Exhibit
10.01


 


CHANGE IN TERMS AGREEMENT


 


	
  Principal

  	
   

  	
  Loan
  Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  SDB

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  9,000,000.00

  	
   

  	
  07-01-2008

  	
   

  	
  12-15-2009

  	
   

  	
  281007262

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  SB

  	
   

  
																	



 


	
  References in the boxes above are for Lender’s use only and do not
  limit the applicability of this document to any particular loan or item.  Any item above containing “***” has been
  omitted due to text length limitations.

  



 


	
  Borrower:

  	
  NEW
  FRONTIER MEDIA, INC.

  	
   

  	
  Lender:

  	
  First
  Community Bank

  
	
   

  	
  7007
  WINCHESTER CIR, STE 200

  	
   

  	
   

  	
  Lakewood
  Loan Servicing Center 

  
	
   

  	
  BOULDER,
  CO 80301

  	
   

  	
   

  	
  215
  Union Blvd, Suite 150 

  
	
   

  	
   

  	
   

  	
   

  	
  Lakewood,
  CO 80228

  
	
   

  	
   

  	
   

  	
   

  	
  (303)
  988-2300

  



 


	
  Principal
  Amount: $9,000,000.00

  	
   

  	
  Date of Agreement:
  June 15, 2009

  



 


DESCRIPTION
OF EXISTING INDEBTEDNESS.  LENDER
IS THE HOLDER OF THAT CERTAIN PROMISSORY NOTE DATED JULY 1, 2008 IN THE
ORIGINAL PRINCIPAL AMOUNT OF $9,000,000.00 AND ANY AND ALL CHANGE IN TERMS
AGREEMENTS PREVIOUSLY EXECUTED.


 


DESCRIPTION
OF COLLATERAL.  ALL ACCOUNTS
AS MORE COMPLETELY DESCRIBED IN THE COMMERCIAL SECURITY AGREEMENT DATED JULY 1,
2008 TOGETHER WITH ALL MODIFICATIONS OF, CONSOLIDATIONS OF, ADDITIONS OF,
REPLACEMENTS OF AND SUBSTITUTIONS OF THE COLLATERAL.


 


DESCRIPTION
OF CHANGE IN TERMS. BORROWER AND LENDER HEREBY AGREE TO MODIFY THE ABOVE
REFERENCED PROMISSORY NOTE AS FOLLOWS:


 


1)  THE
MATURITY DATE SHALL BE EXTENDED FROM JULY 5, 2009 TO DECEMBER 15, 2009.


 


2)  MODIFICATIONS
AND/OR ADDITIONS TO THE BUSINESS LOAN AGREEMENT (ASSET BASED) AS MORE
COMPLETELY DESCRIBED IN SAID DOCUMENT OF EVEN DATE HEREWITH.


 


3)  AS
OF THE DATE OF THIS AGREEMENT THE INTEREST RATE WILL BE ADJUSTED TO THE CURRENT
PRIME RATE, MINUS A MARGIN OF .1250 PERCENTAGE POINTS WITH A FLOOR RATE OF
5.750 PERCENTAGE POINTS, RESULTING IN A CURRENT RATE OF 5.750 PERCENT, AS MORE
COMPLETELY DESCRIBED IN THE “VARIABLE INTEREST RATE” PARAGRAPH CONTAINED
HEREIN.


 


4)  PAYMENTS
SHALL BE DUE AND PAYABLE AS DESCRIBED IN THE “PAYMENT” PARAGRAPH CONTAINED
HEREIN.


 


PAYMENT. Borrower will
pay this loan in one payment of all outstanding principal plus all accrued
unpaid interest on December 15, 2009. In addition, Borrower will pay
regular monthly payments of all accrued unpaid interest due as of each payment
date, beginning July 15, 2009, with all subsequent interest payments to be
due on the same day of each month after that.


 


VARIABLE
INTEREST RATE. The interest rate on this loan is subject to change
from time to time based on changes in an independent index which is the The
Prime Rate as quoted in the Money Section of the Wall Street Journal, when
a range of rates is published the highest rate will be applied (the “Index”).
The Index is not necessarily the lowest rate charged by Lender on its loans. If
the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notifying Borrower. Lender will tell Borrower the current Index rate upon
Borrower’s request. The interest rate change will not occur more often than
each day. Borrower understands that Lender may make loans based on other rates
as well. The Index currently is 3.250% per annum. The interest rate to be
applied to the unpaid principal balance of this loan will be calculated as
described in the “INTEREST CALCULATION METHOD” paragraph using a rate of 0.125
percentage points under the Index, adjusted if necessary for any minimum and
maximum rate limitations described below, resulting in an initial rate of
5.750% per annum based on a year of 360 days. NOTICE: Under no circumstances
will the interest rate on this loan be less than 5.750% per annum or more than
the maximum rate allowed by applicable law.


 


INTEREST
CALCULATION METHOD. Interest on this loan is computed on a 365/360
basis; that is, by applying the ratio of the interest rate over a year of 360
days, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under
this loan is computed using this method.


 


CONTINUING
VALIDITY. Except as expressly changed by this Agreement, the
terms of the original obligation or obligations, including all agreements
evidenced or securing the obligation(s), remain unchanged and in full force and
effect. Consent by Lender to this Agreement does not waive Lender’s right to
strict performance of the obligation(s) as
changed, nor obligate Lender to make any future change in terms. Nothing in
this Agreement will constitute a satisfaction of the obligation(s). It is the
intention of Lender to retain as liable parties all makers and endorsers of the
original obligation(s), including accommodation parties, unless a party is
expressly released by Lender in writing. Any maker or endorser, including
accommodation makers, will not be released by virtue of this Agreement. If any
person who signed the original obligation does not sign this Agreement below,
then all persons signing below acknowledge that this Agreement is given
conditionally, based on the representation to Lender that the non-signing party
consents to the changes and provisions of this Agreement or otherwise will not
be released by it. This waiver applies not only to any initial extension,
modification or release, but also to all such subsequent actions.


 


CERTIFICATION
OF FINANCIAL INFORMATION. Borrower certifies that all financial
statements supplied to Lender are true, complete and correct and fairly present
the financial condition of the Borrower as of such dates for the periods
covered by such statements, and there has been no material adverse change in
the condition (financial or otherwise), business or operations of the Borrower.
There are no liabilities of the Borrower, fixed or contingent, which are
material but are not reflected in the financial statements or in the notes
thereto. No information, exhibit, or report furnished by the Borrower to Lender
In connection with the Note and Related Documents contained any material
misstatement of fact or omitted to state a material fact or any fact necessary to make the
statement contained therein not materially misleading. Borrower warrants and
represents that financial statements and other information
furnished to Lender in the future in connection with Borrower’s obligations
under the Note and Related Documents shall meet the foregoing standards of
correctness, completeness and accuracy.


 


PRIOR
TO SIGNING THIS AGREEMENT, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS AGREEMENT, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER
AGREES TO THE TERMS OF THE AGREEMENT.


 


BORROWER:


 


 


NEW FRONTIER MEDIA, INC.


 


	
  By:

  	
  /s/
  Michael Weiner

  	
   

  	
  By:

  	
  /s/
  Grant Williams

  
	
   

  	
  MICHAEL
  WEINER, CEO of NEW FRONTIER MEDIA, INC.

  	
   

  	
   

  	
  GRANT
  WILLIAMS, CFO of NEW FRONTIER MEDIA, INC.

  



 


[ILLEGIBLE]


 

















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


 


	
  Principal

  	
   

  	
  Loan
  Date

  	
   

  	
  Maturity

  	
   

  	
  Loan No

  	
   

  	
  Call / Coll

  	
   

  	
  Account

  	
   

  	
  Officer

  SDB

  	
   

  	
  Initials

  	
   

  
	
  $

  	
  9,000,000.00

  	
   

  	
  07-01-2008

  	
   

  	
  12-15-2009

  	
   

  	
  281007262

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  SB

  	
   

  
																	



 


	
  References in the boxes above are or Lender’s use only and do not
  limit the applicability of this document to any particular loan or item. Any
  item above containing “***” has been omitted due to text length limitations.

  



 


	
  Borrower:

  	
  NEW
  FRONTIER MEDIA, INC.

  	
   

  	
  Lender:

  	
  First
  Community Bank

  
	
   

  	
  7007
  WINCHESTER CIR, STE 200

  	
   

  	
   

  	
  Lakewood
  Loan Servicing Center 

  
	
   

  	
  BOULDER,
  CO 80301

  	
   

  	
   

  	
  215
  Union Blvd, Suite 150 

  
	
   

  	
   

  	
   

  	
   

  	
  Lakewood,
  CO 80228

  
	
   

  	
   

  	
   

  	
   

  	
  (303)
  988-2300

  



 


THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) dated June 15, 2009, is made and
executed between NEW FRONTIER MEDIA, INC. (“Borrower”) and First Community Bank
(“Lender”) on the following terms and conditions. Borrower has received prior
commercial loans from Lender or has applied to Lender for a commercial loan or
loans or other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement. Borrower understands and
agrees that: (A) in granting, renewing, or extending any Loan, Lender is
relying upon Borrower’s representations, warranties, and agreements as set
forth in this Agreement; (B) the granting, renewing, or extending of any
Loan by Lender at all times shall be subject to Lender’s sole judgment and
discretion; and (C) all such Loans shall be and remain subject to the
terms and conditions of this Agreement.


 


TERM. This Agreement
shall be effective as of June 15, 2009, and
shall continue in full force and effect until such time as all of Borrower’s
Loans in favor of Lender have been paid in full, including principal, interest,
costs, expenses, attorneys’ fees, and other fees
and charges, or until such time as the parties may agree in writing to
terminate this Agreement.


 


ADVANCE
AUTHORITY. The following person or persons are authorized to request
advances and authorize payments under the line of credit until Lender receives
from Borrower, at Lender’s address shown above, written notice of revocation of
such authority: MICHAEL WEINER, CEO of NEW FRONTIER MEDIA, INC.; and GRANT
WILLIAMS, CFO of NEW FRONTIER MEDIA, INC.


 


LINE OF
CREDIT. Lender agrees to make Advances to Borrower from time to time from the
date of this Agreement to the Expiration Date, provided the aggregate amount of
such Advances outstanding at any time does not exceed the Borrowing Base.
Within the foregoing limits, Borrower may borrow, partially or wholly prepay,
and reborrow under this Agreement as follows:


 


Conditions Precedent to Each Advance.  Lender’s obligation to make any Advance to or
for the account of Borrower under this Agreement is subject to the following
conditions precedent, with all documents, instruments, opinions, reports, and
other items required under this Agreement to be in form and substance
satisfactory to Lender:


 


(1)  Lender shall have received evidence that this
Agreement and all Related Documents have been duly authorized, executed, and
delivered by Borrower to Lender.


 


(2)
 Lender shall have received such opinions
of counsel, supplemental opinions, and documents as Lender may request.


 


(3)  The security interests in the Collateral
shall have been duly authorized, created, and perfected with first lien
prfority and shall be in full force and effect.


 


(4)  All guaranties required by Lender for the
credit facility(ies) shall have been executed by each Guarantor, delivered to
Lender, and be in full force and effect.


 


(5)  Lender, at its option and for its sole
benefit, shall have conducted an audit of Borrower’s books, records, and
operations, and Lender shall be satisfied as to their condition.


 


(6)  Borrower shall have paid to Lender all fees,
costs, and expenses specified in this Agreement and the Related Documents as
are then due and payable.


 


(7)  There shall not exist at the time of any
Advance a condition which would constitute an Event of Default under this
Agreement, and Borrower shall have delivered to Lender the compliance
certificate called for in the paragraph below titled “Compliance Certificate.”


 


Making Loan Advances. Advances under this credit
facility, as well as directions for payment from Borrower’s accounts, may be
requested orally or in writing by authorized persons. Lender may, but need not,
require that all oral requests be confirmed in writing. Each Advance shall be
conclusively deemed to have been made at the request of and for the benefit of
Borrower (1) when credited to any deposit account of Borrower maintained
with Lender or (2) when advanced in accordance with the instructions of an
authorized person. Lender, at its option, may set a cutoff time, after which
all requests for Advances will be treated as having been requested on the next
succeeding Business Day.


 


Mandatory Loan Repayments. If at any time the aggregate
principal amount of the outstanding Advances shall exceed the applicable
Borrowing Base, Borrower, immediately upon written or oral notice from Lender,
shall pay to Lender an amount equal to the difference between the outstanding
principal balance of the Advances and the Borrowing Base. On the Expiration
Date, Borrower shall pay to Lender in full the aggregate unpaid principal
amount of all Advances then outstanding and all accrued unpaid interest,
together with all other applicable fees, costs and charges, if any, not yet
paid.


 


Loan Account. Lender shall maintain on its books a record
of account in which Lender shall make entries for each Advance and such other
debits and credits as shall be appropriate in connection with the credit
facility. Lender shall provide Borrower with periodic statements of Borrower’s
account, which statements shall be considered to be correct and conclusively
binding on Borrower unless Borrower notifies Lender to the contrary within
thirty (30) days after Borrower’s receipt of any such statement which Borrower
deems to be incorrect.


 


COLLATERAL. To secure
payment of the Primary Credit Facility and performance of all other Loans,
obligations and duties owed by Borrower to Lender, Borrower (and others, if
required) shall grant to Lender Security Interests in such property and assets
as Lender may require. Lender’s Security Interests in the Collateral shall be
continuing liens and shall include the proceeds and products of the Collateral,
including without limitation the proceeds of any insurance. With respect to the
Collateral, Borrower agrees and represents and warrants to Lender:


 


Perfection of Security Interests. Borrower agrees to execute
all documents perfecting Lender’s Security Interest and to take whatever
actions are requested by Lender to perfect and continue Lender’s Security
Interests in the Collateral. Upon request of Lender, Borrower will deliver to
Lender any and all of the documents evidencing or constituting the Collateral, and
Borrower will note Lender’s interest upon any and all chattel paper and
instruments if not delivered to Lender for possession by Lender.
Contemporaneous with the execution of this Agreement, Borrower will execute one
or more UCC financing statements and any statements as may be required by applicable law, and Lender will file such financing
statements and all such similar statements in the appropriate location or
locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact
for the purpose of executing any documents necessary to perfect or to continue
any Security Interest. Lender may at any time, and without further
authorization from Borrower, file a carbon, photograph, facsimile, or other
reproduction of any financing statement for use as a financing statement.
Borrower will reimburse Lender for all expenses for the perfection,
termination, and  the continuation of  the perfection of Lender’s security
interest in the Collateral. Borrower promptly will notify Lender before any
change in Borrower’s name including any change to the assumed business names of
Borrower. Borrower also promptly will notify Lender before any change in
Borrower’s Social Security Number or Employer Identification Number. Borrower
further agrees to notify Lender in writing prior to any change in address or
location of Borrower’s principal governance office or should Borrower merge or
consolidate with any other entity.


 


Collateral Records. Borrower does now, and at
all times hereafter shall, keep correct and accurate records of the Collateral,
all of which records shall be available to Lender or Lender’s representative
upon demand for inspection and copying at any reasonable time. The above is an
accurate and complete list of all locations at which Borrower keeps or
maintains business records concerning Borrower’s collateral.


 


Collateral Schedules. Concurrently with the
execution and delivery of this Agreement, Borrower shall execute and deliver to
Lender schedules of in form and substance satisfactory to the Lender.
Thereafter supplemental schedules shall be delivered according to the following
schedule:


 


CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender’s obligation to make
the initial Advance and each subsequent Advance under this Agreement shall be
subject to the fulfillment to Lender’s satisfaction of all of the conditions set
forth in this Agreement and in the Related Documents..


 


Loan Documents. Borrower shall provide to Lender the
following documents for the Loan: (1) the Note; (2) Security
Agreements granting to Lender security interests in the Collateral;
(3) financing statements and all other documents perfecting Lender’s
Security Interests; (4) evidence of insurance as required below; (5)
together with all such Related Documents as Lender may require for the Loan;
all in form and substance satisfactory to Lender and Lender’s counsel.


 


Borrower’s Authorization. Borrower shall have provided
in form and substance satisfactory to Lender properly certified resolutions,
duly authorizing the execution and delivery of this Agreement, the Note and the
Related Documents. In addition, Borrower shall have provided


 

















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


(Continued)


 


Loan
No: 281007262


 


such  other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.


 


Fees and Expenses Under This Agreement. Borrower shall have paid to
Lender all fees, costs, and expenses specified in this Agreement and the
Related Documents as are then due and payable.


 


Representations and Warranties. The representations and
warranties set forth in this Agreement, in the Related Documents, and in any
document or certificate delivered to Lender under this Agreement are true and correct.


 


No Event of Default. There shall not exist at the
time of any Advance a condition which would constitute an Event of Default
under this Agreement or under any Related Document.


 


REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of
the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:


 


Organization. Borrower is a corporation for profit which
is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of the State of Colorado. Borrower is
duly authorized to transact business in all other states in which Borrower is
doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Borrower is doing business. Specifically,
Borrower is, and at all times shall be, duly qualified as a foreign corporation
in all states in which the failure to so qualify would have a material adverse
effect on its business or financial condition. Borrower has the full power and
authority to own its properties and to transact the business in which it is
presently engaged or presently proposes to engage. Borrower maintains its
principal office at 7007 WINCHESTER CIR, STE 200, BOULDER, CO 80301. Unless
Borrower has designated otherwise in writing, this is the principal office at
which Borrower keeps its books and records including its records concerning the
Collateral. Borrower will notify Lender prior to any change in the location of
Borrower’s state of organization or any change in Borrower’s name. Borrower
shall do all things necessary to preserve and to keep in full force and effect
its existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrower’s
business activities.


 


Assumed Business Names. Borrower has filed or
recorded all documents or filings required by law relating to all assumed
business names used by Borrower. Excluding the name of Borrower, the following is
a complete list of all assumed business names under which Borrower does
business: None.


 


Authorization. Borrower’s execution, delivery, and
performance of this Agreement and all the Related Documents have been duly
authorized by all necessary action by Borrower, and do not conflict with,
result in a violation of, or constitute a default under (1) any provision of
(a) Borrower’s articles of incorporation or organization, or bylaws, or
(b) any agreement or other instrument binding upon Borrower or
(2) any law, governmental regulation, court decree, or order applicable to
Borrower or to Borrower’s properties.


 


Financial Information. Each of Borrower’s financial
statements supplied to Lender truly and completely disclosed Borrower’s
financial condition as of the date of the statement, and there has been no
material adverse change in Borrower’s financial condition subsequent to the
date of the most recent financial statement supplied to Lender. Borrower has no
material contingent obligations except as disclosed in such financial
statements.


 


Legal Effect. This Agreement constitutes, and any
instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower
enforceable against Borrower in accordance with their respective terms.


 


Properties. Except as contemplated by this Agreement or as
previously disclosed in Borrower’s financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrower’s properties free and clear of all Security Interests, and has not
executed any security documents or financing statements relating to such
properties. All of Borrower’s properties are titled in Borrower’s legal name,
and Borrower has not used or filed a financing statement under any other name
for at least the last five (5) years.


 


Hazardous Substances. Except as disclosed to and
acknowledged by Lender in writing, Borrower represents and warrants that:
(1) During the period of Borrower’s ownership of the Collateral, there has
been no use, generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under, about or
from any of the Collateral. (2) Borrower has no knowledge of, or reason to
believe that there has been (a) any breach or violation of any
Environmental Laws; (b) any use, generation, manufacture, storage,
treatment, disposal, release or threatened release of any Hazardous Substance
on, under, about or from the Collateral by any prior owners or occupants of any
of the Collateral; or (c) any actual or threatened litigation or claims of
any kind by any person relating to such matters. (3) Neither Borrower nor
any tenant, contractor, agent or other authorized user of any of the Collateral
shall use, generate, manufacture, store, treat, dispose of or release any
Hazardous Substance on, under, about or from any of the Collateral; and any
such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without
limitation all Environmental Laws. Borrower authorizes Lender and its agents to enter upon the Collateral to make
such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any
inspections or tests made by Lender shall be at Borrower’s expense and for
Lender’s purposes only and shall not be construed to create any responsibility
or liability on the part of Lender to Borrower or to any other person. The
representations and warranties contained herein are based on Borrower’s due
diligence in investigating the Collateral for hazardous waste and Hazardous
Substances. Borrower hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for
cleanup or other costs under any such laws, and (2) agrees to indemnify,
defend, and hold harmless Lender against any and all claims, losses,
liabilities, damages, penalties, and expenses which Lender may directly or
indirectly sustain or suffer resulting from a breach of this section of the
Agreement or as a consequence of any use, generation, manufacture, storage,
disposal, release or threatened release of a hazardous waste or substance on the
Collateral. The provisions of this section of the Agreement, including the
obligation to indemnify and defend, shall survive the payment of the
Indebtedness and the termination, expiration or satisfaction of this Agreement
and shall not be affected by Lender’s acquisition of any Interest in any of the
Collateral, whether by foreclosure or otherwise.


 


Litigation and Claims. No litigation, claim,
investigation, administrative proceeding or similar action (including those for
unpaid taxes) against Borrower is pending or threatened, and no other event has
occurred which may materially adversely affect Borrower’s financial condition
or properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing.


 


Taxes. To the best of Borrower’s knowledge, all of
Borrower’s tax returns and reports that are or were required to be filed, have
been filed, and all taxes, assessments and other governmental charges have been
paid in full, except those presently being or to be contested by Borrower in
good faith in the ordinary course of business and for which adequate reserves
have been provided.


 


Lien Priority. Unless otherwise previously disclosed to
Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on
or affecting any of the Collateral directly or indirectly securing repayment of
Borrower’s Loan and Note, that would be prior or that may in any way be
superior to Lender’s Security Interests and rights in and to such Collateral.


 


Binding-Effect. This Agreement,
the note, all Security  Agreements  (if any), and all  Related Documents are binding upon the
signers thereof, as well as upon their successors, representatives and
assigns, and are legally enforceable in accordance with their respective terms.


 


AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so
long as this Agreement remains in effect, Borrower will:


 


Notices of Claims and Litigation. Promptly inform Lender in
writing of (1) all material adverse changes in Borrower’s financial
condition, and (2) all existing and all threatened litigation, claims,
investigations, administrative proceedings or similar actions affecting
Borrower or any Guarantor which could materially affect the financial condition
of Borrower or the financial condition of any Guarantor.


 


Financial Records. Maintain its books and
records in accordance with GAAP, applied on a consistent basis, and permit
Lender to examine and audit Borrower’s books and records at all reasonable
times.


 


Financial Statements. Furnish Lender with the
following:


 


Annual Statements. As soon as available, but in
no event later than ninety (90) days after the end of each fiscal year,
Borrower’s balance sheet and income statement for the year ended, audited by a
certified public accountant satisfactory to Lender.


 


Interim Statements. As soon as available, but in
no event later than thirty (30) days after the end of each fiscal quarter,
Borrower’s balance sheet and profit and loss statement for the period ended,
prepared by Borrower.


 


Additional Requirements. Such other information as
Lender may from time to time reasonably request relating to the borrower.


 


All
financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.


 


2
















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


(Continued)


 


Loan No: 281007262


 


Additional Information. Furnish such additional
information and statements, as Lender may request from time to time. 


 


Financial Covenants and Ratios.  Comply with the following covenants and
ratios:


 


Working Capital Requirements. Borrower shall comply with
the following working capital ratio requirements:


 


Current Ratio. Maintain a Current Ratio in excess of 1.250
to 1.000. The term “Current Ratio” means Borrower’s total Current Assets
divided by Borrower’s total Current Liabilities.


 


Tangible Net Worth Requirements. Other Net Worth requirements
are as follows: Total Liabilities to Tangible Net Worth. Customer’s “Leverage
Ratio” shall not at any time exceed 1.0 to 1.0. For purposes hereof, “Leverage
Ratio” shall mean the ratio of (i) Customer’s total liabilities less any
subordinated debt of customer, to (ii) the sum of Customer’s Tangible Net Worth
plus any subordinated debt of customer. The term “Tangible Net Worth” shall
mean Customer’s net worth as shown on Customer’s regular financial statements
prepared in accordance with GAAP, including net prepaid distribution rights,
but excluding an amount equal to: (i) any Intangible Assets, and (ii) any
amounts now or hereafter directly or indirectly owing to Customer by officers,
shareholders or affiliates of Customer. “Intangible Assets” shall mean the
total amount of goodwill, patents, trade names, trade or service marks,
copyrights, experimental expense, organization expense, un-amortized debt
discount and expense, the excess of cost of shares acquired over book value of
related assets, and such other assets as are properly classified as “intangible
assets” of the Customer determined in accordance with GAAP. Subordinated debt
shall mean any debt of Customer for borrowed money which is subordinated in
right of payment and is payable on terms and conditions junior to Lender, and
in a form and manner acceptable to Lender.


 


Additional Requirements. Additional Outside Debt.


No
additional debt in excess of 1,000,000.00 will be allowed without prior written
approval/consent of Lender.


 


Except
as provided above, all computations made to determine compliance with the
requirements contained in this paragraph shall be made in accordance with
generally accepted accounting principles, applied on a consistent basis, and
certified by Borrower as being true and correct.


 


Insurance. Maintain fire and other risk insurance, public
liability insurance, and such other insurance as Lender may require with
respect to Borrower’s properties and operations, in form, amounts, coverages
and with insurance companies acceptable to Lender. Borrower, upon request of
Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including stipulations that
coverages will not be cancelled or diminished without at least fifteen (15)
days prior written notice to Lender. Each insurance policy also shall include
an endorsement providing that coverage in favor of Lender will not be impaired
in any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is
offered a security interest for the Loans, Borrower will provide Lender with
such lender’s loss payable or other endorsements as Lender may require.


 


Insurance Reports. Furnish to Lender, upon
request of Lender, reports on, each existing insurance policy showing such
information as Lender may reasonably request, including without limitation the
following: (1) the name of the Insurer; (2) the risks insured; (3) the amount
of the policy; (4) the properties insured; (5) the then current property values
on the basis of which insurance has been obtained, and the manner of
determining those values; and (6) the expiration date of the policy. In
addition, upon request of Lender (however not more often than annually),
Borrower will have an independent appraiser satisfactory to Lender determine,
as applicable, the actual cash value or replacement cost of any Collateral. The
cost of such appraisal shall be paid by Borrower.


 


Other Agreements. Comply with all terms and conditions of all
other agreements, whether now or hereafter existing, between Borrower and any
other party and notify Lender immediately in writing of any default in
connection with any other such agreements.


 


Loan Proceeds. Use all Loan proceeds solely for Borrower’s
business operations, unless specifically consented to the contrary by Lender in
writing.


 


Taxes, Charges and Liens. Pay and discharge when due
all of its Indebtedness and obligations, including without limitation all
assessments, taxes, governmental charges, levies and liens, of every kind and
nature, imposed upon Borrower or its properties, income, or profits, prior to
the date on which penalties would attach, and all lawful claims that, if
unpaid, might become a lien or charge upon any of Borrower’s properties,
income, or profits. Provided however, Borrower will not be required to pay and
discharge any such assessment, tax, charge, levy, lien or claim so long as (1) the
legality of the same shall be contested in good faith by appropriate
proceedings, and (2) Borrower shall have established on Borrower’s books
adequate reserves with respect to such contested assessment, tax, charge, levy,
lien, or claim in accordance with GAAP.


 


Performance. Perform and comply, in a timely manner, with all
terms, conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower and
Lender. Borrower shall notify Lender immediately in writing of any default in
connection with any agreement.


 


Operations. Maintain executive and management personnel with
substantially the same qualifications and experience as the present executive
and management personnel; provide written notice to Lender of any change in
executive and management personnel; conduct its business affairs in a
reasonable and prudent manner.


 


Environmental Studies. Promptly conduct and
complete, at Borrower’s expense, all such investigations, studies, samplings
and testings as may be requested by Lender or any governmental authority
relative to any substance, or any waste or by-product of any substance defined
as toxic or a hazardous substance under applicable federal, state, or local
law, rule, regulation, order or directive, at or affecting any property or any
facility owned, leased or used by Borrower.


 


Compliance with Governmental Requirements. Comply with all
laws, ordinances, and regulations, now or hereafter in effect, of all
governmental authorities applicable to the conduct of Borrower’s properties,
businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may
contest in good faith any such law, ordinance, or regulation and withhold
compliance during any proceeding, including appropriate appeals, so long as
Borrower has notified Lender in writing prior to doing so and so long as, in
Lender’s sole opinion, Lender’s interests in the Collateral are not
jeopardized. Lender may require Borrower to post adequate security or a surety
bond, reasonably satisfactory to Lender, to protect Lender’s interest.


 


Inspection. Permit employees or agents of Lender at any
reasonable time to inspect any and all Collateral for the Loan or Loans and
Borrower’s other properties and to examine or audit Borrower’s books, accounts,
and records and to make copies and memoranda of Borrower’s books, accounts, and
records. If Borrower now or at any time hereafter maintains any records
(including without limitation computer generated records and computer software
programs for the generation of such records) in the possession of a third
party, Borrower, upon request of Lender, shall notify such party to permit
Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.


 


Compliance Certificates. Unless waived in writing by
Lender, provide Lender at least annually, with a certificate executed by
Borrower’s chief financial officer, or other officer or person acceptable to
Lender, certifying that the representations and warranties set forth in this
Agreement are true and correct as of the date of the certificate and further
certifying that, as of the date of the certificate, no Event of Default exists
under this Agreement.


 


Environmental Compliance and Reports.  Borrower shall comply in all respects with
any and all Environmental Laws; not cause-or permit-to exist, as a result of an
intentional or unintentional action or omission on Borrower’s part or on the
part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of
a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrower’s part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.


 


Additional Assurances. Make, execute and deliver to
Lender such promissory notes, mortgages, deeds of trust, security agreements,
assignments, financing statements, instruments, documents and other agreements
as Lender or its attorneys may reasonably request to evidence and secure the
Loans and to perfect all Security Interests.


 


LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would
materially affect Lender’s interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrower’s failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lender’s option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term
of any applicable insurance policy; or (2) the remaining term of the Note; or (C)
be treated as a balloon payment which will be due and payable at the Note’s
maturity.


 


3

















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


(Continued)


 


Loan
No: 281007262


 


NEGATIVE
COVENANTS. Borrower covenants and agrees with Lender that while
this Agreement is in effect, Borrower shall not, without the prior written
consent of Lender:


 


Indebtedness and Liens. (1) Except for trade debt
incurred in the normal course of business and indebtedness to Lender
contemplated by this Agreement, create, incur or assume indebtedness for
borrowed money, including capital leases, (2) sell, transfer, mortgage, assign,
pledge, lease, grant a security interest in, or encumber any of Borrower’s
assets (except as allowed as Permitted Liens), or (3) sell with recourse any of
Borrower’s accounts, except to Lender.


 


Continuity of Operations. (1) Engage in any business
activities substantially different than those in which Borrower is presently
engaged, (2) cease operations, liquidate, merge, transfer, acquire or
consolidate with any other entity, change its name, dissolve or transfer or
sell Collateral out of the ordinary course of business, or (3) pay any
dividends on Borrower’s stock (other than dividends payable in its stock),
provided, however that notwithstanding the foregoing, but only so long as no
Event of Default has occurred and is continuing or would result from the
payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined
in the Internal Revenue Code of 1986, as amended), Borrower may pay cash
dividends on its stock to its shareholders from time to time in amounts
necessary to enable the shareholders to pay income taxes and make estimated
income tax payments to satisfy their liabilities under federal and state law
which arise solely from their status as Shareholders of a Subchapter S
Corporation because of their ownership of shares of Borrower’s stock, or
purchase or retire any of Borrower’s outstanding shares or alter or amend
Borrower’s capital structure.


 


Loans, Acquisitions and Guaranties. (1) Loan, invest in or
advance money or assets to any other person, enterprise or entity, (2) purchase,
create or acquire any interest in any other enterprise or entity, or (3) incur
any obligation as surety or guarantor other than in the ordinary course of
business.


 


Agreements. Borrower will not enter into any agreement
containing any provisions which would be violated or breached by the
performance of Borrower’s obligations under this Agreement or in connection
herewith.


 


CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan
to Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower or any Guarantor is in default under the terms of this Agreement
or any of the Related Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes
incompetent or becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrower’s financial condition, in the financial condition of any
Guarantor, or in the value of any Collateral securing any Loan; or (D) any
Guarantor seeks, claims or otherwise attempts to limit, modify or revoke such
Guarantor’s guaranty of the Loan or any other loan with Lender; or (E) Lender
in good faith deems itself insecure, even though no Event of Default shall have
occurred.


 


RIGHT OF
SETOFF. To the extent permitted by applicable law, Lender reserves a right of
setoff in all Borrower’s accounts with Lender (whether checking, savings, or
some other account). This includes all accounts Borrower holds jointly with
someone else and all accounts Borrower may open in the future. However, this
does not include any IRA or Keogh accounts, or any trust accounts for which
setoff would be prohibited by law. Borrower authorizes Lender, to the extent
permitted by applicable law, to charge or setoff all sums owing on the
Indebtedness against any and all such accounts, and, at Lender’s option, to
administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.


 


DEFAULT. Each of the
following shall constitute an Event of Default under this Agreement: 


 


Payment Default. Borrower fails to make any payment when due
under the Loan.


 


Other Defaults. Borrower fails to comply with or to perform
any other term, obligation, covenant or condition contained in this Agreement
or in any of the Related Documents or to comply with or to perform any term,
obligation, covenant or condition contained in any other agreement between
Lender and Borrower.


 


Default in Favor of Third Parties. Borrower or any Grantor
defaults under any loan, extension of credit, security agreement, purchase or sales
agreement, or any other agreement, in favor of any other creditor or person
that may materially affect any of Borrower’s or any Grantor’s property or
Borrower’s or any Grantor’s ability to repay the Loans or perform their
respective obligations under this Agreement or any of the Related Documents.


 


False Statements. Any warranty, representation or statement
made or furnished to Lender by Borrower or on Borrower’s behalf under this
Agreement or the Related Documents is false or misleading in any material
respect, either now or at the time made or furnished or becomes false or
misleading at any time thereafter.


 


Insolvency. The dissolution or termination of Borrower’s
existence as a going business, the insolvency of Borrower, the appointment of a
receiver for any part of Borrower’s property, any assignment for the benefit of
creditors, any type of creditor workout, or the commencement of any proceeding
under any bankruptcy or insolvency laws by or against Borrower.


 


Defective Collateralization. This Agreement or any of the
Related Documents ceases to be in full force and effect (including failure of
any collateral document to create a valid and perfected security interest or
lien) at any time and for any reason.


 


Creditor or Forfeiture Proceedings. Commencement of foreclosure
or forfeiture proceedings, whether by judicial proceeding, self-help,
repossession or any other method, by any creditor of Borrower or by any
governmental agency against any collateral securing the Loan. This includes a
garnishment of any of Borrower’s accounts, including deposit accounts, with
Lender. However, this Event of Default shall not apply if there is a good faith
dispute by Borrower as to the validity or reasonableness of the claim which is
the basis of the creditor or forfeiture proceeding and if Borrower gives
Lender written notice of the creditor or forfeiture proceeding and deposits
with Lender monies or a surety bond for the creditor or forfeiture proceeding,
in an amount determined by Lender, in its sole discretion, as being an adequate
reserve or bond for the dispute.


 


Events Affecting Guarantor. Any of the preceding events
occurs with respect to any Guarantor of any of the Indebtedness or any
Guarantor dies or becomes incompetent, or revokes or disputes the validity of,
or liability under, any Guaranty of the Indebtedness.


 


Change in Ownership. Any change in ownership of
twenty-five percent (25%) or more of the common stock of Borrower.


 


Adverse Change. A material adverse change occurs in
Borrower’s financial condition, or Lender believes the prospect of payment or
performance of the Loan is impaired.


 


Insecurity. Lender in good faith believes itself insecure.


 


EFFECT
OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make further Loan Advances or disbursements), and, at Lender’s
option, all Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the “Insolvency” subsection above, such acceleration
shall be automatic and not optional. In addition, Lender shall have all the
rights and remedies provided in the Related Documents or available at law, in
equity, or otherwise. Except as may be prohibited by applicable law, all of
Lender’s rights and remedies shall be cumulative and may be exercised singularly
or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit
of any other remedy, and an election to make expenditures or to take action to perform
an obligation of Borrower or of any Grantor shall not affect Lender’s right to
declare a default and to exercise its rights and remedies.


 


NO
PURCHASE OF SECURITIES. Borrower agrees the proceeds of the credit
facility may not be used to purchase or carry securities.


 


ACQUISITION. In the event
the borrower or any of the subsidaries are acquired or purchased by a third
party, the facility will be due and payable.


 


LOANS TO
AFFILIATED PERSONS AND ENTITIES. Borrower agrees, without
prior written consent of First Community bank, no loans or advances directly or
indirectly made by Customer to affiliated person or entities.


 


MATERIAL
CHANGE IN CLIENT BASE. Borrower agrees, no adverse, material change
in the current client base  as it related to the
Borrowers largest clients, i.e. EchoStar Communications, Time Warner
Broadcasting, Comcast and DirecTV.


 


ADDITIONAL
OUTSIDE DEBT. Borrower agrees no additional debt in excess of $1MM
will be allowed without prior First Community Bank approval.


 


CONTINUITY. Customer will
continue to maintain its business, existence, ownership and good standing.


 


PROPERTY
AND CASUALTY INSURANCE. Borrower shall maintain sufficient and
satisfactory insurance, listing FCB as Mortgagee, against the subject property
at all times. Borrower shall provide proof of insurance as the bank may reasonably
request.


 


OTHER
INFORMATION. Borrower agrees such other information as Lender may
from time to time reasonably request relating to Customer or any Guarantor.


 


MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of
this Agreement:


 


4

















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


(Continued)


 


Loan
No: 281007262


 


Amendments. This Agreement, together with any Related Documents,
constitutes the entire understanding and agreement of the parties as to the
matters set forth in this Agreement. No alteration of or amendment to this
Agreement shall be effective unless given in writing and signed by the party or
parties sought to be charged or bound by the alteration or amendment.


 


Attorneys’ Fees;  Expenses. Borrower agrees
to pay upon demand all of Lender’s reasonable costs and expenses, including
Lender’s attorneys’ fees and Lender’s legal expenses, incurred in connection
with the enforcement of this Agreement. Lender may hire or pay someone else to
help enforce this Agreement, and Borrower shall pay the reasonable costs and
expenses of such enforcement. Costs and expenses include Lender’s attorneys’
fees and legal expenses whether or not there is a lawsuit, including attorneys’
fees and legal expenses far bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. Borrower also shall pay all court costs and
such additional fees as may be directed by the court.


 


Caption Headings. Caption headings in this Agreement are for
convenience purposes only and are not to be used to interpret or define the
provisions of this Agreement.


 


Consent to Loan Participation. Borrower agrees and consents
to Lender’s sale or transfer, whether now or later, of one or more
participation interests in the Loan to one or more purchasers, whether related
or unrelated to Lender. Lender may provide, without any limitation whatsoever,
to any one or more purchasers, or potential purchasers, any information or
knowledge Lender may have about Borrower or about any other matter relating to
the Loan, and Borrower hereby waives any rights to privacy Borrower may have
with respect to such matters. Borrower additionally waives any and all notices
of sale of participation interests, as well as all notices of any repurchase of
such participation interests. Borrower also agrees that the purchasers of any
such participation interests will be considered as the absolute owners of such
interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation
interests. Borrower further waives all rights of offset or counterclaim that it
may have now or later against Lender or against any purchaser of such a
participation interest and unconditionally agrees that either Lender or such
purchaser may enforce Borrower’s obligation under the Loan irrespective of the
failure or insolvency of any holder of any interest in the Loan. Borrower
further agrees that the purchaser of any such participation interests may
enforce its interests irrespective of any personal claims or defenses that
Borrower may have against Lender.


 


Governing Law. This Agreement will be governed by federal
law applicable to Lender and, to the extent not preempted by federal law, the
laws of the State of Colorado without regard to its conflicts of law
provisions. This Agreement has been accepted by Lender in the State of
Colorado.


 


Choice of Venue. If there is a lawsuit, Borrower agrees upon
Lender’s request to submit to the jurisdiction of the courts of Jefferson
County, State of Colorado.


 


No Waiver by Lender. Lender shall not be  deemed
to have waived any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the part of Lender in
exercising any right shall operate as a waiver of such right or any other
right. A waiver by Lender of a provision of this Agreement shall not prejudice
or constitute a waiver of Lender’s right otherwise to demand strict compliance
with that provision or any other provision of this Agreement. No prior waiver
by Lender, nor any course of dealing between Lender and Borrower, or between
Lender and any Grantor, shall constitute a waiver of any of Lender’s rights or
of any of Borrower’s or any Grantor’s obligations as to any future
transactions. Whenever the consent of Lender is required under this Agreement,
the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.


 


Notices. Any notice required to be given under this Agreement
shall be given in writing, and shall be effective when actually delivered, when
actually received by telefacsimile (unless otherwise required by law), when
deposited with a nationally recognized overnight courier, or, if mailed, when
deposited in the United States mail, as first class, certified or registered
mail postage prepaid, directed to the addresses shown near the beginning of
this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that
the purpose of the notice is to change the party’s address. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrower’s
current address. Unless otherwise provided or required by law, if there is more
than one Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.


 


Severability. If a court of competent jurisdiction finds
any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal,
invalid, or unenforceable as to any other circumstance. If feasible, the
offending provision shall be considered modified so that it becomes legal,
valid and enforceable. If the offending provision cannot be so modified, it shall
be considered deleted from this Agreement. Unless otherwise required by law,
the illegality, invalidity, or unenforceability of any provision of this
Agreement shall not affect the legality, validity or enforceability of any
other provision of this Agreement.


 


Subsidiaries and Affiliates of Borrower. To the extent the context of
any provisions of this Agreement makes it appropriate, including without
limitation any representation, warranty or covenant, the word “Borrower” as
used in this Agreement shall include all of Borrower’s subsidiaries and
affiliates. Notwithstanding the foregoing however, under no circumstances shall
this Agreement be construed to require Lender to make any Loan or other
financial accommodation to any of Borrower’s subsidiaries or affiliates.


 


Successors and Assigns. All covenants and agreements
by or on behalf of Borrower contained in this Agreement or any Related
Documents shall bind Borrower’s successors and assigns and shall inure to the
benefit of Lender and its successors and assigns. Borrower shall not, however,
have the right to assign Borrower’s rights under this Agreement or any interest
therein, without the prior written consent of Lender.


 


Survival of Representations and Warranties. Borrower
understands and agrees that in extending Loan Advances, Lender is relying on
all representations, warranties, and covenants made by Borrower in this
Agreement or in any certificate or other instrument delivered by Borrower to
Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation made by Lender, all such
representations, warranties and covenants will survive the extension of Loan
Advances and delivery to Lender of the Related Documents, shall be continuing
in nature, shall be deemed made and redated by Borrower at the time each Loan
Advance is made, and shall remain in full force and effect until such time as
Borrower’s Indebtedness shall be paid in full, or until this Agreement shall be
terminated in the manner provided above, whichever is the last to occur.


 


Time is of the Essence. Time is of the essence in
the performance of this Agreement.


 


DEFINITIONS. The following
capitalized words and terms shall have the following meanings when used in this
Agreement. Unless specifically stated to the contrary, all references to dollar
amounts shall mean amounts in lawful money of the United States of America.
Words and terms used in the singular shall include the plural, and the plural
shall include the singular, as the context may require. Words and terms not
otherwise defined in this Agreement shall have the meanings attributed to such
terms in the Uniform Commercial Code. Accounting words and terms not otherwise
defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the data of this
Agreement:


 


Advance. The word “Advance” means a disbursement of Loan
funds made, or to be made, to Borrower or on Borrower’s behalf under the terms
and conditions of this Agreement.


 


Agreement. The word “Agreement” means this Business Loan
Agreement (Asset Based), as this Business Loan Agreement (Asset Based) may be amended
or modified from time to time, together with all exhibits and schedules
attached his Business Loan Agreement (Asset Based) from time to time.


 


Borrower. The word “Borrower” means NEW FRONTIER MEDIA, INC.
and includes all co-signers and co-makers signing the Note and all their
successors and assigns.


 


Borrowing Base. The words “Borrowing Base” mean Borrowing
Base and Compliance Certificate- submission of the company’s borrowing base and
compliance certificate, to be submitted with 30 days of each month end. The
borrowing base certificate will be signed by CEO, Michael Weiner, is required
to certify the monthly compliance certificate.


 


Eligible
accounts receivable are defined as accounts due and payable to borrower, that
are less than 90 days past the stated due date of the invoice. Eligible
accounts receivable additionally exclude accounts related to the ôreppedō accounts of MRG. A “repped”
account is where MRG represents a mainstream producer as the sales agent for
the distribution of movies, including international sales. As a result the
entire receivable is not retained by MRG, with a portion passing through to the
producer. Additionally, the borrowing base will be adjusted so that no one
client can comprise in excess of fifty (50%) percent of the total borrowing
base at any one time..


 


Business Day. The words “Business Day” mean a day on which
commercial banks are open in the State of Colorado.


 


Collateral. The word “Collateral” means all property and assets
granted as collateral security for a Loan, whether real or personal property,
whether granted directly or indirectly, whether granted now or in the future,
and whether granted in the form of a security interest, mortgage, collateral
mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other
security or lien interest whatsoever, whether created by law, contract, or
otherwise. The word Collateral also includes without limitation all collateral
described in the Collateral section of this Agreement.


 


5

















 


BUSINESS LOAN AGREEMENT (ASSET BASED)


(Continued)


 


Loan
No: 281007262


 


Environmental Laws.  The words “Environmental Laws” mean any and
all state, federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or
other applicable state or federal laws, rules, or regulations adopted pursuant
thereto.


 


Event of Default. The words “Event of Default” mean any of the
events of default set forth in this Agreement in the default section of this
Agreement.


 


Expiration Date. The words “Expiration Date” mean the date of
termination of Lender’s commitment to lend under this Agreement. 


 


GAAP. The word “GAAP” means generally accepted accounting
principles.


 


Grantor. The word “Grantor” means each and all of the persons
or entities granting a Security Interest in any Collateral for the Loan,
including without limitation all Borrowers granting such a Security Interest.


 


Guarantor. The word “Guarantor” means any guarantor, surety, or
accommodation party of any or all of the Loan.


 


Guaranty. The word “Guaranty” means the guaranty from
Guarantor to Lender, including without limitation a guaranty of all or part of
the Note.


 


Hazardous Substances. The words “Hazardous
Substances” mean materials that, because of their quantity, concentration or
physical, chemical or infectious characteristics, may cause or pose a present
or potential hazard to human health or the environment when improperly used,
treated, stored, disposed of, generated, manufactured, transported or otherwise
handled. The words “Hazardous Substances” are used in their very broadest sense
and include without limitation any and all hazardous or toxic substances,
materials or waste as defined by or listed under the Environmental Laws. The
term “Hazardous Substances” also includes, without limitation, petroleum and
petroleum by-products or any fraction thereof and asbestos.


 


Indebtedness. The word “Indebtedness” means the
indebtedness evidenced by the Note or Related Documents, including all principal
and interest together with all other indebtedness and costs and expenses for
which Borrower is responsible under this Agreement or under any of the Related
Documents.


 


Lender. The word “Lender” means First Community Bank, its
successors and assigns.


 


Loan. The word “Loan” means any and all loans and
financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.


 


Note. The word “Note” means the Promissory Note or
Agreement dated July 1, 2008 in the original principal amount of $9,000,000.00
from Borrower/Grantor to Lender together with all renewals of, extensions of,
modifications of, refinancings of, consolidations of, additions of and
substitutions for the Promissory Note or Agreement.


 


Permitted Liens. The words “Permitted Liens” mean (1) liens
and security interests securing Indebtedness owed by Borrower to Lender; (2) liens
for taxes, assessments, or similar charges either not yet due or being
contested in good faith; (3) liens of materialmen, mechanics, warehousemen, or
carriers, or other like liens arising in the ordinary course of business and
securing obligations which are not yet delinquent; (4) purchase money liens or
purchase money security interests upon or in any property acquired or held by
Borrower in the ordinary course of business to secure indebtedness outstanding
on the date of this Agreement or permitted to be incurred under the paragraph
of this Agreement titled “Indebtedness and Liens”; (5) liens and security
interests which, as of the date of this Agreement, have been disclosed to and
approved by the Lender in writing; and (6) those liens and security interests
which in the aggregate constitute an immaterial and insignificant monetary
amount with respect to the net value of Borrower’s assets.


 


Primary Credit Facility. The words “Primary Credit
Facility” mean the credit facility described in the Line of Credit section of
this Agreement.


 


Related Documents. The words “Related
Documents” mean all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, mortgages, deeds of
trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in
connection with the Loan.


 


Security Agreement. The words “Security
Agreement” mean and include without limitation any agreements, promises,
covenants, arrangements, understandings or other agreements, whether created by
law, contract, or otherwise, evidencing, governing, representing, or creating a
Security Interest.


 


Security Interest. The words “Security Interest”
mean, without limitation, any and all types of collateral security, present and
future, whether in the form of a lien, charge, encumbrance, mortgage, deed of
trust, security deed, assignment, pledge, crop pledge, chattel mortgage,
collateral chattel mortgage, chattel trust, factor’s lien, equipment trust,
conditional sale, trust receipt, lien or title retention contract, lease or
consignment intended as a security device, or any other security or lien interest
whatsoever whether created by law, contract, or otherwise.


 


BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT
(ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT
(ASSET BASED) IS DATED JUNE 15, 2009.


 


	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  NEW
  FRONTIER MEDIA, INC

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  Michael Weiner

  	
   

  	
  By:

  	
  /s/
  Grant Williams

  
	
   

  	
  MICHAEL
  WEINER, CEO of NEW FRONTIER MEDIA, INC.

  	
   

  	
  GRANT
  WILLIAMS, CFO of NEW FRONTIER MEDIA, INC.

  
					



 


LENDER:


 


 


FIRST
COMMUNITY BANK


 


	
  By:

  	
  /s/
  Samantha Borelli

  	
   

  
	
   

  	
  Authorized
  Signer 

  	
   

  



 


[ILLEGIBLE]


 


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