Document:

Exhibit 10.01

 

PROMISSORY NOTE

 

	
  Principal

  $5,000,000.00

  	
   

  	
  Loan Date

  12-15-2009

  	
   

  	
  Maturity

  12-15-2010

  	
   

  	
  Loan No.

  15525121115

  	
   

  	
  Call / Coll

  1C1 / 599

  	
   

  	
  Account

  	
   

  	
  Officer

  BORES

  	
   

  	
  Initials

  

 

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:

  	
  GREAT WESTERN BANK

  
	
   

  	
  7007 Winchester Circle, Suite 200

  	
   

  	
  Lakewood

  
	
   

  	
  Boulder, CO 80301

  	
   

  	
  215 Union Blvd.

  
	
   

  	
   

  	
   

  	
  Suite 150

  
	
   

  	
   

  	
   

  	
  Lakewood, CO 80228

  

 

	
  Principal Amount: $5,000,000.00

  	
  Date of Note: December 15, 2009

  

 

PROMISE TO PAY.  New Frontier Media Inc (“Borrower”)
promises to pay to GREAT WESTERN BANK (“Lender”), or order, in lawful money of
the United States of America, the principal amount of Five Million & 00/100
Dollars ($5,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance.  Interest shall be calculated from the date of
each advance until repayment of each advance.

 

PAYMENT.  Borrower will pay this
loan in full immediately upon Lender’s demand. 
If no demand is made, Borrower will pay this loan in one payment of all
outstanding principal plus all accrued unpaid interest on December 15, 2010.  In addition, Borrower will pay regular
monthly payments of all accrued unpaid interest due as of each payment date,
beginning January 15, 2010, with all subsequent interest payments to be due on
the same day of each month after that.  Unless
otherwise agreed or required by applicable law, payments will be applied first
to any accrued unpaid interest; then to principal; then to any unpaid
collection costs; and then to any late charges. 
Borrower will pay Lender at Lender’s address shown above or at such
other place as Lender may designate in writing.

 

VARIABLE INTEREST RATE.  The interest rate on this Note is subject to
change from time to time based on changes in an independent index which is the
The High Prime Rate as quoted in the Money Rates Section of the Wall Street
Journal (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.  Interest on the unpaid principal balance of
this Note 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 Note be less than 5.750% per annum or more than the maximum
rate allowed by applicable law.

 

INTEREST CALCULATION METHOD.  Interest on this Note 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 Note is
computed using this method.

 

PREPAYMENT; MINIMUM INTEREST CHARGE.  Borrower agrees that all loan fees and other
prepaid finance charges are earned fully as of the date of the loan and will
not be subject to refund upon early payment (whether voluntary or as a result
of default), except as otherwise required by law.  In any event, even upon full prepayment of
this Note, Borrower understands that Lender is entitled to a minimum
interest charge of $75.00.  Other
than Borrower’s obligation to pay any minimum interest charge, Borrower may pay
without penalty all or a portion of the amount owed earlier than it is due.  Early payments will not, unless agreed to by
Lender in writing, relieve Borrower of Borrower’s obligation to continue to
make payments of accrued unpaid interest. 
Rather, early payments will reduce the principal balance due.  Borrower agrees not to send Lender payments
marked “paid in full”, “without recourse”, or similar language.  If Borrower sends such a payment, Lender may
accept it without losing any of Lender’s rights under this Note, and Borrower
will remain obligated to pay any further amount owed to Lender.  All written communications concerning
disputed amounts, including any check or other payment instrument that
indicates that the payment constitutes “payment in full” of the amount owed or
that is tendered with other conditions or limitations or as full satisfaction
of a disputed amount must be mailed or delivered to: GREAT WESTERN BANK,
Lakewood, 215 Union Blvd., Suite 150, Lakewood, CO 80228.

 

LATE CHARGE.  If a payment is 10 days or more late,
Borrower will be charged 2.000% of the regularly
scheduled payment or $25.00, whichever is greater.

 

INTEREST AFTER DEFAULT.  Upon default, including failure to pay upon
final maturity, the interest rate on this Note shall be increased to 20.000% per
annum based on a year of 360 days.  However,
in no event will the interest rate exceed the maximum interest rate limitations
under applicable law.

 

DEFAULT.  Each of the following shall constitute an
event of default (“Event of Default”) under this Note:

 

Payment Default.  Borrower fails to make any payment when due
under this Note.

 

Other Defaults.  Borrower fails to comply with or to perform
any other term, obligation, covenant or condition contained in this Note 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.

 

False Statements.  Any warranty, representation or statement
made or furnished to Lender by Borrower or on Borrower’s behalf under this Note
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.

 

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, endorser, surety, or accommodation party of any of
the indebtedness or any guarantor, endorser, surety, or accommodation party
dies or becomes incompetent, or revokes or disputes the validity of, or
liability under, any guaranty of the indebtedness evidenced by this Note.

 

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 this Note is impaired.

 

Insecurity. 
Lender in good faith believes itself insecure.

 

Cure Provisions.  If any default, other than a default in
payment is curable and if Borrower has not been given a notice of a breach of
the same provision of this Note within the preceding twelve (12) months, it may
be cured if Borrower, after Lender sends written notice to Borrower demanding
cure of such default:  (1) cures the
default within fifteen (15) days; or (2) if the cure requires more than fifteen
(15) days, immediately initiates steps which Lender deems in Lender’s sole
discretion to be sufficient to cure the default and thereafter continues and
completes all reasonable and necessary steps sufficient to produce compliance
as soon as reasonably practical.

 

LENDER’S RIGHTS.  Upon default, Lender may declare the entire
unpaid principal balance under this Note and all accrued unpaid interest
immediately due, and then Borrower will pay that amount.

 

ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone else to help
collect this Note if Borrower does not pay. 
Borrower will pay Lender the reasonable costs of such collection.  This includes, subject to any limits under
applicable law, Lender’s attorneys’ fees and Lender’s legal expenses, whether
or not there is a lawsuit, including 

 

 

without limitation attorneys’ fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), and appeals. 
If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.

 

GOVERNING LAW.  This Note 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 Note 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.

 

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.

 

COLLATERAL.  Borrower acknowledges this Note is secured by
COMMERCIAL SECURITY AGREEMENT FROM NEW FRONTIER MEDIA INC TO GREAT WESTERN BANK
DATED 12/15/2009.

 

LINE OF CREDIT.  This Note evidences a revolving line of
credit.  Advances under this Note may be
requested orally by Borrower or as provided in this paragraph.  All oral requests shall be confirmed in
writing on the day of the request.  All
communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lender’s office shown above.  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.  Borrower agrees to be liable for all sums
either:  (A) advanced in accordance with
the instructions of an authorized person or (B) credited to any of Borrower’s
accounts with Lender.  The unpaid
principal balance owing on this Note at any time may be evidenced by
endorsements on this Note or by Lender’s internal records, including daily
computer print-outs.  Lender will have no
obligation to advance funds under this Note if:  (A) Borrower or any guarantor is in default
under the terms of this Note or any agreement that Borrower or any guarantor
has with Lender, including any agreement made in connection with the signing of
this Note; (B) Borrower or any guarantor ceases doing business or is insolvent;
(C) any guarantor seeks, claims or otherwise attempts to limit, modify or
revoke such guarantor’s guarantee of this Note or any other loan with Lender; (D)
Borrower has applied funds provided pursuant to this Note for purposes other than
those authorized by Lender; or (E) Lender in good faith believes itself
insecure.

 

SUCCESSOR INTERESTS.  The terms of this Note shall be binding upon
Borrower, and upon Borrower’s heirs, personal representatives, successors and
assigns, and shall inure to the benefit of Lender and its successors and
assigns.

 

NOTIFY US OF INACCURATE INFORMATION WE REPORT
TO CONSUMER REPORTING AGENCIES.  Please notify us if we report any inaccurate
information about your account(s) to a consumer reporting agency.  Your written notice describing the specific
inaccuracy(ies) should be sent to us at the following address: GREAT WESTERN
BANK 35 1st Ave NE Watertown, SD 57201.

 

GENERAL PROVISIONS.  This Note is payable on demand.  The inclusion of specific default provisions
or rights of Lender shall not preclude Lender’s right to declare payment of
this Note on its demand.  If any part of
this Note cannot be enforced, this fact will not affect the rest of the Note.  Lender may delay or forgo enforcing any of
its rights or remedies under this Note without losing them.  Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, and notice of dishonor.  Upon any change in the terms of this Note, and
unless otherwise expressly stated in writing, no party who signs this Note,
whether as maker, guarantor, accommodation maker or endorser, shall be released
from liability.  All such parties agree
that Lender may renew or extend (repeatedly and for any length of time) this
loan or release any party or guarantor or collateral; or impair, fail to
realize upon or perfect Lender’s security interest in the collateral; and take
any other action deemed necessary by Lender without the consent of or notice to
anyone.  All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other
than the party with whom the modification is made.  The obligations under this Note are joint and
several.

 

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

 

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED
COPY OF THIS PROMISSORY NOTE.

 

	
  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

  
					

 

 

Laser PRO Lending, Ver.
5.46.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2009.  All Rights Reserved.

 

2Exhibit 10.02

 

Portions of this Exhibit have been redacted
pursuant to a request for confidential treatment under Rule 24b-2 of the
General Rules and  Regulations
under the Securities Exchange Act. 
Omitted information, marked “[***]” in this Exhibit, has been filed with
the Securities and Exchange Commission together with such request for
confidential treatment.

 

BUSINESS LOAN AGREEMENT (ASSET BASED)

 

	
  Principal 

  $5,000,000.00

  	
   

  	
  Loan Date 

  12-15-2009

  	
   

  	
  Maturity 

  12-15-2010

  	
   

  	
  Loan No. 

  15525121115

  	
   

  	
  Call / Coll 

  1C1 / 599

  	
   

  	
  Account

  	
   

  	
  Officer 

  BORES

  	
   

  	
  Initials

  

 

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:

  	
  GREAT WESTERN BANK

  
	
   

  	
  7007 Winchester Circle, Suite 200

  	
   

  	
  Lakewood

  
	
   

  	
  Boulder, CO 80301

  	
   

  	
  215 Union Blvd.

  
	
   

  	
   

  	
   

  	
  Suite 150

  
	
   

  	
   

  	
   

  	
  Lakewood, CO 80228

  

 

THIS BUSINESS LOAN AGREEMENT (ASSET BASED)
dated December 15, 2009, is made and executed between New Frontier Media Inc (“Borrower”)
and GREAT WESTERN 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 December
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 December 15, 2010.

 

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 priority 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 Accounts, 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 

 

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

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
similar 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. 
With respect to the Accounts, Borrower agrees to keep and maintain such
records as Lender may require, including without limitation information
concerning Eligible Accounts and Account balances and agings.  Records related to Accounts (Receivables) are
or will be located at .  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
Accounts and schedules of Eligible Accounts in form and substance satisfactory
to the Lender.  Thereafter supplemental
schedules shall be delivered according to the following schedule:

 

Representations and Warranties Concerning Accounts.  With respect to the Accounts, Borrower
represents and warrants to Lender:  (1) Each
Account represented by Borrower to be an Eligible Account for purposes of this
Agreement conforms to the requirements of the definition of an Eligible
Account; (2) All Account information listed on schedules delivered to Lender
will be true and correct, subject to immaterial variance; and (3) Lender, its
assigns, or agents shall have the right at any time and at Borrower’s expense
to inspect, examine, and audit Borrower’s records and to confirm with Account
Debtors the accuracy of such Accounts.

 

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 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 an office at 7007 Winchester
Circle, Suite 200, Boulder, CO 80301.  Unless
Borrower has designated otherwise in writing, the principal office is the
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.

 

2

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

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.

 

Additional Requirements.  Internally prepared interim financials (form
10Q), to be submitted not less than quarterly, to include balance sheet, income
statement and accounts receivable aging schedule.  Submission of the company’s borrowing base
and compliance certificate, to be submitted within 30 days of each month end.  The borrowing base certificate will be signed
by CEO, Michael Weiner to certify compliance. 
Any such other information as Great Western Bank may from time to time
reasonably request relating to Customer.

 

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.

 

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

 

Additional Requirements.  All covenants are required to be certified on
the monthly borrowing base certificate that is submitted monthly.  The financial calculations for the covenants
are based on the most recent quarterly financials submitted.  — No Purchase of Securities.  The proceeds of the credit facilities may not
be used to purchase or carry securities; however, Great Western Bank would
allow them to repurchase their own company stock.  — Continuity. 
Customer will continue and maintain its business, existence, ownership
and good standing.  — Acquisition.  In the event the borrower or any of
subsidiaries are acquired or purchased by a third party, the facility will be
due and payable.  — 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 total
liabilities to tangible net worth.  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 officer,
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 

 

3

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

such other
assets as are properly classified as “Intangible Assets” of the Customer
determined in accordance with GAAP.  —
Current Ratio.  Borrower to maintain a
current ratio of not less than 1.50 to 1.00.

 

Current ratio
is defined as (a) current assets as defined by GAAP less employee or related
party receivables, to (b) current liabilities; as set forth in Customer’s
regular quarter financial statements prepared in accordance with GAAP.  — Loans to Affiliated Persons and Entities.  Without the prior written consent of Great
Western Bank, no loans or advances may be made directly or indirectly made by
the borrower to any affiliated person or entities.  — Material Change in Client Base.  No adverse, material change in the current
client base as it relates to the Borrower’s largest [***] clients.  — Additional Outside Debt.  No additional debt in excess of $1 MM will be
allowed without prior Great Western Bank approval.

 

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 ten (10) 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 within thirty (30) days after the end of each month, 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.

 

4

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

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.

 

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. 
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.

 

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.

 

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.

 

5

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

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.

 

Right to Cure. 
If any default, other than a default on Indebtedness, is curable and if
Borrower or Grantor, as the case may be, has not been given a notice of a
similar default within the preceding twelve (12) months, it may be cured if
Borrower or Grantor, as the case may be, after Lender sends written notice to
Borrower or Grantor, as the case may be, demanding cure of such default:  (1) cure the default within fifteen (15)
days; or (2) if the cure requires more than fifteen (15) days, immediately
initiate steps which Lender deems in Lender’s sole discretion to be sufficient
to cure the default and thereafter continue and complete all reasonable and
necessary steps sufficient to produce compliance as soon as reasonably
practical.

 

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.

 

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

 

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 for 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 

 

6

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

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 date of this Agreement:

 

Account. 
The word “Account” means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Borrower (or to a third party grantor acceptable to Lender).

 

Account Debtor.  The words “Account Debtor” mean the person or
entity obligated upon an Account.

 

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 to this
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, as
determined by Lender from time to time, the lesser of (1) $5,000,000.00
or (2) 75.000% of the aggregate amount of
Eligible Accounts.

 

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.

 

Eligible Accounts.  The words “Eligible Accounts” mean at any
time, all of Borrower’s Accounts which contain selling terms and conditions
acceptable to Lender.  The net amount of
any Eligible Account against which Borrower may borrow shall exclude all
returns, discounts, credits, and offsets of any nature.  Unless otherwise agreed to by Lender in
writing, Eligible Accounts do not include:

 

(1)  Accounts
with respect to which the Account Debtor is employee or agent of Borrower.

 

(2)  Accounts
with respect to which the Account Debtor is a subsidiary of, or affiliated with
Borrower or its shareholders, officers, or directors.

 

(3)  Accounts
with respect to which goods are placed on consignment, guaranteed sale, or
other terms by reason of which the payment by the Account Debtor may be
conditional.

 

(4)  Accounts
with respect to which Borrower is or may become liable to the Account Debtor
for goods sold or services rendered by the Account Debtor to Borrower.

 

(5)  Accounts
which are subject to dispute, counterclaim, or setoff.

 

(6)  Accounts
with respect to which the goods have not been shipped or delivered, or the
services have not been rendered, to the Account Debtor.

 

(7)  Accounts
with respect to which Lender, in its sole discretion, deems the
creditworthiness or financial condition of the Account Debtor to be unsatisfactory.

 

(8)  Accounts
of any Account Debtor who has filed or has had filed against it a petition in
bankruptcy or an application for relief under any provision of any state or
federal bankruptcy, insolvency, or debtor-in-relief acts; or who has had appointed
a trustee, custodian, or receiver for the assets of such Account Debtor; or who
has made an assignment for the benefit of creditors or has become insolvent or
fails generally to pay its debts (including its payrolls) as such debts become
due.

 

(9)  Accounts
which have not been paid in full within Less than 90 days
from the invoice date.

 

7

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

(10)  Any
one client that compromises an excess of 35% of the total borrowing base at any
one time would be excluded from the borrowing base.  The exception to this would be a “producer
for hire” invoice which would be noted in the borrowing base.

 

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 GREAT WESTERN 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 Note executed by New Frontier Media Inc in the principal
amount of $5,000,000.00 dated December 15, 2009, together with all renewals of,
extensions of, modifications of, refinancings of, consolidations of, and
substitutions for the note or credit 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 DECEMBER 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

  

 

8

 

Portions of this Exhibit have been redacted pursuant to a request for
confidential treatment under Rule 24b-2 of the General Rules and
Regulations under the Securities Exchange Act.  Omitted information, marked “[***]” in this
Exhibit, has been filed with the Securities and Exchange Commission together
with such request for confidential treatment.

 

	
  LENDER:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  GREAT WESTERN BANK

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  X /s/ Samantha Borelli

  	
   

  
	
  Authorized
  Signer

  	
   

  

 

Laser PRO Lending, Ver.
5.46.00.003 Copr. Harland Financial Solutions, Inc. 1997, 2009.  All Rights Reserved.

 

9

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