather conditions could adversely impact demand for our products in particularlyhard hit regions. Our advertising and marketing efforts may be costly and may not achieve desired results. We incur substantial expense in connection with our advertising and marketing efforts. Postage represents a significant advertising expense for us because wegenerally mail fliers to current and potential customers through the U.S. Postal Service. Any future increases in postal rates will increase our mailing expensesand could have a material adverse effect on our business, financial condition and results of operations. We may not have adequate or cost-effective liquidity or capital resources. Our ability to satisfy our cash needs depends on our ability to generate cash from operations and to access the capital markets, both of which are subject togeneral economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may need to satisfy our cash needs throughexternal financing. However, external financing may not be available on acceptable terms or at all. Item 1B. Unresolved Staff Comments None. Item 2. Properties We have 43 sales offices and six distribution centers located throughout the United States and in Canada. Our corporate headquarters and one of our primarydistribution centers are located in Anaheim, California in approximately 40,000 square feet of office and warehouse space. We lease all of our properties,consisting of office and warehouse space, under leases generally having a term of three years. For additional information regarding our obligations underproperty leases, see Note 3 of the Notes to Consolidated Financial Statements, included in Part IV, Item 15 of this report. We also own and operate the following properties in connection with our Real Estate Rental Operations: Locations Description Deland, FL Restaurant land and building. Leased to restaurant operator.Orange Park, FL(1) Restaurant land and building. Leased to restaurant operator.Sylmar, CA(2) Two properties leased to industrial tenants.Brooksville, FL(3) Restaurant land and building. Leased to a restaurant operator. 7Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (1) Property subject to mortgage securing promissory note issued to GE Capital Franchise Finance Corporation (“GE Capital”).(2) Property subject to mortgage securing promissory note issued to Community Bank.(3) Property subject to mortgage securing promissory note issued to Zions First National Bank (“Zions Bank”). In September 2012, we entered into anagreement to sell the Brooksville Property for $1,825,000. We anticipate that this transaction will close in January 2013. Item 3. Legal Proceedings From time to time, the Company may be named in claims arising in the ordinary course of business. Currently, we are not a party to any legal proceedingsthat, in the opinion of our management, would reasonably be expected to have a material adverse effect on our business or financial condition. Item 4. Mine Safety Disclosures Not applicable. PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information and Holders The Company's common stock is quoted on the OTCQB operated by the OTC Markets Group Inc., and previously on the OTC Bulletin Board, under thetrading symbol "EACO"; however, there is no established public trading market for the Company’s common stock. As of November 1, 2012, there were1,131 shareholders of record of the Company’s common stock, which excludes individuals holding shares in street names. The closing sale price of theCompany's stock on October 18, 2012, the most recent date on which a sale of our shares occurred, was $2.88 per share. The quarterly high and low sales information of the Company's common stock as quoted on such over-the-counter markets are set forth below. High Low Year Ended August 31, 2011 Quarter ended November 30, 2010 $5.00 $2.01 Quarter ended February 28, 2011 3.88 2.26 Quarter ended May 31, 2011 3.94 2.56 Quarter ended August 31, 2011 2.56 2.25 Year Ended August 31, 2012 Quarter ended November 30, 2011 2.00 0.25 Quarter ended February 29, 2012 2.20 1.85 Quarter ended May 31, 2012 2.01 2.00 Quarter ended August 31, 2012 2.95 2.30 As of August 31, 2012, the Company had no options outstanding under any equity compensation plans. The Company did not grant or issue anyunregistered shares during the year ended August 31, 2012. The Company did not repurchase any of its own common stock during the year ended August31, 2012. 8Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Dividend Policy The Company has never paid cash dividends on its common stock and does not expect to pay any cash dividends on its common stock in the foreseeablefuture. The Company presently intends to retain all available funds for operations and expansion of the business. Item 6. Selected Financial Data The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under thisitem. Item 7. Management’s Discussion and Analysis of Financial Condition and Results Of Operations Overview From the inception of the Company through June 2005, EACO’s business consisted of operating restaurants in the State of Florida. On June 29, 2005, EACOsold all of its operating restaurants and other assets used in the restaurant operations. All the remaining activity from the restaurant operations is presented asdiscontinued operations in the accompanying consolidated financial statements. From June 2005 until the acquisition of Bisco in March 2010, our operationsprincipally consisted of managing five real estate properties held for leasing in Florida and California. As a result of our acquisition of Bisco, the Companycurrently operates in two reportable segments: the Real Estate Rental Operations segment, which consists of managing the five rental properties in Florida andCalifornia, and the Distribution Operations segment, which consists of the business of Bisco, including its subsidiary. Revenues derived from theDistribution Operations segment represented approximately 99% of the Company’s total revenues for the year ended August 31, 2012 and is expected tocontinue to represent the substantial majority of the Company's total revenues for the foreseeable future. The accompanying consolidated financial statementsinclude the financial position and results of operations of Bisco for all periods presented. Critical Accounting Policies Long-Lived Assets Long-lived assets (principally real estate, equipment and leasehold improvements) are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. For purposes of the impairment review, real estate properties are reviewed on an asset-by-asset basis. Recoverability of real estate property assets is measured by a comparison of the carrying amount of each operating property and related assets tofuture net cash flows expected to be generated by such assets. For measuring recoverability of Distribution Operations assets, long-lived assets are groupedwith other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. Revenue Recognition For the Company’s Distribution Operations, the Company’s shipping terms are FOB shipping point. As such, management generally recognizes distributionoperations revenue at the time of product shipment. Revenue is considered to be realized or realizable and earned when there is persuasive evidence of a salesarrangement in the form of an executed contract or purchase order, the product has been shipped (and installed when applicable), the sales price is fixed ordeterminable, and collectability is reasonably assured. For the Real Estate Rental Operations, the Company leases its real estate properties to tenants under operating leases with terms generally exceeding oneyear. Some of these leases contain scheduled rent increases. We record rent revenue for leases which contain scheduled rent increases on a straight-line basisover the term of the lease. 9Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Impairment of Long Lived Assets The Company’s policy is to review long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an assetmay not be recoverable. For the purpose of the impairment review, assets are tested on an individual basis. The recoverability of the assets is measured by acomparison of the carrying value of each asset to the future net undiscounted cash flows expected to be generated by such assets. If such assets are consideredimpaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds their estimated fair value. During theyears ended August 31, 2012 and 2011, the Company did not record an impairment charge on its rental property assets. Liabilities of Discontinued Operations Prior to June 2005, EACO self-insured workers’ compensation claims losses up to certain limits. The liability for workers’ compensation represents anestimate of the present value of the ultimate cost of uninsured losses which are unpaid as of the balance sheet dates. The estimate is frequently reviewed andadjustments to the Company’s estimated claim liability, if any, are reflected in discontinued operations. At fiscal year end, the Company obtains an actuarialreport which estimates its overall exposure based on historical claims and an evaluation of future claims. An actuarial evaluation was obtained by theCompany as of August 31, 2012 and 2011. The Company pursues recovery of certain claims from an insurance carrier. Recoveries, if any, are recognizedwhen realization is reasonably assured. Deferred Tax Assets A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realizetheir benefit, or when future deductibility is uncertain. The Company records net deferred tax assets to the extent management believes these assets will morelikely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversalsof deferred tax liabilities, projected future taxable income (if any), tax planning strategies and recent financial performance. Forming a conclusion that avaluation allowance is not required is difficult when there is negative evidence such as cumulative losses and/or significant decreases in operations. As a resultof the Company’s disposal of significant business operations in June 2005, management concluded that a valuation allowance should be recorded againstcertain federal and state tax credits. The utilization of these credits requires sufficient taxable income after consideration of net operating loss utilization. Results of Operations Comparison of the Fiscal Years Ended August 31, 2012 and 2011 Distribution Sales and Gross Margin (dollars in thousands) Fiscal Year Ended August 31, $ % 2012 2011 Change Change Distribution sales $113,384 $103,467 $9,917 9.6%Cost of sales 82,023 74,865 (7,158) (9.6)%Gross profit $31,361 $28,602 $2,759 Gross margin 27.7% 27.6% 0.1% Distribution sales related to the Distribution Operations segment consist primarily of sales of component parts and fasteners, but also include, to a lesserextent, kitting charges and special order fees, as well as freight charged to customers. Distribution sales generated by the Bisco division represented thesubstantial majority of distribution sales in both periods. The increase in distribution sales in fiscal 2012 compared to the year ended August 31, 2011 (“fiscal2011”) was largely due to increased unit sales, resulting primarily from increases in the salesperson headcount and the number of Sales Focus Teams(“SFT”). The Company uses SFTs to focus on specific markets management has identified and believes that such focus contributes to increases in sales. TheCompany also increased the number of offices during the year, adding three new offices in Iowa, New York and Michigan. 10Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Rental Income (dollars in thousands) Fiscal Year Ended August 31, $ % 2012 2011 Change Change Rental revenue $1,250 $1,242 $8 0.6%Cost of rental operations 641 583 (58) 9.9 Gross profit $609 $659 $(50) Gross margin 48.7% 53.1% (4.4)% All of the Company’s rental properties are currently leased. Gross margin decreased in fiscal 2012 primarily due to an increase in the cost of operations. Selling, General and Administrative Expense (dollars in thousands) Fiscal Year Ended August 31, % 2012 2011 $ Change Change Selling, general and administrative expense $27,648 $25,031 $(2,617) (10.5)%Percent of distribution sales 24.4% 24.2% (0.2)% Selling, general and administrative expense (“SG&A”) consists primarily of payroll and related expenses for the sales and administrative staff,professional fees (including accounting, legal and technology costs and expenses), and sales and marketing costs for the Distribution Operations. SG&Aexpense in fiscal 2012 increased from fiscal 2011 due largely to increased headcount in sales employees and to a lesser extent to the opening of three newoffices. As a percentage of distribution sales, SG&A increased as the Company increased the size of its sales staff with new hires, because those new hiresgenerally do not contribute as much revenue during their first twelve months as veteran sales staff. Other Income (Expense), Net (dollars in thousands) Fiscal Year Ended August 31, $ % 2012 2011 Change Change Other income (expense): Realized gain on sales of marketable trading securities $287 $313 $(26) (8.3)%Unrealized gain (loss) on marketable trading securities 207 (172) 379 (220.3)Interest and other income 20 3 17 566.6 Interest expense, net (737) (770) 33 4.3 Other income (expense), net $(223) $(626) $403 Other income (expense), net as a percent of distribution sales (0.2)% (0.6)% 0.4% Other income (expense), net primarily consists of income or losses on investments in short-term marketable equity securities of publicly-held domesticcorporations. The Company’s investment strategy consists of both long and short positions, as well as utilizing options to improve return. During fiscal 2011,the Company recognized $141,000 in net realized and unrealized gains, which gains were primarily due to long positions the Company was holding. TheCompany experienced net realized and unrealized gains from trading securities of $494,000 during fiscal 2012, due mainly to holding long positions during atime of a general market increase. 11Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Income Tax Provision (dollars in thousands) Fiscal Year Ended August 31, $ % 2012 2011 Change Change Income tax provision $1,679 $1,465 $(214) (14.6)%Percent of net sales 1.5% 1.4% (0.1)% The provision for income taxes increased by $0.2 million in fiscal 2012 as compared to fiscal 2011, which was primarily due to the Company’s higher pre-tax income in fiscal 2012 as compared to fiscal 2011. Liquidity and Capital Resources The Company’s Distribution Operations have historically been funded from positive cash flow from its operations. In addition, the Company has a revolvingcredit agreement with Community Bank, which currently provides for borrowings of up to $10.0 million and bears interest at either the 30, 60 or 90 dayLIBOR (the 90 day LIBOR at August 31, 2012 and 2011 was 0.44% and 0.38%, respectively) plus 1.75% or the bank’s reference rate (3.25% at August 31,2012 and 2011). Borrowings are secured by substantially all assets of the Company’s Distribution Operations and are guaranteed by the Company’s ChiefExecutive Officer and Chairman of the Board, Glen F. Ceiley. The agreement, as amended in March 2012, expires in March 2014. The amount outstandingunder this line of credit as of August 31, 2012 and 2011 was $7,450,000 and $8,500,000, respectively. Availability under the line of credit was $2,550,000and $1,500,000 at August 31, 2012 and 2011, respectively. The Company also has a term loan with Community Bank due in March 2013. The loan is at thebank’s reference rate. The loan is secured by substantially all assets of the Company’s Distribution Operations and guaranteed by the Company’s ChiefExecutive Officer and Chairman of the Board, Glen F. Ceiley. The balance due under the term loan was $299,000 and $498,000 at August 31, 2012 and2011, respectively. The Company’s Real Estate Rental Operations are funded by rents received from the tenants of its five rental properties. Any cash requirements in excess of therental income required by the Real Estate Rental Operations have historically been funded by loans from Bisco. These borrowings and related interest havebeen eliminated in the accompanying consolidated financial statements. The Company currently has three mortgages related to its Real Estate Rental Operations. The first is a note payable to GE Capital secured by the Orange ParkProperty. Second is a note payable to Community Bank secured by the Sylmar Property. The third is a note payable to Zions Bank secured by the BrooksvilleProperty. Cash Flows from Operating Activities During the year ended August 31, 2012, the Company generated $2,889,000 in net cash from its operating activities. This was due mainly to current yearincome and an increase in accounts payable resulting from extending credit terms and checks held at the end of the period and from the use of the company’sdeferred tax asset. These were offset in part by increases in inventory and accounts receivable as a result of the Company’s increase in sales in fiscal 2012 ascompared to fiscal 2011. During the year ended August 31, 2011, the Company used $712,000 in net cash from its operating activities. This was due mainly to increases in bothaccounts receivable and inventory during fiscal 2011, combined with paying down accounts payable. This was offset by the Company’s income for the yearand changes in the deferred tax asset resulting from the Company’s ability to use its net operating losses to decrease payments due to the Internal RevenueService. Cash Flows from Investing Activities Net cash flow provided by investing activities was $700,000 for the year ended August 31, 2012. This was primarily due to the Company’s disposition oftrading securities near the end of fiscal 2012. This was offset by the Company’s purchase of property and equipment, which consisted primarily of computerequipment and leasehold improvements. 12Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Net cash flow provided by investing activities was $114,000 for the year ended August 31, 2011. This was due to the release of restricted cash required aspart of the Company’s self-insured worker’s compensation program by Florida SIGA and an increase in the sales of the Company’s investments during theyear. These were offset by the Company’s purchase of equipment relating to its Distribution Operations segment. Cash Flows from Financing Activities Cash used in financing activities for the year ended August 31, 2012 was $2,313,000 mainly due to the Company’s net payments during the year on itsrevolving credit facility and mortgages related to its real estate holdings. For the year ended August 31, 2011, net cash generated by financing activities was $791,000. This was due to the Company’s payment in fiscal 2011 of$228,000 in dividends on the Company’s preferred stock that had been in arrears and the increase in the Company’s bank overdraft in fiscal 2011, whichwas primarily due to a higher volume of outstanding checks at year end. Additionally, the Company borrowed $1,000,000 in long term debt, which was usedto partially pay down the Company’s revolving credit facility. Off-Balance Sheet Arrangements The Company has no off-balance sheet arrangements that are reasonably likely to have a current or future effect on the financial position, revenues, results ofoperations, liquidity or capital expenditures. Contractual Financial Obligations In addition to using cash flow from operations, the Company finances its operations through the issuance of debt, and previously by entering intoleases. These financial obligations are recorded in accordance with accounting rules applicable to the underlying transactions, with the result that some arerecorded as liabilities in the balance sheet while others are required to be disclosed in the Notes to the accompanying consolidated financial statements andManagement’s Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report on Form 10-K for the year ended August 31,2012. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and is not required to provide the information required under thisitem. Item 8. Financial Statements And Supplementary Data The financial statements required by Regulation S-X are included in Part IV, Item 15 of this report. Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure None. Item 9A. Controls and Procedures (a) Evaluation of disclosure controls and procedures. As required by Rule 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of theperiod covered by this report the Company carried out an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls andprocedures. This evaluation was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, who also serves asthe Company’s principal financial officer. Based upon that evaluation, the Company’s Chief Executive Officer has concluded that the Company’s controlsand procedures were effective for the year ended August 31, 2012. 13Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Management’s annual report on internal control over financial reporting. Management is responsible for establishing and maintainingadequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control overfinancial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements forexternal purposes in accordance with generally accepted accounting principles. The Company’s management, with the participation of its Chief Executive Officer, assessed the effectiveness of the Company’s internal control over financialreporting as of August 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of theTreadway Commission (COSO) in its report entitled “Internal Control-Integrated Framework.” Based on that assessment under such criteria, managementconcluded that the Company’s internal control over financial reporting was effective as of August 31, 2012. Due to its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, and/or that the degree ofcompliance with the policies or procedures may deteriorate. All internal control systems, no matter how well designed, have inherent limitations. Therefore,even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. The Company is a smaller reporting company as defined by Rule 12b-2 of the Exchange Act. As such, this annual report does not include an attestation reportof our independent registered public accounting firm regarding internal control over financial reporting. (c) Changes in internal control over financial reporting. There was no change in our internal control over financial reporting that occurred during thefourth quarter of the year ended August 31, 2012 that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting. Item 9B. Other Information Effective September 26, 2012, we entered into an agreement, as amended on October 2, 2012 (as amended, the “Brooksville Agreement”), with Ka Bun Chan(“Buyer”) to sell our Brooksville Property for a purchase price of $1,825,000. We anticipate that the transaction will close in January 2013. We will pay theBuyer’s broker a commission equal to 3% of the purchase price upon the closing of the sale. PART III Item 10. Directors, Executive Officers and Corporate Governance Set forth below is certain information, as of November 1, 2012, regarding our directors and executive officers, including information regarding the experience,qualifications, attributes or skills of each director that led the Board of Directors to conclude that the person should serve on the Board. Directors and Executive Officers Glen F. Ceiley currently serves as Chairman of the Board and Chief Executive Officer of the Company. Stephen Catanzaro, Jay Conzen and William L.Means also currently serve as directors of the Company. Each director serves a one-year term, or until such director’s successor has been elected and qualified.Each officer holds office at the discretion of the Company’s Board, or until the officer’s successor has been elected and qualified. 14Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Glen F. Ceiley, 66, has served as EACO’s Chief Executive Officer and Chairman of the Board since 1999. Mr. Ceiley is also the Chief Executive Officerand Chairman of the Board of Bisco, and has held those positions since he founded Bisco in 1973. He also served as President of Bisco prior to June 2010. Inaddition, Mr. Ceiley is a former director of Data I/O Corporation, a publicly-held company that provides programming systems for electronic devicemanufacturers. Mr. Ceiley has served as a director of the Company since 1998. As the founder of Bisco with over 39 years of experience in that industry, Mr.Ceiley is uniquely qualified to provide insights into and guidance on the industry and growth and development of the Company. Stephen Catanzaro, 59, has served as the Chief Financial Officer of Allied Business Schools, Inc., a company that provides home study courses anddistance education, since April 2004. Prior to that, Mr. Catanzaro was the Chief Financial Officer of V&M Restoration, Inc., a building restoration company,from September 2002 to February 2004, and the Chief Financial Officer of Bisco. Mr. Catanzaro has served as a director of the Company since 1999. Mr.Catanzaro offers to the Board valuable business and strategic insights obtained through his work in a variety of industries, as well as experience as a certifiedpublic accountant which is invaluable to his service in the Audit Committee. Jay Conzen, 66, has served as the President of Old Fashioned Kitchen, Inc., a national food distributor, since April 2003. Prior to that, from October 1992to April 2003, Mr. Conzen was the principal of Jay Conzen Investments, an investment advisor. Mr. Conzen also served as a consultant to EACO from August1999 until January 2001 and from October 2001 to April 2003. Mr. Conzen has served as a director of the Company since 1998. Having served as anexecutive officer of several companies, Mr. Conzen offers to the Board a wealth of management and leadership experience as well as an understanding of issuesfaced by businesses. He also served as a certified public accountant for a number of years. William L. Means, 69, served as the Vice President of Information Technology of Bisco from 2001 until his retirement in June 2010. Prior to that, from 1997to 2001, Mr. Means was Vice President of Corporate Development of Bisco. Mr. Means has served as a director of the Company since July 1999. He holds anM.B.A. degree from San Jose State University. Mr. Means provides extensive industry expertise to the Board, as well as a deep and broad understanding of theCompany and its operations resulting from his years of service as an officer of Bisco. Donald S. Wagner, 50, has served as the President of Bisco since June 2010 and as its Chief Operating Officer since November 2007. Prior to his promotionto President, Mr. Wagner also held the title of Executive Vice President of Bisco from November 2007. Mr. Wagner has worked at Bisco since 1994 in anumber of other capacities, including as Vice President of Product Management. Prior to joining Bisco, Mr. Wagner worked in the Defense division atRockwell International. He holds a B.A. degree in Communications from California State University, Fullerton. Michael Bains, 43, has served as the Controller of EACO since March 2010 and as the Controller of Bisco since December 2004. Prior to joining Bisco, Mr.Bains worked as the Controller of several service companies and as an accountant in a number of public accounting firms. He is a Certified PublicAccountant and holds a B.S. degree in Accounting from Loyola Marymount University. Zach Ceiley, 32, has served as the Vice President of Sales and Marketing of Bisco since September 2012. Prior to such promotion, Mr. Ceiley was theNorthern Regional Manager of Bisco from September 2010. Since he joined Bisco in February 2003, Mr. Ceiley has served the Company in a number of othercapacities in the sales department, including as Cell Manager and Area Manager. Mr. Ceiley has a B.S. degree in Communication from the University ofColorado. Zach Ceiley, the Vice President of Sales and Marketing of Bisco, is the son of Glen Ceiley, EACO’s Chairman of the Board, Chief Executive Officer andmajority shareholder and Bisco’s Chief Executive Officer and Chairman of the Board. 15Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 16(a) Beneficial Ownership Reporting Compliance Section 16(a) of the Exchange Act requires certain officers of the Company and its directors, and persons who beneficially own more than ten percent of anyregistered class of the Company’s equity securities, to file reports of ownership in such securities and changes in ownership in such securities with the SEC.Specific due dates for these reports have been established, and we are required to report any failure to file by such dates. For the year ended August 31, 2012,the Form 4 filing for a sale on February 8, 2012 by Mr. Ceiley of shares held in the Bisco Industries, Inc. Profit Sharing and Savings Plan was not filedwithin two business days of such sale. Based solely on a review of the reports and written representations provided to the Company by the above referencedpersons, the Company believes that, with respect to the year ended August 31, 2012, except as indicated in the foregoing sentence, all filing requirementsapplicable to its reporting officers, directors and greater than ten percent beneficial owners were timely satisfied. Code of Ethical Conduct The Company has adopted a code of ethics applicable to the Company’s senior executive and financial officers. You may receive, without charge, a copy ofthe Financial Code of Ethical Conduct by contacting our Corporate Secretary at 1500 N. Lakeview Avenue, Anaheim, California 92807. Audit Committee The Audit Committee’s basic functions are to assist the Board in discharging its fiduciary responsibilities to the shareholders and the investment communityin the preservation of the integrity of the financial information published by the Company, to maintain free and open means of communication between theCompany’s directors, independent auditors and financial management, and to ensure the independence of the independent auditors. The Board has adopted awritten charter for the Audit Committee which is attached as Annex E to the Company’s Proxy Statement for the 2010 Annual Meeting of Shareholders, as filedwith the SEC on January 8, 2010. The Audit Committee charter is not available on the Company’s website. Currently, the members of the Audit Committeeare Messrs. Catanzaro, Conzen (Chairman) and Means. As indicated in Item 13 below, the Board has determined that both Messrs. Catanzaro and Conzen areindependent as defined by the NASDAQ Stock Market’s Marketplace Rules. The Board has identified Mr. Conzen as the member of the Audit Committeewho qualifies as an “audit committee financial expert” under applicable SEC rules and regulations governing the composition of the Audit Committee. Item 11. Executive Compensation The Executive Compensation Committee (the “Committee”) is responsible for establishing the salary and annual bonuses paid to executive officers of EACOand administering EACO’s equity incentive plans, including granting stock options to officers and employees of EACO. The Committee has not adopted aformal charter. The current members of the Committee are Messrs. Glen Ceiley and William Means. Prior to the acquisition of Bisco in March 2010, EACO had only one officer — Mr. Ceiley, the Chief Executive Officer of EACO. Due to the nature ofEACO’s operations and related financial results in recent years, the Committee and Mr. Ceiley agreed that no salary or other compensation for his services asthe Chief Executive Officer of EACO was necessary and no such compensation was provided to Mr. Ceiley for fiscal 2012 and fiscal 2011. However, bothMr. Ceiley and Michael Bains, the Controller of EACO and Bisco, receive compensation from Bisco for their services to Bisco. All compensation for the named executive officers for fiscal 2012 and fiscal 2011, other than the amounts payable to Mr. Ceiley in connection with his serviceas director of EACO, were paid by Bisco. The compensation of named executive officers who serve as officers of Bisco are determined by Bisco’s Chairmanof the Board, Glen Ceiley. Bisco currently does not pay bonuses or other incentive compensation to the named executive officers. Summary Compensation The following table sets forth information regarding compensation earned from the Company (including from Bisco, our wholly-owned subsidiary) duringfiscal 2012 and fiscal 2011 by (i) our Chief Executive Officer, (ii) our Controller and (iii) two other most highly compensated executive officers who wereemployed by the Company (including Bisco) as of August 31, 2012 and whose total compensation exceeded $100,000 during that year. The officers listedbelow are collectively referred to as the “named executive officers” in this report. 16Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Name and Principal All Other Position Fiscal Year Salary Compensation Total Glen F. Ceiley, 2012 $334,783 $— $334,783 Chief Executive Officer and 2011 353,887 500(1) 354,387 Chairman of the Board of EACO and Bisco Donald Wagner, 2012 209,431 — 209,431 President of Bisco 2011 212,747 — 212,747 Robert Rist, Vice President 2012 147,229 — 147,229 of Sales and Marketing of Bisco(2) 2011 148,323 — 148,323 Michael Bains, Controller of EACO and Bisco 2012 155,348 — 155,348 2011 150,459 — 150,459 (1)Consists of fees paid to such person in his capacity as a director of EACO.(2)Effective September 1, 2012, Mr. Rist resigned as the Vice President of Sales and Marketing of Bisco for personal reasons. He has since resumed hisprevious duties as a Regional Manager of Bisco. Outstanding Equity Awards at Fiscal Year-End The Company did not grant any equity awards during fiscal 2012 to any named executive officer and no outstanding equity awards were held by the namedexecutive officers at August 31, 2012. Director Compensation The Company pays $10,000 per year in cash to each director not employed by EACO or its subsidiary as compensation for his services. In addition,directors who do not receive a salary from EACO or its subsidiary receive a fee of $500 for each Board meeting attended. Prior to 2011, all directors received afee of $500 per meeting attended. No fees are awarded to directors for attendance at meetings of the Audit Committee or the Executive Compensation Committeeof the Board. The following table sets forth the compensation of certain Company directors for the year ended August 31, 2012. (See the above “Summary Compensation”for information regarding Mr. Ceiley). Fees Earned or Director Paid in Cash Total Stephen Catanzaro $12,000 $12,000 Jay Conzen 12,000 12,000 William Means 12,000 12,000 17Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security Ownership of Certain Beneficial Owners and Management The table below presents certain information regarding beneficial ownership of the Company’s common stock (the Company’s only voting security) as ofNovember 1, 2012 (i) by each shareholder known to the Company to own, or have the right to acquire within sixty days of November 1, 2012, more than fivepercent (5%) of the outstanding common stock, (ii) by each named executive officer and director of the Company, and (iii) by all directors and executiveofficers of the Company as a group. Shares of Name and Address of Common Stock Percent of Beneficial Owner (1) Beneficially Owned Class(2) Stephen Catanzaro 765 * Glen F. Ceiley(3) 4,841,792 98.8%Jay Conzen — — William L. Means 322 * Donald Wagner — — Robert Rist — — Michael Bains — — All executive officers and directors as a group (7 persons)(3)(4) 4,843,019 98.8% * Less than 1% (1) The address for each person named in the table is c/o Bisco Industries, Inc., 1500 North Lakeview Avenue, Anaheim, CA 92807. (2) Based on 4,861,590 shares outstanding as of November 1, 2012. Under the rules of the SEC, the determinations of “beneficial ownership” of theCompany’s common stock are based upon Rule 13d-3 under the Exchange Act. Under Rule 13d-3, shares will be deemed to be “beneficially owned” whena person has, either solely or with others, the power to vote or to direct the voting of shares and/or the power to dispose, or to direct the disposition ofshares, or where a person has the right to acquire any such power within 60 days after the date such beneficial ownership is determined. Shares of theCompany’s common stock that a beneficial owner has the right to acquire within 60 days are deemed to be outstanding for the purpose of computing thepercentage ownership of such owner but are not deemed outstanding for the purpose of computing the percentage ownership of any other person. (3) Includes (i) 4,775,895 shares held directly by Mr. Ceiley; (ii) 6,000 shares held by Mr. Ceiley’s wife; (iii) 17,630 shares held by the Bisco IndustriesProfit Sharing and Savings Plan (the “Bisco Plan”); (iv) 2,267 shares held in his IRA; and (v) 40,000 shares issuable upon conversion of the36,000 shares of Series A Cumulative Convertible Preferred Stock (not including any dividends accrued but not yet paid) held by Mr. Ceiley. Mr. Ceileyhas the sole power to vote and dispose of the shares of common stock he owns individually and the shares owned by the Bisco Plan. Mr. Ceiley is theChief Executive Officer and the sole director of Bisco. Mr. Ceiley disclaims beneficial ownership of the shares held by the Bisco Plan except to the extentof his pecuniary interest therein. (4) Includes shares held by Zachary Ceiley, the current Vice President of Sales and Marketing of Bisco. Does not include shares held by Mr. Rist, who is nolonger an executive officer. 18Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Equity Compensation Plans The following table provides information as of August 31, 2012 with respect to shares of our common stock that may be issued under existing equitycompensation plans. Number of Securities Remaining Available Number of for Future Issuance Securities to be Under Equity Issued Upon Weighted Average Compensation Plans Exercise of Exercise Price of (Excluding Outstanding Outstanding Securities Options, Warrants Options, Warrants Reflected in First Plan Category and Rights and Rights Column) Equity Compensation Plans Approved by Security Holders 2002 Long-Term Incentive Plan (1) 0 N/A 0 Equity Compensation Plans Not Approved by Security Holders None Total 0 N/A 0 (1) 8,000 shares of common stock were initially reserved for issuance under the plan; the plan expired in June 2012. Item 13. Certain Relationships and Related Transactions and Director Independence Certain Relationships and Related Transactions Since September 1, 2010, except as described below, there has not been, nor is there any proposed transaction, where we (or any of our subsidiaries) were orwill be a party in which the amount involved exceeded or will exceed the lesser of $120,000 or one percent of the average of the Company’s total assets at yearend for the last two fiscal years and in which any director, director nominee, executive officer, holder of more than 5% of any class of our voting securities, orany member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest. The Company leases three buildings under operating lease agreements from its CEO and majority shareholder, Glen Ceiley. During the years ended August 31,2012 and 2011, the Company paid approximately $548,000 and $529,000, respectively, in rent with respect to these leases. Director Independence The Company’s Board consists of the following directors: Stephen Catanzaro, Glen Ceiley, Jay Conzen and William L. Means. The Board has determinedthat two of its four directors, Stephen Catanzaro and Jay Conzen, are independent as defined by the NASDAQ Stock Market’s Marketplace Rules. Inaddition to such rules, the Board considered transactions and relationships between each director (and his immediate family) and the Company to determinewhether any such relationships or transactions were inconsistent with a determination that the director is independent. As a result, the Board determined thatMessrs. Ceiley and Means are not independent, as they are (or recently served as) employees of Bisco and members of Bisco’s steering committee. Bisco’ssteering committee handles the day to day operations of the Company, and Messrs. Ceiley and Means have been intimately involved with decision-making thatdirectly affects the financial statements of the Company. Currently, the members of the Audit Committee are Messrs. Catanzaro, Conzen (Chairman) and Means. 19Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Item 14. Principal Accounting Fees and Services Audit Committee Pre-Approval Policies and Procedures The Audit Committee is required to pre-approve all auditing services and permissible non-audit services, including related fees and terms, to be performed forthe Company by its independent auditor, subject to the de minimus exceptions for non-audit services described under the Exchange Act, which are approvedby the Audit Committee prior to the completion of the audit. The Audit Committee also considers whether the provision by its independent accounting firm ofany non-audit related services is compatible with maintaining the independence of such firm. For fiscal 2012 and fiscal 2011, the Audit Committee pre-approved all services performed for the Company by the auditor. Audit Fees The aggregate fees billed by Squar, Milner, Peterson, Miranda & Williamson, LLP (“Squar Milner”) for the years ended August 31, 2012 and 2011 forprofessional services rendered for the audit of such financial statements and for the reviews of the unaudited financial statements included in the Company’squarterly reports on Form 10-Q for the quarters ended during the years ended August 31, 2012 and 2011 were $165,000 and $160,000, respectively. Audit-Related Fees The Company did not pay any audit-related fees to Squar Milner for the years ended August 31, 2012 and 2011. Tax Fees The Company did not pay any fees to Squar Milner for the years ended August 31, 2012 and 2011 for professional services rendered for tax compliance, taxadvice or tax planning. All Other Fees The Company did not pay any fees to Squar Milner for the years ended August 31, 2012 and 2011 for products and services provided to the Company, otherthan for the services described above. PART IV Item 15. Exhibits, Financial Statement Schedules (a) The financial statements listed below and commencing on the pages indicated are filed as part of this report on Form 10-K. Report of Independent Registered Public Accounting FirmF-1Consolidated Balance sheets as of August 31, 2012 and 2011F-2Consolidated Statements of Operations for the years ended August 31, 2012 and 2011F-4Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2012 and 2011F-5Consolidated Statements of Cash Flows for the years ended August 31, 2012 and 2011F-6Notes to the Consolidated Financial StatementsF-8Schedule II – Valuation and Qualifying AccountsF-20 (b) The exhibits listed in “Exhibit Index” are filed herewith or incorporated by reference as indicated 20Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 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 itsbehalf by the undersigned, thereunto duly authorized. EACO Corporation November 26, 2012 /s/ Glen Ceiley By: Glen Ceiley Its: Chairman of the Board and Chief Executive Officer (principal executive officer andprincipal financial officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant in thecapacities and on the date indicated. Signature Title Date /s/ Glen F. Ceiley Chairman of the Board and Chief Executive Officer 11/26/12Glen F. Ceiley (principal executive officer and principal financial officer) /s/ Michael Bains Controller (principal accounting officer) 11/26/12Michael Bains /s/ Steve Catanzaro Director 11/26/12Steve Catanzaro /s/ Jay Conzen Director 11/26/12Jay Conzen /s/ William Means Director 11/26/12William Means 21Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting FirmF-1 Consolidated Balance Sheets as of August 31, 2012 and 2011F-2 Consolidated Statements of Operations for the years ended August 31, 2012 and 2011F-3 Consolidated Statements of Shareholders’ Equity for the years ended August 31, 2012 and 2011F-4 Consolidated Statements of Cash Flows for the years ended August 31, 2012 and 2011F-5 Notes to the Consolidated Financial StatementsF-6 22Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM The Board of Directors and ShareholdersEACO CorporationAnaheim, California We have audited the accompanying consolidated balance sheets of EACO Corporation and Subsidiaries (the “Company”) as of August 31, 2012 and 2011and the related consolidated statements of operations, shareholders' equity, and cash flows for the years then ended.. These financial statements are theresponsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controlover financial reporting as a basis for designing audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinionon the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining,on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for ouropinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of EACO Corporation andSubsidiaries as of August 31, 2012 and 2011 and the results of their operations and their cash flows for the years then ended, in conformity with U.S.generally accepted accounting principles. /s/ Squar, Milner, Peterson, Miranda and Williamson, LLP Newport Beach, CaliforniaNovember 26, 2012 F-1Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Balance Sheets(in thousands, except share and per share information) August 31, 2012 August 31, 2011 ASSETS Current Assets: Cash and cash equivalents $2,568 $1,368 Trade accounts receivable, net 13,972 12,348 Inventory, net 12,189 11,389 Marketable securities, trading 197 892 Prepaid expenses and other current assets 464 320 Assets held for sale 1,521 1,624 Deferred tax asset, current 290 1,062 Total current assets 31,201 29,003 Non-current Assets: Restricted cash 548 632 Real estate properties held for leasing, net 8,253 8,461 Equipment and leasehold improvements, net 1,106 972 Deferred tax asset 2,111 2,623 Other assets, principally deferred charges, net of accumulated amortization 1,110 1,187 Total assets $44,329 $42,878 LIABILITIES AND SHAREHOLDERS’ EQUITY Current Liabilities: Trade accounts payable $9,519 $8,541 Accrued expenses and other current liabilities 2,482 2,325 Liabilities of discontinued operations – short-term 146 147 Liabilities of assets held for sale 1,113 1,144 Current portion of long-term debt 555 778 Total current liabilities 13,815 12,935 Non-current Liabilities: Liabilities of discontinued operations – long-term 2,567 2,708 Deposit liability 147 147 Long-term debt 12,907 14,482 Total liabilities 29,436 30,272 Shareholders’ Equity: Convertible preferred stock, $0.01 par value per share; authorized 10,000,000 shares; 36,000 shares outstanding atAugust 31, 2012 and 2011 (liquidation value $900) 1 1 Common stock, $0.01 par value per share; authorized 8,000,000 shares; 4,861,590 shares outstanding at August31, 2012 and 2011 49 49 Additional paid-in capital 12,378 12,378 Accumulated other comprehensive income 478 554 Retained earnings (accumulated deficit) 1,987 (376)Total shareholders’ equity 14,893 12,606 Total liabilities and shareholders’ equity $44,329 $42,878 See accompanying notes to consolidated financial statements. F-2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Operations(in thousands, except per share amounts) Year EndedAugust 31, 2012 Year Ended August 31, 2011 Distribution sales $113,384 $103,467 Cost of goods sold 82,023 74,865 Gross margin 31,361 28,602 Rental revenue 1,250 1,242 Cost of rental operations 641 583 Gross income from rental operations 609 659 Operating expenses: Selling, general and administrative expenses 27,648 25,031 Total operating expenses 27,648 25,031 Income from operations 4,322 4,230 Other non-operating income (expense): Income on sale of trading securities 287 313 Unrealized gain (loss) on trading securities 207 (172)Interest and other income 20 3 Interest expense (737) (770) Income before income taxes 4,099 3,604 Provision for income taxes 1,679 1,465 Net income 2,420 2,139 Undeclared cumulative preferred stock dividend (76) (76) Net income available to common shareholders $2,344 $2,063 Basic and diluted net income per share: $0.48 $0.42 Basic and diluted weighted average common shares outstanding 4,861,590 4,861,590 See accompanying notes to consolidated financial statements. F-3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Shareholders’ Equity (Deficit)For the Years Ended August 31, 2012 and 2011(in thousands, except share information) Convertible Preferred Stock Common Stock AdditionalPaid-in AccumulatedOther Comprehensive Accumulated(Deficit)Retained Total Shareholder Shares Amount Shares Amount Capital Income Earnings Equity Balance, August 31, 2010 36,000 $1 4,861,590 $49 $12,378 $639 $(2,287) $10,780 Preferred dividends (228) (228)Net income 2,139 2,139 Other comprehensive income: Foreign translation loss (85) (85)Total comprehensive income 2,054 Balance, August 31, 2011 36,000 1 4,861,590 49 12,378 554 (376) 12,606 Preferred dividends (57) (57)Net income 2,420 2,420 Other comprehensive income: Foreign translation loss (76) (76)Total comprehensive income 2,344 Balance, August 31, 2012 36,000 $1 4,861,590 $49 $12,378 $478 $1,987 $14,893 See accompanying notes to consolidated financial statements. F-4Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO Corporation and SubsidiariesConsolidated Statements of Cash Flows(in thousands) Year Ended August 31, 2012 2011 Operating activities: Net income $2,420 $2,139 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 807 752 Bad debt expense 200 165 Change in inventory reserve 204 — Net gain on trading securities (494) (342)(Increase) decrease in: Trade accounts receivable (1,824) (1,399)Inventory (1,004) (1,380)Prepaid expenses and other assets (124) (127)Deferred tax asset 1,284 772 Increase (decrease) in: Trade accounts payable 1,405 (1,574)Accrued expenses and other current liabilities 157 502 Liabilities of discontinued operations (142) (220)Net cash provided by (used in) operating activities 2,889 (712) Investing activities: Purchase of property and equipment (573) (387)Sale of trading securities 1,189 267 Change in restricted cash 84 234 Net cash provided by investing activities 700 114 Financing activities: Net (payments) borrowings on revolving credit facility (1,050) (400)Bank overdraft (427) 889 Payment of preferred dividend (57) (228)Borrowings on long-term debt - 1,000 Payments on long-term debt (779) (470)Net cash (used in) provided by financing activities (2,313) 791 Effect of foreign currency exchange rate changes on cash and cash equivalents (76) (85)Net increase in cash and cash equivalents 1,200 108 Cash and cash equivalents - beginning of period 1,368 1,260 Cash and cash equivalents - end of period $2,568 $1,368 Supplemental disclosures of cash flow information: Cash paid for interest $742 $771 Cash paid for taxes $451 $258 Non cash transfer of equipment and leasehold improvements, net to assets held for sale $1,521 $1,624 Non cash transfer of long-term debt to liabilities of assets held for sale $1,113 $1,144 See accompanying notes to consolidated financial statements. F-5Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EACO CORPORATION AND SUBSIDIARIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTSAugust 31, 2012 and 2011 Note 1. Organization and Basis of Presentation Organization and Merger with Bisco Industries, Inc. EACO Corporation (“EACO”) was incorporated in the State of Florida in September 1985. From the inception of EACO through June 2005, EACO’sbusiness consisted of operating restaurants in the State of Florida. On June 29, 2005, EACO sold all of its operating restaurants (the “Asset Sale”) includingsixteen restaurant businesses, premises, equipment and other assets used in restaurant operations. The only remaining activity of the restaurant operationsrelates to the workers’ compensation claim liability, which is presented as liabilities of discontinued operations on the Company’s balance sheets. After theAsset Sale and prior to the acquisition of Bisco (described below), EACO’s operations principally consisted of managing five real estate properties held forleasing located in Florida and California. On March 24, 2010, EACO completed the acquisition of Bisco Industries, Inc. (“Bisco”), a company under the common control of EACO’s majorityshareholder (Glen Ceiley). Bisco is a distributor of electronic components and fasteners with 43 sales offices and six distribution centers located throughout theUnited States and Canada. Bisco supplies parts used in the manufacture of products in a broad range of industries, including the aerospace, circuit board,communication, computer, fabrication, instrumentation, industrial equipment and marine industries. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. These estimates include allowance fordoubtful trade accounts receivable, slow moving and obsolete inventory reserves, recoverability of the carrying value and estimated useful lives of long-livedassets, workers’ compensation liability and the valuation allowance against deferred tax assets. Actual results could differ from those estimates. Principles of Consolidation The consolidated financial statements for all periods presented include the accounts of EACO, its wholly-owned subsidiary, Bisco Industries, Inc., andBisco’s wholly-owned Canadian subsidiary, Bisco Industries Limited (which are collectively referred to herein as the “Company”, “we”, “us” and “our”). Allsignificant intercompany transactions and balances have been eliminated in consolidation. Note 2. Significant Accounting Policies Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Restricted Cash The State of Florida Division of Workers’ Compensation (the “Division”) requires self-insured companies to pledge collateral in favor of the Division in anamount sufficient to cover the projected outstanding liability. In compliance with this requirement, the Company pledged three irrevocable letters of credittotaling $3,088,000 as of August 31, 2011. In November 2011, the Division lowered the required collateral required by the Company to $2,855,000. Theseletters are secured by certificates of deposits, totaling $548,000 and $632,000 at August 31, 2012 and 2011, respectively, and the Company’s SylmarProperty.F-6Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Trade Accounts Receivable Trade accounts receivable are carried at original invoice amount, less an estimate for an allowance for doubtful accounts. Management determines theallowance for doubtful accounts by identifying probable credit losses in the Company’s accounts receivable and reviewing historical data to estimate thecollectability on items not yet specifically identified as problem accounts. Trade accounts receivable are written off when deemed uncollectible. Recoveries oftrade accounts receivable previously written off are recorded when received. A trade account receivable is considered past due if any portion of the receivablebalance is outstanding for more than 30 days. The Company does not charge interest on past due balances. The allowance for doubtful accounts was$273,000 and $253,000 at August 31, 2012 and 2011, respectively. Inventories Inventories consist primarily of electronic fasteners and components, and are stated at the lower of cost or estimated market value. Cost is determined using theaverage cost method. Inventories are net of a reserve for slow moving or obsolete items of $972,000 and $768,000 at August 31, 2012 and 2011, respectively.The reserve is based upon management’s review of inventories on-hand over their expected future utilization and length of time held by the Company. Real Estate Properties Real estate properties held for leasing are stated at cost, net of accumulated depreciation. Maintenance, repairs and betterments which do not enhance the valueor increase the life of the assets are expensed as incurred. Depreciation is provided for financial reporting purposes principally on the straight-line method overthe following estimated useful lives: buildings and improvements - 25 years; land improvements - 25 years; and equipment – 3 to 8 years. Leaseholdimprovements are amortized over the estimated useful life of the asset or remaining lease term, whichever is less. The Company classifies real estate properties as assets held for sale when the following conditions are present: a) management, having the authority to approvethe action, commits to a plan to sell the asset, b) the asset is available for immediate sale in its present condition, c) an active program to complete the plan ofsale has been initiated, d) the sale of the asset is probable, e) the assets is being marketed for sale at a price that is reasonable in relation to its current fair valueand f) it is unlikely that significant changes to the plan will be made or the plan will be withdrawn. Equipment and Leasehold Improvements Equipment and leasehold improvements not used in conjunction with real estate properties are stated at cost net of accumulated amortization. Depreciation onequipment is calculated on the straight-line method over the estimated useful lives of the assets, ranging from five to seven years. Leasehold improvements areamortized over the estimated useful life of the asset or the remaining lease term, whichever is less. Maintenance and repairs are charged to expense as incurred. Renewals and improvements of a major nature are capitalized. At the time of retirement ordisposition of property and equipment, the cost and accumulated depreciation or amortization are removed from the accounts and any gains or losses arereflected in earnings. F-7Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Long-Lived Assets Long-lived assets (principally real estate, equipment and leasehold improvements) are reviewed for impairment whenever events or changes in circumstancesindicate that the carrying amount of an asset may not be recoverable. For purposes of the impairment review, real estate properties are reviewed on an asset-by-asset basis. Recoverability of real estate property assets is measured by a comparison of the carrying amount of each operating property and related assets tofuture net cash flows expected to be generated by such assets. For measuring recoverability of Distribution Operations assets, long-lived assets are groupedwith other assets to the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities. If assetsare considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds their estimatedfair values. Investments Investments consist of marketable trading securities and short sale positions, which represent securities sold, not yet purchased. Short sales result inobligations to purchase securities at a later date. These securities are stated at fair value. Market value is determined using the quoted closing or latest bid prices. Realized gains and losses on investmenttransactions are determined by the average cost method and are recognized as incurred in the statements of operations. Net unrealized gains and losses arereported in the statements of operations and represent the change in the market value of investment holdings during the period. At August 31, 2012 and 2011,marketable securities consisted of equity securities (including stock options) of publicly-held domestic companies. As of August 31, 2012 and 2011, the Company had no short sale positions. The Company recognized unrealized gains on trading securities of $207,000 and unrealized losses of $172,000 for the years ended August 31, 2012 and2011, respectively. The Company recognized realized gains on trading securities of $287,000 and $313,000 for the years ended August 31, 2012 and 2011,respectively. Revenue Recognition For the Company’s Distribution Operations, the Company’s shipping terms are FOB shipping point. As such, management generally recognizes Companyrevenue at the time of product shipment. Revenue is considered to be realized or realizable and earned when there is persuasive evidence of a sales arrangementin the form of an executed contract or purchase order, the product has been shipped, the sales price is fixed or determinable, and collectability is reasonablyassured. The Company leases its real estate properties to tenants under operating leases with terms exceeding one year. Some of these leases contain scheduled rentincreases. We record rent revenue for leases which contain scheduled rent increases on a straight-line basis over the term of the lease. Income Taxes Deferred taxes on income result from temporary differences between the reporting of income for financial statement and tax reporting purposes. A valuationallowance related to a deferred tax asset is recorded when it is more likely than not that some or all of the deferred tax asset will not be realized. We provide tax contingencies, if any, for federal, state, local and international exposures relating to audit results, tax planning initiatives and complianceresponsibilities. The development of these reserves requires judgments about tax issues, potential outcomes and timing. Although the outcome of these taxaudits is uncertain, in management’s opinion adequate provisions for income taxes have been made for potential liabilities emanating from these reviews. Ifactual outcomes differ materially from these estimates, they could have a material impact on our results of operations. Freight and Shipping/Handling Shipping and handling expenses are included in cost of goods sold, and were approximately $2,157,000 and $2,322,000 for the years ended August 31, 2012and 2011, respectively. F-8Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Leases Certain of the Company’s operating leases provide for minimum annual payments that adjust over the life of the lease. The aggregate minimum annualpayments are expensed on the straight-line basis over the minimum lease term. The Company recognizes a deferred rent liability for rent escalations when theamount of straight-line rent exceeds the lease payments, and reduces the deferred rent liability when the lease payments exceed the straight-line rent expense. Earnings Per Common Share Basic earnings per common share for the years ended August 31, 2012 and 2011 were computed based on the weighted average number of common sharesoutstanding. Diluted earnings per share for those periods have been computed based on the weighted average number of common shares outstanding, givingeffect to all potentially dilutive common shares that were outstanding during the respective periods. Potentially dilutive common shares represent 40,000common shares issuable upon conversion of 36,000 shares of convertible preferred stock, which were outstanding at August 31, 2012 and 2011. Suchsecurities are excluded from the weighted average shares outstanding used to calculate diluted earnings per common share for the years ended August 31, 2012and 2011 as their inclusion would be anti-dilutive since the conversion price was greater than the average market price of the common stock. Foreign Currency Translation and Transactions Assets and liabilities recorded in functional currencies other than the U.S. dollar (Canadian dollars for the Company’s Canadian subsidiary) are translatedinto U.S. dollars at the period-end rate of exchange. Revenue and expenses are translated at the weighted-average exchange rates for the years ended August 31,2012 and 2011. The resulting translation adjustments are charged or credited directly to accumulated other comprehensive income or loss. The averageexchange rates for the years ended August 31, 2012 and 2011 were $1.01. Concentrations Financial instruments that subject the Company to credit risk include cash balances maintained in the United States in excess of federal depository insurancelimits and accounts receivable. Cash accounts maintained by the Company at domestic financial institutions are insured by the Federal Deposit InsuranceCorporation. The Company has not experienced any losses in such accounts. Net sales to customers outside the United States and related trade accounts receivable were approximately 7% and 4% of total sales and trade accountsreceivable, respectively, at August 31, 2012, and 7% and 5%, respectively, at August 31, 2011. No single customer accounted for more than 10% of total revenues for either of the years ended August 31, 2012 or 2011. Estimated Fair Value of Financial Instruments and Certain Nonfinancial Assets and Liabilities The Company’s financial instruments other than its marketable securities include cash and cash equivalents, trade accounts receivable, prepaid expenses,security deposits, trade accounts payable, line of credit, accrued expenses and long-term debt. Management believes that the fair value of these financialinstruments approximate their carrying amounts based on current market indicators, such as prevailing interest rates and the short-term maturities of suchfinancial instruments. The Company’s marketable securities are measured at fair value on a recurring basis (see Note 14). During the years ended August 31, 2012 and 2011, the Company did not have any nonfinancial assets or liabilities that were measured at estimated fair valueon a recurring or nonrecurring basis. F-9Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Segment Reporting Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chiefoperating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. Our chief operating decision makeris our Chief Executive Officer. Management has evaluated its approach for making operating decisions and assessing the performance of our business anddetermined that the Company has two reportable segments: Distribution Operations and Real Estate Rental Operations. The Distribution Operations are thoseresults of Bisco, while the Real Estate Rental Operations reflect the results of EACO Corporation (see Note 13). Reclassifications Certain reclassifications of accounts have been made to the 2011 financial statements to be consistent with the 2012 presentation. Recent Accounting Pronouncements In June 2011, the FASB issued Accounting Standards Update No. 2011-05, C omprehensive Income (Topic 220): Presentation of ComprehensiveIncome (ASU 2011-05) . The objective of this amendment is to increase the prominence of other comprehensive income in the financial statements. Theamendments require entities to report components of net income and the components of other comprehensive income either in a continuous statement ofcomprehensive income or in two separate but consecutive statements. Additionally, the amendments in ASU 2011-05 require an entity to present on the face ofthe financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statements where thecomponents of net income and the components of other comprehensive income are presented. In December 2011, the FASB issued Accounting StandardsUpdate No. 2011-12, which deferred the specific requirements related to the presentation of reclassification adjustments. This amendment is effective forfiscal years, and interim periods within those years, beginning after December 15, 2011. We expect the adoption of this ASU will affect financial statementpresentation only. Note 3. Real Estate Properties Real estate properties held for leasing consist of five properties and are as follows at August 31, 2012 and 2011: August 31, 2012 August 31, 2011 Land $5,030,000 5,030,000 Buildings & improvements 5,042,000 5,042,000 Equipment 1,172,000 1,172,000 Total 11,244,000 11,244,000 Accumulated depreciation (2,991,000) (2,783,000)Book value $8,253,000 8,461,000 One of the properties is located in Sylmar, California and the other three properties are located in Orange Park, Deland and Brooksville, Florida. The SylmarProperty consists of two industrial properties with 65,000 total square feet. The other properties are suited for restaurant use and are approximately 30,000square feet combined. In September 2012, the Company entered into an agreement to sell the Brooksville Property for $1,825,000. We anticipate that this transaction will close inJanuary 2013. As such, the associated land, buildings and improvements and related liabilities were reclassified as assets held for sale and liabilities of assetsheld for sale, respectively, on the accompanying consolidated balance sheets as of August 31, 2012 and 2011. The following table shows the future minimum rentals due under non-cancelable operating leases (where the Company is the lessor or sublessor) in effect atAugust 31, 2012: IndustrialProperties Restaurant Properties Total Year ending August 31, 2013 327,000 395,000 722,000 2014 260,000 334,000 594,000 2015 — 343,000 343,000 2016 — 353,000 353,000 2017 — 257,000 257,000 Thereafter — 526,000 526,000 $587,000 $2,208,000 $2,795,000 For the years ended August 31, 2012 and 2011, depreciation expense was $311,000 and $312,000, respectively. F-10Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 4. Equipment and Leasehold Improvements Equipment and leasehold improvements are summarized as follows at August 31, 2012 and 2011: August 31, 2012 August 31, 2011 Machinery and equipment 4,293,000 3,719,000 Furniture and equipment 687,000 648,000 Vehicles 121,000 173,000 Leasehold improvements 1,164,000 1,148,000 6,265,000 5,688,000 Less accumulated depreciation and amortization (5,159,000) (4,716,000) $1,106,000 $972,000 For the years ended August 31, 2012 and 2011, depreciation expense was $443,000 and $413,000, respectively. Note 5. Line of Credit The Company has a revolving credit agreement with Community Bank, which currently provides for borrowings of up to $10.0 million and bears interest ateither the 30, 60 or 90 day London Inter-Bank Offered Rate (“LIBOR”) (the 90 day LIBOR at August 31, 2012 and 2011 was 0.43% and 0.33%, respectively)plus 1.75% and/or the bank’s reference rate (3.25% at August 31, 2012 and 2011). Borrowings are secured by substantially all assets of the Company’sDistribution Operations and are guaranteed by the Company’s Chief Executive Officer, Chairman of the Board and majority shareholder Glen F. Ceiley. Theagreement, as amended in March 2012, expires in March 2014. The amount outstanding under this line of credit as of August 31, 2012 and 2011 was$7,450,000 and $8,500,000, respectively. Availability under the line of credit was $2,550,000 and $1,500,000 at August 31, 2012 and 2011, respectively. F-11Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 6. Long-Term Debt Long-term debt is summarized as follows: August 31,2012 August 31,2011 Note payable to GE Capital Franchise Finance Corporation (“GE Capital”), secured by real estate, monthlyprincipal and interest payments totaling $10,400, interest at thirty-day LIBOR rate +3.75% (minimum interestrates of 7.3%), due December 2016 $462,000 $546,000 Note payable to Zions Bank, secured by real estate, monthly principal and interest payment totaling$8,402, interest at 6.7%, due April 2033 (reclassified to liabilities of assets held for sale at August 31, 2012and 2011) — — Note payable to Community Bank, secured by real estate, monthly principal and interest payment totaling$39,700, interest at 6.0%, due December 2017 5,252,000 5,395,000 Line of credit payable to Community Bank 7,450,000 8,500,000 Note payable to Community Bank, secured by all Company assets, monthly principal and interestpayment totaling $43,083, interest at the prime rate (3.25% at August 31, 2012), due March 2013 298,000 797,000 Note payable to BMW Bank of North America, secured by automobile, monthly principal and interestpayments totaling $1,800, interest at 0.9%, due July 2012 — 22,000 13,462,000 15,260,000 Less current portion (555,000) (778,000) $12,907,000 $14,482,000 The scheduled payments for the above loans are as follows at August 31, 2012: Year Ending August 31,2013 $555,000 2014 7,727,000 2015 296,000 2016 316,000 2017 253,000 Thereafter 4,315,000 $13,462,000 The GE Capital loan is secured by the Company’s Orange Park Property. The Community Bank loan is secured by the Company’s Sylmar Property. TheZions Bank loan is secured by the Company’s Brooksville Property. The Company was in compliance with all related covenants at August 31, 2012. Note 7. Shareholders’ Equity Earnings Per Common Share The following is a reconciliation of the numerators and denominators used in the basic and diluted computations of earnings per common share: F-12Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. For the Year EndedAugust 31, 2012 For the Year EndedAugust 31, 2011 (In thousands, except per share information) EPS– basic and diluted: Net income $2,420 $2,139 Less: undeclared cumulative preferred stock dividends (76) (76)Net income available to common shareholders for basic and diluted EPS computation $2,344 $2,063 Weighted average common shares outstanding for basic and diluted EPS computation 4,861,590 4,861,590 Earnings per common share – basic and diluted $0.48 $0.42 Stock Options In 2002, the Company adopted the 2002 Long Term Incentive Plan, pursuant to which 8,000 shares were reserved for issuance thereunder. The Company hasno stock options outstanding and the 2002 Long Term Incentive Plan expired in June 2012. During the years ended August 31, 2012 and 2011, the Companyawarded no stock options, nor did any option awards vest during the periods noted, and thus, the Company recorded no compensation expense related tostock options during these periods. During the years ended August 31, 2012 and 2011, no stock options were exercised and, therefore, no cash was receivedfrom stock option exercises. Preferred Stock The Company's Board of Directors is authorized to establish the various rights and preferences for the Company's preferred stock, including voting,conversion, dividend and liquidation rights and preferences, at the time shares of preferred stock are issued. In September 2004, the Company sold 36,000shares of its Series A Cumulative Convertible Non-Voting Preferred Stock (the “Preferred Stock”) to the Company’s CEO, with an 8.5% dividend rate at aprice of $25 per share for a total cash purchase price of $900,000. Holders of the Preferred Stock have the right at any time to convert the Preferred Stock andaccrued but unpaid dividends into shares of the Company’s common stock at the conversion price of $22.50 per share. In the event of a liquidation ordissolution of the Company, holders of the Preferred Stock are entitled to be paid out of the assets of the Company available for distribution to shareholders$25 per share plus all unpaid dividends before any payments are made to the holders of common stock. Note 8. Profit Sharing Plan The Company has a defined contribution 401(k) profit sharing plan for all eligible employees. Employees are eligible to contribute to the 401(k) plan after sixmonths of employment. Under this plan, employees may contribute up to 15% of their compensation. The Company has the discretion to match of 50% of theemployee contributions up to 4% of employees’ compensation. The Company’s contributions are subject to a five-year vesting period beginning the second yearof service. The Company’s contribution expense was approximately $161,000 and $139,000 for the years ended August 31, 2012 and 2011, respectively. F-13Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Note 9. Discontinued Operations When the Company was active in the restaurant business, the Company self-insured losses for workers’ compensation claims up to certain limits. TheCompany exited the restaurant business in 2005. The liability for workers’ compensation represents an estimate of the present value of the ultimate cost ofuninsured losses which are unpaid as of the balance sheet dates. This liability is presented as liabilities of discontinued operations in the accompanyingbalance sheets. The estimate is continually reviewed and adjustments to the Company’s estimated claim liability, if any, are reflected in discontinuedoperations. On a periodic basis, the Company obtains an actuarial report which estimates its overall exposure based on historical claims and an evaluation offuture claims. An actuarial evaluation was last obtained by the Company as of August 31, 2012. As of August 31, 2012 and 2011, the estimated claimliability was $2,713,000 and $2,855,000, respectively. Rental Operations – Brooksville Property As discussed in Note 3 in September 2012, the Company entered into an agreement to sell the Brooksville Property. The Company identified the followingdiscrete cash flows relating to the Brooksville Property (numbers in thousands): Year EndedAugust 31, 2012 Year Ended August31, 2011 Rental revenue $204 $208 Cost of rental operations 187 196 Gross profit from rental operations $17 $12 The gross profit from rental operations relating to the Brooksville Property were reclassified as selling, general and administrative expenses in theaccompanying consolidated statements of operations, as such amounts were considered immaterial for separate presentation as discontinued operations. Note 10. Income Taxes The following summarizes the Company’s provision for income taxes on income from continuing operations: For the YearEnded August31, 2012 For the YearEnded August 31,2011 Current: Federal $62,000 $281,000 State 363,000 413,000 Foreign — — 425,000 694,000 Deferred: Federal 1,237,000 729,000 State 29,000 12,000 Foreign (12,000) 30,000 1,254,000 771,000 $1,679,000 $1,465,000 F-14Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Income taxes for the years ended August 31, 2012 and 2011 differ from the amounts computed by applying the federal statutory corporate rate of 34% to thepre-tax income from continuing operations. The differences are reconciled as follows: For the Year EndedAugust 31, 2012 For the Year EndedAugust 31, 2011 Current: Expected income tax at statutory rate $1,393,000 $1,226,000 Increase (decrease) in taxes due to: State tax, net of federal benefit 194,000 184,000 Permanent differences 22,000 48,000 Change in deferred tax asset valuation allowance (261,000) (120,000)Other, net 335,000 127,000 Income tax expense $1,679,000 $1,465,000 The components of deferred taxes at August 31, 2012 and 2011 are summarized below: August 31,2012 August 31,2011 Deferred tax assets: Net operating loss $1,584,000 $2,643,000 Capital losses 3,351,000 3,445,000 Allowance for doubtful accounts 89,000 84,000 Accrued expenses 190,000 217,000 Accrued worker’s compensation 1,048,000 1,102,000 Related party interest accrual — 376,000 Inventory reserve 602,000 483,000 Unrealized losses (gain) on investment (4,000) 75,000 Excess of tax over book depreciation 305,000 236,000 Other 263,000 222,000 Total deferred tax assets 7,428,000 8,883,000 Valuation allowance (3,887,000) (4,064,000) 3,541,000 4,819,000 Deferred tax liabilities: Deferred gains (1,140,000) (1,134,000)Total deferred tax liabilities (1,140,000) (1,134,000) Net deferred tax assets $2,401,000 $3,685,000 At August 31, 2012, the Company has federal net operating loss carryforwards (“NOLs”) of approximately $3.1 million, which will begin to expire in 2027and state NOLs of approximately $11.3 million, which will begin to expire in 2017. The Company also had federal and state capital loss carryforwards ofapproximately $8.68 million and $8.83 million, respectively, which are deductible only to the extent the Company has future capital gains. F-15Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. In accordance with Sections 382 and 383 of the Internal Revenue Code, the utilization of Federal NOLs and other tax attributes may be subject to substantiallimitations if certain ownership changes occur during a three-year testing period (as defined). Management has determined that the merger with Bisco would notlimit the Company’s utilization of its NOLs or credit carryovers. The Company records net deferred tax assets to the extent management believes these assets will more likely than not be realized. In making suchdetermination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected futuretaxable income (if any), tax planning strategies and recent financial performance. Management reviewed the positive and negative evidence available at August 31, 2012 and 2011 and determined that the capital loss carryforwards, unrealizedlosses on investments and EACO’s state net operating losses did not meet the more likely than not threshold required to be recognized. As such a valuationallowance was retained on these deferred tax assets. The Company applies ASC 740 for the accounting for uncertainty in income taxes recognized in a company’s financial statements. ASC 740 prescribes arecognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in the taxreturn. The Company did not recognize any additional liability for unrecognized tax benefit as a result of the implementation. The Company has no liabilityfor unrecognized tax benefit related to tax positions for the years ended August 31, 2012 or 2011. The Company will recognize interest and penalty related to unrecognized tax benefits and penalties as income tax expense. As of August 31, 2012, theCompany has not recognized liabilities for penalty and interest as the Company does not have any liability for unrecognized tax benefits. The Company is subject to taxation in the U.S., Canada and various states. The Company’s tax years for 2008, 2009, 2010 and 2011 are subject toexamination by the taxing authorities. With few exceptions, the Company is no longer subject to U.S. federal, state, local or foreign examinations by taxingauthorities for years before 2008. Note 11. Commitments and Contingencies Legal Matters From time to time, we may be subject to legal proceedings and claims which arise in the normal course of our business. Any such matters and disputes couldbe costly and time consuming, subject us to damages or equitable remedies, and divert our management and key personnel from our business operations. Wecurrently are not a party to any legal proceedings, the adverse outcome of which, in management’s opinion, individually or in the aggregate, would have amaterial adverse effect on our consolidated results of operations, financial position or cash flows Lease Obligations The Company leases its facilities under operating lease agreements (three of which are with its majority shareholder), which expire on various dates throughSeptember 2016 and require minimum rental payments ranging from $1,000 to $32,000 per month. Certain of the leases contain options for renewal undervarying terms. Minimum future rental payments under operating leases are as follows: Years ending August 31: 2013 $1,205,000 2014 640,000 2015 435,000 2016 288,000 $2,568,000 F-16Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Rental expense for all operating leases for the years ended August 31, 2012 and 2011 was approximately $1,628,000 and $1,608,000, respectively. Note 12. Related Party Transactions The Company leases three buildings under operating lease agreements from its CEO and majority stockholder. During the years ended August 31, 2012 and2011, the Company incurred approximately $529,000 and $529,000, respectively, of expense related to these leases. Note 13. Segment Reporting The Company operates in two reportable business segments; Distribution Operations and Real Estate Rental Operations. The chief operating decision maker,our CEO, evaluates performance based on gross margins, selling general and administrative expenses and net profits. Management also reviews the returns onthe rental real estate properties, inventory, accounts receivable and marketable securities (segment assets). For the Year Ended August 31, 2012 For the Year EndedAugust 31, 2011 Real EstateRental Distribution Total Real EstateRental Distribution Total (In thousands)Revenues $1,250 $113,384 $114,634 $1,242 $103,467 $104,709 Cost of revenues 641 82,023 82,664 583 74,865 75,448 Gross margin 609 31,361 31,970 659 28,602 29,261 Selling, general andadministrative expense — 27,648 27,648 — 25,031 25,031 Gains on marketable trading — 494 494 — 141 141 Interest and other income 20 — 20 3 — 3 Interest expense 448 289 737 462 308 770 Segment profit 181 3,918 4,099 200 3,404 3,604 Segment assets 13,920 30,409 44,329 14,859 28,019 42,878 For the Year EndedAugust 31, 2012 For the Year EndedAugust 31, 2011 United States Canada Total United States Canada Total Revenues $110,345 $4,289 $114,634 $99,998 $4,711 $104,709 Identifiable assets 41,629 2,700 44,329 40,178 2,700 42,878 Note 14. Fair Value of Financial Instruments Management estimates the fair value of an asset or a liability by using the following three levels of the fair-value hierarchy: Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities. For the Company, Level 1 inputs include price and marketablesecurities that are actively traded. Level 2: Inputs other than Level 1 that are observable, either directly or indirectly. At this time, the Company holds no Level 2 financial instruments. F-17Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Level 3: Unobservable inputs. The following table sets forth by level, within the fair value hierarchy, certain assets at estimated fair value as of August 31, 2012 and 2011: Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservableInputs(Level 3) Total August 31, 2012 Marketable securities $197,000 - - $197,000 August 31, 2011 Marketable securities $892,000 - - $892,000 Note 15. Subsequent Events Management has evaluated events subsequent to August 31, 2012, through the date that these consolidated financial statements are being filed with theSecurities and Exchange Commission, for transactions and other events which may require adjustment of and/or disclosure in such financial statements. F-18Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT INDEX Number Exhibit 3.1 Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.01 to the Company's Registration Statement on Form S-1,Registration No. 33-1887, is incorporated herein by reference.)3.2 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.03 to the Company's RegistrationStatement on Form S-1, Registration No. 33-1887, is incorporated herein by reference.)3.3 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.04 to the Company's RegistrationStatement on Form S-1, Registration No. 33-17620, is incorporated herein by reference.)3.4 Amended and Restated Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 4 to the Company's registration statement on Form 8-A,filed with the SEC on March 19, 1997, is incorporated herein by reference.)3.5 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.08 to the Company's AnnualReport on Form 10-K filed with the SEC on March 31, 1998, is incorporated herein by reference.)3.6 Amendment to Amended and Restated Bylaws of Family Steak Houses of Florida, Inc. (Exhibit 3.08 to the Company's Annual Report onForm 10-K filed with the SEC on March 15, 2000, is incorporated herein by reference.)3.7 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc. (Exhibit 3.09 to the Company’s AnnualReport on Form 10-K filed with the SEC on March 29, 2004 is incorporated herein by reference.)3.8 Articles of Amendment to the Articles of Incorporation of Family Steak Houses of Florida, Inc., changing the name of the corporation toEACO Corporation. (Exhibit 3.10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on September 3, 2004, isincorporated herein by reference.)3.9 Articles of Amendment Designating the Preferences of Series A Cumulative Convertible Preferred Stock $0.10 Par Value of EACOCorporation (Exhibit 3.1 to the Company's current report on Form 8-K filed with the SEC on September 8, 2004, is incorporated herein byreference.)3.10 Certificate of Amendment to Amended and Restated Bylaws effective December 21, 2009 (Exhibit 3.10 to the Company’s transition reporton Form 10-K filed with the SEC on December 23, 2009 is incorporated herein by reference.)3.11 Articles of Amendment to Articles of Amendment Designating the Preferences of Series A Cumulative Convertible Preferred Stock, as filedwith the Secretary of State of the State of Florida on December 22, 2009 (Exhibit 3.11 to the Company’s transition report on Form 10-Kfiled with the SEC on December 23, 2009 is incorporated herein by reference.)10.1 Amended and Restated Mortgage, Assignment of Rents and Leases, Security Agreement and Fixture Filing dated October 9, 2002 betweenthe Company and GE Capital Franchise Corporation10.2 Form of Consolidated, Amended and Restated Promissory Note between the Company and GE Capital Franchise Finance Corporation. (Exhibit 10.02 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on November 14, 2002, Registration No. 33-1887, isincorporated herein by reference.)10.3 Loan Agreement dated October 9, 2002 between the Company and GE Capital Franchise Finance Corporation.10.4 Environmental Indemnity Agreement dated October 9, 2002 between the Company and GE Capital Franchise Finance Corporation10.5 Administrative Services Agreement dated March 3, 2006 by and between EACO Corporation and Bisco Industries, Inc. (Exhibit 10.9 tothe Company’s Transition Report on Form 10-K, filed with the SEC on December 23, 2009, is incorporated herein by reference.) Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10.6 Business Loan Agreement dated March 28, 2008 by and between EACO Corporation and Zions First National Bank (Exhibit 10.7 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.7 Promissory Note dated March 28, 2008 in the principal amount of $1,216,354 executed by EACO in favor of Zions First National Bank(Exhibit 10.8 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein byreference.)10.8 Commercial Guaranty dated March 28, 2008 executed by Glen Ceiley (Exhibit 10.9 to the Company’s Annual Report on Form 10-K, filedwith the SEC on November 29, 2011, is incorporated herein by reference.)10.9 Business Loan Agreement dated November 9, 2007 by and between EACO Corporation and Community Bank (Exhibit 10.10 to theCompany’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein by reference.)10.10 Promissory Note dated November 9, 2007 in the principal amount of $5,875,000 executed by EACO in favor of Community Bank(Exhibit 10.11 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, is incorporated herein byreference.)10.11 Commercial Guaranties dated November 9, 2007 executed by Glen F. Ceiley, Bisco Industries, Inc. and the Glen F. Ceiley and Barbara A.Ceiley Revocable Trust (Exhibit 10.12 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, isincorporated herein by reference.)10.12 Commercial Contract effective September 26, 2012, as amended through October 2, 2012, by and between EACO Corporation and KaBun Chan.10.13 Business Loan Agreement dated June 1, 2007 by and between Bisco Industries, Inc. and Community Bank10.14 Promissory Note dated November 15, 2000 executed by Bisco Industries, Inc. in favor of Community Bank10.15 Change in Terms Agreements by and between Bisco Industries, Inc. and Community Bank dated May 1, 2001; July 1, 2001; September1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008; May 15, 2008; March3, 2009; March 23, 2010; April 16, 2010; October 1, 2010; January 3, 2011; March 1, 2011; May 10, 2012; and September 18, 201210.16 Commercial Security Agreement dated August 1, 2004 by and between Bisco Industries, Inc. and Community Bank10.17 Commercial Security Agreement dated March 23, 2010 by and between Bisco Industries, Inc. and Community Bank10.18 Promissory Note dated March 10, 2011 in the principal amount of $1,000,000 executed by Bisco Industries, Inc. in favor of CommunityBank10.19 Commercial Guaranty dated May 1, 2004 executed by Glen F. Ceiley in favor of Community Bank10.20 Commercial Guaranty dated May 15, 2008 executed by the Glen F. Ceiley and Barbara A. Ceiley Revocable Trust in favor of CommunityBank10.21 Commercial Guaranty dated March 23, 2010 executed by EACO Corporation in favor of Community Bank10.22 Commercial Lease dated May 1, 2001, as amended through August 30, 2011, by and between Glen Ceiley and Bisco Industries10.23+ 2002 Long-Term Incentive Plan (Appendix A to the Company’s Proxy Statement on Schedule 14A, filed with the SEC on May 1, 2002, ishereby incorporated by reference.)21.1 Subsidiaries of the Company (Exhibit 21.1 to the Company’s Annual Report on Form 10-K, filed with the SEC on November 29, 2011, isincorporated herein by reference.)31.1 Certification of Chief Executive Officer (principal executive officer and principal financial officer) pursuant to Securities and Exchange ActRules 13a-14(a) and 15d-14(a) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1 Certification of Chief Executive Officer (principal executive officer and principal financial officer) pursuant to Section 906 of theSarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Documen101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document + Indicates a management contract or compensatory plan or arrangement. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.1 THIS DOCUMENT HASBEEN PREPARED BY: David A. Weill, Esq.Kutak Rock LLP1650 Farnam StreetOmaha, Nebraska 68102 THIS DOCUMENT IS TOBE RETURNED TO: LandAmerica Financial Group3636 North Central Avenue, Suite 350Phoenix, Arizona 85012Attn: Mr. Allen Brown / Kimberly BleecksX-02-25965 AMENDED AND RESTATEDMORTGAGE, ASSIGNMENT OF RENTS AND LEASES,SECURITY AGREEMENT AND FIXTURE FILING STATE OF FLORIDA DOCUMENTARY STAMP TAX AND NONRECURRING INTANGIBLE TAX WERE PREVIOUSLY PAID IN CONNECTIONWITH THE ORIGINAL NOTE AND MORTGAGE RECORDED AT OFFICIAL RECORDS VOLUME 8509, PAGE 1565 OF THE PUBLIC RECORDSOF DUVAL COUNTY, FLORIDA THIS AMENDED AND RESTATED MORTGAGE, ASSIGNMENT OF RENTS AND LEASES, SECURITY AGREEMENT AND FIXTUREFILING (this "Mortgage") is dated as of October 9, 2002, between FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation ("Borrower"),whose address is 2113 Florida Boulevard, Neptune Beach, FL 32266, to and for the benefit of GE CAPITAL FRANCHISE FINANCE CORPORATION, aDelaware corporation ("Lender"), whose address is 17207 North Perimeter Drive, Scottsdale, Arizona 85255. RECITALS: Lender is the holder of a promissory note dated December 18, 1996, in the original principal amount of $750,000 (the "Original Note") made byBorrower and payable to the order of Lender. The Original Note is secured by a Mortgage, Assignment of Rents and Leases, Security Agreement and FixtureFiling dated December 18, 1996 from Borrower to FFCA Mortgage Corporation ("Original Lender") recorded among the Public Records of Duval County,Florida in Official Record Volume 8509 at Page 1565 ("Original Mortgage") on certain improved real property located in Duval County, Florida. The OriginalMortgage was assigned by Original Lender to LaSalle Bank National Association, f/k/a LaSalle National Bank, Trustee pursuant to that certain Indenturedated as of May 1, 1997 ("LaSalle") pursuant to an Assignment of Mortgage dated December 18, 1996 and recorded among the Public Records of DuvalCounty, Florida in Official Record Volume 8562 at Page 1598 and assigned by LaSalle to Lender pursuant to an Assignment of Mortgage dated as of the datehereof and recorded among the Public Records of Duval County, Florida in Official Record Volume at Page . The Original Note is being amended andrestated in its entirety (the "Note") to reflect among other things, a change in the interest rate and terms of payment. The Borrower and the Lender now desire toamend and modify the terms of the Original Mortgage and have agreed, for purposes of convenience, to amend and restate the Original Mortgage, in its entirety. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The capitalized terms used in this Mortgage, if not elsewhere defined herein, are defined as indicated in Article I. Borrower holds the fee simpleinterest in the Premises, subject to the Permitted Exceptions. Borrower is executing this Mortgage for the purpose of granting the interest of Borrower in and tothe Mortgaged Property (as defined in the Granting Clauses below) as security for the payment of the Obligations. The Mortgaged Property shall be and remainsubject to the lien of this Mortgage and shall constitute security for the Obligations so long as the Obligations shall remain outstanding. GRANTING CLAUSES: Borrower, in consideration of the premises and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,by these presents does hereby create a security interest in, mortgage, grant, bargain, sell, assign, pledge, give, transfer, set over and convey unto Lender and toits successors and assigns WITH POWER OF SALE AND RIGHT OF ENTRY, for the benefit and security of Lender and its successors and assigns, all ofBorrower's estate, right, title and interest in, to and under any and all of the following property (the "Mortgaged Property"), whether now owned or hereafteracquired, subject only to the Permitted Exceptions: Premises, Rents and Derivative Interests The Premises, all rents, issues, profits, royalties, income and other benefits derived from the property comprising the Premises and the PersonalProperty (as defined below) or any portion thereof (collectively, the "Rents"); all leases or subleases covering the Premises and the Personal Property or anyportion thereof now or hereafter existing or entered into, including, without limitation, the Lease (collectively, "Leases" and individually, a "Lease"), including,without limitation, all cash or security deposits, advance rentals and deposits or payments of similar nature and all guaranties relating to the Leases; alloptions to purchase or lease the Premises and the Personal Property or any portion thereof or interest therein, and any greater estate in the Premises; all interests,estate or other claims, both in law and in equity, with respect to the Premises and the Personal Property or any portion thereof; all easements, rights-of-way andrights used in connection therewith or as a means of access thereto, and all tenements, hereditaments and appurtenances thereof and thereto, and all waterrights and shares of stock evidencing the same; all land lying within the right-of-way of any street, open or proposed, adjoining the Premises and any and allsidewalks, alleys and strips and gores of land adjacent to or used in connection with the Premises; Personal Property All tangible personal property now or at any time hereafter located on or at the Premises or used in connection therewith, including, withoutlimitation, all machinery, appliances, furniture, equipment and inventory (the "Personal Property"); Intangibles All existing and future accounts, contract rights, including, without limitation, with respect to equipment leases, general intangibles, files, books ofaccount, agreements, franchise, license and/or area development agreements, distributor agreements, Indemnity Agreements, permits, licenses and certificatesnecessary or desirable in connection with the acquisition, ownership, leasing, construction, operation, servicing or management of the property comprising thePremises and the Personal Property or any portion thereof, whether now existing or entered into or obtained after the date hereof, all existing and future namesunder or by which the property comprising the Premises and the Personal Property or any portion thereof may at any time be operated or known, all rights tocarry on business under any such names or any variant thereof, and all existing and future telephone numbers and listings, advertising and marketingmaterials, trademarks and good will in any way relating to the property comprising the Premises and the Personal Property or any portion thereof; and 2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Claims and Awards All the claims or demands with respect to the Premises and the Personal Property or any portion thereof, including, without limitation, claims ordemands with respect to the proceeds of insurance in effect with respect thereto, claims under any indemnity agreement, including, without limitation, anyindemnity agreement executed for the benefit of the Premises and the Personal Property or any portion thereof with respect to Hazardous Materials or USTs,and any and all awards made for the taking by eminent domain, or by any proceeding or purchase in lieu thereof, of the whole or any part of the Premises andthe Personal Property, including, without limitation, any awards resulting from a change of grade of streets and awards for severance damages. The Mortgaged Property shall include all products and proceeds of the foregoing property. TO HAVE AND TO HOLD the Mortgaged Property hereby granted or mortgaged or intended to be granted or mortgaged, unto Lender, and itssuccessors and assigns, upon the terms, provisions and conditions set forth herein. THIS MORTGAGE SHALL SECURE THE FOLLOWING INDEBTEDNESS AND OBLIGATIONS (the "Obligations"): (i) Payment of indebtedness evidenced by the Note together with all extensions, renewals, amendments and modifications thereof; (ii) Payment of all other indebtedness and other sums, with interest thereon, which may be owed under, and performance of all otherobligations and covenants contained in, any Loan Document (other than the Environmental Indemnity Agreement), together with any other instrumentgiven to evidence or further secure the payment and performance of any obligation secured hereby or thereby; and (iii) Payment of all indebtedness and other sums, with interest thereon, which may be owed under, and performance of all otherobligations and covenants contained in any Other Agreement, together with any other instrument given to evidence or further secure the payment andperformance of any obligation secured thereby. It is the intention of the parties hereto that the Mortgaged Property shall secure all of the Obligations presently or hereafter owed, and that the priorityof the security interest created by this Mortgage for all such Obligations shall be controlled by the time of proper recording of this Mortgage. In addition, thisMortgage shall also secure unpaid balances of advances made with respect to the Mortgaged Property for the payment of taxes, assessments, insurancepremiums, costs or any other advances incurred for the protection of the Mortgaged Property, together with interest thereon until paid at the Default Rate, all ascontemplated in this Mortgage, all of which shall constitute a part of the Obligations. This paragraph shall serve as notice to all persons who may seek orobtain a lien on the Mortgaged Property subsequent to the date of recording of this Mortgage, that until this Mortgage is released, any debt owed Lender byBorrower, including advances made subsequent to the recording of this Mortgage, shall be secured with the priority afforded this Mortgage as recorded. Notwithstanding the foregoing or any other provisions of this Mortgage to the contrary: (x) in the event that the Loan becomes the subject of a Securitization, Participation or Transfer, this Mortgage shall only secureindebtedness and obligations relating to the Loan and any other loans between any of the Borrower Parties on the one hand and any of the LenderEntities on the other hand which are part of the same Loan Pool as the Loan; and (y) in the event that any loans between any of the Borrower Parties on the one hand and any of the Lender Entities on the other hand(other than the Loan) become the subject of a Securitization, Participation or Transfer, this Mortgage shall not secure any indebtedness andobligations relating to such loans unless the Loan is part of the same Loan Pool as such loans. 3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IT IS HEREBY COVENANTED, DECLARED AND AGREED that the Note and the other Loan Documents are to be executed, delivered andsecured and that the Mortgaged Property is to be held and disposed of by Lender, upon and subject to the provisions of this Mortgage. ARTICLE I DEFINED TERMS Section 1.01. Incorporation of Definitions. Initially capitalized terms not otherwise defined in this Mortgage shall have the meanings set forth inthat certain Loan Agreement dated as of the date of this Mortgage between Borrower and Lender, as the same may be amended from time to time (the "LoanAgreement") Section 1.02. Additional Definitions. Unless the context otherwise specifies or requires, the following terms shall have the meanings specified (suchdefinitions to be applicable equally to singular and plural nouns and verbs of any tense): "Environmental Indemnity Agreement" means that certain Environmental Indemnity Agreement dated as of the date of this Mortgage executed byBorrower for the benefit of Lender and such other parties as are identified in such agreement with respect to the Premises, as the same may be amended fromtime to time. "Event of Default" has the meaning set forth in Section 6.01. "Improvements" means all buildings, fixtures and other improvements now or hereafter located on the Land (whether or not affixed to the Land). "Indemnified Parties" means Lender and Environmental Insurer and any person or entity who is or will have been involved in the origination of theLoan, any person or entity who is or will have been involved in the servicing of the Loan, any person or entity in whose name the encumbrance created by thisMortgage is or will have been recorded, persons and entities who may hold or acquire or will have held a full or partial interest in the Loan (including, but notlimited to, investors or prospective investors in any Securitization, Participation or Transfer, as well as custodians, trustees and other fiduciaries who hold orhave held a full or partial interest in the Loan for the benefit of third parties), as well as the respective directors, officers, shareholders, partners, members,employees, lenders, agents, servants, representatives, contractors, subcontractors, affiliates, subsidiaries, participants, successors and assigns of any and allof the foregoing (including but not limited to any other person or entity who holds or acquires or will have held a participation or other full or partial interest inthe Loan or the Mortgaged Property, whether during the term of the Loan or as a part of or following a foreclosure of the Loan and including, but not limited to,any successors by merger, consolidation or acquisition of all or a substantial portion of Lender's assets and business). "Land" means the parcel or parcels of real estate legally described in Exhibit A attached hereto, and all rights, privileges and appurtenances therewith. "Lease" and "Leases" has the meaning set forth in the Granting Clause. "Lessee" means Barnhill’s Buffet, Inc. "Loan" means the loan made by Lender to Borrower which is evidenced by the Note and secured by this Mortgage. "Loan Agreement" has the meaning set forth in Section 1.01. "Mortgaged Property" has the meaning set forth in the Granting Clause. "Net Award" has the meaning set forth in Section 4.01(b)(v). "Net Insurance Proceeds" has the meaning set forth in Section 4.01(a)(iii) 4Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. "Note" means the promissory note dated as of even date herewith in the amount of $644,000.00 executed by Borrower and payable to Lender which issecured by this Mortgage and any amendments, extensions or modifications thereof, including, without limitation, any amendment and restatement of the Noteas a result of a prepayment contemplated by Section 9 of the Loan Agreement. "Obligations" has the meaning set forth in the Granting Clause. "Other Agreements" means, collectively, all agreements and instruments between, among or by (1) any of the Borrower Parties, and, or for the benefitof, (2) any of the Lender Entities, including, without limitation, promissory notes and guaranties; provided, however, the term "Other Agreements" shall notinclude the agreements and instruments defined in the Loan Agreement as the Loan Documents. "Outstanding Obligations" has the meaning set forth in Section 4.01(b)(iv)(x)(aa). "Partial Taking" has the meaning set forth in Section 4.01(b)(ii). "Personal Property" has the meaning set forth in the Granting Clause. "Premises" means the Land and the Improvements. "Rents" has the meaning set forth in the Granting Clause. "Restoration" means the restoration, replacement or rebuilding of the Premises, or any part thereof, as nearly as possible to its value, condition andcharacter immediately prior to any damage, destruction or Taking. "State" means the State in which the Premises is located. "Taking" has the meaning set forth in Section 4.01(b)(i). "Total Taking" has the meaning set forth in Section 4.01(b)(ii). "UCC" has the meaning set forth in Section 6.02(iii). ARTICLE II INCORPORATION OF REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER The representations, warranties and covenants of Borrower set forth in the Loan Agreement are incorporated by reference into this Mortgage as ifstated in full in this Mortgage. All representations and warranties as incorporated herein shall be deemed to have been made as of the date of this Mortgage andall representations, warranties and covenants incorporated herein shall survive the execution and delivery of this Mortgage. ARTICLE III COVENANTS OF BORROWER In addition to any covenants of Borrower set forth in the Loan Agreement or any other Loan Document, Borrower hereby covenants to Lender andagrees as follows until the Obligations are satisfied in full: Section 3.01. Recording. Borrower shall, upon the execution and delivery hereof and thereafter from time to time, take such actions as Lender mayrequest to cause this Mortgage, each supplement and amendment to such instrument and financing statements with respect thereto and each instrument offurther assurance (collectively, the "Recordable Documents") to be filed, registered and recorded as may be required by law to publish notice and maintain thefirst lien or security interest, as applicable, hereof upon the Mortgaged Property and to publish notice of and protect the validity of the Recordable Documents.Borrower shall, from time to time, perform or cause to be performed any other act and shall execute or cause to be executed any and all further instruments(including financing statements, continuation statements and similar statements with respect to any of said documents) requested by Lender for carrying outthe intention of, or facilitating the performance of, this Mortgage. Lender shall be and is hereby irrevocably appointed the agent and attorney-in-fact ofBorrower to comply therewith (including the execution, delivery and filing of such financing statements and other instruments), which appointment is coupledwith an interest; provided, however, Lender shall not exercise such power of attorney unless Borrower has first failed to comply with this Section, andprovided, further, that this sentence shall not prevent any default in the observance of this Section from constituting an Event of Default. To the extentpermitted by law, Borrower shall pay or cause to be paid recording taxes and fees incident thereto and all expenses, taxes and other governmental chargesincident to or in connection with the preparation, execution, delivery or acknowledgment of the Recordable Documents, any instruments of further assuranceand the Note. 5Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 3.02. Use; Maintenance and Repair; Leases. (a) The Mortgaged Property shall be used solely for the operation of a Permitted Concept andfor no other purpose. Except as set forth below, and except during periods when the Premises is untenantable by reason of fire or other casualty orcondemnation (provided, however, during all such periods while the Premises is untenantable, Borrower shall strictly comply with the terms and conditions ofSection 4.01 of this Mortgage), Borrower shall at all times while this Mortgage is in effect occupy the Mortgaged Property, or cause Lessee to occupy theMortgaged Property, and diligently operate its business, or cause Lessee to diligently operate its business, on the Mortgaged Property. Borrower may cease orallow Lessee to cease diligent operation of business at the Mortgaged Property for a period not to exceed 90 days and may do so only once within any five-yearperiod while this Mortgage is in effect. If Borrower or Lessee does discontinue operation as permitted by this Section, Borrower shall (i) give written notice toLender within 10 days after Borrower or Lessee elects to cease operation, (ii) provide adequate protection and maintenance of the Mortgaged Property duringany period of vacancy and (iii) pay all costs necessary to restore the Mortgaged Property to its condition on the day operation of the business ceased at suchtime as the Mortgaged Property is reopened for Borrower's or Lessee’s business operations or other substituted use. Notwithstanding anything herein to thecontrary, Borrower shall pay monthly the principal and interest due under the Note during any period in which Borrower or Lessee discontinues operation. Borrower shall not, and shall not permit any lessee to, by itself or through any lease or other type of transfer, convert the Premises to an alternativeuse while this Mortgage is in effect without Lender's consent, which consent shall not be unreasonably withheld. Lender may consider any or all of thefollowing in determining whether to grant its consent, without being deemed to be unreasonable: (i) whether the converted use will be consistent with the highestand best use of the Mortgaged Property, and (ii) whether the converted use will increase Lender's risks or decrease the value of the Mortgaged Property. (b) Borrower shall, or shall cause Lessee to, (i) maintain the Mortgaged Property in good condition and repair, subject to reasonable andordinary wear and tear, free from actual or constructive waste, (ii) operate, remodel, update and modernize the Mortgaged Property in accordance with thosestandards adopted from time to time by Lessee on a system-wide basis for the acceptable Permitted Concept, with such remodeling and modernizing beingundertaken in accordance with Lessee’s system-wide timing schedules for such activities, and (iii) pay all operating costs of the Premises in the ordinarycourse of business. (c) Borrower shall not, and shall not permit Lessee to, (i) enter into any Leases (other than the Lease) without Lender's prior written consent; (ii)modify or amend the terms of any Lease without Lender's prior written consent; (iii) grant any consents under any Lease, including, without limitation, anyconsent to an assignment of any Lease, a mortgaging of the leasehold estate created by any Lease or a subletting by the lessee under any Lease, withoutLender's prior written consent; (iv) terminate, cancel, surrender, or accept the surrender of, any Lease, or waive or release any person from the observance orperformance of any obligation to be performed under the terms of any Lease or liability on account of any warranty given thereunder, without Lender's priorwritten consent; or (v) assign, transfer, mortgage, pledge or hypothecate any Lease or any interest therein to any party other than Lender, without Lender'sprior written consent. Any lease, modification, amendment, grant, termination, cancellation, surrender, waiver or release in violation of the foregoing provisionshall be null and void and of no force and effect. Unless Lender otherwise consents or elects, Borrower's title to the Mortgaged Property and the leaseholdinterest in the Mortgaged Property created by any Lease shall not merge, but shall always be kept separate and distinct, notwithstanding the union of suchestates in Borrower, Lender or any other person by purchase, operation of law, foreclosure of this Mortgage, sale of the Mortgaged Property pursuant to thisMortgage or otherwise. 6Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) Borrower shall (i) fulfill, perform and observe in all respects each and every condition and covenant of Borrower contained in any Lease;(ii) give prompt notice to Lender of any claim or event of default under any Lease given to or by Borrower, together with a complete copy or statement of anyinformation submitted or referenced in support of such claim or event of default; (iii) at the sole cost and expense of Borrower, enforce the performance andobservance of each and every covenant and condition of any Lease to be performed or observed by any other party thereto, unless such enforcement is waivedin writing by Lender; (iv) appear in and defend any action challenging the validity, enforceability or priority of the lien created hereby or the validity orenforceability of any Lease; and (v) hold that portion of the Rents which is sufficient to discharge all current sums due under the Note for use in the paymentof such sums. Section 3.03. Alterations and Improvements. Borrower shall not alter, or permit Lessee to alter, the exterior, structural, plumbing or electricalelements of the Mortgaged Property in any manner without the consent of Lender, which consent shall not be unreasonably withheld or conditioned; provided,however, Borrower or Lessee may undertake nonstructural alterations to the Mortgaged Property costing less than $100,000 without Lender's consent. Forpurposes of this Mortgage, alterations to the exterior, structural, plumbing or electrical elements of the Mortgaged Property shall mean: (i) alterations which affect the foundation or "footprint" of the Improvements; (ii) alterations which involve the structural elements of the Improvements, such as a load-bearing wall, structural beams, columns,supports or roof; or (iii) alterations which materially affect any of the building systems, including, without limitation, the electrical systems, plumbing,HVAC and fire and safety systems. If Lender's consent is required hereunder and Lender consents to the making of any such alterations, the same shall be made by Borrower at Borrower's orLessee’s sole expense by a licensed contractor and according to plans and specifications approved by Lender and subject to such other conditions as Lendershall require. Any work at any time commenced on the Mortgaged Property shall be prosecuted diligently to completion, shall be of good workmanship andmaterials and shall comply fully with all the terms of this Mortgage. Upon completion of any alterations or any Restoration, Borrower shall promptly provideLender with (i) evidence of full payment to all laborers and materialmen contributing to the alterations, (ii) an architect's certificate certifying the alterations tohave been completed in conformity with the plans and specifications, (iii) a certificate of occupancy (if the alterations are of such a nature as would require theissuance of a certificate of occupancy), and (iv) any other documents or information reasonably requested by Lender. Section 3.04. After-Acquired Property. All right, title and interest of Borrower in and to all improvements, alterations, substitutions, restorationsand replacements of, and all additions and appurtenances to, the Mortgaged Property, hereafter acquired by or released to Borrower, immediately upon suchacquisition or release and without any further granting by Borrower, shall become part of the Mortgaged Property and shall be subject to the lien hereof fully,completely and with the same effect as though now owned by Borrower and specifically described in the Granting Clauses hereof. Borrower shall execute anddeliver to Lender any further assurances, mortgages, grants, conveyances or assignments thereof as the Lender may reasonably require to subject the same tothe lien hereof. Section 3.05. Taxes, Assessments, Charges and Other Impositions. (a) Borrower shall do or cause to be done everything necessary to preservethe lien hereof without expense to Lender, including, without limitation, paying and discharging or causing to be paid and discharged, whether or not payabledirectly by Borrower or subject to withholding at the source, (i) all taxes, assessments, levies, fees, water and sewer rents and charges and all othergovernmental charges, general, special, ordinary or extraordinary, and all charges for utility or communications services, which may at any time be assessed,levied or imposed upon Borrower, Lessee, the Mortgaged Property, this Mortgage, the Obligations or the Rents or which may arise in respect of the occupancy,use, possession or operation thereof, (ii) all income, excess profits, sales, gross receipts and other taxes, duties or imposts, whether similar or not in nature,assessed, levied or imposed by any Governmental Authority on Borrower, Lessee, the Mortgaged Property or the Rents, and (iii) all lawful claims anddemands of mechanics, laborers, materialmen and others which, if unpaid, might create a lien on the Mortgaged Property, or on the Rents, unless Borrowershall contest the amount or validity thereof in accordance with subsection (b). 7Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Borrower may, at its own expense, contest or cause to be contested, by appropriate legal proceedings conducted in good faith and with duediligence, the amount or validity or application, in whole or in part, of any item specified in subsection (a) or lien therefor, provided that (i) Borrower shallprovide written notice to Lender of any contest involving more than $10,000.00, (ii) such proceeding shall suspend the collection thereof from the MortgagedProperty or any interest therein, (iii) neither the Mortgaged Property nor any interest therein would be in any danger of being sold, forfeited or lost by reason ofsuch proceedings, (iv) no Event of Default has occurred and is continuing, and (v) Borrower shall have deposited with Lender adequate reserves for thepayment of the taxes, together with all interest and penalties thereon, unless paid in full under protest, or Borrower shall have furnished the security as may berequired in the proceeding or as may be required by Lender to insure payment of any contested taxes. Section 3.06. Insurance. (a) Borrower shall maintain, or shall cause Lessee to maintain, with respect to the Mortgaged Property, at its sole expense,the following types and amounts of insurance (which may be included under a blanket insurance policy if all the other terms hereof are satisfied), in additionto such other insurance as Lender may reasonably require from time to time: (i) Insurance against loss, damage or destruction by fire and other casualty, including theft, vandalism and malicious mischief, flood(if the Premises is in a location designated by the Federal Emergency Management Administration as a Special Flood Hazard Area), earthquake (if thePremises is in an area subject to destructive earthquakes within recorded history), boiler explosion (if there is any boiler upon the Premises), plateglass breakage, sprinkler damage (if the Premises have a sprinkler system), all matters covered by a standard extended coverage endorsement,special coverage endorsement commonly known as an "all risk" endorsement and such other risks as Lender may reasonably require, insuring theMortgaged Property for not less than 100% of their full insurable replacement cost. (ii) Commercial general liability and property damage insurance, including a products liability clause, covering Lender and Borroweragainst bodily injury liability, property damage liability and automobile bodily injury and property damage liability, including without limitationany liability arising out of the ownership, maintenance, repair, condition or operation of the Mortgaged Property or adjoining ways, streets orsidewalks and, if applicable, insurance covering Lender, against liability arising from the sale of liquor, beer or wine on the Premises. Suchinsurance policy or policies shall contain a broad form contractual liability endorsement under which the insurer agrees to insure Borrower'sobligations under Section 7.09 hereof to the extent insurable, and a "severability of interest" clause or endorsement which precludes the insurer fromdenying the claim of either Borrower or Lender because of the negligence or other acts of the other, shall be in amounts of not less than $1,000,000.00per injury and occurrence with respect to any insured liability, whether for personal injury or property damage, or such higher limits as Lender mayreasonably require from time to time, and shall be of form and substance reasonably satisfactory to Lender. (iii) Business income insurance equal to 100% of the principal and interest payable under the Note for a period of not less than sixmonths. (iv) State Worker's compensation insurance in the statutorily mandated limits, employer's liability insurance with limits not less than$500,000 or such greater amount as Lender may from time to time require and such other insurance as may be necessary to comply with applicablelaws. (b) All insurance policies shall: (i) Provide for a waiver of subrogation by the insurer as to claims against Lender, its employees and agents and provide that suchinsurance cannot be unreasonably cancelled, invalidated or suspended on account of the conduct of Borrower, its officers, directors, employees oragents; 8Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (ii) Provide that any "no other insurance" clause in the insurance policy shall exclude any policies of insurance maintained by Lenderand that the insurance policy shall not be brought into contribution with insurance maintained by Lender; (iii) Contain a standard without contribution mortgage clause endorsement in favor of Lender and its successors and assigns as theirinterests may appear and any other lender designated by Lender; (iv) Provide that the policy of insurance shall not be terminated, cancelled or substantially modified without at least thirty (30) days'prior written notice to Lender and to any lender covered by any standard mortgage clause endorsement; (v) Provide that the insurer shall not have the option to restore the Premises if Lender elects to terminate this Mortgage in accordancewith the terms hereof; (vi) Be issued by insurance companies licensed to do business in the state in which the Premises is located and which are rated A:VI orbetter by Best's Insurance Guide or otherwise approved by Lender; and (vii) Provide that the insurer shall not deny a claim because of the negligence of Borrower, anyone acting for Borrower or any tenant orother occupant of the Mortgaged Property. It is expressly understood and agreed that the foregoing minimum limits of insurance coverage shall not limit the liability of Borrower for its acts oromissions as provided in this Mortgage. All liability insurance policies (with the exception of worker's compensation insurance to the extent not available understatutory law) shall designate Lender and its successors and assigns as additional insureds as their interests may appear and shall be payable as set forth inArticle IV hereof. All such policies shall be written as primary policies, with deductibles not to exceed 10% of the amount of coverage. Any other policies,including any policy now or hereafter carried by Lender, shall serve as excess coverage. Borrower shall procure , or shall cause Lessee to procure, policies forall insurance for periods of not less than one year and shall provide to Lender certificates of insurance or, upon Lender's request, duplicate originals ofinsurance policies evidencing that insurance satisfying the requirements of this Mortgage is in effect at all times. Section 3.07. Impound Account. Upon the occurrence of an Event of Default under this Mortgage or any other Loan Document, Lender may requireBorrower to pay to Lender sums which will provide an impound account (which shall not be deemed a trust fund) for paying up to the next one year of taxes,assessments and/or insurance premiums. Upon such requirement, Lender will estimate the amounts needed for such purposes and will notify Borrower to paythe same to Lender in equal monthly installments, as nearly as practicable, in addition to all other sums due under this Mortgage. Should additional funds berequired at any time, Borrower shall pay the same to Lender on demand. Borrower shall advise Lender of all taxes and insurance bills which are due and shallcooperate fully with Lender in assuring that the same are paid. Lender may deposit all impounded funds in accounts insured by any federal or state agencyand may commingle such funds with other funds and accounts of Lender. Interest or other gains from such funds, if any, shall be the sole property of Lender.If an Event of Default shall occur subsequent to Lender requiring the establishment of an impound account pursuant to this Section, Lender may apply allimpounded funds against any sums due from Borrower to Lender. Lender shall give to Borrower an annual accounting showing all credits and debits to andfrom such impounded funds received from Borrower. Section 3.08. Advances by Lender. Lender may make advances to perform any of the covenants contained in this Mortgage on Borrower's behalfand all sums so advanced (and all sums advanced pursuant to any other provision hereof) by Lender shall be secured hereby. Borrower shall repay ondemand all sums so advanced with interest thereon at the Default Rate, such interest to be computed from and including the date of the making of suchadvance to and including the date of such repayment, and at Lender's election, Lender may add the amount of such advance to the principal balance of theLoan. 9Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 3.09. Negative Covenants. Without limiting the terms and conditions of Section 8 of the Loan Agreement, Borrower agrees that Borrowershall not, without the prior written consent of Lender, sell, convey, mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the MortgagedProperty or any part thereof or permit the Mortgaged Property or any part thereof to be sold, conveyed, mortgaged, granted, bargained, encumbered, pledged,assigned, or otherwise transferred (each, a "Prohibited Transaction"), other than sales from inventory in the ordinary course of business and the replacementof obsolete Personal Property. A sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning of this Sectionshall be deemed to include, but not limited to, (a) an installment sales agreement wherein Borrower agrees to sell the Mortgaged Property or any part thereof fora price to be paid in installments; and (b) an agreement by Borrower leasing all or any part of the Mortgaged Property (other than the Lease) or a sale,assignment or other transfer of, or the grant of a security interest in, Borrower's right, title and interest in and to any Lease or any Rents. Lender's consent to a Prohibited Transaction shall be subject to the satisfaction of such conditions as Lender shall determine in its sole discretion,including, without limitation, (i) Borrower having executed and delivered such modifications to the terms of this Mortgage and the other Loan Documents asLender shall request, (ii) the Prohibited Transaction having been approved by each of the rating agencies which have issued ratings in connection with anySecuritization of the Loan as well as any other rating agency selected by Lender, and (iii) the proposed transferee having assumed the Note, this Mortgage andthe other Loan Documents (as modified pursuant to clause (i) above). In addition, any such consent shall be conditioned upon the payment by Borrower toLender of (x) a fee equal to one percent (1%) of the then outstanding principal balance of the Note and (y) all out-of-pocket costs and expenses incurred byLender in connection with such consent, including, without limitation, reasonable attorneys' fees. Lender shall not be required to demonstrate any actualimpairment of its security or any increased risk of default hereunder in order to declare the Obligations immediately due and payable upon Borrower's sale,conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property without Lender's consent, as requiredhereunder. The provisions of this Section shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of theMortgaged Property regardless of whether voluntary or not, or whether or not Lender has consented to any previous sale, conveyance, mortgage, grant,bargain, encumbrance, pledge, assignment, or transfer of the Mortgaged Property. ARTICLE IV POSSESSION, USE AND RELEASE OF THE MORTGAGED PROPERTY Section 4.01. Casualty or Condemnation. Borrower, immediately upon obtaining knowledge of any casualty to any portion of the MortgagedProperty or of any proceeding or negotiation for the taking of all or any portion of the Mortgaged Property in condemnation or other eminent domainproceedings, shall notify Lender of such casualty, proceeding or negotiation. Any award, compensation or other payment resulting from such casualty orcondemnation or eminent domain proceeding, as applicable, shall be applied as set forth below (the "Proceeds"). Lender may participate in any condemnationor eminent domain proceeding, and Borrower will deliver or cause to be delivered to Lender all instruments reasonably requested by Lender to permit suchparticipation. (a) Casualty. (i) In the event of any material damage to or destruction of the Mortgaged Property or any part thereof, Borrower will promptlygive written notice to Lender, generally describing the nature and extent of such damage or destruction. No damage to or destruction of the Mortgaged Propertyshall relieve Borrower of its obligation to pay any monetary sum due under the Loan Documents at the time and in the manner provided in the LoanDocuments. (ii) In the event of any damage to or destruction of the Mortgaged Property or any part thereof, Borrower, whether or not the Proceeds, if any, onaccount of such damage or destruction shall be sufficient for the purpose, at its expense, shall promptly cause the Restoration to be commenced and completed. 10Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (iii) Proceeds received by Lender and Borrower on account of any occurrence of damage to or destruction of the Mortgaged Property or any partthereof, less the costs, fees and expenses incurred by Lender and Borrower in the collection thereof, including, without limitation, adjuster's fees and expensesand attorneys' fees and expenses (the "Net Insurance Proceeds"), shall be paid to (1) Borrower, if the amount of such Net Insurance Proceeds is less than$100,000 and applied by Borrower toward the cost of the Restoration, and (2) Lender, if the amount of such Net Insurance Proceeds is $100,000 or greater. NetInsurance Proceeds paid to Lender shall be held and disbursed by Lender, or as Lender may from time to time direct, as the Restoration progresses, to pay orreimburse Borrower for the cost of the Restoration, upon written request of Borrower accompanied by evidence, reasonably satisfactory to Lender, that (aa) theRestoration is in full compliance with all Applicable Regulations and all private restrictions and requirements, (bb) the amount requested has been paid or isthen due and payable and is properly a part of such cost, (cc) there are no mechanics' or similar liens for labor or materials theretofore supplied in connectionwith the Restoration, (dd) if the estimated cost of the Restoration exceeds the Net Insurance Proceeds (exclusive of Proceeds received from Borrower's businessincome insurance), Borrower has deposited into an escrow satisfactory to Lender such excess amount, which sum will be disbursed pursuant to escrowinstructions satisfactory to Lender, and (ee) the balance of such Net Insurance Proceeds, together with the funds deposited into escrow, if any, pursuant to thepreceding subsection (dd), after making the payment requested will be sufficient to pay the balance of the cost of the Restoration. Upon receipt by Lender ofevidence reasonably satisfactory to it that the Restoration has been completed and the cost thereof paid in full, and that there are no mechanics' or similar liensfor labor or materials supplied in connection therewith, the balance, if any, of such Net Insurance Proceeds shall be paid to Borrower. If at the time of thedamage or destruction to the Mortgaged Property or at any time thereafter an Event of Default shall have occurred and be continuing under the LoanDocuments, all Net Insurance Proceeds shall be paid to Lender, and Lender may retain and apply the Net Insurance Proceeds toward the Obligations whetheror not then due and payable, in such order, priority and proportions as Lender in its discretion shall deem proper, or to cure such Event of Default, or, inLender's discretion, Lender may pay such Net Insurance Proceeds in whole or in part to Borrower to be applied toward the cost of the Restoration. If Lendershall receive and retain Net Insurance Proceeds, the lien of this Mortgage shall be reduced only by the amount received and retained by Lender and actuallyapplied by Lender in reduction of the Obligations. (b) Condemnation. (i) In case of a taking of all or any part of the Mortgaged Property or the commencement of any proceedings or negotiationswhich might result in a taking, for any public or quasi-public purpose by any lawful power or authority by exercise of the right of condemnation or eminentdomain or by agreement between Lender, Borrower and those authorized to exercise such right ("Taking"), Borrower will promptly give written notice thereof toLender, generally describing the nature and extent of such Taking. Lender shall file and prosecute on behalf of Lender and Borrower any and all claims forProceeds, and all Proceeds on account of a Taking shall be paid to Lender. (ii) In case of a Taking of the whole of the Mortgaged Property, other than for temporary use ("Total Taking"), or in case of a Taking of lessthan all of the Mortgaged Property ("Partial Taking"), the Loan Documents shall remain in full force and effect. In the case of a Partial Taking, Borrower,whether or not the Proceeds, if any, on account of such Partial Taking shall be sufficient for the purpose (but provided they are made available by Lender forsuch purpose), at its own cost and expense, will promptly commence and complete the Restoration. In case of a Partial Taking, other than a temporary use, ofsuch a substantial part of the Mortgaged Property as shall result in the Mortgaged Property remaining after such Partial Taking being unsuitable for use, suchTaking shall be deemed a Total Taking. (iii) In case of a temporary use of the whole or any part of the Mortgaged Property by a Taking, the Loan Documents shall remain in full forceand effect without any reduction of any monetary sum payable under the Loan Documents. In any proceeding for such Taking, Lender shall have the right tointervene and participate; provided that, if such intervention shall not be permitted, Borrower shall consult with Lender, its attorneys and experts, and makeall reasonable efforts to cooperate with Lender in the prosecution or defense of such proceeding. At the termination of any such use or occupation of theMortgaged Property, Borrower will, at its own cost and expense, promptly commence and complete the Restoration. (iv) Proceeds on account of a Taking, less the costs, fees and expenses incurred by Lender and Borrower in connection with the collectionthereof, including, without limitation, attorneys' fees and expenses, shall be applied in the following order: (x) Proceeds received on account of a Total Taking shall be allocated as follows: (aa) There shall be paid to the Lender an amount up to the sum of the outstanding principal, including all sums advancedby Lender hereunder, and interest under the Note, all as of the date on which such payment is made, such amount shall be applied firstagainst all sums advanced by Lender under this Mortgage, second against the accrued but unpaid interest on the Note, and third to theremaining unpaid principal amount of the Note. If the Proceeds received on account of a Total Taking are not sufficient to satisfy theoutstanding principal balance of the Note, all accrued but unpaid interest on the Note, all other sums due under the Note, all sumsadvanced by Lender under this Mortgage and all other sums due and payable under this Mortgage and the other Loan Documentscorresponding to the Premises (collectively, the "Outstanding Obligations"), Borrower shall pay to Lender simultaneously with the paymentof such Proceeds to Lender the difference between the amount of such Proceeds and the amount of the Outstanding Obligations. 11Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (bb) Any remaining balance shall be paid to Borrower. (y) Proceeds received on account of a Partial Taking shall be held and allocated as follows: (i) first, toward the cost of the Restoration, such application of net awards and other payments to be made substantially in themanner provided in Section 4.01(a)(iii) of this Mortgage; and (ii) then, all or any portion of the balance of such proceeds shall, in Lender's sole discretion, either be paid to: (1) Lender, as the holder of this Mortgage, and applied toward the Outstanding Obligations in such order, priority andproportion, and at such time on or prior to the Maturity Date (as defined in the Note), as Lender shall determine; or (2) Borrower; provided, however, in Lender's sole discretion, such proceeds shall be pledged to Lender to secure theOutstanding Obligations pursuant to a security agreement reasonably satisfactory to Lender, or, with Lender's consent, Borrowershall provide Lender with alternative security satisfactory to Lender in its sole discretion. Lender may deposit any funds held by it in accounts insured by any federal or state agency and may commingle such funds withother funds and accounts of Lender. Interest or gains from such funds, if any, shall be the sole property of Lender. (z) Proceeds received on account of a Taking for temporary use shall be held by Lender and applied to the payment of the monthlyinstallments of combined interest and principal becoming due under the Note, until such Taking for temporary use is terminated and the Restoration,if any, has been completed; provided, however, that, if any portion of any such award or payment is made by reason of any damage to ordestruction of the Mortgaged Property, such portion shall be held and applied as provided in Section 4.01(a)(iii) hereof. The balance, if any, of suchawards and payments shall be paid to Borrower. (v) Notwithstanding the foregoing, if at the time of any Taking or at any time thereafter an Event of Default shall have occurred and becontinuing under the Loan Documents, Lender is hereby authorized and empowered, in the name and on behalf of Borrower and otherwise, to file andprosecute Borrower's claim, if any, for an award on account of any Taking and to collect such award and apply the same, after deducting all costs, fees andexpenses incident to the collection thereof (the "Net Award"), toward the Obligations whether or not then due and payable, in such order, priority andproportions as Lender in its discretion shall deem proper, or to cure such Event of Default, or, in Lender's discretion, Lender may pay the Net Award in wholeor in part to Borrower to be applied toward the cost of the Restoration. If Lender shall receive and retain the Net Award, the lien of this Mortgage shall bereduced only by the amount received and retained by Lender and actually applied by Lender in reduction of the Obligations. Section 4.02. Conveyance in Anticipation of Condemnation, Granting of Easements, Etc. If no Event of Default shall have occurred and becontinuing, Borrower may, from time to time with respect to its interest in the Mortgaged Property, and with Lender's prior written consent, (i) sell, assign,convey or otherwise transfer any interest therein to any person legally empowered to take such interest under the power of eminent domain, (ii) grant easementsand other rights in the nature of easements, (iii) release existing easements or other rights in the nature of easements which are for the benefit of the MortgagedProperty, (iv) dedicate or transfer unimproved portions of the Mortgaged Property for road, highway or other public purposes, (v) execute petitions to have theMortgaged Property annexed to any municipal corporation or utility district, and (vi) execute and deliver to any person any instrument appropriate to confirmor effect such grants, releases, dedications and transfers. 12Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 4.03. Lender's Power. At any time, or from time to time, without liability therefor, Lender, without affecting the personal liability of anyperson for payment of the Obligations or the effect of this Mortgage upon the remainder of said Mortgaged Property, may from time to time without notice (i)release any part of said Mortgaged Property, (ii) consent in writing to the making of any map or plat thereof, (iii) join in granting any easement thereon, (iv)join in any extension agreement or any agreement subordinating the lien or charge hereof, (v) release any person so liable, (vi) extend the maturity or alter any ofthe terms of any Obligations, (vii) grant other indulgences, (viii) take or release any other or additional security for any Obligations, (ix) make compositions orother arrangements with debtors in relation thereto, or (x) advance additional funds to protect the security hereof or to pay or discharge the Obligations in theevent Borrower fails to do so, and all amounts so advanced shall be secured hereby and shall be due and payable upon demand by Lender. ARTICLE V SECURITY INTEREST Section 5.01. Security Agreement. With respect to the Personal Property or any portion of the Mortgaged Property which constitutes fixtures or otherproperty governed by the UCC, this Mortgage shall constitute a security agreement between Borrower, as the debtor, and Lender, as the secured party, andBorrower hereby grants to Lender a security interest in such portion of the Mortgaged Property. Cumulative of all other rights of Lender hereunder, Lendershall have all of the rights conferred upon secured parties by the UCC. Borrower authorizes Lender to file financing statements with respect to the securityinterest of Lender, continuation statements with respect thereto, and any amendments to such financing statements which may be necessitated by reason ofany of the changes described in Section 6.C of the Loan Agreement. Furthermore, at any time, and from time to time, Borrower will execute and deliver toLender all financing statements that may from time to time be required by Lender to establish and maintain the validity and priority of the security interest ofLender, or any modification thereof. Lender may exercise any or all of the remedies of a secured party available to it under the UCC with respect to suchproperty. If, upon the occurrence and during the continuance of an Event of Default, Lender proceeds to dispose of such property in accordance with theprovisions of the UCC, 10 days' notice by Lender to Borrower shall be deemed to be reasonable notice under any provision of the UCC requiring such notice;provided, however, that Lender may at its option dispose of such property in accordance with Lender's rights and remedies with respect to the real propertypursuant to the provisions of this Mortgage, in lieu of proceeding under the UCC. Borrower represents that its exact legal name and state of formation ororganization are as set forth in the first paragraph of this Mortgage. Borrower agrees that, notwithstanding any provision in the UCC to the contrary, Borrowershall not file a termination statement of any financing statement filed by Lender in connection with any security interest granted under this Mortgage if Lenderreasonably objects to the filing of such termination statement. Section 5.02. Effective as a Financing Statement and Fixture Filing. This Mortgage shall be effective as a financing statement filed as a fixturefiling with respect to all fixtures included within the Mortgaged Property and is to be filed for record in the real estate records of each county where any part ofthe Mortgaged Property (including said fixtures) is situated. This Mortgage shall also be effective as a financing statement covering any other portion of theMortgaged Property and may be filed in any other appropriate filing or recording office. The mailing address of Borrower is the address of Borrower set forthin the introductory paragraph of this Mortgage, and the address of the Lender from which information concerning the security interests hereunder may beobtained is the address of Lender as set forth in the introductory paragraph of this Mortgage. A carbon, photographic or other reproduction of this Mortgage orof any financing statement relating to this Mortgage shall be sufficient as a financing statement for any of the purposes referred to in this Section. ARTICLE VI EVENTS OF DEFAULT AND REMEDIES Section 6.01. Events of Default. Each of the following shall be an event of default under this Mortgage (each an "Event of Default"): 13Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (i) Subject to the provisions of Section 3.05(b) of this Mortgage, if Borrower fails to pay, prior to delinquency, any taxes,assessments or other charges the failure of which to pay will result in the imposition of a lien against the Mortgaged Property pursuant to ApplicableRegulations. (ii) If Borrower shall fail to maintain insurance in accordance with the requirements of Section 3.06 of this Mortgage. (iii) If Borrower fails to observe or perform any of the covenants, conditions, or obligations of this Mortgage, provided, however, ifany such failure does not involve the payment of any principal, interest or other monetary sum due under the Note, is not willful or intentional, doesnot place any rights or interest in collateral of Lender in immediate jeopardy, and is within the reasonable power of Borrower to promptly cure afterreceipt of notice thereof, all as determined by Lender in its reasonable discretion, then such failure shall not constitute an Event of Default hereunder,unless otherwise expressly provided herein, unless and until Lender shall have given Borrower notice thereof and a period of 30 days shall haveelapsed, during which period Borrower may correct or cure such failure, upon failure of which an Event of Default shall be deemed to have occurredhereunder without further notice or demand of any kind being required. If such failure cannot reasonably be cured within such 30-day period, asdetermined by Lender in its reasonable discretion, and Borrower is diligently pursuing a cure of such failure, then Borrower shall have a reasonableperiod to cure such failure beyond such 30-day period, which shall in no event exceed 90 days after receiving notice of the failure from Lender. IfBorrower shall fail to correct or cure such failure within such 90-day period, an Event of Default shall be deemed to have occurred hereunder withoutfurther notice or demand of any kind being required. (iv) If there is an "Event of Default" under the Loan Agreement. Section 6.02. Remedies. Upon the occurrence and during the continuance of an Event of Default subject to the limitations set forth in Section 6.01,Lender may declare all or any part of the Obligations to be due and payable, and the same shall thereupon become due and payable without any presentment,demand, protest or notice (including notice of intent to accelerate and notice of acceleration) of any kind except as otherwise expressly provided herein.Furthermore, upon the occurrence and during the continuance of an Event of Default, Lender may: (i) Either in person or by agent, with or without bringing any action or proceeding, or by a receiver appointed by a court, and withoutregard to the adequacy of its security, enter upon and take possession of the Mortgaged Property or any part thereof and do any acts which it deemsnecessary or desirable to preserve the value, marketability or rentability of the Mortgaged Property, or part thereof or interest therein, increase theincome therefrom or protect the security hereof and, with or without taking possession of the Mortgaged Property, take any action described herein,sue for or otherwise collect the Rents, including those past due and unpaid, and apply the same, less costs and expenses of operation and collectionincluding reasonable attorneys' fees, upon any Obligations, all in such order as Lender may determine and pursue any remedy available underChapter 697.07, Florida Statutes as amended, supplemented or superceded from time to time. The entering upon and taking possession of theMortgaged Property, the taking of any action described herein, the collection of such Rents, and the application thereof as aforesaid, shall not cure orwaive any Event of Default or notice of default or invalidate any act done in response to such Event of Default or pursuant to such notice of defaultand, notwithstanding the continuance in possession of the Mortgaged Property or the collection, receipt and application of Rents, Lender shall beentitled to exercise every right provided for in any of the Loan Documents or by law upon any Event of Default, including the right to exercise thepower of sale herein conferred; (ii) Commence an action to foreclose this Mortgage in a single parcel or in several parcels, appoint a receiver or specifically enforce anyof the covenants hereof; (iii) Exercise any or all of the remedies available to a secured party under the Uniform Commercial Code as adopted in the State("UCC"), including, without limitation: 14Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (1) Either personally or by means of a court appointed receiver, commissioner or other officer, take possession of all or anyof the Personal Property and exclude therefrom Borrower and all others claiming under Borrower, and thereafter hold, store, use, operate,manage, maintain and control, make repairs, replacements, alterations, additions and improvements to and exercise all rights and powersof Borrower in respect of the Personal Property or any part thereof. In the event Lender demands or attempts to take possession of thePersonal Property in the exercise of any rights under any of the Loan Documents, Borrower promises and agrees to promptly turn over anddeliver complete possession thereof to Lender; (2) Without notice to or demand upon Borrower, make such payments and do such acts as Lender may deem necessary toprotect its security interest in the Personal Property, including, without limitation, paying, purchasing, contesting or compromising anyencumbrance, charge or lien which is prior to or superior to the security interest granted hereunder and, in exercising any such powers orauthority, to pay all expenses incurred in connection therewith; (3) Require Borrower to assemble the Personal Property or any portion thereof, at the Premises, and promptly to deliver suchPersonal Property to Lender, or an agent or representative designated by it. Lender, and its agents and representatives, shall have the right toenter upon any or all of Borrower's premises and property to exercise Lender's rights hereunder; (4) Sell, lease or otherwise dispose of the Personal Property at public sale, with or without having the Personal Property atthe place of sale, and upon such terms and in such manner as Lender may determine. Lender may be a purchaser at any such sale; (5) Unless the Personal Property is perishable or threatens to decline speedily in value or is of a type customarily sold on arecognized market, Lender shall give Borrower at least 10 days' prior written notice of the time and place of any public sale of the PersonalProperty or other intended disposition thereof. Such notice may be delivered to Borrower at the address set forth at the beginning of thisMortgage and shall be deemed to be given as provided herein; and (6) Any sale made pursuant to the provisions of this subsection shall be deemed to have been a public sale conducted in acommercially reasonable manner if held contemporaneously with the sale of all or a portion of the other Mortgaged Property under power ofsale as provided herein upon giving the same notice with respect to the sale of the Personal Property hereunder as is required for such sale ofthe other Mortgaged Property under power of sale, and such sale shall be deemed to be pursuant to a security agreement covering both realand personal property under the UCC. (iv) Exercise all of Borrower's rights and remedies under the Indemnity Agreements, including, without limitation, making demandsand claims and receiving payments under the Indemnity Agreements. Borrower hereby grants Lender a power of attorney (which grant shall bedeemed irrevocable and coupled with an interest) to exercise such rights and remedies; (v) Apply any sums then deposited in the impound account described in Section 3.07 toward payment of the taxes, assessment andinsurance premiums for the Mortgaged Property and/or as a credit on the Obligations in such priority and proportion as Lender may determine in itssole discretion; (vi) If held by Lender, surrender the insurance policies maintained pursuant to Section 3.06, collect the unearned insurance premiumsand apply such sums as a credit on the Obligations in such priority and proportion as Lender in its sole discretion shall deem proper, and inconnection therewith, Borrower hereby appoints Lender as agent and attorney-in-fact (which is coupled with an interest and is therefore irrevocable)for Lender to collect such insurance premiums; and (vii) Sell Borrower's interest in the Mortgaged Property pursuant to the power of sale herein conferred. If Lender elects to sell Borrower'sinterest in the Mortgaged Property by exercise of such power of sale, Lender shall cause such sale to be performed in the manner then required by law. 15Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (aa) Lender shall cause to be recorded, published and delivered such notices of default and notices of sale as may then be required bylaw and by this Mortgage. Thereafter, Lender shall sell Borrower's interest in the Mortgaged Property at the time and place of sale fixed by it, either asa whole, or in separate lots or parcels or items as Lender shall deem expedient, and in such order as it may determine, at public auction to the highestbidder for cash in lawful money of the United States payable at the time of sale, or as otherwise may then be required by law. Lender shall deliver tosuch purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, without any covenant or warranty,express or implied. The recitals in such deed of any matters or facts shall be conclusive proof of the truthfulness thereof. Any person, including,without limitation, Borrower or Lender, may purchase at such sale. Lender may sell not only the real property but also the Personal Property andother interests which are a part of the Mortgaged Property, or any part thereof, as a unit and as a part of a single sale, or may sell any part of theMortgaged Property separately from the remainder of the Mortgaged Property. Lender shall not be required to take possession of any part of theMortgaged Property or to have any of the Personal Property present at any sale of the Mortgaged Property. Lender may appoint or delegate any one ormore persons as agent to perform any act or acts necessary or incident to any sale held by Lender, including the posting of notices and the conduct ofsale, but in the name and on behalf of Lender. In the event any sale hereunder is not completed or is defective in the opinion of Lender, such sale shallnot exhaust the power of sale hereunder, and Lender shall have the right to cause a subsequent sale or sales to be made hereunder. (bb) As may be permitted by law, Lender shall apply the proceeds of sale (i) first, to payment of all costs, fees and expenses,including attorneys' fees and expenses incurred by the Lender in exercising the power of sale or foreclosing this Mortgage, (ii) second, to the paymentof the Obligations (including, without limitation, the principal, accrued interest and other sums due and owing under the Note and the amounts dueand owing to Lender under this Mortgage) in such manner and order as Lender may elect, and (iii) third, the remainder, if any, shall be paid toBorrower, or to Borrower's heirs, devisees, representatives, successors or assigns, or such other persons as may be entitled thereto. (cc) Lender may in the manner provided by law postpone sale of all or any portion of the Mortgaged Property. Section 6.03. Appointment of Receiver. If an Event of Default shall have occurred and be continuing, Lender, as a matter of right and withoutnotice to Borrower or anyone claiming under Borrower, and without regard to the then value of the Mortgaged Property or the interest of Borrower therein, or theinsolvency of Borrower or the then-owner of the Mortgaged Property, may seek the appointment of a receiver for the Mortgaged Property upon ex parteapplication to any court of the competent jurisdiction. Borrower waives any right to any hearing or notice of hearing prior to the appointment of a receiver. Suchreceiver shall be empowered (a) to take possession of the Mortgaged Property and any businesses conducted by Borrower thereon and any business assets usedin connection therewith, (b) to exclude Borrower and Borrower's agents, servants and employees from the Mortgaged Property, or, at the option of the receiver,in lieu of such exclusion, to collect a fair market rental from any such persons occupying any part of the Mortgaged Property, (c) to collect the Rents, (d) tocomplete any construction that may be in progress, (e) to continue the development, marketing and sale of the Mortgaged Property, (f) to do such maintenanceand make such repairs and alterations as the receiver deems necessary, (g) to use all stores of materials, supplies and maintenance equipment on the MortgagedProperty and replace such items at the expense of the receivership estate, (h) to pay all taxes and assessments against the Mortgaged Property, all premiums forinsurance thereon, all utility and other operating expenses, and all sums due under any prior or subsequent encumbrance, (i) to request that Lender advancesuch funds as may reasonably be necessary to the effective exercise of the receiver's powers, on such terms as may be agreed upon by the receiver and Lender,but not in excess of the Default Rate, and (j) generally to do anything that Borrower could legally do if Borrower were in possession of the Mortgaged Property.All expenses incurred by the receiver or his agents, including obligations to repay funds borrowed by the receiver, shall constitute a part of the Obligations.Any revenues collected by the receiver shall be applied first to the expenses of the receivership, including reasonable attorneys' fees incurred by the receiver andby Lender, together with interest thereon at the highest rate of interest applicable in the Note from the date incurred until repaid, and the balance shall beapplied toward the Obligations or in such other manner as the court may direct. 16Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 6.04. Remedies Not Exclusive. Lender shall be entitled to enforce payment and performance of any Obligations and to exercise all rights andpowers under this Mortgage or under any Loan Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of theObligations may now or hereafter be otherwise secured, whether by mortgage, deed of trust, pledge, lien, assignment or otherwise. Neither the acceptance ofthis Mortgage nor its enforcement, whether by court action or pursuant to the power of sale or other powers herein contained, shall prejudice or in any manneraffect Lender's right to realize upon or enforce any other security now or hereafter held by Lender, it being agreed that Lender shall be entitled to enforce thisMortgage and any other security now or hereafter held by Lender in such order and manner as it may in its absolute discretion determine. No remedy hereinconferred upon or reserved to Lender is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or in equity or bystatute. Every power or remedy given by any of the Loan Documents to Lender, or to which Lender may be otherwise entitled, may be exercised, concurrentlyor independently, from time to time and as often as may be deemed expedient by Lender. Lender may pursue inconsistent remedies. The acceptance by Lender of any sum after the same is due shall not constitute a waiver of the right either to require prompt payment, when due, ofall other sums hereby secured or to declare a subsequent Event of Default as herein provided. The acceptance by Lender of any sum in an amount less than thesum then due shall be deemed an acceptance on account only and upon condition that it shall not constitute a waiver of the obligation of Borrower to pay theentire sum then due, and failure of Borrower to pay such entire sum then due shall be an Event of Default, notwithstanding such acceptance of such amounton account, as aforesaid. Lender shall be, at all times thereafter and until the entire sum then due as contemplated by the Loan Documents shall have beenpaid, and notwithstanding the acceptance by Lender thereafter of further sums on account, or otherwise, entitled to exercise all rights in this instrumentconferred upon them or either of them, and the right to proceed with a sale under any notice of default, or an election to sell, or the right to exercise any otherrights or remedies hereunder, shall in no way be impaired, whether any of such amounts are received prior or subsequent to such proceeding, election orexercise. Consent by Lender to any action or inaction of Borrower which is subject to consent or approval of Lender hereunder shall not be deemed a waiver ofthe right to require such consent or approval to future or successive actions or inactions. Section 6.05. Possession of Mortgaged Property. In the event of a trustee's sale or foreclosure sale hereunder and after the time of such sale,Borrower occupies the portion of the Mortgaged Property so sold, or any part thereof, Borrower shall immediately become the tenant of the purchaser at suchsale, which tenancy shall be a tenancy from day to day, terminable at the will of either tenant or landlord, at a reasonable rental per day based upon the valueof the portion of the Mortgaged Property so occupied, such rental to be due and payable daily to the purchaser. An action of unlawful detainer shall lie if thetenant holds over after a demand in writing for possession of such Mortgaged Property; and this Mortgage and a trustee's or sheriff's deed shall constitute alease and agreement under which the tenant's possession arose and continued. Nothing contained in this Mortgage shall be construed to constitute Lender as a"mortgagee in possession" in the absence of its taking actual possession of the Mortgaged Property pursuant to the powers granted herein. Section 6.06. Waiver of Rights. Borrower waives the benefit of all laws now existing or that hereafter may be enacted (i) providing for anyappraisement before sale of any portion of the Mortgaged Property, or (ii) in any way extending the time for the enforcement of the collection of the Obligationsor creating or extending a period of redemption from any sale made in collecting the Obligations. Borrower agrees that Borrower will not at any time insistupon, plea, claim or take the benefit or advantage of any law now or hereafter in force providing for any appraisement, valuation, stay, extension, redemptionor homestead exemption, and Borrower, for Borrower, Borrower's representatives, successors and assigns, and for any and all persons ever claiming anyinterest in the Mortgaged Property, hereby waives and releases all rights of redemption, valuation, appraisement, stay of execution, homestead exemption,notice of election to mature or declare due the whole of the Obligations and marshaling in the event of foreclosure of the liens hereby created. If any law referredto in this Section and now in force, of which Borrower, Borrower's heirs, devisees, representatives, successors and assigns or other person might takeadvantage despite this Section, shall hereafter be repealed or cease to be in force, such law shall not thereafter be deemed to preclude the application of thisSection. Borrower expressly waives and relinquishes any and all rights, remedies and defenses that Borrower may have or be able to assert by reason of thelaws of the State pertaining to the rights, remedies and defenses of sureties. Section 6.07. Relief From Stay. In the event that Borrower commences a case under the Code or is the subject of an involuntary case that results inan order for relief under the Code, subject to court approval, Lender shall thereupon be entitled and Borrower irrevocably consents to relief from any stayimposed by Section 362 of the Code on or against the exercise of the rights and remedies otherwise available to Lender as provided in the Loan Documents andBorrower hereby irrevocably waives its rights to object to such relief. In the event Borrower shall commence a case under the Code or is the subject of aninvoluntary case that results in an order for relief under the Code, Borrower hereby agrees that no injunctive relief against Lender shall be sought under Section105 or other provisions of the Code by Borrower or other person or entity claiming through Borrower, nor shall any extension be sought of the stay providedby Section 362 of the Code. 17Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 6.08. Cash Collateral. Borrower hereby acknowledges and agrees that in the event that Borrower commences a case under the Code or isthe subject of an involuntary case that results in an order for relief under the Code: (i) that all of the Rents are, and shall for purposes be deemed to be,"proceeds, product, offspring, rents, or profits" of the Premises covered by the lien of this Mortgage, as such quoted terms are used in Section 552(b) of theCode; (ii) that in no event shall Borrower assert, claim or contend that any portion of the Rents are, or should be deemed to be, "accounts" or "accountsreceivable" within the meaning of the Code and/or applicable state law; (iii) that the Rents are and shall be deemed to be in any such bankruptcy proceeding"cash collateral" of Lender as that term is defined in Section 363 of the Code; and (iv) that Lender has valid, effective, perfected, enforceable and "choate"rights in and to the Rents without any further action required on the part of Lender to enforce or perfect its rights in and to such cash collateral, including,without limitation, providing notice to Borrower under Section 546(b) of the Code. Section 6.09. Assignment of Rents and Leases. (a) Borrower hereby assigns, transfers, conveys and sets over to Lender all of Borrower's estate,right, title and interest in, to and under the Leases, whether existing on the date hereof or hereafter entered into, together with any changes, extensions, revisionsor modifications thereof and all rights, powers, privileges, options and other benefits of Borrower as the lessor under the Leases regarding the current tenantsand any future tenants, and all the Rents from the Leases, including those now due, past due or to become due. Borrower irrevocably appoints Lender its trueand lawful attorney-in-fact, at the option of Lender, at any time and from time to time upon the occurrence and during the continuance of an Event of Default,to take possession and control of the Premises, pursuant to Borrower's rights under the Leases, to exercise any of Borrower's rights under the Leases, and todemand, receive and enforce payment, to give receipts, releases and satisfaction and to sue, in the name of Borrower or Lender, for all of the Rents. The powerof attorney granted hereby shall be irrevocable and coupled with an interest and shall terminate only upon the payment of all sums due Lender for all losses,costs, damages, fees and expenses whatsoever associated with the exercise of this power of attorney, and Borrower hereby releases Lender from all liability(other than as a result of the gross negligence or willful misconduct of Lender) whatsoever for the exercise of the foregoing power of attorney and all actionstaken pursuant thereto. The consideration received by Borrower to execute and deliver this assignment and the liens and security interests created herein islegally sufficient and will provide a direct economic benefit to Borrower. It is intended by Borrower and Lender that the assignment set forth herein constitutesan absolute assignment and not merely an assignment for additional security. Notwithstanding the foregoing, this assignment shall not be construed to bindLender to the performance of any of the covenants, conditions or provisions of Borrower contained in the Leases or otherwise to impose any obligation uponLender, and, so long as no Event of Default shall have occurred and be continuing, Borrower shall have a license, revocable upon an Event of Default, topossess and control the Premises and collect and receive all Rents. Upon an Event of Default, such license shall be automatically revoked. The assignment ofRents and Leases contained in this Mortgage are intended to provide Lender with all rights and remedies of mortgagees pursuant to Section 697.07, FloridaStatutes, as may be amended, supplemented or superceded from time to time. However, in no event shall this reference diminish, alter, impair or affect anyother rights or remedies of Lender (b) Upon the occurrence and during the continuance of an Event of Default, Lender may, at any time without notice (except if required byapplicable law), either in person, by agent or by a court-appointed receiver, regardless of the adequacy of Lender's security, and at its sole election (without anyobligation to do so), enter upon and take possession and control of the Premises, or any part thereof, to perform all acts necessary and appropriate to operateand maintain the Premises, including, but not limited to, execute, cancel or modify the Leases, make repairs to the Premises, execute or terminate contractsproviding for the management or maintenance of the Premises, all on such terms as are deemed best to protect the security of this assignment, and in Lender'sor Borrower's name, sue for or otherwise collect such Rents as specified in this Mortgage as the same become due and payable, including, but not limited to,Rents then due and unpaid. Lender may so sue for or otherwise collect such Rents with or without taking possession of the Premises. Borrower agrees thatupon the occurrence and during the continuance of an Event of Default, each tenant of the Premises shall make its rent payable to and pay such rent to Lender(or Lender's agents) on Lender's written demand therefor, delivered to such tenant personally, by mail, or by delivering such demand to each rental unit,without any liability on the part of said tenant to inquire further as to the existence of an Event of Default by Borrower. 18Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (c) Rents collected subsequent to any Event of Default shall be applied at the direction of, and in such order as determined by, Lender to thecosts, if any, of taking possession and control of and managing the Premises and collecting such amounts, including, but not limited to, reasonable attorney'sfees, receiver's fees, premiums on receiver's bonds, costs of repairs to the Premises, premiums on insurance policies, taxes, assessments and other charges onthe Premises, and the costs of discharging any obligation or liability of Borrower with respect to the Leases and to the sums secured by this Mortgage. Lenderor the receiver shall have access to the books and records used in the operation and maintenance of the Premises and shall be liable to account only for thoseRents actually received. (d) Lender shall not be liable to Borrower, anyone claiming under or through Borrower or anyone having an interest in the Premises by reasonof anything done or left undone by Lender hereunder, except to the extent of Lender's gross negligence or willful misconduct. (e) Any entering upon and taking possession and control of the Premises by Lender or the receiver and any application of Rents as providedherein shall not cure or waive any Event of Default hereunder or invalidate any other right or remedy of Lender under applicable law or provided therein. ARTICLE VII MISCELLANEOUS Section 7.01. Satisfaction. If and when the Obligations shall have become due and payable (whether by lapse of time or by acceleration or by theexercise of the privilege of prepayment), and Borrower shall pay or cause to be paid (provided such payment is permitted or required by the Note) the fullamount thereof and shall also pay or cause to be paid all other sums payable by the Borrower Parties to the Lender Entities with respect to the Obligations, thenthis Mortgage shall be void (otherwise it shall remain in full force and effect in law and equity forever) and Lender agrees to execute an instrument evidencingthe satisfaction of all obligations under this Mortgage and releasing this Mortgage which shall be prepared and recorded at Borrower's sole expense. Section 7.02. Limitation of Rights of Others. Nothing in this Mortgage is intended or shall be construed to give to any person, other than Borrower,Environmental Insurer and the holder of the Note, any legal or equitable right, remedy or claim under or in respect of this Mortgage or any covenant, conditionor provision herein contained. Section 7.03. Severability. In case any one or more of the provisions contained herein or in the Note shall be held to be invalid, illegal orunenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision hereof, and this Mortgage shall be construed asif such provision had never been contained herein or therein. Section 7.04. Notices; Amendments; Waiver. All notices, demands, designations, certificates, requests, offers, consents, approvals, appointmentsand other instruments given pursuant to this Mortgage (collectively called "Notices") shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii)express overnight delivery service or (iv) certified or registered mail, return receipt requested and shall be deemed to have been delivered upon (a) receipt, ifhand delivered, (b) transmission, if delivered by facsimile, (c) the next Business Day, if delivered by express overnight delivery service, or (d) the thirdBusiness Day following the day of deposit of such notice with the United States Postal Service, if sent by certified or registered mail, return receipt requested.Notices shall be provided to the parties and addresses (or facsimile numbers, as applicable) specified below: If to Borrower:Family Steak Houses of Florida, Inc. 2113 Florida Boulevard Neptune Beach, FL 32266 Attention: Edward B. Alexander Telephone: (904) 249-4197 Telecopy: (904) 249-1466 19Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If to Lender:GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel Telephone: (480) 585-4500 Telecopy: (480) 585-2226 or to such other address or such other person as either party may from time to time hereafter specify to the other party in a notice delivered in the mannerprovided above. Whenever in this Mortgage the giving of Notice is required, the giving thereof may be waived in writing at any time by the person or personsentitled to receive such Notice. Except as in this Mortgage otherwise expressly provided, (i) this Mortgage may not be modified except by an instrument inwriting executed by Borrower and Lender and (ii) no requirement hereof may be waived at any time except by a writing signed by the party against whom suchwaiver is sought to be enforced, nor shall any waiver be deemed a waiver of any subsequent breach or default. Section 7.05. Successors and Assigns. All of the provisions herein contained shall be binding upon and inure to the benefit of the respectivesuccessors and assigns of the parties hereto, to the same extent as if each such successor and assign were in each case named as a party to this Mortgage.Wherever used, the singular shall include the plural, the plural shall include the singular and the use of any gender shall include all genders. Section 7.06. Headings. The headings appearing in this Mortgage have been inserted for convenient reference only and shall not modify, define,limit or expand the express provisions of this Mortgage. Section 7.07. Time of the Essence. Time is of the essence in the performance of each and every obligation under this Mortgage. Section 7.08. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower acknowledges that this Mortgage was substantially negotiated inthe State of Arizona, this Mortgage was delivered in the State of Arizona, all payments under the Loan Documents will be delivered in the State of Arizona andthere are substantial contacts between the parties and the transactions contemplated herein and the State of Arizona. For purposes of any action or proceedingarising out of this Mortgage, the parties hereto expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona. Borrowerconsents that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance withapplicable law. Furthermore, Borrower waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdictionof such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. The creationof this Mortgage and the rights and remedies of Lender with respect to the Mortgaged Property, as provided herein and by the laws of the State, shall begoverned by and construed in accordance with the internal laws of the State without regard to its principles of conflicts of law. With respect to other provisionsof this Mortgage, this Mortgage shall be governed by the internal laws of the State of Arizona, without regard to its principles of conflicts of law. Nothing inthis Section shall limit or restrict the right of Lender to commence any proceeding in the federal or state courts located in the State to the extent Lender deemssuch proceeding necessary or advisable to exercise remedies available under the Mortgage or the other Loan Documents. Section 7.09. Indemnification. Borrower shall indemnify and hold harmless each of the Indemnified Parties for, from and against any and allclaims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings, obligations, debts, damages, losses, costs, expenses,diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid in settlement and damages of whatever kind or nature(including, without limitation, attorneys' fees, court costs and other costs of defense) (collectively, "Losses") (excluding Losses suffered by an IndemnifiedParty arising out of such Indemnified Party's gross negligence or willful misconduct; provided, however, that the term "gross negligence" shall not includegross negligence imputed as a matter of law to any of the Indemnified Parties solely by reason of Borrower's interest in the Mortgaged Property or Borrower'sfailure to act in respect of matters which are or were the obligation of Borrower under the Loan Documents) caused by, incurred or resulting from Borrower's orLessee’s operations of, or relating in any manner to, the Mortgaged Property, whether relating to its original design or construction, latent defects, alteration,maintenance, use by Borrower, Lessee or any person thereon, supervision or otherwise, or from any breach of, default under or failure to perform any term orprovision of this Mortgage by Borrower, its officers, employees, agents or other persons. It is expressly understood and agreed that Borrower's obligationsunder this Section shall survive the expiration or earlier termination of this Mortgage for any reason. 20Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Section 7.10. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect Damages. LENDER, BY ACCEPTING THISMORTGAGE, AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TOA TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIMBROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTERARISING OUT OF OR IN CONNECTION WITH THIS MORTGAGE, THE RELATIONSHIP OF LENDER AND BORROWER, BORROWER'S USEOR OCCUPANCY OF THE MORTGAGED PROPERTY, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY ORSTATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEENNEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY,VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL ANDINDIRECT DAMAGES FROM THE OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OFTHEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM ORCOUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORSOR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THISMORTGAGE OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY BORROWER AND LENDER OF ANYRIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATED BYTHE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. 21Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, Borrower has executed and delivered this Mortgage as of the day and year first above written. BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By/s/ Edward Alexander Printed NameEdward Alexander TitleExecutive Vice President and Chief Financial Officer U.S. Federal Tax Identification Number: 59-2597349 Organization Identification Number: /s/ Cynthia D Newton Witness Cynthia D Newton Printed Name /s/ Stephen C. Travis Witness Stephen C. Travis Printed Name STATE OF Florida ) ) SS.COUNTY OF Duval ) The foregoing instrument was acknowledged before me on Sept 30, 2002 by Ed Alexander, Exec Vice Pres and Chief Financial Officer of Family SteakHouses of Florida, Inc., a Florida corporation, on behalf of the corporation. He/She is personally known to me or has produced a driver's license asidentification and did not take an oath. /s/ Cynthia D Newton Notary Public My Commission Expires: Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT A LEGAL DESCRIPTION OF PREMISES A portion of the Castro Y Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida, being more particularly described as follows: Commence at the Southwest corner of Lot 15, Block 15, as shown on the plat of Prado Ferrer Plat No. 2 of Florida Beach, as recorded in Plat Book 11, page61 of the current public records of Duval County, Florida; thence North 89°29'50" East along the Northerly line of the 20 foot alley as shown on said platand its Easterly prolongation and the Southerly line of those lands described in Official Records Volume 1659, page 53, of the current public records of saidCounty, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16 as shown on said plat; thence North 00°30’10" West along the Easterly line ofsaid Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, County Road No. 10 (as per J.T.A. Right of Way Map Project No.72100-3178, dated 7/29/66 and as described and recorded in Official Records Volume 2668, page 781 of the current public records of said County; thencealong said Southerly right of way line, run the following three courses and distances: Course No. 1) North 89°29'50" East, 80.00 feet; Course No. 2) North85°l2'29" East, 240.67 feet; Course No. 3) North 89°29'50" East, 315.00 feet to the centerline of Castro Trail as shown on the Plat of Prado Ferrer Plat No.2 of Florida Beach, and the Point of Beginning; thence Southerly along said centerline, also being the Easterly boundary of said Prado Ferrer Plat No. 2 ofFlorida Beach, run the following two courses and distances: Course No. 1) South 00°30'10" East, 133.48 feet to the Point of Curvature of a curve to the left;Course No. 2) Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arc distance of 258.37 feet, said arcbeing subtended by a chord bearing and distance of South 04°37'26" East, 258.15 feet; thence North 80° 00'18" East, 127.11 feet; thence North 87°08'51"East, 100.00 feet; thence South 83°03'09" East, 24.42 feet to the Westerly line of those lands, described and recorded in Official Records Volume 4454, page62 of said current public records; thence Northerly along said Westerly line of last said lands and along the arc of a curve concave Easterly and having aradius of 1546.05 feet, an arc distance of 236.51 feet, said arc being subtended by a chord bearing and distance of North 04°53'07" West, 236.28 feet to thePoint of Tangency of said curve; thence North 00°30'10" West and continuing along the Westerly line of last mentioned lands, 133.48 feet to the aforementionedSoutherly right of way line of Atlantic Boulevard; thence South 89°29'50" West, along last said line, 250.00 feet to the Point of Beginning. Together with the rights and privileges set forth in Non-exclusive Mutually Reciprocal Roadway Easement for Ingress and Egress and Parking Easementrecorded in Official Records Volume 6220, page 1086, as amended in Official Records Volume 6269, page 1436, current public records of Duval County,Florida, more particularly described as follows: A portion of the Castro Y Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida, being more particularly described as follows: Commence at the Southwest corner of Lot 15, Block 15, as shown on the plat of Prado Ferrer Plat No. 2, of Florida Beach, as recorded in Plat Book 11, page61, of the current public records of Duval County, Florida; thence North 89°29'50" East along the Northerly line of the 20 foot alley as shown on said platand its Easterly prolongation and the Southerly line of those lands described in Official Records Volume Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1659, page 53, of the current public records of said County, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16, as shown on said Plat;thence North 00°30'10" West along the Easterly line of said Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, CountyRoad No. 10 (as per J.T.A. Right of Way Map Project No. 72100-3178, dated 7/29/66 and as described and recorded in Official Records Volume 2668, page781 of the current public records of said County): thence along said Southerly right of way line run the following three courses and distances: Course No. 1)North 89°29'50" East, 80.00 feet; Course No. 2) North 85°12'29" East, 240.67 feet; Course No. 3) North 89°29'50" East, 315.00 feet to the centerline ofCastro Trail as shown on the Plat of Prado Ferrer Plat No. 2 of Florida Beach; thence Southerly along said centerline, also being the Easterly boundary of saidPrado Ferrer Plat No. 2 of Florida Beach, run the following two courses and distances: Course No. 1) South 00°30'10" East, 133.48 feet to the Point ofCurvature of a curve to the left; Course No. 2) Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arcdistance of 258.37 feet, said arc being subtended by a chord bearing and distance of South 04°37'26" East, 258.15 feet for a Point of Beginning; thenceNorth 80°00'18" East, 127.11 feet; thence North 87°08'51" East, 100.00 feet; thence South 83°03'09" East, 24.42 feet to the Westerly line of those landsdescribed and recorded in Official Records Volume 4454, page 62 of said current public records; thence Southerly along said Westerly line of last said landsand along the arc of a curve concave Easterly and having a radius of 1546.05 feet, an arc distance of 58.46 feet, said arc being subtended by a chord bearingand distance of South 10°21' 03" East, 58.45 feet; thence South 89°29'50" West, parallel to said Southerly right of way line of Atlantic Boulevard, adistance of 242.00 feet; thence North 37°55'39" West, a distance of 24.87 feet to said curved Easterly boundary of Prado Ferrer Plat No. 2 of Florida Beach;thence Northerly around and along said Easterly boundary and the arc of said curve, a distance of 16.12 feet, said arc being subtended by a chord bearingand distance of North 09°00'08" West, 16.12 feet to the Point of Beginning. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.3 LOAN AGREEMENT THIS LOAN AGREEMENT (this “Agreement”) is made as of Oct 9, 2002 (the “Closing Date”), by and between GE CAPITAL FRANCHISEFINANCE CORPORATION, a Delaware corporation (“Lender”), FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation (“Borrower”). AGREEMENT: In consideration of the mutual covenants and provisions of this Agreement, the parties agree as follows: 1. Definitions. The following terms shall have the following meanings for all purposes of this Agreement: “ADA” means the Americans with Disabilities Act of 1990, as such act may be amended from time to time. “Affiliate” means any Person which directly or indirectly controls, is under common control with, or is controlled by any other Person. For purposesof this definition, “controls”, “under common control with” and “controlled by” means the possession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of such Person, whether through ownership of voting securities or otherwise. “Anti-Money Laundering Laws” means all applicable BSA laws, regulations and government guidance on BSA compliance and on the preventionand detection of money laundering violations under 18 U.S.C. § § 1956 and 1957, as amended. “Applicable Regulations” means all applicable statutes, regulations, rules, ordinances, codes, licenses, permits, orders and approvals of eachGovernmental Authority having jurisdiction over the Premises, including, without limitation, all health, building, fire, safety and other codes, ordinances andrequirements, all applicable standards of the National Board of Fire Underwriters and the ADA and all policies or rules of common law, in each case, asamended, and any judicial or administrative interpretation thereof, including any judicial order, consent, decree or judgment applicable to any of the BorrowerParties or any of the Lessee Parties. “Borrower Parties” means, collectively, Borrower and any guarantors of the Loans (including, in each case, any predecessors-in-interest). “BSA” means the Bank Secrecy Act (31 U.S.C. § § 5311 et. seq.), as amended. “Business Day” means any day on which Lender is open for business other than a Saturday, Sunday or a legal holiday, ending at 5:00 P.M.Phoenix, Arizona time. “Change of Control” means a change in control of any of the Borrower Parties, including, without limitation, a change in control resulting fromdirect or indirect transfers of voting stock or partnership, membership or other ownership interests, whether in one or a series of transactions. For purposes ofthis definition, “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of any of theBorrower Parties, as applicable, and a Change of Control will occur if any of the following occur: (i) any merger or consolidation by any of the BorrowerParties, as applicable, with or into any other entity; or (ii) if any “Person” as defined in Section 3(a)(9) of the Securities and Exchange Act of 1934, asamended (the “Exchange Act”), and as used in Section 13(d) and 14(d) thereof, including a “group” as defined in Section 13(d) of the Exchange Act, who,subsequent to the Closing, becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), of securities of any of the Borrower Parties, asapplicable, representing 50% or more of the combined voting power of Borrower's then outstanding securities (other than indirectly as a result of theredemption by any of the Borrower Parties, as applicable, of its securities). Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Closing” means the disbursement of the Loan Amount by Title Company as contemplated by this Agreement. “Code” means Title 11 of the United States Code, 11 U.S.C. Sec. 101 et seq., as amended. “Commitment” means that certain Commitment Letter dated August 19, 2002 between Lender and Borrower and any amendments or supplementsthereto. “Default Rate” has the meaning set forth in the Note. “Environmental Condition” means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurfacestrata, ambient air and any environmental medium comprising or surrounding the Premises, whether or not yet discovered, which would reasonably beexpected to or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against any of the Borrower Parties, Lessee Parties orLender by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from theoperation of business at the Premises and/or the operation of the business of any other property owner or operator in the vicinity of the Premises and/or anyactivity or operation formerly conducted by any person or entity on or off the Premises. “Environmental Indemnity Agreement” means the environmental indemnity agreement dated as of the date of this Agreement executed by Borrowerfor the benefit of the Indemnified Parties and such other parties as are identified in such agreement with respect to the Premises, as the same may be amendedfrom time to time. “Environmental Insurer” means American International Specialty Lines Insurance Company, or such other environmental insurance company asLender may select, and its successors and assigns. “Environmental Laws” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions anddecrees of Governmental Authorities and common law, relating to Hazardous Materials or USTs and/or the protection of human health or the environment byreason of a Release or a Threatened Release of Hazardous Materials or USTs or relating to liability for or costs of Remediation or prevention of Releases.“Environmental Laws” includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations, rulings, orders ordecrees promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations, orders, injunctions and decrees of GovernmentalAuthorities: the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning andCommunity Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 et seq.; the ResourceConservation and Recovery Act (including but not limited to Subtitle I relating to USTs), 42 U.S.C. §§ 6901 et seq.; the Clean Water Act, 33 U.S.C. §§1251 et seq.; the Clean Air Act, 42 U.S.C. §§ 7401 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Safe Drinking Water Act, 42U.S.C. § § 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C.§ § 136 et seq.; the Endangered Species Act, 16 U.S.C. § § 1531 et seq. and the National Environmental Policy Act, 42 U.S.C. § 4321 et seq.“Environmental Laws” also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations,orders, injunctions and decrees of Governmental Authorities and common law: conditioning transfer of property upon a negative declaration or other approvalof a Governmental Authority of the environmental condition of the property; requiring notification or disclosure of Releases or other environmental condition ofthe Premises to any Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposingconditions or requirements relating to Hazardous Materials or USTs in connection with permits or other authorizations required by Governmental Authorities;relating to the handling and disposal of Hazardous Materials; relating to nuisance, trespass or other causes of action related to Hazardous Materials; andrelating to wrongful death, personal injury, or property or other damage in connection with the physical condition or use of the Premises by reason of thepresence of Hazardous Materials or USTs in, on, under or above the Premises. “Environmental Lien” has the meaning set forth in Section 5.K(9). 2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Environmental Policy” means the environmental insurance policy issued by Environmental Insurer to Lender with respect to the Premises, whichEnvironmental Policy shall be in form and substance satisfactory to Lender in its sole discretion. “Event of Default” has the meaning set forth in Section 9. “FCCR Amount” has the meaning set forth in Section 9.A(7). “Fixed Charge Coverage Ratio” has the meaning set forth in Section 6.J. “GAAP” means generally accepted accounting principles consistently applied. “Governmental Authority” means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Premises or any of the Borrower Parties. “Hazardous Materials” means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant orcontaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipmentcontaining dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or anypetroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of “hazardoussubstances,” “toxic substances,” “hazardous materials,” “hazardous wastes,” “regulated substances” or words of similar import under any EnvironmentalLaws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any GovernmentalAuthority that asserts or may assert jurisdiction over the Premises or the operations or activity at the Premises, or any chemical, material, gas or substancethat does or is reasonably likely to pose a hazard to the health and/or safety of the occupants of the Premises or the owners and/or occupants of propertyadjacent to or surrounding the Premises. “Indemnified Parties” means Lender, Environmental Insurer, the trustees under the Mortgage, if applicable, and any person or entity who is or willhave been involved in the origination of the Loan, any person or entity who is or will have been involved in the servicing of the Loan, any person or entity inwhose name the encumbrance created by the Mortgage is or will have been recorded, persons and entities who may hold or acquire or will have held a full orpartial interest in the Loan (including, but not limited to, investors or prospective investors in any Securitization, Participation or Transfer, as well ascustodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefits of third parties), as well as the respectivedirectors, officers, shareholders, partners, members, employees, lenders, agents, servants, representatives, contractors, subcontractors, affiliates,subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other person or entity who holds oracquires or will have held a participation or other full or partial interest in the Loan or the Premises, whether during the term of the Loan or as a part of orfollowing a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion ofLender's assets and business). “Indemnity Agreements” means all indemnity agreements executed for the benefit of any of the Borrower Parties, Lessee Parties or any prior owner,lessee or occupant of the Premises in connection with Hazardous Materials or USTs, including, without limitation, the right to receive payments under suchindemnity agreements. “Lease” means the lease between Borrower, as lessor, and Lessee, as lessee, with respect to the Premises, together with all amendments,modifications and supplements thereto. “Lender Entities” means, collectively, Lender (including any predecessor- in-interest to Lender) and any Affiliate of Lender (including any Affiliateof any predecessor-in-interest to Lender). 3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Lessee” means Barnhill’s Buffet, Inc., and its successors. “Lessee Parties” means, collectively, Lessee and any guarantors of the Leases (including, in each case, any predecessors-in-interest). “Loan” means the loan for the Premises, described in Section 2. “Loan Amount” means $644,000. “Loan Documents” means, collectively, this Agreement, the Note, the Mortgage, the Environmental Indemnity Agreement, the SubordinationAgreement, the UCC-1 Financing Statements and all other documents, instruments and agreements executed in connection therewith or contemplated thereby,as the same may be amended from time to time. “Loan Pool” means: (i) in the context of a Securitization, any pool or group of loans that are a part of such Securitization; (ii) in the context of a Transfer, all loans which are sold, transferred or assigned to the same transferee; and (iii) in the context of a Participation, all loans as to which participating interests are granted to the same participant. “Material Adverse Effect” means a material adverse effect on (i) the Premises, including, without limitation, the operation of the Premises as aPermitted Concept, or (ii) Borrower's ability to perform its obligations under the Loan Documents. “Mortgage” means the amended and restated mortgage dated as of the date of this Agreement executed by Borrower for the benefit of Lender withrespect to the Premises. “Note” means the amended and restated promissory note dated as of the date of this Agreement in the Loan Amount evidencing the Loan, as the samemay be amended, restated and/or substituted from time to time, including, without limitation, as a result of the payment of the FCCR Amount pursuant toSection 9. “Obligations” has the meaning set forth in the Mortgage. “Other Agreements” means, collectively, all agreements and instruments between, among or by (1) any of the Borrower Parties and/or any Affiliateof any of the Borrower Parties (including any Affiliate of any predecessor-in-interest to any of the Borrower Parties), and, or for the benefit of, (2) any of theLender Entities, including, without limitation, promissory notes and guaranties; provided, however, the term “Other Agreements” shall not include theagreements and instruments defined as the Loan Documents. “Participation” means one or more grants by Lender or any of the other Lender Entities to a third party of a participating interest in notes evidencingobligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities or any or all servicing rights with respect thereto. “Permitted Amounts” means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form orcombination of forms the presence, use, storage, release or handling of which does not constitute a violation of any Environmental Laws and is customarilyemployed in the ordinary course of, or associated with, similar businesses located in the state in which the Premises is located. 4Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Permitted Concept” means a restaurant permitted under the Lease. “Permitted Exceptions” means those recorded easements, restrictions, liens and encumbrances set forth as exceptions in the title insurance policyissued by Title Company to Lender and approved by Lender in its sole discretion in connection with the closing of the Loan. “Person” means any individual, corporation, partnership, limited liability company, trust, unincorporated organization, Governmental Authority orany other form of entity. “Personal Property” has the meaning set forth in the Mortgage. “Premises” means the parcel or parcels of real estate described on Exhibit A attached hereto, together with all rights, privileges and appurtenancesassociated therewith and all buildings, fixtures and other improvements now or hereafter located thereon (whether or not affixed to such real estate) and thePersonal Property. “Related Premises” means collectively, the Premises and, following such financings, all other premises financed by Lender pursuant to theCommitment. “Questionnaire” means the environmental questionnaire completed on behalf of the Borrower Parties with respect to the Premises and submitted toEnvironmental Insurer in connection with the issuance of the Environmental Policy. “Related Premises” means those properties (other than the Premises) which are the subject of mortgage loans from any of the Lender Entities to anyof the Borrower Parties. “Release” means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,escaping, dumping, disposing or other movement of Hazardous Materials or USTs. “Remediation” means any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwiseremediate any Hazardous Materials or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate anyRelease, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring,assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs. “Restoration” has the meaning set forth in the Mortgage. “Securitization” means one or more sales, dispositions, transfers or assignments by Lender or any of the other Lender Entities to a special purposecorporation, trust or other entity identified by Lender or any of the other Lender Entities of notes evidencing obligations to repay secured or unsecured loansowned by Lender or any of the other Lender Entities (and, to the extent applicable, the subsequent sale, transfer or assignment of such notes to another specialpurpose corporation, trust or other entity identified by Lender or any of the other Lender Entities), and the issuance of bonds, certificates, notes or otherinstruments evidencing interests in pools of such loans, whether in connection with a permanent asset securitization or a sale of loans in anticipation of apermanent asset securitization. Each Securitization shall be undertaken in accordance with all requirements which may be imposed by the investors or therating agencies involved in each such sale, disposition, transfer or assignment or which may be imposed by applicable securities, tax or other laws orregulations. “Subordination Agreement” means the subordination, non-disturbance and attornment agreement dated as of the date of this Agreement executed byBorrower, Lessee and Lender with respect to the Lease. “Substitute Documents” has the meaning set forth in Section 11. 5Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Substitute Premises” means one or more parcels of real estate substituted for the Premises in accordance with the requirements of Section 11,together with all rights, privileges and appurtenances associated therewith and all buildings, fixtures and other improvements, equipment, trade fixtures,appliances and other personal property located thereon (whether or not affixed to such real estate). For purposes of clarity, where two or more parcels of realestate comprise a Substitute Premises, such parcels or interests shall be aggregated and deemed to constitute the Substitute Premises for all purposes of thisAgreement. “Terrorism Laws” means Executive Order 13224 issued by the President of the United States of America, the Terrorism Sanctions Regulations(Title 31 Part 595 of the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions Regulations (Title 31 Part 596 of the U.S. Code ofFederal Regulations), the Foreign Terrorist Organizations Sanctions Regulations (Title 31 Part 597 of the U.S. Code of Federal Regulations), and the CubanAssets Control Regulations (Title 31 Part 515 of the U.S. Code of Federal Regulations), and all other present and future federal, state and local laws,ordinances, regulations, policies, lists and any other requirements of any Governmental Authority (including, without limitation, the United States Departmentof the Treasury Office of Foreign Assets Control) addressing, relating to, or attempting to eliminate, terrorist acts and acts of war, each as hereaftersupplemented, amended or modified from time to time, and the present and future rules, regulations and guidance documents promulgated under any of theforegoing, or under similar laws, ordinances, regulations, policies or requirements of other states or localities. “Threatened Release” means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters,groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the Premiseswhich may result from such Release. “Title Company” means Lawyers Title Insurance Corporation. “Transfer” means one or more sales, transfers or assignments by Lender or any of the other Lender Entities to a third party of notes evidencingobligations to repay secured or unsecured loans owned by Lender or any of the other Lender Entities or any or all servicing rights with respect thereto. “UCC-1 Financing Statements” means such UCC-1 Financing Statements as Lender shall file with respect to the transactions contemplated by thisAgreement. “USTs” means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage,dispensing and general use of petroleum and petroleum-based substances. 2. Transaction. On the terms and subject to the conditions set forth in the Loan Documents, Lender shall make the Loan. The Loan will beevidenced by the Note and secured by the Mortgage. Borrower shall repay the outstanding principal amount of the Loan together with interest thereon in themanner and in accordance with the terms and conditions of the Note and the other Loan Documents. The Loan shall be advanced at the Closing in cash orotherwise immediately available funds subject to any prorations and adjustments required by this Agreement. 6Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 3. Escrow Agent. Borrower and Lender hereby employ Title Company to act as escrow agent in connection with the transaction described inthis Agreement. Borrower and Lender will deliver to Title Company all documents, pay to Title Company all sums and do or cause to be done all other thingsnecessary or required by this Agreement, in the reasonable judgment of Title Company, to enable Title Company to comply herewith and to enable any titleinsurance policy provided for herein to be issued. Title Company shall not cause the transaction to close unless and until it has received written instructionsfrom Lender and Borrower to do so. Title Company is authorized to pay, from any funds held by it for Lender's or Borrower's respective credit all amountsnecessary to procure the delivery of such documents and to pay, on behalf of Lender and Borrower, all charges and obligations payable by them, respectively.Borrower will pay all charges payable by it to Title Company. Title Company is authorized, in the event any conflicting demand is made upon it concerningthese instructions or the escrow, at its election, to hold any documents and/or funds deposited hereunder until an action shall be brought in a court ofcompetent jurisdiction to determine the rights of Borrower and Lender or to interplead such documents and/or funds in an action brought in any such court.Deposit by Title Company of such documents and funds, after deducting therefrom its charges and its expenses and attorneys' fees incurred in connectionwith any such court action, shall relieve Title Company of all further liability and responsibility for such documents and funds. Title Company's receipt ofthis Agreement and opening of an escrow pursuant to this Agreement shall be deemed to constitute conclusive evidence of Title Company's agreement to bebound by the terms and conditions of this Agreement pertaining to Title Company. Disbursement of any funds shall be made by check, certified check or wiretransfer, as directed by Borrower and Lender. Title Company shall be under no obligation to disburse any funds represented by check or draft, and no checkor draft shall be payment to Title Company in compliance with any of the requirements hereof, until it is advised by the bank in which such check or draft isdeposited that such check or draft has been honored. Title Company is authorized to act upon any statement furnished by the holder or payee, or a collectionagent for the holder or payee, of any lien on or charge or assessment in connection with the Premises, concerning the amount of such charge or assessment orthe amount secured by such lien, without liability or responsibility for the accuracy of such statement. The employment of Title Company as escrow agentshall not affect any rights of subrogation under the terms of any title insurance policy issued pursuant to the provisions thereof. 4. Closing Conditions. The obligation of Lender to consummate the transaction contemplated by this Agreement is subject to the fulfillmentor waiver of each of the following conditions: A. Title Insurance Commitments. Lender shall have received for the Premises a preliminary title report and irrevocable commitment to insuretitle in the amount of the Loan, by means of a mortgagee's ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is notissued in the jurisdiction where the Premises is located) issued by Title Company showing Borrower vested with good and marketable fee title in the realproperty comprising the Premises, committing to insure Lender's first priority lien upon and security interest in such real property subject only to PermittedExceptions, and containing such endorsements as Lender may require. B. Survey. Lender acknowledges that it is in possession of a current ALTA survey of the Premises or its equivalent, the form and substance ofwhich is satisfactory to Lender. Lender shall have obtained a flood certificate indicating that the location of the Premises is not within the 100-year flood plainor identified as a special flood hazard area as defined by the Federal Emergency Management Agency, or if the Premises is in such a flood plain or specialflood hazard area, Borrower shall have provided Lender with evidence of flood insurance maintained on the Premises in an amount and on terms andconditions reasonably satisfactory to Lender. C. Environmental. Lender shall have completed such environmental due diligence of the Premises as it deems necessary or advisable in itssole discretion, including, without limitation, receiving an Environmental Policy with respect to the Premises, and Lender shall have approved theenvironmental condition of the Premises in its sole discretion. D. Compliance With Representations, Warranties and Covenants. All of the representations and warranties set forth in Section 5 shall betrue, correct and complete as of the Closing Date, and Borrower shall be in compliance with each of the covenants set forth in Section 6 as of the Closing Date.No event shall have occurred or condition shall exist or information shall have been disclosed by Borrower or discovered by Lender which has had or wouldbe reasonably likely to have a material adverse effect on the Premises, any of the Borrower Parties or Lender's willingness to consummate the transactioncontemplated by this Agreement, as determined by Lender in its sole and absolute discretion. E. Proof of Insurance. Borrower shall have delivered to Lender certificates of insurance and copies of insurance policies showing that allinsurance required by the Loan Documents and providing coverage and limits satisfactory to Lender are in full force and effect. F. Legal Opinions. Borrower shall have delivered to Lender such legal opinions as Lender may reasonably require all in form and substancereasonably satisfactory to Lender and its counsel. 7Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. G. Closing Costs. Borrower shall have paid all costs of the transactions described in this Agreement, including, without limitation, the costof title insurance premiums and all endorsements required by Lender, survey charges, UCC and litigation search charges, the attorneys' fees of Borrower,reasonable attorneys' fees and expenses of Lender, the cost of the environmental due diligence undertaken pursuant to Section 4.C, including, withoutlimitation, the cost of the Environmental Policy, Lender's site inspection costs and fees, stamp taxes, mortgage taxes, transfer fees, escrow, filing and recordingfees and UCC filing and recording fees (including preparation, filing and recording fees for UCC continuation statements). Borrower shall have also paid allreal and personal property and other applicable taxes and assessments and other charges relating to the Premises which are due and payable on or prior to theClosing Date as well as taxes and assessments due and payable subsequent to the Closing Date but which Title Company requires to be paid at Closing as acondition to the issuance of the title insurance policy described in Section 4.A. H. Lease, Memorandum and Subordination Agreement. Borrower and Lessee shall have executed and delivered the Lease, memorandum oflease in recordable form for the Premises (the “Memorandum”) and the Subordination Agreement. The Lease, the Memorandum and the SubordinationAgreement shall be in form and substance reasonably satisfactory to Lender. Lessee shall have delivered to Borrower an executed Guaranty with respect to theLease. I. Closing Documents. At or prior to the Closing Date, Lender and/or the Borrower Parties, as may be appropriate, shall have executed anddelivered or shall have caused to be executed and delivered to Lender, or as Lender may otherwise direct, the Loan Documents and such other documents,payments, instruments and certificates, as Lender may require in form acceptable to Lender. Upon fulfillment or waiver of all of the above conditions, Lender shall deposit funds necessary to close this transaction with the Title Company andthis transaction shall close in accordance with the terms and conditions of this Agreement. 5. Representations and Warranties of Borrower. The representations and warranties of Borrower contained in this Section are being madeby Borrower as of the Closing Date to induce Lender to enter into this Agreement and consummate the transactions contemplated herein and shall survive theClosing. Borrower represents and warrants to Lender (and Environmental Insurer solely with respect to Section 5.K) as follows: A. Financial Information. Borrower has delivered to Lender certain financial statements and other information concerning the BorrowerParties in connection with the transaction described in this Agreement (collectively, the “Financial Information”). The Financial Information is true, correct andcomplete in all material respects; there have been no amendments to the Financial Information since the date such Financial Information was prepared ordelivered to Lender. Borrower understands that Lender is relying upon the Financial Information and Borrower represents that such reliance is reasonable. Allfinancial statements included in the Financial Information were prepared in accordance with GAAP and fairly present as of the date of such financialstatements the financial condition of each individual or entity to which they pertain. No change has occurred with respect to the financial condition of any ofthe Borrower Parties and/or the Premises as reflected in the Financial Information which has not been disclosed in writing to Lender or has had, or couldreasonably be expected to result in, a Material Adverse Effect. B. Organization and Authority. Each of the Borrower Parties (other than individuals), as applicable, is duly organized or formed, validlyexisting and in good standing under the laws of its state of incorporation or formation. Borrower is qualified as a foreign corporation, partnership or limitedliability company, as applicable, to do business in the state where the Premises is located and each of the Borrower Parties is qualified as a foreign corporation,partnership or limited liability company, as applicable, to do business in any other jurisdiction where the failure to be qualified would reasonably be expectedto result in a Material Adverse Effect. All necessary action has been taken to authorize the execution, delivery and performance by the Borrower Parties of thisAgreement and the other Loan Documents. The person(s) who have executed this Agreement on behalf of Borrower are duly authorized so to do. Borrower isnot a “foreign corporation”, “foreign partnership”, “foreign trust”, “foreign estate” or “foreign person” (as those terms are defined by the Internal Revenue Codeof 1986, as amended). Borrower's U.S. Federal Tax Identification number, Organization Identification number and principal place of business are correctlyset forth on the signature page of this Agreement. None of the Borrower Parties, and no individual or entity owning directly or indirectly any interest in any ofthe Borrower Parties, is an individual or entity whose property or interests are subject to being “blocked” under any of the Terrorism Laws or is otherwise inviolation of any of the Terrorism Laws. 8Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. C. Enforceability of Documents. Upon execution by the Borrower Parties, this Agreement and the other Loan Documents shall constitute thelegal, valid and binding obligations of the Borrower Parties, enforceable against the Borrower Parties in accordance with their respective terms, except as suchenforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other laws affecting the rights of creditors generally andgeneral principles of equity. D. Litigation. There are no suits, actions, proceedings or investigations pending, or to the best of its knowledge, threatened against orinvolving the Borrower Parties or the Premises before any arbitrator or Governmental Authority, except for such suits, actions, proceedings or investigationswhich, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a Material Adverse Effect. E. Absence of Breaches or Defaults. The Borrower Parties are not, and the authorization, execution, delivery and performance of thisAgreement and the other Loan Documents will not result, in any breach or default under any other document, instrument or agreement to which any of theBorrower Parties is a party or by which any of the Borrower Parties, the Premises or any of the property of any of the Borrower Parties is subject or bound,except for such breaches or defaults which, individually or in the aggregate, have not had, and would not reasonably be expected to result in, a MaterialAdverse Effect. The authorization, execution, delivery and performance of this Agreement and the other Loan Documents will not violate any applicable law,statute, regulation, rule, ordinance, code, rule or order. The Premises is not subject to any right of first refusal, right of first offer or option to purchase or leasegranted to a third party (other than the Lease). F. Utilities. Adequate public utilities are available at the Premises to permit utilization of the Premises as a Permitted Concept and all utilityconnection fees and use charges will have been paid in full prior to delinquency. G. Zoning; Compliance With Laws. The Premises is in compliance with all applicable zoning requirements, and the use of the Premises as aPermitted Concept does not constitute a nonconforming use under applicable zoning requirements. The Borrower Parties and the Premises are in compliancewith all Applicable Regulations except for such noncompliance, which has not had, and would not reasonably be expected to result in, a Material AdverseEffect. H. Area Development; Wetlands. No condemnation or eminent domain proceedings affecting the Premises have been commenced or, to thebest of Borrower's knowledge, are contemplated. Neither the Premises nor, to the best of Borrower's knowledge, the real property bordering the Premises aredesignated by any Governmental Authority as a wetlands. I. Licenses and Permits; Access. All required licenses and permits, both governmental and private, to use and operate the Premises as aPermitted Concept are in full force and effect, except for such licenses and permits the failure of which to obtain has not had, and would not reasonably beexpected to result in, a Material Adverse Effect. Adequate rights of access to public roads and ways are available to the Premises for unrestricted ingress andegress and otherwise to permit utilization of the Premises for their intended purposes, and all such public roads and ways have been completed and dedicatedto public use. J. Condition of Premises. The Premises, including the Personal Property, is in good condition and repair and well-maintained, ordinary wearand tear excepted, fully equipped and operational, free from structural defects, safe and properly lighted. 9Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. K. Environmental. Except as disclosed in the Questionnaire: (1) Neither the Premises nor any of the Borrower Parties are in violation of, or subject to, any pending or, to Borrower's actualknowledge, threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any Environmental Laws, andthis representation and warranty would continue to be true and correct following disclosure to the applicable Governmental Authorities of all relevantfacts, conditions and circumstances, if any, pertaining to the Premises; (2) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixturesand equipment forming a part of the Premises by reason of any Environmental Laws have been obtained; (3) No Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred,disposed of or otherwise Released in, on, under, from or about the Premises, except in Permitted Amounts; (4) The Premises does not contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Premises,if any, are in full compliance with all Environmental Laws; (5) There is no threat of any Release migrating to the Premises in excess of Permitted Amounts; (6) There is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection withthe Premises; (7) None of the Borrower Parties has received any written or oral notice or other communication from any person or entity (includingbut not limited to a Governmental Authority) relating to Hazardous Materials or USTs or Remediation thereof in excess of Permitted Amounts, ofpossible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or anyactual or potential administrative or judicial proceedings in connection with any of the foregoing; (8) All information known to any of the Borrower Parties or contained in the files of any of the Borrower Parties relating to anyEnvironmental Condition or Releases of Hazardous Materials in, on, under or from the Premises, other than in Permitted Amounts, has beenprovided to Lender, including, without limitation, information relating to all prior Remediation; (9) The Premises has been kept free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the“Environmental Liens”); and none of the Borrower Parties has allowed any tenant or other user of the Premises to do any act that materially increasedthe dangers to human health or the environment, posed an unreasonable risk of harm to any person or entity (whether on or off the Premises),impaired the value of the Premises in any material respect, is contrary to any requirement of any insurer, constituted a public or private nuisance,constituted waste, or violated any covenant, condition, agreement or easement applicable to the Premises; (10) The information and disclosures in the Questionnaire are true, correct and complete in all material respects, and the person orpersons executing the Questionnaire were duly authorized to do so. Lender has charged Borrower a fee for the Environmental Policy. Borrower acknowledges that the Environmental Policy is for the sole protection ofLender and will not protect Borrower or provide Borrower with any coverage thereunder. Borrower acknowledges and agrees that Environmental Insurer mayrely on the environmental representations and warranties set forth in this subsection K, that Environmental Insurer is an intended third-party beneficiary ofsuch representations and warranties and that Environmental Insurer shall have all rights and remedies available at law or in equity as a result of a breach ofsuch representations and warranties, including, to the extent applicable, the right of subrogation. 10Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. L. Title to Premises; First Priority Lien. Fee title to the real property comprising the Premises is vested in Borrower, free and clear of allliens, encumbrances, charges and security interests of any nature whatsoever, except the Permitted Exceptions. Borrower is the owner of all Personal Property,free and clear of all liens, encumbrances, charges and security interests of any nature whatsoever, and no Affiliate of Borrower owns any of the PersonalProperty. Upon Closing, Lender shall have a first priority lien upon and security interest in the Premises pursuant to the Mortgage and the UCC-1 FinancingStatements. M. No Mechanics' Liens. There are no delinquent accounts payable or mechanics' liens in favor of any materialman, laborer, or any otherperson or entity in connection with labor or materials furnished to or performed on any portion of the Premises; and no work has been performed or is inprogress nor have materials been supplied to the Premises or agreements entered into for work to be performed or materials to be supplied to the Premises priorto the date hereof, which will be delinquent on or before the Closing Date. N. Lease. Borrower has delivered to Lender a true, correct and complete copy of the Lease. The Lease is the only lease with respect to thePremises, and is in full force and effect, and constitutes the legal, valid and binding obligation of the parties thereto, enforceable against such parties inaccordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, liquidation, reorganization and other lawsaffecting the rights of creditors generally and general principles of equity. Borrower has not assigned, transferred, mortgaged, hypothecated or otherwiseencumbered the Lease or any rights thereunder or any interest therein, and Borrower has not received any notice that the Lessee has made any assignment,pledge or hypothecation of all or any part of its rights or interest in the Lease. Borrower has not received any notice of default from the Lessee which has notbeen cured or given any notice of default to the Lessee which has not been cured. No event has occurred and no condition exists which, with the giving ofnotice or the lapse of time or both, would constitute a default by the Lessee or Borrower under the Lease. O. Money Laundering. (1) Borrower has taken all reasonable measures, in accordance with all applicable Anti-Money Laundering Laws,with respect to each holder of a direct or indirect interest in the Borrower Parties, to assure the funds invested by such holders in the Borrower Parties arederived from legal sources. (2) To Borrower's knowledge after making due inquiry, neither any of the Borrower Parties nor any holder of a direct or indirect interest in theBorrower Parties (a) is under investigation by any Governmental Authority for, or has been charged with or convicted of, any violation of any Anti-MoneyLaundering Laws, or drug trafficking, terrorist-related activities or other money laundering predicated crimes or a violation of the BSA, (b) has been assessedcivil penalties under these or related laws, or (c) has had any of its funds seized or forfeited in an action under these or related laws. (3) Borrower has taken reasonable steps, consistent with industry practice for comparable organizations and in any event as required by law, toensure that the Borrower Parties are and shall be in compliance with all Anti- Money Laundering Laws and laws, regulations, and government guidance for theprevention of terrorism, terrorist financing and drug trafficking. 6. Covenants. Borrower covenants to Lender (and Environmental Insurer solely with respect to Section 6.F) from and after the Closing Dateand until all of the Obligations are satisfied in full, as follows: A. Payment of the Note. Borrower shall punctually pay, or cause to be paid, the principal, interest and all other sums to become due inrespect of the Note and the other Loan Documents in accordance with the Note and the other Loan Documents. Borrower shall authorize Lender to establisharrangements whereby all scheduled payments made in respect of the Obligations are transferred by Automated Clearing House Debit initiated by Lenderdirectly from an account at a U.S. bank in the name of Borrower to such account as Lender may designate or as Lender may otherwise designate. 11Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. B. Title. Borrower shall maintain good and marketable fee simple title to the real property comprising the Premises and title to the PersonalProperty and the remainder of the Premises, free and clear of all liens, encumbrances, charges and other exceptions to title, except the Permitted Exceptions.Lender shall have a valid first lien upon and security interest in the Premises, including the Personal Property, pursuant to the Mortgage and the UCC-1Financing Statements. C. Organization and Status of Borrower; Preservation of Existence. Each of the Borrower Parties (other than individuals), as applicable,shall be validly existing and in good standing under the laws of its state of incorporation or formation. Borrower shall be qualified as a foreign corporation,partnership or limited liability company to do business in the state where the Premises is located, and each of the Borrower Parties shall be qualified as aforeign corporation, partnership or limited liability company in any other jurisdiction where the failure to be qualified would reasonably be expected to result ina Material Adverse Effect. Borrower shall preserve its current form of organization and shall not change its legal name, its state of formation, nor, in onetransaction or a series of related transactions, merge with or into, or consolidate with, any other entity without providing, in each case, Lender with 30 days'prior written notice and obtaining Lender's prior written consent (to the extent such consent is required under Section 7 of this Agreement). In addition,Borrower shall require, and shall take reasonable measures to comply with the requirement, that no individual or entity owning directly or indirectly anyinterest in any of the Borrower Parties is an individual or entity whose property or interests are subject to being blocked under any of the Terrorism Laws or isotherwise in violation of any of the Terrorism Laws. D. Licenses and Permits. All required licenses and permits, both governmental and private, to use and operate the Premises as a PermittedConcept shall be maintained in full force and effect. E. Compliance With Laws Generally. The use and occupation of the Premises, and the condition thereof, including, without limitation, anyRestoration, shall comply with all Applicable Regulations now or hereafter in effect. In addition, the Borrower Parties shall comply with all ApplicableRegulations now or hereafter in effect, including, without limitation, the Terrorism Laws and Anti-Money Laundering Laws. Without limiting the generality ofthe other provisions of this Section, Borrower shall comply with the ADA, and all regulations promulgated thereunder, as it affects the Premises. F. Compliance With Environmental Laws. (1) The Premises, the Borrower Parties and any other operator or user of the Premises shall not bein violation of or subject to any investigation or inquiry by any Governmental Authority or subject to any Remediation obligations under any EnvironmentalLaws. (2) All uses and operations on or of the Premises, whether by Borrower or any other person or entity, shall be in compliance with allEnvironmental Laws and permits issued pursuant thereto. (3) There shall be no Releases or Hazardous Materials in, on, under or from the Premises, except in Permitted Amounts. (4) Borrower shall keep the Premises, or cause the Premises to be kept, free and clear of all Environmental Liens. (5) Borrower shall not do or allow any tenant or other user of the Premises to do any act that (a) materially increases the dangers to humanhealth or the environment, (b) poses an unreasonable risk of harm to any person or entity (whether on or off the Premises), (c) impairs or is reasonably likelyto impair the value of the Premises, (d) is contrary to any requirement of any insurer, (e) constitutes a public or private nuisance or constitutes waste, or (f)violates any covenant, condition, agreement or easement applicable to the Premises. (6) Borrower shall immediately notify Lender in writing upon Borrower obtaining actual knowledge of: 12Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (a) any presence of Releases or Threatened Releases in, on, under, from or migrating towards the Premises, in excess of PermittedAmounts, including, without limitation, the presence on or under the Premises of any Hazardous Materials, apparent or real, in excess of PermittedAmounts; (b) any non-compliance with any Environmental Laws related in any way to the Premises; (c) any Environmental Lien or any act or omission which could reasonably be expected to result in the imposition of anEnvironmental Lien; (d) any required or proposed Remediation of environmental conditions relating to the Premises, including, without limitation, anyand all enforcement, clean-up, remedial, removal or other governmental or regulatory actions threatened, instituted or completed pursuant to any ofthe Environmental Laws affecting the Premises; (e) any written or oral notice or other communication of which any of the Borrower Parties becomes aware from any sourcewhatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials, USTs or Remediation thereof,possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or anyactual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement; or (f) any investigation or inquiry initiated by any Governmental Authority relating to the Environmental Condition of the Premises. (7) If required by any Environmental Law or upon any reasonable suspicion by Borrower or Lender of a Release, a Threatened Release or aviolation of any Environmental Law, Borrower shall, at its sole cost and expense: (a) perform any environmental site assessment or other investigation of environmental conditions in connection with the Premises asmay be reasonably requested by Lender (including but not limited to sampling, testing and analysis of soil, water, air, building materials and othermaterials and substances whether solid, liquid or gas), and share with Lender and Environmental Insurer the reports and other results thereof, andLender, Environmental Insurer and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; and (b) have the Premises inspected as may be required by any Environmental Laws for seepage, spillage and other environmentalconcerns. (8) Borrower shall, at its sole cost and expense, and without limiting the rights of Lender under any other provision of this Agreement, complywith all reasonable written requests of Lender to: (a) reasonably effectuate Remediation of any condition (including but not limited to a Release) in, on, under or from the Premises; (b) comply with any Environmental Law; (c) comply with any directive from any Governmental Authority; and (d) take any other reasonable action necessary or appropriate for protection of human health or the environment. 13Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (9) Lender, Environmental Insurer and any other person or entity designated by Lender, including but not limited to any receiver, anyrepresentative of a Governmental Authority, and any environmental consultant, shall have the right, but not the obligation, to enter upon the Premises duringnormal business hours or at any time in the event of an emergency (including without limitation in connection with any Securitization, Participation orTransfer contemplated by this Agreement or in connection with the exercise of any remedies set forth in the Mortgage or the other Loan Documents) to assessany and all aspects of the environmental condition of the Premises and its use, including but not limited to conducting any environmental assessment or audit(the scope of which shall be determined in Lender's sole and absolute discretion) and taking samples of soil, groundwater or other water, air, or buildingmaterials, and conducting other invasive testing. Borrower shall cooperate with and provide access to Lender, Environmental Insurer and any such person orentity designated by Lender. Any such assessment and investigation shall be at Borrower's sole cost and expense if, at the time Lender undertakes suchassessment or investigation, Lender has a reasonable basis for believing that a Release has occurred at the Premises in excess of Permitted Amounts or if anEvent of Default has occurred and is continuing. Otherwise, any such assessment and investigation shall be at Lender's sole cost and expense. G. Financial Statements. Within 45 days after the end of each fiscal quarter and within 120 days after the end of each fiscal year ofBorrower, Borrower shall deliver to Lender (a) complete financial statements of the Borrower Parties including a balance sheet, profit and loss statement,statement of cash flows and all other related schedules for the fiscal period then ended; and (b) such other financial information as Lender may reasonablyrequest in order to establish compliance with the financial covenants in the Loan Documents. All such financial statements shall be prepared in accordancewith GAAP from period to period, and shall be certified to be accurate and complete by Borrower (or the Treasurer or other appropriate officer of Borrower).The financial statements delivered to Lender need not be audited, but Borrower shall deliver to Lender copies of any audited financial statements of Borrowerwhich may be prepared, as soon as they are available. Borrower shall also cause to be delivered to Lender copies of any financial statements required to bedelivered to Borrower by any tenants of the Premises. H. Lost Note. Borrower shall, if the Note is mutilated, destroyed, lost or stolen (a “Lost Note”), promptly deliver to Lender, upon receipt fromLender of an affidavit and indemnity in a form reasonably acceptable to Lender and Borrower stipulating that the Note has been mutilated, destroyed, lost orstolen, in substitution therefor, a new promissory note containing the same terms and conditions as such Lost Note with a notation thereon of the unpaidprincipal and accrued and unpaid interest. Borrower shall provide fifteen (15) days' prior notice to Lender before making any payments to third parties inconnection with a Lost Note. I. Inspections. Borrower shall, during normal business hours (or at any time in the event of an emergency), (1) provide Lender and Lender'sofficers, employees, agents, advisors, attorneys, accountants, architects, and engineers with access to the Premises, all drawings, plans, and specificationsfor the Premises in possession of the Borrower Parties, all engineering reports relating to the Premises in the possession of the Borrower Parties, the files,correspondence and documents relating to the Premises, and the financial books and records, including lists of delinquencies, relating to the ownership,operation, and maintenance of the Premises (including, without limitation, any of the foregoing information stored in any computer files), (2) allow suchpersons to make such inspections, tests, copies, and verifications as Lender considers necessary, and (3) if Borrower is in breach of the Fixed ChargeCoverage Ratio requirement set forth in the following subsection J, pay expenses reasonably incurred by Lender from time to time in conducting suchinspections, tests, copies and verifications upon demand (such amounts to bear interest at the Default Rate if not paid upon demand until paid). J. Fixed Charge Coverage Ratio. Commencing on January 1, 2003, Borrower shall maintain an aggregate Fixed Charge Coverage Ratio at allof the Related Premises of at least 1.25:1, determined as of the last day of each fiscal year of Borrower. For purposes of this Section, the term “Fixed ChargeCoverage Ratio” shall mean with respect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such periodof time, each as determined in accordance with GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating LeaseExpense, less a corporate overhead allocation in an amount equal to 5% of Gross Sales (or, with respect to the Premises, the Rental), to (b) the sum of theLender Payments, Operating Lease Expense and the Equipment Payment Amount. For purposes of this Section, the following terms shall be defined as set forth below: 14Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Capital Lease” shall mean any lease of any property (whether real, personal or mixed) with respect to one or more of the Related Premiseswhich lease would, in conformity with GAAP, be required to be accounted for on a balance sheet as a capital lease. The term “Capital Lease” shallnot include any operating lease. “Debt” shall mean as directly related to all of the Related Premises and the period of determination (i) indebtedness for borrowed money,(ii) obligations evidenced by bonds, indentures, notes or similar instruments, (iii) obligations to pay the deferred purchase price of property orservices, (iv) obligations under leases which should be, in accordance with GAAP, accounted for as Capital Leases, and (v) obligations under director indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise to assure a creditoragainst loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. “Depreciation and Amortization” shall mean with respect to all of the Related Premises the depreciation and amortization accruing duringany period of determination with respect to Borrower as determined in accordance with GAAP. “Equipment Payment Amount” shall mean for any period of determination the sum of all amounts payable during such period ofdetermination under all (i) leases for equipment located at one or more of the Related Premises and (ii) all loans secured by equipment located at one ormore of the Related Premises. “Gross Sales” shall mean the sales or other income arising from all business conducted at all of the Related Premises during the period ofdetermination, less sales tax and any amounts received from not-for-profit sales of all non-food items approved for use in connection withpromotional campaigns, if any, pursuant to the applicable franchise agreements. “Interest Expense” shall mean for any period of determination, the sum of all interest accrued or which should be accrued in respect of allDebt allocable to one or more of the Related Premises and all business operations thereon during such period (including interest attributable to CapitalLeases), as determined in accordance with GAAP. “Lender Payments” shall mean with respect to the period of determination, the sum of all amounts payable under the notes in favor ofLender with respect to the Related Premises. “Net Income” shall mean with respect to the period of determination, the aggregate net income or net loss allocable to all businessconducted at all of the Related Premises. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and lossesallocable to the period of determination, (ii) deductions shall be made for Depreciation and Amortization, Interest Expense and Operating LeaseExpense allocable to the period of determination, and (iii) no deductions shall be made for (x) income taxes or charges equivalent to income taxesallocable to the period of determination, as determined in accordance with GAAP, or (y) corporate overhead expense allocable to the period ofdetermination. “Operating Lease Expense” shall mean the sum of all payments and expenses incurred under any operating leases with respect to one ormore of the Related Premises and the business operations thereon during the period of determination, as determined in accordance with GAAP. “Rental” means the sum of all rental payments under the Lease. K. Affiliate Transactions. Unless otherwise approved by Lender, all transactions between Borrower and any of its Affiliates shall be on termssubstantially as advantageous to Borrower as those which could be obtained by Borrower in a comparable arm's length transaction with a non-Affiliate ofBorrower. 15Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. L. Compliance Certificates. Within 60 days after the end of each fiscal year of Borrower, Borrower shall deliver a compliance certificate toLender in a form to be provided by Lender in order to establish that Borrower is in compliance in all material respects with all of its obligations, duties andcovenants under the Loan Documents. M. Corporate Fixed Charge Coverage Ratio. Borrower shall maintain a Corporate Fixed Charge Coverage Ratio of at least 1.25:1,determined as of the last day of each fiscal year of Borrower. For purposes of this Section, the term “Corporate Fixed Charge Coverage Ratio” shall mean withrespect to the twelve month period of time immediately preceding the date of determination, the ratio calculated for such period of time, each as determined inaccordance with GAAP, of (a) the sum of Net Income, Depreciation and Amortization, Interest Expense and Operating Lease Expense, minus income taxes orcharges equivalent to income taxes allocable to the period of determination, to (b) the sum of Operating Lease Expense, scheduled principal payments of longterm Debt, scheduled maturities of all Capital Leases and Interest Expense (excluding non-cash interest expense and amortization of non-cash financingexpenses). For purposes of this Section, the following terms shall be defined as set forth below: “Capital Lease” shall mean all leases of any property, whether real, personal or mixed, by Borrower or any of the other Borrower Parties,as applicable, which lease would, in conformity with GAAP, be required to be accounted for as a capital lease on the balance sheet of Borrower. Theterm “Capital Lease” shall not include any operating lease. “Debt” shall mean with respect to Borrower and the other Borrower Parties, collectively, and for the period of determination (i)indebtedness for borrowed money, (ii) obligations evidenced by bonds, indentures, notes or similar instruments, (iii) obligations to pay the deferredpurchase price of property or services, (iv) obligations under leases which should be, in accordance with GAAP, recorded as Capital Leases, and (v)obligations under direct or indirect guarantees in respect of, and obligations (contingent or otherwise) to purchase or otherwise acquire, or otherwise toassure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to in clauses (i) through (iv) above. “Depreciation and Amortization” shall mean the depreciation and amortization accruing during any period of determination with respectto Borrower and the other Borrower Parties, collectively, as determined in accordance with GAAP. “Interest Expense” shall mean for any period of determination, the sum of all interest accrued or which should be accrued in respect of allDebt of Borrower and the other Borrower Parties, collectively, as determined in accordance with GAAP. “Net Income” shall mean with respect to the period of determination, the net income or net loss of Borrower and the other Borrower Parties,collectively. In determining the amount of Net Income, (i) adjustments shall be made for nonrecurring gains and losses or non-cash items allocable tothe period of determination, (ii) deductions shall be made for, among other things, Depreciation and Amortization, Interest Expense, Operating LeaseExpense and actual corporate overhead expense allocable to the period of determination, and (iii) no deductions shall be made for income taxes orcharges equivalent to income taxes allocable to the period of determination, as determined in accordance with GAAP. “Operating Lease Expense” shall mean the sum of all payments and expenses incurred by Borrower and the other Borrower Parties,collectively, under any operating leases during the period of determination, as determined in accordance with GAAP. 16Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. N. Terrorism Law Policies. Borrower shall adopt and maintain adequate policies, procedures and controls to ensure that the Borrower Partiesare in compliance with all Terrorism Laws ("Borrower Terrorism Laws Policies"), which Borrower Terrorism Laws Policies shall be satisfactory to Lender inits reasonable discretion. Borrower shall immediately notify Lender in writing if any individual or entity owning directly or indirectly any interest in any of theBorrower Parties or any director, officer, member, manager or partner of any such holders is an individual or entity whose property or interests are subject tobeing blocked under any of the Terrorism Laws or is otherwise in violation of any of the Terrorism Laws, or is under investigation by any GovernmentalAuthority for, or has been charged with or convicted of, drug trafficking, terrorist-related activities or any violation of Anti-Money Laundering Laws, has beenassessed civil penalties under these or related laws, or has had funds seized or forfeited in an action under these or related laws. Borrower further agrees tomake the Borrower Terrorism Laws Policies, together with the information collected thereby concerning the Borrower Parties or any individual or entity owningdirectly or indirectly any interest in any of the Borrower Parties, available to Lender upon request. 7. Prohibition on Change of Control and Pledge. Without limiting the terms and conditions of Section 3.09 of the Mortgage, Borroweragrees that, from and after the Closing Date and until all of the Obligations are satisfied in full, without the prior written consent of Lender: (1) no Change ofControl shall occur; and (2) no interest in any of the Borrower Parties shall be pledged, encumbered, hypothecated or assigned as collateral for any obligationof any of the Borrower Parties (each, a "Pledge"). In addition, no interest in any of the Borrower Parties, or in any individual or person owning directly orindirectly any interest in any of the Borrower Parties, shall be transferred, assigned or conveyed to any individual or person whose property or interests aresubject to being blocked under any of the Terrorism Laws and/or who is in violation of any of the Terrorism Laws, and any such transfer, assignment orconveyance shall not be effective until the transferee has provided written certification to Borrower and Lender that (A) the transferee or any person who ownsdirectly or indirectly any interest in transferee, is not an individual or entity whose property or interests are subject to being blocked under any of theTerrorism Laws or is otherwise in violation of the Terrorism Laws, and (B) the transferee has taken reasonable measures to assure that any individual orentity who owns directly or indirectly an interest in transferee, is not an individual or entity whose property or interests are subject to being blocked under anyof the Terrorism Laws or is otherwise in violation of the Terrorism Laws. Lender's consent to a Change of Control and/or Pledge shall be subject to thesatisfaction of such conditions as Lender shall determine in its sole discretion, including, without limitation, (i) the execution and delivery of suchmodifications to the terms of the Loan Documents as Lender shall request, (ii) the proposed Change of Control and/or Pledge having been approved by each ofthe rating agencies which have issued ratings in connection with any Securitization of the Loan as well as any other rating agency selected by Lender, and (iii)the proposed transferee having agreed to comply with all of the terms and conditions of the Loan Documents (including any modifications requested by Lenderpursuant to clause (i) above). In addition, any such consent shall be conditioned upon payment by Borrower to Lender of (x) a fee equal to one percent (1%) ofthe then outstanding principal balance of the Note and (y) all out-of-pocket costs and expenses incurred by Lender in connection with such consent, including,without limitation, reasonable attorneys' fees. Lender shall not be required to demonstrate any actual impairment of its security or any increased risk of defaulthereunder in order to declare the Obligations immediately due and payable upon a Change of Control or Pledge in violation of this Section. The provisions ofthis Section shall apply to every Change of Control or Pledge regardless of whether voluntary or not, or whether or not Lender has consented to any previousChange of Control or Pledge. 8. Transaction Characterization. A. It is the intent of the parties hereto that this Agreement and the other Loan Documents are a contract toextend a financial accommodation (as such term is used in the Code) for the benefit of Borrower. B. It is the intent of the parties hereto that the business relationship created by the Loan Documents is solely that of creditor and debtor and hasbeen entered into by both parties in reliance upon the economic and legal bargains contained in the Loan Documents. None of the agreements contained in theLoan Documents is intended, nor shall the same be deemed or construed, to create a partnership (either de jure or de facto) between Borrower and Lender, tomake them joint venturers, to make Borrower an agent, legal representative, partner, subsidiary or employee of Lender, nor to make Lender in any wayresponsible for the debts, obligations or losses of Borrower. 9. Default and Remedies. A. Each of the following shall be deemed an event of default by Borrower (each, an "Event of Default"): 17Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (1) If any representation or warranty of any of the Borrower Parties set forth in any of the Loan Documents is false in any material respect, or ifany of the Borrower Parties renders any statement or account which is false in any material respect. (2) If any principal, interest or other monetary sum due under the Note, the Mortgage or any other Loan Document is not paid within five daysafter the date when due; provided, however, notwithstanding the occurrence of such an Event of Default, Lender shall not be entitled to exercise its rights andremedies set forth below unless and until Lender shall have given Borrower notice thereof and a period of five days from the delivery of such notice shall haveelapsed without such Event of Default being cured. (3) If Borrower fails to observe or perform any of the other covenants (except with respect to a breach of the Fixed Charge Coverage Ratio, whichbreach is addressed in subitem (7) below), conditions, or obligations of this Agreement; provided, however, if any such failure does not involve the paymentof any monetary sum, is not willful or intentional, does not place any rights or interest in collateral of Lender in immediate jeopardy, and is within thereasonable power of Borrower to promptly cure after receipt of notice thereof, all as determined by Lender in its reasonable discretion, then such failure shallnot constitute an Event of Default hereunder, unless otherwise expressly provided herein, unless and until Lender shall have given Borrower notice thereof anda period of 30 days shall have elapsed, during which period Borrower may correct or cure such failure, upon failure of which an Event of Default shall bedeemed to have occurred hereunder without further notice or demand of any kind being required. If such failure cannot reasonably be cured within such 30-day period, as determined by Lender in its reasonable discretion, and Borrower is diligently pursuing a cure of such failure, then Borrower shall have areasonable period to cure such failure beyond such 30-day period, which shall not exceed 90 days after receiving notice of the failure from Lender. If Borrowershall fail to correct or cure such failure within such 90-day period, an Event of Default shall be deemed to have occurred hereunder without further notice ordemand of any kind being required. (4) If any of the Borrower Parties becomes insolvent within the meaning of the Code, files or notifies Lender that it intends to file a petition underthe Code, initiates a proceeding under any similar law or statute relating to bankruptcy, insolvency, reorganization, winding up or adjustment of debts(collectively, an "Action"), becomes the subject of either a petition under the Code or an Action, or is not generally paying its debts as the same become due. (5) If there is an "Event of Default" or a breach or default, after the passage of all applicable notice and cure or grace periods, under any otherLoan Document, the Lease or any of the Other Agreements. (6) If a final, nonappealable judgment is rendered by a court against any of the Borrower Parties which (i) has a material adverse effect on theoperation of the Premises as a Permitted Concept, or (ii) is in an amount greater than $100,000.00 and not covered by insurance, and, in either case, is notdischarged or provision made for such discharge within 60 days from the date of entry of such judgment. (7) If there is a breach of the Fixed Charge Coverage Ratio requirement and Lender shall have given Borrower notice thereof and Borrower shallhave failed within a period of 30 days from the delivery of such notice to (i) pay to Lender the FCCR Amount (without premium or penalty) with respect tosuch of the Premises (starting with the Related Premises with the lowest Fixed Charge Coverage Ratio and proceeding in ascending order to the Related Premiseswith the next lowest Fixed Charge Coverage Ratio) as is necessary to cure the breach of the Fixed Charge Coverage Ratio requirement and for which the thenFixed Charge Coverage Ratio (with the definitions in Section 6.J being deemed to be modified as applicable to provide for the calculation of the Fixed ChargeCoverage Ratio for each such Premises on an individual basis rather than on an aggregate basis with respect to the Related Premises) is below 1.25:1 (each, a"Subject Premises"), (ii) prepay the Note or Notes corresponding to the Subject Premises in whole but not in part (without premium or penalty) or (iii) notifyLender of Borrower's election to substitute a Substitute Premises for each Subject Premises in accordance with the terms of Section 11 (the failure of Borrowerto complete such substitution within 60 days after Lender shall have given the notice discussed above shall be deemed to be an Event of Default withoutfurther notice or demand of any kind being required). For purposes of the preceding sentence, "FCCR Amount" means that sum of money which, whensubtracted from the outstanding principal amount of the Note corresponding to a Subject Premises, and assuming the resulting principal balance isreamortized in equal monthly payments over the remaining term of such Note at the rate of interest set forth therein, will result in an adjusted aggregate FixedCharge Coverage Ratio for all of the Premises of at least 1.25:1 based on the prior year's operations. Promptly after Borrower's payment of the FCCR Amount,Borrower and Lender shall execute an amendment to each such Note in form and substance reasonably acceptable to Lender reducing the principal amountpayable to Lender under such Note and reamortizing the principal amount of such Note in equal monthly payments over the then remaining term of such Noteat the rate of interest set forth therein. Notwithstanding the foregoing, in the event of a breach of the Fixed Charge Coverage Ratio that would not have been abreach had the Premises not have been included in the calculation of such Fixed Charge Coverage Ratio, it shall not be an Event of Default so long the FixedCharge Coverage Ratio (with the definitions in Section 6.J being deemed to be modified as applicable to provide for the calculation of the Fixed ChargeCoverage Ratio for the Premises on an individual basis rather than on an aggregate basis with the Related Premises) for the Premises be greater than 1.0:1. 18Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. B. Upon the occurrence and during the continuance of an Event of Default, subject to the limitations set forth in subsection A, Lender maydeclare all or any part of the obligations of Borrower under the Note, this Agreement and any other Loan Document to be due and payable, and the same shallthereupon become due and payable without any presentment, demand, protest or notice of any kind except as otherwise expressly provided herein, andBorrower hereby waives notice of intent to accelerate the obligations secured by the Mortgage and notice of acceleration. Thereafter, Lender may exercise, at itsoption, concurrently, successively or in any combination, all remedies available at law or in equity, including without limitation any one or more of theremedies available under the Note, the Mortgage or any other Loan Document. Neither the acceptance of this Agreement nor its enforcement shall prejudice or inany manner affect Lender's right to realize upon or enforce any other security now or hereafter held by Lender, it being agreed that Lender shall be entitled toenforce this Agreement and any other security now or hereafter held by Lender in such order and manner as it may in its absolute discretion determine. Noremedy herein conferred upon or reserved to Lender is intended to be exclusive of any other remedy given hereunder or now or hereafter existing at law or inequity or by statute. Every power or remedy given by any of the Loan Documents to Lender, or to which Lender may be otherwise entitled, may be exercised,concurrently or independently, from time to time and as often as may be deemed expedient by Lender. 10. Indemnity; Release. A. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless each of theIndemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings,obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid insettlement and damages of whatever kind or nature (including, without limitation, attorneys' fees, court costs and other costs of defense) (collectively, "Losses)(excluding Losses suffered by an Indemnified Party directly arising out of such Indemnified Party's gross negligence or willful misconduct; provided,however, that the term "gross negligence" shall not include gross negligence imputed as a matter of law to any of the Indemnified Parties solely by reason ofBorrower's interest in the Premises or Borrower's failure to act in respect of matters which are or were the obligation of Borrower under the Loan Documents),and costs of Remediation (whether or not performed voluntarily), engineers' fees, environmental consultants' fees, and costs of investigation (including but notlimited to sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid or gas) imposedupon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one or more of thefollowing: (1) any presence of any Hazardous Materials or USTs in, on, above, or under the Premises; (2) any past, present or Threatened Release in, on, above, under or from the Premises; (3) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in connection with anyactual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production, manufacturing, processing,refining, control, management, abatement, removal, handling, transfer or transportation to or from the Premises of any Hazardous Materials or USTs at anytime located in, under, on or above the Premises; 19Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (4) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in connection with anyactual or proposed Remediation of any Hazardous Materials or USTs at any time located in, under, on or above the Premises, whether or not such Remediationis voluntary or pursuant to court or administrative order, including but not limited to any removal, remedial or corrective action; (5) any past, present or threatened non-compliance or violations of any Environmental Laws (or permits issued pursuant to any EnvironmentalLaw) in connection with the Premises or operations thereon, including but not limited to any failure by Borrower, any person or entity affiliated with Borroweror any tenant or other user of the Premises to comply with any order of any Governmental Authority in connection with any Environmental Laws; (6) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumbering the Premises; (7) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement; (8) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Premises, including butnot limited to costs to investigate and assess such injury, destruction or loss; (9) any acts of Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises in arranging for disposal ortreatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials or USTs owned or possessed by Borrower, anyperson or entity affiliated with Borrower or any tenant or other user, at any facility or incineration vessel owned or operated by another person or entity andcontaining such or similar Hazardous Materials or USTs; (10) any acts of Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises, in accepting any HazardousMaterials or USTs for transport to disposal or treatment facilities, incineration vessels or sites selected by Borrower, any person or entity affiliated withBorrower or any tenant or other user of the Premises, from which there is a Release, or a Threatened Release of any Hazardous Materials which causes theincurrence of costs for Remediation; (11) any personal injury, wrongful death, or property damage arising under any statutory or common law or tort law theory, including but notlimited to damages assessed for the maintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near thePremises; or (12) any misrepresentation or inaccuracy in any representation or warranty or material breach or failure to perform any covenants or otherobligations pursuant to this Agreement. B. Borrower fully and completely releases, waives and covenants not to assert any claims, liabilities, actions, defenses, challenges, contests orother opposition against Lender and Environmental Insurer, however characterized, known or unknown, foreseen or unforeseen, now existing or arising in thefuture, relating to this Agreement and any Hazardous Materials, USTs, Releases and/or Remediation on, at or affecting the Premises. 11. Substitution. Borrower shall have the right to obtain a release of all liens granted in favor of Lender with respect to the Premises bysubstituting a Substitute Premises for the Premises if permitted by the terms of Section 9.A(7), subject to fulfillment of the following conditions: (1) Borrower shall provide Lender with notice of its intention to substitute a Substitute Premises within the applicable 30 day periodcontemplated by Section 9.A(7) and the closing of the substitution shall take place within the applicable 60 day period contemplated by such subsection. 20Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (2) Borrower must provide for the substitution of a Substitute Premises, and the proposed Substitute Premises must: (a) be a Permitted Concept, in good condition and repair, ordinary wear and tear excepted; (b) have for the twelve-month period preceding the date of the closing of such substitution a Fixed Charge Coverage Ratio at least equalto the Fixed Charge Coverage Ratio for the Premises being replaced and the substitution must cure the breach of the Fixed Charge Coverage Ratiorequirement; (c) be owned in fee simple by Borrower; (d) Borrower's right, title and interest in and to the proposed Substitute Premises shall be free and clear of all liens, restrictions,easements and encumbrances, except such matters as are acceptable to Lender (the "Substitute Premises Permitted Exceptions"); (e) have a fair market value no less than the greater of the then fair market value of the Premises or the fair market value of thePremises as of the Closing, all as reasonably determined by Lender's in-house inspectors and underwriters. (3) Lender shall have inspected and approved the Substitute Premises utilizing such site inspection and underwriting approval criteria thatwould be used by a prudent institutional mortgage loan lender. Borrower shall have paid all costs and expenses resulting from such proposed substitution,including, without limitation, the cost of title insurance premiums and all endorsements required by Lender, survey charges, UCC and litigation searchcharges, the attorneys' fees of Borrower, reasonable attorneys' fees and expenses of Lender, the cost of the environmental due diligence undertaken pursuant tosubsection (6) below, including, without limitation, the cost of environmental insurance, Lender's site inspection costs and fees, stamp taxes, mortgage taxes,transfer fees, escrow, filing and recording fees and UCC filing and recording fees (including preparation, filing and recording fees for UCC continuationstatements). (4) Lender shall have received a preliminary title report and irrevocable commitment to insure title in the amount of the then outstandingprincipal balance of the Loan by means of a mortgagee's ALTA extended coverage policy of title insurance (or its equivalent, in the event such form is notissued in the jurisdiction where the proposed Substitute Premises is located) for the proposed Substitute Premises issued by Title Company showing Borrowervested with good and marketable title in the real property comprising the Substitute Premises and committing to insure Lender's first priority lien upon andsecurity interest in the proposed Substitute Premises, subject only to the Substitute Premises Permitted Exceptions and containing endorsements substantiallycomparable to those required by Lender at the Closing. (5) Lender shall have received a current ALTA survey of the proposed Substitute Premises or its equivalent, the form of which shall becomparable to those received by Lender at the Closing and sufficient to cause the standard survey exceptions set forth in the title policy referred to in thepreceding subsection to be deleted, and disclosing no matters other than the Substitute Premises Permitted Exceptions. (6) Lender shall have completed such environmental due diligence of the proposed Substitute Premises as it deems necessary or advisable in itssole discretion, including, without limitation, receiving an environmental insurance policy with respect to the proposed Substitute Premises in a form andsubstance and issued by such environmental insurance company as is acceptable to Lender, and Lender shall have approved the environmental condition ofthe Substitute Premises based on such environmental due diligence as Lender deems necessary or advisable in its sole discretion; provided, however, if suchproposed substitution shall occur from and after such time as the Loan is included in a Securitization, this subitem (6) shall be modified to read as follows:Lender shall have completed such environmental due diligence of the proposed Substitute Premises as a prudent institutional mortgage loan lender deemsnecessary or advisable, including, without limitation, receiving an environmental insurance policy with respect to the proposed Substitute Premises in a formand substance and issued by such environmental insurance company as is acceptable to a prudent institutional mortgage loan lender, and Lender shall haveapproved the environmental condition of the Substitute Premises based on such environmental due diligence as a prudent institutional mortgage loan lenderwould deem necessary or advisable. 21Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (7) Borrower shall deliver, or cause to be delivered, such legal opinions as Lender may reasonably require with respect to the proposedsubstitution, all in a form and substance which would be satisfactory to a prudent institutional mortgage loan lender and its counsel. If the Loan is part of aSecuritization, such opinions shall include, without limitation, an opinion of counsel to the rating agencies which have issued ratings in connection with suchSecuritization that the substitution does not constitute a "significant modification" of such Loan under Section 1001 of the Internal Revenue Code or otherwisecause a tax to be imposed on a "prohibited transaction" by any REMIC Trust. (8) no Event of Default shall have occurred and be continuing under any of the Loan Documents. (9) The Borrower Parties and the Lessee Parties shall have executed such documents as are comparable to the security documents executed anddelivered at Closing, as applicable (but with such revisions as may be reasonably required by Lender to address matters unique to the Substitute Premises) oramendments to such documents, including, without limitation, a Mortgage, Lease and Memorandum of Lease and UCC-1 Financing Statements (the"Substitute Documents"), to provide Lender with a first priority lien on the proposed Substitute Premises, subject only to the Substitute Premises PermittedExceptions, and all other rights, remedies and benefits with respect to the proposed Substitute Premises which Lender holds in the Premises, all of whichdocuments shall be in a form and substance which would be satisfactory to a prudent institutional mortgage loan lender. (10) the representations and warranties set forth in the Substitute Documents and Section 6 of this Agreement applicable to the proposedSubstitute Premises shall be true and correct in all material respects as of the date of substitution, and Borrower shall have delivered to Lender an officer'scertificate to that effect. (11) Borrower shall have delivered to Lender certificates of insurance and insurance policies showing that all insurance required by theSubstitute Documents is in full force and effect. Upon satisfaction of the foregoing conditions with respect to the release of the Premises: (a) the proposed Substitute Premises shall be deemed substituted forthe Premises; (b) the Loan Amount for the Substitute Premises shall be the same as for the Premises; (c) the Substitute Premises shall be referred to herein asthe "Premises" and shall secure the same Obligations as were secured by the replaced Premises; (d) the Substitute Documents shall be dated as of the date ofthe substitution; and (e) Lender will release, or cause to be released, the lien of the Mortgage, UCC-1 Financing Statements and any other Loan Documentsencumbering the replaced Premises. 12. Miscellaneous Provisions. A. Notices. All notices, consents, approvals or other instruments required or permitted to be given by either party pursuant to this Agreement orany of the other Loan Documents shall be in writing and given by (i) hand delivery, (ii) facsimile, (iii) express overnight delivery service or (iv) certified orregistered mail, return receipt requested, and shall be deemed to have been delivered upon (a) receipt, if hand delivered, (b) transmission, if delivered byfacsimile, (c) the next Business Day, if delivered by express overnight delivery service, or (d) the third Business Day following the day of deposit of suchnotice with the United States Postal Service, if sent by certified or registered mail, return receipt requested. Notices shall be provided to the parties andaddresses (or facsimile numbers, as applicable) specified below: 22Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. If to Borrower:Family Steak Houses of Florida, Inc. 2113 Florida Boulevard Neptune Beach, FL 32266 Attention: Edward B. Alexander Telephone: (904) 249-4197 Telecopy: (904) 249-1466 If to Lender:GE Capital Franchise Finance Corporation 17207 North Perimeter Drive Scottsdale, AZ 85255 Attention: General Counsel Telephone: (480) 585-4500 Telecopy: (480) 585-2226 B. Real Estate Commission. Lender and Borrower represent and warrant to each other that they have dealt with no real estate or mortgagebroker, agent, finder or other intermediary in connection with the transactions contemplated by this Agreement or the other Loan Documents. Lender andBorrower shall indemnify and hold each other harmless from and against any costs, claims or expenses, including attorneys' fees, arising out of the breach oftheir respective representations and warranties contained within this Section. C. Waiver and Amendment; Document Review. (1) No provisions of this Agreement or the other Loan Documents shall be deemed waived oramended except by a written instrument unambiguously setting forth the matter waived or amended and signed by the party against which enforcement of suchwaiver or amendment is sought. Waiver of any matter shall not be deemed a waiver of the same or any other matter on any future occasion. (2) In the event Borrower makes any request upon Lender requiring Lender or Lender's attorneys to review and/or prepare (or cause to bereviewed and/or prepared) any documents, plans, specifications or other submissions in connection with or arising out of this Agreement or any of the otherLoan Documents, then Borrower shall (x) reimburse Lender promptly upon Lender's demand for all out-of-pocket costs and expenses incurred by Lender inconnection with such review and/or preparation, including, without limitation, reasonable attorneys' fees, and (y) pay Lender a reasonable processing andreview fee. D. Captions. Captions are used throughout this Agreement and the other Loan Documents for convenience of reference only and shall not beconsidered in any manner in the construction or interpretation hereof. E. Lender's Liability. Notwithstanding anything to the contrary provided in this Agreement or the other Loan Documents, it is specificallyunderstood and agreed, such agreement being a primary consideration for the execution of this Agreement and the other Loan Documents by Lender, that (1)there shall be absolutely no personal liability on the part of any shareholder, director, officer or employee of Lender, with respect to any of the terms,covenants and conditions of this Agreement or the other Loan Documents, (2) Borrower waives all claims, demands and causes of action against Lender'sofficers, directors, employees and agents in the event of any breach by Lender of any of the terms, covenants and conditions of this Agreement or the otherLoan Documents to be performed by Lender and (3) Borrower shall look solely to the assets of Lender for the satisfaction of each and every remedy ofBorrower in the event of any breach by Lender of any of the terms, covenants and conditions of this Agreement or the other Loan Documents to be performedby Lender, such exculpation of liability to be absolute and without any exception whatsoever. F. Severability. The provisions of this Agreement and the other Loan Documents shall be deemed severable. If any part of this Agreement or theother Loan Documents shall be held invalid, illegal or unenforceable, the remainder shall remain in full force and effect, and such invalid, illegal orunenforceable provision shall be reformed by such court so as to give maximum legal effect to the intention of the parties as expressed therein. 23Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. G. Construction Generally. This Agreement and the other Loan Documents have been entered into by parties who are experienced insophisticated and complex matters similar to the transaction contemplated by this Agreement and the other Loan Documents and are entered into by bothparties in reliance upon the economic and legal bargains contained therein and shall be interpreted and construed in a fair and impartial manner without regardto such factors as the party which prepared the instrument, the relative bargaining powers of the parties or the domicile of any party. Borrower and Lenderwere each represented by legal counsel competent in advising them of their obligations and liabilities hereunder. H. Further Assurances. Borrower will, at its sole cost and expense, do, execute, acknowledge and deliver or cause to be done, executed,acknowledged and delivered all such further acts, documents, conveyances, notes, mortgages, deeds of trust, assignments, security agreements, financingstatements and assurances as Lender shall from time to time reasonably require or deem advisable to carry into effect the purposes of this Agreement and theother Loan Documents, to perfect any lien or security interest granted in any of the Loan Documents and for the better assuring and confirming of all ofLender's rights, powers and remedies under the Loan Documents. I. Attorneys' Fees. In the event of any judicial or other adversarial proceeding between the parties concerning this Agreement or the other LoanDocuments, the prevailing party shall be entitled to recover its attorneys' fees and other costs in addition to any other relief to which it may be entitled. J. Entire Agreement. This Agreement and the other Loan Documents, together with any other certificates, instruments or agreements to bedelivered in connection therewith, constitute the entire agreement between the parties with respect to the subject matter hereof, and there are no otherrepresentations, warranties or agreements, written or oral, between Borrower and Lender with respect to the subject matter of this Agreement and the other LoanDocuments. Notwithstanding anything in this Agreement and the other Loan Documents to the contrary, with respect to the Premises, upon the execution anddelivery of this Agreement by Borrower and Lender, any bid proposals or loan commitments with respect to the transactions contemplated by this Agreementshall be deemed null and void and of no further force and effect and the terms and conditions of this Agreement shall control notwithstanding that such termsand conditions may be inconsistent with or vary from those set forth in such bid proposals or loan commitments. K. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower acknowledges that this Agreement and the other Loan Documents weresubstantially negotiated in the State of Arizona, this Agreement and the other Loan Documents were executed by Lender in the State of Arizona and delivered byBorrower in the State of Arizona, all payments under the Note will be delivered in the State of Arizona and there are substantial contacts between the partiesand the transactions contemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Agreement or any of the otherLoan Documents, the parties hereto hereby expressly submit to the jurisdiction of all federal and state courts located in the State of Arizona and Borrowerconsents that it may be served with any process or paper by registered mail or by personal service within or without the State of Arizona in accordance withapplicable law. Furthermore, Borrower waives and agrees not to assert in any such action, suit or proceeding that it is not personally subject to the jurisdictionof such courts, that the action, suit or proceeding is brought in an inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intentof the parties hereto that all provisions of this Agreement and the Note shall be governed by and construed under the laws of the State of Arizona, withoutgiving effect to its principles of conflicts of law. To the extent that a court of competent jurisdiction finds Arizona law inapplicable with respect to anyprovisions of this Agreement or the Note, then, as to those provisions only, the laws of the state where the Premises is located shall be deemed to apply.Nothing in this Section shall limit or restrict the right of Lender to commence any proceeding in the federal or state courts located in the state in which thePremises is located to the extent Lender deems such proceeding necessary or advisable to exercise remedies available under this Agreement or the other LoanDocuments. L. Counterparts. This Agreement and the other Loan Documents may be executed in one or more counterparts, each of which shall be deemedan original. 24Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. M. Assignments by Lender; Binding Effect. Lender may assign in whole or in part its rights under this Agreement, including, withoutlimitation, in connection with any Transfer, Participation and/or Securitization. Upon any unconditional assignment of Lender's entire right and interesthereunder, Lender shall automatically be relieved, from and after the date of such assignment, of liability for the performance of any obligation of Lendercontained herein. This Agreement and the other Loan Documents shall be binding upon and inure to the benefit of Borrower and Lender and their respectivesuccessors and permitted assigns, including, without limitation, any United States trustee, any debtor in possession or any trustee appointed from a privatepanel. N. Survival. Except for the conditions of Closing set forth in Section 4, which shall be satisfied or waived as of the Closing Date, allrepresentations, warranties, agreements, obligations and indemnities of Borrower and Lender set forth in this Agreement and the other Loan Documents shallsurvive the Closing. O. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect Damages. BORROWER AND LENDER HEREBYKNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT TOANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIM BROUGHT BY EITHER OF THEPARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTIONWITH THIS AGREEMENT, ANY OF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATEDHERETO. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEEN NEGOTIATEDAND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY, VOLUNTARILYAND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECTDAMAGES FROM THE OTHER AND ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OF THEIRSUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM OR COUNTERCLAIMBROUGHT BY EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER'S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES ORANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANYOF THE OTHER LOAN DOCUMENTS OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BYBORROWER AND LENDER OF ANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECTDAMAGES HAS BEEN NEGOTIATED BY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. P. Transfers, Participations and Securitizations. (1) A material inducement to Lender's willingness to complete the transactions contemplatedby the Loan Documents is Borrower's agreement that Lender may, at any time, complete a Transfer, Participation or Securitization with respect to the Note,Mortgage and/or any of the other Loan Documents or any or all servicing rights with respect thereto. (2) Borrower agrees to cooperate in good faith with Lender in connection with any such Transfer, Participation and/or Securitization of theNote, Mortgage and/or any of the other Loan Documents, or any or all servicing rights with respect thereto, including, without limitation (i) providing suchdocuments, financial and other data, and other information and materials (the "Disclosures") which would typically be required with respect to the BorrowerParties or the Lessee Parties by a purchaser, transferee, assignee, servicer, participant, investor or rating agency involved with respect to such Transfer,Participation and/or Securitization, as applicable; provided, however, the Borrower Parties and the Lessee Parties shall not be required to make Disclosures ofany confidential information or any information which has not previously been made public unless required by applicable federal or state securities laws; and(ii) amending the terms of the transactions evidenced by the Loan Documents to the extent necessary so as to satisfy the requirements of purchasers,transferees, assignees, servicers, participants, investors or selected rating agencies involved in any such Transfer, Participation or Securitization, so long assuch amendments would not have a material adverse effect upon the Borrower Parties and the Lessee Parties or the transactions contemplated hereunder. Lendershall be responsible for preparing at its expense any documents evidencing the amendments referred to in the preceding subitem (ii). (3) Borrower consents to Lender providing the Disclosures, as well as any other information which Lender may now have or hereafter acquirewith respect to the Premises or the financial condition of the Borrower Parties to each purchaser, transferee, assignee, servicer, participant, investor or ratingagency involved with respect to each Transfer, Participation and/or Securitization, as applicable. Lender and Borrower (and their respective Affiliates) shalleach pay their own attorneys' fees and other out-of-pocket expenses incurred in connection with the performance of their respective obligations under thisSection. 25Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (4) Notwithstanding anything to the contrary contained in this Agreement or the other Loan Documents: (a) an Event of Default or a breach ordefault, after the passage of all applicable notice and cure or grace periods, under any Loan Document or Other Agreement which relates to a loan orsale/leaseback transaction which has not been the subject of a Securitization, Participation or Transfer shall not constitute an Event of Default or a breach ordefault, as applicable, under any Loan Document or Other Agreement which relates to a loan which has been the subject of a Securitization, Participation orTransfer; (b) an Event of Default or a breach or default, after the passage of all applicable notice and cure or grace periods, under any Loan Document orOther Agreement which relates to a loan which is included in any Loan Pool shall not constitute an Event of Default or a breach or default, as applicable,under any Loan Document or Other Agreement which relates to a loan which is included in any other Loan Pool; (c) the Loan Documents and OtherAgreements corresponding to the loans in any Loan Pool shall not secure the obligations of any of the Borrower Parties contained in any Loan Document orOther Agreement which does not correspond to a loan in such Loan Pool; and (d) the Loan Documents and Other Agreements which do not correspond to aloan in any Loan Pool shall not secure the obligations of any of the Borrower Parties contained in any Loan Document or Other Agreement which doescorrespond to a loan in such Loan Pool. Q. Estoppel Certificate. At any time, and from time to time, each party agrees, promptly and in no event later than fifteen (15) days after arequest from the other party, to execute, acknowledge and deliver to the other party a certificate in the form supplied by the other party, certifying: (a) to itsknowledge, whether there are then any existing defaults by it or the other party in the performance of their respective obligations under this Agreement or any ofthe other Loan Documents, and, if there are any such defaults, specifying the nature and extent thereof; (b) that no notice of default has been given or receivedby it under this Agreement or any of the other Loan Documents which has not been cured, except as to defaults specified in the certificate; (c) the capacity ofthe person executing such certificate, and that such person is duly authorized to execute the same on behalf of it; and (d) any other information reasonablyrequested by the other party in connection with this Agreement and the other Loan Documents. 26Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, Borrower and Lender have entered into this Agreement as of the date first above written. LENDER: GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation By/s/ Gregg Seibert Printed Name Gregg Seibert ItsSr. Vice President BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By/s/ Ed Alexander Printed NameEdward Alexander ItsExecutive Vice President U.S. Federal Tax Identification Number: 59-2597349 Organization Identification Number: Principal Place of Business: Neptune Beach, FL Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. STATE OF ARIZONA) ) SS. COUNTY OF MARICOPA) The foregoing instrument was acknowledged before me on October 8, 2002 by Gregg Seibert, Sr. Vice President of GE Capital Franchise FinanceCorporation, a Delaware corporation, on behalf of the corporation. /s/ Marcy Roberts Notary Public My Commission Expires: 11/16/14 STATE OF Florida) ) SS.COUNTY OF Duval) The foregoing instrument was acknowledged before me on Oct 1, 2002 by Edward Alexander, Exec. Vice President of Family Steak Houses ofFlorida, Inc., a Florida corporation, on behalf of the corporation. Cynthia D Newton Notary Public My Commission Expires: Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT A DESCRIPTION OF PREMISES A portion of the Castro Y Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida, being more particularly described as follows: Commence at the Southwest corner of Lot 15, Block 15, as shown on the plat of Prado Ferrer Plat No. 2 of Florida Beach, as recorded in Plat Book 11, page61 of the current public records of Duval County, Florida; thence North 89°29'50" East along the Northerly line of the 20 foot alley as shown on said platand its Easterly prolongation and the Southerly line of those lands described in Official Records Volume 1659, page 53, of the current public records of saidCounty, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16 as shown on said plat; thence North 00°30’10" West along the Easterly line ofsaid Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, County Road No. 10 (as per J.T.A. Right of Way Map Project No.72100-3178, dated 7/29/66 and as described and recorded in Official Records Volume 2668, page 781 of the current public records of said County; thencealong said Southerly right of way line, run the following three courses and distances: Course No. 1) North 89°29'50" East, 80.00 feet; Course No. 2) North85°l2'29" East, 240.67 feet; Course No. 3) North 89°29'50" East, 315.00 feet to the centerline of Castro Trail as shown on the Plat of Prado Ferrer Plat No.2 of Florida Beach, and the Point of Beginning; thence Southerly along said centerline, also being the Easterly boundary of said Prado Ferrer Plat No. 2 ofFlorida Beach, run the following two courses and distances: Course No. 1) South 00°30'10" East, 133.48 feet to the Point of Curvature of a curve to the left;Course No. 2) Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arc distance of 258.37 feet, said arcbeing subtended by a chord bearing and distance of South 04°37'26" East, 258.15 feet; thence North 80° 00'18" East, 127.11 feet; thence North 87°08'51"East, 100.00 feet; thence South 83°03'09" East, 24.42 feet to the Westerly line of those lands, described and recorded in Official Records Volume 4454, page62 of said current public records; thence Northerly along said Westerly line of last said lands and along the arc of a curve concave Easterly and having aradius of 1546.05 feet, an arc distance of 236.51 feet, said arc being subtended by a chord bearing and distance of North 04°53'07" West, 236.28 feet to thePoint of Tangency of said curve; thence North 00°30'10" West and continuing along the Westerly line of last mentioned lands, 133.48 feet to the aforementionedSoutherly right of way line of Atlantic Boulevard; thence South 89°29'50" West, along last said line, 250.00 feet to the Point of Beginning. Together with the rights and privileges set forth in Non-exclusive Mutually Reciprocal Roadway Easement for Ingress and Egress and Parking Easementrecorded in Official Records Volume 6220, page 1086, as amended in Official Records Volume 6269, page 1436, current public records of Duval County,Florida, more particularly described as follows: A portion of the Castro Y Ferrer Grant, Section 38, Township 2 South, Range 29 East, Duval County, Florida, being more particularly described as follows: Commence at the Southwest corner of Lot 15, Block 15, as shown on the plat of Prado Ferrer Plat No. 2, of Florida Beach, as recorded in Plat Book 11, page61, of the current public records of Duval County, Florida; thence North 89°29'50" East along the Northerly line of the 20 foot alley as shown on said platand its Easterly prolongation and the Southerly line of those lands described in Official Records Volume Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 1659, page 53, of the current public records of said County, a distance of 714.22 feet to the Southeast corner of Lot 24, Block 16, as shown on said Plat;thence North 00°30'10" West along the Easterly line of said Lot 24, a distance of 82.00 feet to the Southerly right of way line of Atlantic Boulevard, CountyRoad No. 10 (as per J.T.A. Right of Way Map Project No. 72100-3178, dated 7/29/66 and as described and recorded in Official Records Volume 2668, page781 of the current public records of said County): thence along said Southerly right of way line run the following three courses and distances: Course No. 1)North 89°29'50" East, 80.00 feet; Course No. 2) North 85°12'29" East, 240.67 feet; Course No. 3) North 89°29'50" East, 315.00 feet to the centerline ofCastro Trail as shown on the Plat of Prado Ferrer Plat No. 2 of Florida Beach; thence Southerly along said centerline, also being the Easterly boundary of saidPrado Ferrer Plat No. 2 of Florida Beach, run the following two courses and distances: Course No. 1) South 00°30'10" East, 133.48 feet to the Point ofCurvature of a curve to the left; Course No. 2) Southerly along the arc of said curve being concave Easterly and having a radius of 1796.05 feet, an arcdistance of 258.37 feet, said arc being subtended by a chord bearing and distance of South 04°37'26" East, 258.15 feet for a Point of Beginning; thenceNorth 80°00'18" East, 127.11 feet; thence North 87°08'51" East, 100.00 feet; thence South 83°03'09" East, 24.42 feet to the Westerly line of those landsdescribed and recorded in Official Records Volume 4454, page 62 of said current public records; thence Southerly along said Westerly line of last said landsand along the arc of a curve concave Easterly and having a radius of 1546.05 feet, an arc distance of 58.46 feet, said arc being subtended by a chord bearingand distance of South 10°21' 03" East, 58.45 feet; thence South 89°29'50" West, parallel to said Southerly right of way line of Atlantic Boulevard, adistance of 242.00 feet; thence North 37°55'39" West, a distance of 24.87 feet to said curved Easterly boundary of Prado Ferrer Plat No. 2 of Florida Beach;thence Northerly around and along said Easterly boundary and the arc of said curve, a distance of 16.12 feet, said arc being subtended by a chord bearingand distance of North 09°00'08" West, 16.12 feet to the Point of Beginning. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.4 ENVIRONMENTAL INDEMNITY AGREEMENT THIS ENVIRONMENTAL INDEMNITY AGREEMENT, dated as of Oct 9, 2002 (the “Agreement”), is made by FAMILY STEAK HOUSES OFFLORIDA, INC., a Florida corporation (“Borrower”), in favor of GE CAPITAL FRANCHISE FINANCE CORPORATION, a Delaware corporation. AGREEMENT In consideration of the mutual covenants and provisions of this Agreement, the parties agree as follows: 1. Definitions. Initially capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in that certain LoanAgreement dated as of the date of this Agreement between Borrower and Lender, as the same may be amended from time to time (the “Loan Agreement”). Inaddition, the following terms shall have the following meanings for all purposes of this Agreement: “Environmental Condition” means any condition with respect to soil, surface waters, groundwaters, land, stream sediments, surface or subsurfacestrata, ambient air and any environmental medium comprising or surrounding the Premises, whether or not yet discovered, which would reasonably beexpected to or does result in any damage, loss, cost, expense, claim, demand, order or liability to or against any of the Borrower Parties, Lessee Parties orLender by any third party (including, without limitation, any Governmental Authority), including, without limitation, any condition resulting from theoperation of business at the Premises and/or the operation of the business of any other property owner or operator in the vicinity of the Premises and/or anyactivity or operation formerly conducted by any person or entity on or off the Premises. “Environmental Insurer” means American International Specialty Lines Insurance Company, or such other environmental insurance company asLender may select, and its successors and assigns. “Environmental Laws” means any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions anddecrees of Governmental Authorities and common law, relating to Hazardous Materials or USTs and/or the protection of human health or the environment byreason of a Release or a Threatened Release of Hazardous Materials or USTs or relating to liability for or costs of Remediation or prevention of Releases.“Environmental Laws” includes, but is not limited to, the following statutes, as amended, any successor thereto, and any regulations, rulings, orders ordecrees promulgated pursuant thereto, and any state or local statutes, ordinances, rules, regulations, orders, injunctions and decrees of GovernmentalAuthorities; the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. §§ 9601 et seq.; the Emergency Planning andCommunity Right-to-Know Act, 42 U.S.C. § 11001 et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 5101 etseq.; the ResourceConservation and Recovery Act (including but not limited to Subtitle I relating to USTs), 42 U.S.C. §§6901 etseq.; the Clean Water Act, 33 U.S.C. §§ 1251etseq.; the Clean Air Act, 42 U.S.C. §§ 7401 etseq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 etseq.; the Safe Drinking Water Act, 42 U.S.C.§§ 7401 et seq.; the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. §§ 136et seq.; the Endangered Species Act, 16 U.S.C. §§ 1531 et seq. and the National Environmental Policy Act, 42 U.S.C. § 4321 et seq. “Environmental Laws”also includes, but is not limited to, any present and future federal, state and local laws, statutes, ordinances, rules, regulations, orders, injunctions anddecrees of Governmental Authorities and common law; conditioning transfer of property upon a negative declaration or other approval of a GovernmentalAuthority of the environmental condition of the property; requiring notification or disclosure of Releases or other environmental condition of the Premises toany Governmental Authority or other person or entity, whether or not in connection with transfer of title to or interest in property; imposing conditions orrequirements relating to Hazardous Materials or USTs in connection with permits or other authorizations required by Governmental Authorities; relating to thehandling and disposal of Hazardous Materials; relating to nuisance, trespass or other causes of action related to Hazardous Materials; and relating to wrongfuldeath, personal injury, or property or other damage in connection with the physical condition or use of the Premises by reason of the presence of HazardousMaterials or USTs in, on, under or above the Premises. “Environmental Liens” has the meaning set forth in Section 2(i). 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Environmental Policy” means the environmental insurance policy issued by Environmental Insurer to Lender with respect to the Premises, whichEnvironmental Policy shall be in form and substance satisfactory to Lender in its sole discretion. “Governmental Authority” means any governmental authority, agency, department, commission, bureau, board, instrumentality, court or quasi-governmental authority having jurisdiction or supervisory or regulatory authority over the Premises or any of the Borrower Parties. “Hazardous Materials” means (a) any toxic substance or hazardous waste, substance, solid waste or related material, or any pollutant orcontaminant; (b) radon gas, asbestos in any form which is or could become friable, urea formaldehyde foam insulation, transformers or other equipmentcontaining dielectric fluid having levels of polychlorinated biphenyls in excess of applicable standards established by any Governmental Authority, or anypetroleum product or additive; (c) any substance, gas, material or chemical which is now or hereafter defined as or included in the definition of “hazardoussubstances,” “toxic substances,” “hazardous materials,” “hazardous wastes,” “regulated substances” or words of similar import under any EnvironmentalLaws; and (d) any other chemical, material, gas or substance the exposure to or release of which is prohibited, limited or regulated by any GovernmentalAuthority that asserts or may assert jurisdiction over the Premises or the operations or activity at the Premises, or any chemical, material, gas or substancethat does or is reasonably likely to pose a hazard to the health and/or safety of the occupants of the Premises or the owners and/or occupants of propertyadjacent to or surrounding the Premises. “Indemnified Parties” means Lender, Environmental Insurer, the trustee under the Mortgage, if applicable, and any person or entity who is or willhave been involved in the origination of the Loan, any person or entity who is or will have been involved in the servicing of the Loan, any person or entity inwhose name the encumbrance created by any of the Mortgage is or will have been recorded, persons and entities who may hold or acquire or will have held afull or partial interest in the Loan (including, but not limited to, investors or prospective investors in any Securitization, Participation or Transfer, as well ascustodians, trustees and other fiduciaries who hold or have held a full or partial interest in the Loan for the benefits of third parties), as well as the respectivedirectors, officers, shareholders, partners, members, employees, lenders, agents, servants, representatives, contractors, subcontractors, affiliates,subsidiaries, participants, successors and assigns of any and all of the foregoing (including, but not limited to, any other person or entity who holds oracquires or will have held a participation or other full or partial interest in the Loan or the Premises, whether during the term of the Loan or as a part of orfollowing a foreclosure of the Loan and including, but not limited to, any successors by merger, consolidation or acquisition of all or a substantial portion ofLender’s assets and business). “Indemnity Agreements” means all indemnity agreements executed for the benefit of any of the Borrower Parties, Lessee Parties or any prior owner,lessee or occupant of the Premises in connection with Hazardous Materials or USTs, including, without limitation, the right to receive payments under suchindemnity agreements. “Permitted Amounts” means, with respect to any given level of Hazardous Materials, that level or quantity of Hazardous Materials in any form orcombination of forms the presence, use, storage, release or handling of which does not constitute a violation of any Environmental Laws and is customarilyemployed in the ordinary course of, or associated with, similar businesses located in the state in which the Premises is located. “Premises” means the parcel or parcels of real property legally described on the attached Exhibit A, together with all rights, privileges andappurtenances therewith and all buildings, fixtures, tangible personal property (including, without limitation, equipment) and other improvements now orhereafter located on such real estate (whether or not affixed to the real estate). “Questionnaire” means the environmental questionnaire completed on behalf of the Borrower Parties with respect to the Premises and submitted toEnvironmental Insurer in connection with the issuance of the Environmental Policy. 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. “Release” means any presence, release, deposit, discharge, emission, leaking, spilling, seeping, migrating, injecting, pumping, pouring, emptying,escaping, dumping, disposing or other movement of Hazardous Materials or USTs. “Remediation” means any response, remedial, removal, or corrective action, any activity to clean up, detoxify, decontaminate, contain or otherwiseremediate any Hazardous Materials or USTs required by any Environmental Law or any Governmental Authority, any actions to prevent, cure or mitigate anyRelease, any action to comply with any Environmental Laws or with any permits issued pursuant thereto, any inspection, investigation, study, monitoring,assessment, audit, sampling and testing, laboratory or other analysis, or any evaluation relating to any Hazardous Materials or USTs. “Threatened Release” means a substantial likelihood of a Release which requires action to prevent or mitigate damage to the soil, surface waters,groundwaters, land, stream sediments, surface or subsurface strata, ambient air or any other environmental medium comprising or surrounding the Premiseswhich may result from such Release. “USTs” means any one or combination of below or above ground tanks and associated piping systems used in connection with the storage,dispensing and general use of petroleum and petroleum-based substances. 2. Representations and Warranties. Borrower represents and warrants to Lender and Environmental Insurer, which representations andwarranties shall survive the execution and delivery of this Agreement, that, except as disclosed in the Questionnaire: (a) Neither the Premises nor any of the Borrower Parties are in violation of, or subject to, any pending or, to Borrower’s actualknowledge, threatened investigation or inquiry by any Governmental Authority or to any remedial obligations under any Environmental Laws, andthis representation and warranty would continue to be true and correct following disclosure to the applicable Governmental Authorities of all relevantfacts, conditions and circumstances, if any, pertaining to the Premises; (b) All permits, licenses or similar authorizations required to construct, occupy, operate or use any buildings, improvements, fixturesand equipment forming a part of the Premises by reason of any Environmental Laws have been obtained; (c) No Hazardous Materials have been used, handled, manufactured, generated, produced, stored, treated, processed, transferred,disposed of or otherwise Released in, on, under, from or about the Premises, except in Permitted Amounts; (d) The Premises does not contain Hazardous Materials, except in Permitted Amounts, and all USTs located on or about the Premises,if any, are in full compliance with all Environmental Laws; (e) There is no threat of any Release migrating to the Premises in excess of Permitted Amounts; (f) There is no past or present non-compliance with Environmental Laws, or with permits issued pursuant thereto, in connection withthe Premises; (g) None of the Borrower Parties has received any written or oral notice or other communication from any person or entity (includingbut not limited to a Governmental Authority) relating to Hazardous Materials or USTs or Remediation thereof in excess of Permitted Amounts, ofpossible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or anyactual or potential administrative or judicial proceedings in connection with any of the foregoing; 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (h) All information known to any of the Borrower Parties or contained in the files of any of the Borrower Parties relating to anyEnvironmental Condition, Releases of Hazardous Materials or USTs in, on, under or from the Premises, other than in Permitted Amounts, has beenprovided to Lender, including, without limitation, information relating to all prior Remediation; (i) The Premises has been kept free and clear of all liens and other encumbrances imposed pursuant to any Environmental Law (the“Environmental Liens”); and none of the Borrower Parties has allowed any tenant or other user of the Premises to do any act that materially increasedthe dangers to human health or the environment, posed an unreasonable risk of harm to any person or entity (whether on or off the Premises),impaired the value of the Premises in any material respect, is contrary to any requirement of any insurer, constituted a public or private nuisance,constituted waste, or violated any covenant, condition, agreement or easement applicable to the Premises; and (j) The information and disclosures in the Questionnaire are true, correct and complete in all material respects, and the person orpersons executing the Questionnaire were duly authorized to do so. 3. Covenants. Borrower covenants as follows to Lender and Environmental Insurer from and after the execution and delivery of thisAgreement and until all of the Obligations are satisfied in full: (a) The Premises, the Borrower Parties and any other operator or user of the Premises shall not be in violation of or subject to anyinvestigation or inquiry by any Governmental Authority or subject to any Remediation obligations under any Environmental Laws; (b) All uses and operations on or of the Premises, whether by Borrower or any other person or entity, shall be in compliance with allEnvironmental Laws and permits issued pursuant thereto; (c) There shall be no Releases or Hazardous Materials in, on, under or from the Premises, except in Permitted Amounts; (d) Borrower shall keep the Premises, or cause the Premises to be kept, free and clear of all Environmental Liens; and (e) Borrower shall not do or allow any tenant or other user of the Premises to do any act that (i) materially increases the dangers tohuman health or the environment, (ii) poses an unreasonable risk of harm to any person or entity (whether on or off the Premises), (iii) impairs or isreasonably likely to impair the value of the Premises, (iv) is contrary to any requirement of any insurer, (v) constitutes a public or private nuisanceor constitutes waste, or (vi) violates any covenant, condition, agreement or easement applicable to the Premises. 4. Notification Requirements. Borrower shall immediately notify Lender in writing upon Borrower obtaining actual knowledge of: (a) any presence of Releases or Threatened Releases in, on, under, from or migrating towards the Premises, in excess of PermittedAmounts, including, without limitation, the presence on or under the Premises, or the escape, seepage, leakage, spillage, discharge, emission orrelease from any USTs on, above or under the Premises, of any Hazardous Materials, apparent or real, in excess of Permitted Amounts; (b) any non-compliance with any Environmental Laws related in any way to the Premises; (c) any Environmental Lien or any act or omission which would reasonably be expected to result in the imposition of anEnvironmental Lien; 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 4Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (d) any required or proposed Remediation of environmental conditions relating to the Premises, including, without limitation, any andall enforcement, clean-up, remedial, removal or other governmental or regulatory actions threatened, instituted or completed pursuant to any of theEnvironmental Laws affecting the Premises; (e) any written or oral notice or other communication of which any of the Borrower Parties becomes aware from any sourcewhatsoever (including but not limited to a Governmental Authority) relating in any way to Hazardous Materials, USTs or Remediation thereof,possible liability of any person or entity pursuant to any Environmental Law, other environmental conditions in connection with the Premises, or anyactual or potential administrative or judicial proceedings in connection with anything referred to in this Agreement; or (f) any investigation or inquiry initiated by any Governmental Authority relating to the Environmental Condition of the Premises. 5. Inspections. If required by any Environmental Law or upon any reasonable suspicion by Borrower or Lender of a Release, a ThreatenedRelease or a violation of any Environmental Law, Borrower shall, at its sole cost and expense: (a) perform any environmental site assessment or other investigation of environmental conditions in connection with the Premises asmay be reasonably requested by Lender (including but not limited to sampling, testing and analysis of soil, water, air, building materials and othermaterials and substances whether solid, liquid or gas), and share with Lender and Environmental Insurer the reports and other results thereof, andLender, Environmental Insurer and other Indemnified Parties shall be entitled to rely on such reports and other results thereof; and (b) have the Premises inspected as may be required by any Environmental Laws for seepage, spillage and other environmentalconcerns. If any USTs are located at the Premises, Borrower shall maintain and monitor such USTs in accordance with all Environmental Laws.Borrower shall provide Lender with written certified results of all inspections performed on the Premises. All costs and expenses associated with theinspection, preparation and certification of results, as well as those associated with any corrective action, shall be paid by Borrower. All inspectionsand tests performed on the Premises shall be conducted in compliance with all Environmental Laws. 6. Remediation; Releases. Borrower shall, at its sole cost and expense, and without limiting the rights of Lender under any other provisionof this Agreement, including, without limitation, Section 6(b), comply with all reasonable written requests of Lender to: (1) reasonably effectuate Remediation of any condition (including but not limited to a Release) in, on, under or from the Premises; (2) comply with any Environmental Law; (3) comply with any directive from any Governmental Authority; and (4) take any other reasonable action necessary or appropriate for protection of human health or the environment. 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 5Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 7. Actions by Lender. Lender, Environmental Insurer and any other person or entity designated by Lender, including but not limited to anyreceiver, any representative of a Governmental Authority, and any environmental consultant, shall have the right, but not the obligation, to enter upon thePremises during normal business hours or at any time in the event of an emergency (including without limitation in connection with any Securitization,Participation or Transfer contemplated by the Loan Agreement or in connection with the exercise of any remedies set forth in the Mortgage or the other LoanDocuments) to assess any and all aspects of the environmental condition of the Premises and its use, including but not limited to conducting anyenvironmental assessment or audit (the scope of which shall be determined in Lender’s sole and absolute discretion) and taking samples of soil, groundwateror other water, air, or building materials, and conducting other invasive testing. Borrower shall cooperate with and provide access to Lender, EnvironmentalInsurer and any such person or entity designated by Lender. Any such assessment and investigation shall be at Borrower’s sole cost and expense if, at the timeLender undertakes such assessment or investigation, Lender has a reasonable basis for believing that a Release has occurred at the Premises in excess ofPermitted Amounts or if an Event of Default has occurred and is continuing. Otherwise, any such assessment and investigation shall be at Lender’s sole costand expense. 8. Indemnification. Borrower shall, at its sole cost and expense, protect, defend, indemnify, release and hold harmless each of theIndemnified Parties for, from and against any and all claims, suits, liabilities (including, without limitation, strict liabilities), actions, proceedings,obligations, debts, damages, losses, costs, expenses, diminutions in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts paid insettlement and damages of whatever kind of nature (including, without limitation, attorneys’ fees, court costs and other costs of defense) (collectively,“Losses”) (excluding Losses suffered by an Indemnified Party directly arising out of such Indemnified Party’s gross negligence or willful misconduct;provided, however, that the term “gross negligence” shall not include gross negligence imputed as a matter of law to any of the Indemnified Parties solely byreason of Borrower’s interest in the Premises or Borrower’s failure to act in respect of matters which are or were the obligation of Borrower under the LoanDocuments) and costs of Remediation (whether or not performed voluntarily), engineers’ fees, environmental consultants’ fees, and costs of investigation(including but not limited to sampling, testing, and analysis of soil, water, air, building materials and other materials and substances whether solid, liquid orgas) imposed upon or incurred by or asserted against any Indemnified Parties, and directly or indirectly arising out of or in any way relating to any one ormore of the following: (i) any presence of any Hazardous Materials or USTs in, on, above, or under the Premises; (ii) any past, present or Threatened Releasein, on, above, under or from the Premises; (iii) any activity by Borrower, any person or entity affiliated with Borrower or any tenant or other user of thePremises in connection with any actual, proposed or threatened use, treatment, storage, holding, existence, disposition or other Release, generation, production,manufacturing, processing, refining, control, management, abatement, removal, handling, transfer or transportation to or from the Premises of anyHazardous Materials or USTs at any time located in, under, on or above the Premises; (iv) any activity by Borrower, any person or entity affiliated withBorrower or any tenant or other user of the Premises in connection with any actual or proposed Remediation of any Hazardous Materials or USTs at any timelocated in, under, on or above the Premises, whether or not such Remediation is voluntary or pursuant to court or administrative order, including but notlimited to any removal, remedial or corrective action; (v) any past, present or threatened noncompliance or violations of any Environmental Laws (or permitsissued pursuant to any Environmental Law) in connection with the Premises or operations thereon, including but not limited to any failure by Borrower, anyperson or entity affiliated with Borrower or any tenant or other user of the Premises to comply with any order of any Governmental Authority in connectionwith any Environmental Laws; (vi) the imposition, recording or filing or the threatened imposition, recording or filing of any Environmental Lien encumberingthe Premises; (vii) any administrative processes or proceedings or judicial proceedings in any way connected with any matter addressed in this Agreement;(viii) any past, present or threatened injury to, destruction of or loss of natural resources in any way connected with the Premises, including but not limited tocosts to investigate and assess such injury, destruction or loss; (ix) any acts of Borrower, any person or entity affiliated with Borrower or any tenant or otheruser of the Premises in arranging for disposal or treatment, or arranging with a transporter for transport for disposal or treatment, of Hazardous Materials orUSTs owned or possessed by Borrower, any person or entity affiliated with Borrower or any tenant or other user, at any facility or incineration vessel ownedor operated by another person or entity and containing such or similar Hazardous Materials or USTs; (x) any acts of Borrower, any person or entity affiliatedwith Borrower or any tenant or other user of the Premises, in accepting any Hazardous Materials or USTs for transport to disposal or treatment facilities,incineration vessels or sites selected by Borrower, any person or entity affiliated with Borrower or any tenant or other user of the Premises, from which there isa Release, or a Threatened Release of any Hazardous Materials or USTs which causes the incurrence of costs for Remediation; (xi) any personal injury,wrongful death, or property damage arising under any statutory or common law or tort law theory, including but not limited to damages assessed for themaintenance of a private or public nuisance or for the conducting of an abnormally dangerous activity on or near the Premises; or (xii) any misrepresentationor inaccuracy in any representation or warranty or material breach or failure to perform any covenants or other obligations pursuant to this Agreement. 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 6Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 9. Release. Borrower fully and completely releases, waives and covenants not to assert any claims, liabilities, actions, defenses, challenges,contests or other opposition against Lender and Environmental Insurer, however characterized, known or unknown, foreseen or unforeseen, now existing orarising in the future, relating to this Agreement and any Hazardous Materials, USTs, Releases and/or Remediation on, at or affecting the Premises. 10. Independent Obligations; Conflict. The obligations of Borrower and the rights and remedies of Lender set forth in this Agreement areindependent from those of Borrower pursuant to the Loan Agreement, the Mortgage, the Note and the other Loan Documents, and shall survive the repaymentof the Loan, the termination, expiration and/or release of the Loan Agreement, the Note, the Mortgage and the other Loan Documents and/or the judicial ornonjudicial foreclosure of the Mortgage by Lender or the delivery of a deed-in-lieu of foreclosure by Borrower to Lender. In the event any of the terms andprovisions of this Agreement are in conflict with the terms and conditions of any other Loan Document, the terms and conditions of this Agreement shallcontrol as to such conflict. 11. Reliance By Environmental Insurer. Borrower acknowledges and agrees that Environmental Insurer may rely on the representations,warranties and covenants set forth in this Agreement, that Environmental Insurer is an intended third-party beneficiary of such representations, warranties andcovenants and that Environmental Insurer shall have all rights and remedies available at law or in equity as a result of a breach of such representations,warranties and covenants, including, to the extent applicable, the right of subrogation. 12. Forum Selection; Jurisdiction; Venue; Choice of Law. Borrower acknowledges that this Agreement was substantially negotiated byLender in the State of Arizona and delivered by Borrower in the State of Arizona and there are substantial contacts between the parties and the transactionscontemplated herein and the State of Arizona. For purposes of any action or proceeding arising out of this Agreement, the parties hereto hereby expressly submitto the jurisdiction of all federal and state courts located in the State of Arizona and Borrower consents that it may be served with any process or paper byregistered mail or by personal service within or without the State of Arizona in accordance with applicable law. Furthermore, Borrower waives and agrees not toassert in any such action, suit or proceeding that it is not personally subject to the jurisdiction of such courts, that the action, suit or proceeding is brought inan inconvenient forum or that venue of the action, suit or proceeding is improper. It is the intent of the parties hereto that all provisions of this Agreement shallbe governed by and construed under the laws of the State of Arizona, without regard to its principles of conflicts of law. To the extent that a court of competentjurisdiction finds Arizona law inapplicable with respect to any provisions hereof, then, as to those provisions only, the law of the state where the applicablePremises is located shall be deemed to apply. Nothing in this Section shall limit or restrict the right of Lender to commence any proceeding in the federal orstate courts located in the state where the Premises is located to the extent Lender deems such proceeding necessary or advisable to exercise remedies availableunder this Agreement. 13. Binding Effect. This Agreement shall be binding upon and inure to the benefit of Lender and Borrower and their respective successors andpermitted assigns, including, without limitation, any United States trustee, any Borrower-in-possession or any trustee appointed from a private panel;provided, however, Borrower’s right to assign this Agreement shall be limited as set forth in the Loan Agreement. 14. Severability. The provisions of this Agreement shall be deemed severable. If any part of this Agreement shall be held unenforceable, theremainder shall remain in full force and effect, and such unenforceable provision shall be reformed by such court so as to give maximum legal effect to theintention of the parties as expressed therein. 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 7Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 15. Waiver of Jury Trial and Punitive, Consequential, Special and Indirect Damages. LENDER, BY ACCEPTING THISAGREEMENT, AND BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVETO A TRIAL BY JURY WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM ORCOUNTERCLAIM BROUGHT BY EITHER OF THE PARTIES HERETO AGAINST THE OTHER OR ITS SUCCESSORS WITH RESPECT TOANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP OF LENDER AND BORROWER,BORROWER’S USE OR OCCUPANCY OF THE PREMISES, AND/OR ANY CLAIM FOR INJURY OR DAMAGE, OR ANY EMERGENCY ORSTATUTORY REMEDY. THIS WAIVER BY THE PARTIES HERETO OF ANY RIGHT EITHER MAY HAVE TO A TRIAL BY JURY HAS BEENNEGOTIATED AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. FURTHERMORE, BORROWER AND LENDER HEREBY KNOWINGLY,VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHT EITHER MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL ANDINDIRECT DAMAGES FROM THE OTHER AND ANY OF THE OTHER’S AFFILIATES, OFFICERS, DIRECTORS OR EMPLOYEES OR ANY OFTHEIR SUCCESSORS WITH RESPECT TO ANY AND ALL ISSUES PRESENTED IN ANY ACTION, PROCEEDING, CLAIM ORCOUNTERCLAIM BROUGHT BY EITHER PARTY AGAINST THE OTHER OR ANY OF THE OTHER’S AFFILIATES, OFFICERS, DIRECTORSOR EMPLOYEES OR ANY OF THEIR SUCCESSORS WITH RESPECT TO ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THISAGREEMENT OR ANY DOCUMENT CONTEMPLATED HEREIN OR RELATED HERETO. THE WAIVER BY BORROWER AND LENDER OFANY RIGHT THEY MAY HAVE TO SEEK PUNITIVE, CONSEQUENTIAL, SPECIAL AND INDIRECT DAMAGES HAS BEEN NEGOTIATEDBY THE PARTIES HERETO AND IS AN ESSENTIAL ASPECT OF THEIR BARGAIN. 16. Time of the Essence. Time is of the essence in the performance of each and every obligation under this Agreement. 17. Notices. All notices, demands, designations, certificates, requests, offers, consents, approvals, appointments and other instruments givenpursuant to this Agreement shall be given in accordance with the notice provisions of the Loan Agreement. 18. Amendments; Waivers. This Agreement may not be modified except by an instrument in writing executed by Borrower and Lender and norequirement hereof may be waived at any time except by a writing signed by the party against whom such waiver is sought to be enforced, nor shall anywaiver be deemed a waiver of any subsequent breach or default. 19. Headings. The headings appearing in this Agreement have been inserted for convenient reference only and shall not modify, define, limit orexpand the express provisions of this Agreement. 20. Indemnity Agreements. Borrower hereby grants to Lender a security interest in all Indemnity Agreements, including, without limitation,the right to receive payments under the Indemnity Agreements. Upon the occurrence of an Event of Default, (i) Lender may exercise any or all of the remediesavailable to it under all applicable laws, including, without limitation, all applicable provisions of the Uniform Commercial Code, with respect to theIndemnity Agreements, and (ii) Lender shall have the immediate right to exercise all of Borrower’s rights and remedies under the Indemnity Agreements,including, without limitation, making demands and claims and receiving payments under the Indemnity Agreements. Borrower hereby grants Lender a powerof attorney (which grant shall be deemed irrevocable and coupled with an interest) to exercise such rights and remedies. 01-435323.03FFC No. 8100-4864Unit #109Neptune, FLRev. 3/13/02 8Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. IN WITNESS WHEREOF, the undersigned has executed this Agreement as of the day and year first above written. BORROWER: FAMILY STEAK HOUSES OF FLORIDA, INC., a Florida corporation By/s/ Edward Alexander Printed NameEdward Alexander ItsExecutive Vice President STATE OF Florida) ) SS. COUNTY OF Duval) The foregoing instrument was acknowledged before me on Oct 1, 2002 by Edward Alexander, Exec.Vice President of Family Steak Houses ofFlorida, Inc., a Florida corporation, on behalf of the corporation. /s/ Cynthia D Newton Notary Public My Commission Expires: Cynthia D Newton My Commission DD11231701-435323.03Expires April 25, 2006FFC No. 8100-4864 Unit #109 Neptune. FL Rev. 3/13/02 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(a) Deposit held in escrow byTo Be Determined$ ("Escrow Agent") (checks are subject to actual and final collection) Escrow Agent's address: Phone: (b) Additional deposit to be made to Escrow Agent within 5 days after Effective Date$50,000(c) Additional deposits to be made to Escrow Agent within ____ days after Effective Date$(d) Total financing (see Paragraph 5)$1,440,000(e) Other $(f) All deposits will be credited to the purchase price at closing. Balance to close, subject to adjustments and prorations, to be paidwith locally drawn cashier's or official bank check(s) or wire transfer.$310,000 Exhibit 10.12 Commercial Contract 1. PARTIES AND PROPERTY:Ka Bun Chan("Buyer") agrees to buy andEACO Corporation ("Seller") agrees to sell the property as: Street Address:13235 Cortez Blvd., Brooksville, FL 34613 Legal Description:John G Grubbs Commercial Tracts Lot 1A & 1B ORB 869 PG 485 and the following Personal Property: (all collectively referred to as the "Property") on the terms and conditions set forth below. 2. PURCHASE PRICE:$1,800,000 3. TIME FOR ACCEPTANCE; EFFECTIVE DATE; COMPUTATION OF TIME: Unless this offer is signed by Seller and Buyer and an executedcopy delivered to all parties on or before September 8, 2012 , this offer will be withdrawn and the Buyer's deposit, if any, will be returned. The timefor acceptance of any counter offer will be 3 days from the date the counter offer is delivered. The "Effective Date" of this Contract is the date on which the lastone of the Seller and Buyer has signed or initialed and delivered this offer or the final counter offer. Calendar days will be used when computing time periods,except time periods of 5 days or less. Time periods of 5 days or less will be computed without including Saturday, Sunday, or national legal holidays. Anytime period ending on a Saturday, Sunday, or national legal holiday will extend until 5:00 p.m. of the next business day. Time is of the essence in thisContract. 4. CLOSING DATE AND LOCATION: (a) Closing Date: This transaction will be closed on December 8, 2012 (Closing Date), unless specifically extended by other provisions of thisContract. The Closing Date will prevail over all other time periods including, but not limited to, Financing and Due Dilligence periods. In the eventinsurance underwriting is suspended on Closing Date and Buyer is unable to obtain property insurance, Buyer may postpone closing up to 5 days after theinsurance underwriting suspension is lifted. Buyer (C.K.B) (____) and Seller (M.B.) (____) acknowledge receipt of a copy of this page, which is Page 1 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Location: Closing will take place in _______________________ County, Florida. (If left blank, closing will take place in the county where theproperty is located,) Closing may be conducted by mail or electronic means. 5. THIRD PARTY FINANCING: BUYER’S OBLIGATION: Within ____ days (5 days if left blank) after Effective Date, Buyer will apply for third party financing in an amount not toexceed 80 % of the purchase price or $________________, with a fixed interest rate not to exceed 5.5 % per year with an initial variable interest rate notto exceed ______%, with points or commitment or loan fees not to exceed 3 % of the principal amount, for a term of 10 years, and amortized over 10 years, with additional terms as follows:____________________________________________________________________________________________________________.Buyer will timely provide any and all credit, employment, financial and other information reasonably required by any lender. Buyer will use good faith andreasonable diligence to (i) obtain Loan Approval within _____ days (45 days if left blank) from Effective Date (Loan Approval Date), (ii) satisfy terms andconditions of the Loan Approval, and (iii) close the loan. Buyer will keep Seller and Broker fully informed about loan application status and authorizes themortgage broker and lender to disclose all such information to Seller and Broker. Buyer will notify Seller immediately upon obtaining financing or beingrejected by a lender. CANCELLATION: If Buyer, after using good faith and reasonable diligence, fails to obtain Loan Approval by Loan Approval Date,Buyer may within ____ days (3 days if left blank) deliver written notice to Seller stating Buyer either waives this financing contingency or cancels thisContract. If Buyer does neither, then Seller may cancel this Contract by delivering written notice to Buyer at any time thereafter. Unless this financingcontingency has been waived, this Contract shall remain subject to the satisfaction, by closing, of those conditions of Loan Approval related to the Property.DEPOSIT(S) (for purposes of Paragraph 5 only): If Buyer has used good faith and reasonable diligence but does not obtain Loan Approval by Loan ApprovalDate and thereafter either party elects to cancel this Contract as set forth above or the lender fails or refuses to close on or before the Closing Date without faulton Buyer’s part, the Deposit(s) shall be returned to Buyer, whereupon both parties will be released from all further obligations under this Contract, except forobligations stated herein as surviving the termination of this Contract. If neither party elects to terminate this Contract as set forth above or Buyer fails to usegood faith or reasonable diligence as set forth above, Seller will be entitled to retain the Deposit(s) if the transaction does not close. 6. TITLE: Seller has the legal capacity to and will convey marketable title to the Property by x statutory warranty deed ¨ other_________________________________________, free of liens, easements and encumbrances of record or known to Seller, but subject to property taxesfor the year of closing; covenants, restrictions and public utility easements of record; existing zoning and governmental regulations; and (list any other mattersto which title will be subject) ________________________ _____________________________________________________________________;provided there exists at closing no violation of the foregoing and none of them prevents Buyer’s intended use of the Property as__________________________________________________________________________________________. (a) Evidence of Title: The party who pays the premium for the title insurance policy will select the closing agent and pay for the title search and closingservices. Seller will, at (check one) x Seller’s ¨ Buyer’s expense and within 15 days x after Effective Date ¨ or at least ___ days before ClosingDate deliver to Buyer (check one)x(i.) a title insurance commitment by a Florida licensed title insurer setting forth those matters to be discharged by Seller at or before Closing and,upon Buyer recording the deed, an owner’s policy in the amount of the purchase price for fee simple title subject only to exceptions stated above. IfBuyer is paying for the evidence of title and Seller has an owner’s policy, Seller will deliver a copy to Buyer within 15 days after Effective Date.¨ (ii.) an abstract of title, prepared or brought current by an existing abstract firm or certified as correct by an existing firm. However, if such anabstract is not available to Seller, then a prior owner’s title policy acceptable to the proposed insurer as a base for reissuance of coverage may be used.The prior policy will include copies of all policy exceptions and an update in a format acceptable to Buyer from the policy effective date and certified toBuyer or Buyer’s closing agent together with copies of all documents recited in the prior policy and in the update. If such an abstract or prior policy isnot available to Seller then (i.) above will be the evidence of title. Buyer (C.K.B.) (___) and Seller (M.B.) (___) acknowledge receipt of a copy of this page, which is Page 2 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Environmental (b) Title Examination: Buyer will, within 15 days from receipt of the evidence of title deliver written notice to Seller of title defects. Title will be deemedacceptable to Buyer if (1) Buyer fails to deliver proper notice of defects or (2) Buyer delivers proper written notice and Seller cures the defects within ____days from receipt of the notice (“Curative Period”). If the defects are cured within the Curative Period, closing will occur within 10 days from receipt byBuyer of notice of such curing. Seller may elect not to cure defects if Seller reasonably believes any defect cannot be cured within the Curative Period. If thedefects are not cured within the Curative Period, Buyer will have 10 days from receipt of notice of Seller’s inability to cure the defects to elect whether toterminate this Contract or accept title subject to existing defects and close the transaction without reduction in purchase price. (c) Survey: (check applicable provisions below)x (i.)Seller will, within 15 days from Effective Date, deliver to Buyer copies of prior surveys, plans, specifications, and engineering documents, ifany, and the following documents relevant to this transaction:prepared for Seller or in Seller’s possession, which show all currently existing structures. In the event this transaction does not close, all documentsprovided by Seller will be returned to Seller within 10 days from the date this Contract is terminated.x Buyer will, at ¨ Seller’s x Buyer’s expense and within the time period allowed to deliver and examine title evidence, obtain a current certifiedsurvey of the Property from a registered surveyor. If the survey reveals encroachments on the Property or that the improvements encroach on the lands ofanother, ¨ Buyer will accept the Property with existing encroachments x such encroachments will constitute a title defect to be cured within theCurative period. (d) Ingress and Egress: Seller warrants that the Property presently has ingress and egress. 7. PROPERTY CONDITION: Seller will deliver the Property to Buyer at the time agreed in its present “as is” condition, ordinary wear and tear excepted,and will maintain the landscaping and grounds in a comparable condition. Seller makes no warranties other than marketability of title. In the event that thecondition of the Property has materially changed since the expiration of the Due Diligence Period, Buyer may elect to terminate the Contract and receive arefund of any and all deposits paid, plus interest, if applicable. By accepting the Property “as is”, Buyer waives all claims against Seller for any defects in theProperty. (Check (a) or (b)) ¨ (a) As Is: Buyer has inspected the Property or waives any right to inspect and accepts the Property in its “as is” condition. x (b) Due Diligence Period: Buyer will, at Buyer’s expense and within 30 days from Effective Date (“Due Diligence Period”), determine whether theProperty is suitable, in Buyer’s sole and absolute discretion, for Buyer’s intended use and development of the Property as specified in Paragraph 6. Duringthe Due Diligence Period, Buyer may conduct any tests, analyses, surveys and investigations (“Inspections”) which Buyer deems necessary to determine toBuyer’s satisfaction the Property’s engineering, architectural, environment properties; zoning and zoning restrictions; flood zone designation andrestrictions; subdivision regulations; soil and grade: availability of access to public roads, water, and other utilities; consistency with local, state andregional growth management and comprehensive land use plans; availability of permits, government approvals and licenses; compliance with Americanwith Disabilities Act; absence of asbestos, soil and ground water contamination; and other inspections that Buyer deems appropriate to determine thesuitability of the Property for Buyer’s intended use and development. Buyer will deliver written notice to Seller prior to the expiration of the Due DiligencePeriod of Buyer’s determination of whether or not the Property is acceptable. Buyer’s failure to comply with this notice requirement will constituteacceptance of the Property in its present “as is” condition. Seller grants to Buyer, its agents, contractors and assigns, the right to enter the Property at anytime during the Due Diligence Period for the purpose of conducting inspections: provided, however, that Buyer, its agents, contractors and assigns enter theProperty and conduct Inspections at their own risk. Buyer will indemnify and hold Seller harmless from losses, damages, costs, claims and expenses ofany nature, including attorneys’ fees at all levels, and from liability to any person, arising from the conduct of any and all Inspections or any workauthorized by Buyer. Buyer will not engage in any activity that could result in a mechanic’s lien being filed against the Property without Seller’s priorwritten consent. In the event this transaction does not close, (1) Buyer will repair all damages to the Property resulting from the Inspections and return theProperty to the condition it was in prior to conduct of the Inspections, and (2) Buyer will, at Buyer’s expense release to Seller all reports and other workgenerated as a result of the Inspections. Should Buyer deliver timely notice that the Property is not acceptable, Seller agrees that Buyer’s deposit will beimmediately returned to Buyer and the Contract terminated. Buyer (C.K.B.)(____) and Seller (M.B.)(____) acknowledge receipt of a copy this page, which is page 3 of 8 pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (C) Walk-through Inspection: Buyer may, on the day prior to closing or any other time mutually agreeable to the parties, conduct a final “walk-through”inspection of the Property to determine compliance with this paragraph and to ensure that all Property is on the premises. 8. OPERATION OF PROPERTY DURING CONTRACT PERIOD: Seller will continue to operate the Property and any business conducted on theProperty in the manner operated prior to Contract and will take no action that would adversely impact the Property, tenants, lenders or business, if any. Anychanges, such as renting vacant space, that materially affect the Property or Buyer’s intended use of the Property will be permitted x only with Buyer’sconsent ¨ without Buyer’s consent. 9. CLOSING PROCEDURE: Unless otherwise agreed or stated herein, closing procedure shall be in accordance with the norms where the Property islocated. (a) Possession and Occupancy: Seller will deliver possession and occupancy of the Property to Buyer at closing. Seller will provide keys, remote controls,and any security/access codes necessary to operate all locks, mailboxes, and security systems. (b) Costs: Buyer will pay Buyer’s attorneys’ fees, taxes and recording fees on notes, mortgages and financing statements and recording fees for the deed.Seller will pay Seller’s attorneys’ fees, taxes on the deed and recording fees for documents needed to cure title defects. If Seller is obligated to discharge anyencumbrance at or prior to closing and fails to do so, Buyer may use purchase proceeds to satisfy the encumbrances. (c) Documents: Seller will provide the deed; bill of sale; mechanic’s lien affidavit; originals of those assignable service and maintenance contracts that willbe assumed by Buyer after the Closing Date and letters to each service contractor from Seller advising each of them of the sale of the Property and, ifapplicable, the transfer of its contract, and any assignable warranties or guarantees received or held by Seller from any manufacturer, contractor,subcontractor, or material supplier in connection with the Property; current copies of the condominium documents, if applicable; assignments of leases,updated rent roll; tenant and lender estoppels letters; tenant subordination, non-disturbance and attornment agreements (SNDAs) required by the Buyer orBuyer’s lender; assignments of permits and licenses; corrective instruments; and letters notifying tenants of the change in ownership/rental agent. If anytenant refuses to execute an estoppels letter, Seller will certify that information regarding the tenant’s lease is correct. If Seller is an entity, Seller will deliver aresolution of its Board of Directors authorizing the sale and delivery of the deed and certification by the appropriate party certifying the resolution andsetting forth facts showing the conveyance conforms to the requirements of local law. Seller will transfer security deposits to Buyer. Buyer will provide theclosing statement, mortgages and notes, security agreements, and financing statements. (d) Taxes and Prorations: Real estate taxes, personal property taxes on any tangible personal property, bond payments assumed by Buyer, interest, rents(based on actual collected rents), association dues, insurance premiums acceptable to Buyer, and operating expenses will be prorated through the day beforeclosing. If the amount of taxes for the current year cannot be ascertained, rates for the previous year will be used with due allowance being made forimprovements and exemptions. Any tax proration based on an estimate will, at request of either party, be readjusted upon receipt of current year’s tax bill;this provision will survive closing. (e) Special Assessment Liens: Certified, confirmed, and ratified special assessment liens as of the Closing Date will be paid by Seller. If a certified,confirmed, and ratified special assessment is payable in installments, Seller will pay all installments due and payable on or before the Closing Date, withany installment for any period extending beyond the Closing Date prorated, and Buyer will assume all installments that become due and payable after theClosing Date. Buyer will be responsible for all assessments of any kind which become due and owing after Closing Date, unless an improvement issubstantially completed as of Closing Date. If an improvement is substantially completed as of the Closing Date but has not resulted in a lien before closing.Seller will pay the amount of the last estimate of the assessment. This subsection applies to special assessment liens imposed by a public body and does notapply to condominium association special assessments. (f) Foreign Investment In Real Property Tax Act (FIRPTA): If Seller is a “foreign person” as defined by FIRPTA, Seller and Buyer agree to complywith Section 1445 of the Internal Revenue Code. Seller and Buyer will complete, execute, and deliver as directed any instrument, affidavit, or statementreasonably necessary to comply with the FIRPTA requirements, including delivery of their respective federal taxpayer identification numbers or SocialSecurity Numbers to the closing agent. If Buyer does not pay sufficient cash at closing to meet the withholding requirement, Seller will deliver to Buyer atclosing the additional cash necessary to satisfy the requirement. Buyer (C.K.B.) (____) and Seller (M.B.) (____) acknowledge receipt of a copy of this page, which is Page 4 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 10. ESCROW AGENT: Seller and Buyer authorize Escrow Agent or Closing Agent (collectively “Agent”) to receive, deposit, and hold funds and otherproperty in escrow and, subject to collection, disburse them in accordance with the terms of this Contract. The parties agree that Agent will not be liable to anyperson for misdelivery of escrowed items to Seller or Buyer, unless the misdelivery is due to Agent’s willful breach of this Contract or gross negligence. IfAgent has doubt as to Agent's duties or obligations under this Contract, Agent may, at Agent's option, (a) hold the escrowed items until the parties mutuallyagree to its disbursement or until a court of competent jurisdiction or arbitrator determines the rights of the parties or (b) deposit the escrowed items with theclerk of the court having jurisdiction over the matter and file an action in interpleader. Upon notifying the parties of such action, Agent will be released from allliability except for the duty to account for items previously delivered out of escrow. If Agent is a licensed real estate broker, Agent will comply with Chapter475, Florida Statutes. In any suit in which Agent interpleads the escrowed items or is made a party because of acting as Agent hereunder, Agent will recoverreasonable attorney's fees and costs incurred, with these amounts to be paid from and out of the escrowed items and charged and awarded as court costs infavor of the prevailing party. 11. CURE PERIOD: Prior to any claim for default being made, a party will have an opportunity to cure any alleged default. If a party fails to comply withany provision of this Contract, the other party will deliver written notice to the non-complying party specifying the non-compliance. The non-complying partywill have ___ days (5 days if left blank) after delivery of such notice to cure the non-compliance. Notice and cure shall not apply to failure to close. 12. RETURN OF DEPOSIT: Unless otherwise specified in the Contract, in the event any condition of this Contract is not met and Buyer has timely givenany required notice regarding the condition having not been met, Buyer's deposit will be returned in accordance with applicable Florida Laws and regulations. 13. DEFAULT: (a) In the event the sale is not closed due to any default or failure on the part of Seller other than failure to make the title marketable after diligent effort,Buyer may either (1) receive a refund of Buyer's deposit(s) or (2) seek specific performance. If Buyer elects a deposit refund, Seller will be liable to Brokerfor the full amount of the brokerage fee. (b) In the event the sale is not closed due to any default or failure on the part of Buyer, Seller may either (1) retain all deposit(s) paid or agreed to be paid byBuyer as agreed upon liquidated damages, consideration for the execution of this Contract, and in full settlement of any claims, upon which this Contractwill terminate or (2) seek specific performance. If Seller retains the deposit, Seller will pay the Brokers named in Paragraph 20 fifty percent of all forfeiteddeposits retained by Seller (to be split equally among the Brokers) up to the full amount of the brokerage fee. If Buyer fails to timely place a deposit asrequired by this Contract, Seller may either (1) terminate the Contract and seek the remedy outlined in this subparagraph or (2) proceed with the Contractwithout waiving any remedy for Buyer's default. 14. ATTORNEY'S FEES AND COSTS: In any claim or controversy arising out of or relating to this Contract, the prevailing party, which for purposes ofthis provision will include Buyer, Seller and Broker, will be awarded reasonable attorneys' fees, costs, and expenses. 15. NOTICES: All notices will be in writing and may be delivered by mail, overnight courier, personal delivery, or electronic means. Parties agree to send allnotices to addresses specified on the signature page(s). Any notice, document, or item given by or delivered to an attorney or real estate licensee (including atransaction broker) representing a party will be as effective as if given by or delivered to that party. 16. DISCLOSURES: (a) Commercial Real Estate Sales Commission Lien Act: The Florida Commercial Real Estate Sales Commission Lien Act provides that a broker hasa lien upon the owner's net proceeds from the sale of commercial real estate for any commission earned by the broker under a brokerage agreement. The lienupon the owner's net proceeds is a lien upon personal property which attaches to the owner's net proceeds and does not attach to any interest in real property.This lien right cannot be waived before the commission is earned. Buyer (C.K.B.) (___) and Seller (M.B.) (___) acknowledge receipt of a copy of this page, which is Page 5 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Special Assessment Liens Imposed by Public Body: The Property may be subject to unpaid special assessment lien(s) imposed by a public body.(A public body includes a Community Development District.) Such liens, if any, shall be paid as set forth in Paragraph 9(e). (c) Radon Gas: Radon is a naturally occurring radioactive gas that, when it has accumulated in a building in sufficient quantities, may present healthrisks to persons who are exposed to it over time. Levels of radon that exceed federal and state guidelines have been found in buildings in Florida. Additionalinformation regarding radon and radon testing may be obtained from your county public health unit. (d) Energy-Efficiency Rating Information: Buyer acknowledges receipt of the information brochure required by Section 553.996, Florida Statutes. 17. RISK OF LOSS: (a) If, after the Effective Date and before closing, the Property is damaged by fire or other casualty, Seller will bear the risk of loss and Buyer may cancelthis Contract without liability and the deposit(s) will be returned to Buyer. Alternatively, Buyer will have the option of purchasing the Property at the agreedupon purchase price and Seller will credit the deductible, if any and transfer to Buyer at closing any insurance proceeds, or Seller's claim to any insuranceproceeds payable for the damage. Seller will cooperate with and assist Buyer in collecting any such proceeds. Seller shall not settle any insurance claim fordamage caused by casualty without the consent of the Buyer. (b) If, after the Effective Date and before closing, any part of the Property is taken in condemnation or under the right of eminent domain, or proceedings forsuch taking will be pending or threatened. Buyer may cancel this Contract without liability and the deposit(s) will be returned to Buyer. Alternatively, Buyerwill have the option of purchasing what is left of the Property at the agreed upon purchase price and Seller will transfer to the Buyer at closing the proceedsof any award, or Seller's claim to any award payable for the taking. Seller will cooperate with and assist Buyer in collecting any such award. 18. ASSIGNABILITY; PERSONS BOUND: This Contract may be assigned to a related entity, and otherwise x is not assignable ¨ is assignable. If thisContract may be assigned, Buyer shall deliver a copy of the assignment agreement to the Seller at least 5 days prior to Closing. The terms "Buyer," "Seller"and "Broker" may be singular or plural. This Contract is binding upon Buyer. Seller and their heirs, personal representatives, successors and assigns (ifassignment is permitted). 19. MISCELLANEOUS: The terms of this Contract constitute the entire agreement between Buyer and Seller. Modifications of this Contract will not bebinding unless in writing, signed and delivered by the party to be bound. Signatures, initials, documents referenced in this Contract, counterparts and writtenmodifications communicated electronically or on paper will be acceptable for all purposes, including delivery, and will be binding. Handwritten or typewrittenterms inserted in or attached to this Contract prevail over preprinted terms. If any provision of this Contract is or becomes invalid or unenforceable, allremaining provisions will continue to be fully effective. This Contract will be construed under Florida law and will not be recorded in any public records. 20. BROKERS: Neither Seller nor Buyer has used the services of, or for any other reason owes compensation to, a licensed real estate Broker other than: (a) Seller's Broker: (Company Name)(Licensee) (Address, Telephone, Fax, E-mail) who ¨ is a single agent ¨ is a transaction broker ¨ has no brokerage relationship and who will be compensated by ¨ Seller ¨ Buyer ¨ bothparties pursuant to ¨ a listing agreement ¨ other (specify) _____________________________________________________________________ Buyer (C.K.B.) (___) and Seller (M.B.) (___) acknowledge receipt of a copy of this page, which is Page 6 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. (b) Buyer's Broker:Carlino Commercial Group, Inc.Josephine Yiping Wang (Company Name)(Licensee) (Address, Telephone, Fax, E-mail)who x is a single agent ¨ is a transaction broker ¨ has no brokerage relationship and who will be compensated by ¨ Seller’s Broker x Seller ¨Buyer ¨ both parties pursuant to ¨ an MLS offer of compensation x other (specify)3% of gross purchase price.(collectively referred to as "Broker") in connection with any act relating to the Property, including but not limited to inquiries, introductions, consultations,and negotiations resulting in this transaction. Seller and Buyer agree to indemnify and hold Broker harmless from and against losses, damages, costs andexpenses of any kind, including reasonable attorneys' fees at all levels, and from liability to any person, arising from (1) compensation claimed which isinconsistent with the representation in this Paragraph, (2) enforcement action to collect a brokerage fee pursuant to Paragraph 10, (3) any duty accepted byBroker at the request of Seller or Buyer, which is beyond the scope of services regulated by Chapter 475, Florida Statutes, as amended, or (4)recommendations of or services provided and expenses incurred by any third party whom Broker refers, recommends, or retains for or on behalf of Seller orBuyer. 21. OPTIONAL CLAUSES: (Check if any of the following clauses are applicable and are attached as an addendum to this Contract): ¨ Arbitration¨ Seller Warranty¨ Existing Mortgage ¨ Section 1031 Exchange¨ Coastal Construction Control Line¨ Buyer's Attorney Approval ¨ Property Inspection and Repair¨ Flood Area Hazard Zone¨ Seller's Attorney Approval ¨ Seller Representations¨ Seller Financing¨ Other 22. ADDITIONAL TERMS: THIS IS INTENDED TO BE A LEGALLY BINDING CONTRACT. IF NOT FULLY UNDERSTOOD, SEEK THE ADVICE OF AN ATTORNEYPRIOR TO SIGNING. BROKER ADVISES BUYER AND SELLER TO VERIFY ALL FACTS AND REPRESENTATIONS THAT ARE IMPORTANTTO THEM AND TO CONSULT AN APPROPRIATE PROFESSIONAL FOR LEGAL ADVICE (FOR EXAMPLE, INTERPRETING CONTRACTS,DETERMINING THE EFFECT OF LAWS ON THE PROPERTY AND TRANSACTION, STATUS OF TITLE, FOREIGN INVESTOR REPORTINGREQUIREMENTS, ETC.) AND FOR TAX, PROPERTY CONDITION, ENVIRONMENTAL AND OTHER ADVICE. BUYER ACKNOWLEDGESTHAT BROKER DOES NOT OCCUPY THE PROPERTY AND THAT ALL REPRESENTATIONS (ORAL, WRITTEN OR OTHERWISE) BYBROKER ARE BASED ON SELLER REPRESENTATIONS OR PUBLIC RECORDS UNLESS BROKER INDICATES PERSONAL VERIFICATIONOF THE REPRESENTATION. BUYER AGREES TO RELY SOLELY ON SELLER, PROFESSIONAL INSPECTORS AND GOVERNMENTALAGENCIES FOR VERIFICATION OF THE PROPERTY CONDITION, SQUARE FOOTAGE AND FACTS THAT MATERIALLY AFFECT PROPERTYVALUE. Buyer (C.K.B.) (____) and seller (M.B.) (_____) acknowledge receipt of a copy of this page, which is Page 7 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Each person signing this Contract on behalf of a party that is a business entity represents and warrants to the other party that such signatory has full powerand authority to enter into and perform this Contract in accordance with its terms and each person executing this Contract and other documents on behalf ofsuch party has been duly authorized to do so. /s/ Ka Bun Chan Date:8/30/12Ka Bun Chan Ka Bun Chan Tax ID No: (Typed or Printed Name of Buyer) Title: Telephone: Date: Tax ID No: (Typed or Printed Name of Buyer) Title: Telephone: Buyer's Address for purpose of notice: Facsimile: Email: /s/ Michael Bains Date:9/26/12 Michael Bains - Eaco Tax ID No: (Typed or Printed Name of Seller) Title:Controller Telephone:714-690-2901 x 3331 Date: Tax ID No: (Typed or Printed Name of Seller) Title: Telephone: Seller's Address for purpose of notice:1500 N. Lakeview Ave., Anaheim, Ca 92807 Facsimile:(714) 876-2407 Email:mbains@biscoind.com The Florida Association of REALTORS© makes no representation as to the legal validity or adequacy of any provision of this form in any specifictransaction. This standardized form should not be used in complex transactions or with extensive riders or additions. This form is available for use by theentire real estate industry and is not intended to identify the user as a REALTOR©. REALTORS© is a registered collective membership mark which may beused only by real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS© and who subscribe to its Code of Ethics.The copyright laws of the United States (17 U.S. Code) forbid the unauthorized reproduction of this form by any means including facsimile or computerizedforms. Buyer (C.K.B.) (_____) and Seller (M.B.) (___) acknowledge receipt of a copy of this page, which is Page 8 of 8 Pages. CC-4 Rev. 12/10 ©2010 Florida Association of Realtors® All Rights Reserved formsimplicity Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COUNTER OFFER No. 1 This is Counter Offer No. 1 to the Commercial Contract dated August 30, 2012 (“Offer”) on property located at 13235 Cortez Blvd.,Brooksville, FL 34613 (“Property”) by and between EACO Corporation (“Seller”) and Ka Bun Chan (“Buyer”). The terms and conditions of the above referenced Offer are accepted subject to the following: 2. Purchase Price to be $1,825,000. 3. In Paragraph 2(a), the sum of $50,000 by wire transfer or other immediately available funds to be deposited into escrow upon theopening of escrow. Said deposit shall be applicable to the Purchase Price. 4. Closing shall occur on January 8, 2013 (the “Closing Date”), unless the parties agree to an earlier Closing Date in writing. The ClosingDate shall not be extended by any other provision(s) of the Offer. 5. Buyer is currently the Tenant in possession of the Property under a written lease agreement dated as of January 9, 2008 (“Lease”). Buyershall continue to abide by all terms and conditions of the Lease through the close of escrow. In this regard, Buyer’s Due Diligence Period shall be thirty (30)days. Seller shall have no obligations to operate and/or maintain the Property except for those obligations set forth under the Lease. 6. As to the Risk of Loss, Seller’s cooperation therein, shall be at no cost or expense to Seller. 7. Buyer agrees that in the event Buyer fails to consummate the purchase of the Property on or before the Closing Date, that notwithstandinganything to the contrary contained within the Lease, any and all Options to Renew the Lease are hereby terminated and of no force or effect, including Buyer’salleged exercise of Option to Renew dated August 20, 2012. Buyer agrees that in the event Buyer fails to purchase the Property on or before the Closing Date,that notwithstanding anything contrary contained within the Lease, that the Lease shall terminate and Buyer’s right to possession of the Subject Property shallexpire as of January 8, 2013 and Buyer agrees to vacate the Subject Property no later than January 9, 2013. This Counter Offer No. 1 shall be deemed revoked and of no force or effect unless this Counter Offer is signed by the Buyer and a copy ofthe signed Counter Offer No. 1 is personally received by the person making this Counter Offer by 5:00 PM on _______, 2012. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Seller makes this Counter Offer No.1 on the terms and conditions above. Seller: EACO Corporation By: /s/ Michael Bains Its:Controller Buyer acknowledges receipt of Counter Offer No. 1 and accepts the terms and conditions of Counter Offer No. 1. Buyer:/s/ Ka Bun Chan Ka Bun Chan Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Addendum to Commercial Contract This Addendum (the “Addendum”) to Commercial Contract is dated October 2, 2012 and is by and between EACO Corporation (“Seller”) and KaBun Chan (“Buyer”). WHEREAS, Buyer and Seller entered into that certain Commercial Contract (“Contract”) which has an Effective Date of September 26, 2012, forthe sale and purchase of that certain real property located at 13235 Cortez Boulevard, Brooksville, Florida; and WHEREAS, Buyer and Seller wish to modify the Contract in certain limited respects. NOW THEREFORE, in consideration of the recitals set forth above, and other good and valuable consideration, the parties, intending to be bound,do hereby agree as follows: 1. Incorporation of Recitals; Capitalized Terms. Buyer and Seller agree that the above described recitals are true and correct and that the Contract isin full force and effect as of the date hereof. Whenever the terms of this Addendum are inconsistent with the terms of the Contract, the terms of this Addendumshall be deemed to supersede and amend the terms of the Contract. Except as otherwise specifically provided in this Addendum, capitalized terms herein whichare defined in the Contract shall have the same meaning herein as in the Contract. 2. Escrow Agent. The parties agree that the Escrow Agent shall be McGuireWoods LLP. The Deposit shall be deposited by the Escrow Agent in anon-interest bearing deposit account at Bank of America and the proceeds held and disbursed in accordance with the terms of the Contract. The parties agree jointly to defend (by attorneys selected by Escrow Agent), indemnify and hold harmless Escrow Agent against and from any claim,judgment, loss, liability, cost or expense resulting from any dispute or litigation arising out of or concerning Escrow Agent’s duties or services hereunder. Thisindemnity includes, without limitation, disbursements and reasonable attorneys’ fees either paid to retain attorneys or representing the fair value of legalservices rendered by Escrow Agent to itself. Escrow Agent shall not be liable for any error in judgment or for any act done or step taken or omitted in good faith, or for any mistake of fact or law, exceptfor Escrow Agent’s own gross negligence or willful misconduct. Buyer and Seller acknowledge and agree that (a) the amount of the Deposit may exceed theamount of FDIC insurance coverage applicable to the Deposit in the deposit account in which the Deposit is deposited, (b) Escrow Agent has deposited theDeposit in the deposit account at the direction of Buyer and Seller and has not exercised (and does not have) investment discretion over the Deposit, and (c) theEscrow Agent shall have no liability to Buyer, Seller or any other person or entity in the event of any diminution in value of, or failure of the bank in whichthe Deposit is deposited to pay, any deposit account in which the Deposit or any part thereof is deposited at any time. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. The parties acknowledge that Escrow Agent is merely a stakeholder. Upon payment of the Deposit pursuant to the terms of the Contract, Escrow Agent shallbe fully released from all liability and obligations with respect to the Deposit. It is acknowledged that Escrow Agent is the attorney for Seller and that Escrow Agent shall be entitled to represent such party in any lawsuit. 3. No Further Modifications. Except as expressly modified and amended herein, all the terms and provisions of the Contract shall remain in full force andeffect. IN WITNESS WHEREOF, the parties have executed this Addendum as of the day and year first above written. SELLER: BUYER: EACO Corporation /s/ Ka Bun ChanBy:/s/ Michael Bains Ka Bun ChanName:Michael Bains Title:Controller ACCEPTED AND AGREED TO in its capacity as the Escrow Agent: McGuireWoods LLP By:/s/ Kenneth M Keefe JR Name:Kenneth M Keefe JR Title:Counsel Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.13 BUSINESS LOAN AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0006-01-200704-01-2008155354101CLS 07 / 240600714765/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item abovecontaining “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 THIS BUSINESS LOAN AGREEMENT dated June 1, 2007, is made and executed between BISCO INDUSTRIES, INC. (“Borrower”) andCOMMUNITY BANK (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender or hasapplied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described on any exhibit orschedule attached to this Agreement (“Loan”). Borrower understands and agrees that: (A) in granting, renewing, or extending any Loan, Lenderis relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the granting, renewing, or extending ofany Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion; and (C) all such Loans shall be and remain subjectto the terms and conditions of this Agreement. This Agreement shall apply to any and all present and future loans, loan advances, extension ofcredit, financial accommodations and other agreements and undertakings of every nature and kind that may be entered into by and betweenBorrower and Lender now and in the future. TERM. This Agreement shall be effective as of June 1, 2007, and shall continue in full force and effect until such time as all of Borrower’s Loans in favor ofLender have been paid in full, including principal, interest, costs, expenses, attorneys’ fees, and other fees and charges, or until such time as the parties mayagree in writing to terminate this Agreement. CONDITIONS PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under thisAgreement shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in the Related Documents. Loan Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting to Lendersecurity interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security Interests; (4) evidence of insurance asrequired below; (5) guaranties; (6) together with all such Related Documents as Lender may require for the Loan; all in form and substance satisfactoryto Lender and Lender’s counsel. Borrower’s Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly authorizingthe execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have provided such other resolutions,authorizations, documents and instruments as Lender or its counsel, may require. Payment of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable as specifiedin this Agreement or any Related Document. Representations and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document orcertificate delivered to Lender under this Agreement are true and correct. No Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement orunder any Related Document. REPRESENTATIONS AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of eachdisbursement of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists: Organization. Borrower is a corporation for profit which is, and at all times shall be, duly organized, validly existing, and in good standing under andby virtue of the laws of the State of California. Borrower is duly authorized to transact business in all other states in which Borrower is doing business,having obtained all necessary filings, governmental licenses and approvals for each state in which Borrower is doing business. Specifically, Borroweris, and at all times shall be, duly qualified as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect onits business or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which it is presentlyengaged or presently proposes to engage. Borrower maintains an office at 1500 NORTH LAKEVIEW AVENUE, ANAHEIM, CA 92807. UnlessBorrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its books and records including its recordsconcerning the Collateral. Borrower will notify Lender prior to any change in the location of Borrower’s state of organization or any change in Borrower’sname. Borrower shall do all things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply withall regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court applicable to Borrower andBorrower’s business activities. Assumed Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names used byBorrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower does business: None. Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by allSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Authorization. Borrower’s execution, delivery, and performance of this Agreement and all the Related Documents have been duly authorized by allnecessary action by Borrower, do not require the consent or approval of any other person, regulatory authority, or governmental body, and do notconflict with, result in a violation of, or constitute a default under (1) any provision of (a) Borrower’s articles of incorporation or organization, orbylaws, or (b) any agreement or other instrument binding upon Borrower or (2) any law, governmental regulation, court decree, or order applicable toBorrower or to Borrower’s properties. Borrower has the power and authority to enter into the Note and the Related Documents and to grant collateral assecurity for the Loan. Borrower has the further power and authority to own and to hold all of Borrower’s assets and properties, and to carry onBorrower’s business as presently conducted. Financial Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial condition asof the date of the statement, and there has been no material adverse change in Borrower’s financial condition subsequent to the date of the most recentfinancial statement supplied to Lender. Borrower has no material contingent obligations except as disclosed in such financial statements. Legal Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when delivered willconstitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their respective terms. Properties. Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing to Lender and asaccepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good title to all of Borrower’sproperties free and clear of all Security Interests, and has not executed any security documents or financing statements relating to such properties. All ofBorrower’s properties are titled in Borrower’s legal name, and Borrower has not used or filed a financing statement under any other name for at least thelast five (5) years. Hazardous Substances. Except as disclosed to and acknowledged by Lender in writing. Borrower represents and warrants that: (1) During the periodof Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal, release or threatened release ofany Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower has no knowledge of, or reason to believe thatthere has been (a) any breach or violation of any Environmental Laws; (b) any use, generation, manufacture, storage, treatment, disposal, release orthreatened release of any Hazardous Substance on, under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or(c) any actual or threatened litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant contractor, agentor other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on, under,about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal, state, and local laws,regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon theCollateral to make such inspections and tests as Lender may deem appropriate to determine compliance of the Collateral with this section of theAgreement. Any inspections or tests made by Lender shall be at Borrower’s expense and for Lender’s purposes only and shall not be construed to createany responsibility or liability on the part of Lender to Borrower or to any other person. The representations and warranties contained herein are based onBorrower’s due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives anyfuture claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and(2) agrees to indemnify and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties, and expenses which Lender maydirectly or indirectly sustain or suffer resulting from a breach of this section of the Agreement or as a consequence of any use, generation, manufacture,storage, disposal, release or threatened release of a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement,including the obligation to indemnify, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement andshall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) Litigation and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) againstBorrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial condition or properties,other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged by Lender in writing. Taxes. To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have been filed, and all taxes,assessments and other governmental charges have been paid in full, except those presently being or to be contested by Borrower in good faith in theordinary course of business and for which adequate reserves have been provided. Lien Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security Agreements, orpermitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or indirectly securing repayment of Borrower’sLoan and Note, that would be prior or that may in any way be superior to Lender’s Security interests and rights in and to such Collateral. Binding Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers thereof, as well asupon their successors, representatives and assigns, and are legally enforceable in accordance with their respective terms. Commercial Purposes. Borrower intends to use the Loan proceeds solely for business or commercially related purposes. Employee Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with all applicablerequirements of law and regulations, and (1) no Reportable Event nor Prohibited Transaction (as defined in ERISA) has occurred with respect to anysuch plan, (2) Borrower has not withdrawn from any such plan or initiated steps to do so, (3) no steps have been taken to terminate any such plan or toappoint a trustee to administer such a plan, and (4) there are no unfunded liabilities other than those previously disclosed to Lender in writing. Borrower is not an “investment company” or a company “controlled” by an “investment company”, within the meaning ofthe Investment Company Act of 1940, as amended. Public Utility Holding Company Act. Borrower is not a “holding company”, or a “subsidiary company” of a “holding company”, or an “affiliate” ofa “holding company” or of a “subsidiary company” of a “holding company”, within the meaning of the Public Utility Holding Company Act of 1935,as amended. Regulations T and U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose ofpurchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Information. All information previously furnished or which is now being furnished by Borrower to Lender for the purposes of or in connection withthis Agreement or any transaction contemplated by this Agreement is, and all information furnished by or on behalf of Borrower to Lender in the futurewill be, true and accurate in every material respect on the date as of which such information is dated or certified; and no such information is or will beincomplete by omitting to state any material fact the omission of which would cause the information to be misleading. Claims and Defenses. There are no defenses or counterclaims, offsets or other adverse claims, demands or actions of any kind, personal orotherwise, that Borrower, any Grantor, or any Guarantor could assert with respect to the Note, Loan, this Agreement, or the Related Documents. AFFIRMATIVE COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will: Repayment. Repay the Loan in accordance with its terms and the terms of this Agreement. Notices of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition, and (2) allexisting and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting Borrower or any Guarantor whichcould materially affect the financial condition of Borrower or the financial condition of any Guarantor. In addition, Borrower shall provide Lender withwritten notice of the occurrence of any Event of Default, the occurrence of any Reportable Event under, or the institution of steps by Borrower towithdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have any liability. Financial Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine and auditBorrower’s books and records at all reasonable times. Financial Statements. Furnish Lender with the following: Additional Requirements. Personal: Borrower shall furnish to Lender as soon as available and in any event within fifteen (15) days afterfiling, personal federal income tax returns and supporting schedules. Borrower shall furnish to Lender personal financial statement annually. Tax Returns. But in no event later than thirty (30) days after the applicable filing date for the tax reporting period ended. Borrower’s Corporateannual tax return to be obtained on a best efforts basis. Annual Statements. As soon as available, but in no event later than one-hundred-twenty (120) days after the end of each fiscal year,Borrower’s Consolidated balance sheet and income statement for the year ended, audited with an unqualified opinion, by a certified publicaccountant satisfactory to Lender. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Interim Statements. As soon as available but in no event later than forty-five (45) days after the end of each quarter, Borrower’s Consolidatedfinancial statements for the period ended, prepared by Borrower. All financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent basis, andcertified by Borrower as being true and correct. Additional Information. Furnish such additional information and statements, as Lender may request from time to time. Financial Covenants and Ratios. Comply with the following covenants and ratios: Working Capital Requirements. Borrower shall comply with the following working capital ratio requirements: Current Ratio. Maintain a Current Ratio in excess of 1.250 to 1.000. The term “Current Ratio” means Borrower’s total Current Assetsdivided by Borrowers total Current Liabilities. This liquidity ratio will be evaluated as of Quarter-end within 45 days. Quick Ratio. Maintain a Quick Ratio in excess of 0.500 to 1.000. The term “Quick Ratio” means Borrower’s Cash & Equivalent plusBorrower’s net Trade Receivables divided by Borrower’s total Current Liabilities. This liquidity ratio will be evaluated as of quarterly ona consolidated basis within 45 days. Other Requirements. Debt to Effective Tangible Net Worth. Maintain a maximum Debt to Effective Tangible Net Worth Ratio of 1.75 to1.00. The term “Debt to Effective Tangible Net Worth” means Borrower’s total liabilities, less amounts subordinated to Lender, as evidenced by asubordination agreement. If any divided by Borrower’s Effective Tangible Net Worth. The term “Effective Tangible Net Worth” meansBorrower’s total assets, less intangibles [i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items,but including leaseholds and leasehold improvements], less amounts due from officers, partners, stockholders, directors, affiliates, andsubsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, if any. This leverage ratio tobe measured using GAAP accounting as of each quarter-end plus 45 days. Effective Tangible Net Worth. Maintain an Effective Tangible Net Worth of $11,000,000.00. The term “Effective Tangible Net Worth” meansBorrower’s total assets, less intangibles [i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items,but including leaseholds and leasehold improvements], less amounts due from officers, partners, stockholders, directors, affiliates, andsubsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, if any. This leverage to bemeasured using GAAP accounting as of each quarter-end plus 45 days. Accounts Receivable audit to be performed annually at the Borrower’s expense. Brokerage Statements for marketable securities to be submitted within forty-five (45) days of the end of each fiscal quarter. Minimum current assets of $15,000,000.00 on a consolidated basis measured quarterly. Per GAAP, investments in Data I/O are to continue to beshown as non-current assets. Maximum of $1,000,000.00 of the liability of the margin account for the trading securities. Borrower is not to make any new long-term investments as defined by GAAP, inclusive of Data I/O, in excess of $100,000.00 without priorapproval of Lender. Except as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made inaccordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being true and correct. Insurance. Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect toBorrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower, upon request ofLender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations thatcoverages will not be cancelled or diminished without at least thirty (30) days prior written notice to Lender. Each insurance policy also shall include anendorsement providing that coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any otherperson. In connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lenderwith such lender’s loss payable or other endorsements as Lender may require. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) Insurance Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as Lender mayreasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) theproperties insured; (5) the then current property values on the basis of which insurance has been obtained, and the manner of determining those values;and (6) the expiration date of the policy. In addition, upon request of Lender (however not more often than annually), Borrower will have an independentappraiser satisfactory to Lender determine, as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall bepaid by Borrower. Guaranties. Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantornamed below, on Lender’s forms, and in the amount and under the conditions set forth in those guaranties. Name of Guarantor Amount GLEN F. CElLEY Unlimited Other Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower and any otherparty and notify Lender immediately in writing of any default in connection with any other such agreements. Loan Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by Lender in writing. Taxes, Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments, taxes,governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits, prior to the date onwhich penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any of Borrower’s properties, income, orprofits. Performance. Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the RelatedDocuments, and in all other instruments and agreements between Borrower and Lender, and in all other loan agreements now or in the future existingbetween Borrower and any other party. Borrower shall notify Lender immediately in writing of any default in connection with any agreement. Operations. Maintain executive and management personnel with substantially the same qualifications and experience as the present executive andmanagement personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business affairs in areasonable and prudent manner. Environmental Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as may berequested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance defined as toxic or ahazardous substance under applicable federal, state, or local law, rule, regulation, order or directive, at or affecting any property or any facility owned,leased or used by Borrower. Compliance with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmentalauthorities applicable to the conduct of Borrower’s properties, businesses and operations, and to the use or occupancy of the Collateral, includingwithout limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance, or regulation and withholdcompliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as,in Lender’s sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security or a suretybond, reasonably satisfactory to Lender, to protect Lender’s interest. Inspection. Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s otherproperties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s books, accounts, andrecords. If Borrower now or at any time hereafter maintains any records (including without limitation computer generated records and computer softwareprograms for the generation of such records) in the possession of a third party, Borrower, upon request of Lender, shall notify such party to permitLender free access to such records at all reasonable times and to provide Lender with copies of any records it may request, all at Borrower’s expense. Change of Location. Immediately notify Lender in writing of any additions to or changes in the location of Borrower’s businesses. Title to Assets and Property. Maintain good and marketable title to all of Borrower’s assets and properties. Notice of Default, Litigation and ERISA Matters. Forthwith upon learning of the occurrence of any of the following, Borrower shall provide Lenderwith written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (1) the occurrence of any Event of Default,or (2) the institution of, or any adverse determination in, any litigation, arbitration proceeding or governmental proceeding, or (3) the occurrence of aReportable Event under, or the institution of steps by Borrower to withdraw from, or the institution of any steps to terminate, any employee benefit planas to which Borrower may have any liability. Other Information. From time to time Borrower will provide Lender with such other information as Lender may reasonably request Employee Benefit Plans. So long as this Agreement remains in effect, Borrower will maintain each employee benefit plan as to which Borrower mayhave any liability, in compliance with all applicable requirements of law and regulations. Compliance Certificates. Unless waived in writing by Lender, provide Lender within thirty (30) days after the end of each (This section is herebySource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.waived by Lender and Borrower is notified.), with a certificate executed by Borrower’s chief financial officer, or other officer or person acceptable toLender, certifying that the representations and warranties set forth in this Agreement are true and correct as of the date of the certificate and furthercertifying that, as of the date of the certificate, no Event of Default exists under this Agreement. Environmental Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to exist,as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third party, on property owned and/or occupiedby Borrower, any environmental activity where damage may result to the environment, unless such environmental activity is pursuant to and incompliance with the conditions of a permit issued by the appropriate federal, state or local governmental authorities; shall furnish to Lender promptlyand in any event within thirty (30) days after receipt thereof a copy of any notice, summons, lien, citation, directive, letter or other communication fromany governmental agency or instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with anyenvironmental activity whether or not there is damage to the environment and/or other natural resources. Additional Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments,financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence and secure the Loansand to perfect all Security Interests. LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Borrower failsto comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s failure to discharge or pay when due anyamounts Borrower is required to discharge or pay under this Agreement or any Related Documents, Lender on Borrower’s behalf may (but shall not beobligated to) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests,encumbrances and other claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral.All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid byLender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable ondemand; (B) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) theterm of any applicable insurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at theNote’s maturity. NEGATIVE COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the prior writtenconsent of Lender: Indebtedness and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by thisAgreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease, granta security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens), or (3) sell with recourse any of Borrower’s accounts,except to Lender. Continuity of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged, (2) ceaseoperations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer or sell Collateral out of theordinary course of business, or (3) pay any dividends on Borrower’s stock (other than dividends payable in its stock), provided, however thatnotwithstanding the foregoing, but only so long as no Event of Default has occurred and is continuing or would result from the payment of dividends, ifBorrower is a “Subchapter S Corporation” (as defined in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on itsstock to its shareholders from time to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income taxpayments to satisfy their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporationbecause of their ownership of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter or amend Borrower’scapital structure. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) Loans, Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2) purchase, create oracquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor other than in the ordinary course of business. Agreements. Borrower will not enter into any agreement containing any provisions which would be violated or breached by the performance ofBorrower’s obligations under this Agreement or in connection herewith. CESSATION OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any otheragreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor is in default under theterms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor has with Lender; (B) Borrower or anyGuarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy or similar proceedings, or is adjudged a bankrupt; (C) there occursa material adverse change in Borrower’s financial condition, in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan;or (D) any Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or(E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Loan. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any ofthe Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf, or made byGuarantor, under this Agreement or the Related Documents in connection with the obtaining of the Loan evidenced by the Note or any security documentdirectly or indirectly securing repayment of the Note is false or misleading in any material respect, either now or at the time made or furnished orbecomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateraldocument to create a valid and perfected security interest or lien) at any time and for any reason. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Loan. This includes a garnishment ofany of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute byBorrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender writtennotice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amountdetermined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Execution; Attachment. Any execution or attachment is levied against the Collateral, and such execution or attachment is not set aside, discharged orstayed within thirty (30) days after the same is levied. Change in Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted orimplemented, that limits or defines the uses which may be made of the Collateral such that the present or intended use of the Collateral, as specified inthe Related Documents, would be in violation of such zoning ordinance or regulation or public restriction, as changed. Default Under Other Lien Documents. A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion ofthe Collateral. Judgment. Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving morethan ten thousand dollars ($10,000.00) against Borrower and the failure by Borrower to discharge the same, or cause it to be discharged, or bonded offto Lender’s satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment wasentered. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies orbecomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. In the event of a death, Lender, at itsoption, may, but shall not be required to, permit the Guarantor’s estate to assume unconditionally the obligations arising under the guaranty in a mannersatisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance ofthe Loan is impaired.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Right to Cure. If any default, other than a default on Indebtedness, is curable and if Borrower or Grantor, as the case may be, has not been given anotice of a similar default within the preceding twelve (12) months, it may be cured if Borrower or Grantor, as the case may be, after receiving writtennotice from Lender demanding cure of such default: (1) cure the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,immediately initiate steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continue and complete allreasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the RelatedDocuments, all commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately will terminate(including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness immediately will become due andpayable, all without notice of any kind to Borrower, except that in the case of an Event of Default of the type described in the “Insolvency” subsection above,such acceleration shall be automatic and not optional. In addition, Lender shall have all the rights and remedies provided in the Related Documents or availableat law, in equity, or otherwise. Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercisedsingularly or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or totake action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare a default and to exercise its rights and remedies. ADDITIONAL DOCUMENTS. Borrower shall provide Lender with the following additional documents: Corporate Resolution. Borrower has provided or will provide Lender with a certified copy of resolutions properly adopted by Borrower’s Board ofDirectors, and certified by Borrower’s corporate secretary, assistant secretary, or other authorized officer, under which Borrower’s Board of Directorsauthorized one or more designated officers or employees to execute this Agreement, the Note and any and all Security Agreements directly or indirectlysecuring repayment of the same, and to consummate the borrowings and other transactions as contemplated under this Agreement, and to consent to theremedies following any default by Borrower as provided in this Agreement and in any Security Agreements. Opinion of Counsel. When required by Lender, Borrower has provided or will provide Lender with an opinion of Borrower’s counsel certifying to andthat: (1) Borrower’s Note, any Security Agreements and this Agreement constitute valid and binding obligations on Borrower’s part that are enforceablein accordance with their respective terms; (2) Borrower is validly existing and in good standing; (3) Borrower has authority to enter into this Agreementand to consummate the transactions contemplated under this Agreement; and (4) such other matters as may have been requested by Lender or byLender’s counsel. ADDITIONAL INFORMATION:. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and payables,inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower’s financial condition and business operations as Lender mayrequest from time to time. TAXES, CHARGES AND LIENS. Borrower will not be required to pay and discharge any such assessment, tax, charge, levy, lien or claim so long as(a) the legality of the same shall be contested in good faith by appropriate proceedings, and (b) Borrower shall have established on its books adequate reserveswith respect to such contested assessment, tax, charge, levy, lien, or claim in accordance with generally accepted accounting practices. Borrower, upondemand of Lender, will furnish to Lender evidence of payment of the assessments, taxes, charges, levies, liens and claims and will authorize the appropriategovernmental official to deliver to Lender at any time a written statement of any assessments, taxes, charges, levies, liens and claims against Borrower’sproperties, income, or profits. SURVIVAL OF REPRESENTATION & WARRANTIES. Borrower understands and agrees that Lender, without independent investigation, is relyingupon the above representations and warranties in extending Loan Advances to Borrower. Borrower further agrees that the foregoing representations andwarranties shall be continuing in nature and shall remain in full force and effect until such time as Borrower’s indebtedness shall be paid in full, or until thisAgreement shall be terminated in the manner provided above, whichever is the last to occur. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) ADDITIONAL DEFINITIONS. Indebtedness. The word “Indebtedness” also means Borrower may be obligated as a guarantor, surety, or otherwise; whether recovery upon suchIndebtedness may be or hereafter may become barred by any statute of limitations; and whether such Indebtedness may be or hereafter may become otherwiseunenforceable. Cash Flow. The words “Cash Flow” mean net income after taxes, and exclusive of extraordinary gains and income, plus depreciation and amortization. Debt. The word “DEBT” means all of Borrower’s liabilities excluding Subordinated Debt. Subordinated Debt. The words “Subordinated Debt” mean indebtedness and liabilities of Borrower which have been subordinated by written agreement toindebtedness owed by Borrower to Lender in form and substance acceptable to Lender. Tangible Net Worth. The words “Tangible Net Worth” mean Borrower’s total assets excluding all intangible assets (i.e., goodwill, trademarks, patents,copyrights, organizational expenses, and similar intangible items, but including leasehold improvements) less total Debt. Working Capital. The words “Working Capital” mean Borrower’s current assets, excluding prepaid expenses, less Borrower’s current liabilities. RIGHT TO AUDIT AND INSPECT. Without in any way limiting Lender’s rights under any other provision of this Agreement, Lender shall be entitled toconduct annual audit(s) of Borrower’s books and annual inspection(s) of the Inventory and Equipment and to check and test the same as to quality, quantity,value and condition during the Borrower’s normal business hours. The costs and expenses incurred by Lender in connection with such audits and inspectionsshall be charged to Borrower. Lender will invoice Borrower for such costs and expenses and Borrower shall pay Lender the full amount of such costs andexpenses within ten (10) days from the date of invoice. PRIOR LOAN AGREEMENT. This Business Loan Agreement hereby supersedes and replaces prior Business Loan Agreement dated April 1, 2006, alongwith all modification(s) and amendment(s) thereto. MAINTENANCE OF DEPOSITORY ACCOUNTS. Borrower shall maintain it’s primary demand depository accounts with Lender. LETTER OF CREDIT FACILITY. Subject to the terms of this Agreement, Lender will issue standby letters of credit (each a “Letter of Credit”) on behalfof Borrower. At no time, however, shall the total face amount of all Letters of Credit outstanding, less any partial draws paid under the Letters of Credit exceedthe sum of $1,000,000.00, with a maturity date of April 1, 2008. A three percent (3%) annual Letter of Credit fee shall be accessed. (1) Upon Lender’s request, Borrower promptly shall pay to Lender issuance fees and such other fees, commissions, costs, and any out-of-pocket expensescharged or incurred by Lender with respect to any Letter of Credit. (2) The commitment by Lender to issue Letters of Credit shall, unless earlier terminated in accordance with the terms of this Agreement, automaticallyterminate on the Expiration Date and no Letter of Credit shall expire on a date which is more than zero (0) days after the Expiration Date. (3) Each Letter of Credit shall be in form and substance satisfactory to Lender and in favor of beneficiaries satisfactory to Lender, provided that Lender mayrefuse to issue a Letter of Credit due to the nature of the transaction or its terms or in connection with any transaction where Lender, due to the beneficiary orthe nationality or residence of the beneficiary, would be prohibited by any applicable law, regulation, or order from issuing such Letter of Credit. Under nocircumstances, however will a Letter of Credit exceed zero ( ) days from the issue date. (4) Prior to the issuance of each Letter of Credit, and in all events prior to any daily cutoff time Lender may have established for purposes thereof, Borrowershall deliver to Lender a duly executed form of Lender’s standard form of application for issuance of letter of credit with proper insertions (5) A minimum of ninety (90) days prior written cancellation notice required. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or partiessought to be charged or bound by the alteration or amendment. Arbitration. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant tothe Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take ordispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. Thisincludes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trustor mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, includingtaking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes,claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, includingany claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however thatno arbitrator shall have the right or the power to enjoin or restrain any act of any party. Borrower and Lender agree that in the event of anSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much ofsuch action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitratormay be entered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from acourt of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise beapplicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitrationproceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction,interpretation, and enforcement of this arbitration provision. Attorneys’ Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’slegal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, andBorrower shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or notthere is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay orinjunction), appeals, and any anticipated post-judgment collection services. Borrower also shall pay all court costs and such additional fees as may bedirected by the court. Borrower Information. Borrower consents to the release of information on or about Borrower by Lender in accordance with any court order, law orregulation and in response to credit inquiries concerning Borrower. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Agreement. Consent to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation interestsin the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation whatsoever, to any one ormore purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower or about any other matter relating to theLoan, and Borrower hereby waives any rights to privacy Borrower may have with respect to such matters. Borrower additionally waives any and allnotices of sale of participation interests, as well as all notices of any repurchase of such participation interests. Borrower also agrees that the purchasersof any such participation interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under theparticipation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim thatit may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees that either Lender or suchpurchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency of any holder of any interest in the Loan. Borrowerfurther agrees that the purchaser of any such participation interests may enforce its interests irrespective of any personal claims or defenses thatBorrower may have against Lender. Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, thelaws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State ofCalifornia. Non-Liability of Lender. The relationship between Borrower and Lender created by this Agreement is strictly a debtor and creditor relationship and notfiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender and Borrower. Borrower isexercising Borrower’s own judgement with respect to Borrower’s business. All information supplied to Lender is for Lender’s protection only and noother party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Borrower of any matter withrespect to Borrower’s business. Lender and Borrower intend that Lender may reasonably rely on all information supplied by Borrower to Lender,together with all representations and warranties given by Borrower to Lender, without investigation or confirmation by Lender and that any investigationor failure to investigate will not diminish Lender’s right to so rely. Notice of Lender’s Breach. Borrower must notify Lender in writing of any breach of this Agreement or the Related Documents by Lender and any otherclaim, cause of action or offset against Lender within thirty (30) days after the occurrence of such breach or after the accrual of such claim, cause ofaction or offset. Borrower waives any claim, cause of action or offset for which notice is not given in accordance with this paragraph. Lender is entitledto rely on any failure to give such notice. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) Indemnification of Lender. Borrower agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations,damages, losses, costs and expenses (including, without limitation, Lender’s attorneys’ fees), demands, liabilities, penalties, fines and forfeitures ofany nature whatsoever that may be asserted against or incurred by Lender, its officers, directors, employees, and agents arising out of, relating to, or inany manner occasioned by this Agreement and the exercise of the rights and remedies granted Lender under this, as well as by: (1) the ownership, use,operation, construction, renovation, demolition, preservation, management, repair, condition, or maintenance of any part of the Collateral; (2) theexercise of any of Borrower’s rights collaterally assigned and pledged to Lender hereunder; (3) any failure of Borrower to perform any of its obligationshereunder, and/or (4) any failure of Borrower to comply with the environmental and ERISA obligations, representations and warranties set forth herein.The foregoing indemnity provisions shall survive the cancellation of this Agreement as to all matters arising or accruing prior to such cancellation andthe foregoing indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following defaulthereunder. Borrower’s indemnity obligations under this section shall not in any way be affected by the presence or absence of covering insurance, or bythe amount of such insurance or by the failure or refusal of any insurance carrier to perform any obligation on its part under any insurance policy orpolicies affecting the Collateral and/or Borrower’s business activities. Should any claim, action or proceeding be made or brought against Lender byreason of any event as to which Borrower’s indemnification obligations apply, then, upon Lender’s demand, Borrower, at its sole cost and expense,shall defend such claim, action or proceeding in Borrower’s name, if necessary, by the attorneys for Borrower’s insurance carrier (if such claim, actionor proceeding is covered by insurance), or otherwise by such attorneys as Lender shall approve. Lender may also engage its own attorneys at itsreasonable discretion to defend Borrower and to assist in its defense and Borrower agrees to pay the fees and disbursements of such attorneys. Counterparts. This Agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but all suchcounterparts, taken together, shall constitute one and the same Agreement. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signedby Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver byLender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with thatprovision or any other provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Borrower, or betweenLender and any Grantor, shall constitute a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any futuretransactions. Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall notconstitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in thesole discretion of Lender. Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actuallyreceived by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, whendeposited to the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of thisAgreement. Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that thepurpose of the notice is to change the party’s address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s currentaddress. Unless otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to benotice given to all Borrowers. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance,that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provisionshall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considereddeleted from this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall notaffect the legality, validity or enforceability of any other provision of this Agreement. Sole Discretion of Lender. Whenever Lender’s consent or approval is required under this Agreement, the decision as to whether or not to consent orapprove shall be to the sole and exclusive discretion of Lender and Lender’s decision shall be final and conclusive. Subsidiaries and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including withoutlimitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of Borrower’s subsidiaries andaffiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be construed to require Lender to make any Loan orother financial accommodation to any of Borrower’s subsidiaries or affiliates. Successors and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents shall bindBorrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower shall not, however, have the rightto assign Borrower’s rights under this Agreement or any interest therein, without the prior written consent of Lender. Survival of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on allrepresentations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered by Borrower to Lenderunder this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such representations,warranties and covenants will survive the extension of Loan Advances and delivery to Lender of the Related Documents, shall be continuing to nature,shall be deemed made and redated by Borrower at the time each Loan Advance is made, and shall remain in full force and effect until such time asBorrower’s Indebtedness shall be paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. To the extent permitted by applicable law, all parties to this Agreement hereby waive the right to any jury trial in any action,Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.proceeding, or counterclaim brought by any party against any other party. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall havethe meanings attributed to such terms in the Uniform Commercial Code. Accounting words and terms not otherwise defined in this Agreement shall have themeanings assigned to them in accordance with generally accepted accounting principles as in effect on the date of this Agreement: Advance. The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf on a line of credit ormultiple advance basis under the terms and conditions of this Agreement. Agreement. The word “Agreement” means this Business Loan Agreement, as this Business Loan Agreement may be amended or modified from time totime, together with all exhibits and schedules attached to this Business Loan Agreement from time to time. Borrower. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note and all theirsuccessors and assigns. Cash & Equivalent. The words “Cash & Equivalent” mean all of Borrower’s cash, marketable securities, and other near-cash items, excludingsinking funds. Collateral. The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal property, whethergranted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security interest, mortgage, collateral mortgage,deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale,trust receipt lien, charge, lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interestwhatsoever, whether created by law, contract, or otherwise. Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to theprotection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and LiabilityAct of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L.No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act,42 U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or otherapplicable state or federal laws, rules, or regulations adopted pursuant thereto. ERISA. The word “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and including all regulationsand published interpretations of the act. Event of Default. The words “Event of Default” mean individually, collectively, and interchangeably any of the events of default set forth in thisAgreement in the default section of this Agreement. GAAP. The word “GAAP” means generally accepted accounting principles. Grantor. The word “Grantor” means each and all of the persons or entities granting a Security Interest in any Collateral for the Loan, including withoutlimitation all Borrowers granting such a Security Interest. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. BUSINESS LOAN AGREEMENTLoan No: 155354101(Continued) Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan, and, in each case, Borrower’ssuccessors, assigns, heirs, personal representatives, executors and administrators of any guarantor, surety, or accommodation party. Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical orinfectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored,disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense andinclude without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. Theterm “Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interesttogether with all other indebtedness and costs and expenses for which Borrower is responsible under this Agreement or under any of the RelatedDocuments. Lender. The word “Lender” means COMMUNITY BANK, its successors and assigns. Loan. The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter existing, andhowever evidenced, including without limitation those loans and financial accommodations described herein or described on any exhibit or scheduleattached to this Agreement from time to time, and further including any and all subsequent amendments, additions, substitutions, renewals andrefinancings of any of Borrower’s Loans. Note. The word “Note” means the promissory note dated November 15, 2000, in the original amount of $8,000,000.00 from BISCO INDUSTRIES,INC. to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissorynote or agreement. Permitted Liens. The words “Permitted Liens” mean (1) liens and security interests securing indebtedness owed by Borrower to Lender; (2) liens fortaxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens of materialmen, mechanics, warehousemen, orcarriers, or other like liens arising in the ordinary course of business and securing obligations which are not yet delinquent; (4) purchase money liens orpurchase money security interests upon or in any property acquired or held by Borrower in the ordinary course of business to secure indebtednessoutstanding on the date of this Agreement or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liensand security interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those liens andsecurity interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to the net value of Borrower’s assets. Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents,whether now or hereafter existing, executed in connection with the Loan. Security Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants, arrangements,understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing, or creating a Security Interest. Security Interest. The words “Security Interest” mean, individually, collectively, and interchangeably, without limitation, any and all types ofcollateral security, present and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge,crop pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien or title retentioncontract, lease or consignment intended as a security device, or any other security or lien interest whatsoever whether created by law, contract, orotherwise. Trade Receivables. The words “Trade Receivables” mean all of Borrower’s accounts from trade, net of allowance for doubtful accounts. BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT AND BORROWERAGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS DATED JUNE 1, 2007. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen F. Ceiley GLEN F. CEILEY, Chairman and CEO of BISCOINDUSTRIES, INC. LENDER: COMMUNITY BANK By:/s/ Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Authorized Signer LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-6558 PR-38 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.14 PROMISSORY NOTE PrincipalLoan DateMaturityLoan NoCallCollateralAccountOfficerInitials$8,000,000.0011-15-200005-01-2001155354101CLS 07240600714496/s/References in the shaded area are for Lender's use only and do not limit the applicability of this document to any particular loan or item. BORROWER:BISCO INDUSTRIES, INC. LENDER:COMMUNITY BANK 704 WEST SOUTHERN AVENUE ANAHEIM BRANCH ORANGE, CA 92865 1750 STATE COLLEGE BLVD ANAHEIM, CA 92806 Principal Amount: $8,000,000.00Initial Rate: 9.750%Date of Note: November 15, 2000 PROMISE TO PAY. BISCO INDUSTRIES, INC. ("Borrower") promises to pay to COMMUNITY BANK ("Lender"), or order, in lawful moneyof the United States of America, the principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much as may be outstanding, togetherwith interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance untilrepayment of each advance. PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one payment of all outstanding principal plus all accruedunpaid interest on May 1, 2001. In addition, Borrower will pay regular monthly payments of accrued unpaid Interest beginning December 1,2000, and all subsequent interest payments are due on the same day of each month after that. The annual interest rate for this Note is computed on a365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied bythe actual number of days the principal balance is outstanding. Borrower will pay Lender at Lender's address shown above or at such other place as Lendermay designate in writing. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal,and any remaining amount to any unpaid collection costs and late charges. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Note issubject to change from time to time based on changes in an index which is the Lender's, Community Bank, Reference Rate (the "Index"). Lender's ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena California, as its "Reference Rate",with the understanding that Lender's "Reference Rate" is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender's base rates. Lender will tell Borrower the current Index rate upon Borrower's request.Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The Indexcurrently is 9.500%. The interest rate to be applied to the unpaid principal balance of this Note will be at a rate of 0.250 percentage points overthe Index, resulting in an initial rate of 9.750%. NOTICE: Under no circumstances will the interest rate on this Note be more than the maximum rateallowed by applicable law. INTEREST RATE OPTIONS. The following interest rate options are available under this Note: (a) Default Option. The interest rate margin and index described in the "VARIABLE INTEREST RATE" paragraph above (the "Default Option"). (b) 30 Day London Interbank Offered Rate ("30 Day LIBOR Rate"). A margin of 2.000 percentage points over 30 Day London Interbank OfferedRate ("30 Day LIBOR Rate"). For purposes of this Note, 30 Day London Interbank Offered Rate ("30 Day LIBOR Rate") shall mean the per annum ratedetermined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposit in U.S. dollars to othermajor banks in the London interbank currency market for thirty (30) days ("Interest Period") with such 30 Day LIBOR Rate plus the margin, fixed forthe Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (30 days), the unpaidprincipal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. (c) 60 Day London Interbank Offered Rate ("60 Day LIBOR Rate"). A margin of 2.000 percentage points over 60 Day London Interbank OfferedRate ("60 Day LIBOR Rate"). For purposes of this Note, 60 Day London Interbank Offered Rate ("60 Day LIBOR Rate") shall mean the per annum ratedetermined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposits in U.S. dollars to othermajor banks in the London interbank currency market for sixty (60) days ("Interest Period") with such 60 Day LIBOR Rate plus the margin, fixed forthe Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (60 days), the unpaidprincipal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. (d) 90 Day London Interbank Offered Rate ("90 Day LIBOR Rate"). A margin of 2.000 percentage points over 90 Day London Interbank OfferedRate ("90 Day LIBOR Rate"). For purposes of this Note, 90 Day London Interbank Offered Rate ("90 Day LIBOR Rate") shall mean the per annum ratedetermined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposits in U.S. dollars to othermajor banks in the London interbank currency market for ninety (90) days ("Interest Period") with such 90 Day LIBOR Rate plus the margin, fixed forthe Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (90 days), the unpaidprincipal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. When the interest rate is based on a fixed rate, the rate shall be in effect for a period of the number of days or months as indicated in the rate option description(the "Interest Period"), in any case extended to the next succeeding business day when necessary, beginning on a borrowing date, conversion date or expirationdate of the then current Interest Period. Adjustments in the interest rate due to changes in the maximum nonusurious interest rate allowed (the "Highest LawfulRate") shall be made on the effective day of any change in the Highest Lawful Rate. Provided Borrower is not in default under this Note, Borrower may designate in advance which of the above interest rate indexes shall be applicable to anyloan advance under this Note and shall designate any optional Interest Period applicable to any fixed rate loan or advance. In the absence of any suchdesignation the interest rate option shall be the Default Option. Thereafter unpaid principal balances under this Note may be converted (at the end of an InterestPeriod if the index used to determine the interest rate therefore is a fixed rate) to another of the above interest rate options, or continued for an additional interestperiod, when applicable, as designated by Borrower in advance; and in the absence of sufficient advance designation as to conversion to or continuation of afixed rate index, the index shall be converted to the Default Option. Notwithstanding the foregoing, a fixed rate index may not be elected for a loan or advanceunder this Note, nor any conversion to or continuation of a fixed rate index be elected, if the Interest Period thereof would extend beyond the maturity of thisNote. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitledto a minimum interest charge of $500.00. Other than Borrower's obligation to pay any minimum interest charge, Borrower may pay without penalty all or aportion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation tocontinue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled paymentor $25.00, whichever is greater. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 11-15-2000PROMISSORY NOTEPage 2Loan No 155354101(Continued) DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promiseBorrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in thisNote or any agreement related to this Note, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan, extension ofcredit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any ofBorrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the Related Documents. (d) Anyrepresentation or statement made or furnished to Lender by Borrower or on Borrower's behalf is false or misleading in any material respect either now or at thetime made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower's property, Borrower makes an assignment for thebenefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditor triesto take any of Borrower's property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower's accounts withLender. (g) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Note. (h) A materialadverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. (i) Lenderin good faith deems itself insecure. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within thepreceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lender demandingcure of such default: (a) cures the default within fifteen (15) days; or (b) if the cure requires more than fifteen (15) days, immediately initiates steps whichLender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficientto produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Note and all accrued unpaid interest immediately due,without notice, and then Borrower will pay that amount. Upon Borrower's failure to pay all amounts declared due pursuant to this section, including failure topay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Note to 5.250 percentagepoints over the Index. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower also will pay Lender that amount. Thisincludes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses whether or not there is a lawsuit, including attorneys'fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipatedpost-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. This Note has been delivered toLender and accepted by Lender in the State of California. If there is a lawsuit, Borrower agrees upon Lender's request to submit to thejurisdiction of the courts of LOS ANGELES County, the State of California. Lender and Borrower hereby waive the right to any jury trial in anyaction, proceeding, or counterclaim brought by either Lender or Borrower against the other. Subject to the provisions on arbitration, this Noteshall be governed by and construed in accordance with the laws of the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower's loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lenderall Borrower's right, title and interest in and to, Borrower's accounts with Lender (whether checking, savings, or some other account), including withoutlimitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, andall trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law,to charge or setoff all sums owing on this Note against any and all such accounts. LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note may be requested orally by Borrower or by an authorizedperson. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone orotherwise to Lender are to be directed to Lender's office shown above. The following party or parties are authorized to request advances under the line of credituntil Lender receives from Borrower at Lender's address shown above written notice of revocation of their authority: GLEN F. CEILEY, Chairman andChief Executive Officer; STEPHEN CATANZARO, Chief Financial Offier; and ROBERT FITZPATRICK, Controller. Borrower agrees to be liablefor all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower's accounts with Lender. Theunpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including dailycomputer print-outs. Lender will have no obligation to advance funds under this Note if: (a) Borrower or any guarantor is in default under the terms of thisNote or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Note; (b)Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke suchguarantor's guarantee of this Note or any other loan with Lender; (d) Borrower has applied funds provided pursuant to this Note for purposes other than thoseauthorized by Lender; or (e) Lender in good faith deems itself insecure under this Note or any other agreement between Lender and Borrower. ARBITRATION. Lender and Borrower agree that all disputes, claims and controversies between them, whether individual, joint, or class innature, arising from this Note or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules ofthe American Arbitration Association, upon request of either party. No act to take or dispose of any collateral securing this Note shall constitute awaiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or a temporaryrestraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising anyrights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of the UniformCommercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning anycollateral securing this Note, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall alsoSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lender and Borrower agree that inthe event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, includingcounterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court havingjurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations,estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitrationproceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal ArbitrationAct shall apply to the construction, interpretation, and enforcement of this arbitration provision. OVER ADVANCES. The term "Over Advance" means and refers to the amount of any Advance made which exceeds the Principal Amount of this Note.Upon the occurrence of an Over Advance Borrower, upon Lender's election and demand, shall immediately pay to Lender, in lawful money of the UnitedStates of America, the amount of such excess and such failure to do so shall constitute an event of default herein. COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. REQUEST FOR LIBOR BORROWING. An exhibit, titled "REQUEST FOR LIBOR BORROWING," is attached to this Note and by this reference ismade a part of this Note just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this Note. PRIOR NOTE. Promissory Note dated June 1, 2000. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 11–15–2000PROMISSORY NOTEPage 3Loan No 155354101(Continued) GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender'sright to declare payment of this Note on its demand. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them.Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations,presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated inwriting, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agreethat Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party or guarantor or collateral; or impair, fail to realize uponor perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All suchparties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THEVARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPTOF A COMPLETED COPY OF THE NOTE. BORROWER: BISCO INDUSTRIES, INC. By: /s/ GLEN F. CEILEYGLEN F. CEILEY, Chairman and Chief Executive Officer Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.28 (c) 2000 CFI ProServices, Inc. All rights reserved. [CA-D20 15535410.LN C35.OVL] Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.15 CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCallCollateralAccountOfficerInitials$8,000,000.0007-01-2001155354101CLS 07240600714496/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 704 WEST SOUTHERN AVENUE ANAHEIM BRANCH ORANGE, CA 92885 1750 STATE COLLEGE BLVD ANAHEIM, CA 92806 Principal Amount: $8,000,000.00Date of Agreement: May 1, 2001 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from May 1, 2001 to July 1, 2001. PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful money of theUnited States of America, the principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much as may be outstanding, together with interest onthe unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan on demand, or if no demand is made, in one payment of all outstanding principal plus all accrued unpaid intereston July 1, 2001. In addition, Borrower will pay regular monthly payments of accrued unpaid interest beginning June 1, 2001, and all subsequent interestpayments are due on the same day of each month after that. The annual interest rate for this Agreement is computed on a 365/360 basis; that is, by applyingthe ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days theprincipal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amountto any unpaid collection costs and late charges. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (the “Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.Borrower understands that Lender may make loans based on other rates as well. The interest rate change will not occur more often than each day. The indexcurrently is 7.500%. The interest rate to be applied to the unpaid principal balance of this Agreement will be at a rate of 0.250 percentage points over the index,resulting in an initial rate of 7.750%. NOTICE: Under no circumstances will the interest rate on this Agreement be more than the maximum rate allowed byapplicable law. INTEREST RATE OPTIONS. The following interest rate options are available under this Agreement: (a) Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph above (the “Default Option”). (b) 30 Day London Interbank Offered Rate (“30 Day LIBOR Rate”). A margin of 2.000 percentage points over 30 Day London Interbank OfferedRate (“30 Day LIBOR Rate”). For purposes of this Agreement, 30 Day London Interbank Offered Rate (“30 Day LIBOR Rate”) shall mean the per annumrate determined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposit in U.S. dollars toother major banks in the London Interbank currency market for thirty (30) days (“Interest Period”) with such 30 Day LIBOR Rate plus the margin, fixedfor the Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (30 days), theunpaid principal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. (c) 60 Day London Interbank Offered Rate (“60 Day LIBOR Rate”). A margin of 2.000 percentage points over 60 Day London Interbank OfferedRate (“60 Day LIBOR Rate”). For purposes of this Agreement, 60 Day London Interbank Offered Rate (“60 Day LIBOR Rate”) shall mean the per annumrate determined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposits in U.S. dollars toother major banks in the London Interbank currency market for sixty (60) days (“Interest Period”) with such 60 Day LIBOR Rate plus the margin, fixedfor the Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (60 days), theunpaid principal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. (d) 90 Day London Interbank Offered Rate (“90 Day LIBOR Rate”). A margin of 2.000 percentage points over 90 Day London Interbank OfferedRate (“90 Day LIBOR Rate”). For purposes of this Agreement, 90 Day London Interbank Offered Rate (“90 Day LIBOR Rate”) shall mean the per annumSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.rate determined by the British Bankers Association to be the average rate of interest at which certain major banks would offer deposits in U.S. dollars toother major banks in the London Interbank currency market for ninety (90) days (“Interest Period”) with such 90 Day LIBOR Rate plus the margin,fixed for the Interest Period, upon the Borrowers submission of a Request for LIBOR Borrowing. At the expiration of each Libor Rate period (90 days), theunpaid principal balance thereunder shall bear interest at the Default Option unless another Libor Rate period is selected by Borrower. At no time shall anyamount extended under the Libor Rate option be prepaid. When the interest rate is based on a fixed rate, the rate shall be in effect for a period of the number of days or months as indicated in the rate option description(the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on a borrowing date, conversion date or expirationdate of the then current Interest Period. Adjustments in the interest rate due to changes in the maximum nonusurious interest rate allowed (the “Highest LawfulRate”) shall be made on the effective day of any change in the Highest Lawful Rate. Provided Borrower is not in default under this Agreement, Borrower may designate in advance which of the above interest rate indexes shall be applicable toany loan advance under this Agreement and shall designate any optional Interest Period applicable to any fixed rate loan or advance. In the absence of any suchdesignation the interest rate option shall be the Default Option. Thereafter unpaid principal balances under this Agreement may be converted (at the end of anInterest Period if the index used to determine the interest rate therefore is a fixed rate) to another of the above interest rate options, or continued for an additionalinterest period, when applicable, as designated by Borrower in advance; and in the absence of sufficient advance designation as to conversion to orcontinuation of a fixed rate index, the index shall be converted to the Default Option. Notwithstanding the foregoing, a fixed rate index may not be elected for aloan or advance under this Agreement, nor any conversion to or continuation of a fixed rate index be elected, if the Interest Period thereof would extend beyondthe maturity of this Agreement Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 05-01-2001CHANGE IN TERMS AGREEMENTPage 2Loan No 155354101(Continued) PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender isentitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penaltyall or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments of accrued unpaid interest. Rather, they will reduce the principal balance due. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled paymentor $25.00, whichever is greater. DEFAULT. Borrower will be in default if any of the following happens: (a) Borrower fails to make any payment when due. (b) Borrower breaks any promiseBorrower has made to Lender, or Borrower fails to comply with or to perform when due any other term, obligation, covenant, or condition contained in thisAgreement or any agreement related to this Agreement, or in any other agreement or loan Borrower has with Lender. (c) Borrower defaults under any loan,extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affectany of Borrower’s property or Borrower’s ability to repay this Note or perform Borrower’s obligations under this Note or any of the Related Documents. (d)Any representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf is false or misleading in any material respect either now orat the time made or furnished. (e) Borrower becomes insolvent, a receiver is appointed for any part of Borrower’s property, Borrower makes an assignment forthe benefit of creditors, or any proceeding is commenced either by Borrower or against Borrower under any bankruptcy or insolvency laws. (f) Any creditortries to take any of Borrower’s property on or in which Lender has a lien or security interest. This includes a garnishment of any of Borrower’s accounts withLender. (g) Any guarantor dies or any of the other events described in this default section occurs with respect to any guarantor of this Agreement. (h) A materialadverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of the Indebtedness is impaired. (i) Lenderin good faith deems itself insecure. If any default, other than a default in payment, is curable and if Borrower has not been given a notice of a breach of the same provision of this Agreementwithin the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving written notice from Lenderdemanding cure of such default: (a) cures the default within fifteen (15) days; or (b) if the cure requires more than fifteen (15) days, immediately initiatessteps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessarysteps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interest immediatelydue, without notice, and then Borrower will pay that amount. Upon Borrower’s failure to pay all amounts declared due pursuant to this section, includingfailure to pay upon final maturity, Lender, at its option, may also, if permitted under applicable law, increase the variable interest rate on this Agreement to5.250 percentage points over the Index. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower also will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses whether or not there is alawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction),appeals, and any anticipated post-judgment collection services. Borrower also will pay any court costs, in addition to all other sums provided by law. ThisAgreement has been delivered to Lender and accepted by Lender in the State of California. If there is a lawsuit, Borrower agrees upon Lender’srequest to submit to the jurisdiction of the courts of LOS ANGELES County, the State of California. Lender and Borrower hereby waive theright to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. Subject to the provisionson arbitration, this Agreement shall be governed by and construed in accordance with the laws of the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. Borrower grants to Lender a contractual security interest in, and hereby assigns, conveys, delivers, pledges, and transfers to Lenderall Borrower’s right, title and interest in and to, Borrower’s accounts with Lender (whether checking, savings, or some other account), including withoutlimitation all accounts held jointly with someone else and all accounts Borrower may open in the future, excluding however all IRA and Keogh accounts, andall trust accounts for which the grant of a security interest would be prohibited by law. Borrower authorizes Lender, to the extent permitted by applicable law,to charge or setoff all sums owing on this Agreement against any and all such accounts. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or by anauthorized person. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shown above. The following party or parties are authorized to request advances under theline of credit until Lender receives from Borrower at Lender’s address shown above written notice of revocation of their authority: GLEN F. CEILEY,Chairman and Chief Executive Officer; STEPHEN CATANZARO, Chief Financial Offier; and ROBERT FITZPATRICK, Controller. Borroweragrees to be liable for all sums either: (a) advanced in accordance with the instructions of an authorized person or (b) credited to any of Borrower’s accountswith Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internalrecords, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if: (a) Borrower or any guarantor is indefault under the terms of this Agreement or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection withthe signing of this Agreement; (b) Borrower or any guarantor ceases doing business or is insolvent; (c) any guarantor seeks, claims or otherwise attempts tolimit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender; (d) Borrower has applied funds provided pursuant to thisAgreement for purposes other than those authorized by Lender; or (e) Lender in good faith deems itself insecure under this Agreement or any other agreementbetween Lender and Borrower. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ARBITRATION. Lender and Borrower agree that all disputes, claims and controversies between them, whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association, upon request of either party. No act to take or dispose of any collateral securing this Agreement shallconstitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, without limitation, obtaining injunctive relief or atemporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; orexercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article 9 of theUniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right,concerning any collateral securing this Agreement, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securingthis Agreement, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Lenderand Borrower agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provisionin any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much ofsuch action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in anycourt having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statuteof limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in anyarbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The FederalArbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 05-01-2001CHANGE IN TERMS AGREEMENTPage 3Loan No 155354101(Continued) CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. OVER ADVANCES. The term “Over Advance” means and refers to the amount of any Advance made which exceeds the Principal Amount of this Note.Upon the occurrence of an Over Advance Borrower, upon Lender’s election and demand, shall immediately pay to Lender, in lawful money of the UnitedStates of America, the amount of such excess and such failure to do so shall constitute an event of default herein. REQUEST FOR LIBOR BORROWING. An exhibit, titled “REQUEST FOR LIBOR BORROWING,” is attached to this Agreement and by this referenceis made a part of this Agreement just as if all the provisions, terms and conditions of the Exhibit had been fully set forth in this Agreement. MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The inclusion of specific default provisions or rights of Lender shall notpreclude Lender’s right to declare payment of this Agreement on its demand. Lender may delay or forgo enforcing any of its rights or remedies under thisAgreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive anyapplicable statute of limitations, presentment, demand for payment, protest and notice of dishonor. Upon any change in the terms of this Agreement, andunless otherwise expressly stated in writing, no party who signs this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall bereleased from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan, or release any party orguarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary byLender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone otherthan the party with whom the modification is made. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT ANDACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen F. Ceiley GLEN F. CEILEY, Chairman and Chief Executive Officer Variable Rate. Line of Credit. LASER PRO, Reg. U.S. Pat. & T.M. Off., Ver. 3.29c (C) Concentrex 2001 All rights reserved. |CA-D20 F3.29aP3.29a 15535410.LN C35.OVL| Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$8,000,000.0007-01-200109-01-2001155354101CLS 07 / 240 496/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 STATE COLLEGE BOULEVARD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $8,000,000.00Initial Rate: 7.000%Date of Agreement: July 1, 2001 DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note dated November 15, 2000 and Change in Terms Agreement dated May 1,2001. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from July 1, 2001 to September 1, 2001. PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful money of theUnited States of America, the principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much as may be outstanding, together with interest onthe unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on September 1, 2001. In addition,Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning August 1, 2001, with all subsequentinterest payments to be due on the same day of each month after that. Interest on this Agreement is computed on a 365/360 simple interest basis; that is, byapplying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of daysthe principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (the “Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Indexcurrently is 6.750% per annum. The interest rate to be applied to the unpaid principal balance of the Note will be at a rate of 0.250 percentage points over theIndex, resulting in an initial rate of 7.000% per annum. NOTICE: Under no circumstances will the interest rate on the Note be more than the maximum rateallowed by applicable law. INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth herein, Borrower will be able to select, from one of the following RateOptions, an interest rate which will be applicable to a particular dollar increment of amounts outstanding, or to be disbursed, under this Agreement. Principalshall be payable as specified herein in the “Payment” section, and interest shall be payable as specified for each Rate Option. The following Rate Options areavailable to Borrower: (A) Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph herein (the “Default Option”). (B) Thirty (30) Day LIBOR Rate. A margin of 2.000 percentage points over Thirty (30) Day LIBOR Rate. For purposes of this Agreement, Thirty (30)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 30 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisRate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. (C) Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (60)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 60 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Rate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. (D) Ninety (90) Day LIBOR Rate. A margin of 2.000 percentage points over Ninety (90) Day LIBOR Rate. For purposes of this Agreement, Ninety(90) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certainmajor banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option willbe fixed (a “Fixed Rate Option”) for 90 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginningon a borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisRate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. The following provisions concerning Rate Options art a part of this Agreement: Selection of Rate Options. Provided Borrower is not in default under this Agreement, Borrower may request (a “Rate Request”) that a $1.00 increment orany amount in excess thereof (an “Increment”) of the outstanding principal of, or amounts to be disbursed under, this Agreement bear interest at theselected rate. Borrower may make this Rate Request by telephonic notice, however no later than 10:00 AM PDT three (3) business days prior to theeffective date of the Rate Request to permit Lender to quote the rate requested. Applicable Interest Rate. Borrower’s Rate Request will become effective, and interest on the increment designated will be calculated at the rate (the“Effective Rate”), which Borrower requested, for the applicable Interest Period, subject to the following: (1) Notwithstanding any Rate Request, interest shall be calculated on the basis of the Default Option if (a) Lender, in good faith, is unable toascertain the requested Rate Option by reason of circumstances then affecting the applicable money market or otherwise, (b) it becomes unlawful orimpracticable for Lender to maintain loans based upon the requested Rate Option, or (c) Lender, in good faith, determines that it is impracticable tomaintain loans based on the requested Rate Option because of increased taxes, regulatory costs, reserve requirements, expenses or any other costs orcharges that affect such Rate Options. Upon the occurrence of any of the events described in this “Interest Rate Options” section, any increment towhich a requested Rate Option applies shall be immediately (or at the option of Lender, at the end the current Interest Period), without further actionof Lender or Borrower, converted to an increment to which the Default Option applies. (2) Borrower may have no more than a total of 4 Effective Rates applicable to amounts outstanding under this Agreement at any given time. (3) A Rate Request shall be effective as to amounts to be disbursed under this Agreement only if, on the effective date of the Rate Requests, suchamounts are in fact disbursed to or for Borrower’s account in accordance with the provisions of this Agreement and any related loan documents. (4) Any amounts of outstanding principal for which a Rate Request has not been made, or is otherwise not effective, shall bear interest until paid infull at the Default Option. (5) Any amounts of outstanding principal bearing interest based upon a Rate Option shall bear interest at such rate until the end of the InterestPeriod therefor, and thereafter shall bear interest based upon the Default Option unless a new Rate Request for a Rate Option complying with theterms hereof has been made and has become effective. (6) If Borrower is in default under this Agreement (“Default”), then Lender shall no longer be obligated to honor any Rate Requests. (7) No Interest Period shall extend beyond the maturity date of this Agreement. Notices: Authority to Act. Borrower acknowledges and agrees that the agreement of Lender herein to receive certain notices by telephone is solely forBorrower’s convenience. Lender shall be entitled to rely on the authority of the person purporting to be a person authorized by Borrower to give such notice,and Lender shall have no liability to Borrower on account of any action taken by Lender in reliance upon such telephonic notice. Borrower’s obligation torepay all sums owing under the Note shall not be affected in any way or to any extent by any failure by Lender to receive written confirmation of anytelephonic notice or the receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be contained in the telephonicnotice. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lenderis entitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay withoutpenalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower ofBorrower’s obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borroweragrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender mayaccept it without losing any of Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. Allwritten communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes“payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailedor delivered to: COMMUNITY BANK, Loan Operations Center, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduledpayment or $25.00, whichever is greater. INTEREST AFTER DEFAULT. Upon Borrower’s failure to pay all amounts declared due pursuant to this section, including failure to pay upon finalmaturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Agreement to 5.250 percentage points overthe index. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in anyof the Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement betweenLender and Borrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under thisAgreement or the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false ormisleading at any time thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help,repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. Thisincludes a garnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply ifthere is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceedingand if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditoror forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performanceof the Indebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the sameprovision of this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, afterreceiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days: or (2) if the cure requires morethan fifteen (15) days; immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereaftercontinues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interestimmediately due, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not thereis a lawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), andappeals. Borrower also will pay any court costs, in addition to all other sums provided by law.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check orpreauthorized charge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whetherchecking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open inthe future. However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrowerauthorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or asprovided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, ordirections by telephone or otherwise to Lender are to be directed to Lender’s office shown above. The following persons currently are authorized to requestadvances and authorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice ofrevocation of their authority: GLEN F. CEILEY, Chairman & CEO of BISCO INDUSTRIES, INC.; ROBERT FITZPATRICK, Controller; andSTEPHEN CATANZARO, Chief Financial Officer. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructionsof an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Agreement at any timemay be evidenced by endorsements on this Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligationto advance funds under this Agreement if: (A) Borrower or any guarantor is in default under the terms of this Agreement or any agreement that Borroweror any guarantor has with Lender, including any agreement made in connection with the signing of this Agreement; (B) Borrower or any guarantor ceasesdoing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of thisAgreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Agreement for purposes other than those authorizedby Lender; or (E) Lender in good faith believes itself insecure. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose ofany Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage;obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposingof such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, orcontroversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim torescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitratorshall have the right or the power to enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action forjudicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of suchaction, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may beentered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court ofcompetent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in anaction brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall bedeemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, andenforcement of this arbitration provision. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 3 CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be bindingupon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower,Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance orextension without releasing Borrower from the obligation of this Agreement or liability under the Indebtedness. Notify Us of Inaccurate Information We Report To Consumer Reporting Agencies. Please notify us if we report any inaccurate information about youraccount(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address:COMMUNITY BANK Loan Operations Center P.O. Box 54477 Los Angeles, CA 90064 MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrowerand any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive any applicable statute of limitations, presentment,demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party whosigns this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender mayrenew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’ssecurity interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agreethat Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations underthis Agreement are joint and several. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.17.01.03 Copr. Harland Financial Solutions, Inc. 1997, 2001. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-659PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall/CollAccountOfficerInitials$8,000,000.00 09-01-200111-01-2001155354101CLS 07/ 240 496/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 STATE COLLEGE BOULEVARD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $8,000,000.00Initial Rate: 6.750%Date of Agreement: September 1, 2001 DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note dated November 15, 2000 and two Change in Terms Agreement dated May 1,2001 and July 01, 2001. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from September 1, 2001 to November 1, 2001. PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful money of theUnited States of America, the principal amount of Eight Million & 00/100 Dollars ($8,000,000.00) or so much as may be outstanding, together with interest onthe unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on November 1, 2001. In addition,Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning October 1, 2001, with all subsequentinterest payments to be due on the same day of each month after that. Interest on this Agreement is computed on a 365/360 simple interest basis; that is, byapplying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of daysthe principal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (“the Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The indexcurrently is 6.600% per annum. The interest rate to be applied to the unpaid principal balance of the Note will be at a rate of 0.250 percentage points over theindex, resulting in an initial rate of 6.750% per annum. NOTICE: Under no circumstances will the interest rate on the Note be more than the maximum rateallowed by applicable law. INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth herein, Borrower will be able to select, from one of the following RateOptions, an interest rate which will be applicable to a particular dollar increment of amounts outstanding, or to be disbursed, under this Agreement. Principalshall be payable as specified herein in the “Payment” section, and interest shall be payable as specified for each Rate Option. The following Rate Options areavailable to Borrower: (A)Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph herein (the “Default Option”). (B)Thirty (30) Day LIBOR Rate. A margin of 2.000 percentage points over Thirty (30) Day LIBOR Rate. For purposes of this Agreement, Thirty(30) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at whichcertain major banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on thisRate Option will be fixed (a “Fixed Rate Option”) for 30 days (the “Interest Period”), in any case extended to the next succeeding business daywhen necessary, beginning on a borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interestrate due to changes in the maximum nonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of anychange in the Highest Lawful Rate. Under this Rate Option, Borrower shall make monthly interest payments on the same day of the month, witha final payment of all accrued and unpaid interest on the last day of such Interest Period. (C)Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (60)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certainmajor banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this RateOption will be fixed (a “Fixed Rate Option”) for 60 days (the “Interest Period”), in any case extended to the next succeeding business day whennecessary, beginning on a borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest ratedue to changes in the maximum nonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any changeSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.due to changes in the maximum nonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any changein the Highest Lawful Rate. Under this Rate Option, Borrower shall make monthly interest payments on the same day of the month, with a finalpayment of all accrued and unpaid interest on the last day of such Interest Period. (D)Ninety (90) Day LIBOR Rate. A margin of 2.000 percentage points over Ninety (90) Day LIBOR Rate. For purposes of this Agreement, Ninety(90) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at whichcertain major banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on thisRate Option will be fixed (a “Fixed Rate Option”) for 90 days (the “Interest Period”), in any case extended to the next succeeding business daywhen necessary, beginning on a borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interestrate due to changes in the maximum nonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of anychange in the Highest Lawful Rate. Under this Rate Option, Borrower shall make monthly interest payments on the same day of the month, witha final payment of all accrued and unpaid interest on the last day of such Interest Period. The following provisions concerning Rate Options are a part of this Agreement. Selection of Rate Option. Provided Borrower is not in default under this Agreement, Borrower may request (a “Rate Request”) that a $1.00increment or any amount in excess thereof (an “Increment”) of the outstanding principal of, or amounts to be disbursed under, this Agreement bearinterest at the selected rate. Borrower may make this Rate Request by telephonic notice, however no later than 10:00 AM PDT three (3) business daysprior to the effective date of the Rate Request to permit Lender to quote the rate requested. Applicable Interest Rate. Borrower’s Rate Request will become effective, and interest on the increment designated will be calculated at the rate (the“Effective Rate”), which Borrower requested, for the applicable Interest Period, subject to the following: (1)Notwithstanding any Rate Request, interest shall be calculated on the basis of the Default Option if (a) Lender, in good faith, is unable toascertain the requested Rate Option by reason of circumstances then affecting the applicable money market or otherwise, (b) it becomesunlawful or impracticable for Lender to maintain loans based upon the requested Rate Option, or (c) Lender, in good faith, determines thatit is impracticable to maintain loans based on the requested Rate Option because of increased taxes, regulatory costs, reserve requirements,expenses or any other costs or charges that affect such Rate Options. Upon the occurrence of any of the events described in this “InterestRate Options” section, any Increment to which a requested Rate Option applies shall be immediately (or at the option of Lender, at the endthe current Interest Period), without further action of Lender or Borrower, converted to an increment to which the Default Option applies. (2)Borrower may have no more than a total of 4 Effective Rates applicable to amounts outstanding under this Agreement at any given time. (3)A Rate Request shall be effective as to amounts to be disbursed under this Agreement only if, on the effective date of the Rate Requests, suchamounts are in fact disbursed to or for Borrower’s account in accordance with the provisions of this Agreement and any related loandocuments. (4)Any amounts of outstanding principal for which a Rate Request has not been made, or is otherwise not effective, shall bear interest untilpaid in full at the Default Option. (5)Any amounts of outstanding principal bearing interest based upon a Rate Option shall bear interest at such rate until the end of the InterestPeriod therefor, and thereafter shall bear interest based upon the Default Option unless a new Rate Request for a Rate Option complying withthe terms hereof has been made and has become effective. (6)If Borrower is in default under this Agreement (“Default”), then Lender shall no longer be obligated to honor any Rate Requests. (7)No Interest Period shall extend beyond the maturity date of this Agreement Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 Notices: Authority to Act. Borrower acknowledges and agrees that the agreement of Lender herein to receive certain notices by telephone is solely forBorrower’s convenience. Lender shall be entitled to rely on the authority of the person purporting to be a person authorized by Borrower to give such notice,and Lender shall have no liability to Borrower on account of any action taken by Lender in reliance upon such telephonic notice. Borrower’s obligation torepay all sums owing under the Note shall not be affected in any way or to any extent by any failure by Lender to receive written confirmation of anytelephonic notice or the receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be contained in the telephonicnotice. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender isentitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penaltyall or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to sendLender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing anyof Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communicationsconcerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amountowed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: COMMUNITYBANK, Loan Operations Center, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or$25.00, whichever is greater. INTEREST AFTER DEFAULT. Upon Borrower’s failure to pay all amounts declared due pursuant to this section, including failure to pay upon finalmaturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Agreement to 5.250 percentage points ever theindex. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any ofthe Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreement orthe Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at anytime thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for anypart of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under anybankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a goodfaith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower givesLender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, inan amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of theIndebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provisionof this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, after receiving writtennotice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes allreasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interest immediatelydue, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is alawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or as providedin this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shown above. The following persons currently are authorized to request advances andauthorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of theirauthority: GLEN F. CEILEY, Chairman & CEO of BISCO INDUSTRIES, INC.; ROBERT FITZPATRICK, Controller; and STEPHENCATANZARO, Chief Financial Officer. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorizedperson or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced byendorsement on this Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds underthis Agreement if: (A) Borrower or any guarantor is in default under the terms of this Agreement or any agreement that Borrower or any guarantor has withLender, including any agreement made in connection with the signing of this Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent;(C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender;(D) Borrower has applied funds provided pursuant to this Agreement for purposes other than those authorized by Lender; or (E) Lender in good faith believesitself insecure. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of anyCollateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertywith or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action for judicial foreclosure pursuant toCalifornia Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitutea waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may bereferred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in thisAgreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel,waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitrationproceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The FederalArbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 3 CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be bindingupon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower,Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance orextension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness. Notify Us of Inaccurate Information We Report To Consumer Reporting Agencies. Please notify us if we report any inaccurate information about youraccount(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address:COMMUNITY BANK Loan Operations Center P.O. Box 54477 Los Angeles, CA 90054 MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrowerand any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive any applicable statute of limitations, presentment,demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party whosigns this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender mayrenew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’ssecurity interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agreethat Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations underthis Agreement are joint and several. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/S/ GLEN F. CEILEY GLEN F. CEILEY, CHAIRMAN AND CEO OF BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.17.01.05 Copr. Harland Financial Solutions, Inc. 1997, 2001. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall/CollAccountOfficerInitials$9,000,000.00 10-19-200105-01-2002155354101CLS 07/ 240 496/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 STATE COLLEGE BOULEVARD ANAHEIM, CA 92806 (800) 788-0999 Principal Amount: $9,000,000.00Initial Rate: 5.626%Date of Agreement: October 19, 2001 DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1,2001, July 01, 2001 and September 1, 2001. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from November 1, 2001 to May 1, 2002. Principal amountshall be increased from $8,000,000.00 to $9,000,000.00. The interest rate margin shall be decreased from 0.25 percentage point over the index to 0.125percentage points over the index as referenced in the “Variable Interest Rate” provision below. PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful money of theUnited States of America, the principal amount of Nine Million & 00/100 Dollars ($9,000,000.00) or so much as may be outstanding, together with interest onthe unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower with pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on May 1, 2002. In addition, Borrowerwill pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning November 1, 2001, with all subsequent interestpayments to be due on the same day of each month after that. Interest on this Agreement is computed on a 365/360 simple interest basis; that is, by applyingthe ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days theprincipal balance is outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (the “Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.The interest rate change with not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Indexcurrently is 5.500% per annum. The Interest rate to be applied to the unpaid principal balance of the Note will be at a rate of 0.125 percentage points over theIndex, resulting in an initial rate of 5.625 % per annum. NOTICE: Under no circumstances will the interest rate on the Note be more than the maximum rateallowed by applicable law. INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth herein, Borrower will be able to select, from one of the following RateOptions, an interest rate which will be applicable to a particular dollar increment of amounts outstanding, or to be disbursed, under this Agreement. Principalshall be payable as specified herein in the “Payment” section, and interest shall be payable as specified for each Rate Option. The following Rate Options areavailable to Borrower: (A) Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph herein (the “Default Option”). (B) Thirty (30) Day LIBOR Rate. A margin of 2.000 percentage points over Thirty (30) Day LIBOR Rate. For purposes of this Agreement, Thirty(30) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 30 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest on the lastday of such Interest Period. (C) Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (60)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 60 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.nonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest on the lastday of such Interest Period. (D) Ninety (90) Day LIBOR Rate. A margin of 2.000 percentage points over Ninety (90) Day LIBOR Rate. For purposes of this Agreement, Ninety(90) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certainmajor banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option willbe fixed (a “Fixed Rate Option”) for 90 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning ona borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest on the lastday of such Interest Period. The following provisions concerning Rate Options are a part of this Agreement: Selection of Rate Options. Provided Borrower is not in default under this Agreement, Borrower may request (a “Rate Request”) that a $1.00 increment orany amount in excess thereof (an “Increment”) of the outstanding principal of, or amounts to be disbursed under, this Agreement bear interest at theselected rate. Borrower may make this Rate Request by telephonic notice, however no later than 10:00 AM PDT three (3) business days prior to the effectivedate of the Rate Request to permit Lender to quote the rate requested. Applicable Interest Rate. Borrower’s Rate Request will become effective, and interest on the increment designated will be calculated at the rate (the“Effective Rate”), which Borrower requested, for the applicable Interest Period, subject to the following: (1) Notwithstanding any Rate Request, interest shall be calculated on the basis of the Default Option if (a) Lender, in good faith, is unable toascertain the requested Rate Option by reason of circumstances then affecting the applicable money market or otherwise, (b) it becomes unlawful orimpracticable for Lender to maintain loans based upon the requested Rate Option, or (c) Lender, in good faith, determines that it is impracticable tomaintain loans based on the requested Rate Option because of increased taxes, regulatory costs, reserve requirements, expenses or any other costs orcharges that affect such Rate Options. Upon the occurrence of any of the events described in this “Interest Rate Options” section, any increment towhich a requested Rate Option applies shall be immediately (or at the option of Lender, at the end the current Interest Period), without further action ofLender or Borrower, converted to an increment to which the Default Option applies. (2) Borrower may have no more than a total of 4 Effective Rates applicable to amounts outstanding under this Agreement at any given time. (3) A Rate Request shall be effective as to amounts to be disbursed under this Agreement only if, on the effective date of the Rate Requests, suchamounts are in fact disbursed to or for Borrower’s account in accordance with the provisions of this Agreement and any related loan documents. (4) Any amounts of outstanding principal for which a Rate Request has not been made, or is otherwise not effective, shall been interest until paid infull at the Default Option. (5) Any amounts of outstanding principal bearing interest based upon a Rate Option shall bear interest at such rate until the end of the Interest Periodtherefor, and thereafter shall bear interest based upon the Default Option unless a new Rate Request for a Rate Option complying with the terms hereofhas been made and has become effective. (6) If Borrower is in default under this Agreement (“Default”), then Lender shall no longer be obligated to honor any Rate Requests. (7)No Interest Period shall extend beyond the maturity date of this Agreement. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 Notices: Authority to Act. Borrower acknowledges and agrees that the agreement of Lender herein to receive certain notices by telephone is solely forBorrower’s convenience. Lender shall be entitled to rely on the authority of the person purporting to be a person authorized by Borrower to give suchnotice, and Lender shall have no liability to Borrower on account of any action taken by Lender in reliance upon such telephonic notice. Borrower’sobligation to repay all sums owing under the Note shall not be affected in any way or to any extent by any failure by Lender to receive writtenconfirmation of any telephonic notice or the receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be containedin the telephonic notice. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender isentitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penaltyall or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to sendLender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing anyof Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communicationsconcerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amountowed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: COMMUNITYBANK, Loan Operations Center, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or$25.00, whichever is greater. INTEREST AFTER DEFAULT. Upon Borrower’s failure to pay all amounts declared due pursuant to this section, including failure to pay upon finalmaturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Agreement to 5.125 percentage points over theIndex. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any ofthe Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreementor the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at anytime thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a goodfaith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrowergives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeitureproceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance ofthe Indebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the sameprovision of this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, afterreceiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more thanfifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continuesand completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interest immediatelydue, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is alawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or as providedin this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shown above. The following persons currently are authorized to request advances andauthorize payments under the line of credit Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of their authority:GLEN F. CEILEY, Chairman & CEO of BISCO INDUSTRIES, INC.; ROBERT FITZPATRICK, Controller; and STEPHEN CATANZARO,Chief Financial Officer. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B)credited to any of Borrower’s accounts with Lender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements onthis Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if:(A) Borrower or any guarantor is in default under the terms of this Agreement or any agreement that Borrower or any guarantor has with Lender, including anyagreement made in connection with the signing of this Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantorseeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender; (D) Borrower hasapplied funds provided pursuant to this Agreement for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of anyCollateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertywith or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action for judicial foreclosure pursuant toCalifornia Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitutea waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may bereferred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in thisAgreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel,waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitrationproceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The FederalArbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 3 CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be bindingupon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower,Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance orextension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness. Notify Us Of Inaccurate Information We Report To Consumer Reporting Agencies. Please notify us if we report any inaccurate information about youraccount(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us at the following address:COMMUNITY BANK Loan Operations Center P.O. Box 54477 Los Angeles, CA 90054 MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrowerand any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive any applicable statute of limitations, presentment,demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party whosigns this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender mayrenew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’ssecurity interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agreethat Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations underthis Agreement are joint and several. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.17.01.08 Copr. Harland Financial Solutions, Inc. 1997, 2001. All Rights Reserved. - CA c:\CF150\CFT\LPL\D20C.FC TR-459 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0004-30-200207-01-2002155354101CLS 07/240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 STATE COLLEGE BOULEVARD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.875%Date of Agreement: April 30, 2002 DESCRIPTION OF EXISTING INDEBTEDNESS. The Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1,2001; July 01, 2001; September 1, 2001 and October 19, 2001. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from May 1, 2002 to July 1, 2002. DESCRIPTION OF CHANGE IN LOAN AGREEMENT. 1) Maintain Current Assets of $10,000,000.00. PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful money of theUnited States of America, the principal amount of Nine Million & 00/100 Dollars ($9,000,000.00) or so much as may be outstanding, together with interest onthe unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on July 1, 2002. In addition, Borrowerwill pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning June 1, 2002, with all subsequent interest paymentsto be due on the same day of each month after that. Interest on this Agreement is computed on a 365/360 simple interest basis; that is, by applying the ratio ofthe annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balanceis outstanding. Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (the “Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The indexcurrently is 4.750% per annum. The interest rate to be applied to the unpaid principal balance of the Note will be at a rate of 0.125 percentage points over theindex, resulting in an initial rate of 4.875% per annum. NOTICE: Under no circumstances will the interest rate on the Note be more than the maximum rateallowed by applicable law. INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth herein, Borrower will be able to select, from one of the following RateOptions, an interest rate which will be applicable to a particular dollar increment of amounts outstanding, or to be disbursed, under this Agreement. Principalshall be payable as specified herein in the “Payment” section, and interest shall be payable as specified for each Rate Option. The following Rate Options areavailable to Borrower: (A) Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph herein (the “Default Option”). (B) Thirty (30) Day LIBOR Rate. A margin of 2.000 percentage points over Thirty (30) Day LIBOR Rate. For purposes of this Agreement, Thirty(30) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 30 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest on the lastday of such Interest Period. (C) Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (6O)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks to the London Interbank Currency Market. Interest based on this Rate Option will be fixed(a “Fixed Rate Option”) for 60 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest on the lastday of such Interest Period. (D) Ninety (90) Day LIBOR Rate. A margin of 2.000 percentage points over Ninety (90) Day LIBOR Rate. For purposes of this Agreement, Ninety(90) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certainmajor banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option willbe fixed (a “Fixed Rate Option”) for 90 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning ona borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under this RateOption, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid Interest on the lastday of such interest Period. The following provisions concerning Rate Options are a part of this Agreement: Selection of Rate Options. Provided Borrower is not in default under this Agreement, Borrower may request (a “Rate Request”) that a $1.00 increment orany amount in excess thereof (an “Increment”) of the outstanding principal of, or amounts to be disbursed under, this Agreement bear interest at theselected rate. Borrower may make this Rate Request by telephonic notice, however no later than 10:00 AM PDT three (3) business days prior to the effectivedate of the Rate Request to permit Lender to quote the rate requested. Applicable Interest Rate. Borrower’s Rate Request will become effective, and interest on the increment designated will be calculated at the rate (the“Effective Rate”), which Borrower requested, for the applicable Interest Period, subject to the following: (1) Notwithstanding any Rate Request, interest shall be calculated on the basis of the Default Option if (a) Lender, in good faith, is unable toascertain the requested Rate Option by reason of circumstances then affecting the applicable money market or otherwise, (b) it becomes unlawful orimpracticable for Lender to maintain loans based upon the requested Rate Option, or (c) Lender, in good faith, determines that it is impracticable tomaintain loans based on the requested Rate Option because of increased taxes, regulatory costs, reserve requirements, expenses or any other costs orcharges that affect such Rate Options. Upon the occurrence of any of the events described in this “Interest Rate Options” section, any increment towhich a requested Rate Option applies shall be immediately (or at the option of Lender, at the end the current Interest Period), without further action ofLender or Borrower, converted to an increment to which the Default Option applies. (2) Borrower may have no more than a total of 4 Effective Rates applicable to amounts outstanding under this Agreement at any given time. (3) A Rate Request shall be effective as to amounts to be disbursed under this Agreement only if, on the effective date of the Rate Requests, suchamounts are in fact disbursed to or for Borrower’s account in accordance with the provisions of this Agreement and any related loan documents. (4) Any amounts of outstanding principal for which a Rate Request has not been made, or is otherwise not effective, shall been interest until paid infull at the Default Option. (5) Any amounts of outstanding principal bearing interest based upon a Rate Option shall bear interest at such rate until the end of the Interest Periodtherefor, and thereafter shall bear interest based upon the Default Option unless a new Rate Request for a Rate Option complying with the terms hereofhas been made and has become effective. (6) If Borrower is in default under this Agreement (“Default”), then Lender shall no longer be obligated to honor any Rate Requests. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 (7) No Interest Period shall extend beyond the maturity date of this Agreement. Notices: Authority to Act. Borrower acknowledges and agrees that the agreement of Lender herein to receive certain notices by telephone is solely forBorrower’s convenience. Lender shall be entitled to rely on the authority of the person purporting to be a person authorized by Borrower to give suchnotice, and Lender shall have no liability to Borrower on account of any action taken by Lender in reliance upon such telephonic notice. Borrower’sobligation to repay all sums owing under the Note shall not be affected in any way or to any extent by any failure by Lender to receive writtenconfirmation of any telephonic notice or the receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be containedin the telephonic notice. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender isentitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penaltyall or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to sendLender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing anyof Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communicationsconcerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amountowed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: COMMUNITYBANK, Loan Operations Center, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or$25.00, whichever is greater. INTEREST AFTER DEFAULT. Upon Borrower’s failure to pay all amounts declared due pursuant to this section, including failure to pay upon finalmaturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Agreement to 5.125 percentage points over theIndex. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any ofthe Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreementor the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at anytime thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a goodfaith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrowergives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeitureproceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies orbecomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness evidenced by this Note. In the event ofa death, Lender, at its option, may, but shall not be required to, permit the Guarantor’s estate to assume unconditionally the obligations arising under theguaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance ofthe Indebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the sameSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.provision of this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, afterreceiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more thanfifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continuesand completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interest immediatelydue, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is alawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or as providedin this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shown above. The following persons currently are authorized to request advances andauthorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, written notice of revocation of theirauthority: GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC.; and ROBERT FITZPATRICK, Controller. Borrower agrees tobe liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts withLender. The unpaid principal balance owing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internalrecords, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if: (A) Borrower or any guarantor is indefault under the terms of this Agreement or any agreement that Borrower or any guarantor has with Lender, including any agreement made in connection withthe signing of this Agreement; (B) Borrower or any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts tolimit, modify or revoke such guarantor’s guarantee of this Agreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to thisAgreement for purposes other than those authorized by Lender; or (E) Lender in good faith believes itself insecure. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of anyCollateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertywith or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action for judicial foreclosure pursuant toCalifornia Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitutea waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may bereferred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in thisAgreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 3 The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a partyshall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of anaction for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitrationprovision. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be bindingupon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower,Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance orextension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report anyinaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us atthe following address: COMMUNITY BANK, ANAHEIM BRANCH, 1750 STATE COLLEGE BOULEVARD, ANAHEIM, CA 92806 MISCELLANEOUS PROVISIONS. Lender may delay or forgo enforcing any of its rights or remedies under this Agreement without losing them. Borrowerand any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive any applicable statute of limitations, presentment,demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unless otherwise expressly stated in writing, no party whosigns this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender mayrenew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’ssecurity interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agreethat Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations underthis Agreement are joint and several. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By: /s/ Glen F. Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.19.20.05 Copr. Harland Financial Solutions, Inc. 1997, 2002. All Rights Reserved. - CA c:\CF150\CFT\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0006-17-200209-01-2002155354101CLS 07 / 240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 STATE COLLEGE BOULEVARD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.875%Date of Agreement: June 17, 2002 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 01, 2001; September 1, 2001; October 19, 2001 and April 30, 2002. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from July 1, 2002 to September 01, 2002. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By: /s/ Glen F. Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.19.20.05 Copr. Harland Financial Solutions, Inc. 1997, 2002. All Rights Reserved. - CA c:\CF150\CFT\LPL\D20C.FC TR-630 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0008-28-200210-01-2002155354101CLS 07 / 240 644References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 SOUTH STATE COLLEGE BLVD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.875%Date of Agreement: August 28, 2002 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002 and June 17, 2002. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The Maturity date of the Note is hereby extended from September 1, 2002 to October 1, 2002. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen F. Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.20.00.010 Copr. Harland Financial Solutions, Inc. 1997, 2002. All Rights Reserved. - CA c:\CF150\CFT\LPL\D20C.FC TR-630 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000,0009-16-200211-01-2002155354101CLS 07 / 240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 SOUTH STATE COLLEGE BLVD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.875%Date of Agreement: September 16, 2002 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002 and August 28, 2002. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. Maturity date of the Note is hereby extended from October 1, 2002 to November 01, 2002. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen F. Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.20.00.010 Copr. Harland Financial Solutions, Inc. 1997, 2002. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20C.FC TR-859 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0010-28-200202-01-2003155354101CLS 07 / 240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 SOUTH STATE COLLEGE BLVD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.875%Date of Agreement: October 28, 2002 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002, August 28, 2002 and September 16, 2002. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. Maturity date of the Note is hereby extended from to November 01, 2002 to February 1, 2003. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glen F. Ceiley GLEN F. CEILEY, CHAIRMAN & CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.20.00.010 Copr. Harland Financial Solutions, Inc. 1997, 2002. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20CFC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0001-24-200304-01-2003155354101CLS 07 / 240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 SOUTH STATE COLLEGE BLVD ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.375%Date of Agreement: January 24, 2003 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002 and October 28, 2002. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. Maturity date of the Note is hereby extended from February 1, 2003 to April 01, 2003. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, CHAIRMAN & CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.20.00.010 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-659PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0003-27-200306-01-2003155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.375%Date of Agreement: March 27, 2003 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002 and January24, 2003. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. (1) Maturity date of the Note is hereby extended from April 01, 2003 to June 1, 2003.(2) Persons authorized to request advances and paydowns under the line of credit shall now include: CHRIS GRAHAM, Controller; MIKE BURGESS,Staff Accountant and JUDY VALENTIN, Staff Accountant.(3) STEPHEN CATANZARO, Chief Financial Officer and ROBERT FITZPATRICK, Controller, are no longer authorized to request advance andpaydowns under the line of credit. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.21.50.002 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0006-01-200310-01-2003155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.375%Date of Agreement: June 1, 2003 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003 and March 27, 2003. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN BUSINESS LOAN AGREEMENT. Subject to the terms of this Agreement, Lender will issue commercial and standby letters of credit (each a “Letter of Credit”) on behalf of Borrower. At no time,however, shall the total face amount of all Letters of Credit outstanding, less any partial draws paid under the Letters of Credit exceed the sum of$1,000,000.00. (1) Upon Lender’s request, Borrower promptly shall pay to Lender issuance fees and such other fees, commissions, costs, and any out-of-pocket expensescharged or incurred by Lender with respect to any Letter of Credit. (2) The commitment by Lender to issue Letters of Credit shall, unless earlier terminated in accordance with the terms of this Agreement, automaticallyterminate on the Expiration Date and no Letter of Credit shall expire on a date which is more than zero (0) days after the Expiration Date. (3) Each Letter of Credit shall be in form and substance satisfactory to Lender and in favor of beneficiaries satisfactory to Lender, provided that Lender mayrefuse to issue a Letter of Credit due to the nature of the transaction or its terms or in connection with any transaction where Lender, due to the beneficiary orthe nationality or residence of the beneficiary, would be prohibited by any applicable law, regulation, or order from issuing such Letter of Credit. Under nocircumstances, however will a Letter of Credit exceed zero (0) days from the issue date. (4) Prior to the issuance of each Letter of Credit, and in all events prior to any daily cutoff time Lender may have established for purposes thereof, Borrowershall deliver to Lender a duly executed form of Lender’s standard form of application for issuance of letter of credit with proper insertions INTERNAL FINANCIAL STATEMENTS: As soon as available, but in no event later than (30) days after the end of each month, Borrower’s financialstatements for the month, prepared by borrower in form satisfactory to Lender. DESCRIPTION OF CHANGE IN TERMS. (1) The maturity date of the Note is hereby extended from June 1, 2003 to October 1, 2003 (2) The Libor Optional Rates are no longer available for this facility. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.21.50.002 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0010-01-200312-01-2003155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.125%Date of Agreement: October 1, 2003 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003, March 27, 2003 and June 1, 2003. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The maturity date of the Note is hereby extended from October 1, 2003 to December 1, 2003. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.22.10.005 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA G:\CFl50\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0012-01-200302-01-2004155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.125%Date of Agreement: December 1, 2003 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003, March 27, 2003; June 1, 2003 and October 01, 2003. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The maturity date of the Note is hereby extended from December 1, 2003 to February 01, 2004. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.22.10.005 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-859 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0002-01-200405-01-2004155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.125%Date of Agreement: February 1, 2004 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003, March 27, 2003; June 1, 2003; October 01, 2003 and December 1, 2003. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The maturity date of the Note is hereby extended from February 1, 2004 to May 1, 2004. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.22.10.005 Copr. Harland Financial Solutions. Inc. 1997, 2004. All Rights Reserved, - CA c:\CFl50\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0005-01-200407-01-2004155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.125%Date of Agreement: May 1, 2004 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 01, 2003; December 1, 2003; and February 1, 2004. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The maturity date of the Note is hereby extended from May 1, 2004 to July 1, 2004. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.23.20.002 Copr. Harland Financial Solutions. Inc. 1997, 2004. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20C.FC TR-659 PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0006-23-200408-01-2004155354101CLS 07 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.125%Date of Agreement: June 23, 2004 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 01, 2003; December 1, 2003; February 1, 2004; and May 1, 2004. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. The maturity date of the Note is hereby extended from July 1, 2004 to August 1, 2004. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC, BY:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.23 20.002 Copr. Harland Financial Solutions. Inc 1997, 2004. All Rights Reserved - CA o:\CFIS0\CFl\LPL\D20C.FC TR-659PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0008-01-200402-01-2005155354101CLS 01 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 4.375%Date of Agreement: August 1, 2004 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 01, 2003; December 1, 2003; February 1, 2004; May 1, 2004 and June 23, 2004. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1, 1999. DESCRIPTION OF CHANGE IN TERMS. 1) Maturity date of the Note is hereby extended from August 1, 2004 to Feburary 1, 2005. 2) Additional Collateral as described per Commercial Security Agreement of even date. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. BY:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.23.20.002 Copr. Harland Financial Solution. Inc. 1997, 2004. All Rights Reserved. - CA c:\CFI50\CFI\LPL\D20C.FC TR-6384PR-CERTIFIE Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0002-01-200504-01-2005155354101CLS 01 /240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 5.375%Date of Agreement: February 1, 2005 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 01, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004 and August 1, 2004. DESCRIPTION OF COLLATERAL. Collateral as described per Commercial Security Agreement dated March 1,1999. DESCRIPTION OF CHANGE IN TERMS. 1) Maturity date of the Note is hereby extended from February 1, 2005 to April 1, 2005.2) Michael Bains is hereby added as authorized person to make advances and paydowns on this Note. DESCRIPTION OF CHANGE IN LOAN AGREEMENT 1) Collateral Schedules. With respect to Eligible Accounts, schedules shall be delivered Borrower shall execute and deliver to Lender by the twentieth(20th) day of each month during the term of this Agreement the following: a Transaction Report; a Monthly Reconciliation; Schedules of Ineligible Accountsand Inventory; a detailed aging, by total, of Borrower’s Accounts; a Compliance Certificate; and a written report to Lender of all contract disputes and claimsin excess of Fifty Thousand and No/100 ($50,000.00) not previosuly disclosed to Lender and a listing, by name, address, telephone number and principalcontact, of all of Borrower’s Account Debtors; each prepared as of the last day of the immediately preceding calendar month and each certified by anAuthorized Representative as being true and connect. 2) Annual Statements. Borrower shall furnish Lender, as soon as available within one hundred twenty days (120) days of fiscal year end, Borrower’sbalance sheet and income statement for the year ended, audited by a certified public accountant satisfactory to Lender. 3) Right to Audit and Inspect. Without in any way limiting Lender’s rights under any other provision of this Agreement, Lender shall be entitled toconduct, semi-annual audit(s) of Borrower’s books and, semi-annual inspection(s) of the Inventory and Equipment and to check and test the same as toquality, quantity, value and condition during the Borrower’s normal business hours. The costs and expenses incurred by Lender in connection with suchaudits and inspections shall be charged to Borrower. Lender will invoice Borrower for such costs and expenses and Borrower shall pay Lender the full amountof such costs and expenses within ten (10) days from the date of invoice. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. BY:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.LASER PRO Lending, Ver. 5.23.20.002 Copr. Harland Financial Solution. Inc. 1997, 2004. All Rights Reserved. - CA c:\CFI50\CFI\LPL\D20C.FC TR-5384PR-CERTIFIE Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan PateMaturityLoan NoCall / CollAccountOfficerInitials$9,000,000.0004-01-200504-01-2006155354101CLS 03 /240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $9,000,000.00Initial Rate: 5.875%Date of Agreement: April 1, 2005 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004 andFebruary 1, 2005. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.(1)Maturity date of the Note is hereby extended from April 1, 2005 to April 1, 2006.(2)Libor Optional Rate are hereby added, as described under “Interest Rates Optional” below(3)The Line of Credit is hereby amended from a Certified Accounts Receivable to a Trading Asset(4)The Subordinated Debt in the amount of $2,926,000.00, in the name of Glen F. Ceiley is hereby released. PAYMENT. Borrower will pay this loan on demand. Payment in full is due immediately upon Lender’s demand. If no demand is made,Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on April 1, 2006. in addition, Borrowerwill pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning June 1, 2005, with all subsequentInterest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will beapplied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges. Interest on thisAgreement is computed on a 365/360 simple interest basis; that is, by applying the ratio of the annual interest rate over a year of 360 days,multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower willpay Lender at Lender’s address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. Subject to designation of a different interest rate index by Borrower as provided below, the interest rate on this Agreement issubject to change from time to time based on changes in an index which is the Lender’s, Community Bank, Reference Rate (the “Index”). Lender’s ReferenceRate shall mean the variable rate of interest, per annum most recently announced by Lender at its head office in Pasadena, California, as its “Reference Rate”,with the understanding that Lender’s “Reference Rate” is one of its base rates and serves as a basis upon which effective rates of interest are calculated forloans making reference thereto and may not be the lowest of the Lender’s base rates. Lender will tell Borrower the current index rate upon Borrower’s request.The interest rate change will not occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The indexcurrently is 5.750% per annum. The interest rate to be applied to the unpaid principal balance of the Note will be at a rate of 0.125 percentagepoints over the index, resulting in an initial rate of 5.875% per annum. NOTICE: Under no circumstances will the interest rate on the Note be more thanthe maximum rate allowed by applicable law. INTEREST RATE OPTIONS. On the terms and subject to the conditions set forth herein, Borrower will be able to select, from one of the following RateOptions, an interest rate which will be applicable to a particular dollar increment of amounts outstanding, or to be disbursed, under this Agreement. Principalshall be payable as specified herein in the “Payment” section, and interest shall be payable as specified for each Rate Option. The following Rate Options areavailable to Borrower: (A) Default Option. The interest rate margin and index described in the “VARIABLE INTEREST RATE” paragraph herein (the “Default Option”). (B) Thirty (30) Day LIBOR Rate. A margin of 2.000 percentage points over Thirty (30) Day LIBOR Rate. For purposes of this Agreement, Thirty (30)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 30 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisRate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. (C) Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (60)Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(C) Sixty (60) Day LIBOR Rate. A margin of 2.000 percentage points over Sixty (60) Day LIBOR Rate. For purposes of this Agreement, Sixty (60)Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certain majorbanks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option will befixed (a “Fixed Rate Option”) for 60 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginning on aborrowing date, conversion date or expiration date of the then current interest Period. Adjustments in the Interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisRate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. (D) Ninety (90) Day LIBOR Rate. A margin of 2.000 percentage points over Ninety (90) Day LIBOR Rate. For purposes of this Agreement, Ninety(90) Day LIBOR Rate shall mean the per annum rate determined by the British Bankers Association to be the average rate of interest at which certainmajor banks would offer deposit in U.S. Dollars to other major banks in the London Interbank Currency Market. Interest based on this Rate Option willbe fixed (a “Fixed Rate Option”) for 90 days (the “Interest Period”), in any case extended to the next succeeding business day when necessary, beginningon a borrowing date, conversion date or expiration date of the then current Interest Period. Adjustments in the interest rate due to changes in the maximumnonusurious interest rate allowed (the “Highest Lawful Rate”) shall be made on the effective day of any change in the Highest Lawful Rate. Under thisRate Option, Borrower shall make monthly interest payments on the same day of the month, with a final payment of all accrued and unpaid interest onthe last day of such Interest Period. The following provisions concerning Rate Options are a part of this Agreement: Selection of Rate Options. Provided Borrower is not in default under this Agreement, Borrower may request (a “Rate Request”) that a $500,000.00increment or any amount in excess thereof (an “Increment”) of the outstanding principal of, or amounts to be disbursed under, this Agreement bear interestat the selected rate. Borrower may make this Rate Request by telephonic notice, however no later than 10:00 AM PDT three (3) business days prior to theeffective date of the Rate Request to permit Lender to quote the rate requested. Applicable Interest Rate. Borrower’s Rate Request will become effective, and interest on the increment designated will be calculated at the rate (the“Effective Rate”), which Borrower requested, for the applicable Interest Period, subject to the following: (1) Notwithstanding any Rate Request, interest shall be calculated on the basis of the Default Option if (a) Lender, in good faith, is unable toascertain the requested Rate Option by reason of circumstances then affecting the applicable money market or otherwise, (b) it becomes unlawful orimpracticable for Lender to maintain loans based upon the requested Rate Option, or (c) Lender, in good faith, determines that it is impracticable tomaintain loans based on the requested Rate Option because of increased taxes, regulatory costs, reserve requirements, expenses or any other costs orcharges that affect such Rate Options. Upon the occurrence of any of the events described in this “Interest Rate Options” section, any increment towhich a requested Rate Option applies shall be immediately (or at the option of Lender, at the end the current Interest Period), without further actionof Lender or Borrower, converted to an increment to which the Default Option applies. (2) Borrower may have no more than a total of 1 Effective Rates applicable to amounts outstanding under this Agreement at any given time. (3) A Rate Request shall be effective as to amounts to be disbursed under this Agreement only if, on the effective date of the Rate Requests, suchamounts are in fact disbursed to or for Borrower’s account in accordance with the provisions of this Agreement and any related loan documents. (4) Any amounts of outstanding principal for which a Rate Request has not been made, or is otherwise not effective, shall bear interest until paid infull at the Default Option. (5) Any amounts of outstanding principal bearing interest based upon a Rate Option shall bear interest at such rate until the end of the InterestPeriod therefor, and thereafter shall bear interest based upon the Default Option unless a new Rate Request for a Rate Option complying with theterms hereof has been made and has become effective. (6) If Borrower is in default under this Agreement (“Default”), then Lender shall no longer be obligated to honor any Rate Requests. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 (7) No Interest Period shall extend beyond the maturity date of this Agreement. Notices: Authority to Act. Borrower acknowledges and agrees that the agreement of Lender herein to receive certain notices by telephone is solely forBorrower’s convenience. Lender shall be entitled to rely on the authority of the person purporting to be a person authorized by Borrower to give suchnotice, and Lender shall have no liability to Borrower on account of any action taken by Lender in reliance upon such telephonic notice. Borrower’sobligation to repay all sums owing under the Note shall not be affected in any way or to any extent by any failure by Lender to receive writtenconfirmation of any telephonic notice or the receipt by Lender of a confirmation which is at variance with the terms understood by Lender to be containedin the telephonic notice. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Agreement, Borrower understands that Lender isentitled to a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penaltyall or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’sobligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to sendLender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without losing anyof Lender’s rights under this Agreement, and Borrower will remain obligated to pay any further amount owed to Lender. All written communicationsconcerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes “payment in full” of the amountowed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: COMMUNITYBANK, Loan Operations Center, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or$25.00, whichever is greater. INTEREST AFTER DEFAULT. Upon default, the variable interest rate on this Agreement shall immediately increase to 5.125 percentage points over theIndex, if permitted under applicable law. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Borrower fails to make any payment when due under the Indebtedness. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any ofthe Related Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. Default in Favor of Third Parties. Borrower defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or anyother agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to performBorrower’s obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Agreementor the Related Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at anytime thereafter. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a goodfaith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrowergives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeitureproceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or any Guarantor dies orbecomes incompetent, or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness evidenced by this Note. In the event ofa death, Lender, at its option, may, but shall not be required to, permit the Guarantor’s estate to assume unconditionally the obligations arising under theguaranty in a manner satisfactory to Lender, and, in doing so, cure any Event of Default. Change in Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance ofthe Indebtedness is impaired. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the sameprovision of this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Borrower, afterreceiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more thanfifteen (15) days, immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continuesand completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance on this Agreement and all accrued unpaid interest immediatelydue, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Agreement if Borrower does not pay. Borrower will payLender that amount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is alawsuit, including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. GOVERNING LAW. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. LINE OF CREDIT. This Agreement evidences a revolving line of credit. Advances under this Agreement may be requested orally by Borrower or as providedin this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions bytelephone or otherwise to Lender are to be directed to Lender’s office shown above. The following persons currently are authorized, except as provided in thisparagraph, to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender’s address shown above, writtennotice of revocation of their authority: GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC.; and MICHAEL BAINS. Borrowermay request LIBOR advances in the amount of $500,000.00 and $100,000.00 increments thereafter. Borrower agrees to be liable for all sums either: (A)advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid principal balanceowing on this Agreement at any time may be evidenced by endorsements on this Agreement or by Lender’s internal records, including daily computer print-outs. Lender will have no obligation to advance funds under this Agreement if: (A) Borrower or any guarantor is in default under the terms of this Agreement orany agreement that Borrower or any guarantor has with Lender, including any agreement made in connection with the signing of this Agreement; (B) Borroweror any guarantor ceases doing business or is insolvent; (C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’sguarantee of this Agreement or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Agreement for purposes other than thoseauthorized by Lender; or (E) Lender in good faith believes itself insecure. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 3 ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of anyCollateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertywith or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action for judicial foreclosure pursuant toCalifornia Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitutea waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may bereferred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in thisAgreement shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel,waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitrationproceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The FederalArbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Agreement on transfer of Borrower’s interest, this Agreement shall be bindingupon and inure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Borrower,Lender, without notice to Borrower, may deal with Borrower’s successors with reference to this Agreement and the Indebtedness by way of forbearance orextension without releasing Borrower from the obligations of this Agreement or liability under the Indebtedness. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Please notify us if we report anyinaccurate information about your account(s) to a consumer reporting agency. Your written notice describing the specific inaccuracy(ies) should be sent to us atthe following address: COMMUNITY BANK Loan Operations Center P.O. Box 54477 Los Angeles, CA 90054 MISCELLANEOUS PROVISIONS. This Agreement is payable on demand. The inclusion of specific default provisions or rights of Lender shall notpreclude Lender’s right to declare payment of this Agreement on its demand. Lender may delay or forgo enforcing any of its rights or remedies under thisAgreement without losing them. Borrower and any other person who signs, guarantees or endorses this Agreement, to the extent allowed by law, waive anyapplicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Agreement, and unlessotherwise expressly stated in writing, no party who signs this Agreement, whether as maker, guarantor, accommodation maker or endorser, shall be releasedfrom liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor orcollateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without theconsent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party withwhom the modification is made. The obligations under this Agreement are joint and several. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT,INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.23.20.002 Copr. Harland Financial Solutions, Inc. 1997, 2005. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20C.FC TR-8201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0004-01-200604-01-2007155354101CLS 03 / 240600714644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Initial Rate: 7.750%Date of Agreement: April 1, 2006 description of existing indebtedness. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May 1, 2001;July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24,2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005and April 1, 2005. description of collateral. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.(1) Maturity date of the Note is hereby extended from April 1, 2006 to April 1, 2007.(2) The principal amount of the Note is hereby increased from $9,000,000.00 to $10,000,000.00.(3) The interest rate margin of the Note is hereby decreased from 0.125% to 0% over the Community Bank Reference Rate.(4) The Thirty (30) day, Sixty (60) day and Ninety (90) day Libor Rate margin is hereby changed from 2.00% to 1.75%.(5) The Line of Credit is hereby amended from a Trading Asset covert to a Non Formula Revolving Line of Credit. continuing validity. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreements evidencedor securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right to strictperformance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction ofthe obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), including accommodation parties,unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of thisAgreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that thisAgreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement orotherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all such subsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2006. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-28-200706-01-2007155354101CLS 07 / 240600714765/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Initial Rate: 8.250%Date of Agreement: March 28, 2007 DESCRIPTION of EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005 and April 1, 2006. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.Maturity date of the Note is hereby extended from April 1, 2007 to June 1, 2007. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 6.30.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2007. All Rights Reserved. - CA c:\CF150\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0006-01-200704-01-2008155354101CLS 07 / 240600714765/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Initial Rate: 8.250%Date of Agreement: June 1, 2007 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006 and March 28, 2007. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.Maturity date of the Note is hereby extended from June 1, 2007 to April 1, 2008. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2007. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0007-13-200704-01-2008155354101CLS 07 / 240600714765/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Initial Rate: 8.250%Date of Agreement: July 13, 2007 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006, March 28, 2007 and June 1, 2007. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS. Amy M. Leo, Accounting Supervisor is hereby added as an authorized individual to request advances and/orpaydowns on the line of credit. DESCRIPTION OF CHANGE IN BUSINESS LOAN AGREEMENT 1) The Letter of Credit annual fee is hereby decreased from three (3.0%) percent to two (2.00%) percent. 2) The last sentence under paragraph entitled Effective Tangible Net Worth. is hereby modified and reinstated as follows: Borrower is not to make any new long-term investments as defined by GAAP, inclusive of Data I/O, in excess of $100,000.00 without prior approval ofLender. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2007. All Rights Reserved. - CA c:\CFl50\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-27-200805-15-2008155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800)788-9999 Principal Amount: $10,000,000.00Initial Rate: 5.250%Date of Agreement: March 27, 2008 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006, March 28, 2007, June 1, 2007 and July 13, 2007. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.The maturity date of the Promissory Note and Letter of Credit Facility are hereby extended from April 1, 2006 to May 15, 2006. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ Glenn F. Ceiley GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.20.00.010 Copr. Harland Financial Solutions, Inc. 1997, 2003. All Rights Reserved. - CA c:\CFl5O\CFI\LPL\D20CFC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0005-15-200804-01-2010155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Initial Rate: 5.000%Date of Agreement: May 15, 2008 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006, March 28, 2007, June 1, 2007, July 13, 2007 and March 27, 2008. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN TERMS.1) The maturity date of the Promissory Note is hereby extended from May 15,2008 to April 1,2010. 2) Glen F. Ceiley and Barbara A. Ceiley Revocable Trust Dated May 9, 2007 is hereby added as a guarantor. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.30.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2008. All Rights Reserved. - CA G:\CFl50\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0005-15-200804-01-2010155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: May 15, 2008 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007 and March 27, 2008 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in two Commercial Security Agreements dated March 1, 1999 and August 1, 2004 (“SecurityAgreements”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: 1) The maturity date of the Promissory Note is hereby extended from May 15, 2008 to April 1, 2010. 2) Glen F. Ceiley and Barbara A. Ceiley Revocable Trust is hereby added as guarantor. 4) The Letter of Credit Facility is hereby deleted in its entirety and replaced with the following: Letter of Credit Facility. Subject to the terms of this Agreement, Lender will issue standby letters of credit (each, a “Letter of Credit”) on behalf of Borrower.At no time, however, shall the total face amount of all Letters of Credit outstanding, less any partial draws paid under the Letters of Credit exceed the sum of$1,000,000.00. (1) Upon Lender’s request, Borrower promptly shall pay to Lender issuance fees and such other fees, commissions, costs, and any out-of-pocket expensescharged or incurred by Lender with respect to any Letter of Credit. (2) The commitment by Lender to issue Letters of Credit shall, unless earlier terminated in accordance with the terms of this Agreement, automaticallyterminate on the Expiration Date and no Letter of Credit shall expire on a date which is more than zero (0) days after the Expiration Date. (3) Each Letter of Credit shall be in form and substance satisfactory to Lender and in favor of beneficiaries satisfactory to Lender, provided that Lender mayrefuse to issue a Letter of Credit due to the nature of the transaction or its terms or in connection with any transaction where Lender, due to the beneficiary orthe nationality or residence of the beneficiary, would be prohibited by any applicable law, regulation, or order from issuing such Letter of Credit. Under nocircumstances, however will a Letter of Credit exceed zero (0) days from the issue date. (4) Prior to the issuance of each Letter of Credit, and in all events prior to any daily cutoff time Lender may have established for purposes thereof, Borrowershall deliver to Lender a duly executed form of Lender’s standard form of application for issuance of letter of credit with proper insertions (5) Notwithstanding anything contained in this Agreement or any Related Documents to the contrary, upon issuance of a Letter of Credit by Lender, theamount available for Advances hereunder shall automatically be reduced by the face amount of such Letter of Credit, and such amount shall remainunavailable for Advances so long as Lender remains obligated to make payments under the Letter of Credit. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.45.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2008. All Rights Reserved. - CA G:\CFl50\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-03-200904-01-2010155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800)788-9999 Principal Amount: $10,000,000.00Date of Agreement: March 3, 2009 DESCRIPTION OF EXISTING INDEBTEDNESS. Promissory Note dated November 15, 2000 and subsequent Change in Terms Agreements dated May1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002;January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004;February 1, 2005; April 1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008 and May 15, 2008. DESCRIPTION OF COLLATERAL. Collateral as described per two Commercial Security Agreements dated March 1, 1999 and August 1, 2004. DESCRIPTION OF CHANGE IN THE BUSINESS LOAN AGREEMENT. 1) The provision for minimum current assets is hereby deleted in its entirety and replaced with the following; Minimum Current Assets. Borrower shall maintain a minimum current assets of $22,000,000.00 on a consolidated basis measured quarterly. Per GAAP,Investments in Data I/O are to continue to be shown as non-current assets. 2) The provision for Brokerage Statements is hereby deleted in its entitrety and replaced with the following: Brokerage Statements. Borrower shall furnish to Lender Brokerage Statements for marketable securities on a monthly basis beginning April 1, 2009. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.41.00.004 Copr. Harland Financial Solutions, Inc. 1997, 2008. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-23-201010-01-2010155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: March 23, 2010 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May 15, 2008 and March 3, 2009 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in a Commercial Security Agreements dated March 1, 1999 as amended and restated by thatcertain Commercial Security Agreement of even date herewith and a security interest in personal property assets as described in a Commercial SecurityAgreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified andamended as follows: 1) The covenant entitled “Annual Statements” is hereby deleted in its entirety and replaced with the following: Annual Statements. As soon as available, but in no event later than one hundred twenty (120) days after the end of each fiscal year, Borrower’s companyprepared balance sheet and income statement for the year ended to reconcile with the net worth of the prior financial statements on a consolidating basis,satisfactory to Lender. 2) The covenant entitled “Interim Statements” is hereby deleted in its entirety and replaced with the following: Interim Statements. As soon as available, but in no event later than forty five (45) days after the end of each quarter, Borrower’s company prepared balancesheet and income statement for the period ended, to reconcile with the net worth of the prior financial statements on a consolidating basis, in form satisfactoryto Lender. 3) The covenant entitled “Current Ratio” is hereby deleted in its entirety and replaced with the following: Current Ratio. Maintain a minimum Current Ratio of 1.10:1.00 on a consolidated basis. The term “Current Ratio” means Borrower’s total Current Assetsdivided by Borrower’s total liabilities. This ratio will be evaluated as of quarter-end. 4) The covenant entitled “Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following: Effective Tangible Net Worth. b Maintain minimum Effective Tangible Net Worth of $4,835,000.00 on a consolidated basis. The term “Effective TangibleNet Worth” means Borrower’s total assets, less intangibles [i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangibleitems, but including leaseholds and leasehold improvements], less amounts due from officers, partners, stockholders, directors, affiliates, and subsidiaries,less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, if any. This covenant will be measured as of quarter-end. 5) The covenant entitled “Debt to Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following:Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Debt to Effective Tangible Net Worth. Maintain a maximum Debt to Effective Tangible Net Worth Ratio of 3.85 to 1.00 on a consolidated basis. The term“Debt to Effective Tangible Net Worth” means Borrower’s total liabilities, less amounts subordinated to Lender, as evidenced by a subordination agreement, ifany divided by Borrower’s Effective Tangible Net Worth. This ratio will be evaluated as of quarter-end. 6) The following Affirmative Covenants are hereby added: Annual Statements (EACO Corporation). As soon as available, but in no event later than one hundred twenty (120) days after the end of each fiscal year,EACO Corporation’s consolidated financial statements for the year ended, audited by a Certified Public Accountant satisfactory to Lender and companyprepared financial statements to reconcile with the net worth of the prior financial statements on a consolidating basis within one hundred twenty (120) days offiscal year end. Interim Statements (EACO Corporation). As soon as available, but in no event later than forty five (45) days after the end of each quarter, EACOCorporation’s consolidated financial statements for the period ended, prepared by a certified public accountant in form satisfactory to Lender and companyprepared financial statements to reconcile with the net worth of the prior financial statements on a consolidating basis within forty five (45) days of quarterend. Tax Returns (EACO Corporation). As soon as available, but in no event later than fifteen (15) days after the applicable filing date for the tax reportingperiod ended. Federal and other governmental tax returns on a best efforts basis, prepared by a tax professional satisfactory to Lender. Limited Trading Losses Provision. Borrower’s trading losses shall be limited to an amount that is not more than Borrower’s operating profits. Operatingprofit is defined as gross profit less selling, general and administrative expenses and depreciation and amortization expenses, exclusive of net trading losses onmarketable securities owned by Bisco and any extraordinary items, all as normally defined under GAAP. Net trading losses are defined as the total of realizedgains and realized losses and unrealized gains and unrealized losses as stated on the quarterly income statement. This covenant is to be measured on aquarterly basis with the next measurement date being August 15, 2010. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 Additional Provision. Bisco Industries, Inc. has advanced funds to EACO Corporation for which it expects repayment in the future. Bisco Industries, Inc.will require EACO Corporation to pay down advances from any proceeds received from the sale of real estate in Florida. Bisco Industries, Inc. agrees to paydown the line of credit at Community Bank from any proceeds received from EACO Corporation from the sale of real estate in Florida. Additional Information. Promptly after the same is available and in any event no later than June 1, 2010, Borrower shall furnish to Lender Borrower’smonthly projections for the next eighteen (18) months that would be reflective of the balance sheet and income statement as of the projected dates. 7) The Negative Covenants of Borrower are amended to include the following: Except for non-recurring accounting and legal fees associated with the completion of Borrower’s merger with EACO Corporation (“EACO”), Borrower will nottransfer any funds to EACO exceeding $60,000 in the aggregate in a single calendar month without Lender’s prior written approval. Moreover, the non-recurring merger costs must be paid from the sale of Borrower’s securities and not from Borrower’s line #155354101 and shall not exceed $250,000 in theaggregate. MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: 1)The maturity date of the Promissory Note is hereby extended from April 1, 2010 to October 1, 2010. 2)The LIBOR interest rate options are hereby deleted in their entirety. 3)EACO Corporation is hereby added as Guarantor. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN P. CEILEY GLEN P. CEILEY, Chairman and CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.46.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0004-16-201010-01-2010155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: April 16, 2010 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May 15, 2008; March 3, 2009 and March 23, 2010 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in a Commercial Security Agreements dated March 1, 1999 as amended and restated by thatcertain Commercial Security Agreement of even date herewith and a security interest in personal property assets as described in a Commercial SecurityAgreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified andamended as follows: 1) The covenant entitled “Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following: Effective Tangible Net Worth. Maintain a minimum Effective Tangible Net Worth on a consolidated basis of $4,835,000.00 measured at May 31, 2010 and$5,210,000.00 measured at fiscal year end August 31, 2010. The term “Effective Tangible Net Worth” means Borrower’s total assets, less intangibles [i.e.,goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements], lessamounts due from officers, partners, stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amounts subordinated to Lender, asevidenced by a subordination agreement, if any. 2) The covenant entitled “Debt to Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following: Debt to Effective Tangible Net Worth. Maintain a maximum Debt to Effective Tangible Net Worth Ratio on a consolidated basis of 3.85 to 1.00 measuredat May 31, 2010 and 3.55 to 1.00 measured at fiscal year end August 31, 2010. The term “Debt to Effective Tangible Net Worth” means Borrower’s totalliabilities, less amounts subordinated to Lender, as evidenced by a subordination agreement, if any divided by Borrower’s Effective Tangible Net Worth. 3) The affirmative covenant entitled “Limited Trading Losses Provision” is hereby deleted in its entirety and replaced with the following: Limited Trading Losses Provision. Borrower’s trading losses shall be limited to an amount that is not more than Borrower’s operating profits. Operatingprofit is defined as gross profit less selling, general and administrative expenses and depreciation and amortization expenses, exclusive of net trading losses onmarketable securities owned by Bisco and any extraordinary items, all as normally defined under GAAP. Net trading losses are defined as the total of realizedgains and realized losses and unrealized gains and unrealized losses as stated on the quarterly income statement. This covenant is to be measured on aquarterly basis with the next measurement date being July 15, 2010. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.46.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-11609 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0010-01-201001-03-2011155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: October 1, 2010 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May 15, 2008; March 3, 2009; March 23, 2010 and April 16,2010 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in a Commercial Security Agreements dated March 23, 2010 and a security interest in personalproperty assets as described in a Commercial Security Agreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified andamended as follows: 1) The following provision is hereby deleted in its entirety: Maximum of $1,000,000.00 of the liability of the margin account for the trading securities. 2) The provision entitled “Minimum Current Assets” is hereby deleted in its entirety and replaced with the following: Current Assets. Borrower shall maintain a minimum current assets of $15,000,000.00 on a consolidated basis measured quarterly, per GAAP, Investmentsin Data I/O are to continue to be shown as non-current assets. 3) The provision entitled “Brokerage Statements” is hereby deleted in its entirety and replaced with the following: Brokerage Statements. Brokerage Statements for marketable securities to be submitted quarterly. 4) The provisions entitled “Right to Audit and Inspect” and “Additional Information” are hereby deleted in their entirety and replaced with the following: Right to Audit and Inspect. Without in any way limiting Lender’s rights under any other provision of this Agreement, Lender shall be entitled to conduct,annual audit(s) of Borrower’s books and annual inspection(s) of the Inventory and Equipment and to check and test the same as to quality, quantity, valueand condition during the Borrower’s normal business hours. The costs and expenses incurred by Lender in connection with such audits and inspections shallbe charged to Borrower. Lender will invoice Borrower for such costs and expenses and Borrower shall pay Lender the full amount of such costs and expenseswithin ten (10) days from the date of invoice. Additional Information. Promptly after the same is available and in any event no later than October 31, 2010, Borrower shall furnish to Lender Borrower’smonthly projections for the next twelve (12) months that would be reflective of the balance sheet and income statement as of the projected dates. 5) The paragraph entitled “Letter of Credit Facility” is hereby deleted in its entirety and replaced with the following: Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Subject to the terms of this Agreement, Lender will issue standby letters of credit (each, a “Letter of Credit”) on behalf of Borrower. At no time, however, shallthe total face amount of all Letters of Credit outstanding, less any partial draws paid under the Letters of Credit exceed the sum of $1,000,000.00. (1) Upon Lender’s request, Borrower promptly shall pay to Lender issuance fees and such other fees, commissions, costs, and any out-of-pocket expensescharged or incurred by Lender with respect to any Letter of Credit. (2) The commitment by Lender to issue Letters of Credit shall, unless earlier terminated in accordance with the terms of this Agreement, automaticallyterminate on the Expiration Date and no Letter of Credit shall expire on a date which is more than three hundred sixty-five (365) days after the Expiration Date. (3) Each Letter of Credit shall be in form and substance satisfactory to Lender and in favor of beneficiaries satisfactory to Lender, provided that Lender mayrefuse to issue a Letter of Credit due to the nature of the transaction or its terms or in connection with any transaction where Lender, due to the beneficiary orthe nationality or residence of the beneficiary, would be prohibited by any applicable law, regulation, or order from issuing such Letter of Credit. Under nocircumstances, however will a Letter of Credit exceed zero (0) days from the issue date. (4) Prior to the issuance of each Letter of Credit, and in all events prior to any daily cutoff time Lender may have established for purposes thereof, Borrowershall deliver to Lender a duly executed form of Lender’s standard form of application for issuance of letter of credit with proper insertions (5) Notwithstanding anything contained in this Agreement or any Related Documents to the contrary, upon issuance of a Letter of Credit by Lender, theamount available for Advances hereunder shall automatically be reduced by the face amount of such Letter of Credit, and such amount shall remainunavailable for Advances so long as Lender remains obligated to make payments under the Letter of Credit MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENTLoan No: 155354101(Continued)Page 2 The maturity date of the Note is hereby extended from October 1, 2010 to January 3, 2011. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES, INC. LASER PRO Lending, Ver. 5.52.10.001 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-12288 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0001-03-201103-01-2011155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: January 3, 2011 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May 15, 2008; March 3, 2009; March 23, 2010; April 16, 2010and October 1, 2010 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in a Commercial Security Agreements dated March 23, 2010 and a security interest in personalproperty assets as described in a Commercial Security Agreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: The maturity date of the Note is hereby extended from January 3, 2011 to March 1, 2011. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.54.00.006 Copr. Harland Financial Solutions, Inc. 1997, 2011. All Rights Reserved. - CA G:\CFl5O\CFI\LPL\D20C.FC TR-12720 PR-TRADASSTSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-01-201103-01-2013155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: March 1, 2011 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May 15, 2008; March 3, 2009; March 23, 2010; April 16, 2010;October 1, 2010 and January 3, 2011 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in two (2) Commercial Security Agreements each dated March 23, 2010 and a security interest inpersonal property assets as described in a Commercial Security Agreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified andamended as follows: 1) The covenant entitled “Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following: Effective Tangible Net Worth. Maintain an Effective Tangible Net Worth of not less than $5,210,000.00 to be measured at the end of fiscal quarter May 31,2011 and $7,000,000.00 to be measured at fiscal year end August 31, 2011. The term “Effective Tangible Net Worth” means Borrower’s total assets, lessintangibles [i.e., goodwill, trademarks, patents, copyrights, organizational expenses, and similar intangible items, but including leaseholds and leaseholdimprovements], less amounts due from officers, partners, stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amountssubordinated to Lender, as evidenced by a subordination agreement, if any. 2) The covenant entitled “Debt to Effective Tangible Net Worth” is hereby deleted in its entirety and replaced with the following: Debt to Effective Tangible Net Worth. Maintain a maximum Debt to Effective Tangible Net Worth Ratio of 3.55 to 1.00 to be measured at the end of fiscalquarter May 31, 2011 and 2.50 to 1.00 to be measured at fiscal year end August 31, 2011. The term “Debt to Effective Tangible Net Worth” meansBorrower’s total liabilities, less amounts subordinated to Lender, as evidenced by a subordination agreement, if any divided by Borrower’s Effective TangibleNet Worth. The term “Effective Tangible Net Worth” means Borrower’s total assets, less intangibles [i.e. goodwill, trademarks, patents, copyrights,organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements], less amounts due from officers, partners,stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, ifany. 3) The following Affirmative Covenants entitled “Debt to Effective Tangible Net Worth Ratio (EACO Corporation)’’ and “Debt Service CoverageRatio (EACO Corporation)” are hereby added: Debt to Effective Tangible Net Worth Ratio (EACO Corporation). EACO Corporation shall maintain a maximum Debt to Effective Tangible Net WorthRatio of 3.25 to 1.00 on a consolidated basis to be measured at the end of each fiscal quarter. The term “Debt to Effective Tangible Net Worth” meansBorrower’s total liabilities, less amounts subordinated to Lender, as evidenced by a subordination agreement, if any divided by Borrower’s Effective TangibleNet Worth. The term “Effective Tangible Net Worth” means Borrower’s total assets, less intangibles [i.e. goodwill, trademarks, patents, copyrights,organizational expenses, and similar intangible items, but including leaseholds and leasehold improvements], less amounts due from officers, partners,Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.stockholders, directors, affiliates, and subsidiaries, less total liabilities, plus amounts subordinated to Lender, as evidenced by a subordination agreement, ifany. The first measurement will be as of May 31, 2011. Debt Service Coverage Ratio (EACO Corporation). EACO Corporation shall maintain a Debt Service Coverage Ratio of not less than 1.25 to 1.00 on aconsolidated basis, to be measured at the end of each fiscal year. Debt Service Coverage Ratio” is defined as net income plus depreciation expense, amortizationexpense and any other non-cash expense less cash distributions, cash withdrawals, cash dividends and any non-cash income all divided by the sum ofcurrent maturities of long-term debt and current maturities of capital lease obligations, which sum shall not be less than $1. The first measurement will be asof May 31, 2011. 4) The paragraph entitled “Additional Provision” is hereby deleted in its entirety and replaced with the following: Additional Provision. Bisco Industries, Inc. has advanced funds to EACO Corporation for which it expects repayment in the future. Bisco Industries, Inc.will require EACO Corporation to pay down advances from any proceeds received from the sale of real estate in Florida. Bisco Industries, Inc. agrees to paythe term loan first and the line of credit second at Community Bank from any proceeds received from EACO Corporation from the sale of the real estate inFlorida. 5) The following Negative Covenant is hereby deleted in its entirety: Except for non-recurring accounting and legal fees associated with the completion of Borrower’s merger with EACO Corporation (“EACO”), Borrower will nottransfer any funds to EACO exceeding $60,000 in the aggregate in a single calendar month without Lender’s prior written approval. Moreover, the non-recurring merger costs must be paid from the sale of Borrower’s securities and not from Borrower line #155354101 and shall not exceed $250,000 in theaggregate. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT Loan No: 155354101(Continued)Page 2 6) The following Negative Covenant is hereby added: Additional Negative Covenant. Borrower will not transfer any funds to EACO exceeding $60,000 in the aggregate in a single calendar month withoutLender’s prior written approval. MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: 1) The maturity date of the Note is hereby extended from March 1, 2011 to March 1, 2013. 2) The provision entitled “PRIMARY BANKING RELATIONSHIP” is hereby added: PRIMARY BANKING RELATIONSHIP. Borrower and Lender acknowledge and agree that Borrower now maintains or will maintain its primary bankingrelationship, including its primary deposit account relationship (“Primary Banking Relationship”), with Lender. In the event Borrower ceases to maintain itsPrimary Banking Relationship with Lender (as determined by Lender in its sole discretion), the interest rate margin set forth in this Note shall be increased byone percent (1.00%) from zero percent (0.00%) to one percent (1.00%), at Lender’s option, following a five (5) day written notice to the Borrower. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver. 5.55.00.002 Copr. Harland Financial Solutions, Inc. 1997, 2011. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-12288 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-01-201203-01-2014155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: May 10, 2012 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified byChange in Terms Agreements dated May 1, 2001; July 1, 2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002;September 16, 2002; October 28, 2002; January 24, 2003; March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1,2004; June 23, 2004; August 1, 2004; February 1, 2005; April 1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008, May15, 2008; March 3, 2009; March 23, 2010; April 16, 2010; October 1, 2010; January 3, 2011; and March 1, 2011 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in two (2) Commercial Security Agreements each datedMarch 23, 2010 and a security interest in personal property assets as described in a Commercial Security Agreement dated August 1, 2004 (“SecurityAgreement”). DESCRIPTION OF CHANGE IN TERMS. EFFECTIVE MARCH 28, 2012: MODIFICATION OF BUSINESS LOAN AGREEMENT. The Business Loan Agreement dated June 1, 2007 (“Loan Agreement”) is hereby modified andamended as follows: 1) The paragraph entitled “Brokerage Statements” is hereby deleted in its entirety and replaced with the following: Brokerage Statements. Not later than 45 days after the end of each quarter, Borrower’s Brokerage Statements for marketable securities. 2) The paragraph entitled “Additional Requirements. Personal” is hereby deleted in its entirety and replaced with the following: Additional Requirements. Individual Guarantor. Borrower shall furnish to Lender as soon as available and in any event within fifteen (15) days afterfiling, Individual Guarantor’s federal income tax returns and supporting schedules. Borrower shall furnish to Lender Individual Guarantor’s financialstatement annually. MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: The maturity date of the Note is hereby extended from March 1, 2013 to March 1, 2014. PAYMENT. Borrower will pay this loan in full immediately upon Lender’s demand. If no demand is made Borrower will pay this loan in onepayment of all outstanding principal plus all accrued unpaid interest on March 1, 2014. In addition, Borrower will pay regular monthlypayments of all accrued unpaid interest due as of each payment date, beginning June 1, 2012, with all subsequent interest payments to be dueon the same day of each month after that. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, CHAIRMAN and CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.59.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-15644 PR-38 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CHANGE IN TERMS AGREEMENT PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$10,000,000.0003-01-201203-01-2014155354101CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Principal Amount: $10,000,000.00Date of Agreement: September 18, 2012 DESCRIPTION OF EXISTING INDEBTEDNESS. A loan to Borrower evidenced by a Promissory Note dated November 15, 2000, as modified by Change in Terms Agreements dated May 1, 2001; July 1,2001; September 1, 2001; October 19, 2001; April 30, 2002; June 17, 2002; August 28, 2002; September 16, 2002; October 28, 2002; January 24, 2003;March 27, 2003; June 1, 2003; October 1, 2003; December 1, 2003; February 1, 2004; May 1, 2004; June 23, 2004; August 1, 2004; February 1, 2005; April1, 2005; April 1, 2006; March 28, 2007; June 1, 2007; July 13, 2007; March 27, 2008; May 15, 2008; March 3, 2009; March 23, 2010; April 16, 2010;October 1, 2010; January 3, 2011; March 1, 2011 and May 10, 2012 (“Note”). DESCRIPTION OF COLLATERAL. A security interest in personal property assets as described in two (2) Commercial Security Agreements each dated March 23, 2010 and a security interest inpersonal property assets as described in a Commercial Security Agreement dated August 1, 2004 (“Security Agreement”). DESCRIPTION OF CHANGE IN TERMS. EFFECTIVE AS OF SEPTEMBER 13, 2012 (“Effective Date”): MODIFICATION OF NOTE. The Note is hereby modified and amended as follows: Sweep Account feature is hereby added as described below: SWEEP ACCOUNT. This Line of Credit will automatically advance to Borrower’s checking account number 0704000652 to maintain the target balance of$100,000.00 to the previously mentioned checking account. In addition, any collected balances in excess of $100,000.00 in said checking account will be usedto pay down the principal balance on this Line of Credit. The Borrower will be assessed a monthly maintenance fee of $150.00 for this service {which shall becharged through Borrower’s DDA Account Analysis). CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms of the original obligation or obligations, including all agreementsevidenced or securing the obligation(s), remain unchanged and in full force and effect. Consent by Lender to this Agreement does not waive Lender’s right tostrict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute asatisfaction of the obligation(s). It is the intention of Lender to retain as liable parties all makers and endorsers of the original obligation(s), includingaccommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not bereleased by virtue of this Agreement. If any person who signed the original obligation does not sign this Agreement below, then all persons signing belowacknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisionsof this Agreement or otherwise will not be released by it. This waiver applies not only to any initial extension, modification or release, but also to all suchsubsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS AGREEMENT.BORROWER AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. GLEN F. CEILEY, CHAIRMAN & CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-6558 PR-38 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.16 COMMERCIAL SECURITY AGREEMENT Principal$9,000,000.00Loan Date08-01-2004Maturity02-01-2005Loan No155354101Call/CollCLS 01 /240Account600714Officer 644Initials/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Grantor:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 THIS COMMERCIAL SECURITY AGREEMENT dated August 1, 2004, is made and executed between BISCO INDUSTRIES, INC.(“Grantor”) and COMMUNITY BANK (“Lender”). GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure theIndebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rightswhich Lender may have by law. COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means the following described property, whether now owned orhereafter acquired, whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment ofthe Indebtedness and performance of all other obligations under the Note and this Agreement: All present and future accounts, contract rights, chattel paper, security agreements and debts secured thereby, documents, notes, drafts,instruments, general intangibles (including, without limitation, all present and future choses and things in action, goodwill, patents,trademarks, trade names, customer lists, purchase orders, deposit accounts and tax refunds), and returned goods. All present and hereafteracquired inventory wherever located, including but not limited to all present and future goods held for sale or lease or to be furnished under acontract of service and all raw materials, work in process and finished goods. All present and hereafter acquired equipment whereverlocated, including but not limited to machinery, machine tools, motors, equipment, controls, attachments, parts, tools, furniture, furnishings,fixtures and motor vehicles and all attachments, accessories, accessions, replacements, substitutions, additions and improvements to any ofthe foregoing. All present and future dies, drawings, blueprints, catalogs and computer programs. All proceeds and products of the foregoing,including but not limited to accounts, contract rights, general intangibles, equipment, inventory, money, deposit accounts, goods, chattel paper,documents, notes, drafts, instruments, insurance proceeds, and any other tangible or intangible property received upon the sale or otherdisposition of any of the foregoing. All present and future books and records pertaining to any of the foregoing and the equipment containingsaid books and records. Except as to inventory held for sale, the Borrower has no right to sell or otherwise dispose of any of the collateral. In addition, the word “Collateral” also includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, andwherever located: (A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whetheradded now or later. (B) All products and produce of any of the property described in this Collateral section. (C) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or otherdisposition of any of the property described in this Collateral section. (D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateralsection, and sums due from a third party who has damaged or destroyed the Collateral or from that party’s insurer, whether due to judgment, settlementor other process. (E) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm,microfiche, or electronic media, together with all of Grantor’s right, title, and interest in and to all computer software required to utilize, create, maintain,and process any such records or data on electronic media. Despite any other provision of this Agreement, Lender is not granted, and will not have, a nonpurchase money security interest in household goods, to theextent such a security interest would be prohibited by applicable law. In addition, if because of the type of any Property, Lender is required to give a notice ofthe right to cancel under Truth in Lending for the Indebtedness, then Lender will not have a security interest in such Collateral unless and until such a noticeis given. CROSS-COLLATERAL1ZATION. In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor toLender, or any one or more of them, as well as all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter arising,Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined,absolute or contingent, liquidated or unliquidated whether Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety,accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, andwhether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantorrepresents and promises to Lender that: Perfection of Security Interest. Grantor agrees to execute financing statements and to take whatever other actions are requested by Lender to perfect andcontinue Lender’s security interest in the Collateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing orconstituting the Collateral, and Grantor will note Lender’s interest upon any and all chattel paper if not delivered to Lender for possession by Lender. Thisis a continuing Security Agreement and will continue in effect even though all or any part of the Indebtedness is paid in full and even thoughfor a period of time Grantor may not be indebted to Lender. Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designatefrom time to time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in the management of theCorporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor’s principal office address; (6) change in Grantor’s state oforganization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any other aspect of Grantor that directly or indirectlyrelates to any agreements between Grantor and Lender. No change in Grantor’s name or state of organization will take effect until after Lender has receivednotice. No Violation. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and itscertificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. Enforceability of Collateral. To the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the UniformCommercial Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulationsconcerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacityto contract and are in fact obligated as they appear to be on the Collateral. At the time any Account becomes subject to a security interest in favor ofLender, the Account shall be a good and valid account representing an undisputed, bona fide indebtedness incurred by the account debtor, formerchandise held subject to delivery instructions or previously shipped or delivered pursuant to a contract of sale, or for services previously performedby Grantor with or for the account debtor. So long as this Agreement remains in effect, Grantor shall not, without Lender’s prior written consent,compromise, settle, adjust, or extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of theCollateral, and no agreement shall have been made under which any deductions or discounts may be claimed concerning the Collateral except thosedisclosed to Lender in writing. Location of the Collateral. Except in the ordinary course of Grantor’s business, Grantor agrees to keep the Collateral (or to the extent the Collateralconsists of intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor’s address shown above or at suchother locations as are acceptable to Lender. Upon Lender’s request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of realproperties and Collateral locations relating to Grantor’s operations, including without limitation the following: (1) all real property Grantor owns or ispurchasing; (2) all real property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and (4) all other propertieswhere Collateral is or may be located. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 2 Removal of the Collateral. Except in the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove theCollateral from its existing location without Lender’s prior written consent. To the extent that the Collateral consists of vehicles, or other titled property,Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of California, withoutLender’s prior written consent. Grantor shall, whenever requested, advise Lender of the exact location of the Collateral. Transactions Involving Collateral. Except for inventory sold or accounts collected in the ordinary course of Grantor’s business, or as otherwiseprovided for in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default underthis Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinarycourse of business. A sale in the ordinary course of Grantor’s business does not include a transfer in partial or total satisfaction of a debt or any bulksale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge,other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior inright to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whateverreason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constituteconsent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. Title. Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens andencumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than thosewhich reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender’s rights in theCollateral against the claims and demands of all other persons. Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair andcondition at all times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered ormaterial furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral. Inspection of Collateral. Lender and Lender’s designated representatives and agents shall have the right at all reasonable times to examine and inspectthe Collateral wherever located. Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon thisAgreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any suchpayment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long asLender’s interest in the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen(15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate toprovide for the discharge of the lien plus any interest, costs, attorneys’ fees or other charges that could accrue as a result of foreclosure or sale of theCollateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral.Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Grantor further agrees to furnish Lenderwith evidence that such taxes, assessments, and governmental and other charges have been paid in full and in a timely manner. Grantor may withholdany such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and solong as Lender’s interest in the Collateral is not jeopardized. Compliance with Governmental Requirements. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmentalauthorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or regulationsrelating to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product or commodity.Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals,so long as Lender’s interest in the Collateral, in Lender’s opinion, is not jeopardized. Hazardous Substances. Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lienon the Collateral, used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release orthreatened release of any Hazardous Substance. The representations and warranties contained herein are based on Grantor’s due diligence in investigatingthe Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in theevent Grantor becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify and hold harmless Lender againstany and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to indemnify shall survive the payment of theIndebtedness and the satisfaction of this Agreement. Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liabilitycoverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonablyacceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lenderfrom time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled ordiminished without at least thirty (30) days’ prior written notice to Lender and not including any disclaimer of the insurer’s liability for failure to givesuch a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by anyact, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a securityinterest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain ormaintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate,Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.including if Lender so chooses “single interest insurance,” which will cover only Lender’s interest in the Collateral. Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Collateral. Lender may make proof of loss ifGrantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insurance on the Collateral, including accrued proceeds thereon, shallbe held by Lender as part of the Collateral. If Lender consents to repair or replacement of the damaged or destroyed Collateral, Lender shall, uponsatisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable cost of repair or restoration. If Lender does not consent torepair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to pay all of the Indebtedness, and shall pay the balance toGrantor. Any proceeds which have not been disbursed within six (6) months after their receipt and which Grantor has not committed to the repair orrestoration of the Collateral shall be used to prepay the Indebtedness. Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be createdby monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date,amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shallupon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute a non-interest-bearingaccount which Lender may satisfy by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not hold thereserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. Theresponsibility for the payment of premiums shall remain Grantor’s sole responsibility. Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information asLender may reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the propertyinsured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining that value; and (6) the expirationdate of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory toLender determine, as applicable, the cash value or replacement cost of the Collateral. Financing Statements. Grantor authorizes Lender to file a UCC-1 financing statement, or alternatively, a copy of this Agreement to perfect Lender’ssecurity interest. At Lender’s request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender’ssecurity interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unlessLender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute financing statements and documents of title inGrantor’s name and to execute all documents necessary to transfer title if there is a default. Lender may file a copy of this Agreement as a financingstatement. If Grantor changes Grantor’s name or address, or the name or address of any person granting a security interest under this Agreement changes,Grantor will promptly notify the Lender of such change. GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect toaccounts, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner notinconsistent with this Agreement or the Related Documents, provided that Grantor’s right to possession and beneficial use shall not apply to any Collateralwhere possession of the Collateral by Lender is required by law to perfect Lender’s security interest in such Collateral. Until otherwise notified by Lender,Grantor may collect any of the Collateral consisting of accounts. At any time and even though no Event of Default exists, Lender may exercise its rights tocollect the accounts and to notify account debtors to make payments directly to Lender for application to the Indebtedness. If Lender at any time haspossession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody andpreservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion, shall deemappropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lendershall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any securityinterest given to secure the Indebtedness. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 3 LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Grantor failsto comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge or pay when due anyamounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor’s behalf may (but shall not be obligatedto) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances andother claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expendituresincurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date ofrepayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to thebalance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicableinsurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity. TheAgreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled uponDefault. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Grantor fails to make any payment when due under the Indebtedness. Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of theRelated Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andGrantor. Default in Favor of Third Parties. Should Borrower or any Grantor default under any loan, extension of credit, security agreement, purchase or salesagreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Grantor’s property or Grantor’s or anyGrantor’s ability to repay the Indebtedness or perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor’s behalf under this Agreement or theRelated Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any timethereafter. Defective Collaterallzation. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateraldocument to create a valid and perfected security interest or lien) at any time and for any reason. Insolvency. The dissolution or termination of Grantor’s existence as a going business, the insolvency of Grantor, the appointment of a receiver for anypart of Grantor’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under anybankruptcy or insolvency laws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Grantor’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faithdispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lenderwritten notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in anamount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to Guarantor of any of the Indebtedness or Guarantor dies or becomesincompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Adverse Change. A material adverse change occurs in Grantor’s financial condition, or Lender believes the prospect of payment or performance of theIndebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Grantor has not been given a notice of a breach of the same provisionof this Agreement within the preceding twelve (12) months, it may be cured (and no event of default will have occurred) if Grantor, after receiving writtennotice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,immediately initiates steps which Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes allreasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights ofa secured party under the California Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the followingrights and remedies: Accelerate Indebtedness. Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay,immediately due and payable, without notice of any kind to Grantor.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Assemble Collateral. Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and otherdocuments relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated byLender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral containsother goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makesreasonable efforts to return them to Grantor after repossession. Sell the Collateral. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name orthat of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a typecustomarily sold on a recognized market, Lender will give Grantor, and other persons as required by law, reasonable notice of the time and place of anypublic sale, or the time after which any private sale or any other disposition of the Collateral is to be made. However, no notice need be provided to anyperson who, after Event of Default occurs, enters into and authenticates an agreement waiving that person’s right to notification of sale. The requirementsof reasonable notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to thedisposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shallbecome a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure untilrepaid. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protectand preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the Collateral and apply the proceeds, overand above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender’s right to theappointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Indebtedness by a substantial amount. Employment byLender shall not disqualify a person from serving as a receiver. Collect Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from theCollateral. Lender may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s nominee and receive thepayments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in suchorder of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattelpaper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on theCollateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the nameof Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes,checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitatecollection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. Obtain Deficiency. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining onthe Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liablefor a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. Other Rights and Remedies. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code,as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law,in equity, or otherwise. Election of Remedies. Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, theRelated Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue anyremedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under thisAgreement, after Grantor’s failure to perform, shall not affect Lender’s right to declare a default and exercise its remedies. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 4 POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful attorney-in-fact, irrevocably, with full power of substitution to do thefollowing: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing orpayable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for theCollateral; (c) to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its releaseand settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or inthe name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable. This power is given as security for theindebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Lender. ADDITIONAL DEFINITION OF INDEBTEDNESS. The word “Indebtedness” includes all other obligations, debts and liabilities, plus interest thereon,of Grantor, or any one or more of them, to Lender, as well as all claims by Lender against Grantor, or any one or more of them, whether existing now or later;whether they are voluntary or involuntary, due or not due, direct o indirect, absolute or contingent, liquidated or unliquidated; whether Grantor may be liableindividually or jointly with others; whether Grantor may be obligated as guarantor, surety, accommodation party or otherwise; whether recovery upon suchindebtedness may be or hereafter may become barred by any statute of limitations; and whether such indebtedness may be or hereafter may become otherwiseunenforceable. ADDITIONAL MAINTENANCE AND INSPECTION OF COLLATERAL-GRANTOR. Grantor shall immediately notify Lender of all casesinvolving the return, rejection, repossession, loss or damage of or to any Collateral; of any request for credit or adjustment or of any other dispute arising withrespect to the Collateral; and generally of all happenings and events affecting the Collateral or the value or the amount of the Collateral. COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and insofar as the Collateral consists of accounts and generalintangibles, Grantor shall deliver to Lender schedules of such Collateral, including such information as Lender may require, including without limitationnames and addresses of account debtors and agings of accounts and general intangibles. Insofar as the Collateral consists of inventory and equipment,Grantor shall deliver to Lender, as often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require toidentify the nature, extent, and location of such Collateral. Such information shall be submitted for Grantor and each of its subsidiaries or related companies. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or partiessought to be charged or bound by the alteration or amendment. Arbitration. Grantor and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose ofany Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage;obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposingof such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, orcontroversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim torescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitratorshall have the right or the power to enjoin or restrain any act of any party. Grantor and Lender agree that in the event of an action forjudicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of suchaction, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may beentered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court ofcompetent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in anaction brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall bedeemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, andenforcement of this arbitration provision. Attorneys’ Fees; Expenses. Grantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’slegal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, andGrantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not thereis a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay orinjunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may bedirected by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Agreement. Governing Law. This Agreement will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Agreement has been accepted by Lender in the State of California.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Preference Payments. Any monies Lender pays because of an asserted preference claim in Grantor’s bankruptcy will become a part of the Indebtednessand, at Lender’s option, shall be payable by Grantor as provided in this Agreement. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed byLender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender ofa provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or anyother provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any ofLender’s rights or of any of Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, thegranting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and inall cases such consent may be granted or withheld in the sole discretion of Lender. Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actuallyreceived by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when depositedin the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement.Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of thenotice is to change the party’s address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor’s current address. Unlessotherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to allGrantors. Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for the purpose of executing any documents necessary toperfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. Lender may atany time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of thisAgreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection ofLender’s security interest in the Collateral. Waiver of Co-Obligor’s Rights. If more than one person is obligated for the Indebtedness, Grantor irrevocably waives, disclaims and relinquishes allclaims against such other person which Grantor has or would otherwise have by virtue of payment of the Indebtedness or any part thereof, specificallyincluding but not limited to all rights of indemnity, contribution or exoneration. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance,that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provisionshall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deletedfrom this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect thelegality, validity or enforceability of any other provision of this Agreement. Successors and Assigns. Subject to any limitations stated in this Agreement on transfer of Grantor’s interest, this Agreement shall be binding upon andinure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender,without notice to Grantor, may deal with Grantor’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extensionwithout releasing Grantor from the obligations of this Agreement or liability under the Indebtedness. Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Agreement shall survive theexecution and delivery of this Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor’s Indebtednessshall be paid in full. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by anyparty against any other party. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 5 DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall havethe meanings attributed to such terms in the Uniform Commercial Code: Account. The word “Account” means a trade account, account receivable, other receivable, or other right to payment for goods sold or services renderedowing to Grantor (or to a third party grantor acceptable to Lender). Agreement. The word “Agreement” means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modifiedfrom time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. Borrower. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note. Collateral. The word “Collateral” means all of Grantor’s right, title and interest in and to all the Collateral as described in the Collateral Descriptionsection of this Agreement. Default. The word “Default” means the Default set forth in this Agreement in the section titled “Default”. Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to theprotection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and LiabilityAct of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No.99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or otherapplicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement. Grantor. The word “Grantor” means BISCO INDUSTRIES, INC.. Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Indebtedness. Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical orinfectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored,disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense andinclude without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term“Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interesttogether with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents.Specifically, without limitation, Indebtedness includes all amounts that may be indirectly secured by the Cross-Collateralization provision of thisAgreement. Lender. The word “Lender” means COMMUNITY BANK, its successors and assigns. Note. The word “Note” means the Note executed by BISCO INDUSTRIES, INC. in the principal amount of $8,000,000.00 dated November 15, 2000,together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement. Property. The word “Property” means all of Grantor’s right, title and interest in and to all the Property as described in the “Collateral Description”section of this Agreement. Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether nowor hereafter existing, executed in connection with the Indebtedness. GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT ANDAGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 1, 2004. GRANTOR: BISCO INDUSTRIES, INC.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver 5.23.20.002 Copr. Harland Financial Solutions, Inc. 1997, 2004. All Rights Reserved - CA o:\CF150\CFl\LPL\E40 FCTR-5384 PR-CERTIFIE Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.17 COMMUNITY BANK Partnership Banking COMMERCIAL SECURITY AGREEMENT Principal$10,000,000.00Loan Date03-23-2010Maturity10-01-2010Loan No155354101Call/CollCLS 07 /240Account600714Officer 765Initials/s/ References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Grantor:BISCO INDUSTRIES, INC.Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 THIS COMMERCIAL SECURITY AGREEMENT dated March 23, 2010, is made and executed between BISCO INDUSTRIES, INC.(“Grantor”) and COMMUNITY BANK (“Lender”). GRANT OF SECURITY INTEREST. For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure theIndebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rightswhich Lender may have by law. COLLATERAL DESCRIPTION. The word “Collateral” as used in this Agreement means the following described property, whether now owned orhereafter acquired, whether now existing or hereafter arising, and wherever located, in which Grantor is giving to Lender a security interest for the payment ofthe Indebtedness and performance of all other obligations under the Note and this Agreement: All Inventory, Chattel Paper, Accounts, Equipment, Instruments and General Intangibles; whether any of the foregoing is owned now oracquired later; all accessions, attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral describedherein, whether added now or later; all products and produce of any of the property; all accounts, general intangibles, instruments, rents,monies, payments, and all other rights, arising out of a sale, lease, or other disposition of any of the property; all proceeds (includinginsurance proceeds) from the sale, destruction, loss, or other disposition of any of the property, and sums due from a third party who hasdamaged or destroyed the collateral or from that party's insurer, whether due to judgment, settlement or other process; all records and datarelating to any of the property, whether in the form of a writing, photograph, microfilm, microfiche, or electronic media, together with all ofdebtor's right, title, and interest in and to all computer software required to utilize, create, maintain, and process any such records or dataon electronic media In addition, the word “Collateral” also includes all the following, whether now owned or hereafter acquired, whether now existing or hereafter arising, andwherever located: (A) All accessions, attachments, accessories, tools, parts, supplies, replacements of and additions to any of the collateral described herein, whetheradded now or later. (B) All products and produce of any of the property described in this Collateral section. (C) All accounts, general intangibles, instruments, rents, monies, payments, and all other rights, arising out of a sale, lease, consignment or otherdisposition of any of the property described in this Collateral section. (D) All proceeds (including insurance proceeds) from the sale, destruction, loss, or other disposition of any of the property described in this Collateralsection, and sums due from a third party who has damaged or destroyed the Collateral or from that party’s insurer, whether due to judgment, settlementor other process. (E) All records and data relating to any of the property described in this Collateral section, whether in the form of a writing, photograph, microfilm,microfiche, or electronic media, together with all of Grantor’s right, title, and interest in and to all computer software required to utilize, create, maintain,and process any such records or data on electronic media. CROSS-COLLATERAL1ZATION. In addition to the Note, this Agreement secures all obligations, debts and liabilities, plus interest thereon, of Grantor toLender, or any one or more of them, as well as all claims by Lender against Grantor or any one or more of them, whether now existing or hereafter arising,whether related or unrelated to the purpose of the Note, whether voluntary or otherwise, whether due or not due, direct or indirect, determined or undetermined,absolute or contingent, liquidated or unliquidated, whether Grantor may be liable individually or jointly with others, whether obligated as guarantor, surety,accommodation party or otherwise, and whether recovery upon such amounts may be or hereafter may become barred by any statute of limitations, andwhether the obligation to repay such amounts may be or hereafter may become otherwise unenforceable. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Grantor’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Grantor holds jointly with someone else and all accounts Grantor may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Grantor authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any and all such accounts. GRANTOR’S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL. With respect to the Collateral, Grantorrepresents and promises to Lender that: Perfection of Security Interest. Grantor agrees to take whatever actions are requested by Lender to perfect and continue Lender’s security interest in theCollateral. Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Grantor willnote Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. This is a continuing SecurityAgreement and will continue in effect even though all or any part of the Indebtedness is paid in full and even though for a period of timeGrantor may not be indebted to Lender. Notices to Lender. Grantor will promptly notify Lender in writing at Lender’s address shown above (or such other addresses as Lender may designatefrom time to time) prior to any (1) change in Grantor’s name; (2) change in Grantor’s assumed business name(s); (3) change in the management of theCorporation Grantor; (4) change in the authorized signer(s); (5) change in Grantor’s principal office address; (6) change in Grantor’s state oforganization; (7) conversion of Grantor to a new or different type of business entity; or (8) change in any other aspect of Grantor that directly or indirectlyrelates to any agreements between Grantor and Lender. No change in Grantor’s name or state of organization will take effect until after Lender has receivednotice. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 2 No Violation. The execution and delivery of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party, and itscertificate or articles of incorporation and bylaws do not prohibit any term or condition of this Agreement. Enforceability of Collateral. To the extent the Collateral consists of accounts, chattel paper, or general intangibles, as defined by the UniformCommercial Code, the Collateral is enforceable in accordance with its terms, is genuine, and fully complies with all applicable laws and regulationsconcerning form, content and manner of preparation and execution, and all persons appearing to be obligated on the Collateral have authority and capacityto contract and are in fact obligated as they appear to be on the Collateral. At the time any account becomes subject to a security interest in favor of Lender,the account shall be a good and valid account representing an undisputed, bona fide indebtedness incurred by the account debtor, for merchandise heldsubject to delivery instructions or previously shipped or delivered pursuant to a contract of sale, or for services previously performed by Grantor with orfor the account debtor. So long as this Agreement remains in effect, Grantor shall not, without Lender’s prior written consent, compromise, settle, adjust,or extend payment under or with regard to any such Accounts. There shall be no setoffs or counterclaims against any of the Collateral, and no agreementshall have been made under which any deductions or discounts may be claimed concerning the Collateral except those disclosed to Lender in writing. Location of the Collateral. Except in the ordinary course of Grantor’s business, Grantor agrees to keep the Collateral (or to the extent the Collateralconsists of intangible property such as accounts or general intangibles, the records concerning the Collateral) at Grantor’s address shown above or at suchother locations as are acceptable to Lender. Upon Lender’s request, Grantor will deliver to Lender in form satisfactory to Lender a schedule of realproperties and Collateral locations relating to Grantor’s operations, including without limitation the following: (1) all real property Grantor owns or ispurchasing; (2) all real property Grantor is renting or leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and (4) all other propertieswhere Collateral is or may be located. Removal of the Collateral. Except in the ordinary course of Grantor’s business, including the sales of inventory, Grantor shall not remove theCollateral from its existing location without Lender’s prior written consent. To the extent that the Collateral consists of vehicles, or other titled property,Grantor shall not take or permit any action which would require application for certificates of title for the vehicles outside the State of California, withoutLender’s prior written consent. Grantor shall, whenever requested, advise Lender of the exact location of the Collateral. Transactions Involving Collateral. Except for inventory sold or accounts collected in the ordinary course of Grantor’s business, or as otherwiseprovided for in this Agreement, Grantor shall not sell, offer to sell, or otherwise transfer or dispose of the Collateral. While Grantor is not in default underthis Agreement, Grantor may sell inventory, but only in the ordinary course of its business and only to buyers who qualify as a buyer in the ordinarycourse of business. A sale in the ordinary course of Grantor’s business does not include a transfer in partial or total satisfaction of a debt or any bulksale. Grantor shall not pledge, mortgage, encumber or otherwise permit the Collateral to be subject to any lien, security interest, encumbrance, or charge,other than the security interest provided for in this Agreement, without the prior written consent of Lender. This includes security interests even if junior inright to the security interests granted under this Agreement. Unless waived by Lender, all proceeds from any disposition of the Collateral (for whateverreason) shall be held in trust for Lender and shall not be commingled with any other funds; provided however, this requirement shall not constituteconsent by Lender to any sale or other disposition. Upon receipt, Grantor shall immediately deliver any such proceeds to Lender. Title. Grantor represents and warrants to Lender that Grantor holds good and marketable title to the Collateral, free and clear of all liens andencumbrances except for the lien of this Agreement. No financing statement covering any of the Collateral is on file in any public office other than thosewhich reflect the security interest created by this Agreement or to which Lender has specifically consented. Grantor shall defend Lender’s rights in theCollateral against the claims and demands of all other persons. Repairs and Maintenance. Grantor agrees to keep and maintain, and to cause others to keep and maintain, the Collateral in good order, repair andcondition at all times while this Agreement remains in effect. Grantor further agrees to pay when due all claims for work done on, or services rendered ormaterial furnished in connection with the Collateral so that no lien or encumbrance may ever attach to or be filed against the Collateral. Inspection of Collateral. Lender and Lender’s designated representatives and agents shall have the right at all reasonable times to examine and inspectthe Collateral wherever located. Taxes, Assessments and Liens. Grantor will pay when due all taxes, assessments and liens upon the Collateral, its use or operation, upon thisAgreement, upon any promissory note or notes evidencing the Indebtedness, or upon any of the other Related Documents. Grantor may withhold any suchpayment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and so long asLender’s interest in the Collateral is not jeopardized in Lender’s sole opinion. If the Collateral is subjected to a lien which is not discharged within fifteen(15) days, Grantor shall deposit with Lender cash, a sufficient corporate surety bond or other security satisfactory to Lender in an amount adequate toprovide for the discharge of the lien plus any interest, costs, attorneys’ fees or other charges that could accrue as a result of foreclosure or sale of theCollateral. In any contest Grantor shall defend itself and Lender and shall satisfy any final adverse judgment before enforcement against the Collateral.Grantor shall name Lender as an additional obligee under any surety bond furnished in the contest proceedings. Grantor further agrees to furnish Lenderwith evidence that such taxes, assessments, and governmental and other charges have been paid in full and in a timely manner. Grantor may withholdany such payment or may elect to contest any lien if Grantor is in good faith conducting an appropriate proceeding to contest the obligation to pay and solong as Lender’s interest in the Collateral is not jeopardized. Compliance with Governmental Requirements. Grantor shall comply promptly with all laws, ordinances, rules and regulations of all governmentalauthorities, now or hereafter in effect, applicable to the ownership, production, disposition, or use of the Collateral, including all laws or regulationsrelating to the undue erosion of highly-erodible land or relating to the conversion of wetlands for the production of an agricultural product or commodity.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Grantor may contest in good faith any such law, ordinance or regulation and withhold compliance during any proceeding, including appropriate appeals,so long as Lender’s interest in the Collateral, in Lender’s opinion, is not jeopardized. Hazardous Substances. Grantor represents and warrants that the Collateral never has been, and never will be so long as this Agreement remains a lienon the Collateral, used in violation of any Environmental Laws or for the generation, manufacture, storage, transportation, treatment, disposal, release orthreatened release of any Hazardous Substance. The representations and warranties contained herein are based on Grantor’s due diligence in investigatingthe Collateral for Hazardous Substances. Grantor hereby (1) releases and waives any future claims against Lender for indemnity or contribution in theevent Grantor becomes liable for cleanup or other costs under any Environmental Laws, and (2) agrees to indemnify, defend and hold harmless Lenderagainst any and all claims and losses resulting from a breach of this provision of this Agreement. This obligation to indemnify and defend shall survivethe payment of the Indebtedness and the satisfaction of this Agreement. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 3 Maintenance of Casualty Insurance. Grantor shall procure and maintain all risks insurance, including without limitation fire, theft and liabilitycoverage together with such other insurance as Lender may require with respect to the Collateral, in form, amounts, coverages and basis reasonablyacceptable to Lender and issued by a company or companies reasonably acceptable to Lender. Grantor, upon request of Lender, will deliver to Lenderfrom time to time the policies or certificates of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled ordiminished without at least thirty (30) days’ prior written notice to Lender and not including any disclaimer of the insurer’s liability for failure to givesuch a notice. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not be impaired in any way by anyact, omission or default of Grantor or any other person. In connection with all policies covering assets in which Lender holds or is offered a securityinterest, Grantor will provide Lender with such loss payable or other endorsements as Lender may require. If Grantor at any time fails to obtain ormaintain any insurance as required under this Agreement, Lender may (but shall not be obligated to) obtain such insurance as Lender deems appropriate,including if Lender so chooses “single interest insurance,” which will cover only Lender’s interest in the Collateral. Application of Insurance Proceeds. Grantor shall promptly notify Lender of any loss or damage to the Collateral, whether or not such casualty or lossis covered by insurance. Lender may make proof of loss if Grantor fails to do so within fifteen (15) days of the casualty. All proceeds of any insuranceon the Collateral, including accrued proceeds thereon, shall be held by Lender as part of the Collateral. If Lender consents to repair or replacement of thedamaged or destroyed Collateral, Lender shall, upon satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds for the reasonable costof repair or restoration. If Lender does not consent to repair or replacement of the Collateral, Lender shall retain a sufficient amount of the proceeds to payall of the Indebtedness, and shall pay the balance to Grantor. Any proceeds which have not been disbursed within six (6) months after their receipt andwhich Grantor has not committed to the repair or restoration of the Collateral shall be used to prepay the Indebtedness. Insurance Reserves. Lender may require Grantor to maintain with Lender reserves for payment of insurance premiums, which reserves shall be createdby monthly payments from Grantor of a sum estimated by Lender to be sufficient to produce, at least fifteen (15) days before the premium due date,amounts at least equal to the insurance premiums to be paid. If fifteen (15) days before payment is due, the reserve funds are insufficient, Grantor shallupon demand pay any deficiency to Lender. The reserve funds shall be held by Lender as a general deposit and shall constitute a non-interest-bearingaccount which Lender may satisfy by payment of the insurance premiums required to be paid by Grantor as they become due. Lender does not hold thereserve funds in trust for Grantor, and Lender is not the agent of Grantor for payment of the insurance premiums required to be paid by Grantor. Theresponsibility for the payment of premiums shall remain Grantor’s sole responsibility. Insurance Reports. Grantor, upon request of Lender, shall furnish to Lender reports on each existing policy of insurance showing such information asLender may reasonably request including the following: (1) the name of the insurer; (2) the risks insured; (3) the amount of the policy; (4) the propertyinsured; (5) the then current value on the basis of which insurance has been obtained and the manner of determining that value; and (6) the expirationdate of the policy. In addition, Grantor shall upon request by Lender (however not more often than annually) have an independent appraiser satisfactory toLender determine, as applicable, the cash value or replacement cost of the Collateral. Financing Statements. Grantor authorizes Lender to file a UCC financing statement, or alternatively, a copy of this Agreement to perfect Lender’ssecurity interest. At Lender’s request, Grantor additionally agrees to sign all other documents that are necessary to perfect, protect, and continue Lender’ssecurity interest in the Property. Grantor will pay all filing fees, title transfer fees, and other fees and costs involved unless prohibited by law or unlessLender is required by law to pay such fees and costs. Grantor irrevocably appoints Lender to execute documents necessary to transfer title if there is adefault. Lender may file a copy of this Agreement as a financing statement. If Grantor changes Grantor’s name or address, or the name or address of anyperson granting a security interest under this Agreement changes, Grantor will promptly notify the Lender of such change. GRANTOR’S RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS. Until default and except as otherwise provided below with respect toaccounts, Grantor may have possession of the tangible personal property and beneficial use of all the Collateral and may use it in any lawful manner notinconsistent with this Agreement or the Related Documents, provided that Grantor’s right to possession and beneficial use shall not apply to any Collateralwhere possession of the Collateral by Lender is required by law to perfect Lender’s security interest in such Collateral. Until otherwise notified by Lender,Grantor may collect any of the Collateral consisting of accounts. At any time and even though no Event of Default exists, Lender may exercise its rights tocollect the accounts and to notify account debtors to make payments directly to Lender for application to the Indebtedness. If Lender at any time haspossession of any Collateral, whether before or after an Event of Default, Lender shall be deemed to have exercised reasonable care in the custody andpreservation of the Collateral if Lender takes such action for that purpose as Grantor shall request or as Lender, in Lender’s sole discretion, shall deemappropriate under the circumstances, but failure to honor any request by Grantor shall not of itself be deemed to be a failure to exercise reasonable care. Lendershall not be required to take any steps necessary to preserve any rights in the Collateral against prior parties, nor to protect, preserve or maintain any securityinterest given to secure the Indebtedness. LENDER’S EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral or if Grantor failsto comply with any provision of this Agreement or any Related Documents, including but not limited to Grantor’s failure to discharge or pay when due anyamounts Grantor is required to discharge or pay under this Agreement or any Related Documents, Lender on Grantor’s behalf may (but shall not be obligatedto) take any action that Lender deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances andother claims, at any time levied or placed on the Collateral and paying all costs for insuring, maintaining and preserving the Collateral. All such expendituresincurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date ofrepayment by Grantor. All such expenses will become a part of the Indebtedness and, at Lender’s option, will (A) be payable on demand; (B) be added to thebalance of the Note and be apportioned among and be payable with any installment payments to become due during either (1) the term of any applicableinsurance policy; or (2) the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity. TheAgreement also will secure payment of these amounts. Such right shall be in addition to all other rights and remedies to which Lender may be entitled uponSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Default. DEFAULT. Each of the following shall constitute an Event of Default under this Agreement: Payment Default. Grantor fails to make any payment when due under the Indebtedness. Other Defaults. Grantor fails to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of theRelated Documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andGrantor. Default in Favor of Third Parties. Any guarantor or Grantor defaults under any loan, extension of credit, security agreement, purchase or salesagreement, or any other agreement, in favor of any other creditor or person that may materially affect any of any guarantor's or Grantor's property orability to perform their respective obligations under this Agreement or any of the Related Documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Grantor or on Grantor’s behalf under this Agreement or theRelated Documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any timethereafter. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 4 Defective Collateralization. This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateraldocument to create a valid and perfected security interest or lien) at any time and for any reason. Insolvency. The dissolution or termination of Grantor’s existence as a going business, the insolvency of Grantor, the appointment of a receiver for anypart of Grantor’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under anybankruptcy or insolvency laws by or against Grantor. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Grantor or by any governmental agency against any collateral securing the Indebtedness. This includes agarnishment of any of Grantor’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faithdispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lenderwritten notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in anamount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor of any of the Indebtedness or Guarantor dies or becomesincompetent or revokes or disputes the validity of, or liability under, any Guaranty of the Indebtedness. Adverse Change. A material adverse change occurs in Grantor’s financial condition, or Lender believes the prospect of payment or performance of theIndebtedness is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Grantor has not been given a notice of a breach of the same provisionof this Agreement within the preceding twelve (12) months, it may be cured if Grantor, after Lender sends written notice to Grantor demanding cure ofsuch default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps whichLender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary stepssufficient to produce compliance as soon as reasonably practical. RIGHTS AND REMEDIES ON DEFAULT. If an Event of Default occurs under this Agreement, at any time thereafter, Lender shall have all the rights ofa secured party under the California Uniform Commercial Code. In addition and without limitation, Lender may exercise any one or more of the followingrights and remedies: Accelerate Indebtedness. Lender may declare the entire Indebtedness, including any prepayment penalty which Grantor would be required to pay,immediately due and payable, without notice of any kind to Grantor. Assemble Collateral. Lender may require Grantor to deliver to Lender all or any portion of the Collateral and any and all certificates of title and otherdocuments relating to the Collateral. Lender may require Grantor to assemble the Collateral and make it available to Lender at a place to be designated byLender. Lender also shall have full power to enter upon the property of Grantor to take possession of and remove the Collateral. If the Collateral containsother goods not covered by this Agreement at the time of repossession, Grantor agrees Lender may take such other goods, provided that Lender makesreasonable efforts to return them to Grantor after repossession. Sell the Collateral. Lender shall have full power to sell, lease, transfer, or otherwise deal with the Collateral or proceeds thereof in Lender’s own name orthat of Grantor. Lender may sell the Collateral at public auction or private sale. Unless the Collateral threatens to decline speedily in value or is of a typecustomarily sold on a recognized market, Lender will give Grantor, and other persons as required by law, reasonable notice of the time and place of anypublic sale, or the time after which any private sale or any other disposition of the Collateral is to be made. However, no notice need be provided to anyperson who, after Event of Default occurs, enters into and authenticates an agreement waiving that person’s right to notification of sale. The requirementsof reasonable notice shall be met if such notice is given at least ten (10) days before the time of the sale or disposition. All expenses relating to thedisposition of the Collateral, including without limitation the expenses of retaking, holding, insuring, preparing for sale and selling the Collateral, shallbecome a part of the Indebtedness secured by this Agreement and shall be payable on demand, with interest at the Note rate from date of expenditure untilrepaid. Appoint Receiver. Lender shall have the right to have a receiver appointed to take possession of all or any part of the Collateral, with the power to protectand preserve the Collateral, to operate the Collateral preceding foreclosure or sale, and to collect the Rents from the Collateral and apply the proceeds, overand above the cost of the receivership, against the Indebtedness. The receiver may serve without bond if permitted by law. Lender’s right to theappointment of a receiver shall exist whether or not the apparent value of the Collateral exceeds the Indebtedness by a substantial amount. Employment byLender shall not disqualify a person from serving as a receiver. Collect Revenues, Apply Accounts. Lender, either itself or through a receiver, may collect the payments, rents, income, and revenues from theCollateral. Lender may at any time in Lender’s discretion transfer any Collateral into Lender’s own name or that of Lender’s nominee and receive thepayments, rents, income, and revenues therefrom and hold the same as security for the Indebtedness or apply it to payment of the Indebtedness in suchorder of preference as Lender may determine. Insofar as the Collateral consists of accounts, general intangibles, insurance policies, instruments, chattelpaper, choses in action, or similar property, Lender may demand, collect, receipt for, settle, compromise, adjust, sue for, foreclose, or realize on theSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Collateral as Lender may determine, whether or not Indebtedness or Collateral is then due. For these purposes, Lender may, on behalf of and in the nameof Grantor, receive, open and dispose of mail addressed to Grantor; change any address to which mail and payments are to be sent; and endorse notes,checks, drafts, money orders, documents of title, instruments and items pertaining to payment, shipment, or storage of any Collateral. To facilitatecollection, Lender may notify account debtors and obligors on any Collateral to make payments directly to Lender. Obtain Deficiency. If Lender chooses to sell any or all of the Collateral, Lender may obtain a judgment against Grantor for any deficiency remaining onthe Indebtedness due to Lender after application of all amounts received from the exercise of the rights provided in this Agreement. Grantor shall be liablefor a deficiency even if the transaction described in this subsection is a sale of accounts or chattel paper. Other Rights and Remedies. Lender shall have all the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code,as may be amended from time to time. In addition, Lender shall have and may exercise any or all other rights and remedies it may have available at law,in equity, or otherwise. Election of Remedies. Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement, theRelated Documents, or by any other writing, shall be cumulative and may be exercised singularly or concurrently. Election by Lender to pursue anyremedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under thisAgreement, after Grantor’s failure to perform, shall not affect Lender’s right to declare a default and exercise its remedies. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 5 POWER OF ATTORNEY. Grantor hereby appoints Lender as its true and lawful attorney-in-fact, irrevocably, with full power of substitution to do thefollowing: (a) to demand, collect, receive, receipt for, sue and recover all sums of money or other property which may now or hereafter become due, owing orpayable from the Collateral; (b) to execute, sign and endorse any and all claims, instruments, receipts, checks, drafts or warrants issued in payment for theCollateral; (c) to settle or compromise any and all claims arising under the Collateral, and, in the place and stead of Grantor, to execute and deliver its releaseand settlement for the claim; and (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in its own name or inthe name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable. This power is given as security for theindebtedness, and the authority hereby conferred is and shall be irrevocable and shall remain in full force and effect until renounced by Lender. ADDITIONAL DEFINITION OF INDEBTEDNESS. The word “Indebtedness” includes all other obligations, debts and liabilities, plus interest thereon,of Grantor, or any one or more of them, to Lender, as well as all claims by Lender against Grantor, or any one or more of them, whether existing now or later;whether they are voluntary or involuntary, due or not due, direct o indirect, absolute or contingent, liquidated or unliquidated; whether Grantor may be liableindividually or jointly with others; whether Grantor may be obligated as guarantor, surety, accommodation party or otherwise; whether recovery upon suchindebtedness may be or hereafter may become barred by any statute of limitations; and whether such indebtedness may be or hereafter may become otherwiseunenforceable. ADDITIONAL MAINTENANCE AND INSPECTION OF COLLATERAL-GRANTOR. Grantor shall immediately notify Lender of all casesinvolving the return, rejection, repossession, loss or damage of or to any Collateral; of any request for credit or adjustment or of any other dispute arising withrespect to the Collateral; and generally of all happenings and events affecting the Collateral or the value or the amount of the Collateral. NATURE OF GUARANTY. Guarantor's liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force.Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration orotherwise, of all indebtedness. Accordingly, no payments made upon the indebtedness will discharge or diminish the continuing liability of Guarantor inconnection with any remaining portions of the indebtedness or any of the indebtedness which subsequently arises or is thereafter incurred or contracted. COLLATERAL SCHEDULES AND LOCATIONS. As often as Lender shall require, and insofar as the Collateral consists of accounts and generalintangibles, Grantor shall deliver to Lender schedules of such Collateral, including such information as Lender may require, including without limitationnames and addresses of account debtors and agings of accounts and general intangibles. Insofar as the Collateral consists of inventory and equipment,Grantor shall deliver to Lender, as often as Lender shall require, such lists, descriptions, and designations of such Collateral as Lender may require toidentify the nature, extent, and location of such Collateral. Such information shall be submitted for Grantor and each of its subsidiaries or related companies. PRIOR COMMERCIAL SECURITY AGREEMENT. This Commercial Security Agreement supersedes and replaces that certain prior CommercialSecurity Agreement dated March 1, 1999 along with all modification(s) and amendment(s) thereto. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Agreement: Amendments. This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or partiessought to be charged or bound by the alteration or amendment. Arbitration. Grantor and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Agreement or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to theRules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose ofany Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage;obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposingof such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, orcontroversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim torescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitratorshall have the right or the power to enjoin or restrain any act of any party. Grantor and Lender agree that in the event of an action forjudicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of suchaction, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may beentered in any court having jurisdiction. Nothing in this Agreement shall preclude any party from seeking equitable relief from a court ofcompetent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in anaction brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall bedeemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, andenforcement of this arbitration provision. Attorneys’ Fees; Expenses. Grantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’slegal expenses, incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone else to help enforce this Agreement, andGrantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not thereis a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay orSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.injunction), appeals, and any anticipated post-judgment collection services. Grantor also shall pay all court costs and such additional fees as may bedirected by the court. Caption Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Agreement. Governing Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, thelaws of the State of California without regard to its conflicts of law provisions. This Agreement has been accepted by Lender in the State ofCalifornia. Preference Payments. Any monies Lender pays because of an asserted preference claim in Grantor’s bankruptcy will become a part of the Indebtednessand, at Lender’s option, shall be payable by Grantor as provided in this Agreement. No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in writing and signed byLender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender ofa provision of this Agreement shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or anyother provision of this Agreement. No prior waiver by Lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any ofLender’s rights or of any of Grantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Agreement, thegranting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and inall cases such consent may be granted or withheld in the sole discretion of Lender. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 6 Notices. Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered, when actuallyreceived by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight courier, or, if mailed, when depositedin the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown near the beginning of this Agreement.Any party may change its address for notices under this Agreement by giving formal written notice to the other parties, specifying that the purpose of thenotice is to change the party’s address. For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor’s current address. Unlessotherwise provided or required by law, if there is more than one Grantor, any notice given by Lender to any Grantor is deemed to be notice given to allGrantors. Power of Attorney. Grantor hereby appoints Lender as Grantor’s irrevocable attorney-in-fact for the purpose of executing any documents necessary toperfect, amend, or to continue the security interest granted in this Agreement or to demand termination of filings of other secured parties. Lender may atany time, and without further authorization from Grantor, file a carbon, photographic or other reproduction of any financing statement or of thisAgreement for use as a financing statement. Grantor will reimburse Lender for all expenses for the perfection and the continuation of the perfection ofLender’s security interest in the Collateral. Waiver of Co-Obligor’s Rights. If more than one person is obligated for the Indebtedness, Grantor irrevocably waives, disclaims and relinquishes allclaims against such other person which Grantor has or would otherwise have by virtue of payment of the Indebtedness or any part thereof, specificallyincluding but not limited to all rights of indemnity, contribution or exoneration. Severability. If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to any circumstance,that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance. If feasible, the offending provisionshall be considered modified so that it becomes legal, valid and enforceable. If the offending provision cannot be so modified, it shall be considered deletedfrom this Agreement. Unless otherwise required by law, the illegality, invalidity, or unenforceability of any provision of this Agreement shall not affect thelegality, validity or enforceability of any other provision of this Agreement. Successors and Assigns. Subject to any limitations stated in this Agreement on transfer of Grantor’s interest, this Agreement shall be binding upon andinure to the benefit of the parties, their successors and assigns. If ownership of the Collateral becomes vested in a person other than Grantor, Lender,without notice to Grantor, may deal with Grantor’s successors with reference to this Agreement and the Indebtedness by way of forbearance or extensionwithout releasing Grantor from the obligations of this Agreement or liability under the Indebtedness. Survival of Representations and Warranties. All representations, warranties, and agreements made by Grantor in this Agreement shall survive theexecution and delivery of this Agreement, shall be continuing in nature, and shall remain in full force and effect until such time as Grantor’s Indebtednessshall be paid in full. Time is of the Essence. Time is of the essence in the performance of this Agreement. Waive Jury. To the extent permitted by applicable law, all parties to this Agreement hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by any party against any other party. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Agreement shall havethe meanings attributed to such terms in the Uniform Commercial Code: Agreement. The word “Agreement” means this Commercial Security Agreement, as this Commercial Security Agreement may be amended or modifiedfrom time to time, together with all exhibits and schedules attached to this Commercial Security Agreement from time to time. Borrower. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note and all theirsuccessors and assigns. Collateral. The word “Collateral” means all of Grantor’s right, title and interest in and to all the Collateral as described in the Collateral Descriptionsection of this Agreement. Default. The word “Default” means the Default set forth in this Agreement in the section titled “Default”. Environmental Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances relating to theprotection of human health or the environment, including without limitation the Comprehensive Environmental Response, Compensation, and LiabilityAct of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, Pub. L. No.99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the Resource Conservation and Recovery Act, 42U.S.C. Section 6901, et seq., Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety Code, Section 25100, et seq., or otherapplicable state or federal laws, rules, or regulations adopted pursuant thereto. Event of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default section of this Agreement.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Grantor. The word “Grantor” means BISCO INDUSTRIES, INC.. Guarantor. The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Indebtedness. Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Hazardous Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical, chemical orinfectious characteristics, may cause or pose a present or potential hazard to human health or the environment when improperly used, treated, stored,disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous Substances” are used in their very broadest sense andinclude without limitation any and all hazardous or toxic substances, materials or waste as defined by or listed under the Environmental Laws. The term“Hazardous Substances” also includes, without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos. Indebtedness. The word “Indebtedness” means the indebtedness evidenced by the Note or Related Documents, including all principal and interesttogether with all other indebtedness and costs and expenses for which Grantor is responsible under this Agreement or under any of the Related Documents.Specifically, without limitation, Indebtedness includes all amounts that may be indirectly secured by the Cross-Collateralization provision of thisAgreement. Lender. The word “Lender” means COMMUNITY BANK, its successors and assigns. Note. The word “Note” means the Note executed by BISCO INDUSTRIES, INC. in the principal amount of $8,000,000.00 dated November 15, 2000,together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL SECURITY AGREEMENT Loan No: 155354101(Continued)Page 7 Property. The word “Property” means all of Grantor’s right, title and interest in and to all the Property as described in the “Collateral Description”section of this Agreement. Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whether nowor hereafter existing, executed in connection with the Indebtedness. GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY AGREEMENT ANDAGREES TO ITS TERMS. THIS AGREEMENT IS DATED MARCH 23, 2010. GRANTOR: BISCO INDUSTRIES, INC. By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCO INDUSTRIES,INC. LASER PRO Lending, Ver 5.46.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2010. All Rights Reserved. - CA G:\CF150\CFl\LPL\E40.FCTR-6201 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.18 PROMISSORY NOTE PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials$ 1,000,000.0003-10-201103-01-20137100839CLS 07 / 240600714765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item. Any item abovecontaining “* * *” has been omitted due to text length limitations. Borrower: BISCO INDUSTRIES, INC.1500 N. LAKEVIEW AVE.ANAHEIM, CA 92807Lender:COMMUNITY BANKANAHEIM BRANCH1750 S. STATE COLLEGE BLVD.ANAHEIM, CA 92806(800) 788-9999 Principal Amount: $1,000,000.00Date of Note: March 10, 2011 PROMISE TO PAY. BISCO INDUSTRIES, INC. (“Borrower”) promises to pay to COMMUNITY BANK (“Lender”), or order, in lawful moneyof the United States of America, the principal amount of One Million & 00/100 Dollars ($1,000,000.00), together with interest on the unpaidprincipal balance from March 10, 2011, until paid in full. PAYMENT. Borrower will pay this loan in full immediately upon Lender’s demand. If no demand is made, subject to any payment changesresulting from changes in the Index, Borrower will pay this loan in 24 payments of $43,083.05 each payment. Borrower’s first payment is dueApril 1, 2011, and all subsequent payments are due on the same day of each month after that. Borrower’s final payment will be due onMarch 1, 2013, and will be for all principal and all accrued interest not yet paid. Payments include principal and interest. Unless otherwiseagreed or required by applicable law, payments will be applied to any accrued unpaid interest; then to principal; then to late charges; then toany unpaid collection costs. Notwithstanding anything to the contrary contained in the immediately preceding sentence, all payments will beapplied as invoiced, so any payment received prior to the due date will result in an invoice the succeeding month that is calculated to include apartial interest credit. Conversely, if a payment is received after the due date, the succeeding month’s invoice will reflect a higher accrued interestamount than would otherwise be due if the payment had been made and applied on the due date. Borrower will pay Lender at Lender’saddress shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an index which is the rate fromtime to time established by Lender as its Reference Rate and used to determine the actual interest rates charged on commercial loans, with the understandingthat such Reference Rate is only one of the base rates that may be used by Lender to determine the actual interest rate charged on a commercial loan and maynot be the lowest of the base rates so used (the “Index”). Lender will tell Borrower the current Index rate upon Borrower’s request. The interest rate change willnot occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 3.250% perannum. Interest on the unpaid principal balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraphusing a rate equal to the Index, resulting in an initial rate of 3.250%. NOTICE: Under no circumstances will the interest rate on this Note be more than themaximum rate allowed by applicable law. Whenever increases occur in the interest rate, Lender, at its option, may do one or more of the following: (A) increaseBorrower’s payments to ensure Borrower’s loan will pay off by its original final maturity date, (B) increase Borrower’s payments to cover accruing interest,(C) increase the number of Borrower’s payments, and (D) continue Borrower’s payments at the same amount and increase Borrower’s final payment. INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rateover a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance isoutstanding. All interest payable under this Note is computed using this method. PREPAYMENT; MINIMUM INTEREST CHARGE. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitledto a minimum interest charge of $500.00. Other than Borrower’s obligation to pay any minimum interest charge, Borrower may pay without penalty all or aportion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation tocontinue to make payments under the payment schedule. Rather, early payments will reduce the principal balance due and may result in Borrower’s makingfewer payments. Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language. If Borrower sends such apayment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed toLender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the paymentconstitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must bemailed or delivered to: COMMUNITY BANK, Loan Support Group, Post Office Box 54477 Los Angeles, CA 90054. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment or$25.00, whichever is greater. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.INTEREST AFTER DEFAULT. Upon default, the interest rate on this Note shall, if permitted under applicable law, immediately increase by adding anadditional 5.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also apply to each succeeding interest rate change that wouldhave applied had there been no default. DEFAULT. Each of the following shall constitute an event of default (“Event of Default”) under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of therelated documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender andBorrower. Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or salesagreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability torepay this Note or perform Borrower’s obligations under this Note or any of the related documents. False Statements. Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Note or therelated documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any timethereafter. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Insolvency. The dissolution or termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver forany part of Borrower’s property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceedingunder any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession orany other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment ofany of Borrower’s accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute byBorrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender writtennotice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amountdetermined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute. Events Affecting Guarantor. Any of the preceding events occurs with respect to any guarantor, endorser, surety, or accommodation party of any ofthe indebtedness or any guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, orliability under, any guaranty of the indebtedness evidenced by this Note. Change In Ownership. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance ofthis Note is impaired. Insecurity. Lender in good faith believes itself insecure. Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the sameprovision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after Lender sends written notice to Borrower demandingcure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates stepswhich Lender deems in Lender’s sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessarysteps sufficient to produce compliance as soon as reasonably practical. LENDER’S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediatelydue, and then Borrower will pay that amount. ATTORNEYS’ FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender thatamount. This includes, subject to any limits under applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit,including attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. To the extent permitted by applicable law, Lender and Borrower hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws ofthe State of California without regard to its conflicts of law provisions. This Note has been accepted by Lender in the State of California. DISHONORED ITEM FEE. Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorizedcharge with which Borrower pays is later dishonored. RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender (whether checking,savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower authorizes Lender, tothe extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts. COLLATERAL. Borrower acknowledges this Note is secured by Collateral as described in two (2) Commercial Security Agreements each dated March 23,2010. ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual, joint, or class innature, arising from this Note or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuant to the Rules ofthe American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or dispose of anycollateral securing this Note shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes,without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage;obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing ofsuch property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversiesconcerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any collateral securing this Note, including any claim torescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall also be arbitrated, provided however thatno arbitrator shall have the right or the power to enjoin or restrain any act of any party. Borrower and Lender agree that in the event of anaction for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, thecommencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of suchSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may beentered in any court having jurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competentjurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action broughtby a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed thecommencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement ofthis arbitration provision. PRIMARY BANKING RELATIONSHIP. Borrower and Lender acknowledge and agree that Borrower now maintains or will maintain its primary bankingrelationship, including its primary deposit account relationship (“Primary Banking Relationship”), with Lender. In the event Borrower ceases to maintain itsPrimary Banking Relationship with Lender (as determined by Lender in its sole discretion), the interest rate margin set forth in this Note shall be increased byone percent (1.00%) from zero percent (0.00%) to one percent (1.00%), at Lender’s option, following a five (5) day written notice to the Borrower. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives, successors andassigns, and shall inure to the benefit of Lender and its successors and assigns. NOTIFY US OF INACCURATE INFORMATION WE REPORT TO CONSUMER REPORTING AGENCIES. Borrower may notify Lender ifLender reports any inaccurate information about Borrower’s account(s) to a consumer reporting agency. Borrower’s written notice describing the specificinaccuracy(ies) should be sent to Lender at the following address: COMMUNITY BANK Loan Support Group P.O. Box 54477 Los Angeles, CA 90054. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. GENERAL PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude Lender’sright to declare payment of this Note on its demand. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delayor forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs, guarantees or endorses thisNote, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change inthe terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker orendorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release anyparty or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessaryby Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyoneother than the party with whom the modification is made. The obligations under this Note are joint and several. PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THEVARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: BISCO INDUSTRIES, INC. By:/S/ GLEN F. CEILEY GLEN F. CEILEY, Chairman and CEO of BISCOINDUSTRIES, INC. LASER PRO Lending, Ver. 5.60.00.005 Copr. Harland Financial Solutions, Inc. 1997, 2012. All Rights Reserved. - CA G:\CF150\CFI\LPL\D20C.FC TR-6558 PR-38 Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.19 COMMERCIAL GUARANTY PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials CLS 07 / 240 644/s/References in the shaded area are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC. Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806Guarantor:GLEN F. CEILEY (800) 788-9999 304 EVENING STAR LANE NEWPORT BEACH, CA 92660 AMOUNT OF GUARANTY. The amount of this Guaranty is Unlimited. CONTINUING UNLIMITED GUARANTY. For good and valuable consideration, GLEN F. CEILEY (“Guarantor”) absolutely andunconditionally guarantees and promises to pay to COMMUNITY BANK (“Lender”) or its order, in legal tender of the United States of America,the Indebtedness (as that term is defined below) of BISCO INDUSTRIES, INC. (“Borrower”) to Lender on the terms and conditions set forth Inthis Guaranty. Under this Guaranty, the liability of Guarantor is unlimited and the obligations of Guarantor are continuing. INDEBTEDNESS GUARANTEED. The Indebtedness guaranteed by this Guaranty includes any and all of Borrower’s indebtedness to Lender and is usedin the most comprehensive sense and means and includes any and all of Borrower’s liabilities, obligations and debts to Lender, now existing or hereinafterincurred or created, including, without limitation, all loans, advances, interest, costs, debts, overdraft indebtedness, credit card indebtedness, leaseobligations, other obligations, and liabilities of Borrower, or any of them, and any present or future judgments against Borrower, or any of them; and whetherany such Indebtedness is voluntarily or involuntarily incurred, due or not due, absolute or contingent, liquidated or unliquidated, determined orundetermined; whether Borrower may be liable individually or jointly with others, or primarily or secondarily, or as guarantor or surety; whether recovery onthe Indebtedness may be or may become barred or unenforceable against Borrower for any reason whatsoever; and whether the Indebtedness arises fromtransactions which may be voidable on account of infancy, insanity, ultra vires, or otherwise. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice toGuarantor or to Borrower, and will continue in full force until all Indebtedness incurred or contracted before receipt by Lender of any notice of revocation shallhave been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. If Guarantorelects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certified mail, atLender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to advances or newIndebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness”does not include Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomes absolute,liquidated, determined or due. This Guaranty will continue to bind Guarantor for all Indebtedness incurred by Borrower or committed by Lender prior toreceipt of Guarantor’s written notice of revocation, including any extensions, renewals, substitutions or modifications of the Indebtedness. All renewals,extensions, substitutions, and modifications of the Indebtedness granted after Guarantor’s revocation, are contemplated under this Guaranty and, specificallywill not be considered to be new Indebtedness. This Guaranty shall bind Guarantor’s estate as to Indebtedness created both before and after Guarantor’s deathor incapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legalrepresentative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any otherguarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receivesfrom any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantor’s obligations under this Guarantyshall be in addition to any of Guarantor’s obligations, or any of them, under any other guaranties of Borrower’s Indebtedness or any other person heretofore orhereafter given to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty,affect, invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of Indebtedness coveredby this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of Indebtedness, even to zero dollars($0.00), prior to Guarantor’s written revocation of this Guaranty shall not constitute a termination of this Guaranty. This Guaranty is bindingupon Guarantor and Guarantor’s heirs, successors and assigns so long as any of the guaranteed Indebtedness remains unpaid and even thoughthe Indebtedness guaranteed may from time to time be zero dollars ($0.00). OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Guaranty hereby expressly agrees that recourse under this Guaranty maybe had against both his or her separate property and community property. GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice ordemand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make oneor more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower;(B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any partof the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than theoriginal loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail orSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.decide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal withany one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when andwhat application of payments and credits shall be made on the Indebtedness (F) to apply such security and direct the order or manner of sale thereof, includingwithout limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion may determine;(G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or in part. GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreementsof any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’srequest and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty donot conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation,court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber,hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor willprovide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all futurefinancial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial conditionas of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the mostrecent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) nolitigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I)Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining fromBorrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of anyfacts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request forinformation, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship withBorrower. GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest,demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor orsurety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness;(B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, includingBorrower’s collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give noticeof the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose anyinformation about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursueany remedy or course of action in Lender’s power whatsoever. Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or anyother person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtednessby Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lenderwhich directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release ofany collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) anymodification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the timepayment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of thisGuaranty on Indebtedness incurred prior to such revocation. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 2 Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicialforeclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower byoperation of Section 580d of the California Code of Civil Procedure or otherwise. Guarantor waives all rights and defenses that Guarantor may have because Borrower’s obligation is secured by real property. This means among other things:(1) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (2) If Lender forecloses on anyreal property collateral pledged by Borrower: (a) the amount of Borrower’s obligation may be reduced only by the price for which the collateral is sold at theforeclosure sale, even if the collateral is worth more than the sale price. (b) Lender may collect from Guarantor even if Lender, by forclosing on the realproperty collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights anddefenses Guarantor may have because Borrower’s obligation is secured by real property. These rights and defenses include, but are not limited to, any rightsand defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantormight otherwise be entitled under state and federal law. Guarantor acknowledges that Guarantor has provided these waivers of rights and defenses with theintention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate and independent contract betweenGuarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all Indebtedness is paid in full, Guarantor waivesany right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person, and further, Guarantor waives anyright to participate in any collateral for the Indebtedness now or hereafter held by Lender. In addition to the waivers set forth herein, if now or hereafter Borrower is or shall become insolvent and the Indebtedness shall not at all times until paid befully secured by collateral pledged by Borrower, Guarantor hereby forever waives and gives up in favor of Lender and Borrower, and Lender’s andBorrower’s respective successors, any claim or right to payment Guarantor may now have or hereafter have or acquire against Borrower, by subrogation orotherwise, so that at no time shall Guarantor be or become a “creditor” of Borrower within the meaning of 11 U.S.C. section 547(b), or any successorprovision of the Federal bankruptcy laws. GUARANTOR’S UNDERSTANDING WITH RESPECT TO WAIVERS. Guarantor warrants and agrees that each of the waivers set forth above ismade with Guarantor’s full knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary topublic policy or law. If any such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extentpermitted by law or public policy. SUBORDINATION OF BORROWER’S DEBTS TO GUARANTOR. Guarantor agrees that the Indebtedness of Borrower to Lender, whether now existingor hereafter created, shall be superior to any claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomesinsolvent. Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lendermay now or hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by anassignment for the benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lenderand Guarantor shall be paid to Lender and shall be first applied by Lender to the Indebtedness of Borrower to Lender. Guarantor does hereby assign to Lenderall claims which it may have or acquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that suchassignment shall be effective only for the purpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes orcredit agreements now or hereafter evidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to thisGuaranty and shall be delivered to Lender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to execute and filefinancing statements and continuation statements and to execute such other documents and to take such other actions as Lender deems necessary orappropriate to perfect, preserve and enforce its rights under this Guaranty. MISCELLANEOUS PROVISIONS. The following miscellaneous provisions are a part of this Guaranty: Amendments. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or partiessought to be charged or bound by the alteration or amendment. Arbitration. Borrower and Guarantor and Lender agree that all disputes, claims and controversies between them whether individual, joint,or class in nature, arising from this Guaranty or otherwise, including without limitation contract and tort disputes, shall be arbitratedpursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act totake or dispose of any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement.This includes, without limitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed oftrust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, includingtaking or disposing of such property with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes,claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, includingany claim to rescind, reform, or otherwise modify any agreement relating to the Collateral, shall also be arbitrated, provided however thatno arbitrator shall have the right or the power to enjoin or restrain any act of any party. Borrower and Guarantor and Lender agree that inthe event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in anyother state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitrationSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.as much of such action, including counterclaims, as lawfully may be referred to arbitration. Judgment upon any award rendered by anyarbitrator may be entered in any court having jurisdiction. Nothing in this Guaranty shall preclude any party from seeking equitable relieffrom a court of competent jurisdiction. The statute of limitations, estoppel, waiver, laches, and similar doctrines which would otherwise beapplicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitrationproceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction,interpretation, and enforcement of this arbitration provision. Attorneys’ Fees; Expenses. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees and Lender’slegal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, andGuarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or notthere is a lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay orinjunction), appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may bedirected by the court. Caption Headings. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Guaranty. Governing Law. This Guaranty will be governed by, construed and enforced in accordance with federal law and the laws of the State ofCalifornia. This Guaranty has been accepted by Lender in the State of California. Integration. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity to beadvised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required tointerpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (includingLender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of thisparagraph. Interpretation. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemed tohave been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or whenthis Guaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them.The words “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that anyprovision of this Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid orenforced. Therefore, a court will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid orunenforceable. If any one or more of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is notnecessary for Lender to inquire into the powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting orpurporting to act on their behalf, and any Loan indebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteedunder this Guaranty. Notices. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effectivewhen actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnightcourier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shownnear the beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided inthe section of this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by givingformal written notice to the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agreesto keep Lender informed at all times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor,any notice given by Lender to any Guarantor is deemed to be notice given to all Guarantors. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 3 No Waiver by Lender. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signed byLender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender ofa provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or anyother provision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any ofLender’s rights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, thegranting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and inall cases such consent may be granted or withheld in the sole discretion of Lender. Successors and Assigns. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon andinure to the benefit of the parties, their successors and assigns. Waive Jury. Lender and Guarantor hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by eitherLender or Borrower against the other. LENDERS RIGHT OF SETOFF. In addition to all liens upon the rights of setoff against the moneys, securities or other property of Guarantor given toLender by law, Lender shall have, with respect to Guarantor’s obligations to Lender under this Guaranty and to the extent permitted by law, a contracturalsecurity interest in and a right of setoff against, and Guarantor hereby assigns, conveys, delivers, pledges, and transfers to Lender all of Guarantor’s right,title and interest in and to, all deposits, moneys, securities and other property of Guarantor now or hereafter in the possession of or on deposit with Lender,whether held in a general or special account or deposit, whether held jointly with someone else, or whether held for safekeeping or otherwise, excluding howeverall IRA, Keogh, and trust accounts. Every such security interest and right of setoff may be exercised without demand upon a notice to Guarantor. No securityinterest or right of setoff shall be deemed to have been waived by any act or conduct on the part of Lender or by any neglect to exercise such right of setoff or toenforce such security interest or by any delay in so doing. Every right of setoff and security interest shall continue in full force and effect until such right ofsetoff or security interest is specifically waived or released by an instrument in writing executed by Lender. NATURE OF GUARANTY. Guarantor’s liability under this Guaranty shall be open and continuous for so long as this Guaranty remains in force.Guarantor intends to guarantee at all times the performance and prompt payment when due, whether at maturity or earlier by reason of acceleration orotherwise, of all indebtedness. Accordingly, no payments made upon the indebtedness will discharge or diminish the continuing liability of Guarantor inconnection with any remaining portions of the indebtedness or any of the indebtedness which subsequently arises or is thereafter incurred or contracted. DEFINITIONS. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have themeanings attributed to such terms in the Uniform Commercial Code: Borrower. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note. Guarantor. The word “Guarantor” means each and every person or entity signing this Guaranty, including without limitation GLEN F. CEILEY. Guaranty. The word “Guaranty” means the guaranty from Guarantor to Lender, including without limitation a guaranty of all or part of the Note. Indebtedness. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty. Lender. The word “Lender” means COMMUNITY BANK, its successors and assigns. Note. The word “Note” means the promissory note dated November 15, 2000, in the original amount of $8,000,000.00 from BISCO INDUSTRIES,INC. to Lender, together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the promissorynote or agreement. Related Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents,whether now or hereafter existing, executed in connection with the Indebtedness. EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY ANDAGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPONGUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUEUNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMALACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED MAY 1, 2004. GUARANTOR: WITHNESSD BY/s/ Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results./s/ GLEN F. CEILEY GLEN F. CEILEY TITLEV.P. CERTIFICATE OF ACKNOWLEDGMENT STATE OF ) ) ssCOUNTY OF ) On_________________________, 20______ before me, _____________________________________________________, personally appearedGLEN F. CEILEY, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed tothe within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s)on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal. Signature (Seal) LASER PRO Lending, Ver 5 23 20 002 Copr Harland Financial Solutions, Inc. 1997, 2004. All Rights Reserved - CA c:\CFI50\CFI\LPL\E20 FC TR-659PR-UCCSEC Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.20 COMMERCIAL GUARANTY PrincipalLoan DateMaturityLoan NoCall /CollAccountOfficerInitials CLS 07 / 240 765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC. Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999Guarantor:GLEN F. CEILEY AND BARBARA A. CEILEY REVOCABLE TRUST 304 EVENING STAR LANE NEWPORT BEACH, CA 92660 CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely andunconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of allBorrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender canenforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness oragainst any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or itsorder, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise performBorrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations arecontinuing. INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one ormore times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from any and alldebts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively orinterchangeably with others, owes or will owe Lender. “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit cardindebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodityprice protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans ortransactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarilyincurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct orindirect, primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by anegotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reasonwhatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced orextinguished and then afterwards increased or reinstated. If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall becumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liabilitywill be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties. CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULLAND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOWEXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ONTHE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTYFOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAYBE A ZERO BALANCE FROM TIME TO TIME. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice toGuarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocationshall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. IfGuarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certifiedmail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to newIndebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness”does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomesabsolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is:incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, andmodifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death orincapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legalrepresentative may terminate this Guaranty in the same manner In which Guarantor might have terminated it and with the same effect. Release of any otherguarantor or termination of any other guaranty of the indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receivesfrom any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantor’s obligations under this GuarantySource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.from any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantor’s obligations under this Guarantyshall be in addition to any of Guarantor’s obligations, or any of them, under any other guaranties of the indebtedness or any other person heretofore or hereaftergiven to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty, affect,invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness coveredby this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors andassigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00). GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice ordemand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make oneor more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower;(B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any partof the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than theoriginal loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail ordecide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal withany one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when andwhat application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof,including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion maydetermine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or inpart. GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreementsof any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’srequest and not at the request of Lender, (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty donot conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation,court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber,hypothecate, transfer, or otherwise dispose of all or substantially ail of Guarantor’s assets, or any interest therein; (F) upon Lender’s request Guarantor willprovide to Lender financial and credit information In form acceptable to Lender, and all such financial information which currently has been, and all futurefinancial Information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial conditionas of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the mostrecent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) nolitigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I)Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining fromBorrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of anyfacts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request forinformation, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship withBorrower. GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest,demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor orsurety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness;(B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, includingBorrower’s collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give noticeof the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose anyinformation about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender, or (G) pursueany remedy or course of action in Lender’s power whatsoever. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 2 Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or anyother person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtednessby Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lenderwhich directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release ofany collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) anymodification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the timepayment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of thisGuaranty on the Indebtedness incurred prior to such revocation. Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may becomeavailable to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive. Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicialforeclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower byoperation of Section 580d of the California Code of Civil Procedure or otherwise. Guarantor waives all rights and defenses that Guarantor may have because Borrower’s obligation is secured by real property. This means among other things:(N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (O) If Lender forecloses onany real property collateral pledged by Borrower: (1) the amount of Borrower’s obligation may be reduced only by the price for which the collateral is sold atthe foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the realproperty collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights anddefenses Guarantor may have because Borrower’s obligation is secured by real property. These rights and defenses include, but are not limited to, any rightsand defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantormight otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws ofsuretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers ofrights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate andindependent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtednessis paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person,and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender. Guarantor’s Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’sfull knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. Ifany such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or publicpolicy. Subordination of Borrower’s Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior toany claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Guarantor hereby expresslysubordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may now or hereafter have againstBorrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment for the benefit of creditors,by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantor shall be paid to Lenderand shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have or acquire against Borrower oragainst any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for the purpose of assuring toLender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafter evidencing any debts orobligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered to Lender. Guarantoragrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuation statements and to executedocuments and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights under this Guaranty. Miscellaneous Provisions. The following miscellaneous provisions are a part of this Guaranty: AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought tobe charged or bound by the alteration or amendment ARBITRATION. Borrower and Guarantor and Lender agree that all disputes, claims and controversies between them whether individual, joint,or class in nature, arising from this Guaranty or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuantto the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or disposeof any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertySource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.with or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Guarantor and Lender agree that in the event of an action for judicial foreclosurepursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action willnot constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, aslawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court havingjurisdiction. Nothing in this Guaranty shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statuteof limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall beapplicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action forthese purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. ATTORNEYS’ FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees andLender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, andGuarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there isa lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction),appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by thecourt. CAPTION HEADINGS. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Guaranty. GOVERNING LAW. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, thelaws of the State of California without regard to its conflicts of law provisions. INTEGRATION. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity tobe advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required tointerpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (includingLender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of thisparagraph. INTERPRETATION. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemedto have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when thisGuaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them. Thewords “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision ofthis Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, acourt will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one ormore of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into thepowers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and anyindebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 3 NOTICES. Any notice required to be given under this Guaranty shall be given in writing, and, except revocation notices by Guarantor, shall be effectivewhen actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnightcourier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown nearthe beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the sectionof this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written noticeto the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes, Guarantor agrees to keep Lender informed atall times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to anyGuarantor is deemed to be notice given to all Guarantors. NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signedby Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right A waiver by Lender of aprovision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any otherprovision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’srights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of suchconsent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases suchconsent may be granted or withheld in the sole discretion of Lender. SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding uponand inure to the benefit of the parties, their successors and assigns. WAIVE JURY. To the extent permitted by applicable law, Lender and Guarantor hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by either Lander or Guarantor against the other. Definitions. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have themeanings attributed to such terms in the Uniform Commercial Code: BORROWER. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note and all theirsuccessors and assigns. GUARANTOR. The word “Guarantor” means everyone signing this Guaranty, including without limitation GLEN F. CEILEY AND BARBARA A.CEILEY REVOCABLE TRUST, and in each case, any signer’s successors and assigns. GUARANTY. The word “Guaranty” means this guaranty from Guarantor to Lender. INDEBTEDNESS. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty. LENDER. The word “Lender” means COMMUNITY BANK, its successors and assigns. NOTE. The word “Note” means the Note executed by BISCO INDUSTRIES, INC. in the principal amount of $8,000,000.00 dated November 15, 2000,together with all renewals of, extensions of, modifications of, refinancings of, consolidations of, and substitutions for the note or credit agreement RELATED DOCUMENTS. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whethernow or hereafter existing, executed in connection with the indebtedness. EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY ANDAGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPONGUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUEUNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMALACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED MAY 15, 2008. GUARANTOR: GLEN F. CEILEY AND BARRARA A CEILEY REVOCABLETRUST By: /s/ GLEN F. CEILEY By: /s/ BARBARA A. CEILEY GLEN F. CEILEY, Trustee OF GLEN F. CEILEY AND BARBARA A. CEILEY, Trustee OF GLEN F. CEILEY BARBARA A. CEILEY REVOCABLE TRUST AND BARBARA A. CEILEY REVOCABLE TRUSTSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. CERTIFICATE OF ACKNOWLEDGMENT STATE OFCaliforina )WITNESSED BY ) ss COUNTY OFOrange )TITLE: On May 15, 2008 before me, Amy May Leo, Notary Public (here insert name and title of the officer) personally appeared GLEN F. CEILEY and BARBARA A. CEILEY, who proved to me on the basis of satisfactory evidence to be the person(s) whosename(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), andthat by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature/s/ Amy May Leo (Seal) LASER PRO Lending, Ver. 5,30,00,000 Copr. Harland Financial Solutions, Inc. 1997, 2007. All Rights Reserved . CA G:\CF140 CFI\LPL\E20:FC TR- 6201PR-TRADARST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.21 COMMUNITY BANK Partnership BankingCOMMERCIAL GUARANTY PrincipalLoan DateMaturityLoan NoCall / CollAccountOfficerInitials CLS 07 / 240 765/s/References in the boxes above are for Lender’s use only and do not limit the applicability of this document to any particular loan or item.Any item above containing “***” has been omitted due to text length limitations. Borrower:BISCO INDUSTRIES, INC. Lender:COMMUNITY BANK 1500 NORTH LAKEVIEW AVENUE ANAHEIM BRANCH ANAHEIM, CA 92807 1750 S. STATE COLLEGE BLVD. ANAHEIM, CA 92806 (800) 788-9999 Guarantor:EACO CORPORATION 1500 N. LAKEVIEW AVENUE ANAHEIM, CA 92807 CONTINUING GUARANTEE OF PAYMENT AND PERFORMANCE. For good and valuable consideration, Guarantor absolutely andunconditionally guarantees full and punctual payment and satisfaction of the Indebtedness of Borrower to Lender, and the performance and discharge of allBorrower’s obligations under the Note and the Related Documents. This is a guaranty of payment and performance and not of collection, so Lender canenforce this Guaranty against Guarantor even when Lender has not exhausted Lender’s remedies against anyone else obligated to pay the Indebtedness oragainst any collateral securing the Indebtedness, this Guaranty or any other guaranty of the Indebtedness. Guarantor will make any payments to Lender or itsorder, on demand, in legal tender of the United States of America, in same-day funds, without set-off or deduction or counterclaim, and will otherwise performBorrower’s obligations under the Note and Related Documents. Under this Guaranty, Guarantor’s liability is unlimited and Guarantor’s obligations arecontinuing. INDEBTEDNESS. The word “Indebtedness” as used in this Guaranty means all of the principal amount outstanding from time to time and at any one ormore times, accrued unpaid interest thereon and all collection costs and legal expenses related thereto permitted by law, attorneys’ fees, arising from any and alldebts, liabilities and obligations of every nature or form, now existing or hereafter arising or acquired, that Borrower individually or collectively orinterchangeably with others, owes or will owe Lender. “Indebtedness” includes, without limitation, loans, advances, debts, overdraft indebtedness, credit cardindebtedness, lease obligations, liabilities and obligations under any interest rate protection agreements or foreign currency exchange agreements or commodityprice protection agreements, other obligations, and liabilities of Borrower, and any present or future judgments against Borrower, future advances, loans ortransactions that renew, extend, modify, refinance, consolidate or substitute these debts, liabilities and obligations whether: voluntarily or involuntarilyincurred; due or to become due by their terms or acceleration; absolute or contingent; liquidated or unliquidated; determined or undetermined; direct orindirect; primary or secondary in nature or arising from a guaranty or surety; secured or unsecured; joint or several or joint and several; evidenced by anegotiable or non-negotiable instrument or writing; originated by Lender or another or others; barred or unenforceable against Borrower for any reasonwhatsoever; for any transactions that may be voidable for any reason (such as infancy, insanity, ultra vires or otherwise); and originated then reduced orextinguished and then afterwards increased or reinstated. If Lender presently holds one or more guaranties, or hereafter receives additional guaranties from Guarantor, Lender’s rights under all guaranties shall becumulative. This Guaranty shall not (unless specifically provided below to the contrary) affect or invalidate any such other guaranties. Guarantor’s liabilitywill be Guarantor’s aggregate liability under the terms of this Guaranty and any such other unterminated guaranties. CONTINUING GUARANTY. THIS IS A “CONTINUING GUARANTY” UNDER WHICH GUARANTOR AGREES TO GUARANTEE THE FULLAND PUNCTUAL PAYMENT, PERFORMANCE AND SATISFACTION OF THE INDEBTEDNESS OF BORROWER TO LENDER, NOWEXISTING OR HEREAFTER ARISING OR ACQUIRED, ON AN OPEN AND CONTINUING BASIS. ACCORDINGLY, ANY PAYMENTS MADE ONTHE INDEBTEDNESS WILL NOT DISCHARGE OR DIMINISH GUARANTOR’S OBLIGATIONS AND LIABILITY UNDER THIS GUARANTYFOR ANY REMAINING AND SUCCEEDING INDEBTEDNESS EVEN WHEN ALL OR PART OF THE OUTSTANDING INDEBTEDNESS MAYBE A ZERO BALANCE FROM TIME TO TIME. DURATION OF GUARANTY. This Guaranty will take effect when received by Lender without the necessity of any acceptance by Lender, or any notice toGuarantor or to Borrower, and will continue in full force until all the Indebtedness incurred or contracted before receipt by Lender of any notice of revocationshall have been fully and finally paid and satisfied and all of Guarantor’s other obligations under this Guaranty shall have been performed in full. IfGuarantor elects to revoke this Guaranty, Guarantor may only do so in writing. Guarantor’s written notice of revocation must be mailed to Lender, by certifiedmail, at Lender’s address listed above or such other place as Lender may designate in writing. Written revocation of this Guaranty will apply only to newIndebtedness created after actual receipt by Lender of Guarantor’s written revocation. For this purpose and without limitation, the term “new Indebtedness”does not include the Indebtedness which at the time of notice of revocation is contingent, unliquidated, undetermined or not due and which later becomesabsolute, liquidated, determined or due. For this purpose and without limitation, “new Indebtedness” does not include all or part of the Indebtedness that is:incurred by Borrower prior to revocation; incurred under a commitment that became binding before revocation; any renewals, extensions, substitutions, andmodifications of the Indebtedness. This Guaranty shall bind Guarantor’s estate as to the Indebtedness created both before and after Guarantor’s death orincapacity, regardless of Lender’s actual notice of Guarantor’s death. Subject to the foregoing, Guarantor’s executor or administrator or other legalSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.representative may terminate this Guaranty in the same manner in which Guarantor might have terminated it and with the same effect. Release of any otherguarantor or termination of any other guaranty of the Indebtedness shall not affect the liability of Guarantor under this Guaranty. A revocation Lender receivesfrom any one or more Guarantors shall not affect the liability of any remaining Guarantors under this Guaranty. Guarantor’s obligations under this Guarantyshall be in addition to any of Guarantor’s obligations, or any of them, under any other guaranties of the Indebtedness or any other person heretofore or hereaftergiven to Lender unless such other guaranties are modified or revoked in writing; and this Guarantor shall not, unless provided in this Guaranty, affect,invalidate, or supersede any such other guaranty. It is anticipated that fluctuations may occur in the aggregate amount of the Indebtedness coveredby this Guaranty, and Guarantor specifically acknowledges and agrees that reductions in the amount of the Indebtedness, even to zero dollars($0.00), shall not constitute a termination of this Guaranty. This Guaranty is binding upon Guarantor and Guarantor’s heirs, successors andassigns so long as any of the Indebtedness remains unpaid and even though the Indebtedness may from time to time be zero dollars ($0.00). GUARANTOR’S AUTHORIZATION TO LENDER. Guarantor authorizes Lender, either before or after any revocation hereof, without notice ordemand and without lessening Guarantor’s liability under this Guaranty, from time to time: (A) prior to revocation as set forth above, to make oneor more additional secured or unsecured loans to Borrower, to lease equipment or other goods to Borrower, or otherwise to extend additional credit to Borrower;(B) to alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of the Indebtedness or any partof the Indebtedness, including increases and decreases of the rate of interest on the Indebtedness; extensions may be repeated and may be for longer than theoriginal loan term; (C) to take and hold security for the payment of this Guaranty or the Indebtedness, and exchange, enforce, waive, subordinate, fail ordecide not to perfect, and release any such security, with or without the substitution of new collateral; (D) to release, substitute, agree not to sue, or deal withany one or more of Borrower’s sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; (E) to determine how, when andwhat application of payments and credits shall be made on the Indebtedness; (F) to apply such security and direct the order or manner of sale thereof,including without limitation, any nonjudicial sale permitted by the terms of the controlling security agreement or deed of trust, as Lender in its discretion maydetermine; (G) to sell, transfer, assign or grant participations in all or any part of the Indebtedness; and (H) to assign or transfer this Guaranty in whole or inpart. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 2 GUARANTOR’S REPRESENTATIONS AND WARRANTIES. Guarantor represents and warrants to Lender that (A) no representations or agreementsof any kind have been made to Guarantor which would limit or qualify in any way the terms of this Guaranty; (B) this Guaranty is executed at Borrower’srequest and not at the request of Lender; (C) Guarantor has full power, right and authority to enter into this Guaranty; (D) the provisions of this Guaranty donot conflict with or result in a default under any agreement or other instrument binding upon Guarantor and do not result in a violation of any law, regulation,court decree or order applicable to Guarantor; (E) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber,hypothecate, transfer, or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein; (F) upon Lender’s request, Guarantor willprovide to Lender financial and credit information in form acceptable to Lender, and all such financial information which currently has been, and all futurefinancial information which will be provided to Lender is and will be true and correct in all material respects and fairly present Guarantor’s financial conditionas of the dates the financial information is provided; (G) no material adverse change has occurred in Guarantor’s financial condition since the date of the mostrecent financial statements provided to Lender and no event has occurred which may materially adversely affect Guarantor’s financial condition; (H) nolitigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes) against Guarantor is pending or threatened; (I)Lender has made no representation to Guarantor as to the creditworthiness of Borrower; and (J) Guarantor has established adequate means of obtaining fromBorrower on a continuing basis information regarding Borrower’s financial condition. Guarantor agrees to keep adequately informed from such means of anyfacts, events, or circumstances which might in any way affect Guarantor’s risks under this Guaranty, and Guarantor further agrees that, absent a request forinformation, Lender shall have no obligation to disclose to Guarantor any information or documents acquired by Lender in the course of its relationship withBorrower. GUARANTOR’S WAIVERS. Except as prohibited by applicable law, Guarantor waives any right to require Lender to (A) make any presentment, protest,demand, or notice of any kind, including notice of change of any terms of repayment of the Indebtedness, default by Borrower or any other guarantor orsurety, any action or nonaction taken by Borrower, Lender, or any other guarantor or surety of Borrower, or the creation of new or additional Indebtedness;(B) proceed against any person, including Borrower, before proceeding against Guarantor; (C) proceed against any collateral for the Indebtedness, includingBorrower’s collateral, before proceeding against Guarantor; (D) apply any payments or proceeds received against the Indebtedness in any order; (E) give noticeof the terms, time, and place of any sale of the collateral pursuant to the Uniform Commercial Code or any other law governing such sale; (F) disclose anyinformation about the Indebtedness, the Borrower, the collateral, or any other guarantor or surety, or about any action or nonaction of Lender; or (G) pursueany remedy or course of action in Lender’s power whatsoever. Guarantor also waives any and all rights or defenses arising by reason of (H) any disability or other defense of Borrower, any other guarantor or surety or anyother person; (I) the cessation from any cause whatsoever, other than payment in full, of the Indebtedness; (J) the application of proceeds of the Indebtednessby Borrower for purposes other than the purposes understood and intended by Guarantor and Lender; (K) any act of omission or commission by Lenderwhich directly or indirectly results in or contributes to the discharge of Borrower or any other guarantor or surety, or the Indebtedness, or the loss or release ofany collateral by operation of law or otherwise; (L) any statute of limitations in any action under this Guaranty or on the Indebtedness; or (M) anymodification or change in terms of the Indebtedness, whatsoever, including without limitation, the renewal, extension, acceleration, or other change in the timepayment of the Indebtedness is due and any change in the interest rate, and including any such modification or change in terms after revocation of thisGuaranty on the Indebtedness incurred prior to such revocation. Guarantor waives all rights of subrogation, reimbursement, indemnification, and contribution and any other rights and defenses that are or may becomeavailable to Guarantor by reason of California Civil Code Sections 2787 to 2855, inclusive. Guarantor waives all rights and any defenses arising out of an election of remedies by Lender even though that the election of remedies, such as a non-judicialforeclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against Borrower byoperation of Section 580d of the California Code of Civil Procedure or otherwise. Guarantor waives all rights and defenses that Guarantor may have because Borrower’s obligation is secured by real property. This means among other things:(N) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. (O) If Lender forecloses onany real property collateral pledged by Borrower: (1) the amount of Borrower’s obligation may be reduced only by the price for which the collateral is sold atthe foreclosure sale, even if the collateral is worth more than the sale price. (2) Lender may collect from Guarantor even if Lender, by foreclosing on the realproperty collateral, has destroyed any right Guarantor may have to collect from Borrower. This is an unconditional and irrevocable waiver of any rights anddefenses Guarantor may have because Borrower’s obligation is secured by real property. These rights and defenses include, but are not limited to, any rightsand defenses based upon Section 580a, 580b, 580d, or 726 of the Code of Civil Procedure. Guarantor understands and agrees that the foregoing waivers are unconditional and irrevocable waivers of substantive rights and defenses to which Guarantormight otherwise be entitled under state and federal law. The rights and defenses waived include, without limitation, those provided by California laws ofsuretyship and guaranty, anti-deficiency laws, and the Uniform Commercial Code. Guarantor acknowledges that Guarantor has provided these waivers ofrights and defenses with the intention that they be fully relied upon by Lender. Guarantor further understands and agrees that this Guaranty is a separate andindependent contract between Guarantor and Lender, given for full and ample consideration, and is enforceable on its own terms. Until all of the Indebtednessis paid in full, Guarantor waives any right to enforce any remedy Guarantor may have against the Borrower or any other guarantor, surety, or other person,and further, Guarantor waives any right to participate in any collateral for the Indebtedness now or hereafter held by Lender. Guarantor’s Understanding With Respect To Waivers. Guarantor warrants and agrees that each of the waivers set forth above is made with Guarantor’sfull knowledge of its significance and consequences and that, under the circumstances, the waivers are reasonable and not contrary to public policy or law. Ifany such waiver is determined to be contrary to any applicable law or public policy, such waiver shall be effective only to the extent permitted by law or publicSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.policy. Collateral. This Guaranty is secured by Collateral as described in that certain Commercial Security Agreement of even date and executed by the Grantornamed therein in favor of Lender. Subordination of Borrower’s Debts to Guarantor. Guarantor agrees that the Indebtedness, whether now existing or hereafter created, shall be superior toany claim that Guarantor may now have or hereafter acquire against Borrower, whether or not Borrower becomes insolvent. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTYLoan No: 155354101(Continued)Page 3 Guarantor hereby expressly subordinates any claim Guarantor may have against Borrower, upon any account whatsoever, to any claim that Lender may nowor hereafter have against Borrower. In the event of insolvency and consequent liquidation of the assets of Borrower, through bankruptcy, by an assignment forthe benefit of creditors, by voluntary liquidation, or otherwise, the assets of Borrower applicable to the payment of the claims of both Lender and Guarantorshall be paid to Lender and shall be first applied by Lender to the Indebtedness. Guarantor does hereby assign to Lender all claims which it may have oracquire against Borrower or against any assignee or trustee in bankruptcy of Borrower; provided however, that such assignment shall be effective only for thepurpose of assuring to Lender full payment in legal tender of the Indebtedness. If Lender so requests, any notes or credit agreements now or hereafterevidencing any debts or obligations of Borrower to Guarantor shall be marked with a legend that the same are subject to this Guaranty and shall be delivered toLender. Guarantor agrees, and Lender is hereby authorized, in the name of Guarantor, from time to time to file financing statements and continuationstatements and to execute documents and to take such other actions as Lender deems necessary or appropriate to perfect, preserve and enforce its rights underthis Guaranty. Miscellaneous Provisions. The following miscellaneous provisions are a part of this Guaranty: AMENDMENTS. This Guaranty, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the mattersset forth in this Guaranty. No alteration of or amendment to this Guaranty shall be effective unless given in writing and signed by the party or parties sought tobe charged or bound by the alteration or amendment. ARBITRATION. Borrower and Guarantor and Lender agree that all disputes, claims and controversies between them whether individual, joint,or class in nature, arising from this Guaranty or otherwise, including without limitation contract and tort disputes, shall be arbitrated pursuantto the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party. No act to take or disposeof any Collateral shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement. This includes, withoutlimitation, obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining awrit of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such propertywith or without judicial process pursuant to Article 9 of the Uniform Commercial Code. Any disputes, claims, or controversies concerning thelawfulness or reasonableness of any act, or exercise of any right, concerning any Collateral, including any claim to rescind, reform, or otherwisemodify any agreement relating to the Collateral, shall also be arbitrated, provided however that no arbitrator shall have the right or the powerto enjoin or restrain any act of any party. Borrower and Guarantor and Lender agree that in the event of an action for judicial foreclosurepursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action willnot constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, aslawfully may be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court havingjurisdiction. Nothing in this Guaranty shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statuteof limitations, estoppel, waiver, laches, and similar doctrines which would otherwise be applicable in an action brought by a party shall beapplicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action forthese purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. ATTORNEYS’ FEES; EXPENSES. Guarantor agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s attorneys’ fees andLender’s legal expenses, incurred in connection with the enforcement of this Guaranty. Lender may hire or pay someone else to help enforce this Guaranty, andGuarantor shall pay the costs and expenses of such enforcement. Costs and expenses include Lender’s attorneys’ fees and legal expenses whether or not there isa lawsuit, including attorneys’ fees and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction),appeals, and any anticipated post-judgment collection services. Guarantor also shall pay all court costs and such additional fees as may be directed by thecourt. CAPTION HEADINGS. Caption headings in this Guaranty are for convenience purposes only and are not to be used to interpret or define the provisions ofthis Guaranty. GOVERNING LAW. This Guaranty will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, thelaws of the State of California without regard to its conflicts of law provisions. INTEGRATION. Guarantor further agrees that Guarantor has read and fully understands the terms of this Guaranty; Guarantor has had the opportunity tobe advised by Guarantor’s attorney with respect to this Guaranty; the Guaranty fully reflects Guarantor’s intentions and parol evidence is not required tointerpret the terms of this Guaranty. Guarantor hereby indemnifies and holds Lender harmless from all losses, claims, damages, and costs (includingLender’s attorneys’ fees) suffered or incurred by Lender as a result of any breach by Guarantor of the warranties, representations and agreements of thisparagraph. INTERPRETATION. In all cases where there is more than one Borrower or Guarantor, then all words used in this Guaranty in the singular shall be deemedto have been used in the plural where the context and construction so require; and where there is more than one Borrower named in this Guaranty or when thisGuaranty is executed by more than one Guarantor, the words “Borrower” and “Guarantor” respectively shall mean all and any one or more of them. Thewords “Guarantor,” “Borrower,” and “Lender” include the heirs, successors, assigns, and transferees of each of them. If a court finds that any provision ofthis Guaranty is not valid or should not be enforced, that fact by itself will not mean that the rest of this Guaranty will not be valid or enforced. Therefore, acourt will enforce the rest of the provisions of this Guaranty even if a provision of this Guaranty may be found to be invalid or unenforceable. If any one ormore of Borrower or Guarantor are corporations, partnerships, limited liability companies, or similar entities, it is not necessary for Lender to inquire into theSource: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.powers of Borrower or Guarantor or of the officers, directors, partners, managers, or other agents acting or purporting to act on their behalf, and anyindebtedness made or created in reliance upon the professed exercise of such powers shall be guaranteed under this Guaranty. NOTICES. Any notice required to be given under this Guaranty shall be given in writing, and, except for revocation notices by Guarantor, shall be effectivewhen actually delivered, when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnightcourier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the addresses shown nearthe beginning of this Guaranty. All revocation notices by Guarantor shall be in writing and shall be effective upon delivery to Lender as provided in the sectionof this Guaranty entitled “DURATION OF GUARANTY.” Any party may change its address for notices under this Guaranty by giving formal written noticeto the other parties, specifying that the purpose of the notice is to change the party’s address. For notice purposes. Guarantor agrees to keep Lender informed atall times of Guarantor’s current address. Unless otherwise provided or required by law, if there is more than one Guarantor, any notice given by Lender to anyGuarantor is deemed to be notice given to all Guarantors. NO WAIVER BY LENDER. Lender shall not be deemed to have waived any rights under this Guaranty unless such waiver is given in writing and signedby Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right. A waiver by Lender ofa provision of this Guaranty shall not prejudice or constitute a waiver of Lender’s right otherwise to demand strict compliance with that provision or any otherprovision of this Guaranty. No prior waiver by Lender, nor any course of dealing between Lender and Guarantor, shall constitute a waiver of any of Lender’srights or of any of Guarantor’s obligations as to any future transactions. Whenever the consent of Lender is required under this Guaranty, the granting of suchconsent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases suchconsent may be granted or withheld in the sole discretion of Lender. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. COMMERCIAL GUARANTY Loan No: 155354101(Continued)Page 4 SUCCESSORS AND ASSIGNS. Subject to any limitations stated in this Guaranty on transfer of Guarantor’s interest, this Guaranty shall be binding upon and inure tothe benefit of the parties, their successors and assigns. WAIVE JURY. To the extent permitted by applicable law, Lender and Guarantor hereby waive the right to any jury trial in any action,proceeding, or counterclaim brought by either Lender or Guarantor against the other. Definitions. The following capitalized words and terms shall have the following meanings when used in this Guaranty. Unless specifically stated to thecontrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words and terms used in the singular shallinclude the plural, and the plural shall include the singular, as the context may require. Words and terms not otherwise defined in this Guaranty shall have themeanings attributed to such terms in the Uniform Commercial Code: BORROWER. The word “Borrower” means BISCO INDUSTRIES, INC. and includes all co-signers and co-makers signing the Note and all theirsuccessors and assigns. GUARANTOR. The word “Guarantor” means everyone signing this Guaranty, including without limitation EACO CORPORATION, and in each case, anysigner’s successors and assigns. GUARANTY. The word “Guaranty” means this guaranty from Guarantor to Lender. INDEBTEDNESS. The word “Indebtedness” means Borrower’s indebtedness to Lender as more particularly described in this Guaranty. LENDER. The word “Lender” means COMMUNITY BANK, its successors and assigns. NOTE. The word “Note” means the Note executed by BISCO INDUSTRIES, INC. in the principal amount of $8,000,000.00 dated November 15, 2000,together with all renewals of, extensions of, modifications of, refinancings of, and substitutions for the note or credit agreement. RELATED DOCUMENTS. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental agreements,guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments, agreements and documents, whethernow or hereafter existing, executed in connection with the Indebtedness. EACH UNDERSIGNED GUARANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS GUARANTY ANDAGREES TO ITS TERMS. IN ADDITION, EACH GUARANTOR UNDERSTANDS THAT THIS GUARANTY IS EFFECTIVE UPONGUARANTOR’S EXECUTION AND DELIVERY OF THIS GUARANTY TO LENDER AND THAT THE GUARANTY WILL CONTINUEUNTIL TERMINATED IN THE MANNER SET FORTH IN THE SECTION TITLED “DURATION OF GUARANTY”. NO FORMALACCEPTANCE BY LENDER IS NECESSARY TO MAKE THIS GUARANTY EFFECTIVE. THIS GUARANTY IS DATED MARCH 23,2010. GUARANTOR: WITNESSED BY/s/ EACO CORPORATION TITLE:First Vice President WITNESSED BY/s/By:/s/ GLEN F. CEILEY GLEN F. CEILEY, Authoized Officer of EACO TITLE:Staff Accountant CORPORATION CERTIFICATE OF ACKNOWLEDGMENT STATE OF ) ) ss COUNTY OF ) on , 20___________ before me, ______________________________________________, (here insert name and title of the officer) personally appeared GLEN F. CEILEY, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to thewithin instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) onthe instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct. WITNESS my hand and official seal. Signature (Seal) LASER PRO Lending, Ver, 5.46.00.003 Corp. Harland Financial Solution, Inc. 1997, 2010. All Rights Reserved. CA G:\CFI\LPL\E20.FC TR. 11540 PR-TRADASST Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Exhibit 10.22 Commercial Lease This lease is made between Glen Ceiley, of ______________________________________________, herein called Lessor, and Bisco Industries,of_________________________________________, herein called Lessee. Lessee hereby offers to lease from Lessor the premises situated in the City ofAnaheim, County of Orange, State of California, described as 1500 N Lakeview Ave upon the following TERMS and CONDITIONS: 1. Term and Rent. Lessor demises the above premises for a term of 10 years, commencing May 1st 2001, and terminating on April 30th, 2011, or sooner asprovided herein at the annual rental of $307,200.00 Dollars ($ 25,600 mo.) payable in equal installments in advance on the first day of each month for thatmonth’s rental, during the term of this lease. All rental payments shall be made to Lessor, at the address specified above. 2. Use. Lessee shall use and occupy the premises for Sales and Distribution only. The premises shall be used for no other purpose. Lessor represents that thepremises may lawfully be used for such purpose. Lessee shall not use the premises for the purposes of storing, manufacturing or selling any explosives,flammables, or other inherently dangerous substance, chemical, thing, or device. 3. Care and Maintenance of Premises. Lessee acknowledges that the premises are in good order and repair, unless otherwise indicated herein. Lessee shall,at his own expense and at all times, maintain the premises in good and safe condition, including plate glass, electrical wiring, plumbing and heatinginstallations and any other system or equipment upon the premises and shall surrender the same, at termination hereof, in as good condition as received,normal wear and tear excepted. Lessee shall be responsible for all repairs required, excepting the roof, exterior walls, structural foundations, and:_____________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________which shall be maintained by Lessor. Lessee shall also maintain in good condition such portions adjacent to the premises, such as sidewalks, driveways,lawns and shrubbery, which would otherwise be required to be maintained by Lessor. 4. Alterations. Lessee shall not, without first obtaining the written consent of Lessor, make any alterations, additions, or improvements, in, to or about thepremises. 5. Ordinances and Statutes. Lessee shall comply with all statutes, ordinances and requirements of all municipal, state and federal authorities now in force,or which may hereafter be in force, pertaining to the premises, occasioned by or affecting the use thereof by Lessee. 6. Assignment and Subletting. Lessee shall not assign this lease or sublet any portion of the premises without prior written consent of the Lessor, whichshall not be unreasonably withheld. Any such assignment or subletting without consent shall be void and, at the option of the Lessor, may terminate this lease. 7. Utilities. All applications and connections for necessary utility services on the demised premises shall be made in the name of Lessee only, and Lesseeshall be solely liable for utility charges as they become due, including those for sewer, water, gas, electricity, and telephone services. In the event that anyutility or service provided to the premises is not separately metered, Lessor shall pay the amount due and separately invoice Lessee for Lessee’s pro rata shareof the charges. Tenant shall pay such amounts within fifteen (15) days of invoice. Lessee acknowledges that the leased premises are designed to providestandard office use electrical facilities and standard office lighting. Lessee shall not use any equipment or devices that utilize excessive electrical energy or thatmay, in Lessor’s reasonable opinion, overload the wiring or interfere with electrical services to other tenants. 8. Entry and Inspection. Lessee shall permit Lessor or Lessor’s agents to enter upon the premises at reasonable times and upon reasonable notice, for thepurpose of inspecting the same, and will permit Lessor at any time within sixty (60) days prior to the expiration of this lease, to place upon the premises anyusual “To Let” or “For Lease” signs, and permit persons desiring to lease the same to inspect the premises thereafter. www.socrates.com © 2004, Socrates Media, LLC LF140 • Rev. 04/04Page 1Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 9. Parking. During the term of this lease, Lessee shall have the nonexclusive use in common with Lessor, other tenants of the building, their guests andinvitees, of the nonreserved common automobile parking areas, driveways, and foot ways, subject to rules and regulations for the use thereof as prescribedfrom time to time by Lessor. Lessor reserves the right to designate parking areas within the building or in a reasonable proximity thereto, for Lessee andLessee’s agents and employees. Lessee shall provide Lessor with a list of all license numbers for the cars owned by Lessee, its agents and employees.Separated structured parking, if any, located about the building is reserved for Lessees of the building who rent such parking spaces. Lessee hereby leasesfrom Lessor ___________spaces in such a structural parking area, such spaces to be on a first-come first-served basis. In consideration of the leasing toLessee of such spaces, Lessee shall pay a monthly rental_____________________Dollars ($______________) per space throughout the term of the lease.Such rent shall be due and payable each month without demand at the time herein set for the payment of other monthly rentals, in addition to such otherrentals. 10. Possession. If Lessor is unable to deliver possession of the premises at the commencement hereof, Lessor shall not be liable for any damage causedthereby, nor shall this lease be void or voidable, but Lessee shall not be liable for any rent until possession is delivered. Lessee may terminate this lease ifpossession is not delivered within____________days of the commencement of the term hereof. 11. Indemnification of Lessor. To the extenet of the law, Lessor shall not be liable for any damage or injury to Lessee, or any other person, or to any property,occurring on the demised premises or any part thereof. Lessee agrees to indemnify and hold Lessor harmless from any claims for damages which arise inconnection with any such occurence. Said indemnification shall include indemnity from any costs or fee which Lessor may incur in defending said claim. 12. Insurance. Lessee, at his expense, shall maintain plate glass and public liability insurance including bodily injury and property damage insuring Lesseeand Lessor with minimum coverage as follows: Lessee shall provide Lessor with a Certificate of Insurance showing Lessor as additional insured. The Certificate shall provide for a ten-day writtennotice to Lessor in the event of cancellation or material change of coverage. To the maximum extent permitted by insurance policies which may beowned by Lessor or Lessee, Lessee and Lessor, for the benefit of each other, waive any and all rights of sub rogation which might otherwise exist. If the leased premises or any other part of the building is damaged by fire or other casualty resulting from any act of negligence of Lessee or any ofLessee’s agents, employees or invitees, rent shall not be diminished or abated while such damages are under repair, and Lessee shall be responsiblefor the costs of repair not covered by insurance. 13. Eminent Domain. If the premises or any part thereof or any estate therein, or any other part of the building materially affecting Lessee’s use of thepremises, shall be taken by eminent domain, this lease shall terminate on the date when title vests pursuant to such taking. The rent, and any additional rent,shall be apportioned as of the termination date, and any rent paid for any period beyond that date shall be repaid to Lessee. Lessee shall not be entitled to anypart of the award for such taking or any payment in lieu thereof, but Lessee may file a claim for any taking of fixtures and improvements owned by Lessee,and for moving expenses. 14. Destruction of Premises. In the event of a partial destruction of the premises during the term hereof, from any cause, Lessor shall forthwith repair thesame, provided that such repairs can be made within sixty (60) days under existing governmental laws and regulations, but such partial destruction shall notterminate this lease, except that Lessee shall be entitled to a proportionate reduction of rent while such repairs are being made, based upon the extent to whichthe making of such repairs shall interfere with the business of Lessee on the premises. If such repairs cannot be made within said sixty (60) days, Lessor, athis option, may make the same within a reasonable time, this lease continuing in effect with the rent proportionately abated as aforesaid, and in the event thatLessor shall not elect to make such repairs which cannot be made within sixty (60) days, this lease may be terminated at the option of either party. In the eventthat the building in which the demised premises may be situated is destroyed to an extent of not less than one-third of the replacement costs thereof, Lessormay elect to terminate this lease whether the demised premises be injured or not. A total destruction of the building in which the premises may be situated shallterminate this lease 15. Lessor’s Remedies on Default. If Lessee defaults in the payment of rent, or any additional rent, or defaults in the performance of any of the othercovenants or conditions hereof, Lessor may give Lessee notice of such default and if Lessee does not cure any such default within__________days, after thegiving of such notice (or if such other default is of such nature that it cannot be completely cured within such period, if Lessee does not commence such curingwithin such__________days and thereafter proceed with reasonable diligence and in good faith to cure such default), then Lessor may terminate this lease onnot less than_____________days’ notice to Lessee. On the date specified in such notice the term of this lease shall terminate, and Lessee shall then quit andsurrender the premises to Lessor, without extinguishing Lessee’s liability. If this lease shall have been so terminated by Lessor, Lessor may at any timethereafter resume possession of the premises by any lawful means and remove Lessee or other occupants and their effects. No failure to enforce any term shallbe deemed a waiver. www.socrates.com © 2004, Socrates Media, LLC LF140 • Rev. 04/04Page 2Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. 16. Security Deposit. Lessee shall deposit with Lessor on the signing of this lease the sum of______________Dollars ($_______) as security for theperformance of Lessee’s obligations under this lease, including without limitation the surrender of possession of the premises to Lessor as herein provided. IfLessor applies any part of the deposit to cure any default of Lessee, Lessee shall on demand deposit with Lessor the amount so applied so that Lessor shallhave the full deposit on hand at all times during the term of this lease. 17. Tax Increase. In the event there is any increase during any year of the term of this lease in the City, County or State real estate taxes over and above theamount of such taxes assessed for the tax year during which the term of this lease commences, whether because of increased rate or valuation. Lessee shall payto Lessor upon presentation of paid tax bills an amount equal to_____________% of the increase in taxes upon the land and building in which the leasedpremises are situated. In the event that such taxes are assessed for a tax year extending beyond the term of the lease, the obligation of Lessee shall beproportionate to the portion of the lease term included in such year. 18. Common Area Expenses. In the event the demised premises are situated in a shopping center or in a commercial building in which there are commonareas, Lessee agrees to pay his prorata share of maintenance, taxes, and insurance for the common area. 19. Attorney’s Fees. In case suit should be brought for recovery of the premises, or for any sum due hereunder, or because of any act which may arise out ofthe possession of the premises, by either party, the prevailing party shall be entitled to all costs incurred in connection with such action, including a reasonableattorney’s fee. 20. Waiver. No failure of Lessor to enforce any term hereof shall be deemed to be a waiver. 21. Notices. Any notice which either party may or is required to give, shall be given by mailing the same, postage prepaid, to Lessee at the premises, orLessor at the address specified above, or at such other places as may be designated by the parties from time to time. 22. Heirs, Assigns, Successors. This lease is binding upon and inures to the benefit of the heirs, assigns and successors in interest to the parties. 23. Option to Renew. Provided that Lessee is not in default in the performance of this lease, Lessee shall have the option to renew the lease for an additionalterm of __________ months commencing at the expiration of the initial lease term. All of the terms and conditions of the lease shall apply during the renewalterm except that the monthly rent shall be the sum of $__________. The option shall be exercised by written notice given to Lessor not less than ________days prior to the expiration of the initial lease term. If notice is not given in the manner provided herein within the time specified, this option shall expire. 24. Subordination. This lease is and shall be subordinated to all existing and future liens and encumbrances against the property. 25. Radon Gas Disclosure. As required by law, (Landlord) (Seller) makes the following disclosure: “Radon Gas” is a naturally occurring radioactive gasthat, when it has accumulated in a building in sufficient quantities, may present health risks to persons who are exposed to it over time. Levels of radon thatexceed federal and state guidelines have been found in buildings in____________. Additional information regarding radon and radon testing may be obtainedfrom your county public health unit. 26. Entire Agreement. The foregoing constitutes the entire agreement between the parties and may be modified only by a writing signed by both parties. Thefollowing Exhibits, if any, have been made a part of this lease before the parties’ execution hereof: Signed this 1st day of May, 2001. Lessor:/s/ Glen Ceiley Lessee:/s/ Glen Ceiley www.socrates.com © 2004, Socrates Media, LLC LF140 • Rev. 04/04Page 3Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. AddendumCommercial LeaseBy and Between Glen Ceiley “Landlord” and Bisco Industries “Tenant” The following lease addendum is to the lease commencing May 1, 2001 relating to the property leased by Bisco Industries at 1500 N. Lakeview Ave, Anaheim,CA 92807. The following supersedes the rental rates at that property, effective May 1, 2009. All other items contained in the master lease remain in effect andunchanged. The new rental rates are as follows: 5/1/09$26,368 monthly$316,416 annually 5/1/10$27,159 monthly$325,908 annually Agreed: /s/ Glen Ceiley 8\1\08Glen Ceiley DateLandlord /s/ Glen Ceiley 8\1\08Glen Ceiley DateCEO Bisco Industries Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Addendum 2Commercial LeaseBy and Between Glen Ceiley “Landlord” and Bisco Industries “Tenant” The following lease addendum is to the lease commencing May 1, 2001 relating to the property leased by Bisco Industries at 1500 N. Lakeview Ave, Anaheim,CA 92807. The following supersedes the rental rates at that property, effective May 1, 2009. All other items contained in the master lease remain in effect andunchanged. The new rental rates are as follows: 5/1/09$28,100 monthly$337,200 annually Agreed: /s/ Glen Ceiley 2/24/09Glen Ceiley DateLandlord /s/ Glen Ceiley 2/24/09Glen Ceiley DateCEO Bisco Industries Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. Addendum 3Commercial LeaseBy and Between Glen Ceiley “Landlord” and Bisco Industries “Tenant” The following lease addendum is to the lease commencing May 1, 2001 relating to the property leased by Bisco Industries at 1500 N. Lakeview Ave, Anaheim,CA 92807. The following supersedes the rental rates at that property, effective May 1, 2011. All other items contained in the master lease remain in effect andunchanged. The new rental rates are as follows: 5/1/11$27,973 monthly$335,676 annually Rent Escalation: Rent to escalate effective May 1st at a rate of 3% as follows: 5/1/12$28,812.19 monthly$345,746.28 annually 5/1/13$29,676.55 monthly$356,118.60 annually 5/1/14$30,660.57 monthly$367,926.84 annually 5/1/15$31,580.38 monthly$378,964.56 annually Term: This addendum shall remain in effect through April 30, 2016. Agreed: /s/ Glen Ceiley 8\30\11Glen Ceiley DateLandlord /s/ Glen Ceiley 8\30\11Glen Ceiley DateCEO Bisco Industries Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 31.1 CERTIFICATION PURSUANT TO EXCHANGE ACTRULE 13a-14(a)/15d-14(a), AS ADOPTED PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Glen Ceiley, certify that: 1. I have reviewed this annual report on Form 10-K of EACO Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am 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 my supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to me 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 mysupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes inaccordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about theeffectiveness 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 recentfiscal 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, theregistrant’s internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committeeof 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 reasonablylikely 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 controlover financial reporting. Date: November 26, 2012 /S/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results. EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. §1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the annual report of EACO Corporation (the “Company”) on Form 10-K for the fiscal year ended August 31, 2012, as filed withthe Securities and Exchange Commission on the date hereof (the “Report”), I, Glen Ceiley, Chief Executive Officer of the Company, certify, pursuant to 18U.S.C. §1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended;and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operationsof the Company. Date: November 26, 2012 /S/ GLEN CEILEY Glen Ceiley, Chief Executive Officer (principal executive officer and principal financial officer) Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: EACO CORP, 10-K, November 26, 2012Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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