Exhibit 10.4
 
CONVERTIBLE LOAN AGREEMENT
 
Dated as m July 31, 2009
 
by and between
 
NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY
 
as Lender
 
and
 
X-FACTOR COMMUNICATIONS, LLC
a New York limited liability company
as Borrower
 
INITIAL CREDIT AMOUNT: $100,000
MAXIMUM CREDIT AMOUNT:$500,000 ("Loan")
 
Maturity Date: August 1, 2014
Closing Fee: $2,500
 
Interest: 6%
 
Warrants: 28,900 LLC Membership Units
Class of stock: Preferred Membership Units
Exercise price: $4.33
 
The terms and information set forth on this cover page are a part of the
attached Convertible Loan Agreement, dated as of the date first written above
(this "Agreement"), entered into by and among the New Jersey Economic
Development Authority ("Lender") and X-Factor Communications, LLC, a limited
liability company ("Borrower"), set forth above. The terms and conditions of the
Agreement agreed to between Lender and Borrower are as follows:
 
1) Definitions. As used in this Agreement, the following capitalized terms have
the following meanings:
 
a)       "Securities Act" shall mean the Securities Act of 1933, as amended.
 
b)       "Event of Default" has the meaning given in Section 8 hereof.
 
c)       "Financial Statements" shall mean, with respect to any accounting
period for any Person, statements of operations, retained earnings and cash flow
of such Person for such period, and balance sheets of such Person as of the end
of such period, setting forth in each case in comparative form figures for the
corresponding period in the preceding fiscal year if such period is less than a
full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding fiscal year, all prepared in reasonable detail and in
accordance with GAAP. Unless otherwise indicated, each reference to Financial
Statements of any Person shall be deemed to refer to Financial Statements
prepared on a consolidated basis.
 
 
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d)       "Governmental Authority" means any national, federal, state,
provincial, county, municipal or local government, foreign or domestic, or the
government of any political subdivision of any of the foregoing, any
multinational organization or body, or any entity, authority, agency, ministry
or other similar body exercising executive, legislative, judicial, regulatory,
taxing or administrative authority or functions of or pertaining to government,
including any authority or other quasi-governmental entity established to
perform any of such functions.
 
e)       "GAAP" shall mean generally accepted accounting principles as in effect
in the United States of America.
 
f)        "Innovation Zone" shall mean geographically defined areas within the
cities of Camden, Newark and New Brunswick/North Brunswick in the State of New
Jersey.
 
g)       "Lien" shall mean, with respect to any property, any security interest,
mortgage, pledge, lien, claim, charge or other encumbrance in, of, or on such
property or the income therefrom, including, without limitation, the interest of
a vendor or lessor under a conditional sale agreement, capital lease or other
title retention agreement, or any agreement to provide any of the foregoing, and
the filing of any financing statement or similar instrument under the Uniform
Commercial Code or comparable law of any jurisdiction.
 
h)       "Material Adverse Effect" shall mean a material adverse effect on (a)
the business, assets, operations, prospects or financial or other condition of
Borrower; (b) the ability of Borrower to pay or perform the Obligations in
accordance with the terms of this Agreement and the other Transaction Documents
and to avoid an Event of Default, or an event which, with the giving of notice
or the passage of time or both, would constitute an Event of Default, under any
Transaction Document; or (c) the rights and remedies of Lender under this
Agreement, the other Transaction Documents or any related document, instrument
or agreement.
 
i)       "Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Borrower to Lender of
every kind and description (whether or not evidenced by any note or instrument
and whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of this Agreement, the Note and the other
Transaction Documents, including, all interest, fees, charges, expenses,
attorneys' fees and costs and accountants' fees and costs chargeable to and
payable by Borrower hereunder and thereunder, in each case, whether direct or
indirect, absolute or contingent, due or to become due, and whether or not
arising after the commencement of a proceeding under Title 11 of the United
States Code (11 U. S. C. Section 101 itas amended from time to time (including
post-petition interest) and whether or not allowed or allowable as a claim in
any such proceeding.
 
j)       "Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
 
 
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k) "Senior Indebtedness" shall mean the indebtedness referenced in Paragraph
5(b) of the Security Agreement.
 
1) "Subsidiary" shall mean (a) any corporation of which more than 50% of the
issued and outstanding equity securities having ordinary voting power to elect a
majority of the Board of Directors of such corporation is at the time directly
or indirectly owned or controlled by Borrower, (b) any partnership, joint
venture, or other association of which more than 50% of the equity interest
having the power to vote, direct or control the management of such partnership,
joint venture or other association is at the time directly or indirectly owned
and controlled by Borrower, (c) any other entity included in the financial
statements of Borrower on a consolidated basis.
 
m) "Tax" means any of the following, and "Taxes" means all of the following,
imposed by or payable to any Governmental Authority: any income, gross receipts,
license, payroll, employment, excise, severance, stamp, business, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Internal Revenue Code of 1986, as amended or any successor thereto), capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, or value added tax, any alternative or add-on minimum
tax, any estimated tax, and any levy, impost, duty, assessment, or withholding,
in each case including any interest, penalty, or addition thereto, whether
disputed or not.
 
n)       "Transaction Documents" shall mean this Agreement, the Note, the
Commitment Letter, the Warrant, the Patent, Trademark and Copyright Security
Agreement, and the Security Agreement and any other documents executed in
connection with this loan.
 
2) Disbursements. This Investment will finance working capital with match
funding required. Investment proceeds to be advanced as follows:
 
$100,000 at closing.
 
$100,000 upon receipt of purchase orders totaling at least $500,000, including
one from the US Postal Service (via NEC and Verizon) for at least 460 offices
which involve utilization of Borrower's digital signage control portal.
 
$100,000 upon the Borrower becoming an approved Cisco Eco System Partner and
listed as such on their website. Evidence of said approval deemed satisfactory
to the Authority as certified by the CEO of the Borrower.
 
$100,000 upon the Borrower providing an accepted offer letter and resume deemed
satisfactory to the Authority for a new hire for the position of VP Operations
or COO or CFO.
 
$100,000 upon the Borrower releasing a new/updated version of their digital
signage control portal to include features of syndication, time based content
delivery,
advertising inventory module. Evidence of this release shall be deemed
satisfactory to the Authority as certified by the CEO of Borrower.
 
It is specifically understood and agreed that the conditions under which the
second and third disbursement will be made must be achieved in sequential order.
Once those conditions have been satisfied, the remaining disbursements may be
pursued without regard to sequential achievement.
 
 
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Upon each request for disbursement, Lender shall review Borrower's performance
as set forth in the monthly status report certificates submitted to Lender by
Borrower each month relative to the Borrower's projected performance as set
forth in the Borrower's Business Plan and projections dated December 2008.
 
Notwithstanding anything in the Investment documents to the contrary, in the
event Lender determines, in its sole discretion, that there is a significant
deviation between actual and projected performance, Lender shall have the right
to deny, modify or postpone any and all disbursements to be made hereunder
provided that Borrower has received prior notice with a reasonable opportunity
to cure said deviation.
 
Investment proceeds shall be disbursed within 12 months of the closing date
provided that all documents, searches, opinions, evidence of insurance and
guarantees required by Lender in the commitment letter dated May 29, 2009,
attached as Exhibit B, shall be submitted and deemed satisfactory.
 
3)Convertible Note. The Loan made by Lender shall be evidenced by a convertible
note of Borrower substantially in the form of Exhibit A hereto (the "Note"),
dated the date hereof, payable to Lender. The terms of the Note are as follows:
 
a)     Interest. Borrower shall pay interest on the Note at a fixed rate equal
to the rate specified on the cover page hereof. Interest only for the first
twelve (12) months followed by forty-eight (48) months of level monthly payments
of principal plus interest. Interest payments will be calculated on an actual
days elapsed over a 360 day year and will be payable monthly in arrears. On the
Maturity Date specified on the cover page, the entire outstanding principal
balance of the Note and all accrued and unpaid interest thereon shall be
immediately due and payable.
 
b)    Premium on Repayment. None.
 
c)     Collateral Security. The Note and this Loan are secured by a fully
perfected security interest in all of the existing and after acquired real and
personal, tangible and intangible assets of Borrower other than Borrower's
Intellectual Property (collectively the "Collateral"), provided that springing
lien on the Borrower's Intellectual Property ("IP Assets") shall not attach and
the security interest evidenced by the Security Agreement will be of no force or
effect unless and until a default under the Transaction Documents. All
Collateral will be free and clear of other liens, claims and encumbrances,
except as set forth on Exhibit C attached hereto. Borrower will also enter into
a negative pledge agreement with respect to all IP Assets.
 
d)     Conversion. The Note will be convertible into limited liability company
preferred warrant membership interests of Borrower as provided therein.
 
e)     Warrant. In consideration of the Loan Lender has made available to
Borrower, Borrower agrees to grant Lender a warrant ("Warrant") to purchase
28,900 shares of Borrower's preferred warrant membership interest units warrants
as provided in said Warrant.
 
4)Borrower's Representations and Warranties. Borrower hereby makes the following
representations and warranties and acknowledges and agrees that each and every
one of the following representations and warranties shall survive closing and
shall continue for as long as the Loan remains outstanding:
 
(a) The Borrower has been duly organized and validly exists as a limited
liability company under the laws of the State of New York, has power to enter
into this Agreement and the Note evidencing the debt obligation of the Borrower
to the Lender hereunder and has authorized the taking of all action necessary to
carry out and give effect to the transactions contemplated by this Agreement.
 
 
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(b) There is no action or proceeding pending or to the Borrower's knowledge
threatened against the Borrower before any court or administrative agency that
might adversely affect the ability of the Borrower to perform its obligations
under this Agreement and all authorizations, consents and approvals of
governmental bodies or agencies, required in connection with the performance of
the Borrower's obligations hereunder have been obtained and will be obtained
whenever required hereunder or by law.
 
(c) Neither the execution and delivery of this Agreement, the consummation of
the transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement is prevented, limited by, or
conflicts with or results in a breach of, the terms, conditions, or provisions
of any corporate restrictions or any evidence of indebtedness, agreement or
instrument of whatever nature to which the Borrower is now a party or by which
it is bound, or constitutes a default under any of the foregoing.
 
(d) All tax returns and reports of the Borrower required by law to be filed have
been duly filed and all taxes, assessments, fees and other governmental charges
upon the Borrower or upon any of its respective properties, assets, income or
franchises which are due and payable pursuant to such returns and reports, or
pursuant to any assessment received by the Borrower have been paid other than
those which may be presently payable without penalty or interest.
 
(e) The Borrower has, or will have, title to all the Collateral whenever
acquired or arising free and clear of all liens and claims, encumbrances,
set-offs, defenses and counterclaims, except those stated in Exhibit C attached
hereto or permitted by the Security Agreement, and has not made and will not
make any assignment, pledge, mortgage, hypothecation or transfer (other than
sales or leases in the ordinary course of business) of any such Collateral or
the proceeds thereof.
 
(f) All statements, representations and warranties made by the Borrower in its
application to the Lender, and any materials furnished in support of the request
for Lender financial assistance and this Agreement are true. It is specifically
understood by the Borrower that all such statements, representations and
warranties shall be deemed to have been relied upon by the Lender as an
inducement to make the Loan and that if any such statements, representations or
warranties were materially false at the time they were made or are breached
during the term hereof, the Lender may, in its sole discretion, consider any
such misrepresentation or breach an event of default.
 
(g) The chief executive office of the Borrower is located at 3 Empire Blvd,
South Hackensack, New Jersey 07606. None of the Borrower's books or records are
maintained at any other location. The Borrower shall notify the Lender in
writing of any change in the location of the Borrower's chief executive office.
 
(h) Borrower represents to the Lender that it has at all times pertinent to this
Agreement been represented by advisors of its own selection, including but not
limited to attorneys-at-law and/or certified public accountants; that it has not
relied upon any statement, representation, warranty, agreement or information
provided by the Lender, its employees, agents or attorneys; that it acknowledges
that it is informed by its advisors of its respective rights, duties, and
obligations with respect to the Loan under all applicable laws, that it has no
set-offs, defenses or counterclaims against the Lender with respect to the Loan,
and that it is indebted to the Lender for the amounts stated in this Agreement.
 
(i) Borrower further acknowledges and agrees that the Lender has made no
statements, representations, warranties, agreements or provided information to
it in order to induce the execution of this Agreement. Borrower further
acknowledges and agrees that all agreements of the parties are set forth in this
Agreement or in the financing documents executed by Borrower prior to or on even
date hereof.
 
(j) Owners of the Borrower shall not form any start-ups venture without the
express prior consent of the Lender from the date hereof and ending two years
after the Investment has been fully repaid.
 
 
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5)Lender's Representations and Warranties. Lender hereby represents and warrants
to Borrower as of the Closing Date, knowing and intending that Borrower is
relying hereon in entering into this Agreement and the other Transaction
Documents, and the transactions contemplated hereby and thereby, as follows: (a)
Lender has the power and authority to execute and deliver this Agreement and the
other Transaction Documents to which it is a signatory, and to perform its
obligations hereunder and thereunder, all of which have been duly authorized,
(b) Lender understands that the Note and the Warrant constitute restricted
securities within the meaning of Rule 144 promulgated under the Securities Act,
and that neither of them, or any interest therein, may be sold except pursuant
to an effective registration statement under the Securities Act or in a
transaction exempt from registration under the Securities Act, and Lender
understands the meaning and effect of such restriction.
 
6)Certain Covenants. a) Affirmative Covenants. Borrower covenants and agrees to
the following:
 
(i)       Punctual Payment. Borrower will duly and punctually pay or cause to be
paid the principal and interest on the Note and Borrower will duly and
punctually pay or cause to be paid all other amounts provided for in this
Agreement and the other Transaction Documents to which Borrower is a party, all
in accordance with the terms of this Agreement and the other Transaction
Documents.
 
(ii)       Records and Accounts. Borrower will (i) keep true and accurate
records and books of account in which full, true and correct entries will be
made in accordance with GAAP and (ii) maintain adequate accounts and reserves
for all Taxes (including income Taxes), depreciation, depletion, obsolescence
and amortization of its properties, contingencies, and other reserves, all in
accordance with GAAP.
 
(iii)        Financial Statements, Certificates and Information. Until such time
as all amounts due under this Agreement and any Transaction Documents have been
paid and the Warrant shall have expired or been fully exercised, the Borrower
will deliver to the Lender:
 
(1) within 120 days after the end of each fiscal year commencing with the year
ending 2009, annual audited financial statements of the Borrower as of the end
of such year, together with statements of income, retained earnings and cash
flows of the Borrower for such year, financing statements prepared by an
independent public accounting firm, prepared in accordance with GAAP, and in the
case of the consolidated statements, reviewed without qualification, together
with a written statement from such accounting firm to the effect that they have
read a copy of this Agreement, and that, in making the examination necessary to
said certification, they have obtained no knowledge of any default or Event of
Default, or, if such accountants shall have obtained knowledge of any then
existing default or Event of Default they shall disclose in such statement any
such default or Event of Default;
 
(2) within 30 days after the end of each month commencing with the month ending
July 31, 2009, monthly financial statements together with a status report in the
form attached hereto as Exhibit D;
 
 
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(3) a copy of an annual operating budget and financial projections for each
fiscal year of the Borrower prior to start of each new fiscal year prepared by
the Borrower, together
with management's written discussion and analysis of such budget and financial
projections. The Borrower shall review the budget and projections periodically
and shall advise the Lender of all changes therein and all material deviations
therefrom;
 
(4) annually updated financial projections prepared on a monthly basis for the
upcoming fiscal year submitted beginning with fiscal year 2009. All projections
to be submitted within 30 days prior to the start of the fiscal year;
 
(5) within fifteen days of filing thereof all tax returns of Borrower;
 
(6) such other reports, financial information, certificates and notices as the
Lender may reasonably request as soon as practicable after such reports and
other financial information becomes available;
 
(7) such other reports and notices provided at any time to any shareholder of
the Borrower, and
 
(8) such other reports, financial information, certificates and notices as the
Borrower provides to any senior lender, if any, and to lender of any other
indebtedness that is senior to or pari passu with the Note, at the same time
they are delivered to any senior lender or such lender.
 
(9) additional financial statements may be required at the sole discretion of
the Lender.
 
iv) Notices.
 
(1)       Defaults. Borrower will promptly notify Lender in writing of the
occurrence of any Event of Default. If any Person shall give any notice or take
any other action in respect of a claimed default (whether or not constituting an
Event of Default) under this Agreement, the Note, any other note, evidence of
indebtedness, indenture or other material financial obligation to which or with
respect to which Borrower is a party or obligor, whether as principal,
guarantor, surety or otherwise, Borrower shall forthwith give written notice
thereof to Lender, describing the notice or action and the nature of the claimed
default.
 
(2)       Environmental Events. Borrower will promptly give written notice to
Lender (i) of any violation of any environmental law, rule or regulation that
could reasonably be expected to result in a Material Adverse Effect or that
Borrower reports in writing (or for which any written report supplemental to any
oral report is made) to any Governmental Authority, (ii) upon becoming aware
thereof, of any inquiry, proceeding, investigation, claim, complaint, suit or
other action, including a notice from any agency of potential environmental
liability, of any Governmental Authority or any third party, that could
reasonably be expected to result in a Material Adverse Effect, and (iii) of any
environmental, health or safety condition that could reasonably be expected to
result in a Material Adverse Effect.
 
(3)       Notice of Litigation and Judgments. Borrower will give notice to
Lender in writing within fifteen (15) days of becoming aware of any litigation
or proceedings threatened in writing or any pending litigation and proceedings
affecting Borrower or to which Borrower is or becomes a party involving any
claim against Borrower that could
reasonably be expected to result in a Material Adverse Effect and stating the
nature and status of such litigation or proceedings. Borrower will give notice
to Lender, in writing, in form and detail reasonably satisfactory to Lender,
within 10 days of any judgment, final or otherwise, against Borrower.
 
 
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(4) Notice of Material Events. Borrower will give notice to Lender in writing
within ten (10) days of becoming aware of any fact, circumstance, occurrence or
event that could reasonably be expected to result in a Material Adverse Effect.
 
v)     Corporate Existence; Maintenance of Properties; Presence in New Jersey.
Borrower will do or cause to be done all things necessary to preserve and keep
in full force and effect its corporate existence. Borrower will do or cause to
be done all things necessary to preserve and keep in full force and effect its
material rights and franchises. Borrower (1) will cause all of its properties
used or useful in the conduct of its business to be maintained and kept in good
condition, repair and working order, ordinary wear and tear excepted, (ii) will
cause to be made all necessary repairs, renewals, replacements, betterments and
improvements thereof, all as in the judgment of Borrower may be necessary so
that the business carried on in connection therewith may be properly conducted
at all times, and (iii) will continue to engage primarily in the businesses now
conducted by it and in related businesses. Borrower will maintain its
headquarters and will employ at least 75% of its full time employees (as
determined by payroll tax records) in the state of New Jersey (including
Borrower's president, chief executive and chief financial officer, each of which
shall be employed solely by Borrower) at all times. Within 30 days after the
close of each fiscal year, the Borrower shall furnish a written report to the
Lender of the number, location and classification of Borrower's employees as of
the end of the fiscal year.
 
vi)           Insurance. Borrower will maintain in full force and effect with
financially sound and reputable insurers having an A-rating or better from
Best's Rating Service (or any successor organization), policies of insurance
with respect to its properties and business against such casualties and
contingencies as shall be in accordance with the general practices of businesses
engaged in similar activities in similar geographic areas and in amounts,
containing such terms, in such forms and for such periods as may be reasonable
and prudent and customary for similar businesses. All property and casualty
insurance policies shall name Lender as "lender loss payee" and all liability
insurance policies shall name Lender as "additional insured", and all such
policies shall provide that the insurer is to give Lender 30 days' advance
notice before the effectiveness of any cancellation, non-renewal, amendment and
riders.
 
vii)       Taxes. Borrower will duly pay and discharge, or cause to be paid and
discharged, before the same shall become overdue, all taxes, assessments and
other governmental charges imposed upon it and its properties (real and
personal), sales and activities, or any part thereof, or upon the income or
profits therefrom, as well as all claims for labor, materials, or supplies that
if unpaid could reasonably be expected to by law become a Lien on any of its
property; provided that any such tax, assessment, charge, levy or claim need not
be paid if the validity or amount thereof shall currently be contested in good
faith by appropriate proceedings and if Borrower shall have set aside on its
books adequate reserves with respect thereto in accordance with GAAP; and
provided, further that Borrower will pay all such taxes, assessments, charges,
levies or claims forthwith upon the commencement of proceedings to foreclose any
Lien that may have attached as security therefor.
 
 
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viii)        Inspection of Properties and Books. Borrower shall permit Lender
and its designated representatives, upon reasonable notice if no default has
occurred and is continuing (and at any time without notice if a default has
occurred and is continuing) to visit and inspect any of the properties of
Borrower to examine the corporate, financial and operating records of
Borrower (and to make copies thereof and extracts therefrom), and to discuss the
affairs, finances and accounts of Borrower with, and to be advised as to the
same by, its and their directors, officers and outside tax and financial
advisors, all at such reasonable times and intervals, during normal business
hours if no default has occurred and is continuing as Lender may reasonably
request (and at any time and without notice if a default has occurred and is
continuing); provided  that so long as no default shall have occurred and be
continuing, (only four such inspections and examinations per 12-month period
shall be at the expense of Borrower and, if a default shall have occurred and be
continuing, all such inspections and examinations shall be at the expense of
Borrower).
 
ix)       Compliance with Laws, Contracts, Licenses, and Permits. Borrower will
comply in all material respects with (A) the applicable laws and regulations
wherever its business is conducted, including all Environmental Laws; (B) the
provisions of its Certificate of Incorporation and by-laws; (C) all material
agreements by which it or any of its properties may be bound; and (D) all
applicable decrees, orders, and judgments. If any permit or license from any
Governmental Authority shall be necessary or required for Borrower to fulfill
any of its obligations hereunder or under any of the other Transaction Documents
to which Borrower is a party, Borrower will immediately obtain such permit or
license and furnish Lender with evidence thereof. The Borrower agrees to operate
its business as an authorized project under the New Jersey Economic Development
Authority Act, P.L. 1974, c.80.
 
x)      Environmental Matters. Borrower will conduct its business so as to
comply in all material respects with all applicable Environmental Laws
including, without limitation, compliance in all material respects with the
terms and conditions of all permits and governmental authorizations.
 
xi)       Further Assurances. Borrower will cooperate with Lender and execute
such further instruments and documents as Lender shall reasonably request to
carry out to their satisfaction the transactions contemplated by this Agreement
and the other Transaction Documents.
 
xii)                  Observer Rights. Until such time as all amounts due under
this Agreement and any Transaction Documents have been paid, the Borrower shall
invite a representative from the Lender to attend all meetings of its Board of
Directors in a nonvoting observer capacity and, in this respect, shall give a
representative from the Lender copies of all notices, minutes, consents, and
other materials that it provides to its directors at the same time and in the
same manner as provided to such directors; provided, however, that a
representative from the Lender shall agree to hold in confidence and trust
(subject to OPRA and common law right to know) and to act in a fiduciary manner
with respect to all information so provided; and provided further, that the
Borrower reserves the right to withhold any information and to exclude such
representative from any meeting or portion thereof if access to such information
or attendance at such meeting could adversely affect the attorney-client
privilege between the Borrower and its counsel or result in disclosure of trade
secrets or a conflict of interest.
 
b) Certain Negative Covenants. Unless Borrower has received the permission or
consent of the Lender, which Lender agrees shall not be unreasonably withheld,
Borrower covenants and agrees:
 
(i)       Corporate Changes. Borrower will not directly or indirectly, merge or
consolidate with any Person or amend, alter or modify its organizational
documents or its legal name, mailing address, chief executive office or
principal places of business, jurisdiction of organization, structure, status or
existence, or liquidate or dissolve itself (or suffer any liquidation or
dissolution).
 
(ii)       Indebtedness. Borrower will not create, incur, assume or suffer to
exist any liability for borrowed money, directly or indirectly other than: (i)
indebtedness created under this
Agreement, the Note and the other Transaction Documents; (ii) the Senior
Indebtedness; (iii) those borrowings set forth on Schedule A hereto; or (iv)
those borrowings approved by Lender.
 
 
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(iii)        Liens. Borrower will not create, incur, assume or suffer to exist,
any Lien on any of its properties or assets now owned or hereafter acquired
except: (a) Liens securing the Senior Indebtedness; (b) Liens approved by
Lender; and (c) Liens created under the Transaction Documents.
 
(iv)        Investments. Borrower shall not make any investment in any Person,
whether in cash, securities or other property of any kind.
 
(v)       Guarantees. Borrower will not assume, endorse, be or become liable for
or guarantee the obligations of any other Person.
 
(vi)        Dividends, Stock Redemptions, Stock Issuances, Exchange,
Distributions, Etc.  Borrower will not directly or indirectly, pay any dividends
or distributions on, or purchase, redeem or retire, any shares of any class of
its capital stock or other equity interests or any convertible securities,
whether now or hereafter outstanding, or make any payment on account of or set
apart assets for a sinking or other analogous fund for, the purchase,
redemption, defeasance, retirement or other acquisition of its capital stock or
other equity interests, or make any other distribution in respect thereof,
either directly or indirectly, whether in cash or property or in obligations of
Borrower.
 
(vii)            Transactions with Affiliates. Borrower will not enter into any
transaction with any of its employees, directors or any affiliate other than
loans or advances to employees in the ordinary course of business in an
aggregate outstanding amount not exceeding $250,000.
 
(viii)            Partnerships; Subsidiaries; Joint Ventures; Management
Contracts. Borrower will not at any time create any direct or indirect
Subsidiary, enter into any joint venture or similar arrangement or become a
partner in any general or limited partnership or enter into any management
contract permitting third party management rights with respect to the business
of Borrower.
 
(ix)        Cancellation of Debt. Borrower will not cancel any liability or debt
owed to it, except for consideration equal to or exceeding the outstanding
balance of such liability or debt, and in the ordinary course of business.
 
(x)       Change in Nature of Business. Borrower will not make any changes in
any of its business objectives, purposes, or operations that could reasonably be
expected to adversely affect repayment of its obligations hereunder or under any
of the other Transaction Documents or could reasonably be expected to result in
a Material Adverse Effect or engage in any business other than that presently
engaged in or proposed to be engaged in.
 
(xi)        Borrower shall not repay any unsecured borrowings if: (i) such
repayment would cause an Event of Default; or (ii) Borrower is in default under
the Transaction Documents.
 
7)Fees and Expenses. On the date of this Agreement ("Closing Date"), Borrower
shall pay Lender the Closing Fee specified on the cover page and all recording
fees. Borrower shall also deliver the Note and Warrant to Lender. Upon the
occurrence of an Event of Default, Borrower shall pay all reasonable costs that
Lender incurs in enforcing this Agreement, including without limitation
reasonable attorneys fees and expenses.
 
 
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8)Events of Default. Any one or more of the following shall constitute an Event
of Default under this Agreement:
 
a) Failure to Pay. Borrower shall fail to pay (i) when due any principal or
interest payment on the due date hereunder or (ii) any other payment required
under the terms of this Agreement or any other Transaction Document on the date
due and such payment shall not have been made within five (5) days of Borrower's
receipt of Lender's written notice to Borrower of such failure to pay; or
 
b) Breaches of Covenants. Borrower shall fail to observe or perform any other
covenant, obligation, condition or agreement contained in this Agreement or the
other Transaction Documents and (i) such failure shall continue for fifteen (15)
days, or (ii) if such failure is not curable within such fifteen (15) day
period, but is reasonably capable of cure within thirty (30) days, either (A)
such failure shall continue for thirty (30) days or (B) Borrower shall not have
commenced a cure in a manner reasonably satisfactory to Lender within the
initial fifteen (15) day period; or
 
c) Representations and Warranties. Any representation, warranty, certificate, or
other statement (financial or otherwise) made or furnished by or on behalf of
Borrower to Lender in writing in connection with this Agreement or any of the
other Transaction Documents, or as an inducement to Lender to enter into this
Agreement and the other Transaction Documents, shall be false, incorrect,
incomplete or misleading in any material respect when made or furnished; or
 
d) Other Payment Obligations. Any indebtedness under any bonds, debentures,
notes or other evidences of indebtedness for money borrowed (or any guarantees
thereof, excluding this Agreement and the other Transactions Documents) by
Borrower in an aggregate principal amount in excess of $125,000 is not paid when
due either at its stated maturity or upon acceleration thereof, and such
indebtedness is not discharged, or such acceleration is not rescinded or
annulled; or
 
e) Voluntary Bankruptcy or Insolvency Proceedings. Borrower shall (i) apply for
or consent to the appointment of a receiver, trustee, liquidator or custodian of
itself or of all or a substantial part of its property, (ii) be unable, or admit
in writing its inability, to pay its debts generally as they mature, (iii) make
a general assignment for the benefit of its or any of its creditors, (iv) be
dissolved or liquidated, (v) become insolvent (as such term may be defined or
interpreted under any applicable statute), (vi) commence a voluntary case or
other proceeding seeking liquidation, reorganization or other relief with
respect to itself or its debts under any bankruptcy, insolvency or other similar
law now or hereafter in effect or consent to any such relief or to the
appointment of or taking possession of its property by any official in an
involuntary case or other proceeding commenced against it, or (vii) take any
action for the purpose of effecting any of the foregoing; or
 
f) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for the
appointment of a receiver, trustee, liquidator or custodian of Borrower or of
all or a substantial part of the property thereof, or an involuntary case or
other proceedings seeking liquidation, reorganization or other relief with
respect to Borrower or the debts thereof under any bankruptcy, insolvency or
other similar law now or hereafter in effect shall be commenced and an order for
relief entered or such proceeding shall not be dismissed or discharged within
thirty (30) days of commencement; or
 
g) Judgments. A final judgment or order for the payment of money in excess of
$100,000 shall be rendered against Borrower and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed, or any judgment, writ, assessment, warrant of attachment,
or execution or similar process shall be issued or levied against a substantial
part of the property of Borrower and such judgment, writ, or similar process
shall not be released, stayed, vacated or otherwise dismissed within thirty (30)
days after issue or levy; or
 
 
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h) Transaction Documents. Any Transaction Document or any material term thereof
shall cease to be, or be asserted by Borrower not to be, a legal, valid and
binding obligation of Borrower enforceable in accordance with its terms; or
 
i) Material Adverse Effect. One or more conditions exist or events have occurred
which could reasonably indicate, or reasonably result in, a Material Adverse
Effect.
 
j) Transfer. The transfer of Borrower's headquarters and/or substantial business
operations outside of the state of New Jersey.
 
9)Rights of Lender upon Default.
 
a) Whenever any Event of Default referred to in Section 8 hereof shall have
occurred and be continuing, the Lender may take one or more of the following
remedial steps:
 
(i) declare the entire principal amount of the Note to be due and payable
forthwith, whereupon the Note shall become forthwith, due and payable, both as
to principal and interest, without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived, anything contained herein
or in the Note to the contrary notwithstanding;
 
(ii) take any action at law or in equity to collect the payments then due and
thereafter to become due under the Note or to enforce performance and observance
of any obligation, agreement or covenant of the Borrower under this Agreement;
 
(iii) take possession of the Borrower's interest in the Collateral without
terminating this Agreement (including, without limitation filing the Patent,
Trademark and Copyright Security Agreement held in escrow), and pursue remedies
of a creditor under the Uniform Commercial Code and assign, sell or lease, or
otherwise dispose of the Borrower's interest in the collateral for the account
of the Borrower, and the Borrower shall then be liable for the difference
between the loan payments and other amounts due under this Agreement and the
Note and amounts received pursuant to such assignment or contract of sale or
lease or other disposition of the Borrower's interest in the Collateral and the
amount of such difference shall then be immediately due and payable. The
Borrower hereby agrees that in the event the Lender does take possession of the
Collateral as provided herein, the obligation of the Borrower to pay such loan
payments due or to become due under this Agreement and Note shall survive such
repossession;
 
(iv) without further notice or demand or legal process, enter upon any premises
of the Borrower and take possession of the Collateral, all records and items
relating to the Collateral and, at the Lender's request, the Borrower will
assemble the Collateral and such records and deliver them to the Lender;
 
(v) sell the Collateral but the Lender shall give the Borrower reasonable notice
of the time and place of any public sale of such Collateral or of the time after
which any private sale or other intended disposition thereof is to be made. The
requirement of reasonable notice shall be met if notice of the sale or other
intended disposition is (1) mailed (by certified mail, postage paid) to the
Borrower at least ten (10) days prior to the time of such sale or disposition or
(2) delivered to the Borrower at least five (5) days prior to the time of such
sale or disposition. At such sale the Lender may sell the Collateral for cash or
upon credit or otherwise, at such prices and upon such terms as it deems
advisable and the Lender may bid or become purchaser at such sale, free of the
right of redemption, which is hereby waived. The Lender may adjourn such sales
at the time and place fixed therefor without further notice or advertisement and
may sell such Collateral as an entirety or in separate lots as it deems
advisable, but the Lender shall not be obligated to sell all or any part of such
Collateral at the time and place fixed for such sale if it determines not to do
so. Upon the institution of any such action hereunder by the Lender, the Lender
shall be entitled to the appointment of a receiver for the Collateral without
proof of the depreciation of the value of same.
 
 
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b) If the Lender shall have proceeded to enforce its rights under this Agreement
and such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Lender, then the Borrower and the
Lender shall be restored respectively to their several positions and rights
hereunder, and all rights, remedies and powers of the Borrower and the Lender
shall continue as though no such proceedings had taken place.
 
c) No remedy herein conferred or reserved to the Lender is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Agreement or now or hereafter existing at law or in equity or by
statute. No delay or omission to exercise any right or power accruing upon any
default shall impair any such right or power or shall be construed to be a
waiver thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Lender to
exercise any remedy reserved to it in this Section, it shall not be necessary to
give notice other than such notice as may be required in this Section.
 
d) In addition to the above remedies, if the Borrower commits a breach, or
threatens to commit a breach of this Agreement, the Lender shall have the right
and remedy, without posting bond or other security, to have the provisions of
this Agreement specifically enforced by any court having equity jurisdiction, it
being acknowledged and agreed that any such breach or threatened breach will
cause irreparable injury to the Lender and that money damages will not provide
an adequate remedy therefor.
 
e) In the event the Borrower should default under any of the provisions of this
Agreement and the Lender shall require and employ attorneys or incur other
expenses for the collection of payments due or to become due for the enforcement
or performance or observance of any obligation or agreement on the part of the
Borrower herein contained, the Borrower shall on demand therefor pay to the
Lender, the reasonable fees of such attorneys and other expenses so incurred by
the Lender.
 
f) The Lender shall not be required to do any act whatsoever or exercise any
diligence whatsoever to mitigate the damages to the Borrower if an Event of
Default shall occur hereunder.
 
10) Damage, Destruction, Condemnation.
 
a) If the Collateral shall be damaged or either partially or totally destroyed
or if title to or the temporary use of the whole or any part of the Collateral
shall be taken or condemned by a competent authority for any public use or
purpose, there shall be no abatement or reduction in the amounts payable by the
Borrower under this Agreement or under the Note.
 
b) In the event of any damage, destruction, taking or condemnation, the proceeds
from any insurance or condemnation award shall be deposited with the Lender and
applied to the payment of any amounts due on the Loan unless the Borrower and
the Lender shall agree to apply the proceeds to the repair, reconstruction,
replacement or relocation of the Collateral.
 
 
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11)Conditions Precedent to Closing. The Closing shall be subject to the
satisfaction of each of the following conditions (all in form and substance
satisfactory to Lender):
 
a) Satisfactory Documentation Execution of definitive documents evidencing the
Notes and the Warrant which shall be prepared by counsel to Lender and be in a
form and substance satisfactory to Lender.
 
b) No Material Adverse Effect. As of the Closing Date, there will have been:
 
(i) since Borrower's last audited financial statements, no adverse change or any
development involving a prospective adverse change, in or affecting the general
affairs, industry, management, financial position, shareholders' equity or
results of operations or prospects of Borrower and its owners which Lender, in
its judgment individually or in the aggregate, believes to be material,
 
(ii) no litigation commenced which, if successful, would have a material adverse
impact on Borrower, its business or its ability to repay the loans or which
would challenge the transactions hereby, or
 
(iii) since Borrower's last audited financial statements, no material increase
in the liabilities, liquidated or contingent of Borrower in excess of its
assets.
 
c) No Misrepresentations. No information or representation provided to Lender
shall prove to have been inaccurate, incomplete or misleading in any way in
which, Lender, in its judgment, deems to be material.
 
d) Compliance. Compliance with applicable laws, decrees, and material agreements
or obtaining of applicable consents and waivers.
 
e) Consents. Receipt of all necessary or appropriate third party and
governmental waivers and consents.
 
t) Opinions. Satisfactory opinions of counsel from Borrower's counsel reasonably
acceptable to Lender.
 
12) Closinz Deliveries. At the Closing, Borrower shall deliver to Lender, in
form and substance satisfactory to Lender, three (except in the case of the
Note, then only one duly executed original) duly executed, valid, binding and
enforceable originals of the following:
 
a) the Note;
 
b) the Warrant;
 
c) the Security Agreement;
 
d) the Patent, Trademark and Copyright Security Agreement;
 
e) a (i) filed copy of the Articles of Incorporation, as presently in effect, of
Borrower, (ii) copy of the Operating Agreement, as presently in effect, of
Borrower, (iii) the resolutions of the Borrower's Members authorizing the
execution, delivery and consummation of this Agreement, the other Transaction
Documents and the transactions contemplated hereby, (iv) an original of the long
form good standing certificate of Borrower from the Secretary of State of the
State of New York; (v) a certified copy of the short form good standing
certificate of Borrower from the Department of Treasury — State of New Jersey;
and certified copy of the Certificate of Authority for the State of New Jersey.
 
 
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f) a legal opinion from the Counsel to Borrower, dated the Closing Date,
satisfactory to the Lender and its counsel;
 
g) Evidence of UCC, Tax Lien and Judgment searches;
 
h) Evidence of Property Insurance;
 
i) Certificate of Liability Insurance;
 
j) Flood or Hazard Determination;
 
k) Waiver and Consent and a copy of the fully executed Service Agreement;
 
I) Negative Pledge Agreement;
 
m) Subordination Agreements of Charles Saracino and Kenneth J. Makow;
 
n) Restructured Promissory Notes given by Borrower to Robert Sligsby and Frank
Casatelli;
 
o) Subscription Agreement executed by Michael Sharkey; and
 
p) Payment to Lender of the Closing Fee and all other fees and expenses required
to be paid by Borrower.
 
13)Waivers; Indemnity. Borrower waives presentment and demand for payment,
notice of dishonor, protest and notice of protest of this Agreement, and shall
pay all reasonable costs of collection when incurred, including reasonable
attorneys' fees, costs and expenses, arising out of Lender's relationship with
the Borrower. The Borrower covenants and agrees that neither the Lender, its
members, agents, servants, officers or employees shall be liable for: (1) any
loss, damage or injury to, or death of, any person occurring at or about or
resulting from any defect in the Collateral; (2) any damage or injury to the
persons or property of the Borrower, or its officers, agents, servants or
employees, or any other person who may be about the Borrower's premises, caused
by any act of negligence of any person (other than the Lender or its members,
officers, agents, servants or employees); or (3) any costs, expenses or damages
incurred as a result of any lawsuit commenced because of action taken in good
faith by the Lender in connection with the Collateral or the IP Assets. The
Borrower shall indemnify, protect, defend and hold the Lender, the State of New
Jersey their respective members, agents, servants, officers and employees (each
an "Indemnified Party"), harmless from and against any and all such losses,
damages, injuries, costs or expenses and (except for claims, demands, suits,
actions or other proceedings brought against an Indemnified Party resulting from
willful or wanton misconduct of such Indemnified Party) from and against any and
all claims, demands, suits, actions or other proceedings whatsoever, brought by
any person or entity whatsoever, (except the Borrower) and arising or
purportedly arising from this Agreement, the Note or any transaction
contemplated in any such documents.
 
14)            Publicity. Borrower hereby grants Lender the right to use
Borrowers name and logo in public communications announcing or reporting the
transaction and on Lenders website listing Lender's transactions.
 
 
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15) Notices. All notices, requests, demands, consents, instructions or other
communications required or permitted hereunder shall be in writing and faxed,
mailed or delivered to each party at the respective addresses of the parties as
set forth below, or at such other address or facsimile number as Borrower shall
have furnished to Lender in writing. All such notices and communications shall
be effective (a) when sent by Federal Express or other overnight service of
recognized standing, on the business day following the deposit with such
service; (b) when mailed, by registered or certified mail, first class postage
prepaid and addressed as aforesaid through the United States Postal Service,
upon receipt; (c) when delivered by hand, upon delivery; and (d) when faxed,
upon confirmation of receipt.
 
             If to Lender:
PO Box 990
Trenton, New Jersey 08625-0990 Telephone: 609-292-0183
Facsimile: 609-633-7751
Attention: Director-Portfolio Services

                  If to Borrower: 
3 Empire Blvd.
South Hackensack, New Jersey 07606
Telephone: 551-804-8177
Attention: Charles Saracino, President & CEO

 
           With a copy to: 
Mary E. Deal, Esq.
P.O. Box 119
Pottersville, New Jersey 07979
Telephone: 908-268-3032

 
or to such other address as any party hereto shall notify the other parties
hereto (as provided above) from time to time.
 
16)Miscellaneous. This Agreement can be amended only by an instrument signed by
Lender and Borrower. Except for the commitment letter dated May 29, 2009, which
is incorporated herein and made a part hereof, all prior agreements are
superseded by this Agreement. To the extent of any conflict between such
commitment letter and this agreement, this Agreement shall control. Borrower may
not assign any obligation hereunder without Lender's consent. This Agreement may
be executed in one or more counterparts, each of which shall be deemed an
original, but all of which shall constitute one instrument. This Agreement shall
be governed by the internal laws of the State of New Jersey, without regard to
conflicts of law rules. Borrower and Lender consent to the exclusive
jurisdiction of the United States District Court of the District of New Jersey
and the state courts for the State of New Jersey for all matters arising
directly or indirectly herefrom. The rights and remedies of the Borrower under
this Agreement shall be subject to the New Jersey Contractual Liability Act,
N.J.S.A. 59:13-1 et seq., the provisions of which are hereby incorporated herein
by reference in their entirety.
 
17)JURY WAIVER. Borrower waives any right to trial by jury on any claim, demand,
action or cause of action arising under this Agreement or the transactions
related hereto, in each case whether sounding in contract or tort or otherwise.
Borrower agrees and consents that any such claim, demand, action or cause of
action shall be decided by court trial without a jury, and that any party to
this Agreement may file an original counterpart or a copy of this section with
any court as written evidence of the consent of Borrower to the waiver of its
right to trial by jury. Borrower acknowledges that it has had the opportunity to
consult with counsel regarding this section, that it fully understands its
terms, content and effect, and that it voluntarily and knowingly agrees to the
terms of this section.
 
 
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[SIGNATURE PAGE FOLLOWS]
 
 
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IN WITNESS WHEREOF, the Lender and the Borrower have caused this Convertible
Loan Agreement to be executed in their respective names by their duly authorized
officers, as of the date first above written.
 

  X-FACTOR COMMUNICATIONS, LLC           By:   [f8kex10iv_jpg1.jpg]  
 
 Name: Charles Sara      Title: President & 0             NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY           By:        Name: Teri Dunlop    
Title: Director-Closing Services
 

 
 
18
 
 
STATE OF NEW JERSEYACKNOWLEDGMENT
 
COUNTY OF
[f8kex10iv_jpg2.jpg]
SS.:

 
BE IT REMEMBERED, that on this 31st day of July, 2009, before me, the
subscriber, an Attorney-at-Law of the State of New Jersey, personally appeared
CHARLES SARACINO of X-FACTOR COMMUNICATIONS, LLC, a limited liability company,
who, I am satisfied is the person who executed the foregoing Instrument on
behalf of said limited liability company, and who thereupon acknowledged that he
signed and delivered said Instrument as member, and that said Instrument is the
voluntary act and deed of said limited liability company.
 
Date
 
[f8kex10iv_jpg3.jpg]      
/744,ey E, .))/yz
     
atze-7/yei,
 

 
 
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STATE OF NEW JERSEYACKNOWLEDGMENT
 
SS.:       _______________________________
 
COUNTY OF MERCER
 
BE IT REMEMBERED, that on this 31st day of July , 2009, before me, the
subscriber, personally appeared TERI DUNLOP, who, being by me duly sworn, did
depose and make proof to my satisfaction that she is the DIRECTOR — CLOSING
SERVICES of the NEW JERSEY ECONOMIC DEVELOPMENT AUTHORITY, the authority
mentioned in the within Instrument; that the execution, as well as the making of
this Instrument, has been duly authorized by a proper resolution of the Board of
Members of said authority; and said Instrument was signed and delivered by said
officer as and for the voluntary act and deed of said authority.
 
                                                                ___________________________
 
 
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Schedule A
Unsecured Borrowings
 
1) A note in the amount of $200,000 dated January 15, 2008 between Borrower as
maker and Frank Casatelli and Robert Sligsby as payees.
 
Secured Borrowings
 
1) A note in the amount of $75,000 dated January 29, 2007 between Borrower as
maker and Kenneth J. Makow as payee.
 
2) A note in the amount of $25,000 dated July 26, 2005 between Borrower as maker
and Charles Saracino as payee.
 
3) A note in the amount of $10,000 dated August 5, 2005 between Borrower as
maker and Charles Saracino as payee.
 
4) A note in the amount of $20,000 dated August 22, 2005 between Borrower as
maker and Charles Saracino as payee.

 
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EXHIBIT "C"
 
Permitted Encumbrances
 

Secured Party  Filing Number Filing Date       JPMorganChase Bank, N.A.
24239981  July 2, 2007

 
 
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