Exhibit 10.1

 

FACTORING AND SECURITY AGREEMENT

 

THIS FACTORING AND SECURITY AGREEMENT (“Agreement”) is deemed executed and
binding as of November 26, 2013, by and between Wave Systems Corp. formally
known as Indata Corporation (“Seller”) a Delaware registered company, its
subsidiaries and affiliated companies (including all DBAs), and CapFlow Funding
Group Managers LLC, a Delaware limited liability company (“Purchaser”).

 

1.  Definitions and Index to Definitions.  The following terms used in this
section shall have the following meanings.  Each capitalized term not herein
defined shall have the meaning set forth in the Uniform Commercial Code (herein,
the “UCC”):

 

1.1   “Account” - any right to payment for goods sold or leased or for services
rendered which is not evidenced by an instrument or chattel paper, whether or
not it has been earned by performance.

 

1.2  “Account Debtor” - means a person obligated on an account, chattel paper,
or general intangible.

 

1.3  “Avoidance Claim” - any claim that any payment received by Purchaser is a
fraudulent transfer or obligation, preference, or is otherwise avoidable under
Title 11 of the United States Bankruptcy Code, any other debtor relief statute
or any other law.

 

1.4  “Base Fees” - the Initial Factoring Fee and all subsequent Factoring Fees.

 

1.5  “Chosen State” — shall be New York.

 

1.6  “Clearance Days”- one (1) banking day for funds received from wires, three
(3) banking days for checks drawn on United States banks; otherwise, ten
(10) days.

 

1.7  “Closed” - a Purchased Account is closed upon the first to occur of:
(i) receipt of full payment by Purchaser or (ii) the unpaid Face Amount has been
charged by Purchaser to the Reserve Account pursuant to the terms hereof.

 

1.8  “Collateral”- all Seller’s now owned and hereafter acquired Purchased
Accounts and, in each case to the extent relating to or arising out of the
foregoing, all Chattel Paper, Deposit Accounts, Instruments, Documents, Letter
of Credit Rights, Supporting Obligations of the Purchased Accounts, and any sums
maintained by Purchaser that are identified as payable to Seller from the
Reserve Account.

 

1.9  “Complete Termination” — Complete Termination occurs upon satisfaction of
each of the following conditions:

 

1.9.1.  Payment in full of all Obligations of Seller to Purchaser and
Purchaser’s issuance of a UCC termination statement;

 

1.9.2.  If Purchaser has issued or caused to be issued any guaranty, promise, or
letter of credit on behalf of Seller, acknowledgement from any beneficiaries
thereof that Purchaser or any other issuer has no outstanding direct or
contingent liability therein; and

 

1.9.3.  Seller has executed and delivered to Purchaser a general release in the
form of Exhibit 1.9.3 attached hereto.

 

1.10  “Early Termination Date” — see Section 19.1 hereof.

 

1.11  “Early Termination Fee” — shall be as provided for in Section 19.2.

 

1.12  “Eligible Account” - an Account that is acceptable for purchase as
determined by Purchaser in the exercise of its reasonable sole credit or
business judgment, however, the following Accounts will not qualify as Eligible
Accounts: including;

 

--------------------------------------------------------------------------------

 

i)                             accounts that have been outstanding greater than
90 days;

ii)                          invoices from account debtors that have receivables
greater than 90 days (“cross-age accounts”) or that are currently in dispute;

iii)                       account debtors that are currently seeking or are
under bankruptcy protection;

iv)                      invoices that are less than $1,000;

v)                         invoices from customers whereby Seller is both a
creditor and debtor (“contra accounts”);

vi)                      invoices, or any portion of invoices, in the 61-90 day
bucket that exceed 25% of current outstanding purchases of the Factoring
Facility;

vii)                   invoices that are older than 30 days (excluding the
initial funding);

viii)                invoices generated from unapproved foreign receivables.

 

1.13  “Events of Default” - see Section 16.1.

 

1.14  “Exposed Payments” — any payments received by Purchaser from or for the
account of a Payor that has become subject to a bankruptcy or other form of
debtor relief proceeding, to the extent such payments cleared the Payor’s
deposit account within ninety days of the commencement of said bankruptcy case
or are otherwise subject to avoidance.

 

1.15  “Face Amount” - the total gross amount due on an Account at the time of
purchase.

 

1.16  “Factoring Fee” - the Factoring Fee Percentage multiplied by the Face
Amount of a Purchased Account, for each Factoring Fee Period that any portion
thereof remains unpaid, computed from the end of the Initial Fee Period to and
including the date on which a Purchased Account is Closed.

 

1.17  “Factoring Fee Percentage” — shall be 0.05% for each day after the initial
Factoring Fee Period and commencing on the 31st day after purchase and until the
Late Payment Date.  The Factoring Fees for each Factoring Fee Period (including
the Initial Factoring Fee) will be as follows:

 

Invoice Aging

 

Periodic Amount

 

Cumulative

 

1-30 days

 

1.50

%

1.50

%

Every day thereafter

 

0.05

%

N/A

 

 

1.18   “Factoring Fee Period” — shall be 1 day for all periods except the
initial period, which shall be 30 days.

 

1.19  “Initial Factoring Fee” — shall be 1.50% of the Face Amount for the first
30 day period.

 

1.20  “Initial Fee Period” — shall be 30 days from the date on which the
Purchase Price is paid to Seller or credited by Purchaser to Seller’s Reserve
Account.

 

1.21  “Invoice” — any form of document that evidences or is intended to evidence
an Account.  Where the context so requires, reference to an Invoice shall be
deemed to refer to the Account to which it relates.

 

1.22  “Late Payment Factoring Fee” — shall be 0.15% per day.

 

1.23  “Late Payment Date” - the date which is 90 days from the Invoice date on a
Purchased Account.

 

1.24  “Maximum Amount” — shall be $2,000,000.

 

1.25  “Minimum Invoice Fee” — shall be $30.

 

1.26  “Misdirected Payment Fee”  - if after one (1) month from closing, the
Seller receives an invoice payment, cashes a check or otherwise deposits funds
from any Payor and fails to notify Purchaser immediately and

 

--------------------------------------------------------------------------------

 

remit the payment, in kind, to Purchaser within two (2) business days, then the
Seller shall pay a Misdirected Payment Fee which will equal 10% of the face
amount of the invoice.

 

1.27   “Obligations” - all present and future obligations and liabilities owing
by Seller to Purchaser, whether direct or indirect, absolute or contingent,
including obligations and liabilities that are likely to become owing by Seller
to Purchaser, whether arising hereunder or otherwise, and whether arising
before, during or after the commencement of any case filed under title 11 of the
United States Bankruptcy Code or any other debtor relief proceeding in which
Seller is a Debtor.

 

1.28   “Parties” — the Seller and Purchaser.

 

1.29  “Payor” - an Account Debtor or other obligor on an Account, including an
entity making payment thereon for the account of such party.

 

1.30   “Purchase Date” - the date on which Seller has been advised in writing
that Purchaser has agreed to purchase an Account or in which Purchaser has
caused a credit to be made to Seller’s Reserve Account.

 

1.31  “Purchase Price” - the Face Amount of a Purchased Account less all Base
Fees.

 

1.32  “Purchase Order Facility” — refers to a Purchase Order Assignment
Agreement, if executed, between the Seller and the Purchaser at any time on or
after the date of this Agreement.

 

1.33  “Purchased Accounts” — are Accounts purchased hereunder which have not
been Closed.

 

1.34  “Registered Organization” — shall have the meaning as defined in the UCC,
Section 9-102(a) (71).

 

1.35  “Repurchased” - an Account has been repurchased when Seller has paid to
Purchaser the then unpaid Face Amount.

 

1.36  “Required Reserve Amount” - the Reserve Percentage multiplied by the
unpaid balance of all Purchased Accounts.

 

1.37  “Reserve Account” - a bookkeeping account on the books of the Purchaser
representing the portion of the Purchase Price which has not been paid by
Purchaser to Seller, maintained by Purchaser to secure Seller’s performance with
the provisions hereof.

 

1.38  “Reserve Percentage” — shall be 15%.

 

1.39  “Reserve Shortfall” - the amount by which the Reserve Account is less than
the Required Reserve Amount.

 

1.40  “Schedule of Accounts”  - a form supplied by Purchaser, which may change
from time to time, wherein Seller lists those Accounts it requests that
Purchaser purchase under the terms of this Agreement.

 

1.41  “Security Interest”  - shall have the meaning as defined in the UCC,
Section 1-201(a) (35).

 

1.42  “Term” — a twelve (12) month period.  This Agreement will continue in full
force and effect for the initial Term, and shall be further extended
automatically for successive twelve (12) month Terms, unless Seller or Purchaser
gives the other Party written notice of its intention to terminate at least
sixty (60) days and no more than ninety (90) days prior to each such anniversary
date (each an “Anniversary Date”), whereupon this Agreement shall terminate on
the forthcoming anniversary.  Upon termination, Seller shall, among other
requirements in this Agreement, pay all of the Obligations to Purchaser and
Seller shall repurchase all Accounts then owned by Purchaser.  In the event
Seller fails to pay the Obligations and/or to effect such repurchase of
Accounts, this Agreement shall be extended automatically until the next
Anniversary Date.

 

--------------------------------------------------------------------------------

 

1.43  “UCC” — the Uniform Commercial Code as adopted in the Chosen State.

 

2.  Sale; Purchase Price; Billing

 

2.1  Assignment and Sale.

 

2.1.1.  Seller shall offer for sale to Purchaser, as absolute owner, such of
Seller’s Accounts as are listed from time to time on Schedules of Accounts a
current form of which is attached as Exhibit 2.1.1.

 

2.1.2.  Each Schedule of Accounts shall be accompanied by such documentation, as
Purchaser shall from time to time reasonably request, supporting and evidencing
each Account.

 

2.1.3.  Purchaser shall purchase from Seller such Accounts as Purchaser
determines to be Eligible Accounts, unless i) an Event of Default has occurred
and has not been cured; or ii) such purchase would cause the Face Amount of all
Purchased Accounts, less the required Reserve Amount, to exceed the Maximum
Amount.

 

2.1.4.  Purchaser may elect not to purchase any Account which will cause the
unpaid balance of Purchased Accounts to exceed the Maximum Amount.  However, if
Purchaser purchases Accounts in excess of the Maximum Amount, same shall have no
adverse consequences to Purchaser.

 

2.1.5.  Purchaser shall pay to Seller on the next business day following the
Purchase Date the Purchase Price of any Purchased Account, less any amounts
Purchaser owes Seller, including, without limitation, any amounts due under
Sections 3.1 and 6 hereof, whereupon the Accounts shall be deemed Purchased
Accounts.

 

2.2  Billing.  In an Event of Default or if so requested by a Payor, Purchaser
may send a periodic statement to all Payors itemizing their account activity
during the preceding billing period.  All Payors will be instructed to make
payments exclusively the lockbox established by Purchaser.

 

2.3  Collections.  All collections of Purchased Accounts and other Proceeds of
Collateral shall be deposited into a lockbox controlled by the Purchaser upon
which Purchaser shall have a perfected first priority Security Interest. 
Purchaser shall provide details of the lockbox to Seller prior to entering into
a transaction.

 

3.  Reserve Account.

 

3.1  Seller shall pay to Purchaser on demand the amount of any Reserve
Shortfall.

 

3.2  Purchaser is required, and shall pay to Seller, on a weekly basis any
amount by which the Reserve Account exceeds the Required Reserve Amount. 
Failure of Purchaser to make any required payments to Seller, as detailed in
this Agreement, shall result in an event of default by Purchaser and a
termination of the Agreement and no Early Termination Fee would be due. 
However, prior to any breach of this section creating an event of default,
Seller shall first give Purchaser written notice of such breach and not less
than (5) business days within which to cure.

 

3.3  Purchaser may charge the Reserve Account with any Obligation.

 

3.4  Purchaser may pay any amounts due Seller hereunder by a credit to the
Reserve Account.

 

3.5  Purchaser may retain the Reserve Account until a Complete Termination.

 

3.6  If, upon a Complete Termination of the Agreement and absent an Event of
Default by Seller, Purchaser fails to remit all monies due to Seller, Purchaser
shall be liable to Seller for all such amounts due.  If Seller incurs legal
costs or collection costs in order to collect monies that are found to be owed
to the Seller under this section, then Purchaser will be responsible to Seller
for all costs reasonably required to collect monies unjustifiably withheld by
Purchaser.  However, prior to any breach of this section creating an event of
default, Seller shall first give Purchaser written notice of such breach and not
less than (5) business days within which to cure.

 

--------------------------------------------------------------------------------

 

4.  Exposed Payments.

 

4.1  Upon termination of this Agreement Seller shall pay to Purchaser (which
Purchaser shall retain or hold in a segregated interest bearing account) the
amount of all Exposed Payments (the “Preference Reserve”).

 

4.2  Purchaser may charge the Preference Reserve with the amount of any Exposed
Payments that Purchaser pays to the bankruptcy estate of a Payor that made the
Exposed Payment on account of a claim asserted under Section 547 of the
Bankruptcy Code.

 

4.3  Purchaser shall refund to Seller from time to time that balance of the
Preference Reserve for which a claim under Section 547 of the Bankruptcy Code
can no longer be asserted due to the expiration of the statute of limitations,
settlement with the bankruptcy estate of the Payor or otherwise.

 

5.  Authorization for Purchases.  Subject to the terms and conditions of this
Agreement, Purchaser is authorized to purchase Accounts upon telephonic,
facsimile or other instructions received from anyone purporting to be an
officer, employee or representative of Seller.

 

6.  Fees and Expenses.  Seller shall pay to Purchaser:

 

6.1  Initial Factoring Fee.  The Initial Factoring Fee (i) on the Late Payment
Date or (ii) the date on which a Purchased Account is closed, whichever is
earlier.

 

6.2  Factoring Fee.  The Factoring Fee, for each Factoring Fee Period, computed
from the end of the Initial Factoring Fee Period and (i) until the Late Payment
Date or (ii) the date on which a Purchased Account is Closed, whichever is
earliest.

 

6.3  Misdirected Payment Fee.  Any Misdirected Payment Fee immediately upon its
accrual.

 

6.4  Late Payment Factoring Fee.  The Late Payment Factoring Fee, on demand, on
all past due amounts due from Seller to Purchaser hereunder.

 

6.5  Minimum Volume Fee.  None.

 

6.6  Out-of-pocket Expenses.  The reasonable out-of-pocket expenses directly
incurred by Purchaser in the administration of this Agreement or any other
agreement that is executed between the parties such as wire transfer fees of $30
for all outgoing wire transfers, postage, search fees and collateral audit
fees.  Seller will pay the Purchaser $0 in closing costs (a one-time fee) to
cover the cost of legal, collateral valuations, credit inquiries and other
administrative expenses, with $0 due prior to executing this Agreement, and $0
deducted from the first advance.

 

6.7  Renewal Fee.  Seller shall pay a $0 fee if the Facility is renewed.

 

6.8  Minimum Invoice Fee.  Seller shall be obligated to pay Purchaser the
Minimum Invoice Fee.

 

7.  Repurchase Of Accounts.  Purchaser may require that Seller repurchase, at
Purchaser’s option and on demand, by requiring Seller to: (a) pay the then
unpaid Purchase Price together with any unpaid fees and expenses relating to the
Purchased Account, (b) replace an Account with a new, Eligible Account or (c) by
charging to the Reserve Account:

 

7.1  Any Purchased Account:

 

7.1.1                     The payment of which has been disputed by the Account
Debtor obligated thereon, Purchaser being under no obligation to determine the
bona fides of such dispute;

 

--------------------------------------------------------------------------------

 

7.1.2                     For which Seller has breached any covenant or
representation and warranty as set forth in Sections 12 and 14 hereof;

 

7.1.3                     All Purchased Accounts upon the occurrence of an Event
of Default, or upon the termination date of this Agreement; and

 

7.1.4                     Any Purchased Account which remains unpaid beyond the
Late Payment Date.

 

8.  Security Interest.

 

8.1  In order to secure the Obligations, Seller grants to Purchaser a continuing
first priority Security Interest in the Collateral.

 

8.2  Notwithstanding the creation of this Security Interest, the relationship of
the parties in respect to all Purchased Accounts shall at all times be that of
purchaser and seller, and not that of lender and borrower.

 

8.3  The Security Interest created hereby shall not render Purchaser liable to
observe or perform any term, covenant or condition of any agreement, document or
instrument to which Seller is a party or by which it is bound, with any other
person.

 

8.4  Seller acknowledges that value has been given and agrees that the Security
Interest granted hereby shall attach when Seller signs this Agreement.

 

9.  Clearance Days.  For all purposes under this Agreement, Clearance Days will
be added to the date on which Purchaser receives any payment.

 

10.  Authorization to Purchaser.

 

10.1  Seller irrevocably authorizes Purchaser, at Seller’s expense, to exercise
at any time any of the following powers until all of the Obligations have been
paid in full:

 

10.1.1.  Receive, take, endorse, assign, deliver, accept and deposit, in the
name of Purchaser or Seller, any and all Proceeds of any Purchased Accounts and
Collateral securing the Obligations or the Proceeds thereof;

 

10.1.2.  Take or bring, in the name of Purchaser or Seller, all steps, actions,
suits or proceedings deemed by Purchaser necessary or desirable to effect
collection of or other realization upon Purchaser’s Accounts and any and all
Proceeds of any Purchased Accounts and Collateral securing the Obligations or
the Proceeds thereof;

 

10.1.3.  Pay any sums necessary to discharge any lien or encumbrance which is or
may become senior to Purchaser’s ownership rights in the Purchased Accounts or
Security Interest in the Collateral, which sums shall be included as Obligations
hereunder;

 

10.1.4.  Notify any Payor obligated with respect to any Account, that the
underlying Account has been sold and/or assigned to Purchaser by Seller and that
payment thereof is to be made to the order of and directly and solely to
Purchaser.  Purchaser shall provide all lockbox (or other address) payment
instructions given by Purchaser to Seller to all Payors;

 

10.1.5.  Communicate directly with Seller’s Payors to, among other things,
verify the amount and validity of any Account created by Seller;

 

10.1.6.  After an Event of Default:

 

(a)  Extend the time of payment of, compromise or settle for cash, credit,
return of merchandise, and upon any terms or conditions, any and all Purchased
Accounts and discharge or release any Payor without affecting any of the
Obligations;

 

--------------------------------------------------------------------------------

 

10.1.7.  File any initial financing statements and amendments thereto that:

 

(a)  Indicate the Collateral, regardless of whether any particular asset
comprising the Collateral falls within the scope of Article 9 of the UCC, or as
being of an equal or lesser scope or with greater detail;

 

(b)  Contain any other information required by part 5 of Article 9 of the UCC
for the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether the Seller is a Registered Organization, the
type of organization, and any organization identification number issued to the
Seller and, (ii) in the case of a financing statement filed as a fixture filing
or indicating collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the collateral relates; and

 

(c)  Contain a notification that the Seller has granted a negative pledge to the
Purchaser, and that any subsequent holder of a Security Interest or lien may be
tortiously interfering with Purchaser’s rights.

 

10.1.8.  Advise third parties that any notification given to Seller’s Payors
that may interfere with Purchaser’s collection rights is a violation of
Purchaser’s rights under this Agreement.

 

10.1.9.  File any Correction Statement (or as may be renamed under any UCC
amendments, Information Statement) in the name of Seller under the UCC that
Purchaser reasonably deems necessary to preserve its rights hereunder.

 

10.2  Seller authorizes Purchaser to accept, endorse and deposit on behalf of
Seller any checks tendered by a Payor “in full payment” of its obligation to
Seller.  Seller shall not assert against Purchaser any claim arising therefrom,
irrespective of whether such action by Purchaser effects an accord and
satisfaction of Seller’s claims, under Article 3 of the UCC, or otherwise.

 

11.  ACH Authorization.  In order to satisfy any of the Obligations, Seller
authorizes Purchaser to initiate electronic debit or credit entries through the
ACH system in an Event of Default.

 

12.  Covenants by Seller.

 

12.1  After written notice by Purchaser to Seller, and automatically, without
notice, after an Event of Default, Seller shall not, without the prior written
consent of Purchaser in each instance, (a) grant any extension of time for
payment of any of its Accounts, (b) compromise or settle any of its Accounts for
less than the full amount thereof, (c) release in whole or in part any Payor, or
(d) grant any credits, discounts, allowances, deductions, return authorizations
or the like with respect to any of the Accounts.

 

12.2  From time to time as reasonably requested by Purchaser, Purchaser or its
designee shall have access, during reasonable business hours if prior to an
Event of Default and at any time if on or after an Event of Default, to all
business premises of the Seller and any premises where Collateral is located for
the purposes of inspecting (and removing, if after the occurrence of an Event of
Default) any of the Collateral including Seller’s books, records and computers,
and Seller shall permit Purchaser or its designee to make copies of such books
and records or extracts and all electronically stored information therefrom,
without expense to Purchaser, as Purchaser may request.  If an Event of Default
has occurred, Seller shall provide Purchaser with reasonable access to Seller’s
personnel, equipment, including computer equipment, programs, printed output and
computer readable media, supplies and premises for the collection of Accounts
and realization on other Collateral as Purchaser deems appropriate.  Seller
hereby irrevocably authorizes all accountants and third parties, to promptly
disclose and deliver to Purchaser at Seller’s expense all financial information,
books and records, work papers, management reports and other information in
their possession relating to the Purchased Accounts.

 

12.3  Before sending any Invoice to an Account Debtor, Seller shall mark same
with a notice of assignment which describes, among other things, a duty to pay
Purchaser, in the form and manner as may be required by Purchaser.

 

12.4  Seller shall pay when due all payroll, sale, use and other taxes, and
shall provide proof thereof to Purchaser in such form as Purchaser shall
reasonably require.

 

--------------------------------------------------------------------------------

 

12.5  Seller shall not create, incur, assume or permit to exist any ownership
interests in Seller’s Purchased Accounts or Security Interest or any other form
of lien upon or with respect to any assets in which Purchaser now or hereafter
holds a Security Interest or in those Accounts in which Purchaser acquires an
ownership interest except for Permitted Liens (as defined below) unless Seller
obtains the written consent of Purchaser and an Intercreditor Agreement between
Purchaser and such other party in a form and content acceptable to Purchaser. 
For purposes of clarity, no provision of this Agreement shall be interpreted as
either preventing the Seller from conducting bona fide equity financings or
requiring notice to or consent of the Purchaser in the event of such financings.
 “Permitted Liens” are:  (a) Liens existing on the date of this agreement and
shown on the perfection certificate or arising under this Agreement; (b) liens
for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Seller maintains
adequate reserves on its Books, if they have no priority over Purchaser’s
Security Interests; (c) Liens incurred in the extension, renewal or refinancing
of the indebtedness secured by Liens described in (a) and (b), but any
extension, renewal or replacement lien must be limited to the property
encumbered by the existing lien and the principal amount of the indebtedness may
not increase; (d) liens arising from attachments or judgments, orders, or
decrees in circumstances not constituting an Event of Default under Sections
16.1; and (e) liens in favor of other financial institutions arising in
connection with Seller’s deposit and/or securities accounts held at such
institutions, provided that Purchaser has a perfected Security Interest in the
amounts held in such deposit and/or securities accounts in accordance with the
terms of this Agreement and are identified to the Purchaser prior to execution
of this Agreement.

 

12.6  Seller shall maintain insurance on all insurable property owned or leased
by Seller in the manner as usually maintained by owners of similar businesses
and properties in similar geographic areas.  Seller shall furnish to Purchaser
upon written request: (a) any and all information concerning such insurance
carried; (b) lender loss payable endorsements (or their equivalent) in favor of
Purchaser.  All policies of insurance shall provide for not less than thirty
(30) day’s prior written cancellation notice to Purchaser.

 

12.7  Seller shall pay to Purchaser on the 2nd banking day following the date of
receipt by Seller the amount of any payment made on account of a Purchased
Account.

 

12.8  Seller shall furnish Purchaser with full financial statements and other
documents and information, including, but not limited to, proof of payment
and/or compliance with all federal, state and/or local tax requirements, within
forty five (45) days from the end of each of Seller’s first three fiscal
quarters, and seventy five (75) days from the end of Seller’s last fiscal
quarter, in each case in the form filed by the Seller with the U.S. Security and
Exchange Commission.  Seller shall maintain a standard and modern system of
accounting in accordance with Generally Accepted Accounting Principles.  Seller
agrees to permit Purchaser and any of its employees, officers or agents, on
reasonable advance written notice and during normal business hours, access to
and examination of Seller’s records and books.  The Seller shall provide
Purchaser monthly financial reports relating to Seller’s accounts payable and
accounts receivable aging, as soon as available but no later than thirty (30)
days after the last day of the month including, but not limited to, detailed
description of the Collateral per Purchaser’s specifications, Budget (as soon as
available), financial statements (unaudited income statement, balance sheet and
cash flow statement), as well as usual and customary reports for a transaction
of this nature.

 

12.9  Avoidance Claims.

 

12.9.1.  Seller shall indemnify Purchaser from any loss arising out of the
assertion of any Avoidance Claim and shall pay to Purchaser on demand the amount
thereof.

 

12.9.2.  Seller shall notify Purchaser within two business days of it becoming
aware of the assertion of an Avoidance Claim.

 

12.9.3.  This section 12.9 shall survive termination of this Agreement.

 

12.10  [Reserved].

 

12.11  Seller shall take all necessary steps and actions to preserve its
corporate existence (or the existence of any successor or transferee), it being
acknowledged that no merger of Seller, or sale by Seller of all or substantially

 

--------------------------------------------------------------------------------

 

all of its assets, shall be permitted unless the successor entity or transferee
shall assume and be liable for all obligations of Seller hereunder, either by
operation of law or under written agreement. Seller shall promptly notify
Purchaser of any change in its corporate structure.

 

12.12  [Reserved].

 

12.13  Seller shall cooperate with any and all third party service providers
that the Purchaser introduces to Seller in connection with Seller’s obligations
hereunder and will provide information and will make management available to
these service providers in the same manner the Seller interacts with the
Purchaser.

 

12.14  Seller shall remain in compliance with any arrangement it has entered
into with a tax authority as it relates to Tax Liabilities.

 

12.15  Seller shall notify Purchaser of any completed equity or debt raise in
the private or capital markets within three (3) days of its completion.

 

13.  Account Disputes.  Seller shall notify Purchaser promptly of and, if and
only if requested by Purchaser, settle all disputes concerning any Purchased
Account, at Seller’s sole cost and expense.  Purchaser may, but is not required
to, attempt to settle, compromise, or litigate (collectively, “Resolve”) the
dispute upon such terms, as Purchaser in its sole discretion may deem advisable,
for Seller’s account and risk and at Seller’s sole expense.  All invoices that
are in dispute shall fail to qualify as Eligible Accounts.

 

14.  Representation and Warranties.  Seller and each of its principals
represents and warrants that:

 

14.1  It is fully authorized to enter into this Agreement and to perform
hereunder.

 

14.2  This Agreement constitutes its legal, valid and binding obligation.

 

14.3  Seller is solvent and in good standing in the jurisdiction of its
organization.

 

14.4  The Purchased Accounts are and will remain:

 

14.4.1.  Bona fide existing obligations created by the complete and
unconditional sale and delivery of goods, licensing of intellectual property or
software, or the rendition of services in the ordinary course of Seller’s
business;

 

14.4.2.  Unconditionally owed and will be paid to Purchaser without defenses,
disputes, offsets, counterclaims, or rights of return or cancellation; and,

 

14.4.3.  Sales to a customer that is not, directly or indirectly, affiliated
with Seller or in any way not an “arms length” transaction.

 

14.5  Seller has not received notice or otherwise learned of actual or imminent
bankruptcy, insolvency, or material impairment of the financial condition of any
applicable Payor regarding Purchased Accounts.

 

14.6  Seller is: either a corporation, limited liability company, limited
partnership or other form of Registered Organization, duly organized, validly
existing and in good standing under the laws of the state of its incorporation
or organization and is qualified and authorized to do business and duly
licensed, if necessary and in good standing in every state in which such
qualification and good standing are necessary or desirable.

 

14.7  Immediately prior to the execution and at the time of delivery of each
Schedule of Account, Seller is the sole owner and holder of each of the Accounts
described thereon and that upon Purchaser’s acceptance of each Purchased
Account; it shall become the sole owner of such Purchased Account(s).

 

--------------------------------------------------------------------------------

 

14.8  No Purchased Account shall have been previously sold or transferred or be
subject to any lien, encumbrance, Security Interest or other claim of any kind
or nature, other than Permitted Liens.  Seller will not sell, transfer, assign,
mortgage, pledge, lease, grant a Security Interest in, or encumber any of its
intellectual property if such action would invalidate, cancel or terminate
Purchaser’s rights or security interest of the Purchased Accounts.

 

14.9  Seller will not factor, sell, transfer, pledge or give a Security Interest
in any of its Purchased Accounts to anyone other than Purchaser during the Term
of this Agreement and there are and shall at no time be any Financing Statements
now or hereafter on file in any public office covering any of Seller’s
Collateral except the Financing Statement or Financing Statements filed or to be
filed in respect of this Agreement or those Financing Statements now on file
that have been disclosed in writing by Seller to Purchaser as reflected on the
attached Exhibit 14.9.  If Seller factors, sells, transfers, pledges or gives a
Security Interest in any Accounts other than the Purchased Accounts, then Seller
shall inform Purchaser of such activity within three (3) days of such activity.

 

14.10  Seller shall maintain its books and records in accordance with generally
accepted accounting principles and shall reflect on its books the absolute sale
of the Purchased Accounts to Purchaser.

 

14.11  Seller shall furnish Purchaser such financial information as required in
Section 12.8.

 

14.12  Seller will promptly notify Purchaser of (i) the filing of any lawsuit
against Seller involving amounts greater than $10,000.00 or (ii) any attachment
or any other legal process served or levied against Seller.

 

14.13  The application made or delivered by or on behalf of Seller in connection
with this Agreement, and all statements made therein, were at the time that this
Agreement is executed and shall at all times remain true and correct and Seller
has complied with all fee requirements and obligations in connection therewith. 
There is no fact which Seller has not disclosed to Purchaser in writing which
could adversely affect the properties, business or financial condition of
Seller, or any of the Purchased Accounts or Collateral, or which is necessary to
disclose in order to keep the foregoing representations and warranties from
being misleading.

 

14.14  In no event shall the funds paid to Seller hereunder be used directly or
indirectly for personal, family, household or agricultural purposes.

 

14.15  Seller does business under no trade or assumed names except as indicated
specifically identified otherwise in Exhibit 14.15.

 

14.16  Each written or electronic communication issued by Seller to Purchaser
will be authentic and genuine.

 

14.17  All Purchase Price payments will be used by Seller for routine working
capital needs solely in connection with Seller’s existing business operations.

 

14.18  Seller, unless first obtaining Purchaser’s express written consent, shall
at no time have any authority to enter into or seek to enter into any agreement
with any Payor for the purpose of modifying, releasing or otherwise relieving or
discharging in any way any Payor from such Payor’s duties to pay Purchaser on
any Purchased Account.

 

15.  Indemnification.  Seller agrees to indemnify Purchaser against and save
Purchaser harmless from any and all manner of suits, claims, liabilities,
demands and expenses (including reasonable attorneys’ fees and collection costs)
resulting from or arising out of Seller’s breach of this Agreement, whether
directly or indirectly, including the transactions or relationships contemplated
hereby (including the enforcement of this Agreement), and any failure by Seller
to perform or observe its obligations under this Agreement.

 

16.  Default.

 

16.1  Events of Default.  The following events will constitute an Event of
Default hereunder: (a) Seller defaults in the payment of any Obligations or in
the performance of any provision hereof or of any other agreement now or
hereafter entered into with Purchaser, or any warranty or representation
contained herein proves to be false, (b) Seller or any guarantor of the
Obligations becomes subject to any debtor-relief proceedings, (c) any third
party

 

--------------------------------------------------------------------------------

 

Security Interest, lien (other than a Permitted Lien), garnishment, attachment
or the like shall be issued against or shall attach to the Purchased Accounts,
the Collateral or any portion thereof and the same is not released within five
(5) days; (d) Seller suffers the entry against it of a final judgment for the
payment of money in excess of $10,000.00, unless the same is satisfied, vacated
or stayed within ten (10) days after the date of entry thereof; (e) Seller shall
have a federal, state or other form of tax lien filed against any of its
properties (other than a Permitted Lien), current liens disclosed by the Seller
excepted; (f) Seller is in breach of any covenant, representation or warranty as
described in Sections 12 and 14; (g) Seller fails to pay any other obligations
in respect of indebtedness in excess of $500,000, and such payment is unpaid for
30 days, or; (h) in the Purchaser’s good faith business judgment, a material
adverse change shall have occurred in Seller’s financial conditions, business,
prospects or operations.

 

16.2  Effect of Default.  Upon the occurrence of any Event of Default:

 

16.2.1.  In addition to any rights Purchaser has under this Agreement or
applicable law, Purchaser may immediately terminate this Agreement, at which
time all Obligations shall immediately become due and payable without notice
including the Late Payment Factoring Fee which shall accrue and be payable on
demand in respect to any Obligation not paid when due.

 

16.2.2.  Purchaser shall be entitled to freeze, debit and/or effect a set-off
against any fund or account Seller may maintain with any Bank, including all
funds collected in the Purchaser’s lockbox as provided for in Section 2.3.

 

16.2.3.  Purchaser may seek equitable relief, including, but not limited to,
injunctive or receivership remedies and Seller waives any requirement that
Purchaser post or otherwise obtain or procure any bond, whether otherwise
required under state or federal law or rules of court.  Seller waives any right
it may be entitled to, including an award of attorney’s fees or costs, in the
event any equitable relief sought by and awarded to Purchaser is thereafter, for
whatever reason(s), vacated, dissolved or reversed.  All post-judgment interest
shall bear interest at the greater of (a) eighteen percent (18%) or (b) the
highest rate as may be allowed by law.

 

16.2.4.  All of Seller’s rights of access that may be made available to Seller
to any online internet services that Purchaser may make available to Seller
shall be provisional pending any curing of such Events of Default.  During such
period of time, Purchaser may limit or terminate Seller’s access to Purchaser’s
online services.  Seller acknowledges that the information Purchaser makes
available to Seller constitutes and satisfies any duty to respond to a Request
for an Accounting or Request regarding a Statement of Account that is referenced
in § 9-210 of the UCC.

 

16.2.5. The Parties acknowledge that Purchaser shall have no duty to undertake
to collect any Account or Purchased Account including those in which Purchaser
receives information from any Payor that any form of a dispute exists.  In the
event Purchaser undertakes to collect from or enforce an obligation of any Payor
and ascertains that the possibility of collection is outweighed by the likely
costs and expenses that will be incurred, Purchaser may at any such time cease
any further collection efforts and such action shall be considered commercially
reasonable.

 

16.3.  Seller’s sole remedy for any breach alleged to have been committed by
Purchaser of any obligation or duty owed under the Agreement, any other
agreement between Seller and Purchaser or any duty or obligation arising out of
or related to this Agreement shall be limited to the lesser of (a) any amount in
the Reserve Account at the time notice of such breach is first given to
Purchaser, in writing, or (b) any amounts owed to Seller related to the purchase
of Accounts subject to the Agreement.  Purchaser shall not be liable for any
incidental, special or consequential damages, including, but not limited to,
loss of goodwill or any other losses associated therewith.  Purchaser shall be
liable to Seller for unreturned funds as detailed in Section 3.

 

17.  Account Stated. Purchaser may either provide Seller, electronically through
a website or otherwise, with information on the Purchased Accounts and a monthly
reconciliation of the factoring relationship relating to billing, collection and
Account maintenance such as aging, posting, error resolution and mailing of
statements or make such information available.  All of the foregoing shall be in
a format and in such detail, as Purchaser, in its sole discretion, deems
appropriate.  Purchaser’s books and records as well as all electronically stored
information maintained by Purchaser shall be admissible in evidence without
objection as to authenticity, hearsay or otherwise and shall be admissible as
prima facie evidence in any tribunal of the status of the Purchased Accounts,
non-

 

--------------------------------------------------------------------------------

 

Purchased Accounts and Reserve Account between Purchaser and Seller.  Each
statement, report, accounting rendered or issued by Purchaser to Seller and all
electronically stored information shall be deemed conclusively accurate and
binding on Seller unless within fifteen (15) days after the date of issuance or,
in the case of electronically stored information, the first of each month,
Seller notifies Purchaser to the contrary by registered or certified mail,
setting forth with specificity the reasons why Seller believes such statement,
report, or accounting or electronically stored information is inaccurate, as
well as what Seller believes to be the correct or accurate information. 
Seller’s failure to receive any monthly statement or access the electronically
stored information shall not relieve it of the responsibility to request such
information and Seller’s failure to do so shall nonetheless bind Seller to
whatever Purchaser’s records or electronically stored information report.

 

18.  Amendment and Waiver.  Only a writing signed by all parties hereto may
serve to amend this Agreement.  No failure or delay in exercising any right
hereunder shall impair any such right that Purchaser may have, nor shall any
waiver by Purchaser hereunder be deemed a waiver of any default or breach
subsequently occurring. Purchaser’s rights and remedies herein are cumulative
and not exclusive of each other or of any rights or remedies that Purchaser
would otherwise have.

 

19.  Termination; Effective Date.

 

19.1  This Agreement will be effective on the date indicated in the introduction
to this Agreement, shall continue for the Term, and may be extended for
successive Terms upon mutual written agreement by both parties  unless Seller
issues, at any time, a written notice to terminate prior to three (3) months
before the Term (an “Early Termination Date”).

 

19.2  Either Seller or Purchaser may voluntarily terminate the Factoring
Facility with sixty (60) days prior written notice.  Seller shall pay the Early
Termination Fee of 0.75% of the Maximum Amount if the Seller terminates during
the first six (6) months after the date of this Agreement.

 

19.3  Purchaser may terminate this Agreement by giving Seller at least
thirty-day’s (30) prior written notice of termination, whereupon this Agreement
shall terminate on the earlier date of the date of termination or the end of the
then current Term.

 

19.4   Upon termination, Seller shall pay the Obligations to Purchaser and
Purchaser shall thereafter have no duty to purchase any Accounts from Seller. 
Notwithstanding termination, until Complete Termination, Seller shall remain
obligated to tender all Accounts to Purchaser notwithstanding that Purchaser may
thereafter determine that no Account qualifies as an Eligible Account.  Upon any
termination of this Agreement (including upon or following an Event of Default)
and the repayment by Seller of all Obligations to Purchaser, Purchaser shall
immediately transfer and reassign all Purchased Accounts back to Seller.

 

20.  No Lien Termination without Release.  Notwithstanding payment in full of
all Obligations by Seller, Purchaser shall not be required to file any amended
Financing Statement terminating or satisfying its Security Interest in the
Collateral or ownership rights in the Purchased Accounts unless and until
Complete Termination has occurred.  In the event any person files a UCC
Financing Statement after the Term of this Agreement expires and before a
Complete Termination, Purchaser shall be authorized to advise such Secured Party
of Purchaser’s rights in connection herewith.

 

21.  Conflict.  Unless otherwise expressly stated in any other agreement between
Purchaser and Seller, if a conflict exists between the provisions of this
Agreement and the provisions of such other agreement, the provisions of this
Agreement shall control.

 

22.  Severability.  In the event any one or more of the provisions contained in
this Agreement is held to be invalid, illegal or unenforceable in any respect,
then such provision shall be ineffective only to the extent of such prohibition
or invalidity, and the validity, legality, and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby.

 

23.  Construction.  This Agreement and all agreements relating to the subject
matter hereof shall be deemed the product of joint negotiation by and among each
party and shall be construed accordingly.

 

--------------------------------------------------------------------------------

 

24.  Relationship of Parties.  It is the express intention of the parties that
pursuant to § 9-318(a) of the UCC as to all Purchased Accounts their
relationship shall be that of seller and purchaser of Accounts, that Seller
shall, once acquired by Purchaser, no longer have any right, title or interest
in and to any Purchased Account and Purchaser shall at no time be deemed to be
or become a fiduciary of the Seller, although Seller may be a fiduciary of the
Purchaser.  Seller acknowledges that Purchaser shall at no time owe Seller any
form of fiduciary duty whether in the context of giving advice, guidance,
assistance or otherwise designed to assist or protect Seller in respect to or in
connection with the parties’ relationship or this Agreement and Seller expressly
acknowledges that Purchaser shall at all times have the right to exclusively
protect Purchaser’s own interests and rights in connection with and in respect
to the parties’ relationship and this Agreement.

 

25.  Attorneys’ Fees.  Seller agrees to reimburse Purchaser on demand for:

 

25.1  The actual amount of all costs and expenses, including attorneys’ fees,
which Purchaser has incurred or may incur in:

 

25.1.1.  Negotiating, preparing, or administering the execution of this
Agreement and any documents prepared in connection herewith up to a maximum of
$0 as provided in Section 6.6; any future amendments to this Agreement or
supporting documentation; protecting, preserving or enforcing any lien, security
or other right granted by Seller to Purchaser or arising under applicable law.

 

25.1.2.  Protecting, preserving or enforcing any lien, security or other right
granted by Seller to Purchaser or arising under applicable law, including but
not limited to the defense of any Avoidance Claims or the defense of Purchaser’s
lien priority;

 

25.2  The actual costs, including photocopying (which, if performed by
Purchaser’s employees, shall be at the rate of $.25/page), travel, and
attorneys’ fees and expenses incurred in complying with any subpoena or other
legal process in any way relating to Seller. This provision shall survive
termination of this Agreement.

 

25.3  The actual amount of all costs and expenses, including attorneys’ fees,
which Purchaser may incur in enforcing this Agreement and any documents prepared
in connection herewith, or in connection with any federal or state insolvency
proceeding commenced by or against Seller, including those (i) arising out the
automatic stay, (ii) seeking dismissal or conversion of the bankruptcy
proceeding or (ii) opposing confirmation of Seller’s plan there under.

 

25.4  Seller and Purchaser shall be entitled to indemnification and recovery of
attorney’s fees or costs in respect to any litigation based herein.

 

25.5  Notwithstanding the existence of any law, statute or rule, in any
jurisdiction which may provide Seller with a right to attorney’s fees or costs,
Seller hereby waives any and all rights to hereafter seek attorney’s fees or
costs hereunder and Seller agrees that Purchaser exclusively shall be entitled
to indemnification and recovery of any and all attorney’s fees or costs in
respect to any litigation based hereon, arising out of, or related hereto,
whether under, or in connection with, this and/or any agreement executed in
conjunction herewith, or any course of conduct, course of dealing, statements
(whether verbal or written) or actions of either party.

 

26.  Entire Agreement.

 

26.1  No promises of any kind have been made by Purchaser or any third party to
induce Seller to execute this Agreement.  No course of dealing, course of
performance or trade usage, and no parole evidence of any nature, shall be used
to supplement or modify any terms of this Agreement.

 

26.2   Seller acknowledges that neither the relationship created by this
Agreement nor any services that Purchaser may offer to Seller, in connection
therewith, shall entitle Seller to assert any form of tort claim, whether in the
form of negligence or otherwise, against Purchaser and whether supported by
statute, common law, or otherwise.  Seller and Purchaser acknowledge that unless
the terms of this Agreement create an express duty, the parties do not intend
for any duty to be implied or deemed included within this Agreement except that
to the extent that an implied

 

--------------------------------------------------------------------------------

 

covenant of good faith may exist and in respect thereto, both Purchaser and
Seller agree that such duty, for the purpose of this Agreement, shall be limited
to an obligation that neither party shall take any action to prevent the other
party from performing under this Agreement.

 

26.3  Purchaser and Seller each acknowledge that there is no contract terms,
provision or subject matter in respect to this Agreement that either believes
was negotiated and intended to be included herein but has been omitted from this
Agreement.  Purchaser and Seller each agree that by executing this Agreement
Purchaser and Seller each waive any right either may have to seek any form of
reformation of this Agreement.

 

27.  Choice of Law.  This Agreement and all transactions contemplated hereunder
and/or evidenced hereby shall be governed by, construed under, and enforced in
accordance with the internal laws of the Chosen State.

 

28.  Jury Trial Waiver.  THE PARTIES HERETO WAIVE ANY RIGHT TO TRIAL BY JURY OF
ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING HEREUNDER, OR IN ANY WAY
CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR
TORT OR OTHERWISE; AND EACH PARTY FURTHER WAIVES ANY RIGHT TO CONSOLIDATE ANY
SUCH ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY OTHER ACTION IN WHICH
A JURY TRIAL CANNOT BE OR HAS NOT BEEN WAIVED; AND EACH PARTY HEREBY AGREES AND
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
WITHOUT A JURY.

 

29.  Venue; Jurisdiction; Service of Process.

 

29.1  Any suit, action or proceeding arising hereunder shall, at Purchaser’s
sole and exclusive discretion, be only instituted or maintained in any court
sitting in the Chosen State and in the county in which Purchaser’s chief
executive office is located (the “Acceptable Forums”).  Seller agrees that the
Acceptable Forums are convenient to it, and submits to the jurisdiction of the
Acceptable Forums and waives any and all objections to jurisdiction or venue. 
Should such proceeding be initiated in any other forum, Seller waives any right
to oppose any motion or application made by Purchaser to transfer such
proceeding to an Acceptable Forum.

 

29.2  Seller agrees that Purchaser may effect service of process upon Seller by
regular mail at the address set forth herein or at such other address as may be
reflected in the records of Purchaser, or at the option of Purchaser by service
upon Seller’s agent for the service of process.

 

30.  Assignment.  Purchaser may assign its rights and delegate its duties
hereunder; provided, that without the prior written consent of Seller (which
consent may be withheld in Seller’s sole discretion), Purchaser may not assign
any interest herein to any competitor of Seller.  Upon such assignment or
delegation, Seller shall be deemed to have attorned to such assignee and shall
owe the same obligations to such assignee and shall accept performance hereunder
by such assignee as if such assignee were Purchaser.  If Purchaser wholly
assigns this agreement to a new party, Purchaser will first inform Seller of its
intentions no later than 14 days prior to the expected assignment date (the
“Assignment Notification Period”).  Seller, in its sole discretion, may
repurchase all Accounts and terminate this Agreement during the Assignment
Notification Period subject to the terms and condition in this Agreement. 
Notwithstanding anything contained herein to the contrary, Seller may not,
without Purchaser’s prior written consent, assign this Agreement to any
corporation into or with which Seller is merged or consolidated or to an entity
which purchases all, or substantially all, of the assets of Seller.

 

31.  Miscellaneous Provisions.

 

31.1  This Agreement shall be deemed to be one of financial accommodation and
not assumable by any debtor, trustee or debtor-in-possession in any bankruptcy
proceeding without Purchaser’s express written consent and may be immediately
suspended in the event a petition in bankruptcy is filed by or against Seller.

 

--------------------------------------------------------------------------------

 

31.2  Seller shall not amend its organizational structure, create any subsidiary
or affiliate or enter into any transaction with any affiliate (including any
director(s) or officer(s)) that would reasonably be expected to have a material
adverse effect on any Purchased Accounts or any other Collateral.

 

31.3  Seller expressly authorizes Purchaser to access the internet website
systems or otherwise of and/or communicate with any shipping or trucking company
in order to obtain or verify tracking, shipment or delivery status of any Goods
regarding a Purchased Account.

 

31.4  Seller’s principal(s) acknowledge that the duty to accurately complete
each Schedule of Accounts is fundamental to this Agreement and as such the duty
to accurately complete each Schedule of Account shall at all times remain
non-delegable.  Each of Seller’s principal(s) acknowledge that he/she shall
remain fully responsible for the accuracy of each Schedule of Accounts delivered
to Purchaser.

 

31.5  Seller shall fully complete and execute, as taxpayer, prior to or
immediately upon the execution of this Agreement, a form 8821 (Rev. April 2004)
and/or form 4506 (Rev. October 2008) or form 4506-T (Rev. January 2008) issued
by the Department of the Treasury, Internal Revenue Service or such other forms
as may be requested by Purchaser, irrevocably authorizing Purchaser to, among
other things, inspect or receive tax information relating to any type of tax,
tax form, years or periods or otherwise desired by Purchaser on an ongoing
basis.  Seller shall take no action of any kind that causes or may cause a
revocation of Purchaser’s right to receive such information.

 

31.6  Seller will cooperate with Purchaser in obtaining a Control Agreement in
form and substance satisfactory to Purchaser with respect to the Collateral.

 

31.7  Pursuant to the introductory paragraph of this Agreement, it is the
Seller’s and Purchaser’s intent that Company’s Obligations under this Agreement
will also be assumed by Company’s subsidiaries and affiliates,  however and
notwithstanding, no one except for Company shall be an intended beneficiary of
this Agreement.

 

32.  Counterparts.  This Agreement may be signed in any number of counterparts,
each of which shall be an original, with the same effect as if all signatures
were upon the same instrument.  Delivery of an executed counterpart of the
signature page to this Agreement by facsimile shall be effective as delivery of
a manually executed counterpart of this Agreement, and any party delivering such
an executed counterpart of the signature page to this Agreement by facsimile to
any other party shall thereafter also promptly deliver a manually executed
counterpart of this Agreement to such other party, provided that the failure to
deliver such manually executed counterpart shall not affect the validity,
enforceability, or binding effect of this Agreement.

 

33.  Notice.

 

33.1  All notices required to be given to any party other than Purchaser shall
be deemed given upon the first to occur of (i) three days after deposit thereof
in a receptacle under the control of the United States Postal Service,
(ii) transmittal by electronic means to a receiver under the control of such
party, or (iii) actual receipt by such party or an employee or agent of such
party.

 

33.2  All notices to Purchaser shall be deemed given upon actual receipt by a
responsible officer of Purchaser.

 

33.3  For the purposes hereof, notices hereunder shall be sent to the following
addresses, or to such other addresses as each such party may in writing
hereafter indicate:

 

--------------------------------------------------------------------------------

 

SELLER:

 

PURCHASER:

 

 

 

 

 

Address:

Wave Systems Corp.

Address:

CapFlow Funding Group

 

480 Pleasant Street

 

301 Rte 17 North, 8th Floor

 

Lee, MA 01238

 

Rutherford, NJ 07070

 

 

 

 

Officer:

Rick Donovan

Officer:

 

Fax Number:

(413) 243-0391

Fax Number:

(201) 842-7726

 

34.  Pledges and Assignment of Seller’s Accounts Receivable by Purchaser.  Upon
ten (10) days written notice, Seller acknowledges and understands that Purchaser
may enter into a financial arrangement with one or more lenders (“Lenders”).  In
connection with such financing, Purchaser may sell and/or assign its interests
in Seller’s Accounts to Lenders.  Seller hereby consents to Purchaser entering
into any such financial arrangement and  Seller further agrees that:

 

34.1  Seller shall have no rights under the financial arrangement with Lenders
and Seller will not look or seek to hold Lenders, or its respective officers,
employees, directors or agents responsible for any of Purchaser’s obligations
under this Agreement, and that Purchaser’s relationship with Lenders is
completely separate and apart from Seller’s relationship with Purchaser.  Seller
consents to any lien rights and the granting and enforcing of any Security
Interests that Lenders may have and assert by reason of its purchase and/or
assignment of Seller’s Accounts to Lenders pursuant to the financing agreement
entered into between Purchaser and Lenders.

 

34.2  Seller agrees that all covenants, representations and warranties set forth
in Sections 12 and 14 of this Agreement shall extend and inure to the benefit of
Lenders and its successors and assigns.

 

34.3  Upon Purchaser or Lenders’ request, Seller shall provide to Lenders any
and all information, which Lenders may reasonably request.

 

34.4  Seller consents to Purchaser sharing with Lenders copies of all financial
statements and information regarding Seller delivered or made available to
Purchaser under this Agreement.

 

35.  Confidentiality.  Seller and Purchaser agree to keep this Agreement and the
identity of each party strictly confidential and will not directly or indirectly
disclose the terms of this Transaction or the identity of the parties without
prior written approval of the parties, except to the extent required by law
(including, in the case of Seller, applicable state and federal securities laws,
rules and regulations).  In connection with this Agreement, Seller may disclose
to Purchaser information, which is material inside information (“Confidential
Information”) with respect to Seller.  The Purchaser acknowledges that it is
aware that the federal securities laws prohibit any person who is in possession
of material, nonpublic information from purchasing or selling securities on the
basis of such information or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such other
person is likely to purchase or sell such securities.  Purchaser agrees to treat
all Confidential Information as “material, nonpublic information” for purposes
of the federal securities laws, and not to trade in any of the Seller’s
securities or any of the securities of any other company whose securities are
traded on any exchange or quoted on any quotation system in the United States,
while the Seller is in possession of any non-public Confidential Information.

 

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the Parties have executed this agreement on the day and year
first above written.

 

SELLER:

PURCHASER:

 

 

Wave Systems Corp.

CAPFLOW FUNDING GROUP MANAGERS LLC

 

 

 

 

By:

/s/ Gerard T. Feeney

 

By:

/s/ Timothy Loughlin

 

 

Name: Gerard T. Feeney

Name: Timothy Loughlin

 

 

Title: Chief Financial Officer

Title: Managing Partner

 

 

 

 

Date: November 26, 2013

 

 

--------------------------------------------------------------------------------