Exhibit 10.12

EXECUTION COPY

LOAN AND SECURITY AGREEMENT

by and between

MORIAH CAPITAL, L.P.,

as Lender,

and

JAGGED PEAK, INC.

and

JAGGED PEAK CANADA INC.,

as Borrowers

Dated: As of December 17, 2009

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

EXECUTION COPY

LOAN AND SECURITY AGREEMENT

LOAN AND SECURITY AGREEMENT, dated as of December 17, 2009, by and among JAGGED
PEAK, INC., a Nevada corporation, with its principal place of business located
at 3000 Bayport Drive, 250, Tampa, Florida 33607 (“Parent”), JAGGED PEAK CANADA
INC., a Canadian corporation with its principal place of business located at c/o
McCarthy Tetrault LLP, Box 48, Suite 4700, Toronto Dominion Bank Tower, Toronto,
ON M5K 1E6 (“Canadian Subsidiary” and, together with Parent, and as further
defined below, “Borrower”), and MORIAH CAPITAL, L.P., a Delaware limited
partnership with offices at 444 Madison Avenue, Suite 501, New York, NY 10022
(as further defined below, the “Lender”).

R E C I T A L S:

WHEREAS, Borrower desires to enter into an accounts receivable-based revolving
loan credit facility with Lender pursuant to which Lender may make loans to
Borrower; and

WHEREAS, Lender is willing to make such loans on the terms and conditions
hereinafter set forth;

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements herein contained and other good and valuable consideration, Lender
and Borrower mutually covenant, warrant and agree as follows:

SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION AND CONSTRUCTION

Specific Terms Defined. The following terms (including both the singular and
plurals thereof) shall have the following meanings unless the context indicates
otherwise:

1.1 “Account Debtor” or “account debtor” shall have the meaning ascribed to such
term in the UCC and shall also include a Person obligated for payment of an
Account.

1.2 “Accounts” shall mean “accounts” as defined in the UCC, in the case of
obligations or rights in which a security interest would be governed by United
States law, and the PPSA, in the case of obligations or rights in which a
security interest would be governed by Ontario law, and, in addition, any and
all obligations of any kind at any time due and/or owing to Borrower, whether
now existing or hereafter arising, and all rights of Borrower to receive payment
or any other consideration including, without limitation, invoices, contract
rights, accounts receivable, general intangibles, choses-in-action, notes,
drafts, acceptances, instruments and all other debts, obligations and
liabilities in whatever form owing to Borrower from any Person, Governmental
Authority or any other entity, all security therefor, and all Borrower’s rights
to receive payment for goods sold (whether delivered, undelivered, in transit or
returned), which may be represented thereby, or with respect thereto, including,
but not limited to, all rights as an unpaid vendor (including stoppage in
transit, replevin or reclamation), and all additional amounts due from any
Account Debtor, together with all Proceeds and products of any and all of the
foregoing.

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

1.3 “Advance” shall have the meaning as set forth in Section 2.1 hereof.

1.4 “Affiliate” shall mean, with respect to any Person, (a) any other Person
that, directly or indirectly, controls, is controlled by, or is under common
control with such Person or (b) any other Person who is a director or officer
(i) of such Person, (ii) of any Subsidiary of such Person or (iii) of any Person
described in clause (a) above. For the purposes of this definition, control of a
Person shall mean the power (direct or indirect) to direct or cause the
direction of the management or the policies of such Person whether through the
ownership of any class of stock or equity of such person or by contract or
otherwise.

1.5 “Agreement” shall mean this Loan and Security Agreement (including all
Exhibits annexed hereto and the Borrower’s Disclosure Schedule) as originally
executed or, if amended, modified, supplemented, renewed or extended from time
to time, as so amended, modified, supplemented, renewed or extended.

1.6 “Availability” shall mean the lesser of (i) the Borrowing Base, and (ii) the
Maximum Credit.

1.7 “Balance Sheet Date” means September 30, 2009.

1.8 “Base Rate” shall have the meaning as set forth in Section 3.1 hereof.

1.9 “Borrower” shall mean, collectively, Parent, Canadian Subsidiary and their
respective successors, or each of them, as the context indicates.

1.10 “Borrower’s Disclosure Schedule” means the Disclosure Schedule prepared by
Borrower that is being delivered to Lender concurrently herewith.

1.11 “Borrowing Base” shall be calculated at any time as the sum of (a) the
product obtained by multiplying the outstanding amount of Eligible Accounts, net
of all taxes, discounts, allowances and credits given or claimed, by eighty five
percent (85%), plus (b) only for so long as the Non-Recourse Secured Guaranty
and Pledge Agreement, and related Custodial Agreement, between Lender and each
Parent shareholder party thereto (“Non-Recourse Secured Guaranty and Pledge
Agreement”), remains in effect, Five Hundred Thousand Dollars ($500,000).

1.12 “Borrowing Certificate” shall have the meaning as set forth in Section 2.1
hereof.

1.13 “Business Day” shall mean any day other than a Saturday, Sunday or any
other day on which banks located in the State of New York are authorized or
required to close under applicable banking laws.

1.14 “Capital Assets” shall mean, in accordance with GAAP, fixed assets, both
tangible (such as land, buildings, fixtures, machinery and equipment) and
intangible (such as patents, copyrights, trademarks, franchises and goodwill);
provided, that Capital Assets shall not include any item depreciated or
amortized over a useful life of twelve (12) months or less.

1.15 “Chattel Paper” shall mean all “chattel paper,” as such term is defined in
the UCC, in the case of property in which a security interest would be governed
by United States law, and the PPSA, in the case of property in which a security
interest would be governed by Ontario law, including electronic chattel paper

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

1.16 “Closing Date” shall mean the date of this Agreement.

1.17 “Collateral” shall have the meaning as set forth in Section 5.1 hereof.

1.18 “Common Stock” shall mean the Common Stock, par value $.001 per share, of
Parent.

1.19 “Default Rate” shall have the meaning as set forth in Section 3.1 hereof.

1.20 “Deposit Accounts” means all “deposit accounts” as such term is defined in
the UCC.

1.21 “Document” shall have the meaning ascribed to such term in the UCC in the
case of property in which a security interest would be governed by United States
law, and shall have the meaning ascribed to the term “Document of Title” in the
PPSA, in the case of property in which a security interest would be governed by
Ontario law.

1.22 “Eligible Accounts” are accounts created by Borrower in the ordinary course
of its business which satisfy the following criteria:

(1) such Accounts are created from, or arise in connection with, the bona fide
completed sale of Inventory or the rendering of services in the ordinary course
of Borrower’s business;

(2) such Accounts have not remained unpaid for more than sixty (60) days after
the invoice date thereof;

(3) such Accounts are good and valid Accounts representing undisputed bona fide
indebtedness incurred by the Account Debtor therein named, for a fixed sum as
set forth in the invoice relating thereto with respect to an unconditional sale
and delivery upon the stated terms of goods sold by the Borrower, and
collectible in accordance with their terms;

(4) the amounts of the Accounts reported to Lender are absolutely owing to
Borrower and do not arise from sales on consignment, guaranteed sales or other
terms under which payment by the Account Debtors may be conditional or
contingent;

(5) the Account Debtor’s chief executive office or principal place of business
is located in the United States, unless payment of any such account debtor’s
accounts is backed by a letter of credit or credit insurance acceptable to, and
approved by, Lender in its sole discretion;

(6) such Accounts do not arise from progress billings, retainages or bill and
hold sales;

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

(7) there are no contra relationships, setoffs, counterclaims or disputes
existing with respect thereto;

(8) the Inventory giving rise thereto are not subject to any Liens except for
the Liens of Lender;

(9) such Accounts are not Accounts with respect to which the Account Debtor or
any officer or employee thereof is an officer, employee or agent of or is
affiliated with Borrower, directly or indirectly, whether by virtue of family
membership, ownership, control, management or otherwise;

(10) such Accounts are not Accounts with respect to which the Account Debtor is
the United States or any state or political subdivision thereof or any
department, agency or instrumentality of the United States, Canada, or any
state, province or other political subdivision of either of them, including any
department, agency or instrumentality thereof;

(11) Borrower has delivered to Lender or Lender’s representative such documents
as Lender may have requested in connection with such Accounts and Lender shall
have received a verification of such Account, satisfactory to it, if sent to the
Account Debtor or any other obligor or any bailee;

(12) there are no facts existing or threatened which might result in any
material adverse change in the Account Debtor’s financial condition;

(13) [RESERVED];

(14) such Accounts are not owed by an Account Debtor with respect to which more
than 25% of such Account Debtor’s Accounts have remained unpaid for more than
sixty (60) days after the invoice date thereof;

(15) shipment of the merchandise or the rendition of services has been
completed;

(16) such Accounts continue to be in full conformity with the representations
and warranties made by Borrower to Lender with respect thereto;

(17) Lender is, and continues to be, reasonably satisfied with the credit
standing of the Account Debtor in relation to the amount of credit extended;

(18) such Accounts are not evidenced by chattel paper or an instrument of any
kind with respect to or in payment of the Account unless such instrument is duly
endorsed to and in possession of Lender or represents a check in payment of an
account;

(19) such Accounts are net of any returns, discounts, claims, credits and
allowances;

(20) Borrower is able to bring suit and enforce its remedies against the Account
Debtor through judicial process;

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

(21) such Accounts do not represent interest payments, late or finance charges
owing to Borrower, and

(22) such accounts are otherwise satisfactory to Lender in its sole discretion.

1.23 “Environment” means all air, surface water, groundwater or land, including,
without limitation, land surface or subsurface, including, without limitation,
all fish, wildlife, biota and all other natural resources.

1.24 “Environmental Law” or “Environmental Laws” shall mean all federal, state,
provincial and local laws, statutes, ordinances and regulations of the United
States or Canada now or hereafter in effect, and in each case as amended or
supplemented from time to time, and any judicial or administrative
interpretation thereof, including any judicial or administrative order, consent
decree or judgment relating to the regulation and protection of human health,
safety, the environment and natural resources (including ambient air, surface
water, groundwater, wetlands, land surface or subsurface strata, wildlife,
aquatic species and vegetation).

1.25 “Environmental Liabilities and Costs” shall mean, as to any Person, all
liabilities, obligations, responsibilities, remedial actions, losses, damages,
punitive damages, consequential damages, treble damages, costs and expenses
(including all fees, disbursements and expenses of counsel, experts and
consultants and costs of investigation and feasibility studies), fines,
penalties, sanctions and interest incurred as a result of any claim or demand by
any other Person, whether based in contract, tort, implied or express warranty,
strict liability, criminal or civil statute, including any Environmental Law,
permit, order or agreement with any Governmental Authority or other Person, and
which arise from any environmental, health or safety conditions, or a Release or
conditions that are reasonably likely to result in a Release, and result from
the past, present or future operations of such Person or any of its Affiliates.

1.26 “Environmental Lien” shall mean any Lien in favor of any Governmental
Authority for Environmental Liabilities and Costs.

1.27 “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
the same now exists or may from time to time hereafter be amended, modified,
recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.

1.28 “Equipment” shall mean “equipment”, as such term is defined in the UCC, in
the case of property in which a security interest would be governed by United
States law, and the PPSA, in the case of property in which a security interest
would be governed by Ontario law, now owned or hereafter acquired by Borrower
and, wherever located, and shall include, without limitation, the machinery and
equipment set forth on Exhibit 1.28 annexed hereto, and all other equipment,
machinery, furniture, Fixtures, computer equipment, telephone equipment, molds,
tools, dies, partitions, tooling, transportation equipment, all other tangible
assets used in connection with the manufacture, sale or lease of goods or
rendition of services, and Borrower’s interests in any leased equipment, and all
repairs, modifications, alterations, additions, controls and operating
accessories thereof or thereto, and all substitutions and replacements therefor.

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

1.29 “Equity Interests” shall mean, with respect to any Person, any and all
shares, rights to purchase, options, warrants, general, limited or limited
liability partnership interests, membership interests, units, participations or
other equivalents of or interest in (regardless of how designated) equity of
such Person, whether voting or nonvoting, including common stock, preferred
stock, convertible securities or any other “equity security” (as such term is
defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the
SEC (or any successor thereto) under the 1934 Act) in the case of a security
issued under United States securities laws.

1.30 “Event of Default” shall mean the occurrence or existence of any event or
condition described in Section 11 of this Agreement.

1.31 “Financial Statements” shall have the meaning as set forth in Section 8.9
hereof.

1.32 “Financing Statements” shall mean the Uniform Commercial Code UCC-1
Financing Statements to be filed with applicable Governmental Authorities of
each State, Commonwealth or political subdivision of the United States pursuant
to which Lender shall perfect its security interest in the Collateral, and with
respect to assets and rights in which perfection of a security interest would be
governed by the laws of Ontario, the financing statements to be filed in
accordance with the PPSA.

1.33 “Fiscal Year” shall mean that twelve (12) month period commencing on
January 1 and ending on December 31.

1.34 “Fixtures” shall have the meaning ascribed to such term in the UCC.

1.35 “GAAP” means generally accepted accounting principles in effect in the
United States of America at the time of any determination, and which are applied
on a consistent basis. All accounting terms used in this Agreement which are not
expressly defined in this Agreement shall have the meanings given to those terms
by GAAP, unless the context of this Agreement otherwise requires.

1.36 “General Intangibles” shall have the meaning ascribed to such term in the
UCC in the case of property in which a security interest would be governed by
United States law, and shall have the meaning ascribed to “Intangible” in the
PPSA, in the case of property in which a security interest would be governed by
Ontario law.

1.37 “Goods” shall have the meaning ascribed to such term in the UCC in the case
of property in which a security interest would be governed by United States law,
and the PPSA, in the case of property in which a security interest would be
governed by Ontario law.

1.38 “Governmental Authority” or “Governmental Authorities” shall mean any
federal, state, provincial, county or municipal governmental agency, board,
commission, officer, official or entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.

1.39 “Indebtedness” shall mean, with respect to any Person, all of the
obligations of such Person which, in accordance with GAAP, should be classified
upon such Person’s balance sheet as liabilities, or to which reference should be
made by footnotes thereto, including without limitation, with respect to
Borrower, in any event and whether or not so classified:

(a) all debt and similar monetary obligations of Borrower, whether direct or
indirect, including, without limitation, Subordinated Debt;

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

(b) all obligations of Borrower arising or incurred under or in respect of any
guaranties (whether direct or indirect) by Borrower of the indebtedness,
obligations or liabilities of any other Person; and

(c) all obligations of Borrower arising or incurred under or in respect of any
Lien upon or in any property owned by such Person, even though such Person has
not assumed or become liable for the payment of such obligations.

1.40 “Intellectual Property” shall mean all of the following intellectual
property used in the conduct of the business of Borrower: (a) inventions,
processes, techniques, discoveries, developments and related improvements,
whether or not patentable; (b) United States or Canadian patents, patent
applications, divisionals, continuations, reissues, renewals, registrations,
confirmations, re-examinations, extensions and any provisional applications, of
any such patents or patent applications, and any foreign or international
equivalent of any of the foregoing; (c) United States or Canadian registered or
pending trademark, trade dress, service mark, service name, trade name, brand
name, logo, domain name, or business symbol and any foreign or international
equivalent of any of the foregoing and all goodwill associated therewith;
(d) work specifications, software (including object and source code listing) and
artwork; (e) technical, scientific and other know-how and information, trade
secrets, methods, processes, practices, formulas, designs, assembly procedures,
specifications owned or used by Borrower; (f) copyrights; (g) work for hire;
(h) customer and mailing lists; and (i) any and all rights of the Borrower to
the name(s) listed in Section 8.22 of the Borrower’s Disclosure Schedule or any
derivation thereof, and Borrower’s entire customer list and database and all
assets used or useful by Borrower in the conduct of its business over the
internet or in any electronic medium, including any websites or domain names
owned by Borrower.

1.41 “Instruments” shall have meaning ascribed to such term in the UCC in the
case of property in which a security interest would be governed by United States
law, and in the PPSA, in the case of property in which a security interest would
be governed by Ontario law.

1.42 “Interest Rate” shall have the meaning set forth in Section 3.1 hereof.

1.43 “Inventory” shall mean any “inventory,” as such term is defined in the UCC
in the case of property in which a security interest would be governed by United
States law, and in the PPSA, in the case of property in which a security
interest would be governed by Ontario law, now owned or hereafter acquired by
Borrower, wherever located, and, in any event, shall include, without
limitation, all raw materials, work-in-process, finished and semi-finished food
and food products including, without limitation, all materials, parts,
components and supplies relating to the manufacture or assembly thereof,
packaging and shipping supplies relating thereto, and all other inventory,
merchandise, goods and other personal property now or hereafter owned by
Borrower, which are held for sale, exchange or lease or are furnished or are to
be furnished under a contract of

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

service or an exchange arrangement or which constitute raw materials,
work-in-process or materials used or consumed or to be used or consumed in
Borrower’s business, or the processing, packaging, delivery or shipping of the
same, and all finished goods and the products of the foregoing, whatever form
and wherever located; and all names or marks affixed to or to be affixed thereto
for purposes of selling same by the seller, manufacturer, lessor or licensor
thereof and all right, title and interest of Borrower therein and thereto.

1.44 “Investment Property” means all “investment property”, as such term is
defined in the UCC in the case of property in which a security interest would be
governed by United States law, and in the PPSA, in the case of property in which
a security interest would be governed by Ontario law, now owned or hereafter
acquired by any Person, wherever located.

1.45 “Lender” shall have the meaning set forth in the introductory paragraph
hereof.

1.46 “Letter-of-Credit Rights” means “letter-of-credit rights” as such term is
defined in the UCC, now owned or hereafter acquired by any Person, including
rights to payment or performance under a letter of credit, whether or not such
Person, as beneficiary, has demanded or is entitled to demand payment or
performance.

1.47 “Lien” or “lien” shall mean any mortgage, deed of trust, pledge, security
interest, hypothecation, assignment, lien (statutory or other, including,
without limitations, license imposed by any Governmental Authority), charge, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, pursuant to any conditional sale or other title retention agreement,
any financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the UCC in the case
of property in which a security interest would be governed by United States law,
and under the PPSA, in the case of property in which a security interest would
be governed by Ontario law, or comparable law of any jurisdiction to evidence
any of the foregoing) on personal or real property or fixtures.

1.48 “Loan” and “Loans” shall respectively mean the principal amounts
outstanding from time to time respecting any and all Advances.

1.49 RESERVED.

1.50 “Loan Documents” shall mean this Agreement and any and all other
agreements, notes, documents, mortgages, financing statements, guaranties,
intercreditor agreements, subordination agreements, certificates and instruments
executed and/or delivered by Borrower or any other Person to Lender pursuant to
and in connection with the Loan and this Agreement, including, without
limitation the Note, the Pledge Agreement, the Securities Issuance Agreement,
the Patent and Trademark Security Agreement, Non-Recourse Secured Guaranty and
Pledge Agreement and the Lockbox Agreement.

1.51 “Lockbox” shall have the meaning assigned to such term in the Lockbox
Agreement.

1.52 “Lockbox Agent” means the person serving from time to time as the Lockbox
Agent under the Lockbox Agreement.

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

1.53 “Lockbox Agreement” means that certain Lockbox Agreement dated as of the
date hereof, among Lender, the Borrower and the Lockbox Agent.

1.54 RESERVED.

1.55 “Material Adverse Effect” means a materially adverse effect on (a) the
business, assets, liabilities, financial condition, results of operations or
business prospects of Borrower, (b) the ability of Borrower to perform its
obligations under any Loan Document to which it is a party, (c) the value of the
Collateral or the rights of Lender therein, (d) the validity or enforceability
of any of the Loan Documents, (e) the rights and remedies of Lender under any of
such Loan Documents or (f) the timely payment of the principal of or interest on
the Loan or other amounts payable in connection therewith. All determinations of
materiality shall be made by the Lender.

1.56 “Material Contract” means any contract or other arrangement (other than
Loan Documents), whether written or oral, to which a Borrower is a party as to
which the breach, nonperformance, cancellation or failure to renew by any party
thereto could have a Material Adverse Effect.

1.57 “Maturity Date” shall mean March 18, 2011, or such earlier date by which
the maturity of the Obligations shall have been accelerated pursuant to the
terms hereof.

1.58 “Maximum Credit” shall mean the amount of One Million Five Hundred Thousand
Dollars ($1,500,000.00), which shall automatically reduce to One Million Dollars
at such time as the Non-Recourse Secured Guaranty and Pledge Agreement is
terminated.

1.59 “1934 Act” shall mean the Securities Exchange Act of 1934, as amended.

1.60 “Note” shall have the meaning as set forth in Section 2.1.

1.61 “Obligations” shall mean obligations, liabilities and indebtedness of every
kind, nature and description owing by Borrower to Lender pursuant to the Loan
Documents, including, without limitation, principal, interest, repurchase
obligations, charges, fees, costs and expenses, however evidenced, whether as
principal, surety, endorser, guarantor or otherwise, whether now existing or
hereafter arising, whether arising before, during or after Term or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or the Bankruptcy and Insolvency Act (Canada)or any similar
statute (including, without limitation, the payment of interest and other
amounts which would accrue and become due but for the commencement of such
case), whether direct or indirect, absolute or contingent, joint or several, due
or not due, primary or secondary, liquidated or unliquidated, secured or
unsecured.

1.62 “Payment Intangibles” shall have the meaning ascribed to such term in the
UCC.

1.63 “Permitted Encumbrances” shall mean the following: (a) security interests
and Liens granted to Lender or its Affiliates; (b) purchase money security
interests in favor of equipment vendors upon “Pick to Light Systems” securing
Indebtedness solely to the extent set forth in Schedule 1.63 annexed hereto and
not exceeding $300,000 in the aggregate at any time; provided that, (i) no such
purchase money or other mortgage, Lien or security interest (or capitalized or
finance lease, as the case may be) with respect to specific future Capital
Assets or as refinanced shall

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

extend to or cover any other property, other than the specific Capital Assets so
acquired, and the proceeds thereof, (ii) such mortgage, Lien or security
interest only secures the cost or obligation to pay the purchase price of such
specific Capital Assets only (or the obligations under the capitalized or
finance lease) and (iii) the principal amount secured thereby shall not exceed
one hundred (100%) percent of the lesser of the cost or the fair market value
(at the time of the acquisition of the Capital Assets) of the Capital Assets so
acquired; (c) Liens of carriers, warehousemen, artisans, bailees, mechanics and
materialmen incurred in the ordinary course of business securing sums not
overdue; (d) Liens incurred in the ordinary course of business in connection
with worker’s compensation, unemployment insurance or other forms of
governmental insurance or benefits, relating to employees, securing sums (i) not
overdue or (ii) being diligently contested in good faith provided that adequate
reserves with respect thereto are maintained on the books of the Borrower in
conformity with GAAP; (e) Liens for taxes (i) not yet due or (ii) being
diligently contested in good faith by appropriate proceedings, provided that
adequate reserves with respect thereto are maintained on the books of the
Borrower in conformity with GAAP; and which have no effect on the priority of
Liens in favor of Lender or the value of the assets in which Lender has a Lien;
and (f) such other Liens as are set forth on Exhibit 1.63 annexed hereto and
made a part hereof.

1.64 “Person” or “person” shall mean, as applicable, any individual, sole
proprietorship, partnership, corporation, limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.

1.65 “Pledge Agreement” shall have the meaning as set forth in Section 5.2
hereof.

1.66 “PPSA” shall mean Personal Property Security Act as presently enacted in
Ontario (or any successor legislation thereto), and as the same may be amended
from time to time, and the provincial counterparts thereof as may be enacted in
such jurisdictions where any of the Collateral is located or held.

1.67 “Proceeds” shall have the meaning ascribed to such term in the UCC in the
case of property in which a security interest would be governed by United States
law, and in the PPSA, in the case of property in which a security interest would
be governed by Ontario law, and shall also include, but not be limited to,
(a) any and all proceeds of any and all insurance policies (including, without
limitation, life insurance, casualty insurance, business interruption insurance
and credit insurance), indemnity, warranty or guaranty payable to Borrower from
time to time with respect to any of the Collateral or otherwise, (b) any and all
payments (in any form whatsoever) made or due and payable to Borrower from time
to time in connection with any requisition, confiscation, condemnation, seizure
or forfeiture of all or any part of the Collateral by any governmental body,
authority, bureau or agency or any other Person (whether or not acting under
color of Governmental Authority) and (c) any and all other amounts from time to
time paid or payable under or in connection with any of the Collateral.

1.68 “Promissory Note” shall have the meaning ascribed to such term in the UCC.

1.69 [RESERVED]

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

1.70 “Release” means any spilling, leaking, pumping, pouring, emitting,
emptying, discharging, injecting, escaping, leaching, dumping, or disposing of a
Hazardous Substance into the Environment.

1.71 “Reserves” shall mean, as of any date of determination, such amounts as
Lender may from time to time establish and revise in good faith reducing the
amount of the Maximum Credit which would otherwise be available to Borrower
(a) to reflect events, conditions, contingencies or risks which, as determined
by Lender in good faith, do or may adversely affect (i) the Collateral or any
other property which is security for the Obligations or its value, (ii) the
assets, business or prospects of Borrower, (iii) the security interests and
other rights of Lender in the Collateral (including the enforceability,
perfection and priority thereof), or (iv) Borrower’s ability to perform its
Obligations under the Loan Documents; or (b) in respect of any state of facts
which Lender determines in good faith constitutes an Event of Default or may,
with notice or passage of time or both, constitute an Event of Default.

1.72 “Responsible Officer” shall mean the Chief Executive Officer, the Chief
Operating Officer or the Chief Financial Officer of Borrower.

1.73 “Revolving Loan Commitment” shall mean the difference between
(i) Availability and (ii) the sum of any Reserves plus matured and unpaid
Obligations.

1.74 “Revolving Loans” shall have the meaning as set forth in Section 2.1
hereof.

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

1.76 “SEC Reports” shall mean the Borrower’s (1) Annual Report on Form 10-K for
the year ended December 31, 2008, and (2) all other periodic and other reports
filed by the Borrower with the SEC pursuant to the 1934 Act subsequent to
December 31, 2008, and prior to the date hereof, in each case as filed with the
SEC and including the information and documents (other than exhibits)
incorporated therein by reference.

1.77 “Securities” shall have the meaning ascribed to such term in the PPSA, in
the case of property in which a security interest would be governed by Ontario
law, and in the UCC in the case of property in which a security interest would
be governed by United States law.

1.78 “Software” shall have the meaning ascribed to such term in the UCC.

1.79 “Securities Issuance Agreement” shall have the meaning set forth in
Section 6.8.

1.80 “Subordinated Debt” shall mean, at any particular time, Indebtedness of
Borrower that shall be expressly subordinated upon written terms and conditions,
satisfactory to Lender, in right of payment to the prior payment in full of all
of the Obligations.

1.81 “Subsidiary” shall mean, as to any Person, a corporation, limited liability
company or other entity with respect to which more than fifty (50%) percent of
the outstanding Equity Interests of each class having voting power is at the
time owned by such Person or by one or more Subsidiaries of such Person or by
such Person.

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

1.82 “Tangible Chattel Paper” shall have the meaning ascribed to such term in
the UCC.

1.83 “Term” shall have the meaning set forth in Section 4.1.

1.84 “UCC” shall mean the Uniform Commercial Code as presently enacted in New
York (or any successor legislation thereto), and as the same may be amended from
time to time, and the state counterparts thereof as may be enacted in such
states or jurisdictions where any of the Collateral is located or held.

1.85 Rules of Interpretation and Construction. In this Agreement unless the
context otherwise requires:

(a) All terms used herein which are defined in the UCC or in PPSA shall have the
meanings given therein unless otherwise defined in this Agreement;

(b) Sections mentioned by number only are the respective Sections of this
Agreement as so numbered;

(c) Words importing a particular gender shall mean and include the other gender
and words importing the singular number mean and include the plural number and
vice versa;

(d) Words importing persons shall mean and include firms, associations, limited
liability companies, partnerships (including limited partnerships), societies,
trusts, corporations or other legal entities, including public or governmental
bodies, as well as natural persons;

(e) Each reference in this Agreement to a particular person shall be deemed to
include a reference to such person’s successors and permitted assigns;

(f) Any headings preceding the texts of any Section of this Agreement, and any
table of contents or marginal notes appended to copies hereof are intended,
solely for convenience of reference and shall not constitute a part of this
Agreement, nor shall they affect its meaning, construction or effect;

(g) If any clause, provision or section of this Agreement shall be ruled invalid
or unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any of the remaining provisions thereof;

(h) The terms “herein”, “hereunder”, “hereby”, “hereto”, and any similar terms
as used in this Agreement refer to this Agreement; the term “heretofore: means
before the date of execution of this Agreement; and the term “hereafter” shall
mean after the date of execution of this Agreement;

(i) If any clause, provision or section of this Agreement shall be determined to
be apparently contrary to or conflicting with any other clause, provision or
section of this Agreement, then the clause, provision or section containing the
more specific provisions shall control and govern with respect to such apparent
conflict;

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

(j) Unless otherwise specified, (i) all accounting terms used herein or in any
Loan Document shall be interpreted in accordance with GAAP, (ii) all accounting
determinations and computations hereunder or thereunder shall be made in
accordance with GAAP, and (iii) all financial statements required to be
delivered hereunder or thereunder shall be prepared in accordance with GAAP;

(k) An Event of Default that occurs shall exist or continue or be continuing
unless such Event of Default is waived by Lender in accordance with the terms of
this Agreement; and

(l) The word “and” when used from time to time herein shall mean “or” or
“and/or” if such meaning is expansive of the rights or interests of Lender in
the given context.

SECTION 2. REVOLVING LOANS

2.1 Revolving Loans.

(a) Lender may, subject to the terms and conditions contained herein and the
satisfaction of the closing and funding conditions set forth herein, make
revolving loans to Borrower (“Revolving Loans”) prior to the Maturity Date in
amounts requested by Borrower from time to time, provided that the requested
Revolving Loan would not cause the outstanding Revolving Loans to exceed the
Revolving Loan Commitment existing immediately prior to the making of the
requested Revolving Loan. Subject to the terms and conditions hereof, Borrower
may borrow, repay and reborrow Revolving Loans, as set forth in this Agreement.

(b) Revolving Loans may be drawn in tranches (each drawing, an “Advance” and
collectively, the “Advances”). The obligation of Borrower to repay the Advances
shall be evidenced by a note (the “Note”) in the form of Exhibit 2.1 hereto and
dated the date hereof, and Borrower shall repay the Loans and other Obligations
in accordance with the Note.

(c) Subject to mandatory payment of Revolving Loans as set forth in
Section 2.1(d) below, the principal amount of the Revolving Loans shall be
payable on the Maturity Date.

(d) Notwithstanding any provision herein to the contrary, Borrower shall repay
the Revolving Loans immediately at any time and from time to time in an amount
by which the outstanding balance of the Revolving Loans exceeds the Revolving
Loan Commitment, as determined by Lender.

(e) Whenever Borrower desires an Advance, Borrower will notify Lender by
delivery of a borrowing certificate certified by a Responsible Officer
(“Borrowing Certificate”) no later than 11:00 A.M., New York time, on the date
of the proposed Advance, setting forth in reasonable detail, as of the date set
forth on the Borrowing Certificate, (i) a schedule of all Accounts, and (ii) a
schedule of Eligible Accounts and the calculation of the Advance requested in
connection therewith, which Borrowing Certificate shall in all respects be
subject to Lender’s review and approval. In addition, Borrower shall furnish
Lender with a Borrowing Certificate bi-weekly (every two weeks) on Monday, as of
the close of business on the immediately preceding Friday, during the Term
setting forth such information, irrespective of whether Borrower has then
requested an advance. Lender shall be entitled to rely on any facsimile or
electronic transmission of a Borrowing

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

Certificate given by a person who Lender reasonably believes to be a Responsible
Officer, and Borrower shall indemnify and hold Lender harmless for any damages
or loss suffered by Lender as a result of such reliance. The funding of each
Advance shall be made in accordance with the applicable Borrowing Certificate as
approved by Lender.

(f) Remittances from Account Debtors and all other proceeds of Accounts and
other Collateral shall be sent to a lockbox designated by and/or maintained in
the name of Lender, and deposited into a bank account now or hereafter selected
by Lender and maintained in the name of Lender under arrangements with the
depository bank under which all funds deposited to such bank account are
required to be transferred solely to Lender. Once instituted, such lockbox
system shall remain in effect unless Lender directs otherwise. Borrower shall
bear all risk of loss of any funds deposited into such account except to the
extent such loss is the result of the gross negligence or the willful misconduct
of Lender. In connection therewith, Borrower shall execute such lockbox and bank
account agreements as Lender shall specify, including the Lockbox Agreement. Any
collections or other Collateral proceeds received by Borrower from any source
whatsoever shall be held in trust for the benefit of Lender and immediately
remitted to Lender in kind.

(g) All payments of principal, interest, fees, costs, expenses and other charges
provided for in this Agreement or any other Loan Document that have not been
paid to Lender on the due dates thereof, and any chargeback on an Eligible
Account against which an Advance was made, shall be added to the principal
amount of the Revolving Loans, and shall bear interest at the Default Rate from
the due date thereof.

2.2 Maximum Credit. The aggregate principal amount of the Revolving Loans shall
not exceed the Maximum Credit.

2.3 Reserves. Without limiting any other rights and remedies of Lender hereunder
or under the other Loan Documents, the Availability shall be subject to Lender’s
continuing right, in its sole discretion, to withhold a Reserve from
Availability from time to time.

2.4 Use of Proceeds. Borrower shall use the proceeds of each Advance solely for
the repayment of all Indebtedness to Laurus Master Fund, Ltd. in an amount not
exceeding $1,000,000 and for ordinary course working capital purposes, or as
otherwise agreed in writing by Lender prior to the release of such Advance under
Section 2.1 hereunder.

2.5 Repayment. Except as otherwise set forth herein, Borrower shall repay the
aggregate outstanding principal amount of the Loans and all accrued and unpaid
interest, as calculated in Section 3.1, on or prior to the Maturity Date.

2.6 Borrowing Agency Provisions.

(a) Parent and Canadian Subsidiary are co-borrowers under this Agreement. Each
of Parent and Canadian Subsidiary hereby irrevocably designates Parent, acting
through Parent’s duly authorized officers, to be Canadian Subsidiary’s attorney
and agent and in such capacity to borrow, sign and endorse notes, and execute
and deliver all instruments, documents, writings and further assurances now or
hereafter required hereunder, on behalf of Parent and Canadian Subsidiary, and
hereby authorizes Lender to pay over or credit all loan proceeds hereunder in
accordance with the request of Parent.

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

(b) The handling of this credit facility as a co-borrowing facility with a
borrowing agent in the manner set forth in this Agreement is solely as an
accommodation to Parent and Canadian Subsidiary and at their request. Lender
shall not incur any liability to any Borrower as a result thereof. To induce
Lender to do so and in consideration thereof, each Borrower hereby indemnifies
Lender and holds Lender harmless from and against any and all liabilities,
expenses, losses, damages and claims of damage or injury asserted against Lender
by any Person arising from or incurred by reason of the handling of the
financing arrangements of the Borrowers as provided herein, reliance by Lender
on any request or instruction from Parent or any other action taken by Lender
with respect to this Section 2.6.

(c) All Obligations shall be the joint and several obligations of the Borrowers.
The Borrowers shall make payment upon the maturity of the Obligations by
acceleration or otherwise, and such obligation and liability on the part of the
Borrowers shall in no way be affected by the failure of Lender to pursue or
preserve its rights against any Borrower or the release by Lender of any
Collateral now or thereafter acquired from any Borrower.

(d) Each Borrower expressly waives any and all rights of subrogation,
reimbursement, indemnity, exoneration, contribution or any other claim which
such Borrower may now or hereafter have against the other Borrower or against
any other Person directly or contingently liable for the Obligations until all
Obligations have been indefeasibly paid in full and this Agreement has been
irrevocably terminated.

(e) Each Borrower represents and warrants to Lender that (i) the Borrowers have
one or more common shareholders, directors and officers, (ii) the businesses and
corporate activities of the Borrowers are closely related to, and substantially
benefit, the business and corporate activities of the consolidated group of
which the Borrowers are members, (iii) each Borrower will receive a substantial
economic benefit from entering into this Agreement and will receive a
substantial economic benefit from the application of each Loan hereunder, in
each case, whether or not such amount is used directly by such Borrower and
(iv) all requests for Loans hereunder by Borrower are for the exclusive and
indivisible benefit of the Borrowers as though, for purposes of this Agreement,
the Borrowers constituted a single entity.

SECTION 3. INTEREST, FEES AND CHARGES

3.1 Interest.

(a) Interest on the unpaid principal balance of the Revolving Loans shall be
computed on the basis of the actual number of days elapsed and a year of 360
days and shall accrue at a rate per annum (the “Interest Rate”) equal to the
greater of (i) the sum of (A) the Base Rate plus (B) Six Percent (6.00%), or
(ii) Eleven Percent (11.0%). All accrued interest on the Revolving Loans shall
be payable by Borrower (x) in arrears prior to the Maturity Date, on the first
Business Day of each calendar month, (y) in full on the Maturity Date and (z) on
demand after the Maturity Date. At Lender’s option, Lender may charge the
Borrowers’ account

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

for said interest. Following and during the continuation of an Event of Default,
interest on all outstanding Loans, including principal and interest, shall
accrue at a rate equal to the Default Rate, compounded quarterly.

(b) For the purposes of this Section 3.1,

(i) “Base Rate” means a rate per annum equal to the “Prime Rate” as reported in
the “Money Rates” column of The Wall Street Journal, adjusted as and when such
Prime Rate changes.

(ii) “Default Rate” means a rate per annum equal to twenty percent (20%).

3.2 [RESERVED]

3.3 Late Charges. If the payment of any Obligation due hereunder is more than
ten (10) days overdue, then, in addition to any interest charges payable by
Borrower in connection therewith, Lender may charge Borrow a late fee of three
percent (3%) of such overdue payment.

3.4 Fees and Expenses. Borrower shall pay, on Lender’s demand, all costs,
expenses, filing fees and taxes payable in connection with the preparation,
execution, delivery, recording, administration, collection, liquidation,
enforcement and defense of the Loan Documents, Lender’s rights in the
Collateral, this Agreement, the other Loan Documents, and all other existing and
future agreements or documents contemplated herein or related hereto, including
any amendments, waivers, supplements or consents which may now or hereafter be
made or entered into in respect hereof, or in any way involving claims or
defenses asserted by Lender or claims or defenses against Lender asserted by
Borrower or any third party directly or indirectly arising out of or related to
the relationship between Borrower and Lender, including, but not limited to the
following, whether incurred before, during or after the Term or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or the Bankruptcy and Insolvency Act (Canada) or any similar or
successor statute: (a) all costs and expenses of filing or recording (including
UCC or PPSA Financing Statement filing fees); (b) all fees relating to the wire
transfer of loan proceeds and other funds and fees for returned checks; (c) all
out-of-pocket expenses and costs heretofore and from time to time hereafter
incurred by Lender during the course of periodic field examinations of the
Collateral and Borrower’s operations; and (d) all costs, fees and disbursements
of counsel to Lender. If any fees, costs or charges payable to Lender hereunder
are not paid when due, such amounts shall be added to the principal amount of
the Revolving Loans and accrue interest at the Default Rate until paid.

3.5 Savings Clause. It is intended that the Interest Rate and the Default Rate
shall never exceed the maximum rate, if any, which may be legally charged for
loans made to corporations (the “Maximum Rate”). If the provisions for interest
contained in the Note would result in a rate higher than the Maximum Rate, the
interest shall nevertheless be limited to the Maximum Rate and any amounts which
may be paid toward interest in excess of the Maximum Rate shall be applied to
the reduction of principal, or, at the option of Lender, returned to the
Borrower.

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

SECTION 4. TERM.

4.1 Term. This Agreement shall continue in full force and effect until all
Obligations shall have been indefeasibly paid in full (the “Term”).

4.2 Early Termination; Interest Make-Whole Payment.

(a) Lender shall have the right to terminate this Agreement at any time upon or
after the occurrence of an Event of Default.

(b) Except as set forth in Section 4.2(c) hereof, the Loans shall be prepayable
by Borrower without premium or penalty.

(c) Borrower may prepay the entire principal sum of the Loans without premium or
penalty, provided, however, that, (i) such prepayment is no less than the amount
of the remaining outstanding principal sum of all outstanding Loans evidenced
hereby, (ii) as part of such prepayment, Borrowers shall pay Lender all other
amounts due to Lender pursuant to the Note, the Agreement and other Loan
Documents, and (iii) if such prepayment occurs prior to the first anniversary
hereof, then Borrower shall pay to Lender an amount equal to (1) the product of
(A) the average daily principal balance of all Loans under this Agreement from
the Closing Date through the date of prepayment, multiplied by (B) the weighted
average daily Interest Rate through the date of prepayment, multiplied by
(C) three hundred sixty five (365), minus (2) the amount of interest
indefeasibly received by Lender on account of all Loans under this Agreement
through the date of prepayment (the “Interest Make-Whole Payment”). The Interest
Make-Whole Payment is intended to compensate Lender for committing and deploying
funds for Borrower’s Loans pursuant to this Agreement and for Lender’s loss of
investment of such funds in connection with such early termination, and is not
intended as a penalty. The Interest Make-Whole Payment also shall be due and
payable by Borrower to Lender if Lender accelerates the payment of the
Obligations on or before the first anniversary hereof due to the occurrence of
an Event of Default.

SECTION 5. COLLATERAL.

5.1 Security Interests in Borrower’s Assets. As collateral security for the
payment and performance of the Obligations, Borrower hereby grants and conveys
to Lender, subject to the Permitted Encumbrances, a first priority continuing
security interest in and Lien upon, and assigns to Lender and mortgages and
charges by way of a fixed and specific mortgage and charge to Lender of
Borrower’s right, title and interest to, all now owned and hereafter acquired
property and assets of Borrower and the Proceeds and products thereof (which
property, assets and Proceeds, together with all other collateral security for
the Obligations now or hereafter granted to or otherwise acquired by Lender, are
referred to herein collectively as the “Collateral”), including, without
limitation, all property (including rights) of Borrower now or hereafter held or
possessed by Lender, and including the following:

(a) Accounts;

(b) Chattel Paper;

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

(c) Commercial Tort Claims;

(d) Deposit Accounts;

(e) Documents;

(f) Electronic Chattel Paper;

(g) Equipment;

(h) Fixtures;

(i) General Intangibles;

(j) Goods;

(k) Instruments;

(l) Inventory;

(m) Investment Property;

(n) Letter-of-Credit Rights;

(o) Payment Intangibles;

(p) Promissory Notes;

(q) Software;

(r) Tangible Chattel Paper;

(s) Securities (whether certificated or uncertificated);

(t) warehouse receipts;

(u) cash monies;

(v) tax and duty refunds;

(w) Intellectual Property;

(x) All present and future books and records relating to any of the above
including, without limitation, all present and future books of account of every
kind or nature, purchase and sale agreements, invoices, ledger cards, bills of
lading and other shipping evidence, statements, correspondence, memoranda,
credit files and other data relating to the Collateral or any Account Debtor,
together with the tapes, disks, diskettes and other data and software storage
media and devices, file cabinets or containers in or on which the foregoing are
stored (including any rights of Borrower with respect to any of the foregoing
maintained with or by any other Person); and

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

(y) Any and all products and Proceeds of the foregoing in any form including,
without limitation, all insurance claims, warranty claims and proceeds and
claims against third parties for loss or destruction of or damage to any or the
foregoing.

5.2 Pledge of Equity Interests. In addition to the pledge of Collateral in
Section 5.1, Parent shall enter into one or more Pledge Agreements, of even date
herewith, in the form annexed hereto as Exhibit 5.2, pursuant to which Parent
shall pledge to Lender 100% of all equity interests held directly or indirectly
by Parent in any other Borrower and any other party, including all equity
interests in Canadian Subsidiary. Canadian Borrower undertakes that immediately
upon becoming the holder of any equity interests in any other party, it shall
enter into one or more Pledge Agreements in the form of Exhibit 5.2 so as to
pledge such equity interests to Lender as security for the Obligations.
Financing Statements. Borrower hereby authorizes Lender to file Financing
Statements with respect to the Collateral in form acceptable to Lender and its
counsel, and hereby ratifies any actions taken by Lender prior to the date
hereof to file such Financing Statements. Borrower shall, at all times, do,
make, execute, deliver and record, register or file all Financing Statements and
other instruments, acts, pledges, leasehold or other mortgages, amendments,
modifications, assignments and transfers (or cause the same to be done), and
will deliver to Lender such instruments and/or documentation evidencing items of
Collateral, as may be requested by Lender to better secure or perfect Lender’s
security interest in the Collateral or any Lien with respect thereto. Borrower
acknowledges that it is not authorized to file any Financing Statement or
amendment or termination statement with respect to any Financing Statement
without the prior written consent of Lender and agrees that it will not do so
without the prior written consent of Lender.

5.4 License Grant. Borrower hereby grants to Lender an irrevocable,
non-exclusive, worldwide license without payment of royalty or other
compensation to Borrower, upon the occurrence and during the continuance of an
Event of Default, to use or otherwise exploit in any manner as to which
authorization of the holder of such Intellectual Property would be required, and
to license or sublicense such rights in to and under, any Intellectual Property
now or hereafter owned by or licensed to Borrower, and wherever the same may be
located, including in such license access to all media in which any of such
Intellectual Property may be recorded or stored and to all software and hardware
used for the compilation or printout thereof, and represents, promises and
agrees that any such license or sublicense is not and will not be in conflict
with the contractual or commercial rights of any third Person and subject, in
the case of trademarks and service marks, to sufficient rights to quality
control and inspection in favor of Borrower to avoid the risk of invalidation of
said trademarks and service marks. The foregoing license will terminate on the
indefeasible payment in full of all Obligations; provided, however, that any
license, sublicense, or other rights granted by Lender to a customer of Borrower
which contains customary terms and conditions pursuant to such license during
its term shall remain in effect in accordance with its terms.

5.5 Representations, Warranties and Covenants Concerning the Collateral. Each
Borrower represents, warrants (each of which such representations and warranties
shall be deemed repeated upon the making of each request for a Revolving Loan
and made as of the time of each and every Revolving Loan hereunder) and
covenants as follows on a joint and several basis:

(a) All of the Collateral (i) is owned by it free and clear of all Liens
(including any claim of infringement) except those in Lender’s favor and
Permitted Encumbrances and (ii) is not subject to any agreement prohibiting the
granting of a Lien or requiring notice of or consent to the granting of a Lien.

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

(b) It shall not encumber, mortgage, pledge, assign or grant any Lien upon any
Collateral or any other assets to anyone other than the Lender and except for
Permitted Encumbrances.

(c) The Liens granted pursuant to this Agreement, upon the filing of Financing
Statements in respect of Borrower in favor of the Lender in the applicable
filing office of the state or province of organization or registered or head
office of Borrower, the recording of the Liens in favor of the Lender in the
U.S. Patent and Trademark Office, the U.S. Copyright Office, and the Canadian
Intellectual Property Office as applicable, and the taking of any actions
required under the laws of jurisdictions outside the United States with respect
to Intellectual Property included in the Collateral which is created under such
laws, constitute valid perfected first priority security interests in all of the
Collateral in favor of the Lender, as security for the prompt and complete
payment and performance of the Obligations, enforceable in accordance with the
terms hereof

(d) No security agreement, mortgage, deed of trust, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is or will be on file or of record in any public
office, except those relating to Permitted Encumbrances.

(e) It shall not dispose of any of the Collateral whether by sale, lease or
otherwise except for (i) the sale of Inventory in the ordinary course of
business and (ii) the disposition or transfer in the ordinary course of business
of Equipment only to the extent that the proceeds of any such disposition are
used to acquire replacement Equipment which is subject to the Lender’s security
interest or are used to repay the Obligations.

(f) It shall defend the right, title and interest of the Lender in and to the
Collateral against the claims and demands of all Persons whomsoever, and take
such actions, including (i) all actions necessary to grant the Lender “control”
of any Investment Property, Deposit Accounts, Letter-of-Credit Rights or
Electronic Chattel Paper owned by it, with any agreements establishing control
to be in form and substance satisfactory to the Lender, (ii) the prompt (but in
no event later than three (3) Business Days following the Lender’s request
therefor) delivery to the Lender of all original Instruments, Chattel Paper,
negotiable Documents and certificated Securities owned by it (in each case,
accompanied by stock powers, allonges or other instruments of transfer executed
in blank), (iii) notification to third parties of the Lender’s interest in
Collateral at the Lender’s request, and (iv) the institution of litigation
against third parties as shall be prudent in order to protect and preserve its
and/or the Lender’s interests in the Collateral.

(g) It shall promptly, and in any event within five (5) Business Days after the
same is acquired by it, notify the Lender of any Commercial Tort Claim acquired
by it and, unless otherwise consented to by the Lender, it shall enter into a
supplement to this Agreement granting to the Lender a Lien in such Commercial
Tort Claim for the benefit of Lender.

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

(h) It shall perform in a reasonable time all other steps requested by the
Lender to create and maintain in the Lender’s favor a valid perfected first Lien
in all Collateral subject only to Permitted Encumbrances.

(i) It shall notify the Lender promptly and in any event within three
(3) Business Days after obtaining knowledge thereof (i) of any event or
circumstance that, to its knowledge, would cause the Lender to consider any then
existing Account as no longer constituting an Eligible Account or any then
existing Inventory as no longer constituting Eligible Inventory; (ii) of any
material delay in its performance of any of its obligations to any Account
Debtor; (iii) of any assertion by any Account Debtor of any material claims,
offsets or counterclaims; (iv) of any allowances, credits and/or monies granted
by it to any Account Debtor; (v) of all material adverse information relating to
the financial condition of an Account Debtor; (vi) of any material return of
Goods; and (vi) of any loss, damage or destruction of any of the Collateral.

(j) All Accounts (i) represent complete bona fide transactions which require no
further act under any circumstances on its part to make such Accounts payable by
the Account Debtors, (ii) are not subject to any present, future contingent
offsets or counterclaims, and (iii) do not represent bill and hold sales,
consignment sales, guaranteed sales, sale or return or other similar
understandings or obligations of any Affiliate or Subsidiary of the applicable
Borrower. With regard to any Account which is greater than $10,000, it has not
made, nor will it make, any agreement with any Account Debtor for any extension
of time for the payment of any Account, any compromise or settlement for less
than the full amount thereof, any release of any Account Debtor from liability
therefor, or any deduction therefrom except a discount or allowance for prompt
or early payment allowed by it in the ordinary course of its business consistent
with historical practice and as previously disclosed to the Lender in writing.

(k) It shall keep and maintain its Equipment in good operating condition, except
for ordinary wear and tear, and shall make all necessary repairs and
replacements thereof so that the value and operating efficiency shall at all
times be maintained and preserved. It shall not permit any such items to become
a fixture to real estate or accessions to other personal property.

(l) It shall maintain and keep all of its books and records concerning the
Collateral at its executive offices listed in Section 5.5(n) of the Borrower’s
Disclosure Schedule.

(m) Section 5.5(m) of the Borrower’s Disclosure Schedule lists all banks and
other financial institutions at which it maintains deposits and/or other
accounts, and such Schedule correctly identifies the name, address and telephone
number of each such depository, the name in which the account is held, a
description of the purpose of the account, and the complete account number. It
shall not establish any depository or other bank account with any financial
institution (other than the accounts set forth on Section 5.5(m) of the
Borrower’s Disclosure Schedule) without providing Lender with written
notification thereof and providing similar information related thereto.

(n) On the date hereof, its exact legal name (as indicated in the public record
of its jurisdiction of organization), jurisdiction of organization,
organizational identification number, if any, from the jurisdiction of
organization, and the location of its chief executive office and all other
offices or locations out of which it conducts business or operations, are
specified on Section 5.5(n) of the Borrower’s Disclosure Schedule. It has
furnished to the Lender a certified charter, certificate

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

of incorporation or other organization document and long-form good standing
certificate or analogous Canadian document as of a date which is within thirty
(30) days of the date hereof. It is organized solely under the law of the
jurisdiction so specified and has not filed any certificates of domestication,
transfer or continuance in any other jurisdiction. Except as otherwise indicated
on Section 5.5(n) of the Borrower’s Disclosure Schedule, the jurisdiction of its
organization of formation is required to maintain a public record showing it to
have been organized or formed. Except as specified on Section 5.5(n) of the
Borrower’s Disclosure Schedule, it has not changed its name, jurisdiction of
organization, chief executive office or sole place of business or its corporate
structure in any way (e.g., by merger, consolidation, change in corporate form
or otherwise) within the last five years and has not within the last five years
become bound (whether as a result of merger or otherwise) as a grantor under a
security agreement entered into by another Person, which has not heretofore been
terminated.

(o) It will not, except upon thirty (30) days’ prior written notice to the
Lender and delivery to the Lender of all additional financing statements and
other documents reasonably requested by the Lender to maintain the validity,
perfection and priority of the security interests provided for herein:
(i) change its jurisdiction of organization or the location of its chief
executive office from that referred to in Section 5.5(n) of the Borrower’s
Disclosure Schedule; or (ii) change its name, identity or organizational
structure.

(p) None of the Collateral is subject to any prohibition against encumbering,
pledging, hypothecating or assigning the same or requires notice or consent to
Borrower’s doing of the same.

SECTION 6. CONDITIONS TO EXTENSION OF CREDIT.

The obligation of Lender to make the Loans under this Agreement shall be subject
to the satisfaction or waiver by Lender, prior thereto or concurrently
therewith, of each of the following conditions precedent:

6.1 Loan Documents. Each of the Loan Documents shall have been duly and properly
authorized, executed and delivered by Borrower and the other parties thereto and
shall be in full force and effect as of the date hereof.

6.2 Representations and Warranties. Each of the representations and warranties
made by or on behalf of Borrower to Lender in this Agreement or in other Loan
Documents shall be true and correct in all material respects as of the date
hereof and on the date of the Loans, provided that any such representation or
warranty that is qualified by materiality shall be true and correct in all
respects as of the date hereof and on the date of the Loans.

6.3 Certified Copies of Corporate Documents. Lender shall have received from
Borrower, certified by a duly authorized officer to be true and complete on and
as of a date which is not more than ten (10) Business Days prior to the date
hereof, a copy of each of (a) the certificate of incorporation or such other
formation documents of Borrower in effect on such date of certification, and
(b) the by-laws or operating agreement, as applicable, of Borrower in effect on
such date.

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

6.4 Proof of Corporate Action. Lender shall have received from Borrower a copy,
certified by a duly authorized officer to be true and complete on and as of the
date which is not more than ten (10) Business Days prior to the date hereof, of
the records of all corporate action taken by Borrower to authorize (a) its
execution and delivery of each of the Loan Documents to which it is or is to
become a party as contemplated or required by this Agreement, (b) its
performance of all of its agreements and obligations under each of such
documents, and (c) the incurring of the Obligations contemplated by this
Agreement.

6.5 Legal Opinion. Lender shall have received a written legal opinion, addressed
to Lender, dated the date hereof, from counsel for Borrower. Such legal opinion
shall be acceptable to Lender and its counsel.

6.6 Collateral.

(a) All of the Obligations of Borrower to Lender under or in respect of this
Agreement shall be entitled to all of the benefits of and be secured by this
Agreement and the Loan Documents, and Lender shall have obtained a first,
perfected security interest in the Collateral of Borrower, subject only to the
Permitted Encumbrances.

(b) The Loan Documents and all other documents in respect thereto, which shall
create and maintain a first perfected security interest in favor of Lender and
the appropriate Financing Statements in respect thereto and necessary to enable
Lender to perfect its security interests thereunder, shall have been duly
executed and delivered by Borrower to Lender.

6.7 Insurance. Lender shall have received evidence of insurance, additional
insured and loss payee endorsements required hereunder and under the other Loan
Documents, in form and substance satisfactory to Lender, and certificates of
insurance policies and/or endorsements naming Lender as loss payee as required
hereunder.

6.8 Common Stock Issuance. The Borrower shall have issued to Lender 700,000
shares of Common Stock on the terms set forth in the Securities Issuance
Agreement, of even date herewith, between the Borrower and Lender in
substantially the form annexed hereto as Exhibit 6.8 (the “Securities Issuance
Agreement”).

6.9 [RESERVED]

6.10 Pay Proceeds Letter. Borrower shall have delivered to Lender a pay proceeds
letter with respect to the disbursement of the proceeds of the initial Loans in
form and substance satisfactory to Lender, which letter shall provide for, among
other things, the payment or reimbursement of all costs and expenses incurred by
Lender in connection with this Agreement and the other Loan Documents.

6.11 Access to Income Tax Returns. Borrower shall grant Lender access to
Borrower’s filed tax returns promptly upon Lender’s request.

6.12 IRS Form W-9. Lender shall have received from Borrower an executed Form W-9
to be submitted to the Internal Revenue Service which shall allow Lender to
verify Borrowers’ tax identification number(s).

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

6.13 Qwest Continuation Agreement. Lender shall have entered into a continuation
agreement with Qwest with respect to Borrower’s servers in form and substance
satisfactory to Lender.

6.14 Patent and Trademark Security Agreement. Lender shall have received a
Patent and Trademark Security Agreement with respect to the Intellectual
Property in substantially the form annexed hereto as Exhibit 6.14 (“Patent and
Trademark Security Agreement”).

6.15 Florida Subsidiary Pledge Agreement. Lender shall have received a Pledge
Agreement in form and substance satisfactory to Lender, from Jagged Peak, Inc.,
a Florida corporation and a non-operating Subsidiary of Parent.

SECTION 7. CONDITIONS TO MAKING FURTHER LOANS.

The obligations of Lender to make all Loans to Borrower hereunder shall be
subject to the satisfaction or waiver by Lender, prior thereto or concurrently
therewith, of each of the following conditions precedent:

7.1 Applications and Compliance. The application for such Loans shall have been
made by Borrower to Lender in accordance with the applicable provisions of this
Agreement and in compliance with all provisions of this Agreement.

7.2 Representations and Warranties. Each of the representations and warranties
made by or on behalf of Borrower to Lender in this Agreement or in other Loan
Documents shall have been true and correct in all material respects when made
(provided that any such representation or warranty that is qualified as to
materiality shall be true and correct in all respects), shall, for all purposes
of this Agreement, be deemed to be repeated on and as of the date of each Loan
by Lender hereunder and shall be true and correct in all respects on and as of
each such date, except to the extent that any of such representations and
warranties relate, by the express terms thereof, solely to a date prior to the
date of each Loan by Lender hereunder, and Lender shall have received a
certification from a Responsible Officer with respect to the foregoing in form
and substance satisfactory to Lender.

7.3 Performance, etc. Borrower shall have duly and properly performed, complied
with and observed each of its covenants, agreements and obligations contained in
this Agreement and in any other Loan Documents on the date of each Loan by
Lender hereunder, and Lender shall have received a certification from a
Responsible Officer with respect to the foregoing in form and substance
satisfactory to Lender. No event shall have occurred on or prior to the date of
each Loan by Lender hereunder and be continuing on the date of each Loan by
Lender hereunder, and no condition shall exist on the date of each Loan by
Lender hereunder, which constitutes an Event of Default or which would, with
notice or the lapse of time, or both, constitute an Event of Default under this
Agreement or any other Loan Document, and Lender shall have received a
certification from a Responsible Officer with respect to the foregoing in form
and substance satisfactory to Lender.

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

SECTION 8. REPRESENTATIONS AND WARRANTIES.

Borrower hereby represents and warrants to Lender, knowing and intending that
Lender shall rely thereon in making the Loan contemplated hereby (each of which
representations and warranties shall be continuing unless expressly made in
relation only to a specific date), that:

8.1 Corporate Existence: Good Standing.

(a) Each Borrower (i) is a corporation or limited liability company, as the case
may be, duly organized, validly existing and in good standing under the laws of
the jurisdiction of it organization, (ii) is in good standing in all other
jurisdictions in which it is required to be qualified to do business as a
foreign corporation, and (iii) has all requisite corporate or company power and
authority, as applicable, and full legal right to own or to hold under lease its
properties and to carry on the business as presently engaged.

(b) Each Borrower has the corporate power and authority and has full legal
rights to enter into each of the Loan Documents to which it is a party, to
perform, observe and comply with all of its agreements and obligations under
each of such documents.

8.2 No Violation, etc. The execution and delivery by each Borrower of the Loan
Documents to which it is a party, the performance by each Borrower of all of its
agreements and obligations under each of such documents, and the incurring by
each Borrower of all of the Obligations contemplated by this Agreement, have
been duly authorized by all necessary corporate or company actions, as
applicable, on the part of such Borrower and, if required, its shareholders, and
do not and will not (a) contravene any provision of any Borrower’s charter,
bylaws, operating agreement or other governing documents or this Agreement (each
as from time to time in effect), (b) conflict with, or result in a breach of the
terms, conditions, or provisions of, or constitute a default under, or result in
the creation of any Lien upon any of the property of any Borrower under, any
agreement, mortgage or other instrument to which such Borrower is or may become
a party, (c) violate or contravene any provision of any law, regulation, order,
ruling or interpretation thereunder or any decree, order or judgment or any
court or governmental or regulatory authority, bureau, agency or official (all
as from time to time in effect and applicable to such entity), (d) other than
waivers required from the Borrowers’ landlords, require any waivers, consents or
approvals by any of third party, including any creditors or trustees for
creditors of Borrower, or (e) require any approval, consent, order,
authorization, or license by, or giving notice to, or taking any other action
with respect to, any Governmental Authority.

8.3 Binding Effect of Documents, etc. Each Borrower has duly executed and
delivered each of the Loan Documents to which such Borrower is a party, and each
of the Loan Documents is valid, binding and in full force and effect. The
agreements and obligations of each Borrower as contained in each of the Loan
Documents constitute, or upon execution and delivery thereof will constitute,
legal, valid and binding obligations of such Borrower, enforceable against such
Borrower in accordance with their respective terms, subject, as to the
enforcement of remedies only, to limitations imposed by federal and state laws
regarding bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors’ rights and remedies generally, and by general principles of
law and equity.

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

8.4 No Events of Default.

(a) No Event of Default has occurred and is continuing and no event has occurred
and is continuing and no condition exists that would, with notice or the lapse
of time, or both, constitute an Event of Default.

(b) Borrower is not in default under any material contract, agreement or
instrument to which Borrower is a party or by which Borrower or any property of
Borrower is bound.

(c) The execution, delivery and performance of and compliance with this
Agreement and the other Loan Documents will not, with or without the passage of
time or giving of notice, result in any material violation of law, or be in
conflict with or constitute a default under any such term or provision, or
result in the creation of any Lien upon any of Borrower’s properties or assets
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to Borrower, or any of its
businesses or operations or any of its assets or properties.

8.5 No Governmental Consent Necessary. No consent or approval of, giving of
notice to, registration with or taking of any other action in respect of, any
Governmental Authority is required with respect to the execution, delivery and
performance by Borrower of this Agreement and the other Loan Documents to which
it is a party.

8.6 No Proceedings. There are no actions, suits, or proceedings pending or, to
the best of Borrower’s knowledge, threatened against or affecting Borrower in
any court or before any Governmental Authority which, if adversely determined,
would have an adverse effect on the ability of Borrower to perform its
obligations under this Agreement or the other Loan Documents to which it is a
party.

8.7 No Violations of Laws. Borrower has conducted, and is conducting, its
business, so as to comply in all material respects with all applicable federal,
state, provincial, county and municipal statutes and regulations Neither
Borrower nor any officer, director or shareholder of Borrower is charged with,
or so far as is known by Borrower, is under investigation with respect to, any
violation of any such statutes, regulations or orders, which could have a
Material Adverse Effect.

8.8 Use of Proceeds of the Loan. Proceeds from the Loan shall be used only for
those purposes set forth in this Agreement. No part of the proceeds of the Loan
shall be used, directly or indirectly, for the purpose of purchasing or carrying
any margin stock or for the purpose of purchasing or carrying or trading in any
stock under such circumstances as to involve Borrower in a violation of any
statute or regulation. In particular, without limitation of the foregoing, no
part of the proceeds from the Loans is intended to be used to acquire any
publicly-held stock of any kind.

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

8.9 Financial Statements; Indebtedness.

(a) The audited and unaudited financial statements contained in the SEC Reports
(collectively, the “Financial Statements”) (x) fairly present as of the
respective dates thereof the financial position of the Borrower and the results
of its operations, cash flows and stockholders’ equity for each of the periods
then ended in all material aspects; and (y) except for the fact that the
unaudited financial statements omit notes to such statements and year-end
adjustments thereto, have been prepared in accordance with GAAP in conformity
with the rules and regulations of the SEC.

(b) Except as shown on the most recent Financial Statements, (i) Borrower has no
other Indebtedness as of the date hereof which would adversely affect the
financial condition of Borrower or the Collateral, and (ii) Borrower has no
liabilities, contingent or otherwise, except those which individually or in the
aggregate are not material to the financial condition or operating results of
the Borrower.

(c) Set forth in Section 8.9 of Borrower’s Disclosure Schedule is a description
of all Indebtedness of each Borrower as of the date hereof, indicating the
amount of the indebtedness, the Borrower liable for such Indebtedness, and a
description of the nature thereof, including relevant maturity date(s).

8.10 Changes in Financial Condition. Since December 31, 2008, there has been no
material adverse change and no material adverse development in the business,
properties, operations, condition (financial or otherwise), results of
operations or prospects of the Borrower. Since December 31, 2008, the Borrower
has not (i) declared or paid any dividends, (ii) sold any assets, individually
or in the aggregate, outside of the ordinary course of business, (iii) had
capital expenditures outside of the ordinary course of business, (iv) engaged in
any transaction with any Affiliate except as set forth in the SEC Reports or
(v) engaged in any other transaction outside of the ordinary course of business.

8.11 Equipment. Borrower shall keep its Equipment in good order and repair, and
in running and marketable condition, ordinary wear and tear excepted.

8.12 Taxes and Assessments.

(a) Borrower has paid and discharged when due all taxes, assessments and other
governmental charges which may lawfully be levied or assessed upon its income
and profits, or upon all or any portion of any property belonging to it, whether
real, personal or mixed, to the extent that such taxes, assessment and other
charges have become due. Borrower has filed all tax returns, federal,
provincial, state and local, and all related information, required to be filed
by it.

(b) Borrower shall make all payments to be made by it hereunder without any Tax
Deduction (as defined below), unless a Tax Deduction is required by law. If
Borrower is aware that it must make a Tax Deduction (or that there is a change
in the rate or the basis of a Tax Deduction), it shall promptly notify Lender.
If a Tax Deduction is required by law to be made by Borrower, the amount of the
payment due from Borrower shall be increased to an amount which (after making
the Tax Deduction) leaves an amount equal to the payment which would have been
due if no Tax

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

Deduction had been required. If Borrower is required to make a Tax Deduction,
Borrower shall make the minimum Tax Deduction allowed by law and shall make any
payment required in connection with that Tax Deduction within the time allowed
by law. Within thirty (30) days of making either a Tax Deduction or a payment
required in connection with a Tax Deduction, Borrower shall deliver to Lender
evidence satisfactory to Lender that the Tax Deduction has been made or (as
applicable) the appropriate payment has been paid to the relevant taxing
authority.

(c) “Tax Deduction” means a deduction or withholding for or on account of Tax
from a payment under a Loan Document. “Tax” means any tax, levy, impost, duty or
other charge or withholding of a similar nature, including any income,
franchise, stamp, documentary, excise or property tax, charge or levy (in each
case, including any related penalty or interest).

(d) It is the parties’ intention that the transactions contemplated by this
Agreement and the other Loan Documents not result in the recognition of income
by any non-U.S. member or partner of Lender which is effectively connected with
the conduct of a trade or business within the United States (“Effectively
Connected Income”) within the meaning of Sections 864, 871 and 882 of the
Internal Revenue Code of 1986, as amended (the “Code”), or income which is
treated as Effectively Connected Income under another Code provision, such as
Code Section 897. On Lender’s request and at the Borrower’s sole cost and
expense, each Borrower will take such actions as may be requested by Lender from
time to time to effectuate the foregoing, and the amount of payments due from
Borrower will be increased as necessary to provide Lender with the rate of
return that would have been received hereunder by Lender if no such actions had
been required.

8.13 ERISA. Borrower is in compliance in all material respects with the
applicable provisions of ERISA and all regulations issued thereunder by the
United States Treasury Department, the Department of Labor and the Pension
Benefit Guaranty Corporation. Borrower does not have or maintain, and has never
had or maintained, a pension plan, defined benefit plan or similar plan that is
subject to the laws of Canada or was otherwise made available for the benefit of
employees in Canada.

8.14 Environmental Matters.

(a) Borrower has duly complied with, and its facilities, business, assets,
property, leaseholds and equipment are in compliance in all material respects
with, the provisions of all laws, regulations and orders of all Environmental
Laws.

(b) Borrower has been issued all required federal, provincial, state and local
licenses, certificates or permits relating to the operation of its business.

8.15 United States Anti-Terrorism Laws

(a) In this Section 8.15:

“Anti-Terrorism Law” means each of: (i) Executive Order No. 13224 of
September 23, 2001 Blocking Property and Prohibiting Transactions With Persons
Who Commit, Threaten To Commit, or Support Terrorism (the “Executive Order”);
(ii) the

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

Uniting and Strengthening America by Providing Appropriate Tools Required to
Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56 (commonly known
as the USA Patriot Act); (iii) the Money Laundering Control Act of 1986, Public
Law 99-570; and (iv) any similar law enacted in the United States of America
subsequent to December 31, 2004.

“holding company” has the meaning given to it in the United States Public
Utility Holding Company Act of 1935, and any successor legislation and rules and
regulations promulgated thereunder.

“investment company” has the meaning given to it in the United States Investment
Company Act of 1940.

“public utility” has the meaning given to it in the United States Federal Power
Act of 1920.

“Restricted Party” means any person listed: (i) in the Annex to the Executive
Order; (ii) on the Specially Designated Nationals and Blocked Persons list
maintained by the Office of Foreign Assets Control of the United States
Department of the Treasury; or (iii) in any successor list to either of the
foregoing.

(b) Borrower is not (i) a holding company or subject to regulation under the
United States Public Utility Holding Company Act of 1935; (ii) public utility or
subject to regulation under the United States Federal Power Act of 1920;
(iii) required to be registered as an investment company or subject to
regulation under the United States Investment Company Act of 1940; or
(iv) subject to regulation under any United States Federal or State law or
regulation that limits his/its ability to incur or guarantee indebtedness.

(c) To the best of Borrower’s knowledge, Borrower (i) is not, and is not
controlled by, a Restricted Party; (ii) has not received funds or other property
from a Restricted Party; and (iii) is not in breach of and is not the subject of
any action or investigation under any Anti-Terrorism Law.

(d) Borrower has taken reasonable measures to ensure compliance with the
Anti-Terrorism Laws.

8.16 Customers and Vendors. Except as set forth in Section 8.16. of the
Borrower’s Disclosure Schedule, there are no disputes with any customers,
suppliers, manufacturers, vendors and independent contractors of each Borrower
in excess of $50,000 in the aggregate with any such party.

8.17 Representations, Warranties and Covenants Concerning the Collateral. The
representations and warranties of Borrower set forth in Section 5.5 hereof are
incorporated in this Section 8.17 by reference.

8.18 Books and Records. Borrower maintains its chief executive office and its
books and records related to its Accounts, Inventory and all other Collateral at
its address set forth in Section 5.5(n) of Borrower’s Disclosure Schedule.

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

8.19 Location of Offices. Section 5.5(n) of the Borrower’s Disclosure Schedule
further sets forth a complete and accurate list of all offices and locations at
or out of which Borrower conducts any of its business or operations.

8.20 SEC Reports. The SEC Reports do not contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements therein, in the light of the circumstances under which they are made,
not misleading.

8.21 Changes. Since the Balance Sheet Date, except as disclosed in Section 8.21
of the Borrower’s Disclosure Schedule to this Agreement, with respect to
Borrower, there has not been:

(a) any change in its business, assets, liabilities, condition (financial or
otherwise), properties, operations or prospects, which, individually or in the
aggregate, has had, or could reasonably be expected to have, a Material Adverse
Effect;

(b) any resignation or termination of any of its officers, key employees or
groups of employees;

(c) any material change, except in the ordinary course of business, in its
contingent obligations by way of guaranty, endorsement, indemnity, warranty or
otherwise;

(d) any damage, destruction or loss, whether or not covered by insurance, which
has had, or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect;

(e) any waiver by it of a valuable right or of a material debt owed to it;

(f) any direct or indirect material loans made by it to any of its stockholders,
employees, officers or directors, other than advances made in the ordinary
course of business;

(g) any material change in any compensation arrangement or agreement with any
employee, officer, director or stockholder;

(h) any declaration or payment of any dividend or other distribution of its
assets;

(i) any labor organization activity related to it or any of its Subsidiaries;

(j) any debt, obligation or liability incurred, assumed or guaranteed by it ,
except those for immaterial amounts and for current liabilities incurred in the
ordinary course of business;

(k) any sale, assignment, transfer, abandonment or other disposition of any
Collateral other than Inventory in the ordinary course of business;

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

(l) any change in any material agreement to which it is a party or by which it
is bound which, either individually or in the aggregate, has had, or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect;

(m) any other event or condition of any character that, either individually or
in the aggregate, has had, or could reasonably be expected to have, individually
or in the aggregate, a Material Adverse Effect; or

(n) any arrangement or commitment by it to do any of the acts described in
subsection (a) through (m) of this Section 8.21.

8.22 Intellectual Property.

(a) Except for Permitted Encumbrances, (1) Borrower holds all Intellectual
Property that it owns free and clear of all Liens and restrictions on use or
transfer, whether or not recorded, and has sole title to and ownership of or has
the full, exclusive (subject to the rights of its licensees) right to use in its
field of business such Intellectual Property; and Borrower holds all
Intellectual Property that it uses but does not own under valid licenses or
sub-licenses from others; (2) the use of the Intellectual Property by Borrower
does not, to the knowledge of the Borrower, violate or infringe on the rights of
any other Person; (3) the Borrower has not received any notice of any conflict
between the asserted rights of others and Borrower with respect to any
Intellectual Property; (4) Borrower has used its commercially reasonable best
efforts to protect its rights in and to all Intellectual Property; (5) Borrower
is in compliance with all material terms and conditions of its agreements
relating to the Intellectual Property; (6) Borrower is not, since January 1,
2009, been a defendant in any action, suit, investigation or proceeding relating
to infringement or misappropriation by Borrower of any Intellectual Property nor
has Borrower been notified of any alleged claim of infringement or
misappropriation by Borrower of any Intellectual Property; (7) to the knowledge
of Borrower, none of the products or services Borrower is researching,
developing, propose to research and develop, make, have made, use, or sell,
infringes or misappropriates any Intellectual Property right of any third party;
(8) none of the trademarks and service marks used by Borrower, to the knowledge
of the Borrower, infringes the trademark or service mark rights of any third
party; and (9) to the Borrower’s knowledge, none of the material processes and
formulae, research and development results and other know-how relating to the
Borrower’s business, the value of which to Borrower is contingent upon
maintenance of the confidentiality thereof, has been disclosed to any Person
other than Persons bound by written confidentiality agreements.

(b) Section 8.22 of Borrower’s Disclosure Schedule sets forth a true and
complete list of (i) all registrations and applications for Intellectual
Property owned by Borrower filed or issued by any Intellectual Property
registry, (ii) all Intellectual Property licenses which are either material to
the business of Borrower or relate to any material portion of Borrower’s
Inventory, including licenses for standard software having a replacement value
of more than $10,000, and (iii) all domain names owned by or registered in the
name of Borrower. None of such Intellectual Property licenses are reasonably
likely to be construed as an assignment of the licensed Intellectual Property to
such Borrower. Borrower shall update this list throughout the Term and submit it
to Lender immediately upon the filing or issuance of any registrations or
applications for Intellectual Property owned by Borrower, the licensing by
Borrower of any third party Intellectual Property material to Borrower’s
business or the acquisition or registration by Borrower of any domain names, in
each case made after the effective date of this Agreement.

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

(c) The Borrower represents that none of its Intellectual Property rights have
been registered with, or have been the subject of an application, notice or
other filing with, the Canada Intellectual Property Office (the “CIPO”) .
Borrower undertakes that, prior to submitting a registration, application,
notice or other filing with the CIPO (a “CIPO Filing”) with respect to any of
its Intellectual Property, it shall provide Lender with advance notice of
fifteen (15) days and shall ensure that such CIPO Filing, when submitted to the
CIPO shall be accompanied by such conditional assignments or other instruments
as Lender may request in order to protect its security interest in the
Intellectual Property rights, together with all necessary instructions and
payments to cause such conditional assignments or other instruments to be
registered against the applicable Intellectual Property rights.

8.23 Employees. Borrower does not have any collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending or, to
the Borrower’s knowledge, threatened with respect to the Borrower. Except as
disclosed in the SEC Reports, the Borrower is not a party to or bound by any
currently effective employment contract, deferred compensation arrangement,
bonus plan, incentive plan, profit sharing plan, retirement agreement or other
employee compensation plan or agreement. To the Borrower’s knowledge, no
employee of the Borrower, nor any consultant with whom the Borrower has
contracted, is in violation of any material term of any employment contract or
any other contract relating to the right of any such individual to be employed
by, or to contract with, the Borrower or to receive any benefits; and, to the
Borrower’s knowledge, the continued employment by the Borrower of its present
employees, and the performance of the Borrower’s contracts with its independent
contractors, will not result in any such violation. Except for employees who
have a current effective employment agreement with the Borrower, no employee of
the Borrower has been granted the right to continued employment by the Borrower
or to any material compensation following termination of employment with the
Borrower. The Borrower is not aware that any officer, director, manager,
partner, key employee or group of employees intends to terminate his, her or
their employment with the Borrower, nor does the Borrower have a present
intention to terminate any of the same.

8.24 Tax Status. Borrower (i) has made or filed all federal, state and
provincial income and all other tax returns, reports and declarations required
by any jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges that are shown or determined to be due on
such returns, reports and declarations, except those being contested in good
faith and for which it has set aside on its books a provision in the amount of
such taxes being contested in good faith and (iii) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply.
There are no unpaid taxes claimed to be due by the taxing authority of any
jurisdiction, and the officers of the Borrower know of no basis for any such
claim.

8.25 Internal Accounting Controls. The Borrower maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 under the 1934 Act) that
are effective, subject to the disclosure contained in the SEC Reports, in
ensuring that information required to be disclosed by the Borrower in the
reports that it files or submits under the 1934 Act is recorded, processed,

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

summarized and reported, within the time periods specified in the rules and
forms of the SEC, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the Borrower in
the reports that it files or submits under the 1934 Act is accumulated and
communicated to the Borrower’s management, including its principal executive
officer or officers and its principal financial officer or officers, as
appropriate, to allow timely decisions regarding required disclosure.

8.26 Sarbanes-Oxley Act. To the Borrower’s knowledge, the Borrower is in
compliance with any and all applicable requirements of the Sarbanes-Oxley Act of
2002 that are effective as of the date hereof, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are effective as of the
date hereof.

8.27 Representations and Warranties: True, Accurate and Complete.

(a) None of the representations, certificates, reports, warranties or statements
now or hereafter made or delivered to Lender pursuant hereto or in connection
with this Agreement or any other Loan Document or the transactions contemplated
hereby contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary in order to make the
statements contained herein and therein, in light of the circumstances in which
they are made, not misleading.

(b) All warranties and representations made herein or in any the Loan Documents
by Borrower will be true and accurate at the time Borrower requests Lender to
make a Loan to Borrower hereunder.

8.28 Fees; Brokers; Finders. Except as set forth in Section 8.28 of the
Borrower’s Disclosure Schedule, there are no fees, commissions or other
compensation due to any third party acting on behalf of or at the direction of
Borrower in connection with the Loan Documents. Except as set forth in Section
8.28 of the Borrower’s Disclosure Schedule, all negotiations relative to the
Loan Documents, and the transactions contemplated thereby, have been carried on
by the Borrower with the Lender without the intervention of any other person or
entity acting on behalf of the Borrower, and in such manner as not to give rise
to any claim against the Borrower or the Lender for any finder’s fee, brokerage
commission or like payment due to any third party acting on behalf of or at the
direction of Borrower, and if any such fee, commission or payment is payable, it
shall be the sole responsibility of the Borrower and the Borrower shall pay, and
indemnify the Lender for, the same.

SECTION 9. AFFIRMATIVE COVENANTS.

Until the indefeasible payment and satisfaction in full of all Obligations,
Borrower hereby covenants and agrees as follows:

9.1 Notify Lender. Borrower shall promptly, and in any event within three
(3) Business Days, inform Lender (a) if any one or more of the representations
and warranties made by Borrower in this Agreement or in any document related
hereto shall no longer be entirely true, accurate and complete in any respect,
(b) of any event or circumstance that, to its knowledge, would cause Lender

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

to consider any then existing Inventory as no longer constituting Eligible
Inventory or to consider any then Eligible Receivables as no longer constituting
Eligible Receivables; (c) of all material adverse information relating to the
financial condition of Borrower; (d) of any material return of goods; and (e) of
any loss, damage or destruction of any of the Collateral.

9.2 Pay Taxes and Liabilities; Comply with Agreement. Borrower shall promptly
pay, when due, or otherwise discharge, all indebtedness, sums and liabilities of
any kind now or hereafter owing by Borrower to its employees as wages or
salaries or to Lender and Governmental Authorities however created, incurred,
evidenced, acquired, arising or payable, including without limitation the
Obligations, income taxes, excise taxes, sales and use taxes, license fees, and
all other taxes with respect to any of the Collateral, or any wages or salaries
paid by Borrower or otherwise, unless the validity of which are being contested
in good faith by Borrower by appropriate proceedings, provided that Borrower
shall have maintained reasonably adequate reserves and accrued the estimated
liability on Borrower’s balance sheet for the payment of same.

9.3 Observe Covenants, etc. Borrower shall observe, perform and comply with the
covenants, terms and conditions of this Agreement and the other Loan Documents.

9.4 Maintain Corporate Existence and Qualifications. Borrower shall maintain and
preserve in full force and effect, its corporate existence and rights,
franchises, licenses and qualifications necessary to continue its business, and
comply with all applicable statutes, rules and regulations pertaining to the
operation, conduct and maintenance of its existence and business including,
without limitation, all federal, state and local laws relating to benefit plans,
environmental safety, or health matters, and hazardous or liquid waste or
chemicals or other liquids (including use, sale, transport and disposal
thereof).

9.5 Information and Documents to be Furnished to Lender. Borrower shall deliver
or cause to be delivered to Lender, unless such information has been filed with
the SEC:

(a) Annual Financial Statements and Projections. Annual audited Financial
Statements of the Borrower, as soon as available, but in any event within ninety
(90) days after the end of Borrower’s Fiscal Year during the Term. Such
financial statements will (x) fairly present the financial position of the
Borrower as of the dates thereof and the results of its operations, cash flows
and stockholders’ equity for each of the periods then ended in all material
aspects; and (y) be prepared in accordance with GAAP.

(b) Quarterly Financial Statements. Quarterly Financial Statements of the
Borrower, as soon as available but in any event no later than forty-five
(45) days after the close of each calendar quarter, the unaudited balance sheet
and the related statement of income of the Borrower, prepared in accordance with
GAAP, subject to year-end audit adjustments, together with such other
information with respect to the business of Borrower as Lender may reasonably
request.

(c) Monthly Financial Statements. Not later than the last day of the month
following the end of each calendar month, the unaudited balance sheet and the
related statement of income of the Borrower, subject to year-end audit
adjustments and the absence of footnotes, together with such other information
with respect to the business of Borrower as Lender may request.

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

(d) Monthly Accounts Receivable Aging Report. Not later than the last day of
each calendar month, an accounts receivable aging report, in form and substance
satisfactory to Lender.

(e) Notice of Judgments, Environmental, Health or Safety Complaints.

(i) Within three (3) Business Days thereafter, written notice to Lender of the
entry of any judgment or the institution of any lawsuit or of other legal or
equitable proceedings or the assertion of any crossclaim or counterclaim seeking
monetary damages from Borrower in an amount exceeding $50,000; and

(ii) Within three (3) Business Days thereafter, notice or copies if written of
all claims, complaints, orders, citations or notices, whether formal or
informal, written or oral, from a governmental body or private person or entity,
relating to air emissions, water discharge, noise emission, solid or liquid
waste disposal, hazardous waste or materials, or any other environmental, health
or safety matter, which adversely effect Borrower. Such notices shall include,
among other information, the name of the party who filed the claim, the
potential amount of the claim, and the nature of the claim.

(f) Other Information. Upon demand,

(i) Certificates of insurance for all policies of insurance to be maintained by
Borrower pursuant hereto;

(ii) An estoppel certificate executed by an authorized officer of Borrower
indicating that there then exists no Event of Default and no event which, with
the giving of notice or lapse of time, or both, would constitute an Event of
Default;

(iii) All information received by Borrower affecting the financial status or
condition of any Account Debtor or the payment of any Account, including but not
limited to, invoices, original orders, shipping and delivery receipts; and

(iv) Assignments, in form acceptable to Lender, of all Accounts, and of the
monies due or to become due on specific contracts relating to the same.

(g) Additional Information. From time to time, such other information as Lender
may reasonably request, including financial projections and cash flow analysis.

(h) Financial Information Default. Without affecting Lender’s other rights and
remedies, in the event any Borrower fails to deliver the financial information
required by Section 9.5(a) or (b)on or before the date required by this
Agreement, the Borrowers shall jointly and severally pay Lender a fee in the
amount of $500.00 per week (or portion thereof) for each such failure until such
failure is cured to Lender’s satisfaction or waived in writing by Lender. All
amounts that are incurred pursuant to this Section 9.5(h) shall constitute
Obligations hereunder and shall be due and payable by the Borrowers monthly, in
arrears, on the first Business Day of each calendar month and upon expiration of
the Term.

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

9.6 Access to Records and Property. At any time and from time to time, upon
reasonable notice and during normal business hours, Borrower shall give any
representatives or designees of Lender reasonable access to its properties, and
permit any of them to, examine, audit, copy or make extracts from, any and all
books, records and documents in the possession of Borrower or any independent
contractor relating to Borrower’s affairs and the Collateral, and to inspect any
of its properties wherever located, all at Borrower’s expense. Notwithstanding
the foregoing, no such prior notice shall be required to be given in the event
Lender believes such access is necessary to preserve or protect the Collateral,
or following the occurrence and during the continuance of an Event of Default.

9.7 Comply with Laws. Borrower shall comply with the requirements of all
applicable laws, rules, regulations and orders of any Governmental Authority,
compliance with which is necessary to maintain its corporate existence or the
conduct of its business or non-compliance with which would adversely affect in
any respect its ability to perform its obligations or any security given to
secure its obligations.

9.8 Insurance Required.

(a) Borrower shall cause to be maintained, in full force and effect on all
property of Borrower including, without limitation, all Inventory and Equipment,
insurance in such amounts against such risks as is reasonably satisfactory to
Lender, including, but without limitation, business interruption, fire, boiler,
theft, burglary, pilferage, vandalism, malicious mischief, loss in transit, and
hazard insurance and, if as of the date hereof, any of the real property of
Borrower is in an area that has been identified by the Secretary of Housing and
Urban Development as having special flood or mudslide hazards, and on which the
sale of flood insurance has been made available under the National Flood
Insurance Act of 1968, then Borrower shall maintain flood insurance. Said policy
or policies shall:

(i) Be in a form and with insurers which are satisfactory to Lender;

(ii) Be for such risks, and for such insured values as Lender or its assigns may
reasonably require in order to replace the property in the event of actual or
constructive total loss;

(iii) Designate Lender as additional insured and loss payee as Lender’s
interests may from time to time appear;

(iv) Contain a “breach of warranty clause” whereby the insurer agrees that a
breach of the insuring conditions or any negligence by Borrower or any other
person shall not invalidate the insurance as to Lender and its assignee;

(v) Provide that they may not be canceled or altered without thirty (30) days
prior written notice to Lender and its assigns; and

(vi) Upon demand, be delivered to Lender.

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

(b) Borrower shall obtain such additional insurance as Lender may reasonably
require.

(c) Borrower shall, in the event of loss or damage, forthwith notify Lender and
file proofs of loss with the appropriate insurer. Borrower hereby authorizes
Lender to endorse any checks or drafts constituting insurance proceeds.

(d) Borrower shall forthwith upon receipt of insurance proceeds endorse and
deliver the same to Lender.

(e) In no event shall Lender be required either to (i) ascertain the existence
of or examine any insurance policy or (iiii) advise Borrower in the event such
insurance coverage shall not comply with the requirements of this Agreement.

9.9 Condition of Collateral; No Liens. Borrower shall maintain all Collateral in
good condition and repair at all times, and preserve it against any loss,
damage, or destruction of any nature whatsoever relating to said Collateral or
its use, and keep said Collateral free and clear of any Liens, except for the
Permitted Encumbrances, and shall not permit Collateral to become a fixture to
real estate or accessions to other personal property.

9.10 Payment of Proceeds. Borrower shall forthwith upon receipt of all proceeds
of Collateral, pay such proceeds (insurance or otherwise) up to the amount of
the then-outstanding Obligations over to Lender for application against the
Obligations in such order and manner as Lender may elect.

9.11 Records. Borrower shall at all times keep accurate and complete records of
its operations, of the Collateral and the status of each Account, which records
shall be maintained at its executive offices as set forth on Section 5.5(n) of
the Borrower’s Disclosure Schedule.

9.12 Equipment. Borrower shall maintain is Equipment in good operating
condition, subject to ordinary wear and tear, and shall not permit such
Equipment to become a fixture to real estate or accessions to other personal
property.

9.13 Delivery of Documents. If any proceeds of Accounts shall include, or any of
the Accounts shall be evidenced by, notes, trade acceptances or instruments or
documents, or if any Inventory is covered by documents of title or chattel
paper, whether or not negotiable, then Borrower waives protest regardless of the
form of the endorsement. If Borrower fails to endorse any instrument or
document, Lender is authorized to endorse it on Borrower’s behalf.

9.14 United States Contracts. If any of the Accounts arise out of contracts with
the United States or any of its departments, agencies or instrumentalities,
Borrower will notify Lender, and if requested by Lender, execute any necessary
instruments in order that all monies due or to become due under such contract
shall be assigned to Lender and proper notice of the assignment given under the
Federal Assignment of Claims Act.

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

9.15 Name Changes; Location Changes.

(a) Borrower shall promptly notify Lender if Borrower is known by or conducting
business under any names other than those set forth in this Agreement; and

(b) Borrower shall deliver not less than thirty (30) Business Days prior written
notice to Lender if Borrower intends to conduct any of its business or
operations at or out of offices or locations other than those set forth in this
Agreement, or if it changes the location of its chief executive office or the
address at which it maintains its books and records.

9.16 Further Assurances. Borrower shall at any time or from time to time upon
request of Lender take such steps and execute and deliver such Financing
Statements and other documents all in the form of substance satisfactory to
Lender relating to the creation, validity or perfection of the security
interests provided for herein, under the UCC which are reasonably necessary to
effectuate the purposes and provisions of this Agreement. Borrower shall defend
the right, title and interest of Lender in and to the Collateral against the
claims and demands of all Persons whomsoever, and take such actions, including
(i) all actions necessary to grant Lender “control” of any Investment Property,
Deposit Accounts, Letter-of-Credit Rights or electronic Chattel Paper owned by
it, with any agreements establishing control to be in form and substance
satisfactory to Lender, (ii) the prompt (but in no event later than five
(5) Business Days following Lender’s request therefor) delivery to Lender of all
original Instruments, Chattel Paper, negotiable Documents and certificated
Securities owned by it (in each case, accompanied by stock powers, allonges or
other instruments of transfer executed in blank), (iii) notification of Lender’s
interest in Collateral at Lender’s request, and (iv) the institution of
litigation against third parties as shall be prudent in order to protect and
preserve Borrower’s and/or Lender’s respective and several interests in the
Collateral.

9.17 SEC Reporting Status. Borrower shall timely file all reports required to be
filed with the SEC pursuant to Section 13 or 15(d) of the 1934 Act, and the
Borrower shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would permit such termination. .

9.18 Indemnification. Borrower shall indemnify, protect, defend and save
harmless Lender, as well as Lender’s directors, officers, trustees, employees,
agents, attorneys, partners, members and shareholders (hereinafter referred to
collectively as the “Indemnified Parties” and individually as an “Indemnified
Party”) from and against (a) any and all losses, damages, expenses or
liabilities of any kind or nature and from any suits, claims or demands, by
third parties (including, without limitation, claims of brokers and finders),
including reasonable counsel fees incurred in investigating or defending such
claim, suffered by any of them and caused by, relating to, arising out of,
resulting from, or in any way connected with the Loans and the transactions
contemplated herein and in the other Loan Documents, and (b) any and all losses,
damages, expenses or liabilities sustained by Lender in connection with any
Environmental Liabilities and Costs. In case any action shall be brought against
an Indemnified Party based upon any of the above and in respect to which
indemnity may be sought against Borrower, the Indemnified Party against whom
such action was brought shall promptly notify Borrower in writing, and Borrower
shall assume the defense thereof, including the employment of counsel selected
by Borrower and reasonably satisfactory to the Indemnified Party, the payment of
all costs and expenses and the right to negotiate and consent to settlement.
Upon reasonable determination made by the Indemnified Party, the Indemnified
Party shall have the right to employ separate counsel in any such action and to
participate in the defense

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

thereof; provided, however that the Indemnified Party shall pay the costs and
expenses incurred in connection with the employment of separate counsel.
Borrower shall not be liable for any settlement of any such action effected
without its consent, but if settled with Borrower’s consent, or if there be a
final judgment for the claimant in any such action, Borrower agrees to indemnify
and save harmless said Indemnified Party against whom such action was brought
from and against any loss or liability by reason of such settlement or judgment,
except as otherwise provided above. The provisions of this Section shall survive
the termination of this Agreement and the final repayment of the Obligations.

9.19 Borrower Financial Covenants.

(a) Fixed Charge Coverage Ratio. Beginning March 31, 2010, Borrower shall
maintain a Fixed Charge Coverage Ratio on a consolidated basis of not less than
the following, in each case for the preceding twelve-month period: (i) 0.75:1.0
for the quarter ended March 31, 2010; (ii) 1.0:1.0 for the quarter ended
June 30, 2010; (iii) 1.25:1.0 for the quarter ended September 30, 2010 and
(iv) 1.5:1.0 for the quarter ended December 31, 2010.

“Fixed Charge Coverage Ratio” shall mean, for any period, the ratio of
Borrower’s (i) EBITDA minus capital expenditures to (ii) the sum of Borrower’s
(1) total interest charges, (2) scheduled principal payments on Indebtedness,
(3) equipment lease charges (including operating and capital lease charges),
(4) real property lease charges and (5) income taxes paid in cash for such
period. “EBITDA” shall mean earnings before deduction for interest charges,
taxes, depreciation and amortization.

(b) Funded Debt to EBITDA Ratio. Beginning March 31, 2010, Borrower shall
maintain a Funded Debt to EBITDA Ratio on a consolidated basis of not less than
the following, in each case as of the last day of each calendar quarter, for the
immediately preceding twelve-month period: (i) 3.0:1.0 for the quarter ended
March 31, 2010; (ii) 2.5:1.0 for the quarter ended June 30, 2010; and
(iii) 2.0:1.0 as of the end of each calendar quarter thereafter.

“Funded Debt to EBITDA Ratio” shall mean the ratio of Funded Debt to EBITDA.
“Funded Debt” shall mean all Indebtedness of Borrower to Lender (excluding
accounts payable in the ordinary course of Borrower’s business) and any other
Indebtedness expressly permitted hereunder to which Borrower is a party.

(c) Gross Accounts Receivable. Borrower shall have at all times accounts
receivable of not less than $1,100,000 in the aggregate.

9.20 Form 8-K. No later than two Business Days after the date hereof, Parent
will transmit to Lender for review a draft of a Current Report on Form 8-K under
the 1934 Act, which report shall describe the material terms of the transactions
contemplated hereby.

9.21 Deposit Account Control Agreement – Canadian Subsidiary. No later than
December 31, 2009, Canadian Subsidiary and Lender shall enter into a deposit
account control agreement in form and substance satisfactory to Lender.

 

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

SECTION 10. NEGATIVE COVENANTS.

Until payment and satisfaction in full of all Obligations and the termination of
this Agreement, Borrower hereby covenants and agrees as follows:

10.1 Change of Control; No Creation of Subsidiaries. Borrower will not
consolidate with, merge with, or acquire the stock or a material portion of the
assets of any person, firm, joint venture, partnership, corporation, or other
entity, whether by merger, consolidation, purchase of stock or otherwise if any
such action results in a Change of Control (as defined below). Borrower will not
create or permit to exist any Subsidiary unless such new Subsidiary is a
wholly-owned Subsidiary and is designated by Lender as either a co-borrower or
guarantor hereunder and such Subsidiary shall have entered into all such
documentation required by Lender, including, without limitation, to grant to
Lender a first priority perfected security interest in substantially all of such
Subsidiary’s assets to secure the Obligations. In addition, Borrower will not
acquire a material portion of the assets of any entity in a manner that is not
addressed by the foregoing provisions of this Section 10.1 if such action would
impair Lender’s rights hereunder or in the Collateral.

A “Change of Control” shall be deemed to have occurred if:

(i) any “Person,” which shall mean a “person” as such term is used in Sections
13(d) and 14(d) of the 1934 Act, or group of Persons is or becomes the
“beneficial owner” (as defined in Rule 13d-3 under the 1934 Act), directly or
indirectly, of securities of Borrower representing 50% or more of the combined
voting power of Borrower’s then outstanding voting securities;

(ii) individuals, who at the Closing Date constitute the Board of Directors of
Borrower, and any new director whose election by the Board of Directors of
Borrower, or whose nomination for election by Borrower’s stockholders, was
approved by a vote of at least one-half (1/2) of the directors then in office
(other than in connection with a contested election), cease for any reason to
constitute at least a majority of the Board of Directors of Borrower;

(iii) the stockholders or members of Borrower approve (a) a plan of complete
liquidation of Borrower or (b) the sale or other disposition by Borrower of all
or substantially all of Borrower’s assets; or

(iv) a merger or consolidation of Borrower with any other entity is consummated,
other than:

(a) a merger or consolidation which results in the voting securities of Borrower
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) more than 50% of the combined voting power of the surviving
entity’s outstanding voting securities immediately after such merger or
consolidation; or

(b) a merger or consolidation which would result in the directors of Borrower
(who were directors immediately prior thereto) continuing to constitute more
than 50% of all directors of the surviving entity immediately after such merger
or consolidation.

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

In this paragraph (iv), “surviving entity” shall mean only an entity in which
all of Borrower’s stockholders immediately before such merger or consolidation
(determined without taking into account any stockholders properly exercising
appraisal or similar rights) become stockholders by the terms of such merger or
consolidation, and the phrase “directors of Borrower (who were directors
immediately prior thereto)” shall include only individuals who were directors of
Borrower at the Closing Date.

10.2 Disposition of Assets or Collateral. Borrower will not sell, lease,
transfer, convey, or otherwise dispose of any or all of its assets or
Collateral, other than the disposition or transfer in the ordinary course of
business of obsolete and worn-out Equipment only to the extent that the proceeds
of any such disposition are used to acquire replacement Equipment which is
subject to Lender’s first priority security interest or are used to repay Loans.

10.3 Other Liens. Borrower will not incur, create or permit to exist any Lien on
any of its property or assets, whether now owned or hereafter acquired, except
for (a) those Liens in favor of Lender created by this Agreement and the other
Loan Documents; and (b) the Permitted Encumbrances.

10.4 Other Liabilities. Borrower will not incur, create, assume, or permit to
exist, any Indebtedness or liability on account of either borrowed money or the
deferred purchase price of property, except (a) Obligations to Lender,
(b) Indebtedness constituting Subordinated Debt or secured by Permitted
Encumbrances, or (c) trade payables incurred in the ordinary course of
Borrower’s business.

10.5 Loans. Borrower will not make any loans to any Person, other than advances
to employees of Borrower in the ordinary course of business, with outstanding
advances to any employee not to exceed $10,000 at any time.

10.6 Guaranties. Borrower will not assume, guaranty, endorse, contingently agree
to purchase or otherwise become liable upon the obligation of any Person, except
by the endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.

10.7 [RESERVED]

10.8 Transfers of Notes or Accounts. Borrower will not sell, assign, transfer,
discount or otherwise dispose of any Accounts in excess of $20,000 over any
twelve month period, or any promissory note payable to it, with or without
recourse.

10.9 Dividends. Other than for purchases of stock consistent with past practices
made by Borrower’s ESOP and similar plans, in an amount not to exceed Sixty
Thousand Dollars ($60,000) in the aggregate during any period of twelve
(12) consecutive months during the Term, Borrower will not declare or pay any
cash dividend, make any distribution on, redeem, retire or otherwise acquire
directly or indirectly, any shares of its stock or other Equity Interests
without the prior written consent of Lender.

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

10.10 Payments to Affiliates. Except as set forth in Section 10.10 of the
Borrower’s Disclosure Schedule, or as otherwise approved by Lender in writing in
advance, Borrower shall not make any payments of cash or other property to any
Affiliate.

10.11 Modification of Documents. Borrower will not change, alter or modify, or
permit any change, alteration or modification of its certificate of
incorporation, operating agreement, by-laws or other governing documents in any
manner that might adversely affect Lender’s rights hereunder as a secured lender
or its Collateral without Lender’s prior written consent.

10.12 Change Business or Name. Borrower will not change or alter the nature of
its business, or change its names as they appear in the official filings of its
state of organization.

10.13 Settlements. Other than in the ordinary course of its business, Borrower
will not comprise, settle or adjust any claims in any amount relating to any of
the Collateral, without the prior written consent of Lender.

SECTION 11. EVENTS OF DEFAULT.

The occurrence of any of the following shall constitute an event of default
(hereinafter referred to as an “Event of Default”):

11.1 Failure to Pay. The failure by Borrower to pay, when due, (a) any payment
of principal, interest or other charges due and owing to Lender pursuant to any
obligations of Borrower to Lender including, without limitation, those
Obligations arising pursuant to this Agreement or any Loan Document, or under
any other agreement for the payment of monies then due and payable to Lender, or
(b) any taxes due to any Governmental Authority.

11.2 Failure of Insurance. Failure of one or more of the insurance policies
required hereunder to remain in full force and effect; failure on the part of
Borrower to pay or cause to be paid all premiums when due on the insurance
policies pursuant to this Agreement; failure on the part of Borrower within
three Business Days of Lender’s demand to take such other action as may be
requested by Lender in order to keep said policies of insurance in full force
and effect until all Obligations have been indefeasibly paid in full; and
failure on the part of Borrower within three Business Days of Lender’s request
to execute any and all documentation required by the insurance companies issuing
said policies to effectuate any of the foregoing.

11.3 Failure to Perform. Borrower’s failure to perform or observe any covenant,
term or condition contained in this Agreement or in any other Loan Document,
after giving effect to any applicable grace period.

11.4 Cross Default. Borrower’s default under any covenant, representation, term
or warranty contained in any other Loan Document.

11.5 False Representation or Warranty. Borrower shall have made any statement,
representation or warranty in this Agreement or in any of the other Loan
Documents to which

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

Borrower is a party or in a certificate executed by Borrower incident to this
Agreement, which is at any time found to have been false in any material respect
at the time such representation or warranty was made.

11.6 Liquidation, Voluntary Bankruptcy, Dissolution, Assignment to Creditors.
Any resolution shall be passed or any action (including a meeting of creditors)
shall be taken by Borrower for the termination, winding up, liquidation or
dissolution of Borrower, or Borrower shall make an assignment for the benefit of
creditors, or Borrower shall file a petition in voluntary liquidation or
bankruptcy, or Borrower shall file a petition or answer or consent seeking, or
consenting to, the reorganization of Borrower or the readjustment of any of the
indebtedness of Borrower under any applicable insolvency or bankruptcy laws now
or hereafter existing (including the United States Bankruptcy Code), or Borrower
shall consent to the appointment of any receiver, administrator, liquidator,
custodian or trustee of all or any part of the property or assets of Borrower or
any corporate action shall be taken by Borrower for the purposes of effecting
any of the foregoing.

11.7 Involuntary Petition Against Borrower. Any petition or application for any
relief is filed against Borrower under applicable insolvency or bankruptcy laws
now or hereafter existing (including the United States Bankruptcy Code and the
Bankruptcy and Insolvency Act (Canada)) or under any insolvency, reorganization,
receivership, readjustment of debt, dissolution or liquidation law or statute of
any jurisdiction now or hereafter in effect (whether at law or in equity), and
is not discharged or stayed within thirty (30) days of the filing thereof.

11.8 Judgments; Levies. Any judgments or attachments aggregating in excess of
$65,000 at any given time is obtained against Borrower which remains unstayed
for a period of ten (10) days or is enforced.

11.9 Change in Condition. There occurs any event or a change in the condition or
affairs, financial or otherwise, of Borrower which, in the reasonable opinion of
Lender, impairs Lender’s security or ability of Borrower to discharge its
obligations hereunder or any other Loan Document or which impairs the rights of
Lender in Borrower’s Collateral.

11.10 Environmental Claims. Lender determines that any Environmental Liabilities
and Costs or Environmental Lien with respect to Borrower will have a potentially
adverse effect on the financial condition of Borrower or on the Collateral.

11.11 Failure to Notify. If at any time Borrower fails to provide Lender
immediately with notice or copies, if written, of all complaints, orders,
citations or notices with respect to environmental, health or safety complaints
as required by this Agreement, within 10 days of the date Borrower receives such
complaints, orders, citations or notices.

11.12 Failure to Deliver Documentation. Borrower shall fail to obtain and
deliver to Lender any other documentation required to be signed or obtained as
part of this Agreement, or shall have failed to take any reasonable action
requested by Lender to perfect, protect, preserve and maintain the security
interests and Lien on the Collateral provided for herein, within three
(3) Business Days after Lender’s demand.

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

11.13 Change in Control. The Borrower undergoes a Change of Control.

11.14 Reduction in Certain Equity Ownership Interests. Parent ceases to own of
record and beneficially not less than 100% of the issued and outstanding
membership interests of Canadian Subsidiary.

11.15 Dissolution; Maintenance of Existence. Borrower is dissolved, or Borrower
fails to maintain its corporate existence in good standing, or the usual
business of Borrower ceases or is suspended in any respect.

11.16 Indictment. The indictment of Borrower or any director or Responsible
Officer of Borrower under any criminal statute, or commencement of criminal or
civil proceedings against Borrower, pursuant to which statute or proceedings the
penalties or remedies sought or available include forfeiture of any portion of
the property of Borrower.

11.17 [RESERVED]

11.18 Tax Liens. The filing of a Lien for any unpaid taxes filed by any
Governmental Authority against Borrower or any of its assets.

11.19 Challenge to Validity of Loan Documents. Borrower attempts to terminate,
or challenges the validity of, or its liability under, this Agreement or any
other Loan Document, or any proceeding shall be brought to challenge the
validity, binding effect of Loan Document, or any Loan Document ceases to be a
valid, binding and enforceable obligation of the Borrower).

 

11.20  

 

 

 

 

(a)

                                            
                                         
                                         
                                                                       :

(b)

                                            
                                         
                                         
                                                                       ;

(c)

                                            
                                         
                                         
                                                                       ;

(d)

                                            
                                         
                                         
                                                                  ; or

(e)

                                            
                                         
                                         
                                                                       .

SECTION 12. REMEDIES.

12.1 Acceleration; Other Remedies. Upon the occurrence and during the
continuation of an Event of Default:

(a) Lender shall have all rights and remedies provided in this Agreement, any of
the other Loan Documents, the UCC, the PPSA, or other applicable law, all of
which rights and remedies may be exercised without notice to Borrower, all such
notices being hereby waived, except such notice as is expressly provided for
hereunder or is not waivable under applicable law. All rights

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

and remedies of Lender are cumulative and not exclusive and are enforceable, in
Lender’s discretion, alternatively, successively, or concurrently on any one or
more occasions and in any order Lender may determine. Without limiting the
foregoing, Lender may (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender, (ii) with or without judicial process or
the aid or assistance of others, enter upon any premises on or in which any of
the Collateral may be located and take possession of the Collateral or complete
processing, manufacturing and repair of all or any portion of the Collateral,
(iii) require Borrower, at Borrower’s expense, to assemble and make available to
Lender any part or all of the Collateral at any place and time designated by
Lender, (iv) collect, foreclose, receive, appropriate, setoff and realize upon
any and all Collateral, (v) notify Account Debtors or other obligors to make
payment directly to Lender, or notify bailees as to the disposition of
Collateral, (vi) extend the time of payment of, compromise or settle for cash,
credit, return of merchandise, and upon any terms or conditions, any and all
Accounts or other Collateral which includes a monetary obligation and discharge
or release the Account Debtor or other obligor, without affecting any of the
Obligations, (vii) sell, lease, transfer, assign, deliver or otherwise dispose
of any and all Collateral (including, without limitation, entering into
contracts with respect thereto, by public or private sales at any exchange,
broker’s board, any office of Lender or elsewhere) at such prices or terms as
Lender may deem reasonable, for cash, upon credit or for future delivery, with
Lender having the right to purchase the whole or any part of the Collateral at
any such public sale, all of the foregoing being free from any right or equity
of redemption of Borrower, which right or equity of redemption is hereby
expressly waived and released by Borrower. If any of the Collateral or other
security for the Obligations is sold or leased by Lender upon credit terms or
for future delivery, the Obligations shall not be reduced as a result thereof
until payment therefor is finally collected by Lender. If notice of disposition
of Collateral is required by law, ten (10) days prior notice by Lender to
Borrower designating the time and place of any public sale or the time after
which any private sale or other intended disposition of Collateral is to be
made, shall be deemed to be reasonable notice thereof and Borrower waives any
other notice. In the event Lender institutes an action to recover any Collateral
or seeks recovery of any Collateral by way of prejudgment remedy, Borrower
waives the posting of any bond which might otherwise be required.

(b) Lender may apply the proceeds of Collateral actually received by Lender from
any sale, lease, foreclosure or other disposition of the Collateral to payment
of any of the Obligations, in whole or in part (including attorneys’ fees and
legal expenses incurred by Lender with respect thereto or otherwise chargeable
to Borrower) and in such order as Lender may elect, whether or not then due.
Borrower shall remain liable to Lender for the payment on demand of any
deficiency together with interest at the Default Rate and all costs and expenses
of collection or enforcement, including reasonable attorneys’ fees and legal
expenses.

(c) Lender may, at its option, cure any default by Borrower under any agreement
with a third party or pay or bond on appeal any judgment entered against
Borrower, discharge taxes, Liens at any time levied on or existing with respect
to the Collateral and pay any amount, incur any expense or perform any act
which, in Lender’s sole judgment, is necessary or appropriate to preserve,
protect, insure, maintain, or realize upon the Collateral. Such amounts paid by
Lender shall be repayable by Borrower on demand and added to the Obligations,
with interest payable thereon at the Default Rate. Lender shall be under no
obligation to effect such cure, payment, bonding or discharge, and shall not, by
doing so, be deemed to have assumed any obligation or liability of Borrower.

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

(d) Lender and Lender’s agents shall have the right to utilize any of Borrower’s
customer lists, registered names, trade names, trademarks or other Intellectual
Property to publicly advertise the sale, lease, transfer, assignment, delivery
or other disposition of any and all Collateral and Borrower will be deemed to
have waived and voided any confidentiality agreements by and between Borrower
and Lender.

12.2 Set-off. Lender shall have the right, immediately and without notice of
other action, to set-off against any of Borrower’s liabilities to Lender any
money or other liability owed by Lender or any Affiliate of Lender (and such
Affiliate of Lender is hereby authorized to effect such set-off) in any capacity
to Borrower, whether or not due, and Lender or such Affiliate shall be deemed to
have exercised such right of set-off and to have made a charge against any such
money or other liability immediately upon the occurrence of such Event of
Default even though the actual book entries may be made at a time subsequent
thereto. The right of set-off granted hereunder shall be effective irrespective
of whether Lender shall have made demand under or in connection with the Loan.
None of the rights of Lender described in this Section 12.2 are intended to
diminish or limit in any way Lender’s or Affiliates of Lender’s common-law
set-off rights.

12.3 Costs and Expenses. Borrower shall be liable for all costs, charges and
expenses, including attorney’s fees and disbursements, incurred by Lender by
reason of the occurrence of any Event of Default or the exercise of Lender’s
remedies with respect thereto, each of which shall be repayable by Borrower on
demand with interest at the Default Rate, and added to the Obligations.

12.4 No Marshalling. Lender shall be under no obligation whatsoever to proceed
first against any of the Collateral or other property which is security for the
Obligations before proceeding against any other of the Collateral. It is
expressly understood and agreed that all of the Collateral or other property
which is security for the Obligations stands as equal security for all
Obligations, and that Lender shall have the right to proceed against any or all
of the Collateral or other property which is security for the Obligations in any
order, or simultaneously, as in its sole and absolute discretion it shall
determine. It is further understood and agreed that Lender shall have the right,
subject to the notice provisions in Section 12.1 of this Agreement, as it in its
sole and absolute discretion shall determine, to sell any or all of the
Collateral or other property which is security for the Obligations in any order
or simultaneously, as Lender shall determine in its sole and absolute
discretion.

12.5 No Implied Waivers; Rights Cumulative. No delay on the part of Lender in
exercising any right, remedy, power or privilege hereunder or under any other
Loan Document or provided by statute or at law or in equity or otherwise shall
impair, prejudice or constitute a waiver of any such right, remedy, power or
privilege or be construed as a waiver of any Event of Default or as an
acquiescence therein. No right, remedy, power or privilege conferred on or
reserved to Lender hereunder or under any other Loan Document or otherwise is
intended to be exclusive of any other right, remedy, power or privilege. Each
and every right, remedy, power or privilege conferred on or reserved to Lender
under this Agreement or under any of the other Loan Documents or otherwise shall
be cumulative and in addition to each and every other right, remedy, power or
privilege so conferred on or reserved to Lender and may be exercised by Lender
at such time or times and in such order and manner as Lender shall (in its sole
and complete discretion) deem expedient.

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

SECTION 13. OTHER RIGHTS OF LENDER.

13.1 Collections. Borrower is authorized to collect the Accounts and any other
monetary obligations included in, or proceeds of, the Collateral on behalf of
and in trust for Lender, at Borrower’s expense, but such authority shall, at
Lender’s option, automatically terminate upon the occurrence of an Event of
Default. Lender may modify or terminate such authority at any time whether or
not an Event of Default has occurred and directly collect the Accounts and other
monetary obligations included in the Collateral. Borrower shall, at Borrower’s
expense and in the manner requested by Lender from time to time, direct that
remittances and all other proceeds of accounts and other Collateral up to the
amount of the then-current Obligations shall be (a) remitted in kind to Lender,
(b) sent to a post office box designated by and/or in the name of Lender, or in
the name of Borrower, but as to which access is limited to Lender and/or
(c) deposited into a bank account maintained in the name of Lender and/or a
blocked bank account under arrangements with the depository bank under which all
funds deposited to such blocked bank account are required to be transferred
solely to Lender. In connection therewith, Borrower shall execute such post
office box and/or blocked bank account agreements as Lender shall specify.

13.2 Repayment of Obligations. All Obligations shall be payable at Lender’s
office set forth below or at a bank or such other place as Lender may expressly
designate from time to time for purposes of this Section. Lender shall apply all
proceeds of Accounts or other Collateral received by Lender and all other
payments in respect of the Obligations to the Loans whether or not then due or
to any other Obligations then due, in whatever order or manner Lender shall
determine.

13.3 Lender Appointed Attorney-in-Fact.

(a) Borrower hereby irrevocably constitutes and appoints Lender, with full power
of substitution, as its true and lawful attorney-in-fact, with full irrevocable
power and authority in its place and stead and in its name or otherwise, from
time to time in Lender’s discretion, at Borrower’s sole cost and expense, to
take any and all appropriate action and to execute and deliver any and all
documents and instruments which Lender may deem reasonably necessary or
advisable to accomplish the purposes of this Agreement, including, without
limiting the generality of the foregoing, (i) at any time any of the Obligations
are outstanding, (A) to transmit to Account Debtors, other obligors or any
bailees notice of the interest of Lender in the Collateral or request from
Account Debtors or such other obligors or bailees at any time, in the name of
Borrower or Lender or any designee of Lender, information concerning the
Collateral and any amounts owing with respect thereto; (B) to execute in the
name of Borrower and file against Borrower in favor of Lender Financing
Statements or amendments with respect to the Collateral, or record a copy or an
excerpt hereof in the United States Copyright Office or the United States Patent
and Trademark Office or CIPO and to take all other steps as are necessary in the
reasonable opinion of Lender under applicable law to perfect the security
interests granted herein; and (C) to pay or discharge taxes, Liens, security
interests or other encumbrances levied or placed on or threatened against the
Collateral; (ii) after and during the continuation of an Event of Default,
(A) to receive, take, endorse, assign, deliver, accept and deposit, in the name
of Lender or Borrower, any and all cash, checks, commercial paper, drafts,
remittances and other instruments and documents relating to the Collateral or
the proceeds thereof, (B) to notify Account Debtors or other obligors to make
payment directly to Lender, or notify bailees as to the disposition of
Collateral, (C) to change the address for delivery of

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

mail to Borrower and to receive and open mail addressed to Borrower, (D) take or
bring, in the name of Lender or Borrower, all steps, actions, suits or
proceedings deemed by Lender necessary or desirable to effect collection of or
other realization upon the Collateral; (E) to obtain and adjust insurance
required pursuant to this Agreement and to pay all or any part of the premiums
therefor and the costs thereof, and (F) to extend the time of payment of,
compromise or settle for cash, credit, return of merchandise, and upon any terms
or conditions, any and all accounts or other Collateral which includes a
monetary obligation and discharge or release the account debtor or other
obligor, without affecting any of the Obligations.

(b) Borrower hereby ratifies, to the extent permitted by law, all that Lender
shall lawfully and in good faith do or cause to be done by virtue of and in
compliance with this Agreement. The powers of attorney granted pursuant to this
Agreement are each a power coupled with an interest and shall be irrevocable
until the Obligations are paid indefeasibly in full.

13.4 Release of Lender. Borrower hereby releases and exculpates Lender, its
officers, partners, members, directors, employees, agents, representatives and
designees, from any liability arising from any acts under this Agreement or in
furtherance thereof, whether as attorney-in-fact or otherwise, whether of
omission or commission, and whether based upon any error of judgment or mistake
of law or fact, except for gross negligence or willful misconduct as determined
by a final and non-appealable order from a court of competent jurisdiction. In
no event will Lender have any liability to Borrower for lost profits or other
special or consequential damages.

13.5 Uniform Commercial Code and PPSA. At all times prior and subsequent to an
Event of Default hereinafter, Lender shall be entitled to all the rights and
remedies of a secured party under the UCC and the PPSA with respect to all
Collateral.

13.6 Preservation of Collateral. At all times prior and subsequent to an Event
of Default hereinafter, Lender may (but without any obligation to do so) take
any and all action which in its sole and absolute discretion is necessary and
proper to preserve its interest in the Collateral consisting of Accounts ,
including without limitation the payment of debts of Borrower which might, in
Lender’s sole and absolute discretion, impair the Collateral or Lender’s
security interest therein, and the sums so expended by Lender shall be secured
by the Collateral, shall be added to the amount of the Obligations due Lender
and shall be payable on demand with interest at the Interest Rate from the date
expended by Lender until repaid by Borrower. After written notice by Lender to
Borrower and automatically, without notice, after an Event of Default, Borrower
shall not, without the prior written consent of Lender in each instance,
(a) grant any extension of time of payment of any Accounts, (b) compromise or
settle any Accounts for less than the full amount thereof, (c) release in whole
or in part any account debtor or other person liable for the payment of any of
the Accounts or any such other Collateral, or (d) grant any credits, discounts,
allowances, deductions, return authorizations or the like with respect to any of
the Accounts.

13.7 Lender’s Right to Cure. In the event Borrower shall fail to perform any of
its Obligations hereunder or any of the other Loan Documents, then Lender, in
addition to all of its rights and remedies hereunder, may perform the same, but
shall not be obligated to do so, at the cost and expense of Borrower. Such costs
and expenses shall be added to the amount of the Obligations due Lender, and
Borrower shall promptly reimburse Lender for such amounts together with interest
at the Default Rate from the date such sums are expended until repaid by
Borrower.

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

13.8 Inspection of Collateral. From time to time as requested by Lender, at the
sole expense of Borrower, Lender or its designee shall have access, (a) prior to
an Event of Default during reasonable business hours to all of Borrower’s books
and records, and Borrower shall permit Lender or Lender’s designees to make
copies of such books and records or extracts therefrom as Lender may request,
and (b) on or after an Event of Default that remains uncured, at any time, to
all of the premises where Collateral is located for the purposes of inspecting,
disposing and realizing upon the Collateral, and all Borrower’s books and
records, and Borrower shall permit Lender or its designee to make such copies of
such books and records or extracts therefrom as Lender may request. Without
expense to Lender, Lender may use such of Borrower’s personnel, equipment,
including computer equipment, programs, printed output and computer readable
media, supplies and premises for the collection of Accounts and realization on
other Collateral as Lender, in its sole discretion, deems appropriate. Borrower
hereby irrevocably authorizes all accountants and third parties to disclose and
deliver to Lender at Borrower’s expense all financial information, books and
records, work papers, management reports and other information in their
possession regarding Borrower.

SECTION 14. PROVISIONS OF GENERAL APPLICATION.

14.1 Waivers. Borrower waives demand, presentment, notice of dishonor protest
and notice of protest of any instrument either of Borrower or others which may
be included in the Collateral.

14.2 Survival. All covenants, agreements, representations and warranties made by
Borrower herein or in any of the Loan Documents or in any certificate, report or
instrument contemplated hereby shall survive any independent investigation made
by Lender and the execution and delivery of this Agreement, and such
certificates, reports or instruments and shall continue so long as any
Obligations are outstanding and unsatisfied, applicable statutes of limitations
to the contrary notwithstanding.

14.3 Notices. All notices, requests and demands to or upon the respective
parties hereto shall be given in writing and shall be deemed to have been duly
given or made upon receipt by the receiving party. All notices, requests and
demands are to be given or made to the respective parties at the following
addresses (or to such other addresses as either party may designate by notice in
accordance with the provisions of this paragraph):

 

If to any Borrower:    Jagged Peak, Inc.    3000 Bayport Drive, 250    Tampa,
Florida 33607    Attention: Andrew J. Norstrud With a copy to:    Shumaker, Loop
& Kendrick, LLP    Bank of America Plaza    101 East Kennedy Boulevard    Suite
2800    Tampa, Florida 33602    Attention: Gregory C. Yadley

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

If to Lender:    Moriah Capital, L.P.    444 Madison Avenue, Suite 501,    New
York, New York 10022    Attention: Alexandre T. Speaker and Greg T. Zilberstein
With a copy to:    Cohen Tauber Spievack & Wagner P.C.    420 Lexington Avenue,
Suite 2400    New York, New York 10170    Attention: Adam Stein

Notwithstanding the foregoing, that parties expressly acknowledge and agree that
foregoing provisions of notice by Lender to Borrower’s counsel is an
accommodation only, and that Lender shall have fulfilled its notice obligation
hereunder if notice shall have been received by Borrower at its address set
forth above, irrespective of whether such notice is received by Borrower’s
counsel.

14.4 Amendments; Waiver of Defaults. The terms of this Agreement shall not be
amended, waived, altered, modified, supplemented or terminated in any manner
whatsoever except by a written instrument signed by Lender and Borrower. Any
default or Event of Default by Borrower may only be waived by a written
instrument specifically describing such default or Event of Default and signed
by Lender.

14.5 Binding on Successors.

(a) This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns, provided, however, that,
Borrower may not assign any of its rights or obligations under this Agreement or
the other Loan Documents to any Person without the prior written consent of
Lender.

(b) Lender may assign any or all of the Obligations together with any or all of
the security therefor to any Person and any such assignee shall succeed to all
of Lender’s rights with respect thereto. Lender shall notify Borrower of any
such assignment. Upon such assignment, Lender shall have no further obligations
under the Loan Documents. Lender may from time to time sell or otherwise grant
participations in any of the Obligations and the holder of any such
participation shall, subject to the terms of any agreement between Lender and
such holder, be entitled to the same benefits as Lender with respect to any
security for the Obligations in which such holder is a participant.

14.6 Invalidity. Any provision of this Agreement which may be determined by
competent authority to be prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.

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

14.7 Publicity. Borrower hereby authorizes Lender to make appropriate
announcements of the financial arrangement entered into by and between Borrower
and Lender, including, without limitation, announcements which are commonly
known as tombstones, in such publications and to such selected parties as Lender
shall deem appropriate, with the consent of Borrower, which consent shall not
unreasonably be withheld or delayed, or as required by applicable law. Except to
the extent required by law, Borrower shall not make any public announcement or
issue any release with respect to the financial arrangement between Borrower and
Lender without the prior written consent of Lender as to the form, substance and
timing of any such announcement or release.

14.8 [RESERVED].

14.9 Section or Paragraph Headings. Section and paragraph headings are for
convenience only and shall not be construed as part of this Agreement.

14.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE LAWS OF
WHICH THE BORROWER HEREBY EXPRESSLY ELECTS TO APPLY TO THIS AGREEMENT, WITHOUT
GIVING EFFECT TO PROVISIONS FOR CHOICE OF LAW THEREUNDER. THE BORROWER AGREES
THAT ANY ACTION OR PROCEEDING BROUGHT TO ENFORCE OR ARISING OUT OF THIS
AGREEMENT SHALL BE COMMENCED IN ACCORDANCE WITH THE PROVISIONS OF THIS
AGREEMENT.

14.11 WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED UNDER APPLICABLE LAW,
BORROWER HEREBY WAIVES ANY AND ALL RIGHTS THAT IT MAY NOW OR HEREAFTER HAVE
UNDER THE LAWS OF THE UNITED STATES OF AMERICA OR ANY STATE TO A TRIAL BY JURY
OF ANY AND ALL ISSUES ARISING EITHER DIRECTLY OR INDIRECTLY IN ANY ACTION OR
PROCEEDING BETWEEN BORROWER AND LENDER OR THEIR SUCCESSORS AND ASSIGNS, OUT OF
OR IN ANY WAY CONNECTED WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS AND/OR THE COLLATERAL. IT IS INTENDED THAT SAID WAIVER SHALL APPLY
TO ANY AND ALL DEFENSES, RIGHTS, AND/OR COUNTERCLAIMS IN ANY ACTION OR
PROCEEDINGS BETWEEN BORROWER AND LENDER. BORROWER WAIVES ALL RIGHTS TO INTERPOSE
ANY CLAIMS, DEDUCTIONS, SETOFFS OR COUNTERCLAIMS OF ANY KIND, NATURE OR
DESCRIPTION IN ANY ACTION OR PROCEEDING INSTITUTED BY LENDER WITH RESPECT TO
THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE OBLIGATIONS, THE COLLATERAL OR ANY
MATTER ARISING THEREFROM OR RELATING THERETO, EXCEPT COMPULSORY COUNTERCLAIMS.

14.12 CONSENT TO JURISDICTION. EACH BORROWER HEREBY (a) IRREVOCABLY SUBMITS AND
CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN THE STATE OF NEW YORK, NEW YORK COUNTY, WITH RESPECT TO ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, THE
OBLIGATIONS AND/OR THE COLLATERAL OR ANY MATTER ARISING THEREFROM OR

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

RELATING THERETO, AND (b) WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE BASED ON VENUE OR FORUM NON CONVENIENS WITH RESPECT THERETO. IN ANY SUCH
ACTION OR PROCEEDING, EACH BORROWER WAIVES PERSONAL SERVICE OF THE SUMMONS AND
COMPLAINT OR OTHER PROCESS AND PAPERS THEREIN AND AGREES THAT THE SERVICE
THEREOF MAY BE MADE BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
SUCH BORROWER AT ITS OFFICES SET FORTH HEREIN OR OTHER ADDRESS THEREOF OF WHICH
LENDER HAS RECEIVED NOTICE AS PROVIDED IN THIS AGREEMENT. NOTWITHSTANDING THE
FOREGOING, EACH BORROWER CONSENTS TO THE COMMENCEMENT BY LENDER OF ANY SUIT,
ACTION OR PROCEEDING IN ANY OTHER JURISDICTION TO ENFORCE ITS RIGHTS IN AND TO
THE COLLATERAL AND WAIVES ANY OBJECTIONS WHICH IT MAY NOW OR HEREAFTER HAVE
BASED ON VENUE AND/OR FORUM NON CONVENIENS OF ANY SUCH SUIT, ACTION OR
PROCEEDING.

14.13 Entire Agreement. This Agreement, the other Loan Documents, any
supplements or amendments hereto or thereto, and any instruments or documents
delivered or to be delivered in connection herewith or therewith represents the
entire agreement and understanding concerning the subject matter hereof and
thereof between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.

14.14 Counterparts. This Agreement may be executed in counterparts and by
facsimile or other electronic signatures, each of which when so executed, shall
be deemed an original, but all of which shall constitute but one and the same
instrument.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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

EXECUTION COPY

 

IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year
first above written.

 

BORROWERS: JAGGED PEAK, INC. By:  

 

Name:  

 

Title:  

 

JAGGED PEAK CANADA INC. By:  

 

Name:  

 

Title:  

 

LENDER: MORIAH CAPITAL L.P. By: Moriah Capital Management, L.P., General Partner
By: Moriah Capital Management, GP, LLC, General Partner By:  

 

Name:  

 

Title:  

 

[SIGNATURE PAGE OF LOAN AND SECURITY AGREEMENT]

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

EXECUTION COPY

 

Exhibit 1.28

Loan and Security Agreement

Equipment

[ATTACHED]

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

Exhibit 1.63

Loan and Security Agreement

Permitted Encumbrances

None.

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

Exhibit 2.1

Loan and Security Agreement

Form of Revolver Note

[ATTACHED]

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

Exhibit 5.2

Loan and Security Agreement

Form of Pledge Agreement

[ATTACHED]

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

Exhibit 6.8

Loan and Security Agreement

Form of Securities Issuance Agreement

[ATTACHED]

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

Exhibit 6.14

Loan and Security Agreement

Form of Patent and Trademark Security Agreement

[ATTACHED]