Exhibit 10.3

 

PROMISSORY NOTE

 

$650,000.00 April 30, 2018

 

FOR VALUE RECEIVED, SHIFT8 NETWORKS, INC., d/b/a Synergy Telecom, a Texas
corporation, SHIFT8 TECHNOLOGIES, INC., a Nevada Corporation, and T3
COMMUNICATIONS, INC., a Florida Corporation, T3 ACQUISITION, INC., a Florida
Corporation, and DIGERATI TECHNOLOGIES, INC., a Nevada Corporation, (may
hereinafter be referred to individually as a “Borrower” and all may hereinafter
be referred to collectively as the “Borrowers”), unconditionally promise to pay
to the order of THERMO COMMUNICATIONS FUNDING, LLC, a Delaware limited liability
company (together with its successors and assigns, “Lender”), without setoff, at
its offices at 639 Loyola Avenue, Suite 2565, New Orleans, Louisiana (Orleans
Parish) 70113, or at such other place as may be designated by Lender, the
principal amount of SIX HUNDRED FIFTY THOUSAND DOLLARS AND NO/100 DOLLARS
($650,000.00), or so much thereof as may be advanced from time to time in
immediately available funds, together with interest computed daily on the
outstanding principal balance hereunder, at an annual interest rate (the
“Rate”), and in accordance with the payment schedule indicated below. This
PROMISSORY NOTE (this “Note”) is executed pursuant to and evidences a Loan
funded and to be funded by Lender under that certain TERM LOAN AND SECURITY
AGREEMENT dated as of even date herewith (the “Effective Date”), between Debtor
and Lender (as amended, restated or otherwise modified from time to time, the
“Loan Agreement”), to which reference is made for a statement of the collateral,
rights and obligations of Debtor and Lender in relation thereto, but neither
this reference to the Loan Agreement nor any provision thereof shall affect or
impair the absolute and unconditional obligation of Debtor to pay unpaid
principal of and interest on this Note when due. Capitalized terms not otherwise
defined herein shall have the same meanings as in the Loan Agreement.

 

1. Rate. Prior to the Maturity Date or an Event of Default, the Rate shall be
ZERO PERCENT (0%) per annum; and (ii) from and after the Maturity Date, the Rate
shall be the Maturity Rate. Notwithstanding any provision of this Note or any
other agreement or commitment between Debtor and Lender, whether written or
oral, express or implied, Lender shall never be entitled to charge, receive or
collect, nor shall amounts received hereunder be credited so that Lender shall
be paid, as interest a sum greater than interest at the Maximum Rate. It is the
intention of the parties that this Note, and all instruments securing the
payment of this Note or executed or delivered in connection therewith, shall
comply with applicable law. If Lender ever contracts for, charges, receives or
collects anything of value which is deemed to be interest under applicable law,
and if the occurrence of any circumstance or contingency, whether acceleration
of maturity of this Note, prepayment of this Note, delay in advancing proceeds
of this Note or any other event, should cause such interest to exceed the
Maximum Rate, any amount which exceeds interest at the Maximum Rate shall be
applied to the reduction of the unpaid principal balance of this Note or any
other Indebtedness, and if this Note and such other Indebtedness are paid in
full, any remaining excess shall be paid to Debtor. In determining whether the
interest exceeds interest at the Maximum Rate, the total amount of interest
shall, to the extent permitted by applicable law, be spread, prorated and
amortized throughout the entire term of this Note until its payment in full. The
term “Maximum Rate” as used in this Note means the maximum nonusurious rate of
interest per annum permitted by whichever of applicable United States federal
law or Louisiana law permits the higher interest rate, including to the extent
permitted by applicable law, any amendments thereof hereafter or any new law
hereafter coming into effect to the extent a higher Maximum Rate is permitted
thereby. If at any time the Rate shall exceed the Maximum Rate, the Rate shall
be automatically limited to, and remain at, the Maximum Rate until the total
amount of interest accrued hereunder equals the amount of interest which would
have accrued if there had been no limitation to the Maximum Rate. The term
“Prime” as used in this Note means the Prime Rate for the U.S. as published in
the “Money Rates” section of the Wall Street Journal. In the event the Prime
Rate is published as a range of rates, the highest rate in the quoted range
shall be the “Prime.” The Prime is not necessarily the lowest rate charged by
Lender for any particular class of borrowers or credit extensions. If the Index
becomes unavailable during the term of this Note, Lender may designate a
substitute index by notice to Debtor.

 

2. Accrual Method. Interest on the Indebtedness evidenced by this Note shall be
computed on the basis of a THREE HUNDRED SIXTY (360) day year and shall accrue
on the actual number of days elapsed for any whole or partial month in which
interest is being calculated. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
the close of business on the Business Day received as provided herein.

  

PROMISSORY NOTE (REVOLVING CREDIT FACILITY) – PAGE 1

THERMO COMMUNICATIONS FUNDING LLC – Shift8/T3 (INITIAL)

 

 

 

   

3. Payment Schedule. Except as expressly provided herein to the contrary, all
payments on this Note shall be applied in the following order of priority: (a)
the payment or reimbursement of any expenses, costs or obligations (other than
the outstanding principal balance hereof and interest hereon) for which either
Debtor shall be obligated to Lender or Lender shall be entitled pursuant to the
provisions of this Note or the other Loan Documents, (b) the payment of accrued
but unpaid interest hereon, and (c) the payment of all or any portion of the
principal balance hereof then outstanding hereunder. If an Event of Default
exists, then Lender may, at the sole option of Lender, apply any such payments,
at any time and from time to time, to any of the items specified in clauses (a),
(b) or (c) above without regard to the order of priority otherwise specified
herein and any application to the outstanding principal balance hereof may be
made in either direct or inverse order of maturity. If any payment of principal
or interest on this Note shall become due on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day and such
extension of time shall be included in computing interest in connection with
such payment. The outstanding principal balance of this Note shall be due and
payable on the EARLIEST of (i) the acceleration of the Indebtedness pursuant to
the terms of the Loan Documents; or (ii) MAY 14, 2018 (the EARLIEST of such date
being, the “Maturity Date”), provided, however, the Maturity Date will
automatically be extended by one (1) additional period of thirty (30) days,
until June 14, 2018. Accrued and unpaid interest on the outstanding principal
balance of this Note shall be due and payable monthly commencing on May 14, 2018
and continuing on the SAME day of each calendar month thereafter (or if no
corresponding date shall exist in any calendar month, on the LAST day of such
calendar month) and on the Maturity Date. Debtor may borrow, repay and reborrow
hereunder at any time, up to a maximum aggregate amount outstanding at any one
time equal to the principal amount of this Note, provided that Debtor is not in
Default and that the borrowings hereunder do not exceed the Borrowing Base1 or
other limitation on borrowings by Debtor. Lender shall incur no liability for
its refusal to advance funds based upon its determination that any conditions of
such further advances have not been met. Lender’s records of the amounts
borrowed from time to time shall be conclusive proof thereof absent manifest
error. Lender and Debtor expressly agree that Chapter 346 of the Act shall not
apply to this Note or to any advances under this Note and that neither this Note
nor any such advances shall be governed by or subject to the provisions of such
Chapter in any manner whatsoever.

 

4. Waivers, Consents and Covenants. DEBTOR, ANY INDORSER OR GUARANTOR HEREOF,
AND EACH OF THEM JOINTLY AND SEVERALLY: (A) WAIVES PRESENTMENT, DEMAND, PROTEST,
NOTICE OF DEMAND, NOTICE OF INTENT TO ACCELERATE, NOTICE OF ACCELERATION OF
MATURITY, NOTICE OF PROTEST, NOTICE OF NONPAYMENT, NOTICE OF DISHONOR, AND ANY
OTHER NOTICE REQUIRED TO BE GIVEN UNDER THE LAW IN CONNECTION WITH THE DELIVERY,
ACCEPTANCE, PERFORMANCE, DEFAULT OR ENFORCEMENT OF THIS NOTE, ANY INDORSEMENT OR
GUARANTY OF THIS NOTE, OR ANY OTHER DOCUMENTS EXECUTED IN CONNECTION WITH THIS
NOTE OR ANY OTHER LOAN DOCUMENTS NOW OR HEREAFTER EXECUTED IN CONNECTION WITH
ANY OBLIGATION OF DEBTOR TO LENDER; (B) CONSENTS TO ALL DELAYS, EXTENSIONS,
RENEWALS OR OTHER MODIFICATIONS OF THIS NOTE OR THE LOAN DOCUMENTS AS MAY BE
AGREED IN WRITING BY DEBTOR AND LENDER, OR WAIVERS OF ANY TERM HEREOF OR OF THE
LOAN DOCUMENTS, OR RELEASE OR DISCHARGE BY LENDER OF ANY DEBTOR OR GUARANTOR, OR
RELEASE, SUBSTITUTION OR EXCHANGE OF ANY SECURITY FOR THE PAYMENT HEREOF, OR THE
FAILURE TO ACT ON THE PART OF LENDER, OR ANY INDULGENCE SHOWN BY LENDER (WITHOUT
NOTICE TO OR FURTHER ASSENT FROM DEBTOR OR GUARANTOR); (C) AGREES THAT NO SUCH
ACTION, FAILURE TO ACT OR FAILURE TO EXERCISE ANY RIGHT OR REMEDY BY LENDER
SHALL IN ANY WAY AFFECT OR IMPAIR THE OBLIGATIONS OF DEBTOR OR GUARANTOR OR BE
CONSTRUED AS A WAIVER BY LENDER OF, OR OTHERWISE AFFECT, ANY OF LENDER’S RIGHTS
UNDER THIS NOTE, UNDER ANY INDORSEMENT OR GUARANTY OF THIS NOTE OR UNDER ANY OF
THE LOAN DOCUMENTS; AND (D) AGREES TO PAY, ON DEMAND, ALL COSTS AND EXPENSES OF
COLLECTION OR DEFENSE OF THIS NOTE OR OF ANY INDORSEMENT OR GUARANTY HEREOF
AND/OR THE ENFORCEMENT OR DEFENSE OF LENDER’S RIGHTS WITH RESPECT TO, OR THE
ADMINISTRATION, SUPERVISION, PRESERVATION, OR PROTECTION OF, OR REALIZATION
UPON, ANY PROPERTY SECURING PAYMENT HEREOF, INCLUDING, WITHOUT LIMITATION,
REASONABLE ATTORNEY’S FEES, INCLUDING FEES RELATED TO ANY SUIT, MEDIATION OR
ARBITRATION PROCEEDING, OUT OF COURT PAYMENT AGREEMENT, TRIAL, APPEAL,
BANKRUPTCY PROCEEDINGS OR OTHER PROCEEDING, IN SUCH AMOUNT AS MAY BE DETERMINED
REASONABLE BY ANY ARBITRATOR OR COURT, WHICHEVER IS APPLICABLE.

  

 

1 Lower case the term Borrowing Base is transaction does not use a borrowing
base concept. 

 

PROMISSORY NOTE (REVOLVING CREDIT FACILITY) – PAGE 2

THERMO COMMUNICATIONS FUNDING LLC – Shift8/T3 (INITIAL)

 

 

 

 

5. Remedies Upon Default. Whenever there is an Event of Default the entire
balance outstanding hereunder and all other obligations of any Debtor or
Guarantor to Lender (however acquired or evidenced) shall, at the option of
Lender, become immediately due and payable and any obligation of Lender to
permit further borrowing under this Note shall immediately cease and terminate.
From and after (a) an Event of Default, or (b) the Maturity Date (whether by
acceleration or otherwise), the Rate on the unpaid principal balance of this
Note shall be increased at Lender’s discretion up to the MAXIMUM RATE (the
“Maturity Rate”). The provisions herein for a Maturity Rate (a) shall not be
deemed to extend the time for any payment hereunder or to constitute a “grace
period” giving Debtor or Guarantor a right to cure any default, and (b) shall be
deemed the contract rate of interest applicable to the outstanding principal
balance of the Note from and after the occurrence of one of the events set forth
in this Section. At Lender’s option, any accrued and unpaid interest, fees or
charges may, for purposes of computing and accruing interest on a daily basis
after the due date of this Note or any installment thereof, be deemed to be a
part of the principal balance, and interest shall accrue on a daily compounded
basis after such date at the Maturity Rate provided in this Note until the
entire outstanding balance of principal and interest is paid in full. Upon an
Event of Default, Lender is hereby authorized at any time, at its option and
without notice or demand, to set off and charge against any deposit accounts of
any Debtor (as well as any money, instruments, securities, documents, chattel
paper, credits, claims, demands, income and any other property, rights and
interests of Debtor), which at any time shall come into the possession or
custody or under the control of Lender or any of its agents, affiliates or
correspondents, any and all obligations due hereunder. Additionally, Lender
shall have all rights and remedies available under each of the Loan Documents,
as well as all rights and remedies available at law or in equity.

 

6. Waiver. The failure at any time of Lender to exercise any of its options or
any other rights hereunder shall not constitute a waiver thereof, nor shall it
be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Lender shall be cumulative and may be pursued singly,
successively or together, at the option of Lender. The acceptance by Lender of
any partial payment shall not constitute a waiver of any default or of any of
Lender’s rights under this Note. No waiver of any of its rights hereunder, and
no modification or amendment of this Note, shall be deemed to be made by Lender
unless the same shall be in writing, duly signed on behalf of Lender; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Lender or the obligations of Debtor or
Guarantor to Lender in any other respect at any other time.

  

7. Applicable Law. Debtor agrees that this Note shall be deemed to have been
made in the State of Louisiana at Lender’s address indicated at the beginning of
this Note and shall be governed by, and construed in accordance with, the laws
of the State of Louisiana and is performable in the City and Parish of Louisiana
indicated at the beginning of this Note.

  

8. Partial Invalidity. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.

  

9. Binding Effect. This Note shall be binding upon and inure to the benefit of
Debtor and Lender and their respective successors, assigns, heirs and personal
representatives, provided, however, that no obligations of Debtor hereunder can
be assigned without prior written consent of Lender.

 

10. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.

  

PROMISSORY NOTE (REVOLVING CREDIT FACILITY) – PAGE 3

THERMO COMMUNICATIONS FUNDING LLC – Shift8/T3 (INITIAL)

  

 

 

 

11. COMMERCIAL PURPOSE. DEBTOR REPRESENTS TO LENDER THAT THE PROCEEDS OF THIS
LOAN ARE TO BE USED FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES. DEBTOR
ACKNOWLEDGES HAVING READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS
AND CONDITIONS OF THIS NOTE.

 

12. Collection. If this Note is placed in the hands of an attorney for
collection, or if it is collected through any legal proceeding at law or in
equity or in bankruptcy, receivership or other court proceedings, Debtor agrees
to pay all costs of collection, including, but not limited to, court costs and
reasonable attorneys’ fees.

 

13. Time is of the Essence. Time is of the essence with respect to all
provisions of this Note and the other Loan Documents.

 

14. Notice of Balloon Payment. At maturity (whether by acceleration or
otherwise), Debtor must repay the entire principal balance of this Note and
unpaid interest then due. Lender is under no obligation to refinance the
outstanding principal balance of this Note (if any) at that time. Debtor will,
therefore, be required to make payment out of other assets Debtor may own; or
Debtor will have to find a lender willing to lend Debtor the money at prevailing
market rates, which may be higher than the interest rate on the outstanding
principal balance of this Note. If any Guarantor has guaranteed payment of this
Note, Guarantor may be required to perform pursuant to the provisions of the
Guaranty.

  

15. Statement of Unpaid Balance. At any time and from time to time, Debtor will
furnish promptly, upon the request of Lender, a written statement or affidavit,
in form satisfactory to Lender, stating the unpaid balance of the Loan evidenced
by this Note and that there are no offsets or defenses against full payment of
the Loan evidenced by this Note and the terms hereof, or if there are any such
offsets or defenses, specifying them.

  

16. Waiver Of Jury Trial. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
DEBTOR AND LENDER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL
BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT,
TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR
THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. DEBTOR (A) CERTIFIES THAT
NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT
LENDER HAS BEEN INDUCED TO EXTEND THE LOAN AND EXECUTE THE OTHER LOAN DOCUMENTS
BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS IN THIS SECTION.

  

 

 

NOTICE OF FINAL AGREEMENT

 

THIS NOTE AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

  

 

 

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PROMISSORY NOTE (REVOLVING CREDIT FACILITY) – PAGE 4

THERMO COMMUNICATIONS FUNDING LLC – Shift8/T3 (INITIAL)

  

 

 

 

EXECUTED as of the Effective Date, at New Orleans, Louisiana.

   

DEBTOR:   ADDRESS:       DEBTOR:   ADDRESS:       SHIFT8 NETWORKS, INC.   1600
NE Loop 410, Suite 126     San Antonio, TX 78209       By: /s/ Arthur L. Smith  
  Name: Arthur L. Smith     Title: President/CEO           DEBTOR:   ADDRESS:  
    T3 COMMUNICATIONS, INC.   2401 First Street, Suite 300     Fort Myers, FL
33901       By: /s/ Arthur L. Smith     Name: Arthur L. Smith     Title:
President/CEO           DEBTOR:   ADDRESS:       DIGERATI TECHNOLOGIES, INC.  
1600 NE Loop 410, Suite 126     San Antonio, TX 78209       By: /s/ Arthur L.
Smith     Name: Arthur L. Smith     Title: President/CEO           DEBTOR:  
ADDRESS:       T3 ACQUISITION, INC.   1600 NE Loop 410, Suite 126     San
Antonio, TX 78209       By: /s/ Arthur L. Smith     Name: Arthur L. Smith    
Title: President/CEO           DEBTOR:   ADDRESS:       SHIFT8 TECHNOLOGIES,
INC.   1600 NE Loop 410, Suite 126     San Antonio, TX 78209       By: /s/
Arthur L. Smith     Name: Arthur L. Smith     Title: President/CEO          
GUARANTOR:   ADDRESS:       ARTHUR L. SMITH   1600 NE Loop 410     San Antonio,
TX 78209       By: /s/ Arthur L. Smith     Name: Arthur L. Smith    

 

PROMISSORY NOTE – PAGE 5 

THERMO COMMUNICATIONS FUNDING, LLC – Shift8/T3.

  

 

 

  

TERM LOAN AND SECURITY AGREEMENT

 

THIS TERM LOAN AND SECURITY AGREEMENT (including all schedules, exhibits and
appendices attached or otherwise identified therewith, as amended, modified or
restated from time to time, this “Agreement”) dated as of April 30, 2018 (the
“Effective Date”), is between and among THERMO COMMUNICATIONS FUNDING, LLC, a
Delaware limited liability company (together with its successors and assigns,
“Lender”), and SHIFT8 NETWORKS, INC., d/b/a Synergy Telecom, a Texas
Corporation, SHIFT8 TECHNOLOGIES, INC. a Nevada Corporation, and T3
COMMUNICATIONS, INC., a Florida Corporation, T3 ACQUISTION, INC., a Florida
Corporation, and DIGERATI TECHNOLOGIES, INC., a Nevada Corporation, (may
hereinafter be referred to individually as a “Borrower” and all may hereinafter
be referred to collectively as the “Borrowers”) and (c) each Person identified
as a Guarantor on the signature page hereto.

 

RECITALS

 

WHEREAS, Borrowers (a) have determined that Borrowers will benefit specifically
and materially from the Loan contemplated by this Agreement, and (b) have
requested and bargained for the structure, terms and obligations set forth in
the Loan Documents.

 

NOW THEREFORE, the parties hereto, intending to be legally bound, agree as
follows:

 

1. Definitions. As used in this Agreement, all exhibits, appendices and
schedules hereto, and in any other Loan Documents made or delivered pursuant to
this Agreement, the following terms will have the meanings given such terms in
this Section 1 or in the provisions, sections or recitals herein:

 

(a) “Account Control Agreement” means this Term Loan and Security Agreement

 

(b) “Affiliate” means, with respect to a specified Person, another Person that
directly or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

 

(c) “Business Day” means any day other than a Saturday, Sunday, or any other day
on which any branch of the Federal Reserve Bank of New Orleans, Louisiana, is
closed.

 

(d) “Cash Flow” means the sum of net income of after taxes, plus depreciation
and amortization, other non-cash expenses and interest expense (excluding
non-cash interest) for any period.

 

(e) “Change of Control” means, as to any Person, (i) any material change in the
ownership; (ii) a majority of the current members of the board of directors of
such Person cease to be members of such board of directors; or (ii) any change
in the current Chief Executive Officer of such Person.

 

(f) “Code” means the Uniform Commercial Code as the same may, from time to time,
be enacted and in effect in the State of Louisiana; provided, that to the extent
that the Code is used to define any term herein or in any Loan Document and such
term is defined differently in different articles or divisions of the Code, the
definition of such term contained in Article 9 shall govern; provided further,
that in the event that, by reason of mandatory provisions of law, any or all of
the attachment, perfection or priority of, or remedies with respect to, Lender’s
lien on any Collateral is governed by the Uniform Commercial Code as enacted and
in effect in a jurisdiction other than the State of Louisiana, the term “Code”
shall mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction  solely for purposes of the provisions thereof relating to such
attachment, perfection, priority or remedies and for purposes of definitions
related to such provisions.

  

 

 

 

(g) “Collateral” means:

 

(i) All present and future accounts, chattel paper (including electronic chattel
paper), commercial tort claims, commodity accounts, commodity contracts, deposit
accounts, documents, financial assets, general intangibles, health care
insurance receivables, instruments, Intellectual Property, investment property,
letters of credit, letter of credit rights, payment intangibles, securities,
security accounts and security entitlements now or hereafter owned, held or
acquired.

 

(iii) All present and hereafter acquired inventory and goods (including without
limitation, all raw materials, work in process and finished goods) held,
possessed, owned, held on consignment or held for sale, lease, return or to be
furnished under contracts of services, in whole or in part, wherever located.

 

(v) All equipment and fixtures of whatsoever kind and character now or hereafter
possessed, held, acquired, leased or owned, together with all replacements,
accessories, additions, substitutions and accessions to all of the foregoing,
and all records relating in any way to the foregoing.

 

(vii) All books, records, data, plans, manuals, computer software, computer
tapes, computer systems, computer disks, computer programs, source codes and
object codes containing any information pertaining directly or indirectly to the
Collateral and all rights to retrieve data and other information pertaining
directly or indirectly to the Collateral from third parties.

 

The term “Collateral,” as used herein, shall also include (a) any other property
or assets, real or personal, tangible or intangible, now existing or hereafter
acquired, of any Debtor that may at any time be or become subject to a security
interest or Lien in favor of Lender as security for the Indebtedness; and (b)
all SUPPORTING OBLIGATIONS, PRODUCTS and PROCEEDS of all of the foregoing
(including without limitation, insurance payable by reason of loss or damage to
the foregoing property) and any property, assets securities, guaranties or
monies of Debtor which may at any time come into the possession of Lender. The
designation of proceeds does not authorize Debtor to sell, transfer or otherwise
convey any of the foregoing property except as authorized in this Agreement.

 

(h) “Constituent Documents” means (i) in the case of a corporation, its articles
or certificate of incorporation and bylaws; (ii) in the case of a general
partnership, its partnership agreement; (iii) in the case of a limited
partnership, its certificate of limited partnership and partnership agreement;
(v) in the case of a trust, its trust agreement; (v) in the case of a joint
venture, its joint venture agreement; (vi) in the case of a limited liability
company, its articles of organization and operating agreement or regulations;
and (vii) in the case of any other entity, its organizational and governance
documents and agreements.

 

(i) “Control” means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

 

(j) “Debt” means, with respect to each Person, without duplication, the sum of
the following calculated in accordance with GAAP:

 

(i) all liabilities, obligations and indebtedness for borrowed money of such
Person including, but not limited to, obligations evidenced by bonds,
debentures, notes or other similar instruments of such Person;

  

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(ii) all obligations for the deferred purchase price of property or services of
any such Person, except trade payables arising in the ordinary course of such
Person’s business not more than ninety (90) days past due;

  

(iii) all capital lease obligations of such Person (regardless of whether
accounted for as indebtedness under GAAP);

 

(iv) all guarantees that have the economic effect of guaranteeing the payment of
any Indebtedness of any other Person;

  

(v) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired, whether or not such
indebtedness shall have been assumed by such Person or is limited in recourse;

  

(vi) all payment obligations, contingent or otherwise, of such Person equal to
the face amount of letters of credit, whether or not drawn, including, without
limitation, any reimbursement obligation under any such letter of credit issued
for the account of such Person; and

  

(xii) Hedging Obligations.

 

(k) “Environmental Laws” means all laws, rules, regulations, codes, ordinances,
orders, decrees, judgments, injunctions, notices or binding agreements issued,
promulgated or entered into by any Governmental Authority, relating in any way
to the environment, preservation or reclamation of natural resources, the
management, release or threatened release of any Hazardous Material or to health
and safety matters.

  

(l) “Environmental Liabilities” means, as to any Person, all liabilities,
obligations, responsibilities, remedial actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses, (including,
without limitation, all reasonable fees, disbursements and expenses of counsel,
expert and consulting fees and costs of investigation and feasibility studies),
fines, penalties, sanctions, and interest incurred as a result of any claim or
demand, by any Person, whether based in contract, tort, implied or express
warranty, strict liability, criminal or civil statute, including any
Environmental Law, permit, order or agreement with any Governmental Authority or
other Person, arising from environmental, health or safety conditions or the
release or threatened release of a Hazardous Material into the environment,
resulting from the past, present, or future operations of such Person or its
Affiliates.

 

(m) “Original Loan Documents” means this Term Loan and Security Agreement, as
thereafter may be amended from time to time.

 

(n) “Fiscal Quarter” means, with respect to Borrowers, any consecutive period of
three (3) calendar months ending on the last day of April, July, October and
January of each calendar year.

 

(o) “GAAP” means generally accepted accounting principles in the United States
as in effect from time to time, applied on a consistent basis, as set forth in
Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and which are applicable in
the circumstances as of the date in question. Accounting principles are applied
on a “consistent basis” when the accounting principles applied in a current
period are reasonably comparable in all material respects to those accounting
principles applied in a preceding period.

   

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(p) “Governmental Authority” means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory or administrative powers or functions of or pertaining to
government.

  

(q) “Hazardous Materials” means all explosive or radioactive substances or
wastes and all hazardous or toxic substances, wastes or other pollutants, and
all other substances or wastes of any nature regulated pursuant to any
Environmental Law.

  

(r) “Hedging Agreement” means (i) any agreement (including terms and conditions
incorporated by reference therein) which is a rate swap agreement, basis swap,
forward rate agreement, commodity swap, interest rate option, forward foreign
exchange agreement, spot foreign exchange agreement, rate cap agreement, rate
floor agreement, rate collar agreement, currency swap agreement, cross-currency
rate swap agreement, currency option, any other similar agreement or arrangement
(including any option to enter into any of the foregoing) designed to alter the
risks of any Person arising from fluctuations in interest rates, currency values
or commodity prices, (ii) any combination of the foregoing, and (iii) a master
agreement for any of the foregoing together with all supplements, all as
amended, restated, supplemented or otherwise modified from time to time.

  

(s) “Hedging Obligations” means all existing or future payment and other
obligations, including obligations arising from early termination, of any
Borrower arising under or in connection with any Hedging Agreement.

  

(t) “Indebtedness” means (i) all indebtedness, obligations, and liabilities of
any Borrower to Lender of any kind or character, now existing or hereafter
arising, whether direct, indirect, related, unrelated, fixed, contingent,
liquidated, unliquidated, joint, several and in solido, or joint and several and
in solido, under the Note, this Agreement or any of the other Loan Documents,
(ii) all accrued but unpaid interest on any of the indebtedness described in (i)
above, (iii) all obligations of Obligors to Lender under the Loan Documents,
(iv) all costs and expenses reasonably incurred by Lender in connection with the
enforcement of all or any part of the indebtedness and obligations described in
(i), (ii) and (iii) above or the protection or preservation of, or realization
upon, the Collateral securing all or any part of such indebtedness and
obligations, including without limitation all reasonable attorneys’ fees and
expenses, and (v) all renewals, extensions, modifications and rearrangements of
the indebtedness and payment obligations described in (i), (ii), (iii) and
above.

  

(u) “Intercompany Debt” has the meaning specified in Section 8(b)(ii).

  

(v) “Licenses” means the patent, trademark or copyright license agreements of a
Person as any of the same may from time to time be amended or supplemented and
those licenses which are hereafter obtained or acquired by such Person.

  

(w) “Loan Documents” means this Agreement, the Note, the Security Agreement, the
Subordination Agreement, if any, the Account Control Agreement, and the other
agreements, instruments and documents evidencing, securing, governing,
guaranteeing or pertaining to the Loans (as any of the same may be amended,
modified or restated from time to time).

 

(x) “Loans” means all advances under the term loan pursuant to the Loan
Documents and under the loans pursuant to the Original Loan Documents.

  

- 4 -

 

  

(y) “Material Adverse Effect” means a material adverse effect on (i) the
business, assets, property, operations, or financial condition, of the Borrowers
and their consolidated Subsidiaries, taken as a whole, (ii) the ability of the
Obligors (taken as a whole) to pay the Indebtedness, (iii) any of the material
rights of or material benefits available to Lender under the Loan Documents, or
(iv) the validity or enforceability of the Loan Documents.

  

(z) “Note” means, collectively, any promissory note evidencing all or part of
the Indebtedness from time to time (as any such Note may be amended, modified or
restated from time to time), including but not limited to that certain
Promissory Note dated as of April 30, 2018, executed by Debtors in favor of
Lender, in the original principal amount of $650,000, as amended, modified, and
restated from time to time, and as amended and restated by that certain Amended
and Restated Promissory Note of even date herewith in the original principal
amount of $650,000.00 executed by each Borrower in favor of Lender (as such
Amended and Restated Promissory Note may be amended, modified or restated from
time to time).

 

(aa) “Obligors” means each Borrower or any other Person who guaranteed or is
otherwise obligated to pay or perform all or any portion of Indebtedness.

 

(bb) “Permitted Encumbrances” means the following encumbrances: (i) liens
created by or pursuant to the Loan Documents; (ii) liens in existence as of the
date hereof which are listed, and the Property subject thereto described, on
Schedule 1(bb); and (iii) liens incurred pursuant to the refunding, refinancing,
replacement, renewal, restructuring or extension of any other lien permitted
under this definition that do not increase the outstanding principal amount
secured thereby. For the avoidance of doubt, the term “lien” as used herein
shall mean and include any lien, security interest, pledge, or other
encumbrance.

 

(cc) “Person” means any individual, corporation, limited liability company,
business trust, association, company, partnership, joint venture, Governmental
Authority, or other entity, including without limitation, each of the Borrowers
and Obligors, and shall also include such Person’s heirs, administrators,
personal representatives, executors, successors and assigns.

 

(dd) “Pledged Shares” means one third of all outstanding shares of stock of T3
Communications, Inc..

 

(ee) “Property” of a Person means any and all property, whether real, personal,
tangible, intangible or mixed, of such Person, or any other assets owned,
operated or leased by such Person, and in the case of the Borrowers includes the
Collateral.

 

(ff) “Security Agreement” means the present Term Loan and Security Agreement

 

(gg) “Subordinated Debt” has the meaning specified in Section 9(d)(vi).

 

(hh) “Subsidiary” means any entity (i) of which at least a majority of the
ownership, equity or voting interest is at the time directly or indirectly owned
or controlled by a Person and/or its Subsidiaries, and (ii) which is treated as
a subsidiary in accordance with GAAP. “Subsidiaries” means more than one
Subsidiary.

 

All financial covenants for the Borrowers shall be calculated for purposes of
this Agreement on a combined and consolidated basis.

  

- 5 -

 

 

All words and phrases used herein shall have the meaning specified in the Code
except to the extent such meaning is inconsistent with this Agreement. All
definitions contained in this Agreement are equally applicable to the singular
and plural forms of the terms defined. The words “hereof’, “herein”, and
“hereunder” and words of similar import referring to this Agreement refer to
this Agreement as a whole and not to any particular provision of this Agreement.
Any accounting term used in the Loan Documents shall have, unless otherwise
specifically provided therein, the meaning customarily given such term in
accordance with GAAP, and all financial computations thereunder shall be
computed, unless otherwise specifically provided therein, in accordance with
GAAP consistently applied.

 

2. Term Loans.

 

(a) Joint, Several and In Solido Liability. Borrowers and any other Person named
or identified as a Borrower under any subsequent amendment to the Term Loan
Documents hereby irrevocably and unconditionally: (i) agree that each is
JOINTLY, SEVERALLY AND IN SOLIDO liable to Lender for the full and prompt
payment and performance of the Indebtedness under the Loan Documents in
accordance with the terms thereof; and (ii) agree to fully and promptly perform
all of their obligations hereunder and the other Loan Documents with respect to
each Loan hereunder as if such Loan had been made directly to it. Each Borrower
hereby designates Arthur L. Smith as its representative and agent on its behalf
for the purposes of giving instructions with respect to the disbursement of the
proceeds of the Loans, selecting interest rate options, giving and receiving all
other notices and consents hereunder or under any of the other Loan Documents
and taking all other actions (including in respect of compliance with covenants)
on behalf of the Borrowers under the Loan Documents. Arthur L. Smith hereby
accepts such appointment. Lender may regard any notice or other communication
pursuant to any Loan Document from Arthur L. Smith as a notice or communication
from each Borrower. Each warranty, covenant, agreement and undertaking made on
behalf of any Borrower by Arthur L. Smith shall be deemed for all purposes to
have been made by such Borrower and shall be binding upon and enforceable
against such Borrower to the same extent as it if the same had been made
directly by each Borrower.

  

(b) Cross-Guaranty. Each Borrower hereby agrees that such Borrower is JOINTLY
SEVERALLY AND IN SOLIDO liable for, and hereby absolutely and unconditionally
guarantees to Lender and its successors and assigns, the full and prompt payment
(whether at stated maturity, by acceleration or otherwise) and performance of,
all Indebtedness owed or hereafter owing to Lender by any Borrower. Each
Borrower agrees that its guaranty obligation hereunder is a continuing guaranty
of payment and not of collection, that its obligations under this Section 2(b)
shall not be discharged until indefeasible payment and performance (subject to
the proviso in the immediately preceding sentence) in full of the Indebtedness
has occurred, and that its obligations under this Section 2(b) shall be absolute
and unconditional, irrespective of and unaffected by:

  

(i) the genuineness, validity, regularity, enforceability or any future
amendment of, or change in, this Agreement, any other Loan Document or any other
agreement, document or instrument to which any Borrower is or may become a
party;

 

(ii) the absence of any action to enforce this Agreement, including this Section
2(b), or any other Loan Document or the waiver or consent by Lender with respect
to any of the provisions thereof;

  

(iii) the existence, value or condition of, or failure to perfect its lien
against, any security or Collateral for the Indebtedness or any action, or the
absence of any action, by Lender in respect thereof (including the release of
any such security or Collateral);

 

(iv) the insolvency of any Obligor; or

 

- 6 -

 

 

(v) any other action or circumstance that might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor.

 

Each Borrower shall be regarded, and shall be in the same position, as principal
debtor with respect to the Indebtedness guaranteed hereunder. To the extent that
any Borrower shall make a payment under this Section 2(b) of all or any of the
Indebtedness (other than Loans made to such Borrower for which it is primarily
liable) (a “Guarantor Payment”) that, taking into account all other Guarantor
Payments then previously or concurrently made by any Borrower, exceeds the
amount that such Borrower would otherwise have paid if each Borrower had paid
the aggregate Indebtedness satisfied by such Guarantor Payment in the same
proportion that such Borrower’s Allocable Amount (as defined below) (as
determined immediately prior to such Guarantor Payment) bore to the aggregate
Allocable Amounts of each of Borrower as determined immediately prior to the
making of such Guarantor Payment, then, following indefeasible payment in full
in cash of the Indebtedness, such Borrower shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, each other
Borrower for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Guarantor Payment. As of
any date of determination, the “Allocable Amount” of any Borrower shall be equal
to the maximum amount of the claim that could then be recovered from such
Borrower under this Section 2(b) without rendering such claim voidable or
avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law. This Section 2(b) is intended only to
define the relative rights of each Borrower and nothing set forth herein is
intended to or shall impair the obligations of any Borrower, jointly, severally
and in solido, to pay any amounts as and when the same shall become due and
payable in accordance with the terms of this Agreement. Nothing contained in
this Section 2(b) shall limit the liability of any Borrower to pay the Loans
made directly or indirectly to that Borrower and accrued interest, fees and
expenses with respect thereto for which such Borrower shall be primarily liable.
The liability of each Borrower under this Section 2(b) is in addition to and
shall be cumulative with all other liabilities of any Borrower to Lender under
the Loan Documents to which such Borrower is a party, without any limitation as
to amount, unless the instrument or agreement evidencing or creating such other
liability specifically provides to the contrary.

 

(c) Term Loan. Subject to the terms and conditions set forth in this Agreement
and the other Loan Documents, Lender hereby agrees to lend to Borrower an
aggregate sum of not less than SIX HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS
($650,000) until May 14, 2018 (the “Maturity Date”).

  

(d) Use of Proceeds. The Loans under have been used for the acquisition of
certain businesses by the Borrowers.

  

(e) Fees. Borrowers, jointly and severally, agree to pay to Lender:

  

(i) An earned non-refundable origination fee of $0.00 payable on the date of
this Agreement;

 

(ii) A late fee of $3,000 per calendar week, payable in arrears on a weekly
basis beginning on the 15th day of May, 2018 should payment in full not be
received by Lender by the Maturity Date.

  

3. Note, Rate and Computation of Interest. The Loans are evidenced by the Note.
Interest on the Note shall accrue at the rates set forth therein. The principal
of and interest on the Note shall be due and payable in accordance with the
respective terms and conditions set forth in the Note and in this Agreement.

  

- 7 -

 

 

 

4. Collateral.

 

(a) Grant of Security Interest. As collateral security for the prompt payment in
full when due (whether at stated maturity, by acceleration or otherwise) of the
Indebtedness, Debtor hereby pledges to and grants Lender a security interest in
all of Debtor’s right, title and interest in the Collateral, whether now owned
by Debtor or hereafter acquired and whether now existing or hereafter coming
into existence. If Debtor at any time holds or acquires a commercial tort claim,
Debtor shall notify Lender in writing within FIVE (5) Business Days of such
occurrence with the details thereof and grant to Lender a security interest
therein or Lien thereon and in the proceeds thereof, in form and substance
satisfactory to Lender. If the security interest granted hereby in any rights of
Debtor under any contract or other agreement included in the Collateral is
expressly prohibited by such contract, then the security interest hereby granted
therein nonetheless remains effective to the extent allowed by Article 9 of the
UCC or other applicable law, but is otherwise limited by that prohibition.

 

(b) Debtor Remains Liable. Notwithstanding anything to the contrary contained
herein, (i) Debtor shall remain liable under the contracts and agreements
included in the Collateral to the extent set forth therein to perform all of
Debtor’s respective duties and obligations thereunder to the same extent as if
this Agreement had not been executed; (ii) the exercise by Lender of any of its
rights hereunder shall not release Debtor from any of its duties or obligations
under the contracts and agreements included in the Collateral and (iii) Lender
shall not have any obligation or liability under any of the contracts and
agreements included in the Collateral by reason of this Agreement, nor shall
Lender be obligated to perform any of the obligations or duties of Debtor
thereunder or to take any action to collect or enforce any claim for payment
assigned hereunder.

 

(c) Intellectual Property. All material Intellectual Property owned or used by
Debtor (if any) is listed, together with application or registration numbers,
where applicable, in Schedule I. Debtor owns, or is licensed to use, all
Intellectual Property necessary to conduct its business as currently conducted
except for such Intellectual Property the failure of which to own or license
would not reasonably be expected to have a Material Adverse Effect. Debtor will
maintain the patenting and registration of all Intellectual Property with the
United States Patent and Trademark Office, the United States Copyright Office,
or other appropriate Governmental Authority, and Debtor will promptly patent or
register, as the case may be, all new Intellectual Property and notify Lender in
writing FIVE (5) Business Days prior to filing any such new patent or
registration.

 

(d) Pledge of Stock. Each Borrower hereby pledges, grants a security interest
in, assigns, transfers and delivers unto Secured Party and its successors and
assigns the Pledged Shares as collateral security for the payment and
performance by Borrower of the Obligations set forth herein. Pledgor has,
concurrently herewith, delivered to Secured Party the stock certificate
evidencing the Pledged Shares together with appropriate stock powers executed in
blank in the form of Exhibit A, attached hereto. The Pledged Shares shall hereby
included as the “Collateral.” Pledgor hereby represents and warrants to Secured
Party as follows:

 

(i) Ownership of the Pledged Shares. Pledgor is and shall be the beneficial and
record owner of the Pledged Shares.

 

(ii) Liens, Claims, Encumbrances, Etc. Pledgor owns the Pledged Shares free and
clear of any material liens, claims, encumbrances or security interests of any
kind or nature whatsoever.

 

(iii) Authority. Pledgor is not precluded in any manner whatsoever from
executing, and has the requisite authority to execute, this Agreement and to
pledge, transfer and grant a security interest and lien in the Collateral as
contemplated herein, without the approval or authorization of any other person,
including any governmental or regulatory authority whatsoever.

 

- 8 -

 

 

(iv) First Priority Lien. The pledge, assignment and delivery of the Collateral
pursuant to this Agreement will create a valid first priority lien on and a
first priority perfected security interest in the Collateral pledged by Pledgor,
and the proceeds thereof, securing the payment of the Obligations.

 

(v) Due Authorization. This Agreement has been duly authorized, executed and
delivered by Pledgor and constitutes a legal, valid and binding obligation of
Pledgor enforceable in accordance with its terms, except as enforceability may
be limited by bankruptcy, insolvency, or other similar laws affecting the rights
of creditors generally or by the application of general equity principles.

 

(vi) Lender agrees that it will have no right to exercise its security interest
of the Pledged Shares unless payment in full is not received within 45 days of
the Effective Date of this Agreement.

 

(e) Additional Documents. To secure full and complete payment and performance of
the Indebtedness, each Borrower shall execute and cause to be executed such
further documents and instruments, as Lender, in its reasonable discretion,
deems necessary or desirable to create, evidence, preserve, and perfect its
liens and security interests in the Collateral. In the event any of the Loan
Documents evidencing or securing the Indebtedness misrepresents or inaccurately
reflects the correct terms and/or provisions of the Indebtedness, each Obligor
shall upon request by Lender and in order to correct such mistake, execute such
new documents or initial corrected, original documents as Lender may deem
necessary to remedy said errors or mistakes. Each Obligor shall execute such
other documents as Lender shall deem reasonably necessary to correct any defects
or deficiencies in the Loan Documents.

 

(f) Setoff. If an Event of Default shall have occurred and be continuing, Lender
shall have the right to set off and apply against the Indebtedness in such
manner as Lender may determine, at any time and without notice to any Borrower,
any and all deposits (general or special, time or demand, provisional or final)
or other sums at any time credited by or owing from Lender to any Borrower
whether or not such Indebtedness is then due. The rights and remedies of Lender
hereunder are in addition to any other rights and remedies (including, without
limitation, other rights of setoff) which Lender may have.

 

(g) Satisfaction of Indebtedness. Until the Indebtedness has been indefeasibly
paid and fully satisfied (other than contingent indemnification obligations to
the extent no unsatisfied claim has been asserted) and the commitments of Lender
under the Loan Agreement have been terminated, Lender shall be entitled to
retain the security interests in the Collateral granted under the Loan Documents
and the ability to exercise all rights and remedies available to Lender under
the Loan Documents and applicable laws.

 

5. Conditions Precedent. The obligation of Lender to make the Loans is subject
to the condition precedent that Lender shall have received on or before the day
of such Loans all of the following, each dated (unless otherwise indicated) as
of the date hereof:

 

(a) Resolutions. Resolutions of the governing body of each Obligor that is not a
natural Person, in form and substance reasonably acceptable to Lender, certified
by an authorized officer or representative of such Obligor, which authorize the
execution, delivery, and performance of the Loan Documents to which such Obligor
is a party;

 

- 9 -

 

 

(b) Incumbency Certificate. A certificate, in form and substance reasonably
acceptable to Lender, of incumbency certified by an authorized officer or
representative of an Obligor certifying the names of the individuals or other
Persons authorized to sign the Loan Documents to which any Obligor that is not a
natural Person is to be a party (including the certificates contemplated herein)
together with specimen signatures of such Persons;

 

(c) Constituent Documents. The Constituent Documents of each Obligor that is not
a natural Person, certified to Lender as being true and correct as of the date
of this Agreement;

 

(d) Governmental Certificates. Certificates of the appropriate government
officials of the state of organization of each Obligor that is not a natural
Person, and, if and to the extent required by Lender, and any state such Obligor
is currently doing business in, certifying as to the existence, qualification
and good standing of such Obligor, dated within twenty (20) Business Days of the
date of this Agreement;

 

(e) Loan Documents. The following Loan Documents, duly executed (as applicable),
and in full force and effect:

 

(i) This Agreement;

 

(ii) the Note (amended and restated as of the date hereof);

 

(iii) the Security Agreement; and

 

(iv) any Subordination Agreement;

 

(f) Subordinate Notes. Copy of any promissory note subject to the Subordination
Agreement(s), if any.

 

(g) Financing Statements. Code financing statements covering the Collateral
shall have been filed with such filing offices as Lender may request;

 

(h) Insurance Matters. Copies of insurance certificates describing all insurance
policies of each Borrower, together with loss payable and lender endorsements in
favor of Lender with respect to all insurance policies covering the Collateral;

 

(i) Uniform Commercial Code Search. Results satisfactory to Lender of a Code
search showing all financing statements on file against each Borrower in such
jurisdictions as Lender may reasonably request;

 

(j) Fees and Expenses. Evidence that the reasonable and documented costs
andexpenses of Lender (including reasonable and documented attorneys’ fees) and
all fees owing by any Borrower to Lender on or prior to the date of this
Agreement, shall have been paid in full by Borrowers which may be paid using
proceeds from the Loans;

 

(k) Opinion of Borrower’s Counsel. The opinion of Obligor’s counsel, in form and
substance reasonably acceptable to Lender, as to (A) the existence and due
organization of such Obligor (if not a natural Person) or the legal capacity of
such Obligor (if a natural Person), (B) the due authorization and execution of
the Loan Documents, (C) the enforceability of the Loan Documents, (D) the
perfection of Lender’s security interest in the Collateral, and (E) such other
matters as may be reasonably requested by Lender and its counsel;

 

(l) Other Matters. Such other documents and agreements as may be required by
Lender in its reasonable discretion.

 

- 10 -

 

 

6. Representations and Warranties. Each Obligor hereby represents and warrants
to Lender as follows:

 

(a) Existence. Each Borrower (i) is duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its organization; (ii) has
all requisite power and authority to own its assets and carry on its business as
now being or as proposed to be conducted; and (iii) is qualified to do business
in all jurisdictions in which the nature of its business makes such
qualification necessary and where failure to so qualify would have a Material
Adverse Effect. Each Borrower has the power and authority to execute, deliver,
and perform its obligations under the Loan Documents to which it is or may
become a party.

 

(b) Binding Obligations. The execution, delivery, and performance of the Loan
Documents by each Obligor have been duly authorized by all necessary
organizational action by such Obligor, and constitute legal, valid and binding
obligations of such Obligor, enforceable in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency or similar laws of
general application relating to the enforcement of creditors’ rights and except
to the extent specific remedies may generally be limited by equitable
principles.

 

(c) No Consent. The execution, delivery and performance of the Loan Documents,
and the consummation of the transactions contemplated thereby, do not (i)
conflict with, result in a violation of, or constitute a default under (A) any
provision of the Constituent Documents (if any) or other instrument binding upon
any Obligor, (B) any law, governmental regulation, court decree or order
applicable to any Obligor, or (C) any material contractual obligation,
agreement, judgment, license, order or permit applicable to or binding upon any
Obligor, (ii) require the consent, approval or authorization of any third party
or (iii) result in or require the creation of any lien, charge or encumbrance
upon any Property of any Obligor, except as may be expressly contemplated in or
permitted under the Loan Documents.

 

(d) Financial Condition. Each financial statement of each Obligor supplied to
Lender truly discloses and fairly presents in all material respects such
Person’s financial condition as of the date of each such statement. There has
been no material adverse change in such financial condition or results of
operations of any Borrower and its consolidated Subsidiaries and any other
Obligor (taken as a whole) subsequent to the date of the most recent financial
statement delivered by any Borrower to Lender that would materially and
adversely affect Borrowers’ ability to repay the Indebtedness then outstanding
under the Loan Documents.

 

(e) Operation of Business. Each Borrower possesses all material contracts,
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, required to conduct its businesses substantially as now
conducted and as presently proposed to be conducted, and each Borrower is not to
its knowledge in violation of any valid rights of others with respect to any of
the foregoing, except for any failures of possession or any violations that
could not reasonably be expected to result in a Material Adverse Effect.

 

- 11 -

 

 

(f) Litigation and Judgments. There is no action, suit, investigation, or
proceeding before or by any Governmental Authority or arbitrator pending, or to
the knowledge of any Borrower, threatened in writing against or affecting any
Obligor that would, if adversely determined, have a Material Adverse Effect.
There are no outstanding judgments against any Obligor.

 

(g) Rights in Properties; Liens. Each Borrower has good and marketable title to
or valid leasehold interests in its material Properties, including such
Properties reflected in the financial statements provided to Lender, and none of
the Properties of any Borrower is subject to any lien, except Permitted
Encumbrances.

 

(h) Debt. No Borrower has any Debt other than Permitted Indebtedness.

 

(i) Disclosure. No statement, information, report, representation, or warranty
made by any Obligor in the Loan Documents or furnished by any Obligor to Lender
in connection with the Loan Documents or any of the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state any
material fact necessary to make the statements herein or therein not misleading.
There is no fact known to any Obligor which would reasonably be expected to have
a Material Adverse Effect.

 

(j) Subsidiaries, Ventures, Etc. Each Borrower has no Subsidiaries, Affiliates
or joint ventures or partnerships other than those listed on Schedule 6(j) and
such Schedule sets forth the jurisdiction of organization of each such Person
and the percentage of such Borrower’s ownership interest in such Person.

 

(k) Material Agreements.  No Borrower is a party to any indenture, loan, or
credit agreement, or to any lease or other material agreement or instrument, or
subject to any restriction in any of its Constituent Documents, which could
reasonably be expected to have a Material Adverse Effect. No Borrower is in
default in any material respect in the performance, observance, or fulfillment
of any of the obligations, covenants, or conditions contained in any agreement
or instrument material to its business.

 

(l) Compliance with Laws. No Borrower is in violation of any law, rule,
regulation, order, or decree of any Governmental Authority or arbitrator, the
violation of which could reasonably be expected to have a Material Adverse
Effect.

 

(m) Taxes; Governmental Charges. Each Obligor has filed all federal, and
material state and local tax reports and returns required by any law or
regulation to be filed by it or has either duly paid all taxes, duties and
charges indicated due on the basis of such returns and reports, or made adequate
provision for the payment thereof, except for any such taxes, duties or charges
which are being challenged or disputed by any Obligor in good faith and pursuant
to appropriate proceedings.

 

(n) Security Interest. Each Borrower has and will have at all times the power
and authority to grant a security interest in the Collateral to Lender in the
manner provided herein, free and clear of any lien, security interest or other
charge or encumbrance, other than Permitted Encumbrances. This Agreement creates
a legal, valid and binding first priority security interest (subject to
Permitted Encumbrances) in favor of Lender in the Collateral securing the
Indebtedness. Possession by Lender of certain types of Collateral from time to
time or the filing of the financing statements delivered prior hereto or
concurrently herewith by Borrower to Lender will perfect and establish the first
priority of Lender’s security interest hereunder in the Collateral (to the
extent that perfection can be accomplished through the filing of a financing
statement or the possession of such Collateral) other than for the Permitted
Encumbrances.

 

- 12 -

 

 

(o) Location. Each Borrower’s chief executive office and the office where the
records concerning the Collateral is listed on the signature page below.

 

(p) Environmental Matters. Except for matters disclosed in writing to Lender:

 

(i) Notice of Non-Compliance. Each Borrower and all of its Property and
operations are in full compliance with all applicable Environmental Laws, except
where non-compliance could not reasonably be expected to result in a Material
Adverse Effect. No Borrower is aware of, or has received notice of, any past,
present, or future conditions, events, activities, practices, or incidents which
may interfere with or prevent the compliance or continued compliance of
Borrowers with all Environmental Laws, except where any of the foregoing could
not reasonably be expected to have a Material Adverse Effect;

 

(ii) Permits. Each Borrower has obtained all permits, licenses, and
authorizations that are required under applicable Environmental Laws, and all
such permits are in good standing and each Borrower is in compliance with all of
the terms and conditions of such permits, except where any of the foregoing
could not reasonably be expected to result in a Material Adverse Effect;

 

(iii) Hazardous Materials. No Hazardous Materials exist on, about, or within or
have been used, generated, stored, transported, disposed of on, or released by
any Borrower from any of the Property of any Borrower, except to the extent in
compliance with Environmental Laws or where any of the foregoing could not
reasonably be expected to result in a Material Adverse Effect. The use which
each Borrower makes and intends to make of its respective properties and assets
will not result in the use, generation, storage, transportation, accumulation,
disposal, or release of any Hazardous Material on, in, or from any of its
properties or assets, except to the extent in compliance with Environmental Laws
or where any of the foregoing could not reasonably be expected to result in a
Material Adverse Effect;

 

(iv) No Pending or Threatened Actions. To the knowledge of each Borrower, no
Borrower nor any of its currently or previously owned or leased Property or
operations is subject to any outstanding or threatened order from or agreement
with any Governmental Authority or other Person or subject to any judicial or
docketed administrative proceeding with respect to failure to comply with
Environmental Laws; and

 

(v) No Conditions. There are no conditions or circumstances associated with the
currently (or, to the best of each Borrower’s knowledge, previously) owned or
leased Property or operations of any Borrower that could reasonably be expected
to give rise to any Environmental Liabilities of Borrower.

 

(q) Solvency. On the date hereof each Borrower will be able to pay its debts
generally as they become due, and the assets of each Borrower at a fair
valuation will exceed the liabilities of such Borrower and each such Borrower
will have adequate capital to continue its business operations.

 

(r) Real Property. None of the Borrowers owns any real property.

 

7. Affirmative Covenants. Until all Indebtedness of any Borrower under the Loan
Documents is paid or satisfied in full, each Borrower agrees and covenants as
follows:

 

(a) Compliance with Laws. Each Borrower will conduct its business in an orderly
and efficient manner consistent with good business practices, and perform and
comply with all applicable statutes, rules, regulations or ordinances imposed by
any Governmental Authority upon Borrower and its businesses, operations and
Properties (including without limitation, all applicable environmental statutes,
rules, regulations and ordinances) except where the failure to perform or comply
could not reasonably be expected to have a Material Adverse Effect.

 

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(b) Payment of Obligations. Each Borrower will pay its obligations, including
tax liabilities, that, if not paid, would become a lien on any of its Property
(other than Permitted Encumbrances), before the same shall become delinquent or
in default, except where (i) the validity or amount thereof is being contested
in good faith by appropriate proceedings, (ii) Borrower has set aside on its
books adequate reserves with respect thereto in accordance with GAAP, and (iii)
the failure to make payment pending such contest could not reasonably be
expected to result in a Material Adverse Effect.

 

(c) Application of Proceeds. In addition to the payments obligations set forth
in Section 7(b) above, each Borrower shall pay to Lender any cash proceeds
received by a Borrower in respect of any sale or other disposition of,
collection from, or other realization upon, all or any part of the Collateral
(except for dispositions of inventory and other goods, services and other
Property in the ordinary course of such Borrower’s business) as follows (in such
order and manner as Lender may elect):

 

(i) to the repayment or reimbursement of the reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses)
incurred by Lender in connection with (1) the administration of the Loan
Documents, (2) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (3) the exercise
or enforcement of any of the rights and remedies of Lender hereunder;

 

(ii) to the payment or other satisfaction of any Permitted Encumbrances; and

 

(iii) to the satisfaction of the Indebtedness.

 

(d) Maintenance and Conduct of Business. Each Borrower will (i) keep, maintain
and preserve all Property (tangible and intangible) material to the conduct of
its business in good working order and condition, ordinary wear and tear
excepted, and (ii) do or cause to be done all things necessary to preserve,
renew and keep in full force and effect (A) its legal existence and (B) the
rights, licenses, permits, privileges, agreements and franchises material to the
conduct of its business except where any failure to do any of the foregoing
could not reasonably be expected to result in a Material Adverse Effect.

 

(e) Books and Records; Inspection Rights. Each Borrower will keep proper books
of record and account in which full, true and correct entries are made of all
dealings and transactions in relation to its business and activities. Each
Borrower will permit any representatives designated by Lender, upon reasonable
prior notice, to visit and inspect its Properties, to examine and make extracts
from its books and records, and to discuss its affairs, finances and condition
with its officers and independent accountants, all at such reasonable times and
as often as reasonably requested.

 

(f) Insurance. Each Borrower will maintain fire insurance, comprehensive
property damage, commercial general liability, public liability, worker’s
compensation, business interruption and other insurance deemed reasonably
necessary. Each Borrower will, at its own expense, maintain such insurance with
respect to all Collateral against such risks, and in such form and with such
insurers, and in such amounts as shall be satisfactory to Lender. Each policy of
insurance maintained by each Borrower shall (i) name Lender as additional
insured or lender loss payee, as the case may be, thereunder (without any
representation or warranty by or obligation upon Lender) as their interests may
appear, (ii) contain the agreement by the insurer that any loss thereunder shall
be payable to Lender notwithstanding any action, inaction or breach of
representation or warranty by any Borrower, (iii) provide that there shall be no
recourse against Lender for payment of premiums or other amounts with respect
thereto, and (iv) provide prior written notice of cancellation or of lapse shall
be given to Lender by the insurer in accordance with the insurer’s commercial
practices as adopted from time to time. Borrowers will deliver to Lender
original or duplicate policies of such insurance. Borrowers will also, at the
request of Lender, duly execute and deliver instruments of collateral assignment
of such insurance policies during the continuation of an Event of Default and
cause the respective insurers to acknowledge notice of such assignment. All
insurance payments in respect of loss of or damage to any Collateral shall be
paid to Lender and applied by Lender in accordance with the Loan Documents,
provided, however, that so long as no Event of Default exists, each Borrower may
retain and use such insurance payments for the repair or replacement of such
lost or damaged property or for any other business purpose not prohibited under
this Agreement.

 

- 14 -

 

 

(g) Compliance with Agreements. Each Borrower will comply, in all material
respects with all material agreements, contracts, and instruments to which it is
a party which affect its Properties or business.

 

(h) Additional Subsidiaries. If any Subsidiary of any Borrower is formed or
acquired after the Closing Date, such Borrower will notify Lender thereof and
shall cause the Property of such Subsidiary to be included in the Collateral.

 

(i) Notices of Material Events. Each Borrower will furnish to Lender prompt
written notice of the following:

 

(i) the occurrence of any Event of Default;

 

(ii) the filing or commencement of any action, suit or proceeding by or before
any arbitrator or Governmental Authority against or affecting any Borrower, or
its Subsidiaries or any Affiliate thereof that, if adversely determined, could
reasonably be expected to result in a Material Adverse Effect;

 

(iii) any and all material adverse changes in any Obligor’s financial condition
and all claims made against any Obligor, in each case that constitute items
required to be disclosed on U.S. Securities and Exchange Commission Form 8-K
affect the financial condition of such Obligor; and

 

Each notice delivered under this Section shall be accompanied by a statement of
an executive officer of the relevant Borrower setting forth in reasonable detail
the event or development requiring such notice and any action taken or proposed
to be taken with respect thereto.

 

(j) Ownership and Liens. Each Borrower will maintain good and marketable title
to the Collateral free and clear of all liens, security interests, encumbrances
or adverse claims, except for Permitted Encumbrances. Each Borrower will cause
any Code financing statement or other security instrument with respect to the
Collateral to be terminated, except for Code financing statements evidencing
Permitted Encumbrances. Each Borrower will defend at its expense Lender’s right,
title and security interest in and to the Collateral against the claims of any
third party.

 

(k) Accounts and General Intangibles. Each Borrower will, except as otherwise
provided herein, collect, at such Borrower’s own expense, all amounts due or to
become due under each of the accounts and general intangibles that are included
in the Collateral. In connection with such collections, a Borrower may and, at
Lender’s direction during the continuance of an Event of Default, will take such
action not otherwise forbidden herein as such Borrower or Lender may deem
reasonably necessary or advisable to enforce collection or performance of each
of such accounts and general intangibles. Each Borrower will also duly perform
and cause to be performed all of its material obligations with respect to the
goods or services, the sale or lease or rendition of which gave rise or will
give rise to each such account and all of its obligations to be performed under
or with respect to the general intangibles, except to the extent disclosed in
writing to Lender. Each Borrower also covenants and agrees to take any action
and/or execute any documents that Lender may reasonably request in order to
comply with applicable law relating to the assignment of such accounts.

 

- 15 -

 

 

(l) Chattel Paper, Documents and Instruments. Each Borrower will take such
action as may be reasonably requested by Lender in order to cause any chattel
paper, documents or instruments owned by such Borrower to be valid and
enforceable and will cause all chattel paper, and instruments to have only one
original counterpart. Upon request by Lender, each Borrower will deliver to
Lender all originals of such chattel paper, documents or instruments and unless
such request is made, such Borrower will not deliver possession of such chattel
paper, documents or instruments to any Person and will mark all chattel paper,
documents or instruments with a legend indicating that such chattel paper,
document or instrument is subject to the security interest granted in the
Security Agreement.

 

(m) Mortgages, Waivers and Consents Relating to Leasehold Interests in Real
Property. Upon the request of Lender, each Borrower shall cause each landlord of
real property leased by such Borrower to execute and deliver leasehold mortgage
agreements reasonably satisfactory in form and substance to Lender by which such
Borrower grants a leasehold mortgage to Lender and such landlord waives or
subordinates any liens it may have in any Collateral (other than Permitted
Encumbrances) located on such real property.

 

(n) Intercompany Debt; Other Debt. Each Borrower covenants and agrees that the
payment of principal and/or interest of any Intercompany Debt and any liens
securing Intercompany Debt is or will be subordinated to the Indebtedness on
terms acceptable to Lender until the Indebtedness has been paid in full and
Lender has no funding commitments hereunder. Each Borrower covenants and agrees
that the payment of principal and/or interest of the Subordinated Debt and any
liens securing the Subordinated Debt will be subordinated to the Indebtedness
pursuant to the terms and conditions of the Subordination Agreement, if any.

 

8. Negative Covenants. Until all Indebtedness of any and all Borrowers under the
Loan Documents is indefeasibly paid or satisfied in full, each Borrower agrees
and covenants as follows:

 

(a) Fundamental Change. No Borrower will (i) make any material change in the
nature of its business as carried on as of the date hereof, (ii) liquidate,
merge or consolidate with or into any other Person, (iii) cause, permit or
suffer, directly or indirectly, any Change of Control or (iv) make a change in
organizational structure or the jurisdiction in which it is organized.

 

(b) Indebtedness. No Borrower will create, incur, assume or permit to exist any
Debt except for the following (“Permitted Indebtedness”):

 

(i) The Indebtedness created hereunder;

 

(ii) Intercompany Debt between or among any Borrowers which is subordinated to
the Indebtedness on terms acceptable to Lender (“Intercompany Debt”);

 

(iii) Debt existing on the date hereof and set forth in Schedule 8(b) and 8(c);

 

(iv) Debt constituting trade payables incurred in the ordinary course of
business;

 

- 16 -

 

 

(v) capital lease obligations and purchase money Debt (of any or all Borrowers)
in an aggregate principal amount not to exceed $100,000 at any time outstanding;

 

(vi) Debt incurred or arising from or in connection with any bid, surety
performance, statutory, completion, return-of-money or appeal bonds and similar
obligations;

 

(vii) any refinancings, refundings, replacements, renewals, or extensions, in
whole or in part, of any Debt otherwise permitted hereunder (provided that the
original principal amount of any such Debt described on Schedule 8(b) will not
be increased) and any guarantees permitted under Section 8(c);

 

(viii) Debt arising or incurred as a result of or in connection with any letter
of credit, letter of guaranty, banker’s acceptance, other deposits or any other
similar arrangement by any Borrower in the ordinary course of business, provided
that the aggregate amount of such letters of credit, letters of guaranty,
banker’s acceptances and similar arrangements of all of the Borrowers shall not
exceed $100,000 at any time outstanding; and

 

(ix) Subordinated Debt.

 

(c) Loans and Guarantees. No Borrower will make loans to or guarantee any Debt
of any other Person, other than (i) the loans outstanding on the date hereof as
set forth on Schedule 8(c) hereto, (ii) loans or advances to employees of any
Borrower not to exceed an aggregate principal amount among the Borrowers of FIVE
THOUSAND AND NO/100 DOLLARS ($5,000.00) outstanding at any time, (iii) loans or
advances constituting Intercompany Debt permitted under Section 8(b)(ii), (iv)
accounts receivable for sales of inventory and other goods and services provided
by any Borrower to its respective customers, (v) guarantees of Debt between or
among, and Intercompany Debt between or among any of the Borrowers, and (vi)
guarantees of any Debt permitted under Section 8(b).

 

(d) Transactions With Affiliates. No Borrower will enter into any transaction,
including, without limitation, the purchase, sale or exchange of property or the
rendering of any service, with any Affiliate of such Borrower, except upon fair
and reasonable terms not less favorable to such Borrower than would be obtained
in a comparable arm’s-length transaction with a Person which is not an Affiliate
of such Borrower.

 

(e) Transfer or Encumbrance. No Borrower will (i) sell, assign (by operation of
law or otherwise), transfer, exchange, lease or otherwise dispose of (each a
“Disposition”) any of the Collateral or any other Property, or (ii) grant a lien
or security interest in or execute, file or record any financing statement or
other security instrument with respect to any of the Collateral, other than the
Permitted Encumbrances, except, with respect to clause (i) above, for:

 

(i) Dispositions contemplated by Section 7(c) hereof;

 

(ii) Dispositions of inventory and other goods, services and other Property in
the ordinary course of such Borrower’s business;

 

(iii) Dispositions of Property between or among any Borrowers (provided,
however, that any such Disposition does not adversely affect the validity or
priority of Lender’s lien on such Property); and

 

- 17 -

 

 

(iv) Dispositions of any item of Property of any Borrower which is worn out or
obsolete and is replaced by other Property of substantially equal suitability
and value, owned by such Borrower and made subject to the first priority
security interest under this Agreement, but which is otherwise free and clear of
any lien, security interest, encumbrance or adverse claim (other than Permitted
Encumbrances).

 

(f) Impairment of Security Interest. No Borrower will take any action that would
in any material respect impair the enforceability of Lender’s security interest
in any Collateral.

 

(g) Compromise of Accounts. No Borrower will adjust, settle, or compromise any
of its Accounts included in the Collateral, except for any adjustment,
settlement, or compromise made by such Borrower in its reasonable judgment on
any such account in the ordinary course of such Borrower’s business; provided,
however, this exception shall terminate following Borrowers’ receipt of written
notice from Lender upon the occurrence and during the continuation of an Event
of Default. Each Borrower shall provide to Lender such information concerning
(i) any adjustment, settlement, or compromise of any such account, and (ii) any
claim asserted by any account debtor for credit, allowance, adjustment, dispute,
setoff or counterclaim, on any such account as Lender may reasonably request
from time to time.

 

(h) Financing Statement Filings. No Borrower will cause or permit any change (i)
to such Borrower’s legal name, or (ii) the state of such Borrower’s organization
to a jurisdiction other than as represented herein, unless such Borrower shall
have notified Lender in writing of such change at least thirty (30) days prior
to the effective date of such change, and shall have first taken all action
reasonably required by Lender for the purpose of further perfecting or
protecting the security interest in favor of Lender in the Collateral.

 

(i) Investments. No Borrower will purchase any stock, equity interests or debt
obligations (except for cash equivalents and other debt obligations of the U.S.
Treasury or any other Governmental Authority) (collectively, “Investments”),
except for Investments described on Schedule 8 (i) hereto;

 

9. Minimum Cash Flow to Debt Service Ratio. Until all Indebtedness of any
Borrower under the Loan Documents is indefeasibly paid and satisfied in full,
each Borrower, excluding Digerati Technologies, Inc., agrees and covenants that
it will maintain a ratio of Cash Flow to scheduled interest payments on Debt
(excluding non-cash payments and interest) of not less than 1.00 to 1.00 as of
the end of each Fiscal Quarter beginning with the quarter ending July 31, 2018.

 

10. Reporting Requirements. Until all Indebtedness of any Borrower under the
Loan Documents is indefeasibly paid and satisfied in full, each Borrower agrees
and covenants that it will furnish or cause to be furnished the following:

 

(a) Interim Financial Statements. As soon as available, and in any event within
thirty (45) days after the end of each calendar month, an unaudited set of
consolidated financial statements of Borrowers, to include a consolidated
balance sheet and income statement of Borrowers (on a consolidated and
consolidating basis), as of the end of such calendar month, all in form and
substance and in reasonable detail reasonably satisfactory to Lender and duly
certified (subject to quarter-end and year-end adjustments and the absence of
footnotes) by an appropriate officer of each Borrower (i) as being true and
correct in all material aspects to the best of such officer’s knowledge (subject
to quarter-end and year-end adjustments and the absence of footnotes), and (ii)
as having been prepared in accordance with GAAP.

 

- 18 -

 

 

(b) Annual Financial Statements. As soon as available and in any event (i)
within ninety (90) days after the end of each fiscal year, a set of consolidated
financial statements of Borrowers, to include a consolidated balance sheet,
income statement and cash flow statement of Borrowers, as of the end of such
fiscal year, audited by independent certified public accountants of recognized
standing chosen by the Borrowers and reasonably satisfactory to Lender.

 

(c) Compliance Certificate. Concurrently with the delivery of each of the
financial statements of Borrowers referred to in Sections 10(a) and (b), a
certificate of an officer of each Borrower, substantially in the form of Exhibit
A (i) stating that to such officer’s knowledge, no Event of Default has occurred
and is continuing, or if an Event of Default has occurred and is continuing, a
statement as to the nature thereof and the action which is proposed to be taken
with respect thereto, and (ii) showing in reasonable detail the calculations
demonstrating compliance with the financial covenants set forth in Section 9 of
this Agreement.

 

(d) Other Information.  Borrowers shall promptly deliver such other information
concerning Borrowers or any Subsidiary of any Borrower as Lender may reasonably
request.

 

11. Events of Default. Each of the following shall constitute an “Event of
Default” under this Agreement:

 

(a) Payment Default.  The failure, refusal or neglect of any Borrower to pay any
part of the principal of, or interest on, the Indebtedness owing to Lender by
any Borrower by the Maturity Date and such failure, refusal or neglect shall
continue unremedied for a period of five (5) Business Days.

 

(b) Performance Default.  The failure of any Obligor to timely and properly
observe, keep or perform any covenant or agreement, required herein or in any of
the other Loan Documents which is not cured within five (5) days following
written notice from Lender to such Obligor; provided that the foregoing notice
and opportunity to cure in this subsection (b) will not be required with respect
to a payment default as set forth in Section 11(a), or with respect to a default
under covenants set forth in Section 8 and Section 9;

 

(c) Representations.  Any representation or warranty contained herein or in any
of the other Loan Documents made by an Obligor is false or misleading in any
material respect.

 

(d) Default Under Other Indebtedness. The occurrence and continuance of any
event of default under any agreement (beyond any applicable notice and cure or
grace period) governing or evidencing indebtedness for borrowed money which
permits the acceleration of the maturity of any such indebtedness for borrowed
money in an aggregate principal amount in excess of ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) owing by any Obligor to any third party under any
agreement or understanding.

 

(e) Insolvency. If any Obligor (i) makes a transfer in fraud of creditors, or
makes an assignment for the benefit of creditors, or admits in writing its
inability to pay its debts as they become due (excluding for the avoidance of
doubt any “going concern” language included by any Borrower or its accountants
in any instrument or document); (ii) generally is not paying its debts as such
debts become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of its assets, either in a
proceeding brought by it or in a proceeding brought against it and such
appointment is not discharged or such possession is not terminated within sixty
(60) days after the effective date thereof or it consents to or acquiesces in
such appointment or possession; (iv) files a petition for relief under the
United States Bankruptcy Code or any other present or future federal or state
insolvency, Bankruptcy or similar laws (all of the foregoing hereinafter
collectively called “Applicable Bankruptcy Law”) or an involuntary petition for
relief is filed against it under any Applicable Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming it is entered under any Applicable
Bankruptcy Law, or any composition, rearrangement, extension, reorganization or
other relief of debtors now or hereafter existing is requested or consented to
by it; or (v) fails to have discharged within a period of sixty (60) days any
attachment, sequestration or similar writ levied upon any property of it.

 

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(f) Judgment. The entry of any judgment against any one or more Obligors or the
issuance or entry of any attachments or other liens against any of the Property
of such Obligor(s) or its Subsidiaries for an amount in excess of ONE HUNDRED
THOUSAND AND NO/100 DOLLARS ($100,000.00) (individually or in the aggregate) if
uninsured, undischarged, unbonded or undismissed on the date on which such
judgment could be executed upon.

 

(g) Action of Lien Holder. The holder of any lien or security interest on any of
the assets of any Obligor (securing Debt in excess of $100,000.00), including
without limitation, the Collateral, institutes foreclosure or other proceedings
for the enforcement of its remedies thereunder.

 

(h) Loan Documents. The Loan Documents shall at any time after their execution
and delivery and for any reason cease (i) to create a valid and perfected first
priority security interest (subject to Permitted Encumbrances) in and to the
Collateral purported to be subject to the Loan Documents; or (ii) to be in full
force and effect or shall be declared null and void, or the validity of
enforceability hereof shall be contested in writing by any Obligor, or any
Obligor shall deny in writing that it has any further liability or obligation
under this Agreement or the other Loan Documents.

 

Nothing contained in this Agreement shall be construed to limit the events of
default enumerated in any of the other Loan Documents and all such events of
default shall be cumulative.

 

12. Remedies and Related Rights. If an Event of Default shall have occurred and
be continuing, and without limiting any other rights and remedies provided
herein, under any of the Loan Documents or otherwise available to Lender, Lender
may exercise one or more of the rights and remedies provided in this Section.

 

(a) Remedies. Upon the occurrence and during the continuance of any one or more
of the foregoing Events of Default, (i) the entire unpaid balance of principal
of the Note, together with all accrued but unpaid interest thereon, and all
other Indebtedness owing to Lender by any Borrower at such time shall, at the
option of Lender, become immediately due and payable without further notice,
demand, presentation, notice of dishonor, notice of intent to accelerate, notice
of acceleration, protest or notice of protest of any kind, all of which are
expressly waived by each Borrower. All rights and remedies of Lender set forth
in this Agreement and in any of the other Loan Documents may also be exercised
by Lender, at its option to be exercised in its sole discretion, upon the
occurrence and during the continuance of an Event of Default, and not in
substitution or diminution of any rights now or hereafter held by Lender under
the terms of any other agreement.

 

(b) Application of Cash Collateral. If any Event of Default shall have occurred
and be continuing, Lender may at its discretion apply or use any cash held by
Lender as Collateral as follows (in such order and manner as Lender may elect):

 

(i) to the repayment or reimbursement of the reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses)
incurred by Lender in connection with (1) the administration of the Loan
Documents, (2) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (3) the exercise
or enforcement of any of the rights and remedies of Lender hereunder;

 

- 20 -

 

 

(ii) to the payment or other satisfaction of any Permitted Encumbrances;

 

(iii) to the satisfaction of the Indebtedness;

 

(iv) to the payment of any other amounts required by applicable law; and

 

(v) by delivery to any applicable Borrower or any other party lawfully entitled
to receive such cash whether by direction of a court of competent jurisdiction
or otherwise.

 

(c) No Waiver; Cumulative Remedies. No failure on the part of Lender to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power, or privilege under this Agreement or any other Loan Document shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power, or privilege under this Agreement or any other Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The rights and remedies provided for in this
Agreement and the other Loan Documents are cumulative and not exclusive of any
rights and remedies provided by law.

 

(d) Equitable Relief. Each Borrower recognizes that in the event any Borrower
fails to pay, perform, observe, or discharge any or all of the Indebtedness, any
remedy at law may prove to be inadequate relief to Lender. Each Borrower
therefore agrees that Lender, if Lender so requests, shall be entitled to
temporary and permanent injunctive relief in any such case without the necessity
of proving actual damages.

 

13. Indemnity. Each Borrower hereby jointly and severally indemnifies and agrees
to hold harmless Lender, and its officers, directors, employees, agents and
representatives (each an “Indemnified Person”) from and against any and all
liabilities, obligations, claims, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
(collectively, the “Claims”) which are imposed on, incurred by, or asserted
against, any Indemnified Person arising in connection with the Loan Documents,
the Indebtedness or the Collateral (including without limitation, the
enforcement of the Loan Documents and the defense of any Indemnified Person’s
actions and/or inactions in connection with the Loan Documents, except to the
limited extent the Claims against an Indemnified Person are caused by any
Indemnified Person’s gross negligence or willful misconduct). WITHOUT
LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON
WITH RESPECT TO ANY CLAIMS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT
OF THE NEGLIGENCE OF SUCH AND/OR ANY OTHER INDEMNIFIED PERSON. The
indemnification provided for in this Section shall survive the termination of
this Agreement and shall extend and continue to benefit each individual or
entity that is or has at any time been an Indemnified Person hereunder.

 

14. Limitation of Liability and Releases. As a material inducement to Lender to
enter into this Agreement and to make Loans to Borrowers in accordance with and
subject to the terms and conditions of the Loan Documents, all of which are to
the direct advantage and benefit of each Obligor, and all of their respective
heirs, successors and assigns:

 

(a) Release. Each Obligor does hereby remise, release, acquit, satisfy and
forever discharge Lender, and all of the past, present and future officers,
directors, employees, agents, attorneys, representatives, participants, heirs,
successors and assigns of Lender and any subsidiaries and affiliates of Lender
(each a “Lender Party”) from any and all manner of debts, accountings, bonds,
warranties, representations, covenants, promises, contracts, controversies,
arguments, liabilities, obligations, expenses, damages, judgments, executions,
actions, claims, demands and causes of action of any nature whatsoever, whether
at law or in equity, either now accrued or now existing and hereafter maturing
or whether known or unknown, which such Obligor now has or hereafter can, shall
or may have by reason of any manner, cause or things, in each case existing or
arising from April 30, 2018 and to and including the date on which all
Indebtedness of Borrower under the Loan Documents is paid in full relating to
matters arising out of or in connection with (i) any and all obligations owed or
owing by such Obligor to Lender under the Loan Documents or (ii) the
Indebtedness evidenced and secured thereby (collectively, “Obligor Claims”),
provided that this Section 14(a) shall not apply to any Excluded Obligor Claims
(defined below).

 

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(b) Covenant Not To Sue. Each Obligor does hereby covenant and agree never to
institute or cause to be instituted or to continue prosecution of any suit or
other form of action or proceeding of any kind or nature whatsoever against any
Lender Party, by reason of or in connection with any Obligor Claims (other than
Excluded Obligor Claims). In addition to the foregoing, each Obligor hereby
waives, releases, and agrees not to sue any Lender Party for punitive damages in
respect of any claim (other than Excluded Obligor Claims) in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents.

 

(c) Excluded Obligor Claims. As used herein, the term “Excluded Obligor Claims”
shall mean any Obligor Claim of any Obligor or any other Person against any
Lender Party whether now existing or hereafter arising out of or in connection
with this Agreement or any of the other Loan Documents or any Indebtedness
thereunder that arise, out of, as a result of or in connection with any (i)
willful or intentional misconduct, bad faith or gross negligence by, of or on
the part of any Lender Party, or (ii) fraud or misrepresentation by, of or on
the part of any Lender Party.

 

15. No Duty. All attorneys, accountants, appraisers, and other professional
Persons and consultants retained by Lender shall have the right to act
exclusively in the interest of Lender and shall have no duty of disclosure, duty
of loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to any Obligor or any of any Obligor’s equity holders or any other
Person.

 

16. Lender Not Fiduciary. The relationship between Obligors and Lender is solely
that of debtor and creditor, and Lender has no fiduciary or other special
relationship with any Obligor, and no term or condition of any of the Loan
Documents shall be construed so as to deem the relationship between any Obligor
and Lender to be other than that of debtor and creditor.

 

17. Waiver and Agreement. Neither the failure nor any delay on the part of
Lender to exercise any right, power or privilege herein or under any of the
other Loan Documents shall operate as a waiver thereof, nor shall any single or
partial exercise of such right, power or privilege preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. No
waiver of any provision in this Agreement or in any of the other Loan Documents
and no departure by any Obligor therefrom shall be effective unless the same
shall be in writing and signed by Lender, and then shall be effective only in
the specific instance and for the purpose for which given and to the extent
specified in such writing. No modification or amendment to this Agreement or to
any of the other Loan Documents shall be valid or effective unless the same is
signed by the party against whom it is sought to be enforced.

 

18. Benefits. This Agreement shall be binding upon and inure to the benefit of
Lender and Obligors, and their respective successors and assigns, provided,
however, that no Obligor may, without the prior written consent of Lender,
assign any rights, powers, duties or obligations under this Agreement or any of
the other Loan Documents.

 

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19. Notices. All notices, requests, demands or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and given
by (a) personal delivery, (b) expedited delivery service with proof of delivery,
or (c) United States mail, postage prepaid, registered or certified mail, return
receipt requested, sent to the intended addressee at the address set forth on
the signature page hereof and shall be deemed to have been received either, in
the case of personal delivery, as of the time of personal delivery, in the case
of expedited delivery service, as of the time of the expedited delivery and in
the manner provided herein, or in the case of mail, upon the third day after
deposit in a depository receptacle under the care and custody of the United
States Postal Service. Any party shall have the right to change its address for
notice hereunder to any other location within the continental United States by
notice to the other party of such new address.

 

20. Construction; Venue; Service of Process. This Agreement shall be governed by
and construed in accordance with the laws of the State of Louisiana (without
giving effect to its choice of laws provisions), and shall be performable by the
parties hereto in the parish in Louisiana where Lender’s address set forth on
the signature page hereof is located (the “Venue Site”). Any action or
proceeding against any Obligor under or in connection with any of the Loan
Documents may be brought in any state or federal court within the Venue Site.
Each Obligor hereby irrevocably (a) submits to the nonexclusive jurisdiction of
such courts, and (b) waives any objection it may now or hereafter have as to the
venue of any such action or proceeding brought in any such court or that any
such court is an inconvenient forum. Each Obligor agrees that service of process
upon it may be made by certified or registered mail, return receipt requested,
at its address specified or determined in accordance with the provisions this
Agreement. Nothing in any of the other Loan Documents shall affect the right of
Lender to serve process in any other manner permitted by law or shall limit the
right of Lender to bring any action or proceeding against any Obligor or with
respect to any of its property in courts in other jurisdictions. Any action or
proceeding by any Obligor against Lender shall be brought only in a court
located in the Venue Site.

 

21. Invalid Provisions.  If any provision of the Loan Documents are held to be
illegal, invalid or unenforceable under present or future laws, such provision
shall be fully severable and the remaining provisions of the Loan Documents
shall remain in full force and effect and shall not be affected by the illegal,
invalid or unenforceable provision or by its severance.

 

22. Expenses. Borrowers, jointly and severally, shall pay all reasonable and
documented out- of-pocket costs and expenses (including, without limitation,
reasonable and documented attorneys’ fees) in connection with (a) any action
(including, without limitation, any inspections) required in the course of the
administration of the indebtedness and obligations evidenced by the Loan
Documents, and (b) any action in the enforcement of Lender’s rights upon the
occurrence and during the continuance of an Event of Default.

 

23. Participation of the Loans. Each Borrower agrees that Lender may, at its
option, sell participation interests in the Loans and its rights under this
Agreement to a financial institution or institutions and, in connection with
each such sale, Lender may disclose any financial and other information
available to Lender concerning any Borrower to each prospective purchaser
subject to obtaining a confidentiality agreement with each prospective purchaser
prior to disclosing such Borrower’s confidential information.

 

24. Conflicts. Except as otherwise expressly provided in the Note, in the event
any term or provision of this Agreement is inconsistent with or conflicts with
any provision of the other Loan Documents, the terms and provisions contained in
this Agreement shall be controlling.

 

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25. Counterparts.  The Loan Documents may be separately executed in any number
of counterparts, each of which shall be an original, but all of which, taken
together, shall be deemed to constitute one and the same instrument.

 

26. Survival. All representations and warranties made in the Loan Documents or
in any document, statement, or certificate furnished in connection with this
Agreement shall survive the execution and delivery of the Loan Documents, and no
investigation by Lender or any closing shall affect the representations and
warranties or the right of Lender to rely upon them.

 

27. Waiver of Right to Trial by Jury. THE PARTIES HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT,
PROCEEDING, OR COUNTERCLAIM THAT RELATES TO OR ARISES OUT OF THE LOAN DOCUMENTS
OR THE ACTS OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE
TERMS OR PROVISIONS OF THE LOAN DOCUMENTS.

 

28. Patriot Act Notice. Lender hereby notifies each Obligor that pursuant to the
requirements of Section 326 of the USA Patriot Act of 2001, 31 U.S.C. § 5318
(the “Act”), that Lender is required to obtain, verify and record information
that identifies such Obligor, which information includes the name and address of
such Obligor and other information that will allow such Lender to identify such
Obligor in accordance with the Act.

 

29. Amendment and Restatement. Each Borrower hereby acknowledges and agrees that
this Agreement amends and restates the Original Loan Agreement and amounts
outstanding under the Original Loan Agreement shall not be deemed cancelled or
satisfied, but shall be evidenced by this Agreement instead of by the Original
Loan Agreement.

 

30. Revival and Reinstatement of Indebtedness. If the incurrence or payment of
the Indebtedness by any Borrower or the transfer to the Lender of any property
should for any reason subsequently be declared to be void or voidable under any
state or federal law relating to creditors’ rights, including provisions of
Title 11 of the United States Code relating to fraudulent conveyances,
preferences, or other voidable or recoverable payments of money or transfers of
property (collectively, a “Voidable Transfer”), and if the Lender is required to
repay or restore, in whole or in party, any such Voidable Transfer, or elects to
do so upon the advice of counsel, then, as to any such Voidable Transfer, or the
amount thereof that the Lender is required or elects to repay or restore, and as
to the all reasonable costs, expenses, and attorneys’ fees of the Lender related
thereto, the liability of the Borrowers automatically shall be revived,
reinstated, and restored and shall exist as though such Voidable Transfer had
never been made.

 

31. Inconsistent Provisions. If any provision of this Agreement or any of the
Loan Documents conflicts with or is inconsistent with any other provision in any
of the Loan Documents, the provision most advantageous to Lender shall prevail.

 

32. Notice of Final Agreement. It is the intention of each Obligor and Lender
that the following NOTICE OF FINAL AGREEMENT be incorporated by reference into
each of the Loan Documents (as the same may be amended, modified or restated
from time to time). Each Obligor and Lender warrant and represent that the
entire agreement made and existing by or among each Obligor and Lender with
respect to the Loans is and shall be contained within the Loan Documents, and
that no agreements or promises exist or shall exist by or among, any Obligor and
Lender that are not reflected in the Loan Documents.

 

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NOTICE OF FINAL AGREEMENT

 

THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT
BETWEEN THE PARTIES, AND THE SAME MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS BETWEEN THE PARTIES. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

[Remainder of Page Left Intentionally Blank]

 

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AGREED as of the date first written above.

 

LENDER:   ADDRESS:       THERMO COMMUNICATIONS FUNDING LLC   639 Loyola Avenue  
    Suite 2565 By: /s/ Seth Block   New Orleans, LA 70113 Name: Seth Block    
Title: Executive Vice President    

 

DEBTOR:   ADDRESS:       SHIFT8 NETWORKS, INC.   1600 NE Loop 410, Suite 126    
San Antonio, TX 78209       By: /s/ Arthur L. Smith     Name: Arthur L. Smith  
  Title: President/CEO           DEBTOR:   ADDRESS:       T3 COMMUNICATIONS,
INC.   2401 First Street, Suite 300     Fort Myers, FL 33901       By: /s/
Arthur L. Smith     Name: Arthur L. Smith     Title: President/CEO          
GUARANTOR:   ADDRESS:       DIGERATI TECHNOLOGIES, INC.   1600 NE Loop 410,
Suite 126     San Antonio, TX 78209       By: /s/ Arthur L. Smith     Name:
Arthur L. Smith     Title: President/CEO    

 

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GUARANTOR:   ADDRESS:       T3 ACQUISITION, INC.   1600 NE Loop 410, Suite 126  
  San Antonio, TX 78209       By: /s/ Arthur L. Smith     Name: Arthur L. Smith
    Title: President/CEO           GUARANTOR:   ADDRESS:       SHIFT8
TECHNOLOGIES, INC.   1600 NE Loop 410, Suite 126     San Antonio, TX 78209      
By: /s/ Arthur L. Smith     Name: Arthur L. Smith     Title: President/CEO      
    GUARANTOR:   ADDRESS:       ARTHUR L. SMITH   1600 NE Loop 410 Suite 126    
San Antonio, TX 78209       By: /s/ Arthur L. Smith     Name: Arthur L. Smith  
 

 

 

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