SECURITIES PURCHASE AGREEMENT

 

This SECURITIES PURCHASE AGREEMENT (the “Agreement”) is dated as of June 30,
2014 and effective as of October 20, 2014 (the “Effective Date”), by and between
OSL HOLDINGS, INC., a corporation incorporated under the laws of the State of
Nevada (the “Company”), and TCA GLOBAL CREDIT MASTER FUND, LP, a limited
partnership organized and existing under the laws of the Cayman Islands (the
“Buyer”).

 

WHEREAS, Buyer desires to purchase from Company, and the Company desires to sell
and issue to Buyer, upon the terms and subject to the conditions contained
herein, up to Five Million and No/100 United States Dollars ($5,000,000) of
senior secured convertible, redeemable debentures (in the form attached hereto
as Exhibit A, the “Debenture(s)”), of which One Million Nine Hundred Thousand
and No/100 United States Dollars ($1,900,000) shall be purchased on the date
hereof (the “First Closing”) for the total purchase price of One Million Nine
Hundred Thousand and No/100 United States Dollars ($1,900,000) (the “Purchase
Price”), and up to Three Million One Hundred Thousand Dollars ($3,100,000) may
be purchased in additional closings as set forth in Section 4.2 below (the
“Additional Closings”) (each of the First Closing and the Additional Closings
are sometimes hereinafter individually referred to as a “Closing” and
collectively as the “Closings”), all subject to the terms and provisions
hereinafter set forth;

 

WHEREAS, the Company, Office Supply Line, Inc., a corporation incorporated under
the laws of the State of Nevada, OSL Diversity Marketplace, Inc., a corporation
incorporated under the laws of the State of Nevada, OSL Rewards Corporation, a
corporation incorporated under the laws of the State of Nevada, and Go Green
Hydroponics Inc., a corporation incorporated under the laws of the State of
California (together, jointly and severally, the “Guarantors), have each agreed
to secure all of the Company’s Obligations to Buyer under the Debentures, this
Agreement and all other Transaction Documents by granting to the Buyer (i) an
unconditional and continuing first priority security interest in all of the
assets and properties of the Company and the Guarantors, whether now existing or
hereafter acquired, pursuant to those certain Security Agreements, each dated as
of the date hereof (in the forms attached hereto as Exhibit B, the “Security
Agreements”);

 

WHEREAS, the Guarantors will receive a substantial benefit from the Buyer’s
purchase of the Debenture and, as such, have agreed to guarantee all of the
Obligations of the Buyer under the Debentures, this Agreement and all other
Transactions Documents pursuant to those certain Guarantee Agreements, each
dated as of the date hereof (in the form attached hereto as Exhibit C, the
“Guarantee Agreements”); and

 

WHEREAS, as security for the payment and performance of any and all of the
Company’s Obligations to Buyer under the Debentures, this Agreement and all
other Transaction Agreements, the Company has agreed to execute a Pledge
Agreement in favor of Buyer, whereby the Company shall pledge to the Buyer all
of its right, title and interest in and to, and provide a first priority lien
and security interest on, certain issued and outstanding shares of common stock
of the Guarantors, and Robert Rothenberg, the Company’s Chief Executive Officer,
and Eli Feder and Steve Gormley, directors of the Company, have each agreed to
execute a Pledge Agreement in favor of Buyer, whereby they shall pledge to the
Buyer all of their right, title and interest in and to, and provide a first
priority lien and security interest on, certain issued and outstanding shares of
common stock of the Company, each dated as of the date hereof (in the forms
attached hereto as Exhibit D, the “Pledge Agreements”).

 

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NOW, THEREFORE, in consideration of the premises and the mutual covenants of the
parties hereinafter expressed and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
each intending to be legally bound, agree as follows:

 

ARTICLE I

RECITALS, EXHIBITS, SCHEDULES

 

The foregoing recitals are true and correct and, together with the Schedules and
Exhibits referred to hereafter, are hereby incorporated into this Agreement by
this reference.

 

ARTICLE II

DEFINITIONS

 

For purposes of this Agreement, except as otherwise expressly provided or
otherwise defined elsewhere in this Agreement, or unless the context otherwise
requires, the capitalized terms in this Agreement shall have the meanings
assigned to them in this Article as follows:

 

2.1 “Affiliate” means, with respect to a Person, any other Person directly or
indirectly controlling, controlled by, or under common control with, such Person
at any time during the period for which the determination of affiliation is
being made. For purposes of this definition, the term “control,” “controlling”
“controlled” and words of similar import, when used in this context, means, with
respect to any Person, the possession, directly or indirectly, of the power to
direct, or cause the direction of, management policies of such Person, whether
through the ownership of voting securities, by contract or otherwise.

 

2.2 “Assets” means all of the properties and assets of the Person in question,
as the context may so require, whether real, personal or mixed, tangible or
intangible, wherever located, whether now owned or hereafter acquired.

 

2.3 “Business Day” shall mean any day other than a Saturday, Sunday or a legal
holiday on which federal banks are authorized or required to be closed for the
conduct of commercial banking business.

 

2.4 “Claims” means any Proceedings, Judgments, Obligations, threats, losses,
damages, deficiencies, settlements, assessments, charges, costs and expenses of
any nature or kind.

 

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2.5 “Common Stock” means the common stock of the Company, par value $0.001.

 

2.6 “Compliance Certificate” means that certain compliance certificate executed
by an officer of the Company in the form attached hereto as Exhibit E.

 

2.7 “Consent” means any consent, approval, order or authorization of, or any
declaration, filing or registration with, or any application or report to, or
any waiver by, or any other action (whether similar or dissimilar to any of the
foregoing) of, by or with, any Person, which is necessary in order to take a
specified action or actions, in a specified manner and/or to achieve a specific
result.

 

2.8 “Contract” means any written or oral contract, agreement, order or
commitment of any nature whatsoever, including, any sales order, purchase order,
lease, sublease, license agreement, services agreement, loan agreement,
mortgage, security agreement, guarantee, management contract, employment
agreement, consulting agreement, partnership agreement, shareholders agreement,
buy-sell agreement, option, warrant, debenture, subscription, call or put.

 

2.9 “Collateral” shall have the meaning given to it in the Security Agreements.

 

2.10 “Debenture(s)” shall have the meaning given to it in the preamble hereof.

 

2.11 “Effective Date” means the date so defined in the introductory paragraph of
this Agreement.

 

2.12 “Encumbrance” means any lien, security interest, pledge, mortgage,
easement, leasehold, assessment, tax, covenant, restriction, reservation,
conditional sale, prior assignment, or any other encumbrance, claim, burden or
charge of any nature whatsoever.

 

2.13 “Environmental Requirements” means all Laws and requirements relating to
human, health, safety or protection of the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants, or
Hazardous Materials in the environment (including, without limitation, ambient
air, surface water, ground water, land surface or subsurface strata), or
otherwise relating to the treatment, storage, disposal, transport or handling of
any Hazardous Materials.

 

2.14 “GAAP” means generally accepted accounting principles, methods and
practices set forth in the opinions and pronouncements of the Accounting
Principles Board and the American Institute of Certified Public Accountants, and
statements and pronouncements of the Financial Accounting Standards Board, or of
such other Person as may be approved by a significant segment of the U.S.
accounting profession, in each case as of the date or period at issue, and as
applied in the U.S. to U.S. companies.

 

2.15 “Governmental Authority” means any foreign, federal, state or local
government, or any political subdivision thereof, or any court, agency or other
body, organization, group, stock market or exchange exercising any executive,
legislative, judicial, quasi-judicial, regulatory or administrative function of
government.

 

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2.16 “Guarantee Agreements” shall have the meaning given to it in the recitals
hereof.

 

2.17 “Guarantors” shall have the meaning given to it in the recitals hereof.

 

2.18 “Hazardous Materials” means: (i) any chemicals, materials, substances or
wastes which are now or hereafter become defined as or included in the
definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,”
“extremely hazardous wastes,” “restricted hazardous wastes,” “toxic substances,”
“toxic pollutants” or words of similar import, under any Law; and (iii) any
other chemical, material, substance, or waste, exposure to which is now or
hereafter prohibited, limited or regulated by any Governmental Authority.

 

2.19 “Irrevocable Transfer Agent Instructions” shall mean the Irrevocable
Transfer Agent Instructions to be entered into by and among the Buyer, the
Company and the Company’s transfer agent, in the form attached hereto as Exhibit
F.

 

2.20 “Judgment” means any order, writ, injunction, fine, citation, award,
decree, or any other judgment of any nature whatsoever of any Governmental
Authority.

 

2.21 “Law” means any provision of any law, statute, ordinance, code,
constitution, charter, treaty, rule or regulation of any Governmental Authority.

 

2.22 “Leases” means all leases for real or personal property.

 

2.23 “Material Adverse Effect” shall mean: (i) a material adverse change in, or
a material adverse effect upon, the Assets, business, prospects, properties,
financial condition or results of operations of the Company; (ii) a material
impairment of the ability of the Company to perform any of its Obligations under
any of the Transaction Documents; or (iii) a material adverse effect on: (A) any
material portion of the “Collateral” (as such terms is defined in the Security
Agreements); (B) the legality, validity, binding effect or enforceability
against the Company and the Guarantors of any of the Transaction Documents; (C)
the perfection or priority of any Encumbrance granted to Buyer under any
Transaction Documents; (D) the rights or remedies of the Buyer under any of the
Transaction Documents; or (E) a material adverse effect or impairment on the
Lender’s ability to sell the Advisory Fee Shares or other shares of the
Company’s Common Stock issuable to Buyer under any Transaction Documents without
limitation or restriction. For purposes of determining whether any of the
foregoing changes, effects, impairments, or other events have occurred, such
determination shall be made by Buyer, in its sole, but reasonably exercised,
discretion.

 

2.24 “Material Contract” shall mean any Contract to which the Company is a party
or by which the Company or any of its Assets are bound and which: (i) must be
disclosed to any Governmental Authority or any other laws, rules or regulations
of any Governmental Authority; (ii) involves aggregate payments of Twenty-Five
Thousand Dollars ($25,000) or more to or from the Company; (iii) involves
delivery, purchase, licensing or provision, by or to the Company, of any goods,
services, assets or other items having a value (or potential value) over the
term of such Contract of Twenty-five Thousand Dollars ($25,000) or more or is
otherwise material to the conduct of the Company’s business as now conducted and
as contemplated to be conducted in the future; (iii) involves a Company Lease;
(iv) imposes any guaranty, surety or indemnification Obligations on the Company;
or (v) prohibits the Company from engaging in any business or competing anywhere
in the world.

 

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2.25 “Obligation” means, now existing or in the future, any debt, liability or
obligation of any nature whatsoever (including any required performance of any
covenants or agreements), whether secured, unsecured, recourse, nonrecourse,
liquidated, unliquidated, accrued, voluntary or involuntary, direct or indirect,
absolute, fixed, contingent, ascertained, unascertained, known, unknown, whether
or not jointly owed with others, whether or not from time to time decreased or
extinguished and later decreased, created or incurred, or obligations under
Contracts, existing or incurred under this Agreement, the Debentures or any
other Transaction Documents, or any other agreement between the Company, the
Guarantors and the Buyer, as such obligations may be amended, supplemented,
converted, extended or modified from time to time.

 

2.26 “Ordinary Course of Business” means the ordinary course of business of the
Person in question, consistent with past custom and practice (including with
respect to quantity, quality and frequency).

 

2.27 “OTC Markets” means the OTC Markets Group, Inc.

 

2.28 “Permit” means any license, permit, approval, waiver, order, authorization,
right or privilege of any nature whatsoever, granted, issued, approved or
allowed by any Governmental Authority.

 

2.29 “Person” means any individual, sole proprietorship, joint venture,
partnership, company, corporation, association, cooperation, trust, estate,
Governmental Authority, or any other entity of any nature whatsoever.

 

2.30 “Pledge Agreement” shall have the meaning given to it in the recitals
hereof.

 

2.31 “Principal Trading Market” shall mean the Nasdaq Global Select Market, the
Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the OTC
Markets, the so-called OTC Pink Sheets, the NYSE Euronext or the New York Stock
Exchange, whichever is at the time the principal trading exchange or market for
the Common Stock.

 

2.32 “Proceeding” means any demand, claim, suit, action, litigation,
investigation, audit, study, arbitration, administrative hearing, or any other
proceeding of any nature whatsoever.

 

2.33 “Real Property” means any real estate, land, building, structure,
improvement, fixture or other real property of any nature whatsoever, including,
but not limited to, fee and leasehold interests.

 

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2.34 “Rule 144” shall mean Rule 144 or Rule 144A promulgated under the
Securities Act (or a successor rule thereto.

 

2.35 “SEC” shall mean the United States Securities and Exchange Commission.

 

2.36 “Securities” means, collectively, the Debentures, the Advisory Fee Shares
(as defined herein), and any additional shares of Common Stock issuable in
connection with a conversion of the Debentures, or the terms of this Agreement
or any other Transaction Documents.

 

2.37 “Security Agreements” shall have the meaning given to it in the recitals
hereof.

 

2.38 “Tax” means (i) any foreign, federal, state or local income, profits, gross
receipts, franchise, sales, use, occupancy, general property, real property,
personal property, intangible property, transfer, fuel, excise, accumulated
earnings, personal holding company, unemployment compensation, social security,
withholding taxes, payroll taxes, or any other tax of any nature whatsoever,
(ii) any foreign, federal, state or local organization fee, qualification fee,
annual report fee, filing fee, occupation fee, assessment, rent, or any other
fee or charge of any nature whatsoever, or (iii) any deficiency, interest or
penalty imposed with respect to any of the foregoing.

 

2.39 “Tax Return” means any tax return, filing, declaration, information
statement or other form or document required to be filed in connection with or
with respect to any Tax.

 

2.40 “Transaction Documents” means this Agreement any and all documents or
instruments executed or to be executed by the Company and/or the Guarantors in
connection with this Agreement, including the Debentures, the Security
Agreements, the Guarantee Agreements, the Use of Proceeds Confirmation, the
Irrevocable Transfer Agent Instructions the Pledge Agreements and the Validity
Certificates, together with all modifications, amendments, extensions, future
advances, renewals, and substitutions thereof.

 

2.41 “Use of Proceeds Confirmation” means that certain use of proceeds
confirmation executed by an officer of the Company in the form attached hereto
as Exhibit G.

 

2.42 “Validity Certificate(s)” shall mean those certain validity certificates
executed by such officers and directors of the Company as the Buyer shall
require, in the Buyer’s sole discretion, the form of which is attached hereto as
Exhibit H.

 

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ARTICLE III

INTERPRETATION

 

In this Agreement, unless the express context otherwise requires: (i) the words
“herein,” “hereof” and “hereunder” and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (ii)
references to the words “Article” or “Section” refer to the respective Articles
and Sections of this Agreement, and references to “Exhibit” or “Schedule” refer
to the respective Exhibits and Schedules annexed hereto; (iii) references to a
“party” mean a party to this Agreement and include references to such party’s
permitted successors and permitted assigns; (iv) references to a “third party”
mean a Person not a party to this Agreement; (v) references to the words “share”
or “shareholder”, if in reference to the Company, shall refer to “units” or
“unitholder” respectively and (v) the terms “dollars” and “$” means U.S.
dollars; (vi) wherever the word “include,” “includes” or “including” is used in
this Agreement, it will be deemed to be followed by the words “without
limitation”.

 

ARTICLE IV

PURCHASE AND SALE OF DEBENTURES

 

4.1 Purchase and Sale of Debentures. Subject to the satisfaction (or waiver) of
the terms and conditions of this Agreement, Buyer agrees to purchase, at each
Closing, and Company agrees to sell and issue to Buyer, at each Closing,
Debentures in the amount of the Purchase Price applicable to each Closing as
more specifically set forth below.

 

4.2 Closing Dates. The First Closing of the purchase and sale of the Debentures
shall be for One Million Nine Hundred Thousand and No/100 United States Dollars
($1,900,000), and shall take place on the Effective Date, subject to
satisfaction of the conditions to the First Closing set forth in this Agreement
(the “First Closing Date”). Additional Closings of the purchase and sale of the
Debentures shall be at such times and for such amounts as determined in
accordance with Section 4.4 below, subject to satisfaction of the conditions to
the Additional Closings set forth in this Agreement (the “Additional Closing
Dates”) (collectively referred to as the “Closing Dates”). The Closings shall
occur on the respective Closing Dates through the use of overnight mails and
subject to customary escrow instructions from Buyer and its counsel, or in such
other manner as is mutually agreed to by the Company and the Buyer.

 

4.3 Form of Payment. Subject to the satisfaction of the terms and conditions of
this Agreement, on each Closing Date: (i) the Buyer shall deliver to the
Company, to a Company account designated by the Company, the aggregate proceeds
for the Debentures to be issued and sold to Buyer at each such Closing, minus
the fees to be paid directly from the proceeds of each such Closing as set forth
in this Agreement, in the form of wire transfers of immediately available U.S.
dollars; and (ii) the Company shall deliver to Buyer the Securities which Buyer
is purchasing hereunder at each Closing, duly executed on behalf of the Company,
together with any other documents required to be delivered pursuant to this
Agreement.

 

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4.4 Additional Closings. At any time after the First Closing but prior to the
maturity date of any of the Debentures issued in the First Closing, the Company
may request that Buyer purchase additional Debentures hereunder in Additional
Closings by written notice to Buyer, and, subject to the conditions below, Buyer
shall purchase such additional Debentures in such amounts and at such times as
Buyer and the Company may mutually agree, so long as the following conditions
have been satisfied, in Buyer’s sole and absolute discretion: (i) no default or
“Event of Default” (as such term is defined in any of the Transaction Documents)
shall have occurred or be continuing under this Agreement or any other
Transaction Documents, and no event shall have occurred that, with the passage
of time, the giving of notice, or both, would constitute a default or an Event
of Default hereunder or thereunder; and (ii) any additional purchase of
Debentures beyond the purchase of Debentures at the First Closing shall have
been approved by Buyer, which approval may be given or withheld in Buyer’s sole
and absolute discretion.

 

ARTICLE V

BUYER’S REPRESENTATIONS AND WARRANTIES

 

Buyer represents and warrants to the Company, that:

 

5.1 Investment Purpose. Buyer is acquiring the Securities for its own account
for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof.

 

5.2 Accredited Buyer Status. Buyer is an “accredited investor” as that term is
defined in Rule 501 of Regulation D, as promulgated under the Securities Act of
1933.

 

5.3 Reliance on Exemptions. Buyer understands that the Securities are being
offered and sold to it in reliance on specific exemptions from the registration
requirements of United States federal and state securities laws and that the
Company is relying in part upon the truth and accuracy of, and Buyer’s
compliance with, the representations, warranties, agreements, acknowledgments
and understandings of Buyer set forth herein in order to determine the
availability of such exemptions and the eligibility of Buyer to acquire the
Securities.

 

5.4 Information. Buyer and its advisors, if any, have been furnished with all
materials they have requested relating to the business, finances and operations
of the Company and information Buyer deemed material to making an informed
investment decision regarding its purchase of the Securities. Buyer and its
advisors, if any, have been afforded the opportunity to ask questions of the
Company and its management. Neither such inquiries, nor any materials provided
to Buyer, nor any other due diligence investigations conducted by Buyer or its
advisors, if any, or its representatives, shall modify, amend or affect Buyer’s
right to fully rely on the Company’s representations and warranties contained in
Article VI below. Buyer understands that its investment in the Securities
involves a high degree of risk. Buyer is in a position regarding the Company,
which, based upon economic bargaining power, enabled and enables Buyer to obtain
information from the Company in order to evaluate the merits and risks of this
investment. Buyer has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

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5.5 No Governmental Review. Buyer understands that no United States federal or
state Governmental Authority has passed on or made any recommendation or
endorsement of the Securities, or the fairness or suitability of the investment
in the Securities, nor have such Governmental Authorities passed upon or
endorsed the merits of the offering of the Securities.

 

5.6 Authorization, Enforcement. This Agreement has been duly and validly
authorized, executed and delivered on behalf of Buyer and is a valid and binding
agreement of Buyer, enforceable in accordance with its terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

ARTICLE VI

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

To induce the Buyer to purchase the Securities, the Company makes the following
representations and warranties to Buyer, each of which shall be true and correct
in all respects as of the date of the execution and delivery of this Agreement
and as of the date of each Closing hereunder, and which shall survive the
execution and delivery of this Agreement:

 

6.1 Subsidiaries. A list of all of the Company’s Subsidiaries is set forth in
Schedule 6.1 hereto. The Guarantors have no Subsidiaries.

 

6.2 Organization. The Company is a corporation, duly incorporated, validly
existing and in good standing under the Laws of the jurisdiction in which it is
incorporated. The Company has the full power and authority and all necessary
certificates, licenses, approvals and Permits to: (i) enter into and execute
this Agreement and the Transaction Documents and to perform all of its
Obligations hereunder and thereunder; and (ii) own and operate its Assets and
properties and to conduct and carry on its business as and to the extent now
conducted. The Company is duly qualified to transact business and is in good
standing as a foreign corporation in each jurisdiction where the character of
its business or the ownership or use and operation of its Assets or properties
requires such qualification. The exact legal name of the Company is as set forth
in the preamble to this Agreement, and the Company does not currently conduct,
nor has the Company, during the last five (5) years conducted, business under
any other name or trade name.

 

6.3 Authority and Approval of Agreement; Binding Effect. The execution and
delivery by Company of this Agreement and the Transaction Documents, and the
performance by Company of all of its Obligations hereunder and thereunder,
including the issuance of the Securities, have been duly and validly authorized
and approved by the Company and its board of managers pursuant to all applicable
Laws and no other action or Consent on the part of Company, its board of
managers, members or any other Person is necessary or required by the Company to
execute this Agreement and the Transaction Documents, consummate the
transactions contemplated herein and therein, perform all of Company’s
Obligations hereunder and thereunder, or to issue the Securities. This Agreement
and each of the Transaction Documents have been duly and validly executed by
Company (and the officer executing this Agreement and all such other Transaction
Documents is duly authorized to act and execute same on behalf of Company) and
constitute the valid and legally binding agreements of Company, enforceable
against Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation and other
similar laws relating to, or affecting generally, the enforcement of applicable
creditors’ rights and remedies.

 

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6.4 Capitalization. The authorized capital stock of the Company consists of four
hundred fifty million (450,000,000) shares of Common Stock, of which three
hundred six million three hundred ten thousand nine hundred fifty-one
(306,310,951) shares of Common Stock are issued and outstanding as of the date
hereof. All of such outstanding shares have been validly issued and are fully
paid and nonassessable, have been issued in compliance with all foreign, federal
and state securities laws and none of such outstanding shares were issued in
violation of any preemptive rights or similar rights to subscribe for or
purchase securities. As of the Effective Date, no shares of the Company’s
capital stock are subject to preemptive rights or any other similar rights or
any Claims or Encumbrances suffered or permitted by the Company. The Common
Stock is currently quoted on the OTC Bulletin Board under the trading symbol
“OSLH”. The Company has received no notice, either oral or written, with respect
to the continued eligibility of the Common Stock for quotation on the Principal
Trading Market, and the Company has maintained all requirements on its part for
the continuation of such quotation. Except as disclosed in the “SEC Documents”
(as hereinafter defined) and except for the Securities to be issued pursuant to
this Agreement, as of the date hereof: (i) there are no outstanding options,
warrants, scrip, rights to subscribe to, calls or commitments of any character
whatsoever relating to, or securities or rights convertible into, any shares of
capital stock of the Company or any of its Subsidiaries, or Contracts,
commitments, understandings or arrangements by which the Company or any of its
Subsidiaries is or may become bound to issue additional shares of capital stock
of the Company or any of its Subsidiaries, or options, warrants, scrip, rights
to subscribe to, calls or commitments of any character whatsoever relating to,
or securities or rights convertible into, any shares of capital stock of the
Company or any of its Subsidiaries; (ii) there are no outstanding debt
securities, notes, credit agreements, credit facilities or other Contracts or
instruments evidencing indebtedness of the Company or any of its Subsidiaries,
or by which the Company or any of its Subsidiaries is or may become bound; (iii)
there are no outstanding registration statements with respect to the Company or
any of its securities; (iv) there are no agreements or arrangements under which
the Company or any of its Subsidiaries is obligated to register the sale of any
of their securities under the Securities Act (except pursuant to this
Agreement); (v) there are no financing statements securing obligations filed in
connection with the Company or any of its Assets; (vi) there are no securities
or instruments containing anti-dilution or similar provisions that will be
triggered by this Agreement or any related agreement or the consummation of the
transactions described herein or therein; and (vii) there are no outstanding
securities or instruments of the Company which contain any redemption or similar
provisions, and there are no Contracts by which the Company is or may become
bound to redeem a security of the Company. The Company has furnished to the
Buyer true, complete and correct copies of: (I) the Company’s Certificate of
Incorporation, as amended and as in effect on the date hereof; and (II) the
Company’s Bylaws, as in effect on the date hereof (together, the “Organizational
Documents”). Except for the Organizational Documents or as disclosed in the SEC
Documents, there are no other shareholder agreements, voting agreements or other
Contracts of any nature or kind that restrict, limit or in any manner impose
Obligations on the governance of the Company.

 

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6.5 No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement and the Transaction Documents, and the
consummation of the transactions contemplated hereby and thereby, including the
issuance of any of the Securities, will not: (i) constitute a violation of or
conflict with the Organizational Documents of the Company; (ii) constitute a
violation of, or a default or breach under (either immediately, upon notice,
upon lapse of time, or both), or conflicts with, or gives to any other Person
any rights of termination, amendment, acceleration or cancellation of, any
provision of any Contract to which Company is a party or by which any of its
Assets or properties may be bound; (iii) constitute a violation of, or a default
or breach under (either immediately, upon notice, upon lapse of time, or both),
or conflicts with, any Judgment; (iv) constitute a violation of, or conflict
with, any Law (including United States federal and state securities Laws); or
(v) result in the loss or adverse modification of, or the imposition of any
fine, penalty or other Encumbrance with respect to, any Permit granted or issued
to, or otherwise held by or for the use of, Company or any of Company’s Assets.
The Company is not in violation of its Organizational Documents and the Company
is not in default or breach (and no event has occurred which with notice or
lapse of time or both could put the Company in default or breach) under, and the
Company has not taken any action or failed to take any action that would give to
any other Person any rights of termination, amendment, acceleration or
cancellation of, any Contract to which the Company is a party or by which any
property or Assets of the Company are bound or affected. The businesses of the
Company are not being conducted, and shall not be conducted so long as Buyer
owns any of the Securities, in violation of any Law. Except as specifically
contemplated by this Agreement, the Company is not required to obtain any
Consent of, from, or with any Governmental Authority, or any other Person, in
order for it to execute, deliver or perform any of its Obligations under this
Agreement or the Transaction Documents in accordance with the terms hereof or
thereof, or to issue and sell the Securities in accordance with the terms
hereof. All Consents which the Company is required to obtain pursuant to the
immediately preceding sentence have been obtained or effected on or prior to the
date hereof. The Company is not aware of any facts or circumstances which might
give rise to any of the foregoing.

 

6.6 Issuance of Securities. The Securities are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and non-assessable, and free from all Encumbrances with respect to the issue
thereof, and will be issued in compliance with all applicable United States
federal and state securities Laws.

 

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6.7 SEC Documents; Financial Statements. Except for a certain Current Report on
Form 8-K and certain Section 16 filings, the Company has timely filed all
reports, schedules, forms, statements and other documents required to be filed
by it with the SEC or any governmental authority (all of the foregoing filed
within the two (2) years preceding the date hereof or amended after the date
hereof and all exhibits included therein and financial statements and schedules
thereto and documents incorporated by reference therein, being hereinafter
referred to as the “SEC Documents”). The Company is current with its filing
obligations under the Exchange Act and all SEC Documents have been filed on a
timely basis by the Company. The Company represents and warrants that true and
complete copies of the SEC Documents are available on the SEC website
(www.sec.gov) at no charge to Buyer, and Buyer acknowledges that it may retrieve
all SEC Documents from such website and Buyer’s access to such SEC Documents
through such website shall constitute delivery of the SEC Documents to Buyer;
provided, however, that if Buyer is unable to obtain any of such SEC Documents
from such website at no charge, as result of such website not being available or
any other reason beyond Buyer’s control, then upon request from Buyer, the
Company shall deliver to Buyer true and complete copies of such SEC Documents.
The Company shall make available to Buyer true and complete copies of all draft
filings, reports, schedules, statements and other documents required to be filed
with the requirements of the Exchange Act that have been prepared but not filed
with the SEC as of the date hereof. None of the SEC Documents, at the time they
were filed with the SEC, contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. None of the statements made in any such SEC
Documents is, or has been, required to be amended or updated under applicable
law (except for such statements as have been amended or updated in subsequent
filings prior the date hereof, which amendments or updates are also part of the
SEC Documents). Except as subsequently amended or restated in the SEC Documents,
as of their respective dates, the consolidated financial statements of the
Company and its Subsidiaries included in the SEC Documents (the “Financial
Statements”) complied in all material respects with applicable accounting
requirements and any published rules and regulations of the SEC with respect
thereto. All of the Financial Statements have been prepared in accordance with
GAAP, consistently applied, during the periods involved (except: (i) as may be
otherwise indicated in such Financial Statements or the notes thereto; or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), and fairly present in all
material respects the consolidated financial position of the Company and all of
its Subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). To the knowledge of
Company and its officers, no other information provided by or on behalf of
Company to the Buyer which is not included in the SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading

 

6.8 Absence of Certain Changes. Since the date the last of the SEC Documents was
filed with the SEC, none of the following have occurred:

 

(a) There has been no event or circumstance of any nature whatsoever that has
resulted in, or could reasonably be expected to result in, a Material Adverse
Effect; or

 

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(b) Any transaction, event, action, development, payment, or any other matter of
any nature whatsoever entered into by the Company other than in the Company’s
Ordinary Course of Business.

 

6.9 Absence of Litigation or Adverse Matters. No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or Proceeding (or
threatened litigation or Proceeding or basis therefor) exists which: (i) could
adversely affect the validity or priority of the Encumbrances granted to the
Buyer under the Transaction Documents; (ii) could adversely affect the ability
of the Company to perform its Obligations under the Transaction Documents; (iii)
would constitute a default under any of the Transaction Documents; (iv) would
constitute such a default with the giving of notice or lapse of time or both; or
(v) would constitute or give rise to a Material Adverse Effect. In addition:
(vi) there is no Proceeding before or by any Governmental Authority or any other
Person, pending, or the best of Company’s knowledge, threatened or contemplated
by, against or affecting the Company, its business or Assets; (vii) there is no
outstanding Judgments against or affecting the Company, its business or Assets;
(viii) the Company is not in breach or violation of any Contract; and (ix) the
Company has not received any material complaint from any customer, supplier,
vendor or employee.

 

6.10 Liabilities and Indebtedness of the Company. The Company does not have any
Obligations of any nature whatsoever, except: (i) as disclosed in the Financial
Statements; or (iii) Obligations incurred in the Ordinary Course of Business
since the date of the most recent Financial Statements which do not or would
not, individually or in the aggregate, exceed Ten Thousand Dollars ($10,000) or
otherwise have a Material Adverse Effect.

 

6.11 Title to Assets. The Company has good and marketable title to, or a valid
leasehold interest in, all of its Assets which are material to the business and
operations of the Company as presently conducted, free and clear of all
Encumbrances or restrictions on the transfer or use of same. Except as would not
have a Material Adverse Effect, the Company’s Assets are in good operating
condition and repair, ordinary wear and tear excepted, and are free of any
latent or patent defects which might impair their usefulness, and are suitable
for the purposes for which they are currently used and for the purposes for
which they are proposed to be used.

 

6.12 Real Estate.

 

(a) Real Property Ownership. Except for the Company Leases and as set forth on
Schedule 6.12, the Company and the Guarantors do not own any Real Property.

 

(b) Real Property Leases. Except for ordinary office Leases disclosed to the
Buyer in writing prior to the date hereof (the “Company Leases”), the Company
does not lease any other Real Property. With respect to each of the Company
Leases: (i) the Company has been in peaceful possession of the property leased
thereunder and neither the Company nor the landlord is in default thereunder;
(ii) no waiver, indulgence or postponement of any of the Obligations thereunder
has been granted by the Company or landlord thereunder; and (iii) there exists
no event, occurrence, condition or act known to the Company which, upon notice
or lapse of time or both, would be or could become a default thereunder or which
could result in the termination of the Company Leases, or any of them, or have a
Material Adverse Effect on the business of the Company, its Assets or its
operations or financial results. The Company has not violated nor breached any
provision of any such Company Leases, and all Obligations required to be
performed by the Company under any of such Company Leases have been fully,
timely and properly performed. The Company has delivered to the Buyer true,
correct and complete copies of all Company Leases, including all modifications
and amendments thereto, whether in writing or otherwise. The Company has not
received any written or oral notice to the effect that any of the Company Leases
will not be renewed at the termination of the term of such Company Leases, or
that any of such Company Leases will be renewed only at higher rents.

 

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6.13 Material Contracts. An accurate, current and complete copy of each of the
Material Contracts has been furnished to Buyer, and each of the Material
Contracts constitutes the entire agreement of the respective parties thereto
relating to the subject matter thereof. There are no outstanding offers, bids,
proposals or quotations made by Company which, if accepted, would create a
Material Contract with Company. Each of the Material Contracts is in full force
and effect and is a valid and binding Obligation of the parties thereto in
accordance with the terms and conditions thereof. To the knowledge of the
Company and its officers, all Obligations required to be performed under the
terms of each of the Material Contracts by any party thereto have been fully
performed by all parties thereto, and no party to any Material Contracts is in
default with respect to any term or condition thereof, nor has any event
occurred which , through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration or
modification of any Obligation of any party thereto or the creation of any
Encumbrance upon any of the Assets of the Company. Further, the Company has
received no notice, nor does the Company have any knowledge, of any pending or
contemplated termination of any of the Material Contracts and, no such
termination is proposed or has been threatened, whether in writing or orally.

 

6.14 Compliance with Laws. To the knowledge of the Company and its officers, the
Company is and at all times has been in full compliance with all Laws. The
Company has not received any notice that it is in violation of, has violated, or
is under investigation with respect to, or has been threatened to be charged
with, any violation of any Law.

 

6.15 Intellectual Property. The Company owns or possesses adequate and legally
enforceable rights or licenses to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and all other intellectual property rights necessary to conduct its
business as now conducted. The Company does not have any knowledge of any
infringement by the Company of trademark, trade name rights, patents, patent
rights, copyrights, inventions, licenses, service names, service marks, service
mark registrations, trade secret or other intellectual property rights of
others, and, to the knowledge of the Company, there is no Claim being made or
brought against, or to the Company’s knowledge, being threatened against, the
Company regarding trademark, trade name, patents, patent rights, invention,
copyright, license, service names, service marks, service mark registrations,
trade secret or other intellectual property infringement; and the Company is
unaware of any facts or circumstances which might give rise to any of the
foregoing.

 

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6.16 Labor and Employment Matters. The Company is not involved in any labor
dispute or, to the knowledge of the Company, is any such dispute threatened. To
the knowledge of the Company and its officers, none of the Company’s employees
is a member of a union and the Company believes that its relations with its
employees are good. To the knowledge of the Company and its officers, the
Company has complied in all material respects with all Laws relating to
employment matters, civil rights and equal employment opportunities.

 

6.17 Employee Benefit Plans. Except as disclosed to the Buyer in writing prior
to the date hereof, the Company does not have and has not ever maintained, and
has no Obligations with respect to any employee benefit plans or arrangements,
including employee pension benefit plans, as defined in Section 3(2) of the
Employee Retirement Income Security Act of 1974, as amended (“ERISA”),
multiemployer plans, as defined in Section 3(37) of ERISA, employee welfare
benefit plans, as defined in Section 3(1) of ERISA, deferred compensation plans,
stock option plans, bonus plans, stock purchase plans, hospitalization,
disability and other insurance plans, severance or termination pay plans and
policies, whether or not described in Section 3(3) of ERISA, in which employees,
their spouses or dependents of the Company participate (collectively, the
“Employee Benefit Plans”). To the Company’s knowledge, all Employee Benefit
Plans meet the minimum funding standards of Section 302 of ERISA, where
applicable, and each such Employee Benefit Plan that is intended to be qualified
within the meaning of Section 401 of the Internal Revenue Code of 1986 is
qualified. No withdrawal liability has been incurred under any such Employee
Benefit Plans and no “Reportable Event” or “Prohibited Transaction” (as such
terms are defined in ERISA), has occurred with respect to any such Employee
Benefit Plans, unless approved by the appropriate Governmental Authority. To the
Company’s knowledge, the Company has promptly paid and discharged all
Obligations arising under ERISA of a character which if unpaid or unperformed
might result in the imposition of an Encumbrance against any of its Assets or
otherwise have a Material Adverse Effect.

 

6.18 Tax Matters. The Company and each Guarantor has made and timely filed all
Tax Returns required by any jurisdiction to which it is subject, and each such
Tax Return has been prepared in compliance with all applicable Laws, and all
such Tax Returns are true and accurate in all respects. Except and only to the
extent that the Company and each Guarantor has set aside on its books provisions
reasonably adequate for the payment of all unpaid and unreported Taxes, the
Company has timely paid all Taxes shown or determined to be due on such Tax
Returns, except those being contested in good faith, and the Company has set
aside on its books provision reasonably adequate for the payment of all Taxes
for periods subsequent to the periods to which such Tax Returns apply. There are
no unpaid Taxes in any material amount claimed to be due by the taxing authority
of any jurisdiction, and the officers of the Company know of no basis for any
such claim. The Company has withheld and paid all Taxes to the appropriate
Governmental Authority required to have been withheld and paid in connection
with amounts paid or owing to any Person. There is no Proceeding or Claim for
refund now in progress, pending or threatened against or with respect to the
Company regarding Taxes.

 

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6.19 Insurance. The Company is covered by valid, outstanding and enforceable
policies of insurance which were issued to it by reputable insurers of
recognized financial responsibility, covering its properties, Assets and
businesses against losses and risks normally insured against by other
corporations or entities in the same or similar lines of businesses as the
Company is engaged and in coverage amounts which are prudent and typically and
reasonably carried by such other corporations or entities (the “Insurance
Policies”). Such Insurance Policies are in full force and effect, and all
premiums due thereon have been paid. None of the Insurance Policies will lapse
or terminate as a result of the transactions contemplated by this Agreement. The
Company has complied with the provisions of such Insurance Policies. The Company
has not been refused any insurance coverage sought or applied for and the
Company does not have any reason to believe that it will not be able to renew
its existing Insurance Policies as and when such Insurance Policies expire or to
obtain similar coverage from similar insurers as may be necessary to continue
its business at a cost that would not materially and adversely affect the
condition, financial or otherwise, or the earnings, business or operations of
the Company.

 

6.20 Permits. The Company possesses all Permits necessary to conduct its
business, and the Company has not received any notice of, or is otherwise
involved in any Proceedings relating to, the revocation or modification of any
such Permits. All such Permits are valid and in full force and effect and the
Company is in full compliance with the respective requirements of all such
Permits.

 

6.21 Bank Accounts; Business Location. Schedule 6.21 sets forth, with respect to
each account of the Company with any bank, broker or other depository
institution: (i) the name and account number of such account; (ii) the name and
address of the institution where such account is held; (iii) the name of any
Person(s) holding a power of attorney with respect to such account, if any; and
(iv) the names of all authorized signatories and other Persons authorized to
withdraw funds from each such account. The Company has no office or place of
business other than as identified on Schedule 6.21 and the Company’s principal
places of business and chief executive offices are indicated on Schedule 6.21.
All books and records of the Company and other material Assets of the Company
are held or located at the principal offices of the Company indicated on
Schedule 6.21.

 

6.22 Environmental Laws. Except as are used in such amounts as are customary in
the Company’s Ordinary Course of Business and in compliance with all applicable
Environmental Laws, the Company represents and warrants to Buyer that: (i) the
Company has not generated, used, stored, treated, transported, manufactured,
handled, produced or disposed of any Hazardous Materials, on or off any of the
premises of the Company (whether or not owned by the Company) in any manner
which at any time violates any Environmental Law or any Permit, certificate,
approval or similar authorization thereunder; (ii) the operations of the Company
comply in all material respects with all Environmental Laws and all Permits
certificates, approvals and similar authorizations thereunder; (iii) there has
been no investigation, Proceeding, complaint, order, directive, Claim, citation
or notice by any Governmental Authority or any other Person, nor is any pending
or, to the Company’s knowledge, threatened; and (iv) the Company does not have
any liability, contingent or otherwise, in connection with a release, spill or
discharge, threatened or actual, of any Hazardous Materials or the generation,
use, storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Material.

 

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6.23 Illegal Payments. Neither the Company, nor any director, officer, agent,
employee or other Person acting on behalf of the Company has, in the course of
his actions for, or on behalf of, the Company: (i) used any corporate funds for
any unlawful contribution, gift, entertainment or other unlawful expenses
relating to political activity; (ii) made any direct or indirect unlawful
payment to any foreign or domestic government official or employee from
corporate funds; (iii) violated or is in violation of any provision of the U.S.
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

 

6.24 Related Party Transactions. Except for arm’s length transactions pursuant
to which the Company makes payments in the Ordinary Course of Business upon
terms no less favorable than the Company could obtain from third parties, none
of the officers, directors or employees of the Company, nor any stockholders who
own, legally or beneficially, five percent (5%) or more of the issued and
outstanding shares of any class of the Company’s capital stock (each a “Material
Shareholder”), is presently a party to any transaction with the Company (other
than for services as employees, officers and directors), including any Contract
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from, any
officer, director or such employee or Material Shareholder or, to the best
knowledge of the Company, any other Person in which any officer, director, or
any such employee or Material Shareholder has a substantial or material interest
in or of which any officer, director or employee of the Company or Material
Shareholder is an officer, director, trustee or partner. There are no Claims or
disputes of any nature or kind between the Company and any officer, director or
employee of the Company or any Material Shareholder, or between any of them,
relating to the Company and its business.

 

6.25 Internal Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurance that: (i)
transactions are executed in accordance with management’s general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with GAAP and to maintain
asset accountability; (iii) access to Assets is permitted only in accordance
with management’s general or specific authorization; and (iv) the recorded
accountability for Assets is compared with the existing Assets at reasonable
intervals and appropriate action is taken with respect to any differences.

 

6.26 Acknowledgment Regarding Buyer’s Purchase of the Securities. The Company
and each Guarantor acknowledges and agrees that Buyer is acting solely in the
capacity of an arm’s length purchaser with respect to this Agreement and the
transactions contemplated hereby. The Company and each Guarantor further
acknowledges that Buyer is not acting as a financial advisor or fiduciary of the
Company (or in any similar capacity) with respect to this Agreement and the
transactions contemplated hereby and any advice given by Buyer or any of its
representatives or agents in connection with this Agreement and the transactions
contemplated hereby is merely incidental to Buyer’s purchase of the Securities.
The Company further represents to Buyer that the Company’s and each Guarantor’s
decision to enter into this Agreement has been based solely on the independent
evaluation by the Company, each Guarantor and its representatives.

 

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6.27 Seniority. No indebtedness or other equity or security of the Company and
the Guarantors is senior to the Debentures in right of payment, whether with
respect to interest or upon liquidation or dissolution, or otherwise, except
only purchase money security interests (which are senior only as to underlying
Assets covered thereby).

 

6.28 Brokerage Fees. There is no Person acting on behalf of the Company and the
Guarantors who is entitled to or has any claim for any brokerage or finder’s fee
or commission in connection with the execution of this Agreement or the
consummation of the transactions contemplated hereby.

 

6.29 No General Solicitation. Neither the Company, nor any of its Affiliates,
nor any Person acting on its or their behalf, has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D under
the Securities Act) in connection with the offer or issuance of the Securities.

 

6.30 No Integrated Offering. Neither the Company, nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any security or solicited any offers to buy any security,
under circumstances that would require registration of the Securities under the
Securities Act or cause this offering of such securities to be integrated with
prior offerings by the Company for purposes of the Securities Act.

 

6.31 Private Placement. No registration under the Securities Act or the laws,
rules or regulation of any other governmental authority is required for the
issuance of the Securities.

 

6.32 Full Disclosure. All the representations and warranties made by Company and
the Guarantors herein or in the Schedules hereto, and all of the financial
statements, schedules, certificates, confirmations, agreements, contracts, and
other materials submitted to the Buyer in connection with or in furtherance of
this Agreement or pertaining to the transaction contemplated herein, whether
made or given by Company and the Guarantors, its agents or representatives, are
complete and accurate, and do not omit any information required to make the
statements and information provided, in light of the transaction contemplated
herein and in light of the circumstances under which they were made, not
misleading, accurate and meaningful.

 

6.33 Crisnic. The Company and Guarantors represent and warrant that there are no
obligations owing to Crisnic Fund, S.A.

 

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ARTICLE VII

COVENANTS

 

7.1 Negative Covenants.

 

(a) Indebtedness. So long as Buyer owns, legally or beneficially, any of the
Debentures, the Company shall not, without prior written consent of the Buyer on
a which shall be determined on a case-by-case basis and shall not be
unreasonably withheld, either directly or indirectly, create, assume, incur or
have outstanding any indebtedness for borrowed money of any nature or kind
(including purchase money indebtedness), or become liable, whether as endorser,
guarantor, surety or otherwise, for any Obligation of any other Person, except
for: (i) the Debentures; (ii) Obligations disclosed in the financial statements
provided to the Buyer as of the Effective Date; and (iii) Obligations for
accounts payable, other than for money borrowed, incurred in the Company’s
Ordinary Course of Business; provided that, any management or similar fees
payable by the Company shall be fully subordinated in right of payment to the
prior payment in full of the Debentures. Notwithstanding anything to the
contrary, in the event the Buyer approves the assumption of the secured debt by
the Company, such approval shall be contingent on the execution of a
subordination agreement in the form and substance acceptable to the Buyer in its
sole and absolute discretion. For the avoidance of doubt, the Company shall not,
either directly or indirectly, incur any additional indebtedness in connection
with the Typenex Co-Investment, LLC transaction.

 

(b) Encumbrances. With the exception of any Encumbrance in existence as of the
date hereof so long as Buyer owns, legally or beneficially, any of the
Debentures, the Company and the Guarantors shall not, either directly or
indirectly, create, assume, incur or suffer or permit to exist any Encumbrance
upon any Asset of the Company and the Guarantors, whether owned at the date
hereof or hereafter acquired.

 

(c) Investments. So long as Buyer owns, legally or beneficially, any of the
Debentures, the Company shall not, either directly or indirectly, make or have
outstanding any new investments (whether through purchase of stocks, obligations
or otherwise) in, or loans or advances to, any other Person, or acquire all or
any substantial part of the assets, business, stock or other evidence of
beneficial ownership of any other Person, except following: (i) investments in
direct obligations of the United States or any state in the United States; (ii)
trade credit extended by the Company in the Company’s Ordinary Course of
Business; (iii) investments existing on the Effective Date and set forth in the
financial statements provided to the Buyer; and (iv) capital expenditures first
approved by the Buyer in writing, which approval shall not be unreasonably
withheld.

 

(d) Issuances. So long as Buyer owns, legally or beneficially, any of the
Debentures, the Company shall not, either directly or indirectly, issue any
equity, debt or convertible or derivative instruments or securities whatsoever,
except upon obtaining Buyer’s prior written consent, which consent may be
withheld in Buyer’s sole discretion, provided, however, the Company shall be
permitted to issue or distribute capital stock, membership interest, or other
securities to the extent that such issuance or distribution does not result in a
Change in Control of the Company or any Guarantor.

 

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(e) Transfer; Merger. So long as Buyer owns, legally or beneficially, any of the
Debentures, the Company shall not, either directly or indirectly, permit or
enter into any transaction involving a “Change in Control” (as hereinafter
defined), or any other merger, consolidation, sale, transfer, license, Lease,
Encumbrance or other disposition of all or substantially all of its properties
or business or all or substantially all of its Assets, except for the sale,
lease or licensing of property or Assets of the Company in the Company’s
Ordinary Course of Business. For purposes of this Agreement, the term “Change of
Control” shall mean any sale, conveyance, assignment or other transfer, directly
or indirectly, of any ownership interest of the Company which results in any
change in the identity of the individuals or entities previously having the
power to direct, or cause the direction of, the management and policies of the
Company, or the grant of a security interest in any ownership interest of any
Person directly or indirectly controlling the Company, which could result in a
change in the identity of the individuals or entities previously having the
power to direct, or cause the direction of, the management and policies of the
Company.

 

(f) Distributions; Restricted Payments; Change in Management. So long as Buyer
owns, legally or beneficially, any of the Debentures, the Company shall not,
either directly or indirectly: (i) purchase or redeem any shares of its capital
stock; (ii) declare or pay any dividends or distributions, whether in cash or
otherwise, or set aside any funds for any such purpose; (iii) make any
distribution to its shareholders, make any distribution of its property or
Assets or make any loans, advances or extensions of credit to, or investments
in, any Person, including, without limitation, any Affiliates of the Company, or
the Company’s officers, directors, employees or Material Shareholder; (iv) pay
any outstanding indebtedness of the Company, except for indebtedness and other
Obligations permitted hereunder; (v) increase the annual salary paid to any
officers or directors of the Company as of the Effective Date, unless any such
increase is part of a written employment contract with any such officers entered
into prior to the Effective Date, a copy of which has been delivered to and
approved by the Buyer; or (vi) add, replace, remove, or otherwise change any
officers or other senior management positions of the Company from the officers
and other senior management positions existing as of the Effective Date, unless
first approved by Buyer in writing, which approval may be granted or withheld or
conditioned by Buyer in its sole and absolute discretion. The Company shall not
pay any brokerage or finder’s fee or commission in connection with the execution
of this Agreement or the consummation of the transactions contemplated hereby.

 

(g) Use of Proceeds. The Company shall not use any portion of the proceeds of
the Debentures, either directly or indirectly, for any of the following
purposes: (i) to make any payment towards any indebtedness or other Obligations
of the Company; (ii) to pay any Taxes of any nature or kind that may be due by
the Company; or (iii) to pay any Obligations of any nature or kind due or owing
to any officers, directors, employees, or Material Shareholders of the Company,
other than salaries payable in the Company’s Ordinary Course of Business. The
Company covenants and agrees to only use any portion of the proceeds of the
purchase and sale of the Debentures for the purposes set forth in the Use of
Proceeds Confirmation to be executed by the Company on the Effective Date,
unless the Company obtains the prior written consent of the Buyer to use such
proceeds for any other purpose, which consent may be granted or withheld or
conditioned by Buyer in its sole and absolute discretion.

 

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(h) Business Activities; Change of Legal Status and Organizational Documents.
The Company shall not: (i) engage in any line of business other than the
businesses engaged in as of the Effective Date and business reasonably related
thereto; (ii) change its name, organizational identification number (if
applicable), its type of organization, its jurisdiction of organization or other
legal structure; or (iii) permit its Certificate of Formation, Operating
Agreement or other organizational documents to be amended or modified in any way
which could reasonably be expected to have a Material Adverse Effect.

 

(i) Transactions with Affiliates. The Company shall not enter into any
transaction with any of its Affiliates, officers, directors, employees, Material
Shareholders or other insiders, except in the Company’s Ordinary Course of
Business and upon fair and reasonable terms that are no less favorable to the
Company than it would obtain in a comparable arm’s length transaction with a
Person not an Affiliate of the Company.

 

(j) Bank Accounts. The Company shall not maintain any bank, deposit, credit card
payment processing accounts, or other accounts with any financial institution,
or any other Person, other than the Company’s accounts listed in the attached
Schedule 6.21. Specifically, the Company may not change, modify, close or
otherwise affect any of the accounts listed in Schedule 6.21 without Buyer’s
prior written approval, which approval may be withheld or conditioned in Buyer’s
sole and absolute discretion.

 

7.2 Affirmative Covenants.

 

(a) Corporate Existence. The Company shall at all times preserve and maintain
its: (i) existence and good standing in the jurisdiction of its organization;
and (ii) its qualification to do business and good standing in each jurisdiction
where the nature of its business makes such qualification necessary, and shall
at all times continue as a going concern in the business which the Company is
presently conducting.

 

(b) Tax Liabilities. The Company and the Guarantors shall at all times pay and
discharge all Taxes upon, and all Claims (including claims for labor, materials
and supplies) against the Company or any of its properties or Assets, before the
same shall become delinquent and before penalties accrue thereon, unless and to
the extent that the same are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP are being
maintained.

 

(c) Notice of Proceedings. The Company shall, promptly, but not more than five
(5) days after knowledge thereof shall have come to the attention of any officer
of the Company, give written notice to the Buyer of all threatened or pending
Proceedings before any Governmental Authority or otherwise affecting the Company
or any of its Assets.

 

(d) Material Adverse Effect. The Company shall, promptly, but not more than five
(5) days after knowledge thereof shall have come to the attention of any officer
of the Company, give written notice to the Buyer of any event, circumstance,
fact or other matter that could in any way have or be reasonably expected to
have a Material Adverse Effect.

 

21

 

 

(e) Notice of Default. The Company shall, promptly, but not more than five (5)
days after the commencement thereof, give notice to the Buyer in writing of the
occurrence of any “Event of Default” (as such term is defined in any of the
Transaction Documents) or of any event which, with the lapse of time, the giving
of notice or both, would constitute an Event of Default hereunder or under any
other Transaction Documents.

 

(f) Maintain Property. The Company shall at all times maintain, preserve and
keep all of its Assets in good repair, working order and condition, normal wear
and tear excepted, and shall from time to time, as the Company deems appropriate
in its reasonable judgment, make all needful and proper repairs, renewals,
replacements, and additions thereto so that at all times the efficiency thereof
shall be fully preserved and maintained. The Company shall permit Buyer to
examine and inspect such Assets at all reasonable times upon reasonable notice
during business hours. During the continuance of any Event of Default hereunder
or under any Transaction Documents, the Buyer shall, at the Company’s expense,
have the right to make additional inspections without providing advance notice.

 

(g) Maintain Insurance. The Company shall at all times insure and keep insured
with insurance companies acceptable to Buyer, all insurable property owned by
the Company which is of a character usually insured by companies similarly
situated and operating like properties, against loss or damage from
environmental, fire and such other hazards or risks as are customarily insured
against by companies similarly situated and operating like properties; and shall
similarly insure employers’, public and professional liability risks. Prior to
the Effective Date, the Company shall deliver to the Buyer a certificate setting
forth in summary form the nature and extent of the insurance maintained pursuant
to this Section. All such policies of insurance must be satisfactory to Buyer in
relation to the amount and term of the Debentures and type and value of the
Assets of the Company, shall identify Buyer as sole/lender’s loss payee and as
an additional insured. In the event the Company fails to provide Buyer with
evidence of the insurance coverage required by this Section or at any time
hereafter shall fail to obtain or maintain any of the policies of insurance
required above, or to pay any premium in whole or in part relating thereto, then
the Buyer, without waiving or releasing any obligation or default by the Company
hereunder, may at any time (but shall be under no obligation to so act), obtain
and maintain such policies of insurance and pay such premium and take any other
action with respect thereto, which Buyer deems advisable. This insurance
coverage: (i) may, but need not, protect the Company’s interest in such
property; and (ii) may not pay any claim made by, or against, the Company in
connection with such property. The Company may later request that the Buyer
cancel any such insurance purchased by Buyer, but only after providing Buyer
with evidence that the insurance coverage required by this Section is in force.
The costs of such insurance obtained by Buyer, through and including the
effective date such insurance coverage is canceled or expires, shall be payable
on demand by the Company to Buyer, together with interest at the highest
non-usurious rate permitted by law on such amounts until repaid and any other
charges by Buyer in connection with the placement of such insurance. The costs
of such insurance, which may be greater than the cost of insurance which the
Company may be able to obtain on its own, together with interest thereon at the
highest non-usurious rate permitted by Law and any other charges incurred by
Buyer in connection with the placement of such insurance may be added to the
total Obligations due and owing by the Company hereunder and under the
Debentures to the extent not paid by the Company.

 

22

 

 

(h) ERISA Liabilities; Employee Plans. The Company shall: (i) keep in full force
and effect any and all Employee Plans which are presently in existence or may,
from time to time, come into existence under ERISA, and not withdraw from any
such Employee Plans, unless such withdrawal can be effected or such Employee
Plans can be terminated without liability to the Company; (ii) make
contributions to all of such Employee Plans in a timely manner and in a
sufficient amount to comply with the standards of ERISA, including the minimum
funding standards of ERISA; (iii) comply with all material requirements of ERISA
which relate to such Employee Plans; (iv) notify Buyer immediately upon receipt
by the Company of any notice concerning the imposition of any withdrawal
liability or of the institution of any Proceeding or other action which may
result in the termination of any such Employee Plans or the appointment of a
trustee to administer such Employee Plans; (v) promptly advise Buyer of the
occurrence of any “Reportable Event” or “Prohibited Transaction” (as such terms
are defined in ERISA), with respect to any such Employee Plans; and (vi) amend
any Employee Plan that is intended to be qualified within the meaning of Section
401 of the Internal Revenue Code of 1986 to the extent necessary to keep the
Employee Plan qualified, and to cause the Employee Plan to be administered and
operated in a manner that does not cause the Employee Plan to lose its qualified
status.

 

(i) Reporting Status; Listing. So long as Buyer owns, legally or beneficially,
any of the Securities, the Company shall: (i) file in a timely manner all
reports required to be filed under the Securities Act, the Exchange Act or any
securities Laws and regulations thereof applicable to the Company of any state
of the United States, or by the rules and regulations of the Principal Trading
Market, and, to provide a copy thereof to the Buyer promptly after such filing;
(ii) not terminate its status as an issuer required to file reports under the
Exchange Act even if the Exchange Act or the rules and regulations thereunder
would otherwise permit such termination; (iii) if required by the rules and
regulations of the Principal Trading Market, promptly secure the listing of any
shares of Common Stock issuable to Buyer under any of the Transaction Documents
upon the Principal Trading Market (subject to official notice of issuance) and,
take all reasonable action under its control to maintain the continued listing,
quotation and trading of its Common Stock (including, without limitation, any
shares of Common Stock issuable to Buyer under any of the Transaction Documents)
on the Principal Trading Market, and the Company shall comply in all respects
with the Company’s reporting, filing and other Obligations under the bylaws or
rules of the Principal Trading Market, the Financial Industry Regulatory
Authority, Inc. and such other Governmental Authorities, as applicable. The
Company shall promptly provide to Buyer copies of any notices it receives from
the SEC or any Principal Trading Market, to the extent any such notices could in
any way have or be reasonably expected to have a Material Adverse Effect.

 

23

 

 

(j) Rule 144. With a view to making available to Buyer the benefits of Rule 144
under the Securities Act (“Rule 144”), or any similar rule or regulation of the
SEC that may at any time permit Buyer to sell shares of Common Stock issuable to
Buyer under any Transaction Documents to the public without registration, the
Company represents and warrants that:

 

(i) the Company is, and has been for a period of at least ninety (90) days
immediately preceding the date hereof, subject to the reporting requirements of
Section 13 or 15(d) of the Exchange Act; (ii) the Company has filed all required
reports under Section 13 or 15(d) of the Exchange Act, as applicable, during the
twelve (12) months preceding the First Closing Date (or for such shorter period
that the Company was required to file such reports); and (iii) the Company is
not currently an issuer defined as a “Shell Company” (as hereinafter defined).
For the purposes hereof, the term “Shell Company” shall mean an issuer that
meets such a description as defined under Rule 144. In addition, so long as
Buyer owns, legally or beneficially, any securities of the Company, the Company
shall, at its sole expense

 

(ii) Make, keep and ensure that adequate current public information with respect
to the Company, as required in accordance with Rule 144, is publicly available;

 

(iii) furnish to the Buyer, promptly upon reasonable request: (A) a written
statement by the Company that it has complied with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act; and (b) such other
information as may be reasonably requested by Buyer to permit the Buyer to sell
any of the shares of Common Stock acquired hereunder or under any other
Transaction Documents pursuant to Rule 144 without limitation or restriction;
and

 

(iv) promptly at the request of Buyer, give the Company’s transfer agent (the
“Transfer Agent”) instructions to the effect that, upon the Transfer Agent’s
receipt from Buyer of a certificate (a “Rule 144 Certificate”) certifying that
Buyer’s holding period (as determined in accordance with the provisions of Rule
144) for any portion of the shares of Common Stock issuable under any
Transaction Document which Buyer proposes to sell (or any portion of such shares
which Buyer is not presently selling, but for which Buyer desires to remove any
restrictive legends applicable thereto) (the “Securities Being Sold”) is not
less than six (6) months, and receipt by the Transfer Agent of the “Rule 144
Opinion” (as hereinafter defined) from the Company or its counsel (or from Buyer
and its counsel as permitted below), the Transfer Agent is to effect the
transfer (or issuance of a new certificate without restrictive legends, if
applicable) of the Securities Being Sold and issue to Buyer or transferee(s)
thereof one or more stock certificates representing the transferred (or
re-issued) Securities Being Sold without any restrictive legend and without
recording any restrictions on the transferability of such shares on the Transfer
Agent’s books and records. In this regard, upon Buyer’s request, the Company
shall have an affirmative obligation to cause its counsel to promptly issue to
the Transfer Agent a legal opinion providing that, based on the Rule 144
Certificate, the Securities Being Sold may be sold pursuant to the provisions of
Rule 144, even in the absence of an effective registration statement (the “Rule
144 Opinion”). If the Transfer Agent requires any additional documentation in
connection with any proposed transfer (or re-issuance) by Buyer of any
Securities Being Sold, the Company shall promptly deliver or cause to be
delivered to the Transfer Agent or to any other Person, all such additional
documentation as may be necessary to effectuate the transfer (or re issuance) of
the Securities Being Sold and the issuance of an unlegended certificate to any
such Buyer or any transferee thereof, all at the Company’s expense. Any and all
fees, charges or expenses, including, without limitation, attorneys’ fees and
costs, incurred by Buyer in connection with issuance of any such shares, or the
removal of any restrictive legends thereon, or the transfer of any such shares
to any assignee of Buyer, shall be paid by the Company, and if not paid by the
Company, the Buyer may, but shall not be required to, pay any such fees, charges
or expenses, and the amount thereof, together with interest thereon at the
highest non-usurious rate permitted by law, from the date of outlay, until paid
in full, shall be due and payable by the Company to Buyer immediately upon
demand therefor, and all such amounts shall be additional Obligations of the
company to Buyer secured under the Transaction Documents. In the event that the
Company and/or its counsel refuses or fails for any reason to render the Rule
144 Opinion or any other documents, certificates or instructions required to
effectuate the transfer (or re-issuance) of the Securities Being Sold and the
issuance of an unlegended certificate to any such Buyer or any transferee
thereof, then: (A) to the extent the Securities Being Sold could be lawfully
transferred (or re-issued) without restrictions under applicable laws, Company’s
failure to promptly provide the Rule 144 Opinion or any other documents,
certificates or instructions required to effectuate the transfer (or
re-issuance)of the Securities Being Sold and the issuance of an unlegended
certificate to any such Buyer or any transferee thereof shall be an immediate
Event of Default under this Agreement and all other Transaction Documents; and
(B) the Company hereby agrees and acknowledges that Buyer is hereby irrevocably
and expressly authorized to have counsel to Buyer render any and all opinions
and other certificates or instruments which may be required for purposes of
effectuating the transfer (or re-issuance) of the Securities Being Sold and the
issuance of an unlegended certificate to any such Buyer or any transferee
thereof, and the Company hereby irrevocably authorizes and directs the Transfer
Agent to, without any further confirmation or instructions from the Company,
transfer or re-issue any such Securities Being Sold as instructed by Buyer and
its counsel.

 

24

 

 

(k) Matters With Respect to Securities.

 

(i) Issuance of Conversion Shares. The parties hereto acknowledge that pursuant
to the terms of the Debentures, Buyer has the right, at its discretion following
an Event of Default, to convert amounts due under the Debentures into Common
Stock in accordance with the terms of the Debentures. In the event, for any
reason, the Company fails to issue, or cause its Transfer Agent to issue, any
portion of the Common Stock issuable upon conversion of the Debentures (the
“Conversion Shares”) to Buyer in connection with the exercise by Buyer of any of
its conversion rights under the Debentures, then the parties hereto acknowledge
that Buyer shall irrevocably be entitled to deliver to the Transfer Agent, on
behalf of itself and the Company, a “Conversion Notice” (as defined in the
Debentures) requesting the issuance of the Conversion Shares then issuable in
accordance with the terms of the Debentures, and the Transfer Agent, provided
they are the acting transfer agent for the Company at the time, shall, and the
Company hereby irrevocably authorizes and directs the Transfer Agent to, without
any further confirmation or instructions from the Company, issue the Conversion
Shares applicable to the Conversion Notice then being exercised, and surrender
to a nationally recognized overnight courier for delivery to Buyer at the
address specified in the Conversion Notice, a certificate of the Common Stock of
the Company, registered in the name of Buyer or its nominee, for the number of
Conversion Shares to which Buyer shall be then entitled under the Debentures, as
set forth in the Conversion Notice.

 

(ii) Removal of Restrictive Legends. In the event that Buyer has any shares of
the Company’s Common Stock bearing any restrictive legends, and Buyer, through
its counsel or other representatives, submits to the Transfer Agent any such
shares for the removal of the restrictive legends thereon, whether in connection
with a sale of such shares pursuant to any exemption to the registration
requirements under the Securities Act, or otherwise, and the Company and or its
counsel refuses or fails for any reason to render an opinion of counsel or any
other documents or certificates required for the removal of the restrictive
legends, then the Company hereby agrees and acknowledges that Buyer is hereby
irrevocably and expressly authorized to have counsel to Buyer render any and all
opinions and other certificates or instruments which may be required for
purposes of removing such restrictive legends, and the Company hereby
irrevocably authorizes and directs the Transfer Agent to, without any further
confirmation or instructions from the Company, issue any such shares without
restrictive legends as instructed by Buyer, and surrender to a common carrier
for overnight delivery to the address as specified by Buyer, certificates,
registered in the name of Buyer or its designees or nominees, representing the
shares of Common Stock to which Buyer is entitled, without any restrictive
legends and otherwise freely transferable on the books and records of the
Company.

 

(iii) Authorized Agent of the Company. The Company hereby irrevocably appoints
the Buyer and its counsel and its representatives, each as the Company’s duly
authorized agent and attorney-in-fact for the Company for the purposes of
authorizing and instructing the Transfer Agent to process issuances, transfers
and legend removals upon instructions from Buyer, or any counsel or
representatives of Buyer, as specifically contemplated herein. The authorization
and power of attorney granted hereby is coupled with an interest and is
irrevocable so long as any obligations of the Company under Debentures remain
outstanding, and so long as the Buyer owns or has the right to receive, any
shares of the Company’s Common Stock hereunder or under any Transaction
Documents. In this regard, the Company hereby confirms to the Transfer Agent and
the Buyer that it can NOT and will NOT give instructions, including stop orders
or otherwise, inconsistent with the terms of this Agreement with regard to the
matters contemplated herein, and that the Buyer shall have the absolute right to
provide a copy of this Agreement to the Transfer Agent as evidence of the
Company’s irrevocable authority for Buyer and Transfer Agent to process
issuances, transfers and legend removals upon instructions from Buyer, or any
counsel or representatives of Buyer, as specifically contemplated herein,
without any further instructions, orders or confirmations from the Company.

 

25

 

 

(iv) Injunction and Specific Performance. The Company specifically acknowledges
and agrees that in the event of a breach or threatened breach by the Company of
any provision of this Section 7.2(k), the Buyer will be irreparably damaged and
that damages at law would be an inadequate remedy if this Agreement were not
specifically enforced. Therefore, in the event of a breach or threatened breach
of any provision of this Section 7.2(k) by the Company, the Buyer shall be
entitled to obtain, in addition to all other rights or remedies Buyer may have,
at law or in equity, an injunction restraining such breach, without being
required to show any actual damage or to post any bond or other security, and/or
to a decree for specific performance of the provisions of this Section 7.2(k).

 

(l) Continued Due Diligence/Field Audits. The Company acknowledges that during
the term of this Agreement, Buyer and its agents and representatives undertake
ongoing and continuing due diligence reviews of the Company and its business and
operations. Such ongoing due diligence reviews may include, and the Company does
hereby agree to allow Buyer, to conduct site visits and field examinations of
the office locations of the Company, and the Assets and records of each of them,
the results of which must be satisfactory to Buyer in Buyer’s sole and absolute
discretion. In this regard, in order to cover Buyer’s expenses of the ongoing
due diligence reviews and any site visits or field examinations which Buyer may
undertake from time to time while this Agreement is in effect, the Company shall
pay to Buyer, within five (5) Business Days after receipt of an invoice or
demand therefor from Buyer, a fee of up to $1,500 per year (based on two (2)
expected filed audits and ongoing due diligence of $750 per visit or audit) to
cover such ongoing expenses. Failure to pay such fee as and when required shall
be deemed an Event of Default under this Agreement and all other Transaction
Documents. The foregoing notwithstanding, from and after the occurrence of an
Event of Default or any event which with notice, lapse of time or both, would
become an Event of Default, Buyer may conduct site visits, field examinations
and other ongoing reviews of the Company’s records, Assets and operations at any
time, in its sole discretion, without any limitations in terms of number of site
visits or examinations and without being limited to the fee hereby contemplated,
all at the sole expense of the Company.

 

7.3 Reporting Requirements. The Company agrees as follows:

 

(a) Financial Statements. The Company shall at all times maintain a system of
accounting capable of producing its individual and consolidated (if applicable)
financial statements in compliance with GAAP (provided that monthly financial
statements shall not be required to have footnote disclosure, are subject to
normal year-end adjustments and need not be consolidated), and shall furnish to
the Buyer or its authorized representatives such information regarding the
business affairs, operations and financial condition of the Company as Buyer may
from time to time request or require, including:

 

(i) As soon as available, and in any event, within ninety (90) days after the
close of each fiscal year, a copy of the annual audited financial statements of
the Company, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended, in reasonable detail,
prepared and reviewed by an independent certified public accountant reasonably
acceptable to Buyer, containing an unqualified opinion of such accountant;

 

26

 

 

(ii) as soon as available, and in any event, within sixty (60) days after the
close of each fiscal quarter, a copy of the quarterly financial statements of
the Company, including balance sheet, statement of income and retained earnings,
statement of cash flows for the fiscal year then ended, in reasonable detail,
prepared and certified as accurate in all material respects by the CEO or CFO of
the Company; and

 

(iii) as soon as available, and in any event, within thirty (30) days following
the end of each calendar month, a copy of the financial statements of the
Company regarding such month, including balance sheet, statement of income and
retained earnings, statement of cash flows for the month then ended, in
reasonable detail, prepared and certified as accurate in all material respects
by the CEO or CFO of the Company.

 

No change with respect to the Company’s accounting principles shall be made by
the Company without giving prior notification to Buyer. The Company represents
and warrants to Buyer that the financial statements delivered to Buyer at or
prior to the execution and delivery of this Agreement and to be delivered at all
times thereafter accurately reflect and will accurately reflect the financial
condition of the Company in all material respects. Buyer shall have the right at
all times (and on reasonable notice so long as there then does not exist any
Event of Default) during business hours to inspect the books and records of the
Company and make extracts therefrom.

 

(b) Additional Reporting Requirements. The Company shall provide the following
reports and statements to Buyer as follows:

 

(i) Income Projections; Variance. On the Effective Date, the Company shall
provide to Buyer an income statement projection showing, in reasonable detail,
the Company’s income statement projections for the twelve (12) calendar months
following the Effective Date (the “Income Projections”). In addition, on the
first (1st) day of every calendar month after the Effective Date, the Company
shall provide to Buyer a report comparing the Income Projections to actual
results. Any variance in the Income Projections to actual results that is more
than ten percent (10%) (either above or below) will require the Company to
submit to Buyer written explanations as to the nature and circumstances for the
variance.

 

(ii) Use of Proceeds; Variance. On the first (1st) day of every calendar month
after the Effective Date, the Company shall provide to Buyer a report comparing
the use of the proceeds from the sale of Debentures set forth in the Use of
Proceeds Confirmation, with the actual use of such proceeds. Any variance in the
actual use of such proceeds from the amounts set forth in the approved Use of
Proceeds Confirmation will require the Company to submit to Buyer written
explanations as to the nature and circumstances for the variance.

 

(iii) Bank Statements. The Company shall submit to Buyer true and correct copies
of all bank statements received by the Company within five (5) days after the
Company’s receipt thereof from its bank.

 

27

 

 

(iv) Interim Reports. Promptly upon receipt thereof, the Company shall provide
to Buyer copies of interim and supplemental reports, if any, submitted to the
Company by independent accountants in connection with any interim audit or
review of the books of the Company.

 

(v) Aged Accounts/Payables Schedules. The Company shall, on the first (1st) day
of each and every calendar month, deliver to Buyer an aged schedule of the
accounts receivable of the Company, listing the name and amount due from each
Person and showing the aggregate amounts due from: (i) 0-30 days; (ii) 31-60
days; (iii) 61-90 days; (iv) 91-120 days; and (v) more than 120 days, and
certified as accurate by the CEO or CFO of the Company. The Company shall, on
the first (1st) day of each and every calendar month, deliver to Buyer an aged
schedule of the accounts payable of the Company, listing the name and amount due
to each creditor and showing the aggregate amounts due from: (v) 0-30 days; (w)
31-60 days; (x) 61-90 days; (y) 91-120 days; and (z) more than 120 days, and
certified as accurate by the CEO or CFO of the Company.

 

(c) Covenant Compliance. The Company shall, within thirty (30) days after the
end of each calendar month, deliver to Buyer a Compliance Certificate,
confirming compliance by the Company with the covenants therein, and certified
as accurate by an officer of the Company.

 

7.4 Fees and Expenses.

 

(a) Transaction Fees. The Company agrees to pay to Buyer a transaction advisory
fee equal to two percent (2%) of the amount of the Debentures purchased by Buyer
at the First Closing, which fee shall be due and payable on the Effective Date
and withheld from the gross purchase price paid by Buyer for the Debentures. In
the event of any Additional Closings, the Company shall pay to Buyer a
transaction advisory fee equal to two percent (2%) of the amount of the
Debentures purchased by Buyer at any such Additional Closings, which fee shall
be due and payable upon such Additional Closing and withheld from the gross
purchase price paid by Buyer for the Debentures at such Additional Closing.

 

(b) Due Diligence Fees. The Company agrees to pay to the Buyer a due diligence
fee equal to Eight Thousand and No/100 United States Dollars ($8,000.00), which
shall be due and payable in full on the Effective Date, or any remaining portion
thereof shall be due and payable on the Effective Date if a portion of such fee
was paid upon the execution of any term sheet related to this Agreement.

 

(c) Document Review and Legal Fees. The Company agrees to pay to the Buyer or
its counsel a document review and legal fee equal to Fifteen Thousand and No/100
United States Dollars ($15,000.00), which shall be due and payable in full on
the Effective Date, or any remaining portion thereof shall be due and payable on
the Effective Date if a portion of such fee was paid upon the execution of any
term sheet related to this Agreement. The Company also agrees to be responsible
for the prompt payment of all legal fees and expenses of the Company and its own
counsel and other professionals incurred by the Company in connection with the
negotiation and execution of this Agreement and the Transaction Documents.

 

28

 

 

(d) Other Fees. The Company also agrees to pay to the Buyer (or any designee of
the Buyer), upon demand, or to otherwise be responsible for the payment of, any
and all other costs, fees and expenses, including the reasonable fees, costs,
expenses and disbursements of counsel for the Buyer and of any experts and
agents, which the Buyer may incur or which may otherwise be due and payable in
connection with: (i) the preparation, negotiation, execution, delivery,
recordation, administration, amendment, subordination, waiver or other
modification or termination of this Agreement or any other Transaction
Documents; (ii) any documentary stamp taxes, intangibles taxes, recording fees,
filing fees, or other similar taxes, fees or charges imposed by or due to any
Governmental Authority in connection with this Agreement or any other
Transaction Documents; (iii) the exercise or enforcement of any of the rights of
the Buyer under this Agreement or the Transaction Documents; or (iv) the failure
by the Company to perform or observe any of the provisions of this Agreement or
any of the Transaction Documents. Included in the foregoing shall be the amount
of all expenses paid or incurred by Buyer in consulting with counsel concerning
any of its rights under this Agreement or any other Transaction Document or
under applicable law. To the extent any such costs, fees, charges, taxes or
expenses are incurred prior to the funding of proceeds from the Closing, same
shall be paid directly from the proceeds of the Closing. All such costs and
expenses, if not so immediately paid when due or upon demand thereof, shall bear
interest from the date of outlay until paid, at the highest rate set forth in
the Debenture, or if none is so stated, the highest rate allowed by law. All of
such costs and expenses shall be additional Obligations of the Company to Buyer
secured under the Transaction Documents. The provisions of this Subsection shall
survive the termination of this Agreement.

 

7.5 Advisory Fee.

 

(i) Share Issuance. In consideration of advisory services provided by Buyer to
the Company prior to the Effective Date, the Company shall pay to the Buyer a
fee by issuing to Buyer that number of shares of the Company’s Common Stock
equal to a dollar amount of Two Hundred Twenty-Three Thousand Five Hundred
United States Dollars (US$223,500) (the “Share Value”). For purposes of
determining the number of shares issuable to Lender under this Section 7.5 (the
“Advisory Fee Shares”), the Company’s Common Stock shall be valued at price
equal to the lowest volume weighted average price for the Common Stock for the
five (5) Business Days immediately prior to the Effective Date (the “Valuation
Date”), as reported by Bloomberg (the “VWAP”). Buyer shall confirm to the
Company in writing, the VWAP for the Common Stock as of the Valuation Date, and
the corresponding number of Advisory Fee Shares issuable to Buyer based on such
price. The Company shall instruct its transfer agent to issue certificates
representing the Advisory Fee Shares issuable to the Buyer immediately upon the
Company’s execution of this Agreement, and shall cause its transfer agent (the
“Transfer Agent”) to deliver such certificates to Buyer within three (3)
Business Days from the Closing Date. In the event such certificates representing
the Advisory Fee Shares issuable hereunder shall not be delivered to the Buyer
within said three (3) Business Day period, same shall be an immediate default
under this Agreement and the other Loan Documents. The Advisory Fee Shares, when
issued, shall be deemed to be validly issued, fully paid, and non-assessable
shares of the Company’s Common Stock. The Advisory Fee Shares shall be deemed
fully earned as of the Closing Date, regardless of the amount or number of
Revolving Loans made hereunder.

 

29

 

 

(ii) Adjustments. It is the intention of the Company and Buyer that the Buyer
shall generate net proceeds from the sale of the Advisory Fee Shares equal to
the Share Value. The Buyer shall have the right to sell the Advisory Fee Shares
in the Principal Trading Market or otherwise, at any time in accordance with
applicable securities laws. At any time the Buyer may elect, the Buyer may
deliver to the Company a reconciliation statement showing the net proceeds
actually received by the Buyer from the sale of the Advisory Fee Shares (the
“Sale Reconciliation”). If, as of the date of the delivery by Buyer of the Sale
Reconciliation, the Buyer has not realized net proceeds from the sale of such
Advisory Fee Shares equal to at least the Share Value, as shown on the Sale
Reconciliation, then the Company shall immediately take all required action
necessary or required in order to cause the issuance of additional shares of
Common Stock to the Buyer in an amount sufficient such that, when sold and the
net proceeds thereof are added to the net proceeds from the sale of any of the
previously issued and sold Advisory Fee Shares, the Buyer shall have received
total net funds equal to the Share Value. If additional shares of Common Stock
are issued pursuant to the immediately preceding sentence, and after the sale of
such additional issued shares of Common Stock, the Buyer still has not received
net proceeds equal to at least the Share Value, then the Company shall again be
required to immediately take all required action necessary or required in order
to cause the issuance of additional shares of Common Stock to the Buyer as
contemplated above, and such additional issuances shall continue until the Buyer
has received net proceeds from the sale of such Common Stock equal to the Share
Value. In the event the Buyer receives net proceeds from the sale of Advisory
Fee Shares equal to the Share Value, and the Buyer still has Advisory Fee Shares
remaining to be sold, the Buyer shall return all such remaining Advisory Fee
Shares to the Company. In the event additional Common Stock is required to be
issued as outlined above, the Company shall instruct its Transfer Agent to issue
certificates representing such additional shares of Common Stock to the Buyer
immediately subsequent to the Buyer’s notification to the Company that
additional shares of Common Stock are issuable hereunder, and the Company shall
in any event cause its Transfer Agent to deliver such certificates to Buyer
within three (3) Business Days following the date Buyer notifies the Company
that additional shares of Common Stock are to be issued hereunder. In the event
such certificates representing such additional shares of Common Stock issuable
hereunder shall not be delivered to the Buyer within said three (3) Business Day
period, same shall be an immediate default under this Agreement and the Loan
Documents. Notwithstanding anything contained in this Section 7.5 to the
contrary, the Company shall have the right to redeem any Advisory Fee Shares
then in the Buyer’s possession for an amount payable by the Company to Buyer in
cash equal to the Share Value, less any net cash proceeds received by the Buyer
from any previous sales of Advisory Fee Shares. Upon Buyer’s receipt of such
cash payment in accordance with the immediately preceding sentence, the Buyer
shall return any then remaining Advisory Fee Shares in its possession back to
the Company and otherwise undertake any required actions reasonably requested by
Company to have such then remaining Advisory Fee Shares returned to Company.

 

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(iii) Mandatory Redemption. Notwithstanding anything contained in this Agreement
to the contrary, in the event the Buyer has not realized net proceeds from the
sale of Advisory Fee Shares equal to at least the Share Value by the twelve
month anniversary of the Closing Date, then at any time thereafter, the Buyer
shall have the right, upon written notice to the Company, to require that the
Company redeem all Advisory Fee Shares then in Buyer’s possession for cash equal
to the Share Value, less any cash proceeds received by the Buyer from any
previous sales of Advisory Fee Shares, if any. In the event such redemption
notice is given by the Buyer, the Company shall redeem the then remaining
Advisory Fee Shares in Buyer’s possession for an amount of Dollars equal to the
Share Value, less any cash proceeds received by the Buyer from any previous
sales of Advisory Fee Shares, if any, payable by wire transfer to an account
designated by Buyer within five (5) Business Days from the date the Buyer
delivers such redemption notice to the Company.

 

7.6 Share Reserve. The Company shall take all action reasonably necessary to at
all times have authorized, and reserved for the purpose of issuance, such number
of shares of Common Stock as shall be necessary to effect the issuance of the
Conversion Shares under this Agreement or any other Transaction Documents
(collectively, the “Share Reserve”). The Company represents that it has
sufficient authorized and unissued shares of Common Stock available to create
the Share Reserve after considering all other commitments that may require the
issuance of Common Stock. The Company shall take all action reasonably necessary
to at all times have authorized, and reserved for the purpose of issuance, such
number of shares of Common Stock as shall be necessary to effect the full
conversion of the Debentures that may be issuable hereunder. If upon the receipt
of a conversion notice the Share Reserve is insufficient to effect the full
conversion of the Debentures that may be issuable hereunder, the Company shall
take all required measures to implement an increase of the Share Reserve
accordingly within sixty (60) days of such notice. If the Company does not have
sufficient authorized and unissued shares of Common Stock available to increase
the Share Reserve, the Company shall call and hold a special meeting of the
shareholders, for the sole purpose of increasing the number of shares
authorized. The Company’s management shall recommend to the shareholders to vote
in favor of increasing the number of shares of Common Stock authorized.

 

7.7 Subsidiaries. Any Subsidiary which is formed or acquired or otherwise
becomes a Subsidiary of the Company following the date hereof, within ten (10)
Business Days of such event, shall become an additional party hereto and
guarantor of the Company’s Obligation hereunder, and the Company shall take any
and all actions necessary or advisable to cause said Subsidiary to execute a
counterpart to this Agreement and any and all other documents which the Buyer
shall require. “Subsidiary” shall mean, respectively, each and all such
corporations, partnerships, limited partnerships, limited liability companies,
limited liability partnerships or other entities of which or in which a Person
owns, directly or indirectly, fifty percent (50%) or more of: (i) the combined
voting power of all classes of stock/units having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
entity if a corporation; (ii) the management authority and capital interest or
profits interest of such entity, if a partnership, limited partnership, limited
liability company, limited liability partnership, joint venture or similar
entity; or (iii) the beneficial interest of such entity, if a trust, association
or other unincorporated organization.

 

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ARTICLE VIII

CONDITIONS PRECEDENT TO THE COMPANY’S OBLIGATIONS TO SELL

 

The obligation of the Company hereunder to issue and sell the Securities to the
Buyer at the Closings is subject to the satisfaction, at or before the
respective Closing Dates, of each of the following conditions, provided that
these conditions are for the Company’s sole benefit and may be waived by the
Company at any time in its sole discretion:

 

8.1 Buyer shall have executed the Transaction Documents and delivered them to
the Company.

 

8.2 The representations and warranties of the Buyer shall be true and correct in
all material respects as of the date when made and as of the Closing Dates as
though made at that time (except for representations and warranties that speak
as of a specific date), and the Buyer shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Buyer at or prior to the Closing Dates.

 

8.3 The Company shall have received such certificates, confirmations,
resolutions, acknowledgements or other documentation necessary or advisable from
all applicable Governmental Authorities, including, but not limited to, those
located in the State of Nevada, as the Company may require in order to evidence
such Governmental Authorities’ approval of this Agreement, the Transaction
Documents and the purchase of the Debentures contemplated hereby.

 

ARTICLE IX

CONDITIONS PRECEDENT TO THE BUYER’S OBLIGATIONS TO PURCHASE

 

The obligation of the Buyer hereunder to purchase the Debentures at the Closings
is subject to the satisfaction, at or before each applicable Closing Date, of
each of the following conditions (in addition to any other conditions precedent
elsewhere in this Agreement), provided that these conditions are for the Buyer’s
sole benefit and may be waived by the Buyer at any time in its sole discretion:

 

9.1 First Closing. The obligation of the Buyer hereunder to purchase the
Debentures at the First Closing is subject to the satisfaction, at or before the
First Closing Date, of each of the following conditions (in addition to any
other conditions precedent elsewhere in this Agreement), provided that these
conditions are for the Buyer’s sole benefit and may be waived by the Buyer at
any time in its sole discretion:

 

(a) The Company, each Guarantor and/or the Chief Executive Officer (as
applicable) shall have executed and delivered the Transaction Documents
applicable to the First Closing and delivered the same to the Buyer.

 

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(b) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties are already qualified as to materiality in Article VI above, in
which case, such representations and warranties shall be true and correct in all
respects without further qualification) as of the date when made and as of the
First Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date) and the Company and each Guarantor
shall have performed, satisfied and complied in all material respects with the
covenants, agreements and conditions required by this Agreement to be performed,
satisfied or complied with by the Company and each Guarantor at or prior to the
First Closing Date.

 

(c) The Buyer shall have issued an irrevocable issuance instruction letter and
board resolution, authorizing the issuance of the Advisory Fee Shares and
irrevocably directing its Transfer Agent to issue and deliver the Advisory Fee
Shares to Buyer or its designee.

 

(d) The Buyer shall have received an opinion of counsel from counsel to the
Company in a form satisfactory to the Buyer and its counsel.

 

(e) The Buyer shall have received evidence in a form satisfactory to the Buyer
that the Company has authorized the Buyer to publish such press releases with
respect to this Agreement and the instant transaction, including, but not
limited to, a copy of an email delivered to Marketwire.com by the Company
whereby the Company authorizes the Buyer to use its name and, if applicable,
stock symbol, in connection with current or future press releases.

 

(f) The Company and each Guarantor shall have executed and delivered to Buyer a
closing certificate, certified as true, complete and correct by an officer of
the Company or Guarantor, in substance and form required by Buyer, which closing
certificate shall include and attach as exhibits: (i) a true copy of a
certificate of good standing evidencing the formation and good standing of the
Company or Guarantor from the secretary of state (or comparable office) from the
jurisdiction in which the Company is formed; (ii) the Company’s or Guarantor’s
Organizational Documents; (iii) copies of the resolutions of the board of
directors of the Company or Guarantor as adopted by the Company’s or Guarantor’s
board of directors, in a form acceptable to Buyer; and (iv) resolution of the
Guarantor’s shareholders, approving and authorizing the execution, delivery and
performance of the Transaction Documents to which it is party and the
transactions contemplated thereby, in a form acceptable to the Buyer.

 

(g) No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect.

 

(h) The Buyer shall have received copies of UCC search reports, issued by the
Secretary of State of the state of incorporation or residency, as applicable, of
the Company and each Guarantor, dated such a date as is reasonably acceptable to
Buyer, listing all effective financing statements which name the Company and
each Guarantor, under their present name and any previous names, as debtors,
together with copies of such financing statements.

 

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(i) The Company and each Guarantor shall have executed such other agreements,
certificates, confirmations or resolutions as the Buyer may require to
consummate the transactions contemplated by this Agreement and the Transaction
Documents, including a closing statement and joint disbursement instructions as
may be required by Buyer.

 

9.2 Additional Closing. Provided the Buyer is to purchase additional Debentures
in accordance with Section 4.4 at an Additional Closing, the obligation of the
Buyer hereunder to accept and purchase the Debentures at any Additional Closing
is subject to the satisfaction, at or before the Additional Closing Date, of
each of the following conditions:

 

(a) The Company and each Guarantor shall have executed the Transaction Documents
applicable to the Additional Closing and delivered the same to the Buyer.

 

(b) The representations and warranties of the Company shall be true and correct
in all material respects (except to the extent that any of such representations
and warranties are already qualified as to materiality in Article VI above, in
which case, such representations and warranties shall be true and correct in all
respects without further qualification) as of the date when made and as of the
Additional Closing Date as though made at that time (except for representations
and warranties that speak as of a specific date) and the Company shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by the Company at or prior to the Additional Closing Date.

 

(c) No event shall have occurred which could reasonably be expected to have a
Material Adverse Effect.

 

(d) No default or Event of Default shall have occurred and be continuing under
this Agreement or any other Transaction Documents, and no event shall have
occurred that, with the passage of time, the giving of notice, or both, would
constitute a default or an Event of Default under this Agreement or any other
Transaction Documents.

 

(e) The Company and each Guarantor shall have executed such other agreements,
certificates, confirmations or resolutions as the Buyer may require to
consummate the transactions contemplated by this Agreement and the Transaction
Documents, including a closing statement and joint disbursement instructions as
may be required by Buyer.

 

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ARTICLE X

INDEMNIFICATION

 

10.1 Company’s and the Guarantors’ Obligation to Indemnify. In consideration of
the Buyer’s execution and delivery of this Agreement and acquiring the
Securities hereunder, and in addition to all of the Company’s and the
Guarantors’ other obligations under this Agreement, the Company and each
Guarantor hereby agrees to defend and indemnify Buyer and its Affiliates and
subsidiaries and their respective directors, officers, employees, agents and
representatives, and the successors and assigns of each of them (collectively,
the “Buyer Indemnified Parties”) and Company and each Guarantor does hereby
agree to hold the Buyer Indemnified Parties forever harmless, from and against
any and all Claims made, brought or asserted against the Buyer Indemnified
Parties, or any one of them, and Company and each Guarantor hereby agrees to pay
or reimburse the Buyer Indemnified Parties for any and all Claims payable by any
of the Buyer Indemnified Parties to any Person, including reasonable attorneys’
and paralegals’ fees and expenses, court costs, settlement amounts, costs of
investigation and interest thereon from the time such amounts are due at the
highest non-usurious rate of interest permitted by applicable Law, through all
negotiations, mediations, arbitrations, trial and appellate levels, as a result
of, or arising out of, or relating to: (i) any misrepresentation or breach of
any representation or warranty made by the Company and the Guarantors in this
Agreement, the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby; (ii) any breach of any covenant,
agreement or Obligation of the Company and the Guarantors contained in this
Agreement, the Transaction Documents or any other certificate, instrument or
document contemplated hereby or thereby; or (iii) any Claims brought or made
against the Buyer Indemnified Parties, or any one of them, by a third party and
arising out of or resulting from the execution, delivery, performance or
enforcement of this Agreement, the Transaction Documents or any other
instrument, document or agreement executed pursuant hereto or thereto, any
transaction financed or to be financed in whole or in part, directly or
indirectly, with the proceeds of the issuance of the Debentures, or the status
of the Buyer or holder of any of the Securities, as a buyer and holder of such
Securities in the Company. To the extent that the foregoing undertaking by the
Company and the Guarantors may be unenforceable for any reason, the Company and
the Guarantors shall make the maximum contribution to the payment and
satisfaction of each of the Claims covered hereby, which is permissible under
applicable Law.

 

ARTICLE XI

MISCELLANEOUS

 

11.1 Notices. All notices of request, demand and other communications hereunder
shall be addressed to the parties as follows:

 

If to the Company: OSL Holdings, Inc.   1669 Edgewood Road, Suite 214   Yardley,
PA 10967   Attention: Robert Rothenberg   Telephone: (845) 363-6776   Facsimile:
(845) 363-6779   E-Mail: bob@oslholdings.com

 

With a copy to: Legal & Compliance, LLC

 

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(which shall not constitute notice) 330 Clematis Street, Suite 217   West Palm
Beach, FL 33401   Attention: Laura Anthony, Esq.   Telephone: (561) 515-0936  
Facsimile: (561) 514-0832   E-Mail: lanthony@legalandcompliance.com

 

If to the Buyer: TCA Global Credit Master Fund, LP   3960 Howard Hughes Parkway,
Suite 500   Las Vegas, NV 89169   Attn: Mr. Robert Press   Telephone: (702)
990-3752   Facsimile: (973) 807-1813   E-Mail: bpress@tcaglobalfund.com

 

With a copy to: Lucosky Brookman LLP (which shall not constitute notice) 101
Wood Avenue South, 5th Floor   Woodbridge, NJ 08830   Attn: Seth A. Brookman,
Esq.   Telephone: (732) 395-4400   Facsimile: (732) 395-4401   E-Mail:
sbrookman@lucbro.com

 

unless the address is changed by the party by like notice given to the other
parties. Notice shall be in writing and shall be deemed delivered: (i) if mailed
by certified mail, return receipt requested, postage prepaid and properly
addressed to the address below, then three (3) business days after deposit of
same in a regularly maintained U.S. Mail receptacle; or (ii) if mailed by
Federal Express, UPS or other nationally recognized overnight courier service,
next business morning delivery, then one (1) business day after deposit of same
in a regularly maintained receptacle of such overnight courier; or (iii) if hand
delivered, then upon hand delivery thereof to the address indicated on or prior
to 5:00 p.m., EST, on a business day. Any notice hand delivered after 5:00 p.m.,
EST, shall be deemed delivered on the following business day. Notwithstanding
the foregoing, notice, consents, waivers or other communications referred to in
this Agreement may be sent by facsimile, e-mail, or other method of delivery,
but shall be deemed to have been delivered only when the sending party has
confirmed (by reply e-mail or some other form of written confirmation from the
receiving party) that the notice has been received by the other party.

 

11.2 Obligations Absolute. None of the following shall affect the Obligations of
the Company and the Guarantors to Buyer under this Agreement, Buyer’s rights
with respect to the Collateral or any other Transaction Documents:

 

(a) acceptance or retention by Buyer of other property or any interest in
property as security for the Obligations;

 

(b) release by Buyer of all or any part of the Collateral or of any party liable
with respect to the Obligations (other than Company and the Guarantors);

 

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(c) release, extension, renewal, modification or substitution by Buyer of the
debentures or any other Transaction Documents; or

 

(d) failure of Buyer to resort to any other security or to pursue the Company or
any other obligor liable for any of the Obligations of the Company and the
Guarantors hereunder before resorting to remedies against the Collateral.

 

11.3 Entire Agreement. This Agreement and the other Transaction Documents: (i)
are valid, binding and enforceable against the Company, the Guarantors and Buyer
in accordance with its provisions and no conditions exist as to their legal
effectiveness; (ii) constitute the entire agreement between the parties; and
(iii) are the final expression of the intentions of the Company, the Guarantors
and Buyer. No promises, either expressed or implied, exist between the Company,
the Guarantors and Buyer, unless contained herein or in the Transaction
Documents. This Agreement and the Transaction Documents supersede all
negotiations, representations, warranties, commitments, offers, contracts (of
any kind or nature, whether oral or written) prior to or contemporaneous with
the execution hereof.

 

11.4 Amendments; Waivers. No amendment, modification, termination, discharge or
waiver of any provision of this Agreement or of the Transaction Documents, or
consent to any departure by the Company or the Guarantors therefrom, shall in
any event be effective unless the same shall be in writing and signed by Buyer,
and then such waiver or consent shall be effective only for the specific purpose
for which given.

 

11.5 WAIVER OF JURY TRIAL. BUYER, THE COMPANY AND THE GUARANTORS, AFTER
CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, EACH
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, IRREVOCABLY, THE RIGHT TO TRIAL
BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY TRANSACTION DOCUMENT OR ANY OF
THE OBLIGATIONS HEREUNDER, THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT OR COURSE OF DEALING IN WHICH BUYER AND THE COMPANY AND/OR THE
GUARNATORS ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
BUYER PURCHASING THE DEBENTURES.

 

11.6 MANDATORY FORUM SELECTION. TO INDUCE BUYER TO PURCHASE THE DEBENTURES, THE
COMPANY AND THE GUARANTORS IRREVOCABLY AGREE THAT ANY DISPUTE ARISING UNDER,
RELATING TO, OR IN CONNECTION WITH, DIRECTLY OR INDIRECTLY, THIS AGREEMENT OR
RELATED TO ANY MATTER WHICH IS THE SUBJECT OF OR INCIDENTAL TO THIS AGREEMENT
ANY OTHER TRANSACTION DOCUMENT (WHETHER OR NOT SUCH CLAIM IS BASED UPON BREACH
OF CONTRACT OR TORT) SHALL BE SUBJECT TO THE EXCLUSIVE JURISDICTION AND VENUE OF
THE STATE AND/OR FEDERAL COURTS LOCATED IN BROWARD COUNTY, FLORIDA. THIS
PROVISION IS INTENDED TO BE A “MANDATORY” FORUM SELECTION CLAUSE AND GOVERNED BY
AND INTERPRETED CONSISTENT WITH FLORIDA LAW. THE COMPANY AND THE GUARANTORS
HEREBY CONSENT TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL
COURT HAVING ITS SITUS IN SAID JURISDICTION, AND WAIVE ANY OBJECTION BASED ON
FORUM NON CONVENIENS. THE COMPANY AND THE GUARNATOR HEREBY WAIVE PERSONAL
SERVICE OF ANY AND ALL PROCESS AND CONSENT THAT ALL SUCH SERVICE OF PROCESS MAY
BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO THE COMPANY AS
SET FORTH HEREIN IN THE MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF
COURT OR OTHERWISE.

 

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11.7 Assignability. Buyer may at any time assign Buyer’s rights in this
Agreement, the Debentures, any Transaction Document, or any part thereof and
transfer Buyer’s rights in any or all of the Collateral, and Buyer thereafter
shall be relieved from all liability with respect to such Collateral. In
addition, Buyer may at any time sell one or more participations in the
Debentures. The Company and the Guarantors may not sell or assign this
Agreement, any Transaction Document or any other agreement with Buyer, or any
portion thereof, either voluntarily or by operation of law, nor delegate any of
its duties of obligations hereunder or thereunder, without the prior written
consent of Buyer, which consent may be withheld or conditioned in Buyer’s sole
and absolute discretion. This Agreement shall be binding upon Buyer, the
Guarantors and the Company and their respective legal representatives,
successors and permitted assigns. All references herein to a Company or the
Guarantor shall be deemed to include any successors, whether immediate or
remote. In the case of a joint venture or partnership, the term “Company”, or
“Guarantor” shall be deemed to include all joint venturers or partners thereof,
who shall be jointly and severally liable hereunder.

 

11.8 Publicity. Buyer shall have the right to approve, before issuance, any
press release or any other public statement with respect to the transactions
contemplated hereby made by the Company; provided, however, that the Company
shall be entitled, without the prior approval of Buyer, to issue any press
release or other public disclosure with respect to such transactions required
under applicable securities or other laws or regulations. Notwithstanding the
foregoing, the Company shall use its best efforts to consult Buyer in connection
with any such press release or other public disclosure prior to its release and
Buyer shall be provided with a copy thereof upon release thereof. Buyer shall
have the right to make any press release with respect to the transactions
contemplated hereby without Company’s approval. In addition, with respect to any
press release to be made by Buyer, the Company hereby authorizes and grants
blanket permission to Buyer to include the Company’s stock symbol, if any, in
any press releases. The Company shall, promptly upon request, execute any
additional documents of authority or permission as may be requested by Buyer in
connection with any such press releases.

 

11.9 Binding Effect. This Agreement shall become effective upon execution by the
Company, the Guarantors and Buyer.

 

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11.10 Governing Law. Except in the case of the Mandatory Forum Selection Clause
in Section 11.6 above, which clause shall be governed and interpreted in
accordance with Florida law, this Agreement and all other Transaction Documents
shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Nevada, and for all
purposes shall be construed in accordance with the laws of such State, without
giving effect to the choice of law provisions of such State.

 

11.11 Enforceability. Wherever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by, unenforceable or
invalid under any jurisdiction, such provision shall as to such jurisdiction, be
severable and be ineffective to the extent of such prohibition or invalidity,
without invalidating the remaining provisions of this Agreement or affecting the
validity or enforceability of such provision in any other jurisdiction.

 

11.12 Survival of Company’s and the Guarantors’ Representations. All covenants,
agreements, representations and warranties made by the Company and the
Guarantors herein shall, notwithstanding any investigation by Buyer, be deemed
material and relied upon by Buyer and shall survive the making and execution of
this Agreement and the Transaction Documents and the sale and purchase of the
Debentures, and shall be deemed to be continuing representations and warranties
until such time as the Company and the Guarantors have fulfilled all of its
Obligations to Buyer hereunder and under all other Transaction Documents, and
Buyer has been indefeasibly paid in full.

 

11.13 Time of Essence. Time is of the essence in making payments of all amounts
due Buyer under this Agreement and the other Transaction Documents and in the
performance and observance by the Company and the Guarantors of each covenant,
agreement, provision and term of this Agreement and the other Transaction
Documents. The parties agree that in the event that any date on which
performance is to occur falls on a day other than a Business Day, then the time
for such performance shall be extended until the next Business Day thereafter
occurring.

 

11.14 Release. In consideration of the mutual promises and covenants made
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby, the
Company and the Guarantors hereby agree to fully, finally and forever release
and forever discharge and covenant not to sue Buyer, and/or any other Buyer
Indemnified Parties from any and all Claims, debts, fees, attorneys’ fees,
liens, costs, expenses, damages, sums of money, accounts, bonds, bills,
covenants, promises, judgments, charges, demands, causes of action, suits,
Proceedings, liabilities, expenses, Obligations or Contracts of any kind
whatsoever, whether in law or in equity, whether asserted or unasserted, whether
known or unknown, fixed or contingent, under statute or otherwise, from the
beginning of time through the Effective Date, including, without limiting the
generality of the foregoing, any and all Claims relating to or arising out of
any financing transactions, credit facilities, debentures, security agreements,
and other agreements including each of the Transaction Documents, entered into
by the Company and the Guarantors with Buyer and any and all Claims that the
Company and the Guarantors do not know or suspect to exist, whether through
ignorance, oversight, error, negligence, or otherwise, and which, if known,
would materially affect their decision to enter into this Agreement or the
related Transaction Documents.

 

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11.15 Interpretation. If any provision in this Agreement requires judicial or
similar interpretation, the judicial or other such body interpreting or
construing such provision shall not apply the assumption that the terms hereof
shall be more strictly construed against one party because of the rule that an
instrument must be construed more strictly against the party which itself or
through its agents prepared the same. The parties hereby agree that all parties
and their agents have participated in the preparation hereof equally.

 

11.16 Compliance with Federal Law. The Company shall: (i) ensure that no Person
who owns a controlling interest in or otherwise controls the Company is or shall
be listed on the Specially Designated Nationals and Blocked Person List or other
similar lists maintained by the Office of Foreign Assets Control (“OFAC”), the
Department of the Treasury, included in any Executive Orders or any other
similar lists from any Governmental Authority, foreign or national; (ii) not use
or permit the use of the proceeds of the Debentures to violate any of the
foreign asset control regulations of OFAC or any enabling statute or Executive
Order relating thereto, or any other similar national or foreign governmental
regulations; and (iii) comply with all applicable Lender Secrecy Act laws and
regulations, as amended. As required by federal law and Buyer’s policies and
practices, Buyer may need to obtain, verify and record certain customer
identification information and documentation in connection with opening or
maintaining accounts or establishing or continuing to provide services.

 

11.17 Termination. Upon payment in full of all outstanding Debentures purchased
hereunder, together with all other charges, fees and costs due and payable under
this Agreement or under any of the Transaction Documents, the Company shall have
the right to terminate this Agreement upon written notice to the Buyer. The
parties agree that the amount payable to pursuant to this Section 11.17 is a
reasonable calculation of Buyer’s lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early termination
of this Agreement.

 

11.18 Gender and Use of Singular and Plural. All pronouns shall be deemed to
refer to the masculine, feminine, neuter, singular or plural, as the identity of
the party or parties or their personal representatives, successors and assigns
may require.

 

11.19 Execution. This Agreement may be executed in one or more counterparts, all
of which taken together shall be deemed and considered one and the same
Agreement, and same shall become effective when counterparts have been signed by
each party and each party has delivered its signed counterpart to the other
party. In the event that any signature is delivered by facsimile transmission or
by e-mail delivery of a “.pdf’ format file or other similar format file, such
signature shall be deemed an original for all purposes and shall create a valid
and binding obligation of the party executing same with the same force and
effect as if such facsimile or “.pdf’ signature page was an original thereof.

 

11.20 Headings. The article and section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of the Agreement.

 

11.21 Further Assurances. The Company and the Guarantors will execute and
deliver such further instruments and do such further acts and things as may be
reasonably required by Buyer to carry out the intent and purposes of this
Agreement.

 

11.22 No Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns, and
is not for the benefit of, nor may any provision hereof be enforced by, any
other Person.

 

[signature pages follow]

 

40

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date and year set forth above.

 

COMPANY:

 

OSL HOLDINGS, INC.

 

By: /s/ Robert H. Rothenberg, Jr.   Name:  Robert H. Rothenberg, Jr.   Title:
Chief Executive Officer  

 

BUYER:

 

TCA GLOBAL CREDIT MASTER FUND, LP

 

By: TCA Global Credit Master Fund GP, Ltd.   Its: General Partner  

 

By: /s/ Robert Press   Name: Robert Press   Title: Managing Director  

 

41

 

 

CONSENT AND AGREEMENT

 

The undersigned, referred to in the foregoing securities purchase agreement as a
guarantor, hereby consents and agrees to said securities purchase agreement and
to the payment of the amounts contemplated therein, documents contemplated
thereby and to the provisions contained therein relating to conditions to be
fulfilled and obligations to be performed by it pursuant to or in connection
with said securities purchase agreement to the same extent as if the undersigned
were a party to said securities purchase agreement.

 

GUARANTOR:

 

OFFICE SUPPLY LINE, INC.

 

By: /s/ Mordecai E. Feder   Name: Mordecai E. Feder   Title: President  

 

OSL DIVERSITY MARKETPLACE, INC.

 

By: /s/ Mordecai E. Feder   Name: Mordecai E. Feder   Title: President  

 

OSL REWARDS CORPORATION

 

By: /s/ Mordecai E. Feder   Name: Mordecai E. Feder   Title: President  

 

GO GREEN HYDROPONICS INC.

 

By: /s/ Mordecai E. Feder   Name: Mordecai E. Feder   Title: President  

 

42

 

 

EXHIBIT A

 

FORM OF DEBENTURE

 

43

 

 

EXHIBIT B

 

FORM OF SECURITY AGREEMENT

 

44

 

 

EXHIBIT C

 

FORM OF GUARANTEE

 

45

 

 

EXHIBIT D

 

FORM OF PLEDGE AGREEMENT

 

46

 

 

EXHIBIT E

 

FORM OF COMPLIANCE CERTIFICATE

 

47

 

 

EXHIBIT F

 

FORM OF IRREVOCABLE TRANSFER AGENT INSTRUCTION LETTER

 

48

 

 

EXHIBIT G

 

FORM OF USE OF PROCEEDS CONFIRMATION

 

49

 

 

EXHIBIT H

 

FORM OF VALIDITY CERTIFICATE

50

 

 

SCHEDULE 6.1

 

SUBSIDIARIES

 

Office Supply Line, Inc.

OSL Diversity Marketplace, Inc.

OSL Rewards Corporation

Go Green Hydroponics Inc.

 

51

 

 

SCHEDULE 6.12

 

REAL PROPERTY

 

None

 

52

 

 

SCHEDULE 6.21

 

BANK ACCOUNTS; BUSINESS LOCATIONS

 

Bank: Investor Bank

 

Account Name: OSL Holdings, Inc.

 

Routing Number: 221272031

 

Account Number: 4399903477

 

Authorized Signatories: Robert H. Rothenberg, Eli Feder, Tom D’Orazio, and
Rosina Hirsh

 

BUSINESS LOCATIONS:

 

1669 Edgewood Road, Suite 214

Yardley, PA 19067

 

668 Stony Hill Road, Suite 32C

Yardley, PA 19067

 

668 Stony Hill Road, Suite 32B

Yardley, PA 19067

 

668 Stony Hill Road, Suite 32A

Yardley, PA 19067

 

15721 Ventura Blvd.

Encino, CA 91436

 

53