ex10_1.htm


    SALE OF ACCOUNTS AND
SECURITY AGREEMENT

     

    Date:
May, 2009

     

    Zagg
Incorporated, a Nevada corporation, with its principal offices at .3855 South
500 West, Suite J, Salt Lake City, UT 84115 ("Seller") and Faunus Group
International, Inc., a Delaware corporation ("FGI"), hereby agree,
intending to be legally bound, to the terms and conditions set forth in this
Sale of Accounts and Security Agreement ("Agreement").

     

    Section
1.1                      Definitions. For the
purposes of this Agreement and unless defined otherwise

    herein,
all terms used shall have the meanings assigned to them in this Section
1.1:

     

    "AccountCs)" has the
definition contained in the UCC and which shall include a right to payment of a
monetary obligation, whether or not earned by performance, (i) for property that
has been or is to be sold, leased, licensed, assigned, or otherwise disposed of
or (ii) for services rendered or to be rendered.

     

    "Account Debtor" has
the definition contained in the UCC and which includes any Person who is
obligated on an Account, Chattel Paper or General Intangible.

     

    "Advance" means
amounts advanced by FGI to the Seller under this Agreement.

     

    "Agreement" means this
Agreement, including the Exhibits and any Schedules hereto, and all amendments,
modifications and supplements hereto and thereto and restatements hereof and
thereof.

     

    "Application" means
each application made by Seller in connection with this Agreement.

     

    "Avoidance Claim"
means any claim that any payment received by FGl from or for the account of an
Account Debtor is avoidable under the Bankruptcy Code or any other debtor relief
statute.

     

    "Chattel Paper" has
the definition contained in the UCC and which includes a record or records that
evidence both a monetary obligation and a security interest in specific goods, a
security interest in specific goods and software used in the goods, a security
interest in specific goods and license of software used in the goods, a lease of
specific goods, or a lease of specific goods and license of software used in the
goods.

     

    "Collateral" means and
includes all of the Sellers' right, title and interest in and to each of the
following, wherever located and whether now or hereafter existing or now owned
or hereafter acquired or arising: (a) all Accounts, (b) Chattel Paper, (c)
Commercial Tort Claims, (d) Deposit Accounts, (e) Documents, (f) Equipment, (g)
General Intangibles, (h) Goods (including but not limited to all files,
correspondence, computer programs, tapes, disks and related data processing
software which contain information identifYing or pertaining to any of the
Collateral or any Account Debtor or showing the amounts thereof or payments
thereon or otherwise necessary or helpful in the realization thereon or the
collection thereof, (i) Inventory, G) Investments, (k) Investment Property, (I)
Letters of Credit and Letter of Credit rights, (m) all Supporting Obligations
and (n) all cash and non-cash proceeds of the foregoing, including insurance
proceeds.

     

    "Commercial Tort
Claim" has the definition contained in the UCC.

     

    "Credit ApprovalCs) and
Credit Approved" means, with regard to a Purchased Account, that FGI has
accepted the risk of nonpayment as specified under the terms and conditions of
this Agreement and with regard to the specific Purchased Accounts for which
written credit approval has been given. If an Account Debtor, after receiving
and accepting the delivery of Goods or services (subject to all warranties
herein) for which FGl has given written Credit Approval, fails to pay a
Purchased Account when due, and such nonpayment is due solely to financial
inability to pay, FGI shall bear any loss thereon, subject to the terms and
provisions stated herein. If nonpayment is due to any reason besides financial
inability to pay, however, FGI shall not be responsible. Specifically, FGl shall
not be responsible for any nonpayment of a Credit Approved Purchased Account:
(a) because of the assertion of any claim or dispute by an Account Debtor for
any reason whatsoever, including, without limitation, dispute as to price, terms
of sales, delivery,

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    quantity,
quality, or other, or the exercise of any counterclaim or offset (whether or not
such claim, counterclaim or offset relates to the specific Purchased Account);
(b) where nonpayment is a consequence of enemy attack, civil commotion, strikes,
lockouts, the act or restraint of public authorities, acts of God or force
majeure; or (c) if any representation or warranty made by Seller to FGl in
respect of such Purchased Account has been breached whether intentionally or
unintentionally. The assertion of a dispute by an Account Debtor shall have the
effect of negating any Credit Approval on the affected Purchased Account( s) and
such Purchased Account(s) shall be at Full Recourse until paid or otherwise
cleared from FGI's books.

     

    "Date of Collection"
means the date a check, draft or other item representing payment on an invoice
is received by FGI plus four (4) business days.

     

    "Deficiency
Assessment" means charges as set forth in Section .3 of this Agreement
applied to the difference between the minimum monthly net funds employed and the
actual average net funds employed for the month and shall be chargeable to
Reserve Account, or at FGI's option, payable by Seller on FGI's
demand.

     

    "Default" means any of
the events specified in Section 10 of this Agreement that, with the passage of
time or giving of notice or both, would constitute an Event of
Default.

     

    "Deposit Account" has
the definition contained in the UCC and which includes any demand, time,
savings, passbook or like account maintained with a bank, savings and loan
association, credit union or like organization, other than an account evidenced
by a certificate of deposit that is an instrument under the UCC.

     

    "Dispute or Disputed
Account" means any claim, whether or not provable, bona fide, or with or
without support, made by an Account Debtor as a basis for refusing to pay a
Purchased Account, either in whole or in part, including, but not limited to,
any contract dispute, charge back, credit, right to return Goods, or other
matter which diminishes or may diminish the dollar amount or timely collection
of such Account.

     

    "Documents" means a
document oftitle or a receipt ofthe type described in UCC 7-201(2).

     

    "Equipment" has the
definition contained in the UCC.

     

    "Event of Default"
means any of the events specified in Section 10 of this Agreement.

     

    "Facility Amount"
means $4,000,000; provided FOI may from time to time and at any time increase or
decrease such amount in its sole and absolute discretion.

     

    "Financial Inability to
Pay" means an Account Debtor's insolvency such that the value of its
assets is exceeded by its fixed, liquidated and non-contingent
liabilities.

     

    "Financing Statement"
means each Uniform Commercial Code financing statement naming FGI as
purchaser/secured party and the Seller as Seller/debtor, in connection with this
Agreement.

     

    "Full Recourse" means
those Purchased Accounts for which FGl has not given Credit Approval, for which
Credit Approval has been withdrawn or revoked or with respect to which FGI is
not responsible under Section 2.

     

    "GAAP" means generally
accepted accounting principles consistently applied and maintained throughout
the period indicated and consistent with the prior financial practice of the
Person referred to.

     

    "General Intangible"
has the definition contained in the UCC.

     

    "Goods" has the
definition contained in the UCc.

     

    "Instrument" has the
definition contained in the UCC and which includes a negotiable instrument
or

     

    
      
        
        

      

      
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    any other
writing that evidences a right to the payment of a monetary obligation, is not
itself a security agreement or lease, and is of a type that in ordinary course
of business is transferred by delivery with any necessary endorsement or
assignment.

     

    "Inventory" has the
definition contained in the UCc.

     

    "Investment Property"
has the definition contained in the UCC.

     

    "Letter of Credit
Right" has the definition contained in the UCc.

     

    "Lien" means, as
applied to the property of any Person, the filing of, or any agreement to give,
any financing statement under the UCC or its equivalent in any
jurisdiction.

     

    "Misdirected Payment
Fee" means 15% of the amount of any payment on account of a Purchased
Account which has been received by Seller and not delivered in kind to FGI
within two business days following the date of receipt by SelleL

     

    "Net Invoice Amount"
means the invoice amount of the Purchased Account, less returns (whenever made),
all selling discounts (at FGI's sole option, calculated on shortest terms), and
credit or deductions of any kind allowed or granted to or taken by the Account
Debtor at any time.

     

    "Obligations" means
all present and future obligations owing by Seller to FGI whether or not for the
payment of money, whether or not evidenced by any note or other instrument,
whether direct or indirect, absolute or contingent, due or to become due, joint
or several, primary or secondary, liquidated or unliquidated, secured or
unsecured, original or renewed or extended, whether arising before, during or
after the commencement of any Bankruptcy Case in which Seller is a debtor
(specifically including interest accruing after the commencement of any
bankruptcy, insolvency or similar proceeding with respect to Seller, whether or
not a claim for such post-commencement interest is allowed), including but not
limited to any obligations arising pursuant to letters of credit or acceptance
transactions or any other financial accommodations.

     

    "Original Term" means
the term of this Agreement as reflected in Section 13 and "Term" means the
Original Tenn and any extensions thereof.

     

    "person" means an
individual, corporation, partnership, limited liability company, association,
trust or unincorporated organization or a government or any agency or political
subdivision thereof.

     

    "Purchase Price" means
the price that FGI pays Seller for each Purchased Account which price shall
equal the Net Invoice Amount less FGI's fees.

     

    "Purchased Account(s)"
means an Account which is deemed acceptable for purchase as determined by FGI in
the exercise of its reasonable sole credit or business judgment and for which
FGI has made payment of the sum specified in Section 2 constituting FGI's
acceptance of an Account.

     

    "Reserve Account"
means (a) a bookkeeping account on the books ofFGI and/or (b) an account of FGI
in which FGI deposits the Required Reserve Amount from time to time, in either
case representing an unpaid portion of the Purchase Price, maintained by FGI to
ensure Seller's performance with the provisions hereof.

     

    "Reserve Percentage"
means 20% of the face amount of the Purchased Accounts and as such percent may
change in accordance herewith.

     

    "Reserve Shortfall"
means the amount by which the Reserve Account is less than the Required Reserve
Amount.

     

    "Required Reserve
Amount" means the Reserve Percentage multiplied by the unpaid balance
of

     

    
      
        
        

      

      
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    all
Purchased Accounts and as such amount may change in accordance
herewith.

     

    "Schedule of Accounts" means a
schedule of Accounts in a form supplied by FGI from time to time wherein Seller
lists all the existing Accounts of Seller, which Seller is required to offer for
sale to FGI under the terms of this Agreement.

     

    "Security Interest"
means the Liens ofFGI on and in the Collateral affected hereby or pursuant to
the terms hereof or thereof.

     

    "Supporting
Obligation" has the definition contained in the UCc.

     

    'Termination Fee"
means a fee payable to FGI in the event Seller terminates this Agreement prior
to maturity of the Original Term or Tern1 of this Agreement.

     

    "UCC" means the
Uniform Commercial Code as in effect from time to time in the State of New
York.

     

    Section
1.2  Other
Referential Provisions.

     

    (a) Except as
otherwise expressly provided herein, all accounting terms not specifically
defined or specified herein shall have the meanings generally attributed to such
terms under GAAP including, without limitation, applicable statements and
interpretations issued by the Financial Accounting Standards Board and
bulletins, opinions, interpretations and statements issued by the American
Institute of Certified Public Accountants or its committees.

     

    (b) All
personal pronouns used in this Agreement, whether used in the masculine,
feminine or

     

    
      
        
        

      

      
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    neuter
gender, shall include all other genders; the singular shall include the plural,
and the plural shall include the singular.

    


    (c) The words
"hereof', "herein" and "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provisions of this Agreement.

    


    (d) Titles of
Articles and Sections in this Agreement are for convenience only, do not
constitute part of this Agreement and neither limit nor amplify the provisions
of this Agreement, and all references in this Agreement to Articles, Sections,
Subsections, paragraphs, clauses, sub clauses, Schedules or Exhibits shall refer
to the corresponding Article, Section, Subsection, paragraph, clause or sub
clause of, or Schedule or Exhibit attached to, this Agreement, unless specific
reference is made to the articles, sections or other subdivisions or divisions
of, or to schedules or exhibits to, another document or instrument.

    


    (e) Each
definition of a document in this Agreement shall include such document as
amended,

    modified,
supplemented or restated from time to time in accordance with the tern1S of this
Agreement.

     

    Section
1.3                      Exhibits and
Schedules. All Exhibits and Schedules attached hereto are by reference
made a part hereof.

    


    Section
2. Purchase
& Sale of Accounts

    


    (a) Seller
hereby offers to sell, assign, transfer, convey and deliver to FGI, as absolute
owner, in accordance with the procedure detailed herein, all of Seller's right,
title and interest in and to Seller's Accounts; provided at no time shall the
maximum aggregate amount paid by FGI for Accounts purchased from Seller
outstanding on FGl's books exceed the Facility Amount.

    


    (b) Accounts
shall be submitted to FGI on a Schedule of Accounts listing each Account
separately. The Schedule of Accounts shall be in the form attached hereto as
Schedule 1 or in such other
form as required by FG I, and shall be signed by a person acting or purporting
to act on behalf of Seller. At the time the Schedule of Accounts is presented,
Seller shall also deliver to FGI one copy of a sales contract, purchase order,
and invoice for each Account together with evidence of shipment, furnishing
and/or delivery of the Goods or rendition of service(s).

     

    
      
        
        

      

      
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    (c) Any and
all Purchased Accounts shall be purchased on either a Credit Approved or with
Full
Recourse basis, as determined by FGI in its sole and absolute discretion. In the
absence of written Credit Approval, the Purchased Accounts shall be purchased at
Full Recourse. If Goods are shipped or services are provided based on a verbal
approval, it is Seller's responsibility to ensure that such approval is received
in writing in a timely manner. Credit Approval(s) may be withdrawn, either
orally or in writing, in FGI's sole and absolute discretion at any time if, in
FGI's opinion, an Account Debtor's credit standing or ability to perform with
respect to the applicable Account becomes impaired before actual delivery of
Goods or rendering of services. Credit Approval(s) shall be limited to the
specific terms and amounts indicated, and, notwithstanding any information
subsequently provided to Seller by FGI, such Credit Approval(s) are
automatically rescinded and withdrawn if the terms of sale vary from the terms
approved by FGI, or if the terms of sale are changed by Seller without FGI's
written Credit Approval on the new terms, or if the Purchased Account is not
assigned to FGI within ten (10) days from the date of the invoice, or if the
amount of outstanding Accounts of an Account Debtor exceed the maximum Credit
Approval amount for the Account Debtor as determined by FGI from time to time.
Seller further acknowledges that if Seller ships Goods or provides services to
an Account Debtor who has outstanding Accounts from Seller, and such Account
Debtor's credit line and/or outstanding Credit Approval(s) have been withdrawn
by FGI, and the Accounts created thereby, whether or not they are sold and
assigned to FGI, exceed 10% of the amount Accounts purchased from Seller
outstanding on FGI's books, that any Credit Approvals applying to those
Purchased Accounts outstanding on FGI's books are automatically deemed cancelled
and all outstanding Purchased Accounts from that Account Debtor are with Full
Recourse.

     

    (d) With
regard to sales without Credit Approval or deemed without Credit Approval,
Seller agrees that any payments or credits applying to any Account owing by such
Account Debtor will be applied: first, to any
Credit-Approved Purchased Accounts outstanding on FGI's books, if any; second, to any Full
Recourse Purchased Accounts outstanding on FGI's books; and, third, to any
Accounts outstanding on Seller's books. This order of payment applies regardless
of the respective dates the sales occurred and regardless of any notations on
payment items.

     

    (e) If FGI
fails to collect a Purchased Account within ninety (90) days of its maturity
for

     

    which
Credit Approval has been given, FGI shall pay to Seller the Net Invoice Amount
of such Purchased Account within a reasonable time period, subject to the terms
and provisions stated herein. At the sole discretion of FGI, Seller may have the
option to repurchase any such Purchased Account for which Credit Approval has
been granted. Any Purchased Account for progress payments, work-in-process,
freight, samples or miscellaneous sales (including, without limitation, the sale
of Goods and/or in quantities not regularly sold by Seller) is always assigned
to FGI at Full Recourse, notwithstanding any written Credit Approval from
FGI.

     

    (f) FGI shall
have no liability of any kind for declining or refusing to give, or
for

     

    withdrawing,
revoking, or modifying, any Credit Approval pursuant to the terms of this
Agreement, or for exercising or failing to exercise any rights or remedies FGI
may have under this Agreement or otherwise. In the event FGI declines to give
Credit Approval on any order received by Seller from an Account Debtor and in
advising Seller of such decline FGI furnishes Seller with information as to the
credit standing of the Account Debtor, such inforn1ation shall be deemed to have
been requested of FGI by Seller and FGI's advice containing such information is
recognized as a privileged communication. Seller agrees that such information
shall not be given to Seller's customers or to Seller's sales representative(s).
If necessary, Seller shall merely advise its customer(s) that credit has been
declined on the Account and that any questions should be directed to FGI. Each
Full Recourse Account(s) assigned to and purchased by FGI is with full recourse
to Seller and at Seller's sole credit risk. FGI shall have the right to charge
back to Seller's Reserve Account the amount of such Full Recourse Accounts at
any time and from time to time either before or after their maturity. Seller
agrees to pay FGI upon demand the full amount thereof, together with all
expenses incurred by FGI up to the date of such payment, including reasonable
attorney's fees in attempting to collect or enforce such payment or payment of
such Account(s). FGI's Credit Approval shall only begin after the first 15% of
all Purchased Accounts relating to each Account Debtor. For purposes of
determining FGI's Credit Approval hereunder, the Purchased Account(s) balance
due FGI

     

    
      
        
        

      

      
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    from any
given Account Debtor shall be calculated as the aggregate amount owed by that
Account Debtor less any credits to which such Account Debtor may be entitled,
and is not to be construed to mean individual invoices owed by that Account
Debtor.

     

    Section
3. Purchase
Price and Fees.

    


    (a) The
purchase price that FGI shall pay to Seller for each Purchased Account shall
equal

    the Net
Invoice Amount thereof less FGI's fees, as specified below. No discount, credit,
allowance or deduction with respect to any Purchased Account, unless shown on
the face of an invoice, shall be granted or approved by Seller to any Account
Debtor without FGI's prior written consent.

    


    (b) The
purchase price (as computed above), less (i) any Required Reserve Amount or
credit

    balance
that FGI, in FGI's sole and absolute discretion, determines to hold, (ii) moneys
remitted, paid, or otherwise advanced by FGI to or on behalf of Seller
(including any amounts which FGI reasonably determines that Seller may be
obligated to pay in the future), and (iii) any other charges provided for by
this Agreement, shall be payable by FGI to Seller on the Date of
Collection.

    


    (c) FGI shall
be entitled, in its sole and absolute discretion, to withhold the Required
Reserve Amount, and may increase or decrease the Required Reserve Amount or
Reserve Percentage at any time and from time to time if FGI deems it necessary
to do so in order to protect FGI's interests. In no event shall Seller permit a
Reserve Shortfall to occur. FGI may charge against the Reserve Account any
amount for which Seller may be obligated to FGI at any time, whether under the
terms of this Agreement, or otherwise, including but not limited to the
repayment of any over advance, any damages suffered by FGI as a result of
Seller's breach of any provision of Section 4 hereof (whether intentional or
unintentional), any adjustments due and any attorneys' fees, costs and
disbursements due. Seller recognizes that the Reserve Account may, in FGI's sole
discretion, represent bookkeeping entries only and not cash funds. It is further
agreed that with respect to the balance in the Reserve Account, FGI is
authorized to withhold, without giving prior notice to Seller, such payments and
credits otherwise due to Seller under the terms of this Agreement for reasonably
anticipated claims or to adequately satisfy reasonably anticipated obligation(s)
Seller may owe FG!. Upon the occurrence of an Event of Default, or, in the event
Seller shall cease selling Accounts to FGI, FGI shall be under no obligation to
pay the amount maintained in the Reserve Account until all Accounts listed on
all Schedules of Accounts have been collected or FGI has determined, in its sole
and absolute discretion, that it will make no further efforts to collect any
Accounts and all sums due FGI hereunder have been paid.

    


    (d) In FGI's
sole and absolute discretion, in accordance with the terms of this Agreement,
FGI may from time to time advance to Seller against the purchase price of
Purchased Accounts purchased by FGI hereunder, sums up to 80% of the aggregate
purchase price of Purchased Accounts outstanding at the time any such advance is
made, less: (i) any such Purchased Accounts that are in dispute; (ii) any such
Purchased Accounts that are not credit approved; (iii); any such Purchased
Accounts aged nintey (90) days or more past invoice date; and (iv) any fees,
actual or estimated, that are chargeable to the Reserve Account. Any advance
shall be payable on demand and shall bear interest at the rate set forth in
subsection ( e) below from the date such advance is made until the date FGI
would otherwise be obligated hereunder to pay the purchase price of the
Purchased Account(s) against which such advance was made.

    


    (e) Interest
upon the daily total outstanding balance of any Purchased Account shall be
charged to Seller's Reserve Account at a rate greater of 7.00% per annum or
3.00% above the rate of interest designated by FGI as its selected "Prime Rate"
or "Base Rate', as the case may be (which as of the date hereof is based upon
the Wall Street Journal, Money Rates Section which is subject to change) on the
net daily balance of all outstanding Purchased Accounts. In the event that the
Wall Street Journal ceases to publish a Prime Rate, then the Prime Rate shall be
the average of the three largest U.S. money center commercial banks, as
determined by FG!. All such interest shall be computed for the actual number of
days elapsed on the basis of a year consisting of three hundred sixty (360)
days. Any adjustment in FGI's interest rate, whether downward or upward will
become effective on the day in which the prime rate of interest is decreased or
increased. If during any month, a net credit balance (i.e., the reserve or
credit balance exceeds outstanding Accounts), then Seller agrees to credit FGI's
reserve account as of the last day of each month with interest at a rate equal
to 3.00% above the Prime Rate,

    


    
      
        
        

      

      
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    (f) Seller
shall unconditionally pay and FGI shall be entitled to receive a one time
non-refundable facility fee in an amount equal $40,000 payable in immediately
available funds upon signing of the Agreement.

    


    (g) Seller
shall unconditionally pay and FGI shall be entitled to receive a non-refundable
monthly collateral management fee equal to 0.87% of the average monthly balance
of Purchased Accounts; with such fee charged monthly to Seller's Reserve Account
or if funds are not available therein, payable by Seller on demand.

    


    (h) The
minimum monthly net funds employed during each contract year hereof shall be
$1,500,00; any deficiency will be subject to a Deficiency
Assessment.

     

    (i) IT IS THE
INTENTION OF THE PARTIES HERETO THAT AS TO ALL PURCHASED ACCOUNTS, THE
TRANSACTIONS CONTEMPLATED HEREBY SHALL CONSTITUTE A TRUE PURCHASE AND SALE OF
ACCOUNT(S) UNDER § 9-318 OF THE UCC AND AS SUCH, THE SELLER SHALL HAVE NO LEGAL
OR EQUITABLE INTEREST IN THE ACCOUNTS SOLD. NEVERTHELESS, IN THE EVENT ALL OR
ANY PORTION OF THIS TRANSACTION IS CHARACTERIZED AS A LOAN, THE PARTIES HERETO
INTEND TO CONTRACT IN STRICT COMPLIANCE WITH APPLICABLE USURY LAW FROM TIME TO
TIME IN EFFECT. IN FURTHERANCE THEREOF SUCH PARTIES STIPULATE AND AGREE THAT
NONE OF THE TERMS AND PROVISIONS CONTAINED IN THIS AGREEMENT SHALL EVER BE
CONSTRUED TO CREATE A CONTRACT TO PAY, FOR THE USE, FORBEARANCE OR DETENTION OF
MONEY, INTEREST IN EXCESS OF THE MAXIMUM RATE (AS HEREINAFTER DEFINED) FROM TIME
TO TIME IN EFFECT. NEITHER SELLER, ANY PRESENT OR FUTURE GUARANTOR OR ANY OTHER
PERSON HEREAFTER BECOMING LIABLE FOR THE PAYMENT OF THE ADVANCES, SHALL EVER BE
LIABLE FOR ANY OBLIGATION THAT MAY BE CHARACTERIZED AS UNEARNED INTEREST HEREON
OR SHALL EVER BE REQUIRED TO PAY ANY OBLIGATION THAT MA Y BE CHARACTERIZED AS
INTEREST THEREON IN EXCESS OF THE MAXIMUM AMOUNT THAT MAY BE LAWFULLY CHARGED
UNDER APPLICABLE LAW FROM TIME TO TIME IN EFFECT, AND THE PROVISIONS OF THIS
SECTION SHALL CONTROL OVER ALL OTHER PROVISIONS OF THIS AGREEMENT WHICH MAY BE
IN CONFLICT THEREWITH. IF ANY INDEBTEDNESS OR OBLIGATION OWED BY SELLER
HEREUNDER IS DETERMINED TO BE IN EXCESS OF THE LEGAL MAXIMUM, OR FGI SHALL
OTHERWISE COLLECT MONEYS WHICH ARE DETERMINED TO CONSTITUTE INTEREST WHICH WOULD
OTHERWISE INCREASE THE INTEREST ON ALL OR ANY PART OF SUCH OBLIGATIONS TO AN
AMOUNT IN EXCESS OF THAT PERMITTED TO BE CHARGED BY APPLICABLE LAW THEN IN
EFFECT, THEN ALL SUCH SUMS DETERMINED TO CONSTITUTE INTEREST IN EXCESS OF SUCH
LEGAL LIMIT SHALL, WITHOUT PENALTY, BE PROMPTLY APPLIED TO REDUCE THE THEN
OUTSTANDING OBLIGATIONS OR, AT FGI'S OPTION, RETURNED TO SELLER OR THE OTHER
PAYOR THEREOF UPON SUCH DETERMINATION. IF AT ANY TIME THE RATE AT WHICH INTEREST
IS PAYABLE HEREUNDER EXCEEDS THE MAXIMUM RATE, THE AMOUNT OUTSTANDING HEREIJNDER
SHALL CEASE BEARING INTEREST UNTIL SUCH TIME AS THE TOTAL AMOUNT OF INTEREST
ACCRUED HEREUNDER EQUALS (BUT DOES NOT EXCEED) THE MAXIMUM RATE APPLICABLE
HERETO. AS USED IN THIS SECTION, THE TERM "APPLICABLE LAW" MEANS THE LAWS OF THE
STATE OF NEW YORK OR, IF DIFFERENT, THE LAWS OF THE STATE OR TERRITORY IN WHICH
THE SELLER RESIDES, WHICHEVER LAW ALLOWS THE GREATER RATE OF INTEREST, AS SUCH
LAWS NOW EXIST OR MAY BE CHANGED OR AMENDED OR COME INTO EFFECT IN THE FUTURE
AND THE TERM "MAXIMUM RATE" MEANS THE MAXIMUM NON USURIOUS RATE OF INTEREST THAT
FGI IS PERMITTED UNDER APPLICABLE LAW TO CONTRACT FOR, TAKE, CHARGE OR RECEIVE
WITH RESPECT TO THE ADVANCES.

    


    
      
        
        

      

      
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    (j) Upon
FGI's acceptance of each Purchased Account, FGI shall be the sole owner and
holder of such Purchased Account. Seller hereby sells, transfers, conveys and
assigns to FGI all of its right, title and interest in and to each Purchased
Account effective at the time of acceptance thereof by FGI. Seller agrees to
execute and deliver to each Account Debtor obligated under an Account and/or a
Purchased Account such written notice of sale of the Purchased Account as FGI
may request in the form attached hereto as Schedule 2 or in such
form as required by FGI.

     

    (k) FGI shall
provide Seller online access via a secured website to information on the
Purchased Accounts and a reconciliation of the relationship relating to billing,
collection and account maintenance such as aging, posting, error resolution and
mailing of statements in the ordinary course of FGI's business. All of the
foregoing shall be in a format and in such detail, as FGI, in its sole and
absolute discretion, deems appropriate. Furthermore, FGI's books and records
shall be admissible in evidence without objection as prima facie evidence of the
status of the Purchased and non-purchased Accounts and Reserve Account between
FGI and Seller. Each statement, report, or accounting rendered or issued by FGI
to Seller, if any, and all online information shall be deemed conclusively
accurate and binding on Seller unless within fifteen (15) days after the date of
issuance or posting Seller notifies FGI to the contrary by registered or
certified mail, setting forth with specificity the reasons why Seller believes
such statement, report, or accounting is inaccurate, as well as what Seller
believes to be correct amount(s) therefore. FGI's failure to provide or Seller's
failure to receive such online access shall not relieve Seller of Seller's
obligations under this Agreement or the responsibility of Seller to request such
statement and Seller's failure to do so shall nonetheless bind Seller to
whatever FGl's records would have reported.

     

    Section
4. Seller's Representations and
Covenants. Seller, as well as each of Seller's principals, represent,
warrant and covenant, jointly and severally, to FGI that:

     

    (a) Seller is
either a corporation, limited liability company, limited partnership or other
form of registered Person, is duly organized, validly existing and in good
standing under the laws of the State of Nevada and is qualified and authorized
to do business and is in good standing in all states in which such qualification
and good standing are necessary or desirable.

     

    (b) The
execution, delivery and performance by Seller of this Agreement does not and
will not constitute a violation of any applicable law, violation of Seller's
articles of incorporation, articles of organization, bylaws, operating
agreement, partnership agreement or other organizational documents and does not
and will not constitute any material breach of any other document, agreement or
instrument to which Seller is a party or by which Seller is bound.

     

    (c) Seller
has all requisite power and authority to enter into and perform this Agreement,
and has taken all proper and necessary action to authorize the execution,
delivery and performance of this Agreement and other documents, instruments and
agreements executed in connection herewith. This Agreement is a legal, valid and
binding obligation of Seller enforceable against it in accordance with its
terms.

     

    (d) Immediately
prior to the execution and at the time of delivery of each Schedule of Account,
Seller is the sole owner and holder of each of the Account described thereon and
that upon FGI's acceptance of each Purchased Account; FGI shall become the sole
owner and holder of such Purchased Account(s).

     

    (e) No
Purchased Account shall have been previously sold or transferred or be subject
to any lien, encumbrance, security interest or other claim of any kind of
nature. Seller will not factor, sell, transfer, pledge or give a security
interest in any of its Accounts to anyone other than FGI. There are no financing
statements now on file in any public office covering any Collateral of Seller of
any kind, real or personal, in which Seller is named in or has signed as the
debtor, except the financing statement or statements filed or to be filed in
respect of this Agreement or those statements now on file specifically listed on
Schedule 4(e)
attached hereto. Seller will not execute any security agreement or authorize the
filing of any financing statement in favor of any other Person, except FGI,
during the Term of this Agreement.

    


    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    (f) The
amount of each Purchased Account is due and owing to Seller and represents an
accurate statement of a bona fide sale, delivery and acceptance of Goods or
performance of service by Seller to or for an Account Debtor. The terms for
payment of Purchased Accounts are no greater than sixty (60) days from date of
invoice and the payment of such Purchased Accounts is not contingent upon the
fulfillment by Seller of any further performance of any nature whatsoever. Each
Account Debtor's business is solvent to the best of Seller's
knowledge.

     

    (g) There are
and shall be no set-offs, allowances, discounts, deductions, counterclaims, or
disputes with respect to any Purchased Account, either at the time it is
accepted by FGI for FGI or prior to the date it is to be paid. Seller shall
inform FGI, in writing, immediately upon learning that there exists any Account,
which is subject to a Dispute. Seller shall accept no returns and shall grant no
allowance or credit to any Account Debtor without the prior written consent of
FG!. On the first business day of each calendar week, Seller shall provide to
FGI for each Account Debtor who is indebted on a Purchased Account that has been
purchased, a weekly report in a form and substance satisfactory to FGT itemizing
all such returns and allowances made during the previous week with respect such
Purchased Accounts and at FGT's option a check (or wire transfer) payable to FGI
for the amount thereof or in FGT's sole and exclusive discretion, FGT may accept
the issuance of a Credit Memo and apply same to the Reserve
Account.

     

    (h) Seller's
address, as set forth in any Application submitted to FGI, is Seller's mailing
address, its chief executive office, principal place of business and the office
where all of the books and records concerning the Purchased Accounts are
maintained which shall not be changed without giving thirty (30) days prior
written notice to FG!.

     

    (i) Seller
shall maintain its books and records in accordance with GAAP and shall reflect
on its books the absolute sale of the Purchased Accounts to FG r. Seller shall
furnish FGI, upon request, such information and statements, as FGT shall request
from time to time and at any time regarding Seller's business affairs, financial
condition and results of its operations. Without limiting the generality of the
foregoing, Seller shall provide FGT, on or prior to the thirtieth (30th) day of
each month, unaudited financial statements with respect to the prior month and,
within ninety (90) days after the end of each of Seller's fiscal years, annual
financial statements and such certificates relating to the foregoing as FGI may
request including, without limitation, a monthly certificate from the president
and chief financial officer of Seller stating that no Event of Default exists or
if an Event of Default has occurred stating in detail the nature of the Event(s)
of Default. Seller will furnish to FGI upon request a current listing of all
open and unpaid accounts payable and Accounts, and such other items of
information that FGT may deem necessary or appropriate from time to time. Unless
otherwise expressly provided herein or unless FGT otherwise consents, all
financial statements and reports furnished to FGT hereunder shall be prepared
and all financial computations and detern1inations pursuant hereto shall be made
in accordance with GAAP, consistently applied.

     

    (j) Seller
has and will file all tax returns required to be filed in any jurisdiction where
Seller conducts business and Seller has paid and will pay all taxes and
governmental charges (including taxes and charges imposed with respect to sale
of Goods or provision of services) and furnish to FGT upon request satisfactory
proof of payment and compliance with all federal, state and local tax
requirements.

     

    (k) The are
no existing lawsuits against Seller involving amounts greater than $10,000 and
Seller will promptly notify FGI of (i) the filing of any lawsuit against Seller
involving amounts greater than $10,000, and (ii) any attachment or any other
legal process levied against Seller.

     

    (l) The
Application made or delivered by or on behalf of Seller in connection with this
Agreement, and the statements made therein are true and correct at the time that
this Agreement is executed. There is no fact which Seller has not disclosed to
FGT in writing which could materially adversely affect the properties, business,
financial condition or prospects of Seller, or any of the Purchased Accounts or
Collateral, or which is necessary to disclose in order to keep the foregoing
representations and warranties from being misleading.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (m) In no
event shall the funds paid to Seller hereunder be used directly or indirectly
for personal, family, household or agricultural purposes.

     

    (n) Seller
does business under no trade or assumed names other than specifically listed on
Schedule 4(n) attached hereto.

     

    (o) Any
invoice or written communication that IS issued by Seller to FGI by facsimile
transmission is a duplicate of the original.

     

    (p) Any
electronic communication of data, whether bye-mail, tape, disk, or otherwise,
Seller remits or causes to be remitted to FGI shall be authentic and
genuine.

     

    (q) Seller
has obtained all licenses, permits, franchises or other governmental
authorizations necessary for the ownership of its Property and for the conduct
of its business.

     

    (r) After
giving effect to the transactions contemplated under this Agreement, Seller is
solvent, is able to pay its debts as they become due, and has capital sufficient
to carryon its business and all businesses in which it is about to engage, and
now owns property having a value both at fair valuation and at present fair
salable value greater than the amount required to pay Seller's debts. Seller
will not be rendered insolvent by the execution and delivery of this Agreement
or by the transactions contemplated hereunder or thereunder.

     

    (s) Seller
shall continue 111 the business presently operated by it using its best efforts
to maintain its customers and goodwill.

     

    (t) shall
deliver written notice to FGI promptly upon becoming aware of the existence of
(i) any condition or event which constitutes an Event of Default under this
Agreement, specifying the nature and period of existence thereof and what action
Seller is taking (and proposes to take) with respect thereto or (ii) notice of
default, oral or written, given to Seller by any creditor for indebtedness for
borrowed money in excess of$10,000.

     

    (u) Seller
shall permit any of FGl's officers or other representatives to visit and inspect
upon reasonable notice during business hours any of the locations of Seller, to
examine and audit all of Seller's books of account, records, reports and other
papers, to make copies and extracts therefrom and to discuss its affairs,
finances and accounts with its officers, employees and independent certified
public accountants all at Seller's expense at the standard rates charged by FGI
for such activities, plus FGl's reasonable out-of­pocket
expenses.

     

    (v) Seller
agrees that immediately upon becoming aware of any development or other
information outside the ordinary course of business and excluding matters of a
general economic, financial or political nature which would reasonably be
expected to have a material adverse effect the properties, business, financial
condition or prospects of Seller it shall give to FGI telephonic notice
specifying the nature of such development or information and such anticipated
effect. In addition, such verbal communication shall be confirmed by written
notice thereof to FGI on the same day such verbal communication is made or the
next business day thereafter.

     

    (w) Seller
will immediately notify FGI in writing in the event that Seller becomes a party
to or obtains any rights with respect to any Commercial Tort Claim. Such
notification shall include information sufficient to describe such Commercial
Tort Claim, including, but not limited to, the parties to the claim, the court
in which the claim was commenced, the docket number assigned to such claim, if
any, and a detailed explanation of the events that gave rise to the claim.
Seller shall execute and deliver to FGI all documents and/or agreements
necessary to grant FGI a security interest in such Commercial Tort Claim to
secure the Obligations. Seller authorizes FGI to file (without Seller's
signature) initial financing statements or amendments, as FGI deems necessary to
perfect its security interest in the Commercial Tort Claim.

    


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (x) Seller
shall provide FGI with written notice of any letters of credit for which Seller
is the beneficiary. Seller shall execute and deliver (or cause to be executed or
delivered) to FGI, all documents and agreements as FGI may require in order to
obtain and perfect its security interest in such Letter of Credit
Rights.

     

    (y) Seller
shall not engage in any transaction or series of related transactions pursuant
to

    which (A)
a Person or group of Persons acquire (i) voting securities of Seller
constituting greater than 50% of the issued and outstanding voting securities of
Seller and/or entitling such Person(s) to elect a majority of Seller's board of
directors or similar governing body (whether by merger, consolidation,
recapitalization, division, conversion or otherwise) or (ii) all or
substantially all of the Seller's assets determined on a consolidated basis, or
(B) Seller is dissolved or liquidated or otherwise ceases to be in existence in
the form as of the date hereof.

    


    (z) Excepting
the endorsement in the ordinary course of business of negotiable instruments for
deposit or collection, Seller shall not become or be liable, directly or
indirectly, primary or secondary, matured or contingent, in any manner, whether
as guarantor, surety, accommodation maker, or otherwise, for the existing or
future Indebtedness of any kind of any Person.

    


    (aa) Seller
shall not: (i) declare or payor make any forn1s of distribution or dividend to
holders of Seller's capital stock, membership interest or other equity interest;
(ii) declare or pay any bonus compensation to its officers if an Event of
Default exists or would result from the payment thereof; or (iii) hereafter
incur or become liable for any indebtedness.

    


    (bb) Seller
shall not make or have outstanding loans, advances, extensions of credit or
capital contributions to, or investments in, any Person, except with regard to
the Brighton Partners, Industro, or certain financings related to Seller's kiosk
program.

    


    (cc) Seller
shall not use FGI's name in connection with any of its business operations.
Nothing herein contained is intended to permit or authorize Seller to make any
contract on behalf ofFGI.

    


    (dd) Seller
shall not become or be a party to any contract or agreement which at the time of
becoming a party to such contract or agreement materially impairs Seller's
ability to perform under this Agreement, or under any other instrument,
agreement or document to which Seller is a party or by which it is or may be
bound.

     

    Section
5. Notice of Purchase.
Seller authorizes FGI to file, and Seller shall execute and deliver to
FGI and/or file at such times and places as FGI may designate, such financing
statements, continuations and amendments thereto as are necessary or desirable
to give notice of FGI's purchase of the Purchased Accounts under the DCC in
effect in any applicable jurisdiction and FGI's security interest in Seller's
Collateral as provided in Section 6 below.

     

    Section
6. Collateral. In order
to secure the payment of all indebtedness and obligations of Seller to FGI
(including the Obligations), in addition to the sale of Purchased Accounts,
Seller hereby grants to FGI a security interest in and lien upon all of Seller's
right, title and interest in and to all of Seller's Collateral. Seller agrees to
comply with all appropriate laws in order to perfect FGI's security interest in
and to the Collateral and to execute such documents as FGI may, from time to
time, require and to deliver to FGI a list of all locations of its Inventory,
Equipment and Goods. Seller shall provide written notice to FGI of any change in
the locations at which it keeps its Inventory, Equipment and Goods at least
thirty (30) days prior to any such change. The occurrence of any Event of
Default shall entitle FGI to all of the default rights and remedies (without
limiting the other rights and remedies exercisable by FGI either prior or
subsequent to an Event of Default) as available to a Secured Party under the UCC
in effect in any applicable jurisdiction.

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    Section
7. Collection.

    


    (a) Seller
shall notify all Account Debtors and take other necessary or appropriate means
to insure that all of Seller's Account(s), whether or not purchased by FGI,
shall be paid directly to FGI at the remittance address or by the wire
instructions set forth below. FGI shall have the right at any time, either
before or after the occurrence of an Event of Default and without notice to
Seller, to notify any or all Account Debtors of the assignment to FGI and to
direct such Account Debtors to make payment of all amounts due or to become due
to Seller directly to FGI. As to any Account proceeds that do not represent
Purchased Accounts, and so long as no Event of Default has occurred, FGI shall
be deemed to have received any such proceeds of Accounts as a pure pass-through
for and on account of Seller; provided, however, FGI may retain, in its sole and
absolute discretion, any such amounts as additional reserves in the Reserve
Account. Unless otherwise required by FGI, all invoices of all of Seller's
Accounts shall plainly state on their face: "All amounts owing under this
invoice have been assigned to Faunus Group International, Inc. d/b/a FGI Finance
and all such amounts payable hereunder are payable to Faunus Group
International, Inc. d/b/a FGI Finance at the remittance address or by the wire
instructions set forth below:

     

    
      
        	
                Wire
      Instructions:

                Citizens
      Bank

                ABA/Routing
      #: 02131.310.3

                Swift:
      CTZlUS.3.3

                Beneficiary:
      FGI

                Finance
      Account#:4001212.3.30

              	
                Mailing
      Address:

                80
      Broad Street

                22nd
      Floor

                New
      York, NY 10004

                 

              


      

    

    


    (b) FGI, as
the sole and absolute owner of the Purchased Accounts, shall have the sole and
exclusive power and authority to collect each such Purchased Account, through
legal action or otherwise, and FGI may, in its sole discretion, settle,
compromise, or assign (in whole or in part) any of such Purchased Accounts, or
otherwise exercise, to the maximum extent permitted by applicable law, any other
right now existing or hereafter arising with respect to any of such Purchased
Accounts.

     

    Section
8. Payments Received by
Seller. Should Seller receive payment of all or any portion of any
Purchased Account, Seller shall immediately notify FGI in writing of the receipt
of the payment, hold said payment in trust for FGI separate and apart from
Seller's own property and funds, and shall deliver said payment to FGI without
delay in the identical fornl in which received with all necessary endorsements.
Should Seller receive any check or other payment instrument with respect to a
Purchased Account or after default any Account and fail to surrender and deliver
to FGI said check or payment instrument within two business days following the
date of receipt by Seller, FG I shall be entitled to charge Seller a Misdirected
Payment Fee to compensate FGI for the additional administrative expenses that
the parties acknowledge is likely to be incurred as a result of such breach. In
the event any Goods, the sale of which gave rise to a Purchased Account, are
returned to or repossessed by Seller, such Goods shall be held by Seller in
trust for FGI, separate and apart from Seller's own property and subject to
FGI's sole direction and control.

     

    Section
9. Power of Attorney.
Seller grants to FGI an irrevocable power of attorney authorizing and permitting
FGI, at its option, with or without notice to Seller to do any or all of the
following: (a) endorse the name of Seller on any checks or other evidences of
payment whatsoever that may come into the possession of FGI regarding Purchased
Accounts or Collateral, including checks received by FGI pursuant to Section 9
hereof; (b) receive, open and dispose of any mail addressed to Seller and put
FGI's address on any statements mailed to Account Debtors; (c) pay, settle,
compromise, prosecute or defend any action, claim, conditional waiver and
release, or proceeding relating to Purchased Accounts or Collateral; (d) upon
the occurrence of an Event of Default, notify in the name of the Seller, the
U.S. Post Office to change the address for delivery of mail addressed to Seller
to such address as FGI may designate, however, FGI shall turn over to Seller all
such mail not relating to Purchased Accounts or Collateral; (e) file any
financing statement deemed necessary or appropriate by FGI to protect FGI's
interest in and to the Purchased Accounts or Collateral, or under any provision
of this Agreement; (f) effect debits to any demand deposit or other deposit
account that Seller maintains at any bank for any sums due to or from the Seller
under this Agreement; and (g) to do all other things necessary and proper in
order to carry out this Agreement. The authority granted to FGI herein is
irrevocable until this Agreement is tem1inatcd and all Obligations arc fully
satisfied.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    Section
10. Default and
Remedies. An Event of Default shall be deemed to have occurred hereunder
and FGI may immediately exercise its rights and remedies with respect to the
Purchascd Accounts and the Collateral under this Agreement, upon the happening
of one or more of the following: (a) Seller shall fail to pay as and when due
any amount owed to FGI; (b) (i) the commencement of any action for the
dissolution or liquidation of Seller, or the commencement of any proceeding to
avoid any transaction entered into by Seller, or the commencement of any case or
proceeding for reorganization or liquidation of Seller's debts under the federal
bankruptcy code or any other state or federal law, now or hereafter enacted for
the relief of debtors, whether instituted by or against Seller; provided however,
that Seller shall have thirty (30) days to obtain the dismissal or discharge of
involuntary proceedings filed against it, it being understood that during such
thirty (30) day period, (ii) Sellcr makes or proposes in writing, an assignment
for the benefit of creditors generally, offers a composition or extension to
creditors, or makes or sends notice of an intended bulk sale of any business or
assets now or hereafter owned or conducted by Seller, or (iii) the appointment
of a receiver, liquidator, custodian, trustee or similar official or fiduciary
for Seller or for Seller's property; (c) Seller shall become insolvent in that
its debts are greater than the fair value of its assets, or Seller is generally
not paying its debts as they become due; (d) any involuntary lien, garnishment,
attachment or the like shall be issued against or shall attach to the Purchased
Accounts, the Collateral or any portion thereof and the same is not released
within ten (l0) days; ( e) Seller suffers the entry against it for a final
judgment for the payment of money in excess of $10,000, unless the same is
discharged within thirty (30) days after the date of entry thereof or an appeal
or appropriate proceeding for review thereof is taken within such periods and a
stay of execution pending such appeal is obtained; (f) Seller shall breach any
covenant, warranty or representation set forth herein or same shall be untrue
when made; (g) any report, certificate, schedule, financial statement, profit
and loss statement or other statement furnished by Seller, or by any other
person on behalf of Seller, to FGI is not true and correct in any material
respect; (h) Seller shall have a federal or state tax lien filed against any of
its properties, or shall fail to pay any federal or state tax when due, or shall
fail to file any federal or state tax form as and when due; or (i) a material
adverse change shall have occurred in Seller's financial conditions, business,
operations or prospects. Upon the occurrence of an Event of Default, all
obligations owing to FGI (including the Obligations) shall become immediately
due and owing at the option of FGI (provided upon the occurrence of an Event of
Default under clause (b) above, all such amounts shall become immediately due
and payable without further notice or demand) and FGI shall be entitled to any
form of equitable relief that may be appropriate without having to establish any
inadequate remedy at law or other grounds other than to establish that its
Collateral is subject to being improperly used, moved, dissipated or withheld
from FGI. FGI shall be entitled to freeze, debit and/or effect a set-off against
any fund or account Seller may maintain with any Bank. In the event FGI deems it
necessary to seek equitable relief, including, but not limited to, injunctive or
receivership remedies, as a result of and Event of Default, Seller waives any
requirement that FGI post or otherwise obtain or procure any bond.
Alternatively, in the event FGI, in its sole and exclusive discretion, desires
to procure and post a bond, FGI may procure and file with the court a bond in an
amount up to and not greater than $10,000 notwithstanding any common or
statutory law requirement to the contrary. Upon FGI's posting of such bond it
shall be entitled to all benefits as if such bond was posted in compliance with
state law. Seller also waives any right it may be entitled to, including an
award of attorney's fees or costs, in the event any equitable relief sought by
and awarded to FGI is thereafter, for whatever reason(s), vacated, dissolved or
reversed. All post-judgmcnt interest shall bear interest at either the contract
rate, 18% per annum or such higher rate as may be allowed by law.

     

    Section
11. Cumulative Rights;
Waivers. All rights, remedies and powers granted to FGI in this
Agreement, or in any other instrument or agreement given to Seller to FGI or
otherwise available to FGI in equity or at law, are cumulative and may be
exercised singularly or concurrently with such other rights as FGI may have.
These rights may be exercised from time to time as to all or any part of the
Purchased Accounts purchased hereunder or the Collateral as FGI in its sole and
absolute discretion may detennine. In the event that any part of this
transaction between Seller and FGI is construed to be a loan from FGI to Seller,
any advances or payments made as the Purchase Price for all Purchased Accounts
shall be secured by the Purchased Accounts and the Collateral and FGI shall have
all rights and remedies available to FGI in addition to its rights and remedies
hereunder. FGI may not be held to have waived its rights and remedies unless the
waiver is in writing and signed by FGl. A waiver by FGJ of a right, remedy or
default under this Agreement on one occasion is not a waiver of any right,
remedy or default on any subsequent occasion. Any failure by FGI to exercise, or
any delay by FGI of such right or any other right, nor in any manner impair the
subsequent exercise by FGI of any of its rights.

    


    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    Section
12. Notices. Any notice
or communication with respect to this Agreement shall be given in writing, sent
by (i) personal delivery, or (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid, registered or certified
mail, or (iv) facsimile, addressed to each party hereto at its address set forth
below or to such other address or to the attention of such other person as
hereafter shall be designated in writing by the applicable party sent in
accordance herewith. Any such notice or communication shall be deemed to have
been given either at the time of personal delivery or, in the case of delivery
service or mail, as of the date of first attempted delivery at the address and
in the manner provided herein, or in the case of facsimile, upon
receipt

    


    
      	
              FGI
      Finance

              80
      Broad Street

              22nd
      Floor

              New
      York, NY 10004

              Fax:
      (212) 248-3404

            	
              Zagg
      Incorporated .

              3855
      South 500 West

              Suite
      J

              Salt
      Lake City, UT 84 I 15

              Fax:
      (801) 26.3-1841

            


    

     

    Section
1.3. Term. The Original
Term of this Agreement shall be twenty four (24) months from the date of this
Agreement, provided that this Agreement shall be extended automatically for an
additional two (2) years for each succeeding term unless written notice of
termination is given by one party hereto to the other party hereto at least
sixty (60) days, but not more than ninety (90) days, prior to the end of the
Original Term or any extension thereof. Any such notice of termination, however,
and notwithstanding payment in full of all Obligations by Seller, is conditioned
on Seller's delivery, to FGJ, of a general release in a form reasonably
satisfactory to Purchaser. Seller understands that this provision constitutes a
waiver of its rights under § 9-51.3 of the UCc. FGl shall not be required to
record any terminations or satisfactions of any of FGl's liens on the Collateral
unless and until Seller has executed and delivered to FGJ said general release
and Seller shall have no authority to do so without FGl's express written
consent. In the event Seller terminates this Agreement within the first .360
days following the commencement of this Agreement, Seller shall pay to FGI an
early Termination Fee in the amount of one hundred thousand dollars
($100,000.00). In the event that Seller terminates this Agreement after the
first .360 days, but prior to the end of the Original Term of the Agreement then
Seller shall pay to FGJ an early Termination Fee in the amount of seventy five
thousand dollars ($75,000.00). Any tennination of this Agreement shall not
affect FGl's security interest in the Collateral and FGl's ownership of the
Purchased Accounts, and this Agreement shall continue to be effective, until all
transactions entered into and obligations incurred hereunder have been completed
and satisfied in full. Notwithstanding anything to the contrary, and assuming no
default by Seller in which event FGJ may terminate without notice, FGJ may
terminate this Agreement at any time by giving not less than thirty (.30) days
notice in which event, Seller shall not be obligated to pay any Termination
Fee.

     

    Section
14. Expenses. At closing
and from time to time thereafter, Seller will pay upon demand of FGJ all costs,
fees and expenses of FGJ in connection with (i) the analysis, negotiation,
preparation, execution, administration, delivery and termination of this
Agreement and the documents and instruments referred to herein, and any
amendment, amendment and restatement, supplement, waiver or consent relating
hereto or thereto, whether or not any such amendment, amendment and restatement,
supplement, waiver or consent is executed or becomes effective, including search
costs, the reasonable fees, expenses and disbursements of counsel for FGl,
reasonable charges of any expert consultant to FGI and reimbursement for
premiums incurred by FGI to insure against nonpayment of the Accounts or other
insurable losses to the Collateral, (ii) the enforcement of FGJ's rights
hereunder, or the collection of any payments owing from, Seller under this
Agreement or the protection, preservation or defense of the rights of FGI
hereunder, (iii) the enforcement of FGI's rights with respect to the Accounts,
including the collection of any payments owing from any account debtors with
respect to the Accounts (including, the reasonable fees, expenses and
disbursements of counsel for FGI), and (iv) any refinancing or restructuring of
the arrangements provided under this Agreement in the nature of a "work-out" or
of any insolvency or bankruptcy proceedings, or otherwise (including the
reasonable fees and disbursements of counsel for FGI). Seller hereby authorizes
FGI, at FGl's sole discretion, to deduct such fees, costs and expenses from the
Reserve Account or may make demand therefore.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    Section
15. Indemnity. Seller
releases and shall indemnify, defend and hold harmless FGl and its respective
officers, shareholders, employees and agents, of and from any claims, demands,
liabilities, obligations, judgments, injuries, losses, damages and costs and
expenses (including, without limitation, reasonable legal fees) resulting from
(i) acts or conduct of Seller under, pursuant or related to this Agreement, (ii)
Seller's breach or violation of any representation, warranty, covenant or
undertaking contained in this Agreement, (iii) Seller's failure to comply with
any or all laws, statutes, ordinances, governmental rules, regulations or
standards, whether federal, state or local, or court or administrative orders or
decrees and (iv) any claim by any third party, including any other creditor of
Seller, against PGl arising out of any transaction whether hereunder or in any
way related to this Agreement and all costs, expenses, fines, penalties or other
damages resulting therefrom, unless resulting solely from acts or conduct of FG
I constituting willful misconduct or gross negligence.

    


    Section
16. Severability. Each
and every provision, condition, covenant and representation contained in this
Agreement is, and shall be construed to be, a separate and independent covenant
and agreement. If any term or provision of this Agreement shall to any extent be
invalid or unenforceable, the remainder of the Agreement shall not be affected
thereby.

    


    Section
17. Parties in Interest. All grants,
covenants and agreements contained in this Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that Seller may not delegate or assign any of its duties or
obligations under this Agreement without the prior written consent of FGI. FGI
reserves the right to assign its rights and obligations under this agreement in
whole or in part to any person or entity.

     

    Section
18. Governing Law: Submission
to Process and Venue. This agreement shall be deemed a contract made
under the laws of the State of New York and shall be construed and enforced,
along with all matters arising hereunder or related hereto, in accordance with
and governed by the internal laws of the State of New York, without reference to
the rules thereof relating to conflicts of law. Seller hereby irrevocably
submits itself to the non-exclusive jurisdiction of the state and federal courts
located in New York, and agrees and consents that service of process may be made
upon it in any legal proceeding relating to this agreement, the purchase of
Accounts or any other relationship between PGl and Seller by any means allowed
under state or federal law. Any legal proceeding arising out of or in any way
related to this Agreement, the purchase of Accounts or any other relationship
between FGl and Seller shall be brought and litigated in any of the state or
federal courts located in the State of New York in any county in which FGI has a
business location, the selection of which shall be in the exclusive discretion
ofFGI. Seller hereby waives and agrees not to assert, by way of motion, as a
defense or otherwise, that any such proceeding, is brought in any inconvenient
forum or that the venue thereof is improper.

     

    Section
19. Complete Agreement.
This Agreement, the written documents executed pursuant to this Agreement, if
any, and the acknowledgment delivered in connection herewith set forth the
entire understanding and agreement of the parties hereto with respect to the
transactions contemplated herein and may not be contradicted by evidence of
prior, contemporaneous, or subsequent oral agreements of the parties. No
modification or amendment of or supplement to this Agreement shall be valid or
effective unless the same is in writing and signed by the party against whom it
is sought to be enforced.

     

    Section
20. Miscellaneous.

    


    (a) Seller
acknowledges that there is no, and it will not seek or attempt to establish any,
fiduciary relationship between FGl and Seller, and Seller waives any right to
assert, now or in the future, the existence or creation of any fiduciary
relationship between FGI and Seller in any action or proceeding (whether by way
of claim, counterclaim, crossclaim or otherwise) for damages.

    


    (b) This
Agreement shall be deemed to be one of financial accommodation and not assumable
by any debtor, trustee or debtor-in-possession in any bankruptcy proceeding
without FGT's express written consent and may be suspended in the event a
petition in bankruptcy is filed by or against Seller

    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    (c) In the
event Seller's principals, officers or directors form a new entity, whether
corporate, partnership, limited liability company or otherwise, similar to that
of Seller during the term of this Agreement, such entity shall be deemed to have
expressly assumed the obligations due FGI by Seller under this Agreement Upon
the formation of any such entity, FGI shall be deemed to have been granted an
irrevocable power of attorney with authority to execute, on behalf of the newly
formed successor business, a new UCC-l or UCC-.3 financing statement and have it
filed with the appropriate secretary of state or UCC filing office. FGI shall be
held-harmless and be relieved of any liability statement or the resulting
perfection of a lien in any of the successor entity's assets. In addition, FGI
shall have the right to notify the successor entity's account debtors of FGI's
lien rights, its right to collect all Accounts, and to notify any new FGI or
lender who has sought to procure a competing lien of FGI's right is in such
successor entity's assets.

    


    (d) Seller
expressly authorizes FGI to access the systems of and/or communicate with any
third party with respect to the status of any Goods regarding a Purchased
Account, including without limitation warehousemen, bailees, shipping or
trucking company in order to obtain or verify tracking, shipment or delivery
status of any Goods regarding a Purchased Account.

    


    (e) Seller's
principal(s) acknowledge that the duty to accurately complete each Schedule of
Accounts is critical to this Agreement and as such all obligations with respect
thereto are non-delegable.  Each of Seller's principal(s) acknowledge
that he/she shall remain fully responsible for the accuracy of each Schedule of
Accounts delivered to FGI regardless of who is delegated the responsibility to
prepare and/or complete such Schedule of Accounts.

    


    (f) Seller
shall indemnify FGI from any loss arising out of the assertion of any Avoidance
Claim. Seller shall notify FGI within two business days of it becoming aware of
the assertion of an Avoidance Claim.

    


    (g) Seller
agrees to execute any and all forms (i.e. Forms 8821 and/or 2848) that FGI may
require in order to enable FGI to obtain and receive tax information issued by
the Department of the Treasury, Internal Revenue Service, or receive refund
checks.

    


    (h) Seller
will cooperate with FGI in obtaining a control agreement in form and substance
satisfactory to FGI with respect to Collateral consisting of: Deposit Accounts;
Investment Property; Letter­of-credit rights; and Electronic chattel
paper.

    


    (i) Whenever
Seller shall be required to make any payment, or perform any act, on a
day

    which is
not a business day, such payment may be made, or such act may be performed, on
the next succeeding business day. Time is of the essence in Seller's performance
under all provisions of this Agreement and all related agreements and
documents.

    


    (j) All
warranties, representations, and covenants made by Seller herein, or in any
agreement referred to herein or on any certificate, document or other instrument
delivered by it or on its behalf under this Agreement, shall be considered to
have been relied upon by FG! regardless of any investigation made by FGI or on
its behalf. All statements in any such certificate or other instrument prepared
and/or delivered for the benefit of FGI shall constitute warranties and
representations by FGI hereunder. Except as otherwise expressly provided herein,
all covenants made by Seller hereunder or under any other agreement or
instrument shall be deemed continuing until all Obligations are satisfied in
full. All indemnification obligations under this Agreement shall survive the
termination of this Agreement and payment of the Obligations.

    


    (k) FGI, in
its sole discretion, shall have the right to announce and publicize the
arrangement established hereunder, as it deems appropriate, by means and media
selected by FG!. Such publication may include all pertinent information relating
to such arrangement. The form and content of the published information shall be
in the sole discretion of FGI and shall be considered the sole and exclusive
property of FOL All expenses related to publicizing the financing shall be the
sole responsibility FGI.

    


    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    (l) The word
"including" (and its various forms) means "including without limitation"
whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural and vice versa.

     

    Section
21.                      Waiver of Jury Trial, Punitive and
Consequential Damages, Etc. Seller and FGI hereby (a) irrevocably waive any
right either may have to a trial by jury in respect of any litigation directly
or indirectly at any time arising out of, under or in connection with this
Agreement or any transaction contemplated hereby or associated herewith; (b)
Seller irrevocably waives, to the maximum extent not prohibited by law, any
right it may have to claim or recover in any such litigation any special,
exemplary, punitive or consequential damages, or damages other than, or in
addition to, actual damages and Seller hereby releases and exculpates FGI, its
officers, employees and designees, from any liability arising from any acts
under this Agreement or in furtherance thereof whether of omission or
commission, and whether based upon any error of judgment or mistake of law or
fact, except for willful misconduct; (c) and Seller certifies that no party
hereto nor any representative or agent or counsel for any party hereto has
represented, expressly or otherwise, or implied that such party would not, in
the event of litigation, seek to enforce the foregoing waivers; and (d) Seller
acknowledges that FGI has been induced to enter into this Agreement and the
transactions contemplated hereby, in part, as a result of the mutual waivers and
certifications contained in this Section.

     

    Section
22.                      Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of each of the parties. Seller may not transfer, assign or delegate any
of its duties or obligations hereunder. Seller acknowledges and agrees that FOI
may at any time, and from time to time, (a) sell participating interests in
FOT's rights hereunder, and (b) sell, transfer, or assign FOT's rights hereunder
without notice to or the consent of Seller. No rights are intended to be created
hereunder, or under any related agreements or documents for the benefit of any
third party donee, creditor or incidental beneficiary of Seller. Nothing
contained in this Agreement shall be construed as a delegation to FGI of
Seller's s duty of performance, including, without limitation, Seller's duties
under any account or contract with any other Person.

     

    Section
23.                      Delivery by Electronic Means.
This Agreement, the agreements referred to herein, and each other agreement or
instrument entered into in connection herewith or therewith or contemplated
hereby or thereby, and any amendments hereto or thereto, to the extent signed
and delivered by electronic means, including by means of unalterable files
attached to e-mail communications or by facsimile, shall be treated in all
manner and respects as an original agreement or instrument and shall be
considered to have the same binding legal effect as if it were the original
signed version thereof delivered in person. At the request of any party hereto
or to any such agreement or instrument, each other party hereto or thereto shall
reexecute original forms thereof and deliver them to all other parties. No party
hereto or to any such agreement or instrument shall raise the use of electronic
means to deliver a signature or the fact that any signature or agreement or
instrument was transmitted or communicated through the use of electronic means
as a defense to the formation or enforceability of a contract and each such
party forever waives any such defense.

     

    Section
24.                      Interpretation of Agreement.
The parties hereto acknowledge and agree that this Agreement and the agreements
or instruments entered into in connection herewith have been negotiated at
arm's-length and among parties equally sophisticated and knowledgeable in the
matters dealt with in this Agreement or in such agreements or instruments.
Accordingly, any rule of law or legal decision that would require interpretation
of any ambiguities in this Agreement or the agreements or instruments entered
into in connection herewith against the party that has drafted it is not
applicable and is waived. The provisions of this Agreement and the agreements
and instruments entered into in connection herewith shall be interpreted in a reasonable manner to
effect the intent of the parties as set forth herein or therein.

     

    SIGNATURES
ON FOLLOWING PAGE

    


    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the parties have set their hand and seals on the day and year
first herinabove written.


     

    
      	
              FGI:

            	 
      
	 
      	 
      
	
              Witness:
      _________________________

            	
              FAUNUS
      GROUP INTERNATIONAL, INC.

            
	
              Name:
      ___________________________

            	 
      
	 
      	
              By:
      _______________________

            
	 
      	
              Name:
      David M. DiPiero

            
	 
      	
              Title:
      President

            
	 
      	 
      
	
              SELLER:

            	 
      
	 
      	 
      
	
              Witness:
      _________________________

            	
              ZAGG
      INCORPORATED

            
	
              Name:
      ___________________________

            	 
      
	 
      	
              By:
      _________________________

            
	 
      	
              Name:
      Robert Pedersen

            
	 
      	
              Title:
      Chief Executive Officer

            
	 
      	 
      
	
              PRINCIPALS:

            	 
      
	 
      	 
      
	
              Witness:
      _________________________

            	
              _________________________
      (SEAL)

            
	
              Name:
      ___________________________

            	
              Name:
      Robert Pedersen

            
	 
      	 
      
	
              Witness:
      _________________________

            	
              _________________________
      (SEAL)

            
	
              Name:
      ___________________________

            	
              Name:
      Brandon O’Brien

            


    

    


     

    STATE OF
____________

     

    COUNTY OF
__________

     

    I HEREBY CERTIFY that on this day
personally appeared before me, officers duly authorized to administer oaths and
take acknowledgements, _____________________________, as ________________ of
_________________________________, a _________ _____________ who has produced
the following identification: _________________ or (   ) who is
personally known to me, and who acknowledged before me that he executed the same
for the purposes therein expressed, as the act and deed of said
entity.

     

    WITNESS my hand and official seal in
the County and State last aforesaid on this _____ day of ___________,
200__.

     

    


     

    _____________________________

     

    Notary
Public, State of __________

     

    My
Commission Expires

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    Schedule
1

    


    Schedule of Accounts
Sold/Bill of Sale

    


    
      	
              Client’s
      Name: Zagg Incorporated

            	
              Schedule
      Number________________

            


    

    


    Page ___
of _____    Date of _____________20__

    


    
      
        
          
            	
                    Invoice

                    Date

                  	
                    Invoice
      Number

                  	
                    Name
      of Account Debtor

                  	
                    Location

                  	
                    Invoice
      Amount

                  
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      


          

        

      

    

    


    ASSIGNMENT:

     

    KNOW ALL
MEN BY THESE PRESENTS, that the undersigned for value received has sold
transferred and assigned and does hereby sell, transfer and assign to Faunus
Group International, Inc. (hereinafter called the "Buyer"), its successors and
assigns, in accordance with the provision of that certain Sale of Accounts and
Security Agreement heretofore duly executed and delivered by the undersigned and
duly accepted by the Buyer, and any amendments thereto (hereinafter called the
"Agreement"), each Account, listed hereon, and all right, title and interest of
the undersigned in and to such Account(s) and in and to all merchandise, the
sale of which shall have given rise to such Account(s), including all of the
undersigned's right of stoppage in transit replevin and reclamation as an unpaid
vendor. Each Account is made a part hereof as if attached or incorporated herein
for specific tern1s, conditions, provisions and description of said
Account(s).

     

    For the
purpose of inducing the Buyer to purchase such Account(s), the undersigned
hereby reaffirms all warranties under the Agreement applicable to such
Account(s) and account debtors. In the event of any breach of any such warranty,
the Buyer, its successors and assigns, shall have such rights, inter alia, as
are provided in the Agreement.

     

    The
undersigned in his/her business capacity and PERSON ALL Y warrants and
represents that, with respect to each Account, since the last sale of Accounts
by the undersigned to the Buyer, no merchandise has been returned or rejected,
no defense, dispute, claim, offset or counterclaim has developed or has been
asserted with respect to any Account heretofore sold, transferred and assigned
by the undersigned to the Buyer, which has not been or is not contemporaneously
being reported in writing by the undersigned to the Buyer.

     

    IN
WITNESS WHEREOF, the undersigned has hereunto set its hand and seal this
______,200__.

     

    By:
__________________________

     

    Name:_______________________

     

    Title:
________________________

     

    


    
      
        
        

      

      
        20