CREDIT AGREEMENT

 

DATED AS OF DECEMBER 31, 2012,

 

BUT MADE EFFECTIVE AS OF FEBRUARY 22, 2013,

 

BY AND BETWEEN

 

SOCIAL REALITY, INC., AS BORROWER,

 

AND

 

TCA GLOBAL CREDIT MASTER FUND, LP,

 

AS LENDER

 

 

 

 

CREDIT AGREEMENT

 

This CREDIT AGREEMENT (this “Agreement”), dated as of December 31, 2012 but made
effective as of February 22, 2013 (the “Effective Date”), is executed by and
between SOCIAL REALITY, INC., a Delaware corporation (the “Borrower”), and TCA
GLOBAL CREDIT MASTER FUND, LP (“Lender”).

 

WHEREAS, Borrower has requested that Lender extend a revolving credit facility
to Borrower of up to Five Million and No/100 Dollars ($5,000,000.00) for the
purposes permitted hereunder; and for these purposes, Lender is willing to make
certain loans and extensions of credit to Borrower of up to such amount and upon
the terms and conditions set forth herein; and

 

WHEREAS, Borrower has agreed to secure all of its obligations under the Loan
Documents by granting to Lender a first priority, perfected security interest in
and lien upon all of Borrower’s existing and after-acquired personal and real
property; and

 

WHEREAS, in connection with the loans and extensions of credit to be made by
Lender pursuant to this Agreement, the officers and directors of the Borrower
are willing to execute validity guarantees in favor of Lender in connection with
the Borrower’s obligations under the Loan Documents;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter contained, and for other good and valuable consideration, the
parties hereto agree as follows:

 

1.            DEFINITIONS.

 

1.1          Defined Terms. For the purposes of this Agreement, the following
capitalized words and phrases shall have the meanings set forth below.

 

(a)        “Account” shall mean, individually, and “Accounts” shall mean,
collectively, any and all accounts (as such term is defined in the UCC) of the
Borrower.

 

(b)        “Affiliate” (a) of Lender shall mean: (i) any entity which, directly
or indirectly, controls or is controlled by or is under common control with
Lender; and (ii) any entity administered or managed by Lender, or an Affiliate
or investment advisor thereof and which is engaged in making, purchasing,
holding or otherwise investing in commercial loans; and (b) of the Borrower
shall mean any entity which, directly or indirectly, controls or is controlled
by or is under common control with Borrower. With respect to an Affiliate of
Lender or an Affiliate of Borrower, an entity shall be deemed to be “controlled
by” another entity if such other entity possesses, directly or indirectly, power
to direct or cause the direction of the management and policies of such entity,
whether by contract, ownership of voting securities, membership interests or
otherwise.

 

(c)        “Agreement” shall mean this Credit Agreement by and between Borrower
and Lender.

 

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(d)        “Borrower” shall have the meaning given to such term in the preamble
hereof.

 

(e)        “Borrowing Base Amount” shall mean, if the Reserve Amount has not
been fully collected by Lender as of the date the Borrowing Base Amount is
calculated, then an amount, expressed in Dollars, equal to eighty percent (80%)
of the amount of funds then available and cleared in the Lock Box Account as of
the date the Borrowing Base Amount is calculated, less the Reserve Amount, less
any interest or fees then due and payable to Lender under this Agreement. If the
Reserve Amount has been fully collected by Lender in the Lock Box Account as of
the date the Borrowing Base Amount is calculated, then “Borrowing Base Amount”
shall mean an amount, expressed in Dollars, equal to one hundred percent (100%)
of the amount of funds then available and cleared in the Lock Box Account as of
the date the Borrowing Base Amount is calculated, less the Reserve Amount, less
any interest or fees then due and payable to Lender under this Agreement.

 

(f)         “Borrowing Base Certificate” shall mean a certificate delivered by
Lender to Borrower from time to time in a form acceptable to Lender, pursuant to
which the formula and calculation of the Borrowing Base Amount is made.

 

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

 

(h)        “Capital Expenditures” shall mean expenditures (including Capital
Lease obligations which should be capitalized under GAAP) for the acquisition of
fixed assets which are required to be capitalized under GAAP.

 

(i)         “Capital Lease” shall mean, as to any Person, a lease of any
interest in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, by such Person as lessee that is, or should be, in
accordance with Financial Accounting Standards Board Statement No. 13, as
amended from time to time, or, if such Statement is not then in effect, such
statement of GAAP as may be applicable, recorded as a “capital lease” on the
balance sheets of Borrower prepared in accordance with GAAP.

 

(j)         “Change in Control” shall mean any sale, conveyance, assignment or
other transfer, directly or indirectly, of any ownership interest of Borrower,
which results in any change in the identity of the individuals or entities
previously in Control of Borrower or the grant of a security interest in any
ownership interest of any Person, directly or indirectly Controlling Borrower,
which could result in a change in the identity of the individuals or entities
previously in Control of Borrower.

 

(k)        “Closing Date” shall mean the date upon which the first Revolving
Loan is initially funded.

 

(l)         “Collateral” shall mean, collectively, and whether now existing or
hereafter arising, all assets which secure the Loans, including, without
limitation, all existing and after-acquired tangible and intangible assets and
property of the Borrower, including real property owned by the Borrower, with
respect to which the Borrower grants to Lender a Lien under the terms of the
Security Agreement and any of the other Loan Documents.

 

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(m)       “Common Stock” shall mean the Class A common stock of the Borrower,
par value $0.001 per share.

 

(n)        “Compliance Certificate” shall mean the covenant compliance
certificate contemplated by Section 10.11 hereof, the form of which is attached
hereto as Exhibit “A”.

 

(o)        “Contingent Liability” and “Contingent Liabilities” shall mean,
respectively, each obligation and liability of Borrower and all such obligations
and liabilities of Borrower incurred pursuant to any agreement, undertaking or
arrangement by which Borrower either: (i) guarantees, endorses or otherwise
becomes or is contingently liable upon (by direct or indirect agreement,
contingent or otherwise, to provide funds for payment, to supply funds to, or
otherwise to invest in, a debtor, or otherwise to assure a creditor against
loss) the indebtedness, dividend, obligation or other liability of any other
Person in any manner (other than by endorsement of instruments in the course of
collection), including without limitation, any indebtedness, dividend or other
obligation which may be issued or incurred at some future time; (ii) guarantees
the payment of dividends or other distributions upon the shares or ownership
interest of any other Person; (iii) undertakes or agrees (whether contingently
or otherwise): (A) to purchase, repurchase, or otherwise acquire any
indebtedness, obligation or liability of any other Person or any property or
assets constituting security therefor; (B) to advance or provide funds for the
payment or discharge of any indebtedness, obligation or liability of any other
Person (whether in the form of loans, advances, stock purchases, capital
contributions or otherwise), or to maintain solvency, assets, level of income,
working capital or other financial condition of any other Person; or (C) to make
payment to any other Person other than for value received; (iv) agrees to lease
property or to purchase securities, property or services from such other Person
with the purpose or intent of assuring the owner of such indebtedness or
obligation of the ability of such other Person to make payment of the
indebtedness or obligation; (v) to induce the issuance of, or in connection with
the issuance of, any letter of credit for the benefit of such other Person; or
(vi) undertakes or agrees otherwise to assure or insure a creditor against loss.
The amount of any Contingent Liability shall (subject to any limitation set
forth herein) be deemed to be the outstanding principal amount (or maximum
permitted principal amount, if larger) of the indebtedness, obligation or other
liability guaranteed or supported thereby.

 

(p)        “Control” or “Controlling” shall mean the possession of the power to
direct, or cause the direction of, the management and policies of a Person by
contract, voting of securities, or otherwise.

 

(q)        “Customer” shall mean any Person who is obligated to Borrower for any
Receipts.

 

(r)         “Default Rate” shall mean a per annum rate of interest equal to the
greater of: (i) Eighteen Percent (18%) per annum; or (ii) the highest rate
permitted by applicable law.

 

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(s)        “Depreciation” shall mean the total amounts added to depreciation,
amortization, obsolescence, valuation and other proper reserves, as reflected on
Borrower’s financial statements and determined in accordance with GAAP.

 

(t)         “Dollars” or “$” means lawful currency of the United States of
America.

 

(u)        “EBIDTA” shall mean, for any period, the sum of the following: (i)
Net Income (excluding extraordinary and unusual items and income or loss
attributable to a minority equity position in any affiliated corporation or
Subsidiary) for such period; plus (ii) interest expense; plus (iii) income and
franchise taxes payable or accrued; plus (iv) Depreciation for such period; plus
(v) all other non-cash charges; plus (vi) management fees; plus (vii) costs,
fees and expenses incurred in connection with, or otherwise associated with, the
closing of the transaction contemplated by this Agreement; minus (viii) that
portion of Net Income arising out of the sale of assets outside of the Ordinary
Course of Business (to the extent not previously excluded under clause (i) of
this definition), in each case to the extent included in determining Net Income
for such period.

 

(v)        “Effective Date” shall have the meaning given to it in the preamble
hereof.

 

(w)       “Employee Plan” includes any pension, stock bonus, employee stock
ownership plan, retirement, disability, medical, dental or other health plan,
life insurance or other death benefit plan, profit sharing, deferred
compensation, stock option, bonus or other incentive plan, vacation benefit
plan, severance plan or other employee benefit plan or arrangement, including,
without limitation, those pension, profit-sharing and retirement plans of
Borrower described from time to time in the financial statements of Borrower and
any pension plan, welfare plan, Defined Benefit Pension Plans (as defined in
ERISA) or any multi-employer plan, maintained or administered by Borrower or to
which Borrower is a party or may have any liability or by which Borrower is
bound.

 

(x)        “Environmental Laws” shall mean all federal, state, district, local
and foreign laws, rules, regulations, ordinances, and consent decrees relating
to health, safety, hazardous substances, pollution and environmental matters, as
now or at any time hereafter in effect, applicable to Borrower’s business or
facilities owned or operated by Borrower, including laws relating to emissions,
discharges, releases or threatened releases of pollutants, contamination,
chemicals, or hazardous, toxic or dangerous substances, materials or wastes in
the environment (including, without limitation, ambient air, surface water, land
surface or subsurface strata) or otherwise relating to the generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.

 

(y)        “ERISA” shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.

 

(z)        “Event of Default” shall mean any of the events or conditions set
forth in Section 12 hereof.

 

(aa)      “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.

 

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(bb)     “Funded Indebtedness” shall mean, as to any Person, without
duplication: (i) all indebtedness for borrowed money of such Person (including
principal, interest and, if not paid when due, fees and charges), whether or not
evidenced by bonds, debentures, notes or similar instruments; (ii) all
obligations to pay the deferred purchase price of property or services; (iii)
all obligations, contingent or otherwise, with respect to the maximum face
amount of all letters of credit (whether or not drawn), bankers’ acceptances and
similar obligations issued for the account of such Person (including the Letters
of Credit), and all unpaid drawings in respect of such letters of credit,
bankers’ acceptances and similar obligations; and (iv) all indebtedness secured
by any Lien on any property owned by such Person, whether or not such
indebtedness has been assumed by such Person (provided, however, if such Person
has not assumed or otherwise become liable in respect of such indebtedness, such
indebtedness shall be deemed to be in an amount equal to the fair market value
of the property subject to such Lien at the time of determination).
Notwithstanding the foregoing, Funded Indebtedness shall not include trade
payables and accrued expenses incurred by such Person in accordance with
customary practices and in the Ordinary Course of Business of such Person.

 

(cc)      “GAAP” shall mean United States generally accepted accounting
principles set forth from time to time in the opinions and pronouncements of the
Accounting Principles Board and the American Institute of Certified Public
Accountants and statements and pronouncements of the Financial Accounting
Standards Board (or agencies with similar functions of comparable stature and
authority within the U.S. accounting profession), which are applicable to the
circumstances as of the date of determination; provided, however, that interim
financial statements or reports shall be deemed in compliance with GAAP despite
the absence of footnotes and fiscal year-end adjustments as required by GAAP.

 

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

 

(ee)      “Hazardous Materials” shall mean any hazardous, toxic or dangerous
substance, materials and wastes, including, without limitation, hydrocarbons
(including naturally occurring or man-made petroleum and hydrocarbons),
flammable explosives, asbestos, urea formaldehyde insulation, radioactive
materials, biological substances, polychlorinated biphenyls, pesticides,
herbicides and any other kind and/or type of pollutants or contaminants
(including, without limitation, materials which include hazardous constituents),
sewage, sludge, industrial slag, solvents and/or any other similar substances,
materials or wastes that are or become regulated under any Environmental Law
(including, without limitation, any that are or become classified as hazardous
or toxic under any Environmental Law).

 

(ff)       “Interest Rate” shall mean a fixed rate of interest equal to Eighteen
Percent (18%) per annum, calculated on the actual number of days elapsed over a
360-day year.

 

(gg)     “Lender” shall have the meaning given to it in the preamble hereof.

 

(hh)     “Liabilities” shall mean, at all times, all liabilities of Borrower
that would be shown as such on the balance sheets of Borrower prepared in
accordance with GAAP.

 

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(ii)        “Lien” shall mean, with respect to any Person, any mortgage, pledge,
hypothecation, judgment lien or similar legal process, title retention lien, or
other lien or security interest granted by such Person or arising by judicial
process or otherwise, including, without limitation, the interest of a vendor
under any conditional sale or other title retention agreement and the interest
of a lessor under a lease of any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible, by such Person as
lessee that is, or should be, a Capital Lease on the balance sheet of such
Person prepared in accordance with GAAP.

 

(jj)        “Loan” or “Loans” shall mean the aggregate of all Revolving Loans
made by Lender to Borrower under and pursuant to this Agreement.

 

(kk)      “Loan Documents” shall mean those documents listed in Sections 3.1,
3.2 and 3.3 hereof, and any other documents or instruments executed in
connection with this Agreement or the Revolving Loans contemplated hereby, and
all renewals, extensions, future advances, modifications, substitutions, or
replacements thereof.

 

(ll)        “Material Adverse Effect” shall mean: (i) a material adverse change
in, or a material adverse effect upon, the assets, business, properties,
financial condition or results of operations of Borrower; (ii) a material
impairment of the ability of Borrower to perform any of its Obligations under
any of the Loan Documents; (iii) a material adverse effect on: (A) any material
portion of the Collateral; (B) the legality, validity, binding effect or
enforceability against Borrower of any of the Loan Documents; (C) the perfection
or priority (subject to Permitted Liens) of any Lien granted to Lender under any
Loan Document; or (D) the rights or remedies of Lender under any Loan Document;
or (iv) a material adverse effect or impairment on the Lender’s ability to sell
Facility Fee Shares or other shares of Borrower’s Common Stock issuable to
Lender under any Loan Documents without limitation or restriction in the
Principal Trading Market, to the extent caused as a direct result of any action
or inaction by Borrower.

 

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

 

(nn)     “Net Income” shall mean, with respect to any period, the amount shown
opposite the caption “Net Income” or a similar caption on the financial
statements of Borrower, prepared in accordance with GAAP.

 

(oo)     “Obligations” shall mean all loans, advances and other financial
accommodations (whether primary, contingent or otherwise), all interest accrued
thereon (including interest which would be payable as post-petition in
connection with any bankruptcy or similar Proceeding, whether or not permitted
as a claim thereunder), and any fees due to Lender under this Agreement or the
other Loan Documents, any expenses incurred by Lender under this Agreement or
the other Loan Documents, and any and all other liabilities and obligations of
the Borrower to Lender, and the performance by the Borrower of all covenants,
agreements and obligations of every nature and kind on the part of Borrower to
be performed under this Agreement and any other Loan Documents.

 

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(pp)     “Ordinary Course of Business” means the Ordinary Course of Business
consistent with past custom and practice (including with respect to quantity,
quality and frequency).

 

(qq)     “Payment Date” shall have the meaning given to it in Section 2.1(c)
hereof.

 

(rr)       “Permitted Liens” shall mean: (i) Liens for Taxes, assessments or
other governmental charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith by appropriate proceedings and,
in each case, for which adequate reserves are maintained in accordance with GAAP
and in respect of which no Lien has been filed; (ii) Liens of carriers,
warehousemen, mechanics and materialmen arising in the Ordinary Course of
Business and other similar Liens imposed by law; (iii) Liens in the form of
deposits or pledges incurred in connection with worker’s compensation,
unemployment compensation and other types of social security (excluding Liens
arising under ERISA or in connection with surety bonds, bids, performance bonds
and similar obligations) for sums not overdue or being contested in good faith
by appropriate proceedings and not involving any advances or borrowed money or
the deferred purchase price of property or services, which do not in the
aggregate materially detract from the value of the property or assets of
Borrower taken as a whole or materially impair the use thereof in the operation
of Borrower’s business and, in each case, for which adequate reserves are
maintained in accordance with GAAP and in respect of which no Lien has been
filed; (iv) Liens described in the Financial Statements and the replacement,
extension or renewal of any such Lien upon or in the same property subject
thereto arising out of the extension, renewal or replacement of the indebtedness
secured thereby (without increase in the amount thereof); (v) attachments,
appeal bonds, judgments and other similar Liens, for sums not exceeding Fifty
Thousand and 00/100 Dollars ($50,000) arising in connection with court
proceedings, provided the execution or other enforcement of such Liens is
effectively stayed and the claims secured thereby are being actively contested
in good faith and by appropriate proceedings and to the extent such judgments or
awards do not constitute an Event of Default; (vi) zoning and similar
restrictions on the use of property and easements, rights of way, restrictions,
minor defects or irregularities in title and other similar Liens not interfering
in any material respect with the ordinary conduct of the business of Borrower;
(vii) Liens arising in connection with Capital Leases (and attaching only to the
property being leased); (viii) Liens that constitute purchase money security
interests on any property securing indebtedness incurred for the purpose of
financing all or any part of the cost of acquiring such property, provided that
any such Lien attaches to such property within sixty (60) days of the
acquisition thereof and attaches solely to the property so acquired; (ix) Liens
granted to Lender hereunder and under the Loan Documents; (x) any interest or
title of a lessor, sublessor, licensor or sublicensor under any lease or
non-exclusive license permitted by this Agreement; (xi) Liens arising from
precautionary uniform commercial code financing statements filed under any lease
permitted by this Agreement; and (xii) banker’s Liens and rights of set-off of
financial institutions arising in connection with items deposited in accounts
maintained at such financial institutions and subsequently unpaid and unpaid
fees and expenses that are charged to Borrower by such financial institutions in
the Ordinary Course of Business of the maintenance and operation of such
accounts.

 

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

 

(tt)       “Person” shall mean any individual, partnership, limited liability
company, limited liability partnership, corporation, trust, joint venture, joint
stock company, association, unincorporated organization, government or agency or
political subdivision thereof, or other entity.

 

(uu)     “Principal Trading Market” shall mean the Nasdaq Global Select Market,
the Nasdaq Global Market, the Nasdaq Capital Market, the OTC Bulletin Board, the
OTC Markets, the NYSE Euronext or the New York Stock Exchange, whichever is at
the time the principal trading exchange or market for the Common Stock.

 

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

 

(ww)    “Receipts” shall mean all revenues, receipts, receivables, Accounts,
collections or any other funds at any time received or receivable by Borrower,
or otherwise owing to Borrower, in connection with its business, operations or
from any other source.

 

(xx)      “Receipts Collection Fee” shall mean a surcharge of 0.00% of all
Receipts deposited into the Lock Box Account.

 

(yy)     “Regulatory Change” shall mean the introduction of, or any change in
any applicable law, treaty, rule, regulation or guideline or in the
interpretation or administration thereof by any Governmental Authority or any
central bank or other fiscal, monetary or other authority having jurisdiction
over Lender or its lending office.

 

(zz)      “Reserve Amount” shall mean an amount, expressed in Dollars, equal to
twenty percent (20%) of the then applicable Revolving Loan Commitment.

 

(aaa)    “Revolving Loan” and “Revolving Loans” shall mean, respectively, each
direct advance, and the aggregate of all such direct advances, made by Lender to
Borrower under and pursuant to Section 2.1 of this Agreement.

 

(bbb)   “Revolving Loan Availability” shall mean at any time the then applicable
Revolving Loan Commitment.

 

(ccc)    “Revolving Loan Commitment” shall mean, on the Closing Date, Three
Hundred Thousand and No/100 Dollars ($300,000.00), and in the event Borrower
requests and Lender agrees to increase the Revolving Loan Commitment pursuant to
Section 2.1(b), thereafter, shall mean the amount to which Lender agrees to
increase the Revolving Loan Commitment, up to Five Million and No/100 Dollars
($5,000,000.00), all as applicable pursuant to Section 2.1(b).

 

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(ddd)   “Revolving Loan Maturity Date” shall mean the earlier of: (i) six (6)
months from the Closing Date; (ii) upon prepayment of the Revolving Note by
Borrower (subject to Section 2.1(d)(ii)); or (iii) the occurrence of an Event of
Default and acceleration of the Revolving Note pursuant to this Agreement,
unless the date in clause (i) shall be extended pursuant to Section 2.3 or by
Lender pursuant to any modification, extension or renewal note executed by
Borrower and accepted by Lender in its sole and absolute discretion in
substitution for the Revolving Note.

 

(eee)    “Revolving Note” shall mean that certain Revolving Note in the
principal amount of the Revolving Loan Commitment of even date herewith made by
Borrower in favor of Lender, in form substantially similar to that of Exhibit
“B” attached hereto, and any renewal, extension, future advance, modification,
substitution, or replacement thereof.

 

(fff)      “SEC” shall mean the United States Securities and Exchange
Commission.

 

(ggg)   “Securities Act” shall mean the Securities Act of 1933, as amended.

 

(hhh)   “Security Agreement” shall mean a Security Agreement in favor of Lender,
in form substantially similar to that of Exhibit “C” attached hereto.

 

(iii)      “Subsidiary” and “Subsidiaries” shall mean, respectively, each and
all such corporations, partnerships, limited partnerships, limited liability
companies, limited liability partnerships or other entities of which or in which
a Person owns, directly or indirectly, fifty percent (50%) or more of: (i) the
combined voting power of all classes of stock having general voting power under
ordinary circumstances to elect a majority of the board of directors of such
entity if a corporation; (ii) the management authority and capital interest or
profits interest of such entity, if a partnership, limited partnership, limited
liability company, limited liability partnership, joint venture or similar
entity; or (iii) the beneficial interest of such entity, if a trust, association
or other unincorporated organization.

 

(jjj)       “UCC” shall mean the Uniform Commercial Code in effect in Nevada
from time to time.

 

(kkk)    “Validity Guaranties” shall mean the validity guaranties executed by
such officers and directors of Borrower as Lender shall require, in Lender’s
sole discretion, which shall be substantially in the form of Exhibit “D”
attached hereto.

 

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1.2          Accounting Terms. Any accounting terms used in this Agreement which
are not specifically defined herein shall have the meanings customarily given
them in accordance with GAAP. Calculations and determinations of financial and
accounting terms used and not otherwise specifically defined hereunder and the
preparation of financial statements to be furnished to Lender pursuant hereto
shall be made and prepared, both as to classification of items and as to amount,
in accordance with GAAP as used in the preparation of the financial statements
of any Borrower on the date of this Agreement. If any changes in accounting
principles or practices from those used in the preparation of the financial
statements are hereafter occasioned by the promulgation of rules, regulations,
pronouncements and opinions by or required by the Financial Accounting Standards
Board or the American Institute of Certified Public Accountants (or any
successor thereto or agencies with similar functions), which results in a
material change in the method of accounting in the financial statements required
to be furnished to Lender hereunder or in the calculation of financial
covenants, standards or terms contained in this Agreement, the parties hereto
agree to enter into good faith negotiations to amend such provisions so as
equitably to reflect such changes to the end that the criteria for evaluating
the financial condition and performance of Borrower will be the same after such
changes as they were before such changes; and if the parties fail to agree on
the amendment of such provisions, Borrower will furnish financial statements in
accordance with such changes but shall provide calculations for all financial
covenants, perform all financial covenants and otherwise observe all financial
standards and terms in accordance with applicable accounting principles and
practices in effect immediately prior to such changes. Calculations with respect
to financial covenants required to be stated in accordance with applicable
accounting principles and practices in effect immediately prior to such changes
shall be reviewed and certified by Borrower’s accountants.

 

1.3          Other Terms Defined in UCC. All other words and phrases used herein
and not otherwise specifically defined shall have the respective meanings
assigned to such terms in the UCC, as amended from time to time, to the extent
the same are used or defined therein.

 

1.4          Other Definitional Provisions; Construction. Whenever the context
so requires, the neuter gender includes the masculine and feminine, the single
number includes the plural, and vice versa. The words “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision of this
Agreement, and references to Article, Section, Subsection, Annex, Schedule,
Exhibit and like references are references to this Agreement unless otherwise
specified. Wherever the word “include,” “includes” or “including” is used in
this Agreement, it will be deemed to be followed by the words “without
limitation.” An Event of Default shall “continue” or be “continuing” until such
Event of Default has been waived in accordance with Section 14.3 hereof.
References in this Agreement to any party shall include such party’s successors
and permitted assigns. References to any “Section” shall be a reference to such
Section of this Agreement unless otherwise stated. The term “Borrower” shall
refer collectively to the Borrower and all of its Subsidiaries from time to time
in existence, whether or not such Subsidiaries are made a part of this Agreement
or not, and to each of them individually, in each case as the context may so
require, it being the intent of the parties under this Agreement that all of the
terms, conditions, provisions and representations hereof shall, to the greatest
extent possible, apply equally to the Borrower and each of its Subsidiaries from
time to time in existence, as if each term, covenant, provision and
representation was separately made herein by each of them, except only with
respect to any terms and provisions that deal directly with the issuance of any
Common Stock, in which case the term Borrower shall mean and refer only to the
Borrower as defined in the introductory paragraph to this Agreement. To the
extent any of the provisions of the other Loan Documents are inconsistent with
the terms of this Agreement, the provisions of this Agreement shall govern.

 

10

 

 

2.            REVOLVING LOAN FACILITY.

 

2.1          Revolving Loan.

 

(a)          Revolving Loan Commitment. Subject to the terms and conditions of
this Agreement and the other Loan Documents, and in reliance upon the
representations and warranties of Borrower set forth herein and in the other
Loan Documents, Lender agrees to make such Revolving Loans at such times as
Borrower may from time to time request, pursuant to the terms of this Agreement,
until, but not including, the Revolving Loan Maturity Date, and in such amounts
as Borrower may from time to time request up to the Revolving Loan Availability
(and subject at all times to the amounts available to be borrowed in accordance
with the Borrowing Base Certificate); provided, however, that the aggregate
principal balance of all Revolving Loans outstanding at any time shall not
exceed the Revolving Loan Availability; and further provided, however, that,
notwithstanding anything contained in this Agreement or any other Loan Documents
to the contrary, each Revolving Loan requested by Borrower under this Agreement
shall be subject to Lender’s approval, which approval may be given or withheld
in Lender’s sole and absolute discretion. Revolving Loans made by Lender may be
repaid and, subject to the terms and conditions hereof, borrowed again up to,
but not including, the Revolving Loan Maturity Date, unless the Revolving Loans
are otherwise terminated or extended as provided in this Agreement. The
Revolving Loans shall be used by Borrower for the purpose of ongoing working
capital purposes.

 

(b)          Increase to Revolving Loan Commitment. Borrower may request, from
time to time, that the Revolving Loan Commitment be increased to up to Five
Million Dollars ($5,000,000); and Lender, in its sole discretion, may make
available Revolving Loan Commitment increases to Borrower. Lender’s election to
increase the Revolving Loan Commitment from time to time may be granted or
denied by Lender in its sole and absolute discretion, however, at a minimum, the
following conditions must be satisfied, in Lender’s sole and absolute
discretion:

 

(i)          no Event of Default shall have occurred or be continuing, or result
from the applicable increase of the Revolving Loan Commitment;

 

(ii)         Borrower shall have executed and delivered a new or revised
Revolving Note;

 

(iii)        After giving effect to such increase, the amount of the aggregate
outstanding principal balance of all Revolving Loans shall not be in excess of
the Revolving Loan Availability; and

 

(iv)        Lender shall have reviewed and accepted, in its sole and absolute
discretion, the amount and type of current and historical Receipts of the
Borrower, or other Collateral required for the increase.

 

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(c)          Revolving Loan Interest and Payments. Except as otherwise provided
in this Section, the outstanding principal balance of the Revolving Loans shall
be repaid on or before the Revolving Loan Maturity Date. Principal amounts
repaid on the Revolving Note may be re-borrowed. The principal amount of the
Revolving Loans outstanding from time to time shall bear interest at the
Interest Rate. For purposes of calculating interest hereunder, such calculations
shall be made based on the principal amount of the Revolving Loans outstanding
hereunder from time to time, less the Reserve Amount then held by Lender in the
Lock Box Account, if any. The Receipts Collection Fee and accrued and unpaid
interest on the unpaid principal balance of all Revolving Loans outstanding from
time to time shall be payable on a weekly basis on the weekly anniversary date
of the Closing Date, or such other date as Lender and Borrowers may agree upon,
commencing on the first such date to occur after the date hereof and on the
Revolving Loan Maturity Date (each a “Payment Date”). Any amount of principal or
interest on the Revolving Loans which is not paid when due, whether at stated
maturity, by acceleration or otherwise, shall at Lender’s option bear interest
payable on demand at the Default Rate.

 

(d)          Revolving Loan Principal Repayments.

 

(i)          Mandatory Principal Prepayments; Overadvances. All Revolving Loans
hereunder shall be repaid by Borrower on or before the Revolving Loan Maturity
Date, unless payable sooner pursuant to the provisions of this Agreement. In the
event the aggregate outstanding principal balance of all Revolving Loans
hereunder exceed the Revolving Loan Availability, Borrower shall, upon notice or
demand from Lender, immediately make such repayments of the Revolving Loans or
take such other actions as shall be necessary to eliminate such excess. Lender
shall apply funds (in excess of any recurring fees owed under Section 2.2, fees
owed to any custodian/back-up servicer, the Receipts Collection Fee, and
interest owed under Sections 2.1(c) and 2.4) received into the Lock Box Account
as payment against the outstanding principal balance of the Revolving Loans on
any Payment Date.

 

(ii)         Optional Prepayments. Borrower may, from time to time, prepay the
Revolving Loan, in whole or in part, without premium or penalty.

 

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(e)          Collections; Lock Box.

 

(i)          To the extent any Customers make or pay any Receipts to Borrower by
a wire transfer or other form of electronic fund transfer, Borrower shall direct
all of such Customers to make all such wire transfer or electronic fund transfer
payments directly to the Lock Box Account. To the extent any Customers make or
pay any Receipts to Borrower by any other form other than wire transfer or other
form of electronic funds transfer (such as through a check), then Borrower shall
direct all of its Customers to make all such payments and Receipts directly to a
post office box designated by, and under the exclusive control of, Lender (such
post office box is referred to herein as the “Lock Box”). The parties recognize
that in some instances, Customers of Borrower make payments to Borrower through
the use of a credit or debit card, and that in certain instances, the “Payment
Processing Companies” (as hereinafter defined) remit payments from such credit
card or debit card transactions to an account designated by Borrower through
user elections made by Borrower with such Payment Processing Companies through
an online portal or management system controlled by the Borrower (the “Online
Payment Systems”). In that regard, Borrower shall, prior to the Closing Date,
modify its agreements with all credit/debit card payment processing companies
with whom it has agreements or other payment processing relationships (the
“Payment Processing Companies”), so as to authorize, direct and cause: (A) all
credit/debit card payments from any Customers; and (B) any reserves or holdbacks
withheld by any of the Payment Processing Companies, if, as, and when
distributed or paid to Borrower, to be deposited directly into the Lock Box
Account, rather than any other bank accounts of Borrower. It shall be a
condition precedent to the making of any Revolving Loans hereunder that each of
the Payment Processing Companies issue and deliver to Lender an estoppel
certificate, disbursement direction or other similar document confirming and
agreeing: (I) to the foregoing payment directions; (II) that such payment
instructions and directions shall not be changed, amended or terminated, except
upon written notice from Lender; and (III) that copies of all statements,
notices and other communications sent by any Payment Processing Companies to
Borrower, also be delivered to Lender. In the alternative, to the extent any
applicable Payment Processing Companies use Online Payment Systems to control
the follow of funds between the Payment Processing Borrower and the Borrower,
then in such an instance, the Borrower shall, on or prior to the Closing Date,
give full control of the Online Payment Systems to Lender, including allowing
Lender to change the passwords to gain access to such Online Payment Systems
(which passwords shall not be shared or made available to Borrower), so as to
authorize and permit Lender and its representatives to designate the account to
which any remittances from such Payment Processing Borrower are made, which
account shall be the Lock Box Account, to prevent such payment instructions from
being changed without Lender’s consent, and to otherwise grant full access and
control to Lender to view and control all payments and remittances to and from
such Online Payment Systems; provided, however, the parties recognize that the
Online Payment System used or expected to be used by Borrower with Pay Pal is
not active and in use as of the Closing Date, and accordingly, the Borrower
hereby agrees that it shall give Lender at least three (3) Business Days’ prior
written notice before the Online Payment System with Pay Pal is to become active
and in use, so that Lender may gain access and control thereof as required
hereby. Borrower hereby represents and warrants to Lender that the only Payment
Processing Companies with whom the Borrower has any agreements or other payment
processing relationships as of the Closing Date is PayPal. Borrower shall not
enter into any other agreements with any other Payment Processing Companies,
except for the Payment Processing Companies disclosed herein, without the prior
written consent of Lender. Borrower hereby agrees to undertake any and all
required actions, execute any required documents, instruments or agreements, or
to otherwise do any other thing required or requested by Lender in order to
effectuate the foregoing. Lender shall maintain an account at a financial
institution acceptable to Lender in its sole and absolute discretion (the “Lock
Box Account”), which Lock Box Account is and shall be maintained in Lender’s
name, and into which all Receipts, whether through wires, electronic fund
transfers, credit and debit card payments from any Customers (whether directly
or through any Payment Processing Companies), and all other monies, checks,
notes, drafts or other payments or Receipts of any kind received or receivable
by, or due to, the Borrower shall be deposited. If Borrower, any Affiliate or
Subsidiary, any shareholder, officer, director, employee or agent of Borrower or
any Affiliate or Subsidiary, or any other Person acting for or in concert with
Borrower, shall receive any monies, checks, notes, drafts or other payments or
Receipts, the Borrower and each such Person shall receive all such items in
trust for, and as the sole and exclusive property of, Lender, and, immediately
upon receipt thereof, shall remit the same (or cause the same to be remitted) in
kind to the Lock Box Account. Borrower and Lender agree that all payments made
to such Lock Box Account, whether in respect of Receipts, as proceeds of
Collateral, or otherwise (except for proceeds of Collateral which are required
to be delivered to the holder of a Permitted Lien which is prior in right of
payment), will be swept from the Lock Box Account to Lender on each Payment Date
to be applied according to the following priorities: (1) to unpaid fees and
expenses due hereunder including, without limitation, any recurring fees due
pursuant to Section 2.2 hereof; (2) to any custodian/back-up servicer (if
applicable); (3) to accrued but unpaid interest owed under Sections 2.1(c) and
2.4 hereof; (4) to any accrued but unpaid Receipts Collection Fee; (5) if at any
time the Lender is not holding, in the Lock Box Account, an amount equal to at
least the Reserve Amount, then all Receipts received into the Lock Box Account
shall be withheld and applied by Lender to amounts required to establish the
Reserve Amount, until the Reserve Amount is reached, which Reserve Amount (or
portion thereof) may be kept and maintained in the Lock Box Account during the
duration of this Agreement as additional security for the Obligations; (6) to
amounts payable pursuant to Section 2.1(d); and (7) upon the occurrence of an
Event of Default, to Lender (including any Reserve Amount then in the Lock Box
Account), to reduce the outstanding Revolving Loan balance to zero. Borrower
agrees to pay all reasonable fees, costs and expenses in connection with opening
and maintaining of the Lock Box, the Lock Box Account, or of creating,
administering or switching any payment accounts with any of the Payment
Processing Companies. All of such reasonable fees, costs and expenses, if not
paid by Borrower within five (5) Business Days of Lender’s written request, may
be paid by Lender and in such event all amounts paid by Lender shall constitute
Obligations hereunder, shall be payable to Lender by Borrower upon demand, and,
until paid, shall bear interest at the Default Rate. It is intended that all
Receipts, and all other checks, drafts, instruments and other items of payment
or proceeds of Collateral at any time received, due or owing to Borrower, shall
be deposited into the Lock Box Account, and if not deposited into the Lock Box
Account, shall be remitted or endorsed by Borrower to Lender into the Lock Box
Account, and, if that remittance or endorsement of any such item shall not be
made for any reason, Lender is hereby irrevocably authorized to remit or endorse
the same on Borrower’s behalf. For purpose of this Section, Borrower irrevocably
hereby makes, constitutes and appoints Lender (and all Persons designated by
Lender for that purpose) as Borrower’s true and lawful attorney and
agent-in-fact: (A) to endorse Borrower’s name upon said items of payment and/or
proceeds of Collateral and upon any chattel paper, document, instrument, invoice
or similar document or agreement relating to any Receipts of Borrower; (B) to
take control in any manner of any item of payment or proceeds thereof; (C) to
have access to Borrower’s operating accounts, through Borrower’s online banking
system, or otherwise, to make remittances of any Receipts deposited therein into
the Lock Box Account as required hereby; (D) to have access to any lock box or
postal box into which Borrower’s mail is deposited, and open and process all
mail addressed to Borrower and deposited therein; and (E) direct and otherwise
deal with all Payment Processing Companies to insure that all payments and
reserves as hereby contemplated are remitted to the Lock Box Account.

 

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(ii)         Lender may, at any time and from time to time after the occurrence
and during the continuance of an Event of Default, whether before or after
notification to any Customer and whether before or after the maturity of any of
the Obligations: (A) enforce collection of any of the Accounts or Receipts of
Borrower or other amounts or Receipts owed to Borrower by suit or otherwise; (B)
exercise all of the rights and remedies of Borrower with respect to proceedings
brought to collect any Accounts or other amounts or Receipts owed to Borrower;
(C) surrender, release or exchange all or any part of any Accounts or other
amounts or Receipts owed to Borrower, or compromise or extend or renew for any
period (whether or not longer than the original period) any indebtedness
thereunder; (D) sell or assign any Account of Borrower or other amount or
Receipts owed to Borrower upon such terms, for such amount and at such time or
times as Lender deems advisable; (E) prepare, file and sign Borrower’s name on
any proof of claim in bankruptcy or other similar document against any Customer
or other Person obligated to Borrower; and (F) do all other acts and things
which are necessary, in Lender’s sole discretion, to fulfill Borrower’s
obligations under this Agreement and the other Loan Documents and to allow
Lender to collect the Accounts or other amounts and receipts owed to Borrower.
In addition to any other provision hereof, Lender may at any time after the
occurrence and during the continuance of an Event of Default, at Borrower’s
expense, notify any Customers or any other parties obligated on any of the
Accounts or Receipts due or payable to Borrower, to make payment directly to
Lender of any amounts due or to become due thereunder.

 

14

 

 

(iii)        On a monthly basis, Lender shall deliver to Borrower an invoice and
an account statement showing all Loans, charges and payments, which shall be
deemed final, binding and conclusive upon Borrower, unless Borrower notifies
Lender in writing, specifying any error therein, within thirty (30) days of the
date such account statement is sent to Borrower and any such notice shall only
constitute an objection to the items specifically identified.

 

2.2          Fees.

 

(a)          Intentionally Left Blank.

 

(b)          Asset Monitoring Fee. Borrower agrees to pay to Lender an asset
monitoring fee (“Asset Monitoring Fee”)equal to One Thousand Five-Hundred and
No/100 Dollars ($1,500.00), which shall be due and payable on the Closing Date,
and thereafter on the first day of each calendar quarter during the term of this
Agreement. The Asset Monitoring Fee shall be increased in increments of Five
Hundred and No/100 Dollars ($500.00) each time the Revolving Loan Commitment
amount is increased pursuant to Section 2.1(b); provided that the Asset
Monitoring Fee shall never exceed Two Thousand Five Hundred and No/100 Dollars
($2,500.00) per calendar quarter.

 

(c)          Transaction Advisory Fee. Borrower agree to pay to Lender a
transaction advisory fee equal to four percent (4.0%)of the Revolving Loan
Commitment as of the Closing Date, and two percent (2.0%)on the amount of any
increase thereof pursuant to Section 2.1(b), which shall be due and payable on
the Closing Date and on the date of any increase to the Revolving Loan
Commitment pursuant to Section 2.1(b).

 

(d)          Due Diligence Fees. Borrower agrees to pay a due diligence fee
equal to Ten Thousand and No/100 Dollars ($10,000.00), which shall be due and
payable in full on the Closing Date, or any remaining portion thereof shall be
due and payable on the Closing Date if a portion of such fee was paid upon the
execution of any term sheet related to this Agreement.

 

(e)          Document Review and Legal Fees. Borrower agrees to pay a document
review and legal fee equal to Twelve Thousand Five Hundred and No/100 Dollars
($12,500.00)which shall be due and payable in full on the Closing Date, or any
remaining portion thereof shall be due and payable on the Closing Date if a
portion of such fee was paid upon the execution of any term sheet related to
this Agreement.

 

15

 

 

(f)          Other Fees. Borrower also agrees to pay to the Lender (or any
designee of the Lender), upon demand, or to otherwise be responsible for the
payment of, any and all other costs, fees and expenses, including the reasonable
fees, costs, expenses and disbursements of counsel for the Lender and of any
experts and agents, which the Lender may incur or which may otherwise be due and
payable in connection with: (i) the preparation, negotiation, execution,
delivery, recordation, administration, amendment, waiver or other modification
or termination of this Agreement or any other Loan Documents (provided that
there shall be no fees for the preparation and negotiation of this Agreement
other than as specifically set forth in this Section 2.2); (ii) any documentary
stamp taxes, intangibles taxes, recording fees, filing fees, or other similar
taxes, fees or charges imposed by or due to any Governmental Authority in
connection with this Agreement or any other Loan Documents; (iii) the exercise
or enforcement of any of the rights of the Lender under this Agreement or the
Loan Documents; or (iv) the failure by Borrower to perform or observe any of the
provisions of this Agreement or any of the Loan Documents. Included in the
foregoing shall be the amount of all expenses paid or incurred by Lender in
consulting with counsel concerning any of its rights under this Agreement or any
other Loan Document or under applicable law. All such costs and expenses, if not
so immediately paid when due or upon demand thereof, shall bear interest from
the date of outlay until paid, at the Default Rate. All of such costs and
expenses shall be additional Obligations of the Borrower to Lender secured under
the Loan Documents. The provisions of this Subsection shall survive the
termination of this Agreement.

 

(g)          Intentionally Left Blank.

 

(h)          Investment Banking Fee.

 

(i)          Share Issuance. The Borrower shall pay to Lender a fee for
investment banking and advisory services provided by the Lender to the Borrower
prior to the Closing Date by issuing to Lender that number of shares of the
Borrower’s Common Stock equal to a dollar amount of $100,000.00 (the “Share
Value”). For purposes of determining the number of shares issuable to Lender
under this Section 2.2(h)(the “Facility Fee Shares”), the Borrower’s Common
Stock shall be valued at the average of the volume weighted average price for
the Common Stock for the five (5) Business Days immediately prior to the date
the Borrower executes this Agreement (the “Valuation Date”), as reported by
Bloomberg (the “VWAP”). The Lender shall confirm to the Borrower in writing, the
VWAP for the Common Stock as of the Valuation Date, and the corresponding number
of Facility Fee Shares issuable to the Lender based on such price. If the
Borrower’s transfer agent (the “Transfer Agent”)is participating in the
Depository Trust Borrower (“DTC”)Fast Automated Securities Transfer
(“FAST”)program, the Borrower shall cause the Transfer Agent to electronically
transmit the Facility Fee Shares by crediting the account of the Lender’s prime
broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”)system,
and provide proof satisfactory to the Lender of such delivery within five (5)
Business Days from the Effective Date. In the event that the Transfer Agent is
not participating in the DTC FAST program and is not otherwise DWAC eligible,
within five (5) Business Days from the Effective Date, the Borrower shall
instruct and cause its Transfer Agent to issue certificates representing the
Facility Fee Shares issuable to the Lender simultaneously with the Borrower’s
execution of this Agreement, and shall cause its Transfer Agent to deliver such
certificates to Lender within fifteen (15) Business Days from the Effective
Date. In the event such certificates representing the Facility Fee Shares
issuable hereunder shall not be either credited to Lender’s broker with DTC or
otherwise delivered to the Lender within said fifteen (15) Business Day period,
same shall be an immediate default under this Agreement and the other Loan
Documents. The Facility Fee Shares, when issued, shall be deemed to be validly
issued, fully paid, and non-assessable shares of the Borrower’s Common Stock.
The Facility Fee Shares shall be deemed fully earned as of the date the Borrower
executes this Agreement, regardless of the amount or number of Revolving Loans
made hereunder. In the event the Lender elects to increase the Revolving Loan
Commitment as permitted by this Agreement, the Borrower agrees to pay additional
advisory service fees to Lender, either in cash or through the issuance of
additional Facility Fee Shares in a similar manner as set forth in this Section
2.2(h)(and subject to similar adjustments as set forth in this Section 2.2(h)),
at Lender’s sole discretion, provided, however, that any such additional
advisory fees shall only be due for the first two (2) increases in the Revolving
Loan Commitment, and further provided that the amount of such fees shall not
exceed $50,000 for each of such increases, or $200,000 in the aggregate.

 

16

 

 

(ii)         Adjustments. It is the intention of the Borrower and Lender that by
a date that is twelve (12) months after the Valuation Date (the “Twelve Month
Valuation Date”)the Lender shall have generated net proceeds from the sale of
the Facility Fee Shares equal to the Share Value. The Lender shall have the
right to sell the Facility Fee Shares in the Principal Trading Market or
otherwise, at any time in accordance with applicable securities laws. At any
time the Lender may elect after the Twelve Month Valuation Date (or prior to
such Twelve Month Valuation Date, if Lender has sold all Facility Fee Shares
prior to such Twelve Month Valuation Date), the Lender may deliver to the
Borrower a reconciliation statement showing the net proceeds actually received
by the Lender from the sale of the Facility Fee Shares (the “Sale
Reconciliation”). If, as of the date of the delivery by Lender of the Sale
Reconciliation, the Lender has not realized net proceeds from the sale of such
Facility Fee Shares equal to at least the Share Value, as shown on the Sale
Reconciliation, then the Borrower shall immediately take all required action
necessary or required in order to cause the issuance of additional shares of
Common Stock to the Lender in an amount sufficient such that, when sold and the
net proceeds thereof are added to the net proceeds from the sale of any of the
previously issued and sold Facility Fee Shares, the Lender shall have received
total net funds equal to the Share Value. If additional shares of Common Stock
are issued pursuant to the immediately preceding sentence, and after the sale of
such additional issued shares of Common Stock, the Lender still has not received
net proceeds equal to at least the Share Value, then the Borrower shall again be
required to immediately take all required action necessary or required in order
to cause the issuance of additional shares of Common Stock to the Lender as
contemplated above, and such additional issuances shall continue until the
Lender has received net proceeds from the sale of such Common Stock equal to the
Share Value. In the event the Lender receives net proceeds from the sale of
Facility Fee Shares equal to the Share Value, and the Lender still has Facility
Fee Shares remaining to be sold, the Lender shall return all such remaining
Facility Fee Shares to the Borrower. In the event additional Common Stock is
required to be issued as outlined above, the Borrower shall instruct its
Transfer Agent to issue such additional shares in the same procedural manner and
within the same required time frames as set forth in Section 2.2(h)(i)above. In
the event such certificates representing such additional shares of Common Stock
shall not be either credited to Lender’s broker with DTC or otherwise delivered
to the Lender within said fifteen (15)Business Day period, same shall be an
immediate default under this Agreement and the other Loan Documents.
Notwithstanding anything contained in this Section 2.2(h)to the contrary, at any
time on or prior to the Twelve Month Valuation Date, but not thereafter (unless
agreed to by the Lender), the Borrower shall have the right, at any time during
such period, to redeem any Facility Fee Shares then in the Lender’s possession
for an amount payable by the Borrower to Lender in cash equal to the Share
Value, less any net cash proceeds received by the Lender from any previous sales
of Facility Fee Shares. Upon Lender’s receipt of such cash payment in accordance
with the immediately preceding sentence, the Lender shall return any then
remaining Facility Fee Shares in its possession back to the Borrower and
otherwise undertake any required actions reasonably requested by Borrower to
have such then remaining Facility Fee Shares returned to Borrower.

 

17

 

 

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

 

(iv)        Leak-Out Covenant; Short Sale Restriction. Notwithstanding anything
contained in this Agreement to the contrary, so long as no Event of Default
exists, and so long as no event has occurred that, with the passage of time, the
giving of notice, or both, would constitute an Event of Default, the Lender
agrees that it shall not, during any given calendar week, sell Facility Fee
Shares in excess of twenty percent (20%)of the average weekly volume of the
Common Stock on the Principal Trading Market over the immediately preceding
calendar week, as reported by Bloomberg. Sales by Lender of the Facility Fee
Shares shall only be made at the offer price. In addition, Lender represents
that neither the Lender, nor of its Affiliates, has an open short position in
the Common Stock as of the Effective Date, and the Lender agrees that so long as
no Event of Default occurs, and so long as no event has occurred that, with the
passage of time, the giving of notice, or both, would constitute an Event of
Default under this Agreement or any other Loan Documents, while this Agreement
remains in effect, Lender shall not, and Lender will cause its Affiliates not
to, engage in any short sales of the Common Stock, or otherwise borrow any money
using the Facility Fee Shares as collateral (margin transactions) or otherwise
pledge or hypothecate the Facility Fee Shares.

 

(v)         Surviving Obligations. Notwithstanding anything contained in this
Agreement or any other Loan Document to the contrary, the Borrower agrees and
acknowledges that notwithstanding the termination of this Agreement, or the
payment in full of all of the Borrowers’ obligations hereunder or under any
other Loan Documents, the Borrower’s obligations and liability under this
Agreement and the other Loan Documents, and the Lender’s Lien and security
interest on all Collateral, shall remain valid and effective and shall not be
released or terminated, until the Borrower has fully complied with all of its
obligations with respect to payment of the fees contemplated by this Section
2.2(h), and Lender has generated and received net proceeds from the sale of the
Facility Fee Shares (or otherwise received equivalent payment thereof in cash as
permitted hereunder) equal to the Share Value.

 

18

 

 

(i)           Matters with Respect to Common Stock.

 

(i)          Issuance of Conversion Shares. The parties hereto acknowledge that
pursuant to the terms of the Revolving Note, Lender has the right, at its
discretion upon the occurrence of an Event of Default, to convert amounts due
under the Revolving Note into Common Stock in accordance with the terms of the
Revolving Note. In the event, for any reason, the Borrower fails to issue, or
cause the Transfer Agent to issue, any portion of the Common Stock issuable upon
conversion of the Revolving Note (the “Conversion Shares”)to Lender in
connection with the exercise by Lender of any of its conversion rights under the
Revolving Note, then the parties hereto acknowledge that Lender shall
irrevocably be entitled to deliver to the Transfer Agent, on behalf of itself
and the Borrower, a “Conversion Notice” (as defined in the Revolving Note)
requesting the issuance of the Conversion Shares then issuable in accordance
with the terms of the Revolving Note, and the Transfer Agent, provided they are
the acting transfer agent for the Borrower at the time, shall, and the Borrower
hereby irrevocably authorizes and directs the Transfer Agent to, without any
further confirmation or instructions from the Borrower, issue the Conversion
Shares applicable to the Conversion Notice then being exercised, and to deliver
such Conversion shares as more specifically set forth in the Revolving Note.

 

(ii)         Issuance of Additional Common Stock Under Section 2.2(h). The
parties hereto acknowledge that pursuant to Section 2.2(h) above, the Borrower
has agreed to issue, simultaneously with the execution of this Agreement and in
the future, certain shares of the Borrower’s Common Stock in accordance with the
terms of Section 2.2(h) above. In the event, for any reason, the Borrower fails
to issue, or cause its Transfer Agent to issue, any portion of the Common Stock
issuable to Lender under Section 2.2(h), either now or in the future, then the
parties hereto acknowledge that Lender shall irrevocably be entitled to deliver
to the Transfer Agent, on behalf of itself and the Borrower, a written
instruction requesting the issuance of the shares of Common Stock then issuable
in accordance with Section 2.2(h) above, and the Transfer Agent, provided they
are the acting transfer agent for the Borrower at the time, shall, and the
Borrower hereby irrevocably authorizes and directs the Transfer Agent to,
without any further confirmation or instructions from the Borrower, issue such
shares of the Borrower’s Common Stock as directed by Lender, and deliver such
shares of Common Stock in accordance with Section 2.2(h).

 

19

 

 

(iii)        Removal of Restrictive Legends. In the event that Lender has any
shares of the Borrower’s Common Stock bearing any restrictive legends, and
Lender, through its counsel or other representatives, submits to the Transfer
Agent any such shares for the removal of the restrictive legends thereon,
whether in connection with a sale of such shares pursuant to any exemption to
the registration requirements under the Securities Act, or otherwise, and the
Borrower and or its counsel refuses or fails for any reason to render an opinion
of counsel or any other documents, certificates or instructions required for the
removal of the restrictive legends, then the Borrower hereby agrees and
acknowledges that Lender is hereby irrevocably and expressly authorized to have
counsel to Lender render any and all opinions and other certificates or
instruments which may be required for purposes of removing such restrictive
legends, and the Borrower hereby irrevocably authorizes and directs the Transfer
Agent to, without any further confirmation or instructions from the Borrower,
issue any such shares without restrictive legends as instructed by Lender, and
deliver such shares to Lender in the same manner as set forth in section 2.2(h)
hereof, without any restrictive legends and otherwise freely transferable on the
books and records of the Borrower. If Borrower or its counsel refuses or fails
for any reason to render an opinion of counsel or any other documents,
certificates or instructions required for the removal of the restrictive
legends, and as permitted hereby, counsel to Lender renders any such required
opinions and other certificates or instruments which may be required for
purposes of removing such restrictive legends, and in such circumstances, the
restrictive legends or other restrictions are not removed and free-trading
certificates are not delivered to Lender as required by this Agreement, then to
the extent such shares of stock are eligible for re-sale (or re-issuance)under
Rule 144, or otherwise could be lawfully transferred (or re-issued)without
restrictions under applicable laws, the failure of Lender to receive such
free-trading certificates within the time frames and as otherwise required by
this Agreement shall be an immediate Event of Default under this Agreement and
all other Loan Documents. At Closing, the Borrower shall provide a letter to the
Lender, executed by the Transfer Agent, pursuant to which the Transfer Agent
acknowledges that it has received irrevocable instructions from the Borrower,
authorizing the Transfer Agent to rely on opinions and other certificates and
instruments from Lender or its counsel, as permitted above, for purposes of
having restrictive legends and other restrictions on the transfer of stock
certificates removed, and further acknowledging that such instructions are
irrevocable and cannot be altered, changed or withdrawn by the Borrower without
Lender’s prior written approval, which approval may be given or withheld in
Lender’s sole discretion.

 

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

 

(v)         Injunction and Specific Performance. The Borrower specifically
acknowledges and agrees that in the event of a breach or threatened breach by
the Borrower of any provision of this Section 2.2(i), the Lender will be
irreparably damaged and that damages at law would be an inadequate remedy if
this Agreement were not specifically enforced. Therefore, in the event of a
breach or threatened breach of any provision of this Section 2.2(i) by the
Borrower, the Lender shall be entitled to obtain, in addition to all other
rights or remedies Lender may have, at law or in equity, an injunction
restraining such breach, without being required to show any actual damage or to
post any bond or other security, and/or to a decree for specific performance of
the provisions of this Section 2.2(i).

 

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2.3           Renewal of Revolving Loans; Non-Renewal of Revolving Loans; Fees.
On the Revolving Loan Maturity Date, so long as no Event of Default exists, and
so long as no event has occurred that, with the passage of time, the giving of
notice, or both, would constitute an Event of Default, Borrower shall have the
right to request a renewal of the Revolving Loan Commitment and extension of the
Revolving Loan Maturity Date for one (1) additional six (6) month period. To
make such request, Borrower shall give written notice to Lender of Borrower’s
request to renew the Revolving Loan Commitment and extend the Revolving Loan
Maturity Date for an additional six (6) month period on or before the Revolving
Loan Maturity Date, and provided that no Event of Default exists, and that no
event has occurred that, with the passage of time, the giving of notice, or
both, would constitute an Event of Default, Lender shall accept Borrower’s
request for a renewal of the Revolving Loan Commitment and extension of the
Revolving Loan Maturity Date, subject to execution by Borrower of any documents
or instruments reasonably requested by Lender to evidence such extension.

 

2.4           Interest and Fee Computation; Collection of Funds. Interest
accrued hereunder shall be payable as set forth in Section 2.1(d) hereof. Except
as otherwise set forth herein, all interest and fees shall be calculated on the
basis of a year consisting of 360 days and shall be paid for the actual number
of days elapsed. Principal payments submitted in funds not immediately available
shall continue to bear interest until collected. If any payment to be made by
Borrower hereunder or under the Revolving 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 any interest in
respect of such payment. Any Obligations which are not paid when due (subject to
applicable grace periods) shall bear interest at the Default Rate.

 

2.5           Automatic Debit. In order to effectuate the timely payment of any
of the Obligations when due, Borrower hereby authorizes and directs Lender, at
Lender’s option, to: (i) debit, or cause or instruct the debit of, the amount of
the Obligations to any ordinary deposit account of Borrower; or (ii) make a
Revolving Loan hereunder to pay the amount of the Obligations.

 

2.6           Discretionary Disbursements. Lender, in its sole and absolute
discretion, may immediately upon notice to Borrower, disburse any or all
proceeds of the Revolving Loans made or available to Borrower pursuant to this
Agreement to pay any fees, costs, expenses or other amounts required to be paid
by Borrower hereunder and not so paid. All monies so disbursed shall be a part
of the Obligations, payable by Borrower on demand from Lender.

 

2.7           US Dollars; Currency Risk. All Receipts will be in Dollars. In the
event Receipts are not in Dollars, Borrower shall bear the risk of Lender’s
currency losses, and if Lender suffers a currency loss and the result is to
increase the cost to Lender or to reduce the amount of any sum received or
receivable by Lender under this Agreement or under the Revolving Note with
respect thereto, then after demand by Lender (which demand shall be accompanied
by a certificate setting forth reasonably detailed calculations of the basis of
such demand), Borrower shall pay to Lender such additional amount or amounts as
will compensate Lender for such increased cost or such reduction. Borrower
hereby authorizes Lender to advance or cause an advance of Revolving Loans to
pay for the increased costs or reductions associated with any such currency
losses.

 

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3.            CONDITIONS OF BORROWING.

 

Notwithstanding any other provision of this Agreement, the obligation of Lender
to disburse or make all or any portion of any Loans is subject to satisfaction
of all of the following conditions precedent (unless a condition is waived in
writing by Lender) contained in this Article 3.

 

3.1           Intentionally Left Blank.

 

3.2           Loan Documents to be Executed by Borrower. As a condition
precedent to Lender’s disbursal or making of the Loans pursuant to this
Agreement, Borrower shall have executed or cause to be executed and delivered to
Lender all of the following documents, each of which must be satisfactory to
Lender and Lender’s counsel in form, substance and execution:

 

(a)          Credit Agreement. An original of this Agreement duly executed by
Borrower;

 

(b)          Revolving Note. An original Revolving Note duly executed by
Borrower;

 

(c)          Security Agreement. An original of the Security Agreement dated as
of the date of this Agreement, executed by Borrower;

 

(d)          Intentionally Left Blank.

 

(e)          Validity Guaranties. Validity Guarantees duly executed by such
officers and directors of Borrower as Lender shall require;

 

(f)          Search Results. Copies of UCC search reports dated such a date as
is reasonably acceptable to Lender, listing all effective financing statements
which name Borrower, under its present name and any previous names, as debtors,
together with copies of such financing statements;

 

(g)          Organizational and Authorization Documents. A certificate of the
corporate secretary or other authorized officer of Borrower certifying and
attaching: (i) copies of its articles of incorporation and bylaws; (ii)
resolutions of the board of directors of Borrower, approving and authorizing
Borrower’s issuance of the Revolving Note, and the execution, delivery and
performance of the Loan Documents to which it is party and the transactions
contemplated thereby; (iii) the signatures and incumbency of the officers of
Borrower executing any of the Loan Documents, each of which Borrower hereby
certifies to be true and complete, and in full force and effect without
modification, it being understood that Lender may conclusively rely on each such
document and certificate until formally advised by Borrower of any changes
therein; and (iv) good standing certificate in the state of incorporation of
Borrower and in each other state requested by Lender;

 

(h)          Insurance. Evidence satisfactory to Lender of the existence of
insurance required to be maintained pursuant to this Agreement and the Security
Agreement, together with evidence that Lender has been named as additional
insured and lender’s loss payee, as applicable, on all related insurance
policies;

 

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(i)           Opinion of Counsel. A customary opinion of Borrower’s counsel, in
form satisfactory to Lender; and

 

(j)           Additional Documents. Such other agreements, documents,
instruments, certificates, financial statements, schedules, resolutions,
opinions of counsel, notes and other items which Lender shall require in
connection with this Agreement.

 

3.3          Issuance of Stock. The Borrower shall have issued and delivered to
Lender an irrevocable issuance instruction letter and board resolution,
irrevocably authorizing the issuance of the Facility Fee Shares and irrevocably
directing its Transfer Agent to issue and deliver the Facility Fee Shares to
Lender or its designee.

 

3.4          Payment of Fees. Borrower shall have paid to Lender all fees, costs
and expenses, including, but not limited to, due diligence expenses, attorney’s
fees, search fees, title fees, documentation and filing fees (including
documentary stamps and taxes payable on the face amount of the Revolving Note).

 

3.5          Event of Default. No Event of Default, or event which, with notice
or lapse of time, or both, would constitute an Event of Default, shall have
occurred and be continuing.

 

3.6          Adverse Changes. There shall not have occurred any Material Adverse
Effect.

 

3.7          Litigation. No pending claim, investigation, litigation or
governmental proceeding shall have been instituted against Borrower or any of
their respective Subsidiaries or any of their respective officers or
shareholders.

 

3.8          Representations and Warranties. No representation or warranty of
Borrower contained herein or in any Loan Documents shall be untrue or incorrect
in any material respect as of the date of any Loans as though made on such date,
except to the extent such representation or warranty expressly relates to an
earlier date.

 

3.9          Due Diligence. The business, legal and collateral due diligence
review performed by Lender, including, but not limited to, a review of
Borrower’s historical performance and financial information, must be acceptable
to Lender in its sole discretion. Lender reserves the right to increase any and
all aspects of its due diligence in Lender’s sole discretion.

 

3.10        Key Personnel Investigations. Lender shall be satisfied, in its sole
discretion, with results from background investigations conducted on key members
of Borrower’s principals and management teams.

 

3.11        Repayment of Outstanding Indebtedness. Borrower shall have repaid in
full all outstanding indebtedness secured by Collateral, other than indebtedness
giving rise to Permitted Liens.

 

23

 

 

4.            NOTES EVIDENCING LOANS.

 

The Revolving Loans shall be evidenced by the Revolving Note (together with any
and all renewal, extension, modification or replacement notes executed by
Borrower and delivered to Lender and given in substitution therefor) duly
executed by Borrower and payable to the order of Lender. At the time of the
initial disbursement of a Revolving Loan and at each time an additional
Revolving Loan shall be requested hereunder or a repayment made in whole or in
part thereon, an appropriate notation thereof shall be made on the books and
records of Lender. All amounts recorded shall be, absent demonstrable error,
conclusive and binding evidence of: (i) the principal amount of the Revolving
Loans advanced hereunder; (ii) any unpaid interest owing on the Revolving Loans;
and (iii) all amounts repaid on the Revolving Loans. The failure to record any
such amount or any error in recording such amounts shall not, however, limit or
otherwise affect the obligations of Borrower under the Revolving Note to repay
the principal amount of the Revolving Loans, together with all interest accruing
thereon.

 

5.            MANNER OF BORROWING.

 

5.1          Loan Requests. Subject to Section 2.1(a) and Article 3 hereof, the
Loans shall be made available to Borrower upon Borrower’s request, from any
Person whose authority to so act has not been revoked by Borrower in writing
previously received by Lender. Borrower may make requests for borrowing no more
than one time every two (2) weeks up to the then applicable Revolving Loan
Commitment; provided, however, that, notwithstanding anything contained in this
Agreement or any other Loan Documents to the contrary, each Revolving Loan
requested by Borrower under this Agreement shall be subject to Lender’s
approval, which approval may be given or withheld in Lender’s sole and absolute
discretion. A request for a Loan may only be made if no default or Event of
Default shall have occurred or be continuing and shall be subject to: (i)
Lender’s preparation of a Borrowing Base Certificate, showing that there is
borrowing availability under the Revolving Loan Commitment and pursuant to a
calculation of the Borrowing Base Amount; and (ii) Receipts deposited into the
Lock Box Account and other Collateral being acceptable to Lender. In addition, a
request for a Loan must be received by no later than 11:00 a.m. eastern time the
day it is to be funded and be in a minimum amount equal to Fifty Thousand
Dollars and No/100 ($50,000.00).

 

5.2          Communications. Lender is authorized to rely on any written,
verbal, electronic, telephonic or telecopy loan requests which Lender believes
in its good faith judgment to emanate from the President or Chief Executive
Officer, or any other authorized representative of Borrower. Borrower hereby
irrevocably confirms, ratifies and approves all such advances by Lender and
Borrower hereby indemnifies Lender against losses and expenses (including court
costs, attorneys’ and paralegals’ fees) and shall hold Lender harmless with
respect thereto.

 

6.            SECURITY FOR THE OBLIGATIONS.

 

To secure the payment and performance by Borrower of the Obligations hereunder,
Borrower grants, under and pursuant to the Security Agreement executed by
Borrower dated as of the date hereof, to Lender, its successors and assigns, a
continuing, first-priority, perfected security interest in, and does hereby
assign, transfer, mortgage, convey, pledge, hypothecate and set over to Lender,
its successors and assigns, all of the right, title and interest of Borrower in
and to the Collateral, whether now owned or hereafter acquired, and all proceeds
(including, without limitation, all insurance proceeds) and products of any of
the Collateral. At any time upon Lender’s request, Borrower shall execute and
deliver to Lender any other documents, instruments or certificates requested by
Lender for the purpose of properly documenting and perfecting the security
interests of Lender in and to the Collateral granted hereunder, including any
additional security agreements, mortgages, control agreements, and financing
statements.

 

24

 

 

7.            REPRESENTATIONS AND WARRANTIES OF BORROWER.

 

To induce Lender to make the Loans, Borrower makes the following representations
and warranties to Lender, each of which, except as set forth in the SEC
Documents, shall be true and correct in all material respects as of the date of
the execution and delivery of this Agreement and as of the date of each Loan
made hereunder, except to the extent such representation expressly relates to an
earlier date, and which shall survive the execution and delivery of this
Agreement:

 

7.1          Subsidiaries. Borrower does not own, directly or indirectly, any
outstanding voting securities of or other interests in, or have any control
over, any other Person.

 

7.2          Borrower Organization and Name. Borrower is a corporation, duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization, and has the full power and authority and all
necessary Permits to: (i) enter into and execute this Agreement and the Loan
Documents and to perform all of its obligations hereunder and thereunder; and
(ii) own and operate its assets and properties and to conduct and carry on its
business as and to the extent now conducted. Borrower is duly qualified to
transact business and is in good standing as a foreign corporation in each
jurisdiction where the character of its business or the ownership or use and
operation of its assets or properties requires such qualification, except where
such failure to be so qualified would not result, in Lender’s sole but
reasonable discretion, in a Material Adverse Effect. The exact legal name of
Borrower is as set forth in the first paragraph of this Agreement, and Borrower
does not currently conduct, nor has Borrower, during the last five (5) years
conducted, business under any other name or trade name.

 

7.3          Authorization; Validity. Borrower has full right, power and
authority to enter into this Agreement, to make the borrowings and execute and
deliver the Loan Documents as provided herein and to perform all of its duties
and obligations under this Agreement and the Loan Documents and no other action
or consent on the part of Borrower, its board of directors, stockholders, or any
other Person is necessary or required by Borrower to execute this Agreement and
the Loan Documents, consummate the transactions contemplated herein and therein,
and perform all of its obligations hereunder and thereunder. The execution and
delivery of this Agreement and the Loan Documents will not, nor will the
observance or performance of any of the matters and things herein or therein set
forth, violate or contravene any provision of law or of Borrower’s Articles of
Incorporation, Bylaws, or other governing documents. All necessary and
appropriate corporate action has been taken on the part of Borrower to authorize
the execution and delivery of this Agreement and the Loan Documents and the
issuance of the Revolving Note and the Facility Fee Shares. This Agreement and
the Loan Documents are valid and binding agreements and contracts of Borrower,
enforceable against Borrower in accordance with their respective terms, except
to the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium and other laws enacted for the relief of debtors
generally and other similar laws affecting the enforcement of creditors’ rights
generally or by equitable principles which may affect the availability of
specific performance and other equitable remedies. Borrower does not know of any
reason why Borrower cannot perform any of its obligations under this Agreement,
the Loan Documents or any related agreements.

 

25

 

 

7.4           Capitalization. The authorized capital stock of Borrower consists
of 309,000,000 shares, 259,000,000 of which are designated as Common Stock or
Class B common stock, and 50,000,000 of which are designated as preferred stock
(the “Preferred Stock”). As of the date hereof, Borrower has 3,917,129 shares of
Common Stock and 9,000,000 shares of Class B common stock issued and
outstanding, and no shares of Preferred Stock issued and outstanding. In
addition, there are 3,000,000 shares of Common Stock reserved for future
issuance under the Borrower’s equity compensation plans for employees, and for
issuances upon the exercise of currently outstanding options, warrants and other
convertible securities, all of which are detailed in Schedule 7.4. All of the
outstanding shares of capital stock of Borrower are validly issued, fully paid
and nonassessable, have been issued in compliance with all federal and state
securities laws and none of such outstanding shares were issued in violation of
any preemptive rights or similar rights to subscribe for or purchase securities.
As of the date of this Agreement, no shares of Borrower’s capital stock are
subject to preemptive rights or any other similar rights or any Liens suffered
or permitted by Borrower. The Common Stock is currently quoted on the OTC
Bulletin Board under the trading symbol “SCRI”. The Borrower has received no
notice, either oral or written, with respect to the continued eligibility of the
Common Stock for quotation on the Principal Trading Market, and the Borrower has
maintained all requirements on its part for the continuation of such quotation.
Except for the securities to be issued pursuant to this Agreement, and except as
otherwise set forth in the SEC Documents or in Schedule 7.4, as of the date of
this Agreement: (i) there are no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of Borrower
or any of its Subsidiaries, or contracts, commitments, understandings or
arrangements by which Borrower or any of its Subsidiaries is or may become bound
to issue additional shares of capital stock of Borrower or any of its
Subsidiaries or options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into, any shares of capital stock of Borrower or any of its
Subsidiaries; (ii) there are no outstanding debt securities, notes, credit
agreements, credit facilities or other contracts or instruments evidencing
indebtedness of Borrower or any of its Subsidiaries, or by which Borrower or any
of its Subsidiaries is or may become bound; (iii) there are no outstanding
registration statements with respect to Borrower or any of its securities and
there are no outstanding comment letters from the SEC, the Principal Trading
Market, or any other Governmental Authority with respect to any securities of
Borrower or any of its Subsidiaries; (iv) there are no agreements or
arrangements under which Borrower or any of its Subsidiaries is obligated to
register the sale of any of its securities under the Securities Act; (v) there
are no financing statements filed with any Governmental Authority securing any
obligations of Borrower or any of its Subsidiaries, or filed in connection with
any assets or properties of Borrower or any of its Subsidiaries; (vi) there are
no securities or instruments containing anti-dilution or similar provisions that
will be triggered by this Agreement or any related agreement or the consummation
of the transactions described herein or therein; and (vii) there are no
outstanding securities or instruments of Borrower which contain any redemption
or similar provisions, and there are no contracts or agreements by which
Borrower is or may become bound to redeem a security of Borrower (except
pursuant to this Agreement). Borrower has furnished to the Lender true, complete
and correct copies of Borrower’s Certificate of Incorporation, as amended and as
in effect on the date hereof and Borrower’s Bylaws, as in effect on the date
hereof, and any other governing or organizational documents, as applicable.
Except for the documents delivered to Lender in accordance with the immediately
preceding sentence, there are no other shareholder agreements, voting
agreements, operating agreements, or other contracts or agreements of any nature
or kind that restrict, limit or in any manner impose obligations, restrictions
or limitations on the governance of Borrower.

 

26

 

 

7.5           No Conflicts; Consents and Approvals. The execution, delivery and
performance of this Agreement and the Loan Documents, and the consummation of
the transactions contemplated hereby and thereby, including the issuance of the
Facility Fee Shares, will not: (i) constitute a violation of or conflict with
the Certificate of Incorporation, Bylaws, or any other organizational or
governing documents of Borrower; (ii) constitute a violation of, or a default or
breach under (either immediately, upon notice, upon lapse of time, or both), or
conflicts with, or gives to any other Person any rights of termination,
amendment, acceleration or cancellation of, any provision of any contract or
agreement to which Borrower is a party or by which any of its or their assets or
properties may be bound; (iii) constitute a violation of, or a default or breach
under (either immediately, upon notice, upon lapse of time, or both), or
conflicts with, any order, writ, injunction, decree, or any other judgment of
any nature whatsoever; (iv) constitute a violation of, or conflict with, any
law, rule, ordinance or other regulation (including United States federal and
state securities laws and the rules and regulations of the Principal Trading
Market); or (v) result in the loss or adverse modification of, or the imposition
of any fine, penalty or other Lien, claim or encumbrance with respect to, any
Permit granted or issued to, or otherwise held by or for the use of, Borrower or
any of its assets. Borrower is not in violation of its Certificate of
Incorporation, Bylaws, or other organizational or governing documents, as
applicable, and Borrower is not in default or breach (and no event has occurred
which with notice or lapse of time or both could put Borrower in default or
breach) under, and Borrower has not taken any action or failed to take any
action that would give to any other Person any rights of termination, amendment,
acceleration or cancellation of, any contract or agreement to which Borrower is
a party or by which any property or assets of Borrower are bound or affected. No
business of Borrower is being conducted, and shall not be conducted, in
violation of any law, rule, ordinance or other regulation. Except as
specifically contemplated by this Agreement, Borrower is not required to obtain
any consent or approval of, from, or with any Governmental Authority, or any
other Person, in order for it to execute, deliver or perform any of its
obligations under this Agreement or the Loan Documents in accordance with the
terms hereof or thereof, or to issue the Facility Fee Shares in accordance with
the terms hereof. All consents and approvals which Borrower is required to
obtain pursuant to the immediately preceding sentence have been obtained or
effected on or prior to the date hereof.

 

7.6           Issuance of Securities. The Facility Fee Shares are duly
authorized and, upon issuance in accordance with the terms hereof, shall be duly
issued, fully paid and non-assessable, and free from all Liens, claims, charges,
taxes, or other encumbrances with respect to the issue thereof, and will be
issued in compliance with all applicable United States federal and state
securities laws and the laws of any foreign jurisdiction applicable to the
issuance thereof. Any shares issuable upon conversion of the Revolving Note, in
accordance with the terms of the Revolving Note, are duly authorized and, upon
issuance in accordance with the terms hereof, shall be duly issued, fully paid
and non-assessable, and free from all Liens, claims, charges, taxes, or other
encumbrances with respect to the issue thereof, and will be issued in compliance
with all applicable United States federal and state securities laws and the laws
of any foreign jurisdiction applicable to the issuance thereof. Assuming the
accuracy of the Lender’s representations in Section 8 hereof, the issuance of
the Facility Fee Shares and any shares issuable upon conversion of the Revolving
Note is and will be exempt from: (i) the registration and prospectus delivery
requirements of the Securities Act; (ii) the registration and/or qualification
provisions of all applicable state and provincial securities and “blue sky”
laws; and (iii) any similar registration or qualification requirements of any
foreign jurisdiction or other Governmental Authority.

 

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7.7           Compliance With Laws. The nature and transaction of Borrower’s
business and operations and the use of its properties and assets, including, but
not limited to, the Collateral or any real estate owned, leased, or occupied by
Borrower, do not and during the term of the Loans shall not, violate or conflict
with any applicable law, statute, ordinance, rule, regulation or order of any
kind or nature, including, without limitation, the provisions of the Fair Labor
Standards Act or any zoning, land use, building, noise abatement, occupational
health and safety or other laws, any Permit or any condition, grant, easement,
covenant, condition or restriction, whether recorded or not, except to the
extent such violation or conflict would not result in a Material Adverse Effect.

 

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

 

7.9           Collateral Representations. No Person other than Borrower, owns or
has other rights in the Collateral, and the Collateral is free from any Lien of
any kind, other than the Lien of Lender and Permitted Liens.

 

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7.10         SEC Documents; Financial Statements. The Borrower is subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, and the
Borrower has, except as provided in Schedule 7.10, timely filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the SEC or any other Governmental Authority (all of the foregoing filed within
the two (2) years preceding the date hereof or amended after the date hereof and
all exhibits included therein and financial statements and schedules thereto and
documents incorporated by reference therein, being hereinafter referred to as
the “SEC Documents”). Except as set forth in Schedule 7.10, the Borrower is
current with its filing obligations under the Exchange Act and all SEC Documents
have been filed on a timely basis or the Borrower has received a valid extension
of such time of filing and has filed any such SEC Document prior to the
expiration of any such extension. The Borrower represents and warrants that true
and complete copies of the SEC Documents are available on the SEC’s website
(www.sec.gov) at no charge to Lender, and Lender acknowledges that it may
retrieve all SEC Documents from such website and Lender’s access to such SEC
Documents through such website shall constitute delivery of the SEC Documents to
Lender; provided, however, that if Lender is unable to obtain any of such SEC
Documents from such website at no charge, as result of such website not being
available or any other reason beyond Lender’s control, then upon request from
Lender, the Borrower shall deliver to Lender true and complete copies of such
SEC Documents. The Borrower shall also deliver to Lender, upon request, true and
complete copies of all draft filings, reports, schedules, statements and other
documents required to be filed with the SEC that have been prepared but not
filed with the SEC as of the date hereof. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Exchange Act, and none of the SEC Documents, at the time they were filed with
the SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. None of the statements made in any such SEC Documents is, or has
been, required to be amended or updated under applicable law (except for such
statements as have been amended or updated in subsequent filings prior the date
hereof, which amendments or updates are also part of the SEC Documents). As of
their respective dates, the consolidated financial statements of the Borrower
and its Subsidiaries included in the SEC Documents (the “Financial
Statements”)complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto. All of the Financial Statements have been prepared in accordance with
GAAP, consistently applied, during the periods involved (except: (i) as may be
otherwise indicated in such Financial Statements or the notes thereto; or (ii)
in the case of unaudited interim statements, to the extent they may exclude
footnotes or may be condensed or summary statements), and fairly present in all
material respects the consolidated financial position of the Borrower and all of
its Subsidiaries as of the dates thereof and the consolidated results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments). To the knowledge of
Borrower and its officers, no other information provided by or on behalf of
Borrower to the Lender which is not included in the SEC Documents contains any
untrue statement of a material fact or omits to state any material fact
necessary in order to make the statements therein, in the light of the
circumstance under which they are or were made, not misleading.

 

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

 

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

 

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

 

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7.12         Litigation and Taxes. There is no Proceeding pending, or to
Borrower’s knowledge, threatened, against Borrower or its officers, managers,
members or shareholders, or against or affecting any of its assets. In addition,
there is no outstanding judgments, orders, writs, decrees or other similar
matters or items against or affecting Borrower, its business or assets. Borrower
has not received any material complaint from any Customer, supplier, vendor or
employee. Borrower has duly filed all applicable income or other tax returns and
has paid all income or other taxes when due. There is no Proceeding, controversy
or objection pending or threatened in respect of any tax returns of Borrower.

 

7.13         Event of Default. No Event of Default has occurred and is
continuing, and no event has occurred and is continuing which, with the lapse of
time, the giving of notice, or both, would constitute such an Event of Default
under this Agreement or any of the other Loan Documents, and Borrower is not in
default (without regard to grace or cure periods) under any contract or
agreement to which it is a party or by which any of their respective assets are
bound.

 

7.14         ERISA Obligations. To the knowledge of Borrower, all Employee Plans
of Borrower meet the minimum funding standards of Section 302 of ERISA, where
applicable, and each such Employee Plan that is intended to be qualified within
the meaning of Section 401 of the Internal Revenue Code of 1986 is qualified. No
withdrawal liability has been incurred under any such Employee Plans and no
“Reportable Event” or “Prohibited Transaction” (as such terms are defined in
ERISA), has occurred with respect to any such Employee Plans, unless approved by
the appropriate Governmental Authority. To the knowledge of Borrower, Borrower
has promptly paid and discharged all obligations and liabilities arising under
the ERISA of a character which if unpaid or unperformed might result in the
imposition of a Lien against any of its properties or assets.

 

7.15         Adverse Circumstances. No condition, circumstance, event,
agreement, document, instrument, restriction, litigation or Proceeding (or
threatened litigation or Proceeding or basis therefor) exists which: (i) could
adversely affect the validity or priority of the Liens granted to Lender under
the Loan Documents; (ii) could adversely affect the ability of Borrower to
perform its obligations under the Loan Documents; (iii) would constitute a
default under any of the Loan Documents; (iv) would constitute such a default
with the giving of notice or lapse of time or both; or (v) would constitute or
give rise to a Material Adverse Effect.

 

7.16         Liabilities and Indebtedness of the Borrower. Borrower does not
have any Funded Indebtedness or any liabilities or obligations of any nature
whatsoever, except: (i) as disclosed in the Financial Statements; or (ii)
liabilities and obligations incurred in the Ordinary Course of Business of
Borrower since the date of the last Financial Statements filed by the Borrower
with the SEC which do not or would not, individually or in the aggregate, exceed
Fifty Thousand Dollars ($50,000) or otherwise have a Material Adverse Effect.

 

7.17         Real Estate.

 

 (a)         Real Property Ownership. Except for the Borrower Leases, Borrower
does not own any Real Property.

 

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(b)          Real Property Leases. Except for ordinary office leases described
in the SEC Documents (the “Borrower Leases”), Borrower does not lease any other
Real Property. With respect to each of the Borrower Leases: (i) Borrower has
been in peaceful possession of the property leased thereunder and neither
Borrower nor the landlord is in default thereunder; (ii) no waiver, indulgence
or postponement of any of the obligations thereunder has been granted by
Borrower or landlord thereunder; and (iii) there exists no event, occurrence,
condition or act known to Borrower which, upon notice or lapse of time or both,
would be or could become a default thereunder or which could result in the
termination of the Borrower Leases, or any of them, or have a Material Adverse
Effect. Borrower has not violated nor breached any provision of any such
Borrower Leases, and all obligations required to be performed by Borrower under
any of such Borrower Leases have been fully, timely and properly performed,
except where failure to so perform would not, in Lender’s sole but reasonable
discretion, result in a Material Adverse Effect. Borrower has not received any
written or oral notice to the effect that any of the Borrower Leases will not be
renewed at the termination of the term of such Borrower Leases, or that the
Borrower Leases will be renewed only at higher rents.

 

7.18         Material Contracts. An accurate, current and complete copy of each
of the Material Contracts is readily available as part of the SEC Documents, and
each of the Material Contracts constitutes the entire agreement of the
respective parties thereto relating to the subject matter thereof. There are no
outstanding offers, bids, proposals or quotations made by Borrower which, if
accepted, would create a Material Contract with Borrower. Each of the Material
Contracts is in full force and effect and is a valid and binding obligation of
the parties thereto in accordance with the terms and conditions thereof. To the
knowledge of Borrower and its officers, all obligations required to be performed
under the terms of each of the Material Contracts by any party thereto have been
fully performed by all parties thereto, and no party to any Material Contracts
is in default with respect to any term or condition thereof, nor has any event
occurred which, through the passage of time or the giving of notice, or both,
would constitute a default thereunder or would cause the acceleration or
modification of any obligation of any party thereto or the creation of any Lien,
claim, charge or other encumbrance upon any of the assets or properties of
Borrower. Further, Borrower has not received any notice, nor does Borrower have
any knowledge, of any pending or contemplated termination of any of the Material
Contracts and, no such termination is proposed or has been threatened, whether
in writing or orally.

 

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

  

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

 

7.21         Labor and Employment Matters. Borrower is not involved in any labor
dispute or, to the knowledge of Borrower, is any such dispute threatened. To the
knowledge of the Borrower and its officers, none of the employees of Borrower is
a member of a union and Borrower believes that its relations with its employees
are good. To the knowledge of Borrower and its officers, Borrower has complied
in all material respects with all laws, rules, ordinances and regulations
relating to employment matters, civil rights and equal employment opportunities.

 

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

 

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

 

7.24         Lending Relationship. Borrower acknowledges and agrees that the
relationship hereby created with Lender is and has been conducted on an open and
arm’s length basis in which no fiduciary relationship exists and that Borrower
has not relied, nor is relying on, any such fiduciary relationship in executing
this Agreement and in consummating the Loans. Lender represents that it will
receive the Revolving Note payable to its order as evidence of the Loans.

 

7.25         Compliance with Regulation U. No portion of the proceeds of the
Loans shall be used by Borrower, or any Affiliates of Borrower, either directly
or indirectly, for the purpose of purchasing or carrying any margin stock,
within the meaning of Regulation U as adopted by the Board of Governors of the
Federal Reserve System.

 

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7.26         Governmental Regulation. Borrower is not, nor after giving effect
to any Loan, will be, subject to regulation under the Public Utility Holding
Borrower Act of 1935, the Federal Power Act or the Investment Borrower Act of
1940 or to any federal or state statute or regulation limiting its ability to
incur indebtedness for borrowed money.

 

7.27         Bank Accounts. Schedule 7.27 sets forth, with respect to each
account of Borrower with any bank, broker, merchant processor, or other
depository institution: (i) the name and account number of such account; (ii)
the name and address of the institution where such account is held; (iii) the
name of any Person(s) holding a power of attorney with respect to such account,
if any; and (iv) the names of all authorized signatories and other Persons
authorized to withdraw funds from each such account.

 

7.28         Places of Business. The principal place of business of Borrower is
set forth on Schedule 7.28 and Borrower shall promptly notify Lender of any
change in such location. Borrower will not remove or permit the Collateral to be
removed from such locations without the prior written consent of Lender, except
for: (i) certain heavy equipment kept at third party sites when conducting
business or maintenance; (ii) vehicles, containers and rolling stock; (iii)
Inventory sold or leased in the Ordinary Course of Business; and (iv) temporary
removal of Collateral to other locations for repair or maintenance as may be
required from time to time in each instance in the Ordinary Course of Business
of Borrower.

 

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

 

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

 

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

 

7.32         Brokerage Fees. Except for Meyers Associates, LP, there is no
Person acting on behalf of Borrower who is entitled to or has any claim for any
brokerage or finder’s fee or commission in connection with the execution of this
Agreement or the consummation of the transactions contemplated hereby. Meyers
Associates, LP, a FINRA registered securities brokerage firm, shall be paid a
finder’s fee by the Borrower, at Closing, in accordance with a separate
agreement between the Borrower and Meyers Associates, LP, which fee shall not be
greater than three percent (3%) of the initial Revolving Loan Commitment.

 

7.33         No General Solicitation. Neither Borrower, nor any of its
Affiliates, nor any Person acting on its or their behalf, has engaged in any
form of general solicitation or general advertising (within the meaning of
Regulation D under the Securities Act) in connection with the offer or issuance
of the Revolving Note, the Facility Fee Shares or the shares issuable upon
conversion of the Revolving Note.

 

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

 

7.35         Private Placement. Assuming the accuracy of the Lender’s
representations and warranties set forth in Section 8 below, no registration
under the Securities Act or the laws, rules or regulation of any other
Governmental Authority is required for the issuance of the Revolving Note, the
Facility Fee Shares or the shares issuable upon conversion of the Revolving Note
as contemplated hereby.

 

7.36         Complete Information. This Agreement and all financial statements,
schedules, certificates, confirmations, agreements, contracts, and other
materials submitted to Lender in connection with or in furtherance of this
Agreement by or on behalf of Borrower fully and fairly states the matters with
which they purport to deal, and do not misstate any material fact nor,
separately or in the aggregate, fail to state any material fact necessary to
make the statements made not misleading.

 

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8.            REPRESENTATIONS AND WARRANTIES OF LENDER.

 

Lender makes the following representations and warranties to the Borrower, each
of which shall be true and correct in all material respects as of the date of
the execution and delivery of this Agreement and as of the date of each Loan
made hereunder, except to the extent such representation expressly relates to an
earlier date, and which shall survive the execution and delivery of this
Agreement:

 

8.1           Investment Purpose. Lender is acquiring the Revolving Note, the
Facility Fee Shares or the shares issuable upon conversion of the Revolving
Note, for its own account, for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution thereof, except
pursuant to sales registered or exempted under the Securities Act.

 

8.2           Accredited Lender Status. Lender is an “Accredited Lender” as that
term is defined in Rule 501(a)(3) of Regulation D promulgated under the
Securities Act.

 

8.3           Reliance on Exemptions. Lender understands that the Revolving
Note, the Facility Fee Shares or the shares issuable upon conversion of the
Revolving Note, are each being offered and sold to it in reliance on specific
exemptions from the registration requirements of United States federal and state
securities laws and that Borrower are relying in part upon the truth and
accuracy of, and Lender’s compliance with, the representations, warranties,
agreements, acknowledgments and understandings of Lender set forth herein in
order to determine the availability of such exemptions and the eligibility of
Lender to acquire such securities.

 

8.4           Information. Lender has been furnished with all materials relating
to the business, finances and operations of Borrower and information deemed
material by Lender to making an informed investment decision regarding the
Revolving Note and Facility Fee Shares, which have been requested by Lender.
Lender has been afforded the opportunity to ask questions of Borrower and its
management. Neither such inquiries nor any other due diligence investigations
conducted by Lender or its representatives shall modify, amend or affect
Lender’s right to rely on Borrower’s representations and warranties contained in
Article 7 above or in any other Loan Documents. Lender understands that its
investment in the Revolving Note and Facility Fee Shares involves a high degree
of risk. Lender is in a position regarding Borrower, which, based upon economic
bargaining power, enabled and enables Lender to obtain information from Borrower
in order to evaluate the merits and risks of this investment. Lender has sought
such accounting, legal and tax advice, as it has considered necessary to make an
informed investment decision with respect to the Revolving Note.

 

8.5           No Governmental Review. Lender understands that no United States
federal or state agency or any other Governmental Authority has passed on or
made any recommendation or endorsement of the Revolving Note, or the fairness or
suitability of the investment in the Revolving Note, nor have such authorities
passed upon or endorsed the merits of the offering of the Revolving Note.

 

8.6           Transfer or Resale. Lender understands that: (i) the Revolving
Note, the Facility Fee Shares and the shares issuable upon conversion of the
Revolving Note, have not been and are not being registered under the Securities
Act or any other foreign or state securities laws, and may not be offered for
sale, sold, assigned or transferred unless: (A) subsequently registered
thereunder; or (B) Lender shall have delivered to Borrower an opinion of
counsel, in a generally acceptable form, to the effect that such securities to
be sold, assigned or transferred may be sold, assigned or transferred pursuant
to an exemption from such registration requirements; and (ii) neither Borrower
nor any other Person is under any obligation to register such securities under
the Securities Act or any foreign or state securities laws or to comply with the
terms and conditions of any exemption thereunder, except as otherwise set forth
in this Agreement.

 

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8.7           Intentionally Left Blank.

 

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

 

8.9           Intentionally Left Blank.

 

8.10         Due Formation of Lender. Lender is an entity that has been formed
and validly exists and has not been organized for the specific purpose of
purchasing the Revolving Note and is not prohibited from doing so.

 

8.11         No Legal Advice from Borrower. Lender acknowledges that it had the
opportunity to review this Agreement and the transactions contemplated by this
Agreement with his or its own legal counsel and investment and tax advisors.
Lender is relying solely on such counsel and advisors and not on any statements
or representations of Borrower or any of its representatives or agents for
legal, tax or investment advice with respect to this investment, the
transactions contemplated by this Agreement or the securities laws of any
jurisdiction; provided, however, the foregoing shall not modify, amend or affect
Lender’s right to rely on Borrower’s representations and warranties contained in
Article 7 above or in any other Loan Documents.

 

9.            NEGATIVE COVENANTS.

 

9.1          Indebtedness. Borrower shall not, either directly or indirectly,
create, assume, incur or have outstanding any Funded Indebtedness (including
purchase money indebtedness), or become liable, whether as endorser, guarantor,
surety or otherwise, for any debt or obligation of any other Person, except:

 

(a)           the Obligations;

 

(b)          endorsement for collection or deposit of any commercial paper
secured in the Ordinary Course of Business;

 

(c)          obligations for taxes, assessments, municipal or other governmental
charges; provided, the same are being contested in good faith by appropriate
proceedings and are insured against or bonded over to the satisfaction of
Lender;

 

(d)          obligations for accounts payable, other than for money borrowed,
incurred in the Ordinary Course of Business; provided that, any management or
similar fees payable by Borrower shall be fully subordinated in right of payment
to the prior payment in full of the Loans made hereunder;

 

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(e)          obligations existing on the date hereof which are disclosed on the
Financial Statements;

 

(f)           unsecured intercompany Funded Indebtedness incurred in the
Ordinary Course of Business;

 

(g)          Funded Indebtedness existing on the Closing Date and set forth in
the Financial Statements, including any extensions or refinancings of the
foregoing, which do not increase the principal amount of such Funded
Indebtedness as of the date of such extension or refinancing; provided such
Funded Indebtedness is subordinated to the Obligations owed to Lender pursuant
to a subordination agreement, in form and content acceptable to Lender in its
sole discretion, which shall include an indefinite standstill on remedies and
payment blockage rights during any default;

 

(h)          Funded Indebtedness consisting of Capital Lease obligations or
secured by Permitted Liens of the type described in clause (g) of the definition
thereof not to exceed $250,000 in the aggregate at any time;

 

(i)           Contingent Liabilities arising with respect to customary
indemnification obligations in favor of purchasers in connection with
dispositions permitted hereunder;

 

(j)           Contingent Liabilities incurred in the Ordinary Course of Business
with respect to surety and appeal bonds, performance bonds and other similar
obligations;

 

(k)          Contingent Liabilities arising under indemnity agreements to title
insurers to cause such title insurers to issue to Lender title insurance
policies; and

 

(l)           Unsecured Funded Indebtedness incurred after the Closing Date;
provided such Funded Indebtedness is subordinated to the Obligations owed to
Lender pursuant to a subordination agreement, in form and content acceptable to
Lender in its sole discretion, which shall include an indefinite standstill on
remedies and payment blockage rights during any default.

 

9.2          Encumbrances. Borrower shall not, either directly or indirectly,
create, assume, incur or suffer or permit to exist any Lien or charge of any
kind or character upon any asset of Borrower or their Subsidiaries; whether
owned at the date hereof or hereafter acquired, except Permitted Liens or as
otherwise authorized by Lender in writing.

 

9.3          Investments. Borrower shall not, either directly or indirectly,
make or have outstanding any new investments (whether through purchase of
stocks, obligations or otherwise) in, or loans or advances to, any other Person,
or acquire all or any substantial part of the assets, business, stock or other
evidence of beneficial ownership of any other Person except following:

 

(a)           The stock or other ownership interests in a Subsidiary existing as
of the Closing Date;

 

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(b)           investments in direct obligations of the United States or any
state in the United States;

 

(c)           trade credit extended by Borrower in the Ordinary Course of
Business;

 

(d)           investments in securities of Customers received pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy or insolvency
of such Customers;

 

(e)           investments existing on the Closing Date and set forth in the
Financial Statements;

 

(f)           Contingent Liabilities permitted pursuant to Section 9.1; or

 

(g)          Capital Expenditures permitted under Section 9.5.

 

9.4          Transfer; Merger. Borrower shall not, either directly or
indirectly, permit a Change in Control, merge, consolidate, sell, transfer,
license, lease, encumber or otherwise dispose of all or any part of its property
or business or all or any substantial part of its assets, or sell or discount
(with or without recourse) any of its Notes (as defined in the UCC), Chattel
Paper, Payment Intangibles or Accounts; provided, however, that Borrower may:

 

(a)           sell or lease Inventory and Equipment in the Ordinary Course of
Business;

 

(b)           upon not less than three (3) Business Days’ prior written notice
to Lender, any Subsidiary of Borrower may merge with (so long as the Borrower
remains the surviving entity), or dissolve or liquidate into, or transfer its
property to Borrower;

 

(c)           dispose of used, worn-out or surplus equipment in the Ordinary
Course of Business;

  

(d)           discount or write-off overdue Accounts for collection in the
Ordinary Course of Business;

 

(e)           sell or otherwise dispose (including cancellation of Funded
Indebtedness) of any Investment permitted under Section 9.3 in the Ordinary
Course of Business; and

 

(f)            grant Permitted Liens.

 

9.5          Capital Expenditures. Without Lender’s prior consent, Borrower
shall not make or incur obligations for any Capital Expenditures in any fiscal
year.

 

9.6          Issuance of Stock. Borrower shall have the ability to issue
additional capital stock, including securities convertible or exercisable into
Common Stock, without the prior written consent of Lender, so long as: (i)
Borrower provides written notice to Lender of any such issuance no less than 48
hours prior to such issuance; and (ii) no such issuance shall cause a Change in
Control or otherwise include provisions or requirements for the addition or
removal of any officers or directors of the Borrower.

 

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9.7          Distributions; Restricted Payments. Borrower shall not: (i)
purchase or redeem any shares of its stock or declare or pay any dividends or
distributions, whether in cash or otherwise, set aside any funds for any such
purpose or make any distribution to its shareholders, make any distribution of
its property or assets or make any loans, advances or extensions of credit to,
or investments in, any Persons, including, without limitation, Borrower’s
Affiliates, officers, partners, employees or Material Shareholders, without the
prior written consent of Lender; (ii) make any payments of any Funded
Indebtedness other than as permitted hereunder; or (iii) increase the annual
salary paid to any officers of Borrower as of the Closing Date, unless any such
increase is part of a written employment contract with any such officers entered
into prior to the Closing Date, a copy of which has been delivered to and
approved by the Lender.

 

9.8          Use of Proceeds. Borrower shall not use any portion of the proceeds
of the Loans, either directly or indirectly, for the purpose of purchasing any
securities underwritten by any Affiliate of Lender. In addition, Borrower shall
not use any portion of the proceeds of the Loans, either directly or indirectly,
for any of the following purposes: (i) to make any payment towards any Funded
Indebtedness of Borrower or any Subsidiaries or Affiliates thereof existing as
of the Effective Date, or otherwise created thereafter, if permitted under this
Agreement; (ii) to pay any taxes of any nature or kind that may be due by
Borrower or any Subsidiaries or Affiliates thereof; (iii) to pay any obligations
or liabilities of any nature or kind due or owing to any officers, directors,
employees, or Material Shareholders of Borrower or any Subsidiaries or
Affiliates thereof. Borrower shall only use any portion of the proceeds of the
Loans for the purposes set forth in a “Use of Proceeds Confirmation” to be
executed by Borrower on the Closing Date, unless Borrower obtains the prior
written consent of Lender to use proceeds of Loans for any other purpose, which
consent may be granted or withheld by Lender in its sole and absolute
discretion.

 

9.9          Business Activities; Change of Legal Status and Organizational
Documents. Borrower shall not: (i) engage in any line of business other than the
businesses engaged in on the date hereof and business reasonably related
thereto; (ii) change its name, its type of organization, its jurisdictions of
organization or other legal structure; or (iii) permit its Articles of
Incorporation, Bylaws, or other organizational documents to be amended or
modified in any way which could reasonably be expected to adversely affect the
interests of Lender.

 

9.10        Transactions with Affiliates. Borrower shall not enter into any
transaction with any of its Affiliates, except in the Ordinary Course of
Business and upon fair and reasonable terms that are no less favorable to
Borrower than it would obtain in a comparable arm’s length transaction with a
Person not an Affiliate of Borrower.

 

9.11        Bank Accounts. Borrower shall not maintain any bank, deposit or
credit card payment processing accounts with any financial institution, Payment
Processing Companies, or any other Person, for Borrower or any Affiliate of
Borrower, other than Borrower’s accounts listed in the attached Schedule 7.27,
and other than the Lock Box Account established pursuant to this Agreement.
Specifically, Borrower shall not change, modify, close or otherwise affect the
Lock Box Account or any of the other accounts listed in Schedule 7.27, without
Lender’s prior written approval, which approval may be withheld or conditioned
in Lender’s sole and absolute discretion.

 

39

 

 

10.          AFFIRMATIVE COVENANTS.

 

10.1        Compliance with Regulatory Requirements. Upon demand by Lender,
Borrower shall reimburse Lender for Lender’s additional costs and/or reductions
in the amount of principal or interest received or receivable by Lender if at
any time after the date of this Agreement any law, treaty or regulation or any
change in any law, treaty or regulation or the interpretation thereof by any
Governmental Authority charged with the administration thereof or any other
authority having jurisdiction over Lender or the Loans, whether or not having
the force of law, shall impose, modify or deem applicable any reserve and/or
special deposit requirement against or in respect of assets held by or deposits
in or for the account of the Loans by Lender or impose on Lender any other
condition with respect to this Agreement or the Loans, the result of which is to
either increase the cost to Lender of making or maintaining the Loans or to
reduce the amount of principal or interest received or receivable by Lender with
respect to such Loans. Said additional costs and/or reductions will be those
which directly result from the imposition of such requirement or condition on
the making or maintaining of such Loans.

 

10.2        Corporate Existence. Borrower shall at all times preserve and
maintain its: (i) existence and good standing in the jurisdiction of its
organization; and (ii) its qualification to do business and good standing in
each jurisdiction where the nature of its business makes such qualification
necessary (other than such jurisdictions in which the failure to be qualified or
in good standing could not reasonably be expected to have a Material Adverse
Effect), and shall at all times continue as a going concern in the business
which Borrower is presently conducting.

 

10.3        Maintain Property. Borrower shall at all times maintain, preserve
and keep its plants, properties and equipment, including, but not limited to,
any Collateral, in good repair, working order and condition, normal wear and
tear excepted, and shall from time to time, as Borrower deems appropriate in its
reasonable judgment, make all needful and proper repairs, renewals,
replacements, and additions thereto so that at all times the efficiency thereof
shall be fully preserved and maintained. Borrower shall permit Lender to examine
and inspect such plant, properties and equipment, including, but not limited to,
any Collateral, at all reasonable times upon reasonable notice during business
hours. During the continuance of any Event of Default, Lender shall, at
Borrower’s expense, have the right to make additional inspections without
providing advance notice.

 

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

 

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10.5        Tax Liabilities.

 

(a)          Borrower shall at all times pay and discharge all property, income
and other taxes, assessments and governmental charges upon, and all claims
(including claims for labor, materials and supplies) against Borrower or any of
its properties, Equipment or Inventory, before the same shall become delinquent
and before penalties accrue thereon, unless and to the extent that the same are
being contested in good faith by appropriate proceedings and for which adequate
reserves in accordance with GAAP are being maintained.

 

(b)          Borrower shall be solely responsible for the payment of any and all
documentary stamps and other taxes imposed by the State of Florida and any other
jurisdiction in connection with the execution of this Agreement, the Security
Agreement and the Revolving Note.

 

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

 

41

 

 

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

 

(a)          If the Revolving Loan Maturity Date is extended beyond the original
term, as soon as available, and in any event, within one hundred five (105) days
after the close of each fiscal year, a copy of the annual audited financial
statements of Borrower, including balance sheet, statement of income and
retained earnings, statement of cash flows for the fiscal year then ended, in
reasonable detail, prepared and reviewed by an independent certified public
accountant reasonably acceptable to Lender, containing an unqualified opinion of
such accountant;

 

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

 

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

 

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

 

Borrower agrees to advise Lender immediately, in writing, of the occurrence of
any Material Adverse Effect, or the occurrence of any event, circumstance or
other happening that could be reasonably expected to lead to or become a
Material Adverse Effect.

 

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10.8        Additional Reporting Requirements. Borrower shall provide the
following reports and statements to Lender as follows:

 

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

 

(b)           Borrower shall submit to Lender true and correct copies of all
bank statements received by Borrower within five (5) days after Borrower’s
receipt thereof from its bank.

 

(c)           Promptly upon receipt thereof, Borrower shall provide to Lender
copies of interim and supplemental reports, if any, submitted to Borrower by
independent accountants in connection with any interim audit or review of the
books of Borrower.

 

10.9        Aged Accounts/Payables Schedules. Borrower shall, within twenty (20)
days after the end of each calendar month, deliver to Lender an aged schedule of
the Accounts of Borrower, listing the name and amount due from each Customer and
showing the aggregate amounts due from: (i) 0-30 days; (ii) 31-60 days; (iii)
61-90 days; (iv) 91-120 days; and (v) more than 120 days, and certified as
accurate by the Chief Financial Officer or the President of Borrower. Borrower
shall, within twenty (20) days after the end of each calendar month, deliver to
Lender an aged schedule of the accounts payable of Borrower, listing the name
and amount due to each creditor and showing the aggregate amounts due from: (v)
0-30 days; (w) 31-60 days; (x) 61-90 days; (y) 91-120 days; and (z) more than
120 days, and certified as accurate by the Chief Financial Officer or the
President of Borrower.

 

10.10      Failure to Provide Reports. If at any time during the term of this
Agreement, Borrower shall fail to timely provide any reports required to be
provided by Borrower to Lender under this Agreement or any other Loan Document,
in addition to all other rights and remedies that Lender may have under this
Agreement and the other Loan Documents, Lender shall have the right to require,
at each instance of any such failure, upon written notice to Borrower, that the
Borrower redeem Facility Fee Shares, for cash, in an amount equal to 8.33% of
the Share Value for each failure to provide reports as required hereby, which
cash redemption payment shall be due and payable by wire transfer to an account
designated by Lender within five (5) Business Days from the date the Lender
delivers such redemption notice to the Borrower.

 

10.11      Covenant Compliance. Borrower shall, within thirty (30) days after
the end of each calendar month, deliver to Lender a Compliance Certificate
showing compliance by Borrower with the covenants therein, and certified as
accurate by the President or Chief Financial Officer of Borrower.

 

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10.12      Continued Due Diligence/Field Audits. Borrower acknowledges that
during the term of this Agreement, Lender and its agents and representatives
undertake ongoing and continuing due diligence reviews of Borrower and its
business and operations. Such ongoing due diligence reviews may include, and
Borrower does hereby allow Lender, to conduct site visits and field examinations
of the office locations of Borrower, and the assets and records of Borrower, the
results of which must be satisfactory to Lender in Lender’s sole and absolute
discretion. In this regard, in order to cover Lender’s expenses of the ongoing
due diligence reviews and any site visits or field examinations which Lender may
undertake from time to time while this Agreement is in effect, the Borrower
shall pay to Lender, either quarterly or yearly, at Lender’s discretion, and
within five (5) Business Days after receipt of an invoice or demand therefor
from Lender, a fee of up to $2,000 per quarter to cover such ongoing expenses.
Failure to pay such fee as and when required shall be deemed an Event of Default
under this Agreement and all other Loan Documents. The foregoing
notwithstanding, from and after the occurrence of an Event of Default or any
event which with notice, lapse of time or both, would become an Event of
Default, Lender may conduct site visits, field examinations and other ongoing
reviews of Borrower’s records, assets and operations at any time, in its sole
discretion, without any limitations in terms of number of site visits or
examinations and without being limited to the fee hereby contemplated, all at
the sole expense of Borrower.

 

10.13      Notice and Other Reports. Borrower shall provide prompt written
notice to Lender if at any time Borrower fails to comply with Section 11 herein.
In addition, Borrower shall, within such period of time as Lender may reasonably
specify, deliver to Lender such other schedules and reports as Lender may
reasonably require.

 

10.14      Collateral Records. Borrower shall keep full and accurate books and
records relating to the Collateral and shall mark such books and records to
indicate Lender’s Lien in the Collateral including, without limitation, placing
a legend, in form and content reasonably acceptable to Lender, on all Chattel
Paper created by Borrower indicating that Lender has a Lien in such Chattel
Paper.

 

10.15      Notice of Proceedings. Borrower shall, promptly, but not more than
five (5) days after knowledge thereof shall have come to the attention of any
officer of Borrower, give written notice to Lender of all threatened or pending
actions, suits, and all Proceedings before any court or any other Governmental
Authority which may have a Material Adverse Effect.

 

10.16      Notice of Default. Borrower shall, promptly, but not more than five
(5) days after the commencement thereof, give notice to Lender in writing of the
occurrence of an Event of Default or of any event which, with the lapse of time,
the giving of notice or both, would constitute an Event of Default hereunder.

 

10.17      Environmental Matters. If any release or threatened release or other
disposal of Hazardous Substances shall occur or shall have occurred on any real
property or any other assets of Borrower or any Subsidiary or Affiliate of
Borrower, Borrower shall cause the prompt containment and/or removal of such
Hazardous Substances and the remediation and/or operation of such real property
or other assets as necessary to comply with all Environmental Laws and to
preserve the value of such real property or other assets. Without limiting the
generality of the foregoing, Borrower shall comply with any Federal or state
judicial or administrative order requiring the performance at any real property
of Borrower of activities in response to the release or threatened release of a
Hazardous Substance. To the extent that the transportation of Hazardous
Substances is permitted by this Agreement, Borrower shall dispose of such
Hazardous Substances, or of any other wastes, only at licensed disposal
facilities operating in compliance with Environmental Laws.

 

44

 

 

10.18      Reporting Status; Listing. So long as this Agreement remains in
effect, and for so long as Lender owns, legally or beneficially, any of the
Facility Fee Shares or other shares of Common Stock, the Borrower shall: (i)
file in a timely manner all reports required to be filed under the Securities
Act, the Exchange Act or any securities laws and regulations thereof applicable
to the Borrower of any state of the United States, or by the rules and
regulations of the Principal Trading Market, and, to provide a copy thereof to
the Lender promptly after such filing; (ii) not terminate its status as an
issuer required to file reports under the Exchange Act even if the Exchange Act
or the rules and regulations thereunder would otherwise permit such termination;
(iii) if required by the rules and regulations of the Principal Trading Market,
promptly secure the listing of the Facility Fee Shares and any other shares of
the Borrower’s Common Stock issuable to Lender under any Loan Documents upon the
Principal Trading Market (subject to official notice of issuance) and, take all
reasonable action under its control to maintain the continued listing, quotation
and trading of its Common Stock on the Principal Trading Market, and the
Borrower shall comply in all respects with the Borrower’s reporting, filing and
other obligations under the bylaws or rules of the Principal Trading Market, the
Financial Industry Regulatory Authority, Inc. and such other Governmental
Authorities, as applicable. The Borrower shall promptly provide to Lender copies
of any notices it receives from the SEC or any Principal Trading Market, to the
extent any such notices could in any way have or be reasonably expected to have
a Material Adverse Effect.

 

10.19      Rule 144. With a view to making available to Lender the benefits of
Rule 144 under the Securities Act (“Rule 144”), or any similar rule or
regulation of the SEC that may at any time permit Lender to sell the Facility
Fee Shares or other shares of Common Stock issuable to Lender under any Loan
Documents to the public without registration, the Borrower represents and
warrants that: (i) the Borrower is, and has been for a period of at least ninety
(90) days immediately preceding the date hereof, subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act; (ii) the Borrower has
filed all required reports under Section 13 or 15(d) of the Exchange Act, as
applicable, during the twelve (12) months preceding the Closing Date (or for
such shorter period that the Borrower was required to file such reports); (iii)
the Borrower is not an issuer defined as a “Shell Borrower” (as hereinafter
defined); and (iv) if the Borrower has, at any time, been an issuer defined as a
Shell Borrower, the Borrower has: (A) not been an issuer defined as a Shell
Borrower for at least six (6) months prior to the Closing Date; and (B) has
satisfied the requirements of Rule 144(i) (including, without limitation, the
proper filing of “Form 10 information” at least six (6) months prior to the
Closing Date). For the purposes hereof, the term “Shell Borrower” shall mean an
issuer that meets the description defined under Rule 144. In addition, so long
as Lender owns, legally or beneficially, any securities of the Borrower, the
Borrower shall, at its sole expense:

 

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

 

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

 

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

 

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10.20      Reservation of Shares. The Borrower shall take all action reasonably
necessary to at all times have authorized, and reserved for the purpose of
issuance, such number of shares of Common Stock as shall be necessary to effect
the full conversion of the Revolving Note in accordance with its terms (the
“Share Reserve”). If at any time the Share Reserve is insufficient to effect the
full conversion of the Revolving Note then outstanding, the Borrower shall
increase the Share Reserve accordingly. If the Borrower does not have sufficient
authorized and unissued shares of Common Stock available to increase the Share
Reserve, the Borrower shall call and hold a special meeting of the shareholders
within sixty (60) days of such occurrence, or take action by the written consent
of the holders of a majority of the outstanding shares of Common Stock, if
possible, for the sole purpose of increasing the number of shares authorized.
Borrower’s management shall recommend to the shareholders to vote in favor of
increasing the number of shares of Common Stock authorized.

 

11.          FINANCIAL COVENANTS.

 

11.1        Revenue Covenant. For each calendar quarter while this Agreement
remains in effect, Borrower shall have sales revenues that are not less than
seventy-five percent (75%) of the sales revenues shown on the most recent of the
Financial Statements.

 

12.          EVENTS OF DEFAULT.

 

Borrower, without notice or demand of any kind, shall be in default under this
Agreement upon the occurrence of any of the following events (each an “Event of
Default”):

 

12.1        Nonpayment of Obligations. Any amount due and owing on the Revolving
Note or any of the Obligations, whether by its terms or as otherwise provided
herein, is not paid on the date such amount is due.

 

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12.2        Misrepresentation. Any written warranty, representation, certificate
or statement of Borrower in this Agreement, the Loan Documents or any other
agreement with Lender shall be false or misleading in any material respect when
made or deemed made.

 

12.3        Nonperformance. Any failure to perform or default in the performance
of any covenant, condition or agreement contained in this Agreement (not
otherwise addressed in this Article 12), which failure to perform or default in
performance continues for a period of fifteen (15) days after Borrower receives
notice or knowledge from any source of such failure to perform or default in
performance (provided that if the failure to perform or default in performance
is not capable of being cured, in Lender’s sole but reasonable discretion, then
the cure period set forth herein shall not be applicable and the failure or
default shall be an immediate Event of Default hereunder).

 

12.4        Default under Loan Documents. Any failure to perform or default in
the performance by Borrower that continues after applicable grace and cure
periods under any covenant, condition or agreement contained in any of the other
Loan Documents or any other agreement with Lender, all of which covenants,
conditions and agreements are hereby incorporated in this Agreement by express
reference.

 

12.5        Default under Other Obligations. Any default by Borrower in the
payment of principal, interest or any other sum for any other obligation beyond
any period of grace provided with respect thereto, or in the performance of any
other term, condition or covenant contained in any other agreement, the effect
of which default is to cause or permit the holder of such obligation (or the
other party to such other agreement) to cause such obligation or agreement to
become due prior to its stated maturity, to terminate such other agreement, or
to otherwise modify or adversely affect such obligation or agreement in a manner
that could have a Material Adverse Effect on Borrower.

 

12.6        Assignment for Creditors. Borrower makes an assignment for the
benefit of creditors, fails to pay, or admits in writing its inability to pay
its debts as they mature; or if a trustee of any substantial part of the assets
of Borrower is applied for or appointed, and in the case of such trustee being
appointed in a proceeding brought against Borrower, Borrower, by any action or
failure to act indicates its approval of, consent to, or acquiescence in such
appointment and such appointment is not vacated, stayed on appeal or otherwise
shall not have ceased to continue in effect within sixty (60) days after the
date of such appointment.

 

12.7        Bankruptcy. Any proceeding involving Borrower, is commenced by or
against Borrower under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law or statute of the federal
government or any state government, and in the case of any such proceeding being
instituted against Borrower: (i) Borrower, by any action or failure to act,
indicates its approval of, consent to or acquiescence therein; or (ii) an order
shall be entered approving the petition in such proceedings and such order is
not vacated, stayed on appeal or otherwise shall not have ceased to continue in
effect within sixty (60) days after the entry thereof.

 

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12.8        Judgments. The entry of any judgment, decree, levy, attachment,
garnishment or other process, or the filing of any Lien against the property of
Borrower for an amount in excess of $50,000 and such judgment or other process
would have a Material Adverse Effect on the ability of Borrower to perform under
this Agreement or under the Loan Documents, as determined by Lender in its sole
discretion, unless such judgment or other process shall have been, within sixty
(60) days from the entry thereof: (i) bonded over to the satisfaction of Lender
and appealed; (ii) vacated; or (iii) discharged.

 

12.9        Material Adverse Effect. A Material Adverse Effect shall occur.

 

12.10      Change in Control. Except as permitted under this Agreement, any
Change in Control shall occur; provided, however, a Change in Control shall not
constitute an Event of Default if: (i) it arises out of an event or circumstance
beyond the reasonable control of Borrower (for example, but not by way of
limitation, a transfer of ownership interest due to death or incapacity); and
(ii) within sixty (60) days after such Change in Control, Borrower provides
Lender with information concerning the identity and qualifications of the
individual or individuals who will be in Control, and such individual or
individuals shall be acceptable to Lender, in Lender’s sole discretion.

 

12.11      Collateral Impairment. The entry of any judgment, decree, levy,
attachment, garnishment or other process, or the filing of any Lien against, any
of the Collateral or any collateral under a separate security agreement securing
any of the Obligations, and such judgment or other process shall not have been,
within thirty (30) days from the entry thereof: (i) bonded over to the
satisfaction of Lender and appealed; (ii) vacated; or (iii) discharged, or the
loss, theft, destruction, seizure or forfeiture, or the occurrence of any
material deterioration or impairment of any of the Collateral or any of the
Collateral under any security agreement securing any of the Obligations, or any
material decline or depreciation in the value or market price thereof (whether
actual or reasonably anticipated), which causes the Collateral, in the sole
opinion of Lender acting in good faith, to become unsatisfactory as to value or
character, or which causes Lender to reasonably believe that it is insecure and
that the likelihood for repayment of the Obligations is or will soon be
impaired, time being of the essence. The cause of such deterioration,
impairment, decline or depreciation shall include, but is not limited to, the
failure by Borrower to do any act deemed reasonably necessary by Lender to
preserve and maintain the value and collectability of the Collateral.

 

13.          REMEDIES.

 

Upon the occurrence and during the continuance of an Event of Default, Lender
shall have all rights, powers and remedies set forth in the Loan Documents, in
any written agreement or instrument (other than this Agreement or the Loan
Documents) relating to any of the Obligations or any security therefor, or as
otherwise provided at law or in equity. Without limiting the generality of the
foregoing, Lender may, at its option, upon the occurrence and during the
continuance of an Event of Default, declare its commitments to Borrower to be
terminated and all Obligations to be immediately due and payable; provided,
however, that upon the occurrence of an Event of Default under either Section
12.6, “Assignment for Creditors”, or Section 12.7, “Bankruptcy”, all commitments
of Lender to Borrower shall immediately terminate and all Obligations shall be
automatically due and payable, all without demand, notice or further action of
any kind required on the part of Lender. The Borrower hereby waives any and all
presentment, demand, notice of dishonor, protest, and all other notices and
demands in connection with the enforcement of Lender’s rights under the Loan
Documents, and hereby consents to, and waives notice of release, with or without
consideration, of the Borrower or of any Collateral, notwithstanding anything
contained herein or in the Loan Documents to the contrary.

 

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No Event of Default shall be waived by Lender, except and unless such waiver is
in writing and signed by Lender. No failure or delay on the part of Lender in
exercising any right, power or remedy hereunder shall operate as a waiver of the
exercise of the same or any other right at any other time; nor shall any single
or partial exercise of any such right, power or remedy preclude any other or
further exercise thereof or the exercise of any other right, power or remedy
hereunder. There shall be no obligation on the part of Lender to exercise any
remedy available to Lender in any order. The remedies provided for herein are
cumulative and not exclusive of any remedies provided at law or in equity.
Borrower agrees that in the event that Borrower fails to perform, observe or
discharge any of its Obligations or liabilities under this Agreement, the
Revolving Note, and other Loan Documents, or any other agreements with Lender,
no remedy of law will provide adequate relief to Lender, and further agrees that
Lender shall be entitled to temporary and permanent injunctive relief in any
such case without the necessity of proving actual damages.

 

14.          MISCELLANEOUS.

 

14.1        Obligations Absolute. None of the following shall affect the
Obligations of Borrower to Lender under this Agreement or Lender’s rights with
respect to the Collateral:

 

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

 

(b)          release by Lender of all or any part of the Collateral or of any
party liable with respect to the Obligations (other than Borrower);

 

(c)          release, extension, renewal, modification or substitution by Lender
of the Revolving Note, or any note evidencing any of the Obligations; or

 

(d)          failure of Lender to resort to any other security or to pursue
Borrower or any other obligor liable for any of the Obligations before resorting
to remedies against the Collateral.

 

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

 

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

 

14.4        WAIVER OF DEFENSES. THE BORROWER WAIVES EVERY PRESENT AND FUTURE
DEFENSE, CAUSE OF ACTION, COUNTERCLAIM OR SETOFF WHICH THE BORROWER MAY HAVE AS
OF THE DATE HEREOF TO ANY ACTION BY LENDER IN ENFORCING THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS. THE BORROWER WAIVES ANY IMPLIED COVENANT OF GOOD FAITH AND
RATIFIES AND CONFIRMS WHATEVER LENDER MAY DO PURSUANT TO THE TERMS OF THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS AS OF THE DATE OF THIS AGREEMENT. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL
ACCOMMODATION TO BORROWER.

 

14.5        WAIVER OF JURY TRIAL. LENDER AND BORROWER, AFTER CONSULTING OR
HAVING HAD THE OPPORTUNITY TO CONSULT WITH COUNSEL, KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE, IRREVOCABLY, THE RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY
LEGAL PROCEEDING BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT, THE REVOLVING NOTE, ANY LOAN DOCUMENT OR ANY OF THE OBLIGATIONS,
THE COLLATERAL, OR ANY OTHER AGREEMENT EXECUTED OR CONTEMPLATED TO BE EXECUTED
IN CONJUNCTION WITH THIS AGREEMENT, OR ANY COURSE OF CONDUCT OR COURSE OF
DEALING IN WHICH LENDER AND BORROWER (OR EITHER GUARANTOR) ARE ADVERSE PARTIES.
THIS PROVISION IS A MATERIAL INDUCEMENT FOR LENDER GRANTING ANY FINANCIAL
ACCOMMODATION TO BORROWER.

 

14.6        JURISDICTION. TO INDUCE LENDER TO MAKE THE LOANS, BORROWER
IRREVOCABLY AGREES THAT ALL ACTIONS ARISING, DIRECTLY OR INDIRECTLY, AS A RESULT
OR CONSEQUENCE OF THIS AGREEMENT, THE REVOLVING NOTE, ANY OTHER AGREEMENT WITH
LENDER OR THE COLLATERAL, SHALL BE INSTITUTED AND LITIGATED ONLY IN COURTS
HAVING THEIR SITUS IN THE COUNTY OF CLARK, NEVADA, PROVIDED THAT NOTHING IN THIS
AGREEMENT SHALL BE DEEMED OR OPERATE TO PRECLUDE LENDER FROM BRINGING SUIT OR
TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION. BORROWER HEREBY CONSENTS TO
THE EXCLUSIVE JURISDICTION AND VENUE OF ANY STATE OR FEDERAL COURT HAVING ITS
SITUS IN SAID COUNTY, AND WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS.
BORROWER HEREBY WAIVES PERSONAL SERVICE OF ANY AND ALL PROCESS AND CONSENT THAT
ALL SUCH SERVICE OF PROCESS MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, DIRECTED TO BORROWER, AS APPLICABLE, AS SET FORTH HEREIN IN THE
MANNER PROVIDED BY APPLICABLE STATUTE, LAW, RULE OF COURT OR OTHERWISE.

 

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

 

14.8        Confidentiality. Each of the parties hereto shall keep confidential
any information obtained from the other party (except information publicly
available or in such party’s domain prior to disclosure of such information from
the other party hereto, and except as required by applicable laws) and shall
promptly return to the other party all schedules, documents, instruments, work
papers and other written information without retaining copies thereof,
previously furnished by it as a result of this Agreement or in connection
herewith.

 

14.9        Publicity. Borrower and Lender shall have the right to approve,
before issuance, any press release or any other public statement with respect to
the transactions contemplated hereby made by any party; provided, however, that
Borrower shall be entitled, without the prior approval of Lender, to issue any
press release or other public disclosure with respect to such transactions
required under applicable securities or other laws or regulations.
Notwithstanding the foregoing, Borrower shall use its best efforts to consult
Lender in connection with any such press release or other public disclosure
prior to its release and Lender shall be provided with a copy thereof upon
release thereof.

 

14.10      Binding Effect. This Agreement shall become effective upon execution
by Borrower and Lender.

 

14.11      Governing Law. This Agreement, the Loan Documents and the Revolving
Note shall be delivered and accepted in and shall be deemed to be contracts made
under and governed by the internal laws of the State of Nevada, and for all
purposes shall be construed in accordance with the laws of such State, without
giving effect to the choice of law provisions of such State.

 

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

 

14.13      Survival of Borrower’s Representations. All covenants, agreements,
representations and warranties made by Borrower herein shall, notwithstanding
any investigation by Lender, be deemed material and relied upon by Lender and
shall survive the making and execution of this Agreement and the Loan Documents
and the issuance of the Revolving Note, and shall be deemed to be continuing
representations and warranties until such time as Borrower has fulfilled all of
its Obligations to Lender, and Lender has been indefeasibly paid in full.
Lender, in extending financial accommodations to Borrower, is expressly acting
and relying on the aforesaid representations and warranties.

 

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14.14      Extensions of Lender’s Commitment and the Revolving Note. This
Agreement shall secure and govern the terms of any extensions or renewals of
Lender’s commitment hereunder and the Revolving Note pursuant to the execution
of any modification, extension or renewal note executed by Borrower and accepted
by Lender in its sole and absolute discretion in substitution for the Revolving
Note.

 

14.15      Time of Essence. Time is of the essence in making payments of all
amounts due Lender under this Agreement and in the performance and observance by
Borrower of each covenant, agreement, provision and term of this Agreement.

 

14.16      Counterparts. This Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute one and the same instrument.

 

14.17      Electronic Signatures. Lender is hereby authorized to rely upon and
accept as an original any Loan Documents or other communication which is sent to
Lender by facsimile, telegraphic or other electronic transmission (each, a
“Communication”) which Lender in good faith believes has been signed by Borrower
and has been delivered to Lender by a properly authorized representative of
Borrower, whether or not that is in fact the case. Notwithstanding the
foregoing, Lender shall not be obligated to accept any such Communication as an
original and may in any instance require that an original document be submitted
to Lender in lieu of, or in addition to, any such Communication.

 

14.18      Notices. Any notices, consents, waivers, or other communications
required or permitted to be given under the terms of this Agreement must be in
writing and in each case properly addressed to the party to receive the same in
accordance with the information below, and will be deemed to have been
delivered: (i) if mailed by certified mail, return receipt requested, postage
prepaid and properly addressed to the address below, then three (3) business
days after deposit of same in a regularly maintained U.S. Mail receptacle; or
(ii) if mailed by Federal Express, UPS or other nationally recognized overnight
courier service, next business morning delivery, then one (1) business day after
deposit of same in a regularly maintained receptacle of such overnight courier;
or (iii) if hand delivered, then upon hand delivery thereof to the address
indicated on or prior to 5:00 p.m., EST, on a Business Day. Any notice hand
delivered after 5:00 p.m., EST, shall be deemed delivered on the following
Business Day. Notwithstanding the foregoing, notice, consents, waivers or other
communications referred to in this Agreement may be sent by facsimile, e-mail,
or other method of delivery, but shall be deemed to have been delivered only
when the sending party has confirmed (by reply e-mail or some other form of
written confirmation) that the notice has been received by the other party. The
addresses and facsimile numbers for such communications shall be as set forth
below, unless such address or information is changed by a notice conforming to
the requirements hereof. No notice to or demand on Borrower in any case shall
entitle Borrower to any other or further notice or demand in similar or other
circumstances:

 

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If to any Borrower: Social Reality, Inc.   P.O. Box 1010   Santa Monica, CA
90406   Attention: Mr. Christopher Miglino, CEO
E-Mail:       Chris@socialreality.com   With a copy to: Raul Silvestre, Esq.  
31200 Via Collins, Suite 200   Westlake Village, CA 91362   E-Mail:
rsilvestre@silvestrelaw.com     If to the Investor: TCA Global Credit Master
Fund, LP   1404 Rodman Street   Hollywood, Florida 33020   Attention: Robert
Press, Director   Telephone:(786) 323-1650   Facsimile: (786) 323-1651  
E-Mail:       bpress@trafcap.com     With a Copy to: David Kahan, P.A.   6420
Congress Ave., Suite 1800   Boca Raton, Florida 33487   Telephone:(561) 672-8330
  Facsimile: (561) 672-8301   E-Mail:       david@dkpalaw.com

 

14.19      Indemnification. Borrower agrees to defend, protect, indemnify and
hold harmless Lender and all of its officers, directors, employees and agents
(including, without limitation, those retained in connection with the
transactions contemplated by this Agreement) (each, a “Lender Indemnitee” and
collectively, the “Lender Indemnitees”) from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
claims, costs, expenses and distributions of any kind or nature (including,
without limitation, the disbursements and the reasonable fees of counsel for
each Lender Indemnitee thereto), which may be imposed on, incurred by, or
asserted against, any Lender Indemnitee (whether direct, indirect or
consequential and whether based on any federal, state or local laws or
regulations, including, without limitation, securities, Environmental Laws and
commercial laws and regulations, under common law or in equity, or based on
contract or otherwise) in any manner relating to or arising out of this
Agreement or any of the Loan Documents, or any act, event or transaction related
or attendant thereto, the preparation, execution and delivery of this Agreement
and the Loan Documents, including, but not limited to, the making or issuance
and management of the Loans, the use or intended use of the proceeds of the
Loans, the enforcement of Lender’s rights and remedies under this Agreement, the
Loan Documents, the Revolving Note, any other instruments and documents
delivered hereunder, or under any other agreement between Borrower and Lender;
provided, however, that Borrower shall not have any obligations hereunder to any
Lender Indemnitee with respect to matters caused by or resulting from the
willful misconduct or gross negligence of such Lender Indemnitee. To the extent
that the undertaking to indemnify set forth in the preceding sentence may be
unenforceable because it violates any law or public policy, Borrower shall
satisfy such undertaking to the maximum extent permitted by applicable law. Any
liability, obligation, loss, damage, penalty, cost or expense covered by this
indemnity shall be paid to each Lender Indemnitee on demand, and, failing prompt
payment, shall, together with interest thereon at the Default Rate from the date
incurred by each Lender Indemnitee until paid by Borrower, be added to the
Obligations of Borrower and be secured by the Collateral. The provisions of this
Section shall survive the satisfaction and payment of the other Obligations and
the termination of this Agreement.

 

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14.20      Release. In consideration of the mutual promises and covenants made
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, and intending to be legally bound hereby,
Borrower hereby agrees to fully, finally and forever release and forever
discharge and covenant not to sue Lender, and/or and its parent companies,
subsidiaries, affiliates, divisions, and their respective attorneys, officers,
directors, agents, shareholders, members, employees, predecessors, successors,
assigns, personal representatives, partners, heirs and executors from any and
all debts, fees, attorneys’ fees, liens, costs, expenses, damages, sums of
money, accounts, bonds, bills, covenants, promises, judgments, charges, demands,
claims, causes of action, suits, liabilities, expenses, obligations or contracts
of any kind whatsoever, whether in law or in equity, whether asserted or
unasserted, whether known or unknown, fixed or contingent, under statute or
otherwise, from the beginning of time through the Closing Date, including,
without limiting the generality of the foregoing, any and all claims relating to
or arising out of any financing transactions, credit facilities, debentures,
security agreements, and other agreements including, without limitation, each of
the Loan Documents, entered into by Borrower with Lender and any and all claims
that Borrower does not know or suspect to exist, whether through ignorance,
oversight, error, negligence, or otherwise, and which, if known, would
materially affect their decision to enter into this Agreement or the related
Loan Documents.

 

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

 

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

 

[REMAINDER OF PAGE LEFT BLANK, SIGNATURE PAGE FOLLOWS.]

 

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IN WITNESS WHEREOF, Borrower and Lender have executed this Credit Agreement as
of the date first above written.

 

BORROWER:     SOCIAL REALITY, INC., a Delaware corporation     By:   Name:  
Title:       LENDER: TCA GLOBAL CREDIT MASTER FUND, LP     By: TCA Global Credit
Fund GP, Ltd. Its: General Partner     By:     Robert Press, Director

 

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Exhibit A

 

Form of Covenant Compliance Certificate

 

 

 

 

FORM OF COMPLIANCE CERTIFICATE

 

TCA Global Credit Master Fund, LP

1404 Rodman Street

Hollywood, Florida 33020

Attention:  Bob Press

Facsimile:  786-323-1651

 

Re:SOCIAL REALITY, INC., a Delaware corporation (the “Borrower”) Covenant
Compliance Certificate for the Period Ending on _______________, 2012 (the
“Reporting Date”)

 

Dear Bob:

 

Reference is made to that certain Credit Agreement, dated as of December 31,
2012 (the “Credit Agreement”), by and among Borrower and TCA Global Credit
Master Fund, LP (“Lender”). Capitalized terms used, but not defined, herein
shall have the respective meanings assigned to such terms in the Credit
Agreement.

 

Pursuant to Section 10.11 of the Credit Agreement, the undersigned, the
President or other chief executive of the Borrower, hereby certifies to Lender
that: (a) all representations and warranties in Section 7 of the Credit
Agreement are true and correct as of the Reporting Date; (b) the undersigned has
no knowledge of any default or Event of Default under the Credit Agreement or
any other Loan Documents that has not been cured or waived, except as set forth
on Schedule 1 attached hereto; (c) Borrower is in compliance with the financial
covenants contained in Section 11 of the Credit Agreement; (d) to the best of
the undersigned’s knowledge, Borrower has, in all material respects, observed
and performed all of its other covenants and other agreements, and has satisfied
every condition contained in the Credit Agreement and the other Loan Documents
to be observed, performed or satisfied by it during the calendar month ending on
the Reporting Date; and (e) attached hereto as Schedule 2 are the computations
necessary to determine that Borrower is in compliance with Section 11 of the
Credit Agreement as of the Reporting Date referenced above.

 

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

 

 

 

 

IN WITNESS WHEREOF, the undersigned President, Manager or other chief executive
of each Borrower hereby certifies to the above as of the Reporting Date.

 

SOCIAL REALITY, INC.,   a Delaware corporation       By:     Name:     Title:  
 

 

 

 

 

Schedule 1 to Compliance Certificate

 

Events of Default

 

 

 

 

Schedule 2 to Compliance Certificate

 

1.Positive EBITDA (Section 11.1)

 

As of the Reporting Date:

 

(a)          Borrower is required to have a positive EBITDA.

 

(b)          Borrower’s EBITDA as of the Reporting Date is: [$_____________].

 

(c)          Borrower [is/is not] in compliance with the applicable EBITDA
requirement set forth in Section 11.1 of the Credit Agreement.

 

Please provide calculations below or on an attached sheet.

 

2.Revenue Covenant (Section 11.2):

 

As of the Reporting Date:

 

(a)For each calendar quarter while the Credit Agreement remains in effect,
Borrower is required to have sales revenues that are not less than seventy-five
percent (75%) of the sales revenues shown on the most recent financial
statements provided by Borrower to Lender (or otherwise filed with the SEC).

 

(b)Borrower hereby certifies that as of the Reporting Date, Borrower’s sales
revenues are $_____________, and based on such numbers and expected revenue
through the end of the quarter, Borrower [expects/does not expect] to be in
compliance with the revenue covenant set forth in Section 11.2 of the Credit
Agreement as of the end of the next upcoming calendar quarter.

 

Please provide calculations below or on an attached sheet.

 

 

 

 

Exhibit B

 

Form of Revolving Note

 

 

 

 

Exhibit C

 

Form of Security Agreement

 

 

 

 

Exhibit D

 

Form of Validity Guaranties

 

 

 

 

VALIDITY GUARANTY

 

This Validity Guaranty, dated as of December 31, 2012 and made effective as of
February 22, 2013 (the “Validity Guaranty”), is made by Christopher Miglino, an
individual (the “Undersigned”), for the benefit of TCA Global Credit Master
Fund, LP (the “Lender”).

 

RECITALS 

 

A.         Lender and Social Reality, Inc., a Delaware corporation (“Borrower”)
are parties to that certain Credit Agreement dated as of the date hereof (the
“Credit Agreement”) pursuant to which Lender agreed to extend credit and make
certain financial accommodations to Borrower.

 

B.          The Undersigned is the CEO and President of the Borrower.

 

C.         As a condition to entering into the Credit Agreement and extending
such financial accommodations to Borrower, Lender has required the execution and
delivery of this Validity Guaranty by the Undersigned.

 

NOW THEREFORE, the Undersigned, in consideration of the premises and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, hereby agrees as follows:

 

1.           Definitions. Capitalized terms used in this Validity Guaranty shall
have the meanings given to them in the Credit Agreement, unless otherwise
defined herein.

 

2.           Guaranty. The Undersigned, jointly and severally if more than one,
do hereby absolutely and unconditionally, represent, warrant and guarantee to
Lender that:

 

(a)         All Receipts and other monies, checks, notes, drafts or other
payments receivable or received by the Borrower shall be deposited into the Lock
Box Account and otherwise used only in accordance with the terms of the Credit
Agreement.

 

(b)         All reports, schedules, certificates, and other information from
time to time delivered or otherwise reported to Lender by Borrower, including,
without limitation, all financial statements, tax returns, and all supporting
information or documentation delivered in connection therewith, shall be bona
fide, complete, correct, and accurate in all material respects and shall
accurately and completely report all matters purported to be covered or reported
thereby.

 

(c)         All representations and warranties made by the Borrower in the
Credit Agreement, and any other documents or instruments executed in connection
with the Credit Agreement, are complete, correct, and accurate in all material
respects and do not contain any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.

 

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(d)         The Undersigned may from time to time, sign and deliver reports
(including, without limitation, those specifically mentioned above) or otherwise
deliver any such information to Lender as Lender may request, and the
Undersigned that he is duly authorized to deliver same to Lender on behalf of
Borrower.

 

(e)         All Collateral: (i) will be owned by Borrower and will be possessed
by Borrower or its agent; (ii) will not be subject to any lien or security
interest except as permitted by Lender; and (iii) will be maintained only at the
locations designated in the Credit Agreement or Security Agreement, unless
Borrower obtains Lender’s prior written consent.

 

3.           Consideration for Guaranty. The Undersigned acknowledges and agrees
with Lender that, but for the execution and delivery of this Validity Guaranty
by the Undersigned, Lender would not have entered into the Credit Agreement. The
Undersigned acknowledges and agrees that the loans and other extensions of
credit made to Borrower by Lender under the Credit Agreement will result in
significant benefits to the Undersigned.

 

4.           Indemnification. The Undersigned, jointly and severally if more
than one, hereby agrees and undertakes to indemnify, defend, and save Lender
free and harmless of and from any damage, loss, and expense (including, without
limitation, reasonable attorneys’ fees and costs) which Lender may sustain or
incur, directly or indirectly, as a result of any breach, default or material
inaccuracy of any of the representations, warranties, covenants, and agreements
contained herein, it being acknowledged that if there is no breach, default or
material inaccuracy of any of the representations, warranties, covenants, and
agreements contained in this Validity Guaranty by the Undersigned, then the
Undersigned shall have no liability hereunder solely as a result of Borrower’s
failure to pay monies due under the Credit Agreement. The Undersigned’s
liability hereunder is direct and unconditional. Upon the occurrence of a breach
or default of any of the representations, warranties or covenants in Section 2
above, the Lender may enforce this Validity Guaranty independently of any other
remedy or security Lender at any time may have or hold under the Credit
Agreement or other Loan Documents, and it shall not be necessary for Lender to
proceed upon or against and/or exhaust any security or remedy before proceeding
to enforce this Validity Guaranty.

 

5.           Cumulative Remedies. Lender’s rights and remedies hereunder are
cumulative of all other rights and remedies which Lender may now or hereafter
have with respect to the Undersigned, Borrower, or any other Person.

 

6.           Borrower’s Financial Condition. The Undersigned acknowledges that
he has reviewed and is familiar with the Loan Documents and is familiar with the
operations and financial condition of Borrower, and agrees that Lender shall not
have any duty or obligation to communicate to the Undersigned any information
regarding Borrower’s financial condition or affairs.

 

7.           Assignability. This Validity Guaranty shall be binding upon the
Undersigned and shall inure to the benefit of Lender and its successors or
assigns. Lender may at any time assign Lender’s rights in this Validity
Guaranty.

 

8.           Continuing Guaranty. This is a continuing guaranty and shall remain
in full force and effect as to all of the Obligations until such date as all
amounts owing by Borrower to Lender shall have been paid in full in cash and all
commitments of Lender to lend under the Credit Agreement have terminated or
expired and all obligations of Lender with respect to any of the Obligations
shall have terminated or expired.

 

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9.           Further Assurances. The Undersigned agrees that he will cooperate
with Lender at all times in connection with any actions taken by Lender pursuant
to the Credit Agreement to monitor, administer, enforce, or collect the
Collateral. In the event Borrower should cease or discontinue operating as a
going concern in the ordinary course of business, then for so long as any
Obligations remain outstanding, the Undersigned agrees that he shall assist
Lender in connection with any such action, as Lender may request.

 

10.         Choice Of Law and Venue Selection. All terms and provisions hereof
and the rights and obligations of the Undersigned and Lender hereunder shall be
governed, construed and interpreted in accordance with the laws of the State of
Nevada, without reference to conflict of laws principles. The Undersigned hereby
irrevocably submit to the non-exclusive jurisdiction of the state and federal
courts located in Clark County, Nevada, and agree and consent that service of
process may be made upon the Undersigned in any legal proceeding relating to
this Validity Guaranty or any other relationship between Lender and the
Undersigned. Any judicial proceeding by the Undersigned against Lender
involving, directly or indirectly, any matter in any way arising out of, related
to, or connection with this Validity Guaranty or any Loan Document shall be
brought only in a state or federal court in Clark County, Nevada, having
jurisdiction. The Undersigned hereby waive and agree not to assert, by way of
motion, as a defense or otherwise, that any such proceeding is brought in an
inconvenient forum or that the venue thereof is improper. Nothing herein shall
limit the right of Lender to bring proceedings against the Undersigned in the
courts of any other jurisdiction.

 

11.         WAIVER OF JURY TRIAL. THE UNDERSIGNED AND LENDER HEREBY VOLUNTARILY,
KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY
PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED UPON CONTRACT, TORT OR
OTHERWISE) BETWEEN THE UNDERSIGNED AND LENDER OR AMONG BORROWER, THE
UNDERSIGNED, AND LENDER AND/OR LENDER’S AFFILIATES ARISING OUT OF OR IN ANY WAY
RELATED TO THIS VALIDITY GUARANTY, ANY OTHER LOAN DOCUMENT OR ANY RELATIONSHIP
AMONG LENDER, THE UNDERSIGNED, BORROWER, AND/OR ANY AFFILIATE OF LENDER. THIS
PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO PROVIDE THE FINANCING DESCRIBED
IN THE CREDIT AGREEMENT.

 

12.         ADVICE OF COUNSEL. THE UNDERSIGNED ACKNOWLEDGE THAT EACH OF THEM HAS
EITHER OBTAINED THE ADVICE OF COUNSEL OR HAS HAD THE OPPORTUNITY TO OBTAIN SUCH
ADVICE IN CONNECTION WITH THE TERMS AND PROVISIONS OF THIS VALIDITY GUARANTY.

 

13.         Electronic Signatures. Lender is hereby authorized to rely upon and
accept as an original this Validity Guaranty which is sent to Lender via
facsimile, .pdf, or other electronic transmission.

 

[SIGNATURE PAGE TO FOLLOW]

 

3

 

 

The Undersigned has executed this Validity Guaranty as of the date first above
written.

 

  By:     Name: Christopher Miglino

 

Validity Guaranty Signature Page

 

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