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EXHIBIT 10.15    
    

REDACTED COPY  

NREL
Patent License Number 06-098 

[Note: A "[*]" indicates that material has been omitted pursuant to a request for confidential treatment and that the material has been
filed separately.]

[NREL
National Renewable Energy Laboratory LOGO] 

NON-EXCLUSIVE PATENT LICENSE AGREEMENT

Between

Midwest Research Institute

And

Ascent Solar Technologies, Inc.  

        This License Agreement (hereinafter "Agreement") is between Midwest Research Institute (hereinafter "MRI") located at 425 Volker Boulevard, Kansas City, Missouri
64110, Management and Operating Contractor for the National Renewable Energy Laboratory (hereinafter "NREL") located at 1617 Cole Blvd., Golden, Colorado 80401 and Ascent Solar
Technologies, Inc., (hereinafter "Licensee"), a Colorado company organized and existing under the laws of the State of Delaware and having a principal place of business at 8120 Shaffer Parkway,
Littleton, CO 80127, each hereinafter referred to individually as a "Party" and jointly as "Parties." This Agreement shall be effective on the later of
(a) the date the last Party signs this Agreement or (b) the date MRI receives the Upfront Fee pursuant to Section B of Exhibit B hereof (hereinafter "Effective Date"). 

BACKGROUND:  

        MRI manages and operates NREL under authority of its Prime Contract No. DE-AC36-99GO10337 (hereinafter "Prime Contract") with the
United States Government as represented by the Department of Energy (hereinafter "DOE"); 

        Inventions
identified in Exhibit A (hereinafter "Licensed Inventions"), were conceived or first reduced to practice in the performance of work at NREL under the above Prime
Contract. Pursuant to the terms of said Prime Contract and existing laws of the United States, MRI acquired rights in and to said Licensed Inventions, as defined below; 

        Licensee's
parent company is a Colorado business located in Littleton, CO that has worked closely with NREL on Copper Indium Gallium DiSelenide ("CIGS") and other thin film photovoltaic
related projects; 

        Licensee
will commercialize the parent company's proprietary process of putting CIGS technology on plastic substrates; and 

        Licensee
is interested in acquiring certain rights to MRI's patented CIGS technologies. MRI is willing to grant such rights so that the Licensed Inventions will be developed and be used
to the fullest extent possible for the benefit of the general public. 

 

TERMS & CONDITIONS:  

        THEREFORE, in consideration of the foregoing, the Parties agree to be bound as follows: 

1.     Definitions.  

1.1
"Licensed Inventions" means MRI's issued United States and foreign patents. The Licensed Inventions are listed in Exhibit A, Licensed
Inventions, which is hereby incorporated into this Agreement by reference. 

1.2.
"Licensed Products" means (a) any composition of matter, machine, article of manufacture, or component, or (b) processes, methods, or procedures, the manufacture, use or sale of
which by the Licensee, but for the license granted under this Agreement, would infringe one or more of the claims of the patents covering the Licensed Inventions. 

1.3.
"Net Sales" means the gross selling price of Licensed Products as invoiced by Licensee to purchasers for Licensed Products sold during a particular accounting period minus actual costs Licensee
incurred due to returns of Licensed Products, freight, and excise or other taxes (excluding income taxes) imposed on the production, sale, delivery, or use of the Licensed Products. When Licensed
Products are used or transferred, but not sold by Licensee, Net Sales shall mean the fair market value of the Licensed Products as if they were sold to an unrelated third party in similar quantities. 

1.4.
"Government" shall mean the government of the United States of America, including any agency thereof. 

2.     Grants.  

2.1.
Subject to the terms and conditions of this Agreement, including the terms as set forth in Exhibit B, Fields of Use and Financial
Considerations, which is attached to this Agreement and hereby incorporated by reference, MRI hereby grants to Licensee the worldwide, non-exclusive
right and license, subject to certain Government rights set forth below in Section 2.2., to make, have made, use, or sell, the Licensed Products worldwide, subject to patent coverage of the
Licensed Inventions. 

2.2.
The right and license granted in Section 2.1 is subject to the following Government rights: (a) the Government has a paid-up, royalty-free, worldwide,
nontransferable, irrevocable license to practice or have practiced by or on behalf of the Government the Licensed Inventions, and (b) DOE's march-in rights as required by the Prime
Contract and further defined in 35 U.S.C. §203. 

2.3.
Licensee agrees that any Licensed Products for use or sale in the United States shall be substantially manufactured in the United States. 

2.4.
Licensee shall mark all Licensed Products in accordance with the statutes of the United States relating to marking of patented articles, see 35 U.S.C. § 287. 

2.5.
No right to sublicense is granted to Licensee hereunder. 

2.6
This Agreement and the rights thereof granted to Licensee are personal to Licensee. Licensee shall not assign or otherwise transfer any rights or obligations under this Agreement, in whole or in
part, except (a) to a wholly owned subsidiary of Licensee or (b) as otherwise approved in writing in advance by MRI. 

3.     Financial Obligations and Commercialization Plan.  

3.1.
In consideration of the rights and license granted herein, Licensee agrees to be bound by the provisions of Exhibit B and Exhibit C, Development and
Commercialization Plan, attached to this Agreement and hereby incorporated by reference. 

2

 

3.2.
Licensee shall owe no royalties to MRI for any sales for which payment of the purchase price involves Government funds if such sales reflect a discount that is greater than or equal to the amount
Licensee would owe to MRI under this license, because of the Government's retained license in the Licensed Inventions. 

3.3.
Licensee shall report the Net Sales price paid by the purchaser for sales for which payment of the purchase price involves Government funds under Section 4 of this Agreement. This report
will also include (a) a Government control number (if available), and (b) identification of the Government agency for each sale. 

3.4.
Upon termination of this Agreement for any reason whatsoever, Licensee shall report and pay to MRI, within thirty (30) calendar days of such termination, any financial obligations
due through such termination including, but not limited to payments due for Continuous Royalties, interest, and other consideration, due and owing MRI. 

4.     Records, Reports, and Royalty Payments.  

4.1.
Licensee agrees to: (a) keep adequate and sufficiently detailed records or other appropriate information in accordance with generally accepted accounting principles to enable Licensee's
financial obligations as required under this Agreement to be readily determined; and (b) within forty-eight (48) hours provide such records and information for inspection and copying by
MRI's authorized representatives, with reasonable notice, at any time during Licensee's regular business hours. 

4.1.1.
Licensee agrees that it shall also provide MRI with any additional records or other appropriate information that MRI reasonably determines are necessary to verify any records or information
that Licensee is required to generate or maintain to fulfill the requirements of this Agreement, including those listed in Exhibits B and C. 

4.1.2.
Licensee agrees to retain and make any records or information that it is required to generate or maintain under the terms of this Agreement available for inspection by MRI's authorized
representatives for three (3) years after the last royalty period to which the records or information refer. 

4.2.
Licensee shall provide MRI with a written report, certified by an officer of Licensee, that complies with the requirements of Section 11 and Section 3.3 of this Agreement no later
than thirty (30) days after the end of each calendar year (hereinafter "Annual Written Report") for the life of this Agreement that identifies the following information for the immediately
preceding calendar year: (a) all Net Sales
of the Licensed Products made by Licensee in U.S. Dollars itemized by domestic and/or foreign sales including for any sales for which payment of the purchase price involves Government funds and all
export Net Sales, and if none to so indicate, and (b) the amount of each payment due MRI for Continuous Royalty payments in accordance with the Royalty Rate Schedule, Section C,
Exhibit B. Accompanying the Annual Written Report will be the full payment due in U.S. Dollars, for Continuous Royalties due for Net Sales in the preceding calendar year (less any amounts
described in Section 3.2 or as otherwise provided in this Agreement), and the Minimum Annual Royalty due for the current calendar year, pursuant to the terms of this Agreement in
Exhibit B. 

4.3.
Licensee shall make financial payments to the order of MRI in U.S. dollars in accordance with Exhibit B and Section 4.2 above. 

4.4.
If Licensee fails to make any payment to MRI that may be required under this Agreement within the time period prescribed for such payment, then the unpaid amount shall bear interest at the rate
of one and one half percent (1.5%) per month, from the date when the payment was due until payment in full, with interest, is made. Should Licensee have need to delay a payment when due, MRI will
consider Licensee's needs as presented, in writing to MRI, by Licensee prior to the required reporting 

3

 

and
payment date. Under such conditions, MRI may, at its sole discretion, extend the date upon which an annual payment is required. 

5.     Infringement by Third Parties.  

5.1.
Licensee shall notify MRI of any suspected infringement of the Licensed Inventions. 

5.2.
The sole right to institute a suit for infringement rests with MRI, and MRI shall retain all the proceeds thereof. 

5.3.
Licensee agrees to cooperate with MRI in all aspects of such infringement suit, including having any of Licensee's employees testify, at MRI's expense, when requested by MRI, and making available
any records, papers, information, specimens, and the like. MRI shall pay for expenses, costs and fees incurred by Licensee in connection with this Section 5.3. 

6.     Representations and Warranties.  

6.1.
MRI represents and warrants that MRI is the true and legal owner of the Licensed Inventions and possesses the legal authority to grant the rights, licenses, and privileges granted by this
Agreement. 

6.2.
MRI represents and warrants that MRI has no actual knowledge of any infringement claims filed against MRI for practicing the Licensed Inventions anywhere in the world. MRI makes no
representations or warranties, express or implied, nor shall MRI have any liability, in respect of any infringement of patents or other rights of third parties due to Licensee's operation under the
license herein granted. 

6.3.
Except as set forth in Sections 6.1 and 6.2, MRI makes NO REPRESENTATIONS OR WARRANTIES, express or implied, with regard to infringement of
any Licensed Inventions. 

6.4.
Licensee represents and warrants that it shall not export any NREL Protected Information (or the direct product thereof) furnished to Licensee, either directly or indirectly by MRI in the grant
of a license to the Licensed Inventions, from the United States of America, directly or indirectly without first complying with all requirements of the Export Administration Laws and Regulations,
including the requirement for obtaining an export license, if applicable. 

6.5.
Licensee agrees to indemnify, defend and hold harmless MRI, DOE and the Government, its officers, agents and employees from all liability involving the violation of such export laws or
regulations, either directly or indirectly, by Licensee. 

6.6
Licensee acknowledges it may be subject to criminal liability under U.S. laws for Licensee's failure to obtain any required export licenses. 

7.     Limitations of Warranties and Indemnification.  

7.1
Neither MRI, DOE, the Government nor persons acting on their behalf will be responsible for any injury to or death of persons, or damage to or destruction of any property, or for any other loss,
damage, or injury of any kind whatsoever resulting from Licensee's manufacture, use, or sale of Licensed Inventions, or Licensed Products, in whatever form furnished hereunder, absent gross
negligence, reckless misconduct or negligence on the part of MRI, DOE and/or the Government. 

7.2.
THE PARTIES AGREE THAT NEITHER MRI, DOE, THE GOVERNMENT, NOR PERSONS ACTING ON THEIR BEHALF MAKE ANY WARRANTY, EXPRESS OR IMPLIED:

7.2.1. WITH RESPECT TO THE MERCHANTABILITY, ACCURACY, COMPLETENESS, OR USEFULNESS OF ANY LICENSED INVENTIONS, PATENT APPLICATIONS, IF APPLICABLE, ISSUED PATENTS, LICENSED
PRODUCTS, OR NREL PROTECTED INFORMATION FURNISHED HEREUNDER;

4

 

7.2.2.
THAT THE USE OF ANY LICENSED INVENTIONS, PATENT APPLICATIONS, IF APPLICABLE, ISSUED PATENTS, LICENSED PRODUCTS, OR NREL PROTECTED INFORMATION MAY NOT INFRINGE ANY
PRIVATELY OWNED RIGHTS;  

7.2.3. THAT ANY LICENSED INVENTIONS, PATENT APPLICATIONS, IF APPLICABLE, ISSUED PATENTS, LICENSED PRODUCTS, OR NREL PROTECTED INFORMATION FURNISHED HEREUNDER WILL NOT RESULT IN
INJURY OR DAMAGE WHEN USED FOR ANY PURPOSE; OR  

7.2.4. THAT ANY LICENSED INVENTIONS, PATENT APPLICATIONS, IF APPLICABLE, ISSUED PATENTS, LICENSED PRODUCTS, OR NREL PROTECTED INFORMATION FURNISHED HEREUNDER WILL ACCOMPLISH
THE INTENDED RESULT OR ARE SAFE OR FIT FOR ANY PURPOSE, INCLUDING THE INTENDED OR PARTICULAR PURPOSE.  

7.3. MRI, DOE AND THE GOVERNMENT HEREBY SPECIFICALLY DISCLAIM ANY AND ALL WARRANTIES, EXPRESS OR IMPLIED, FOR ANY LICENSED INVENTIONS, PATENT
APPLICATIONS, IF APPLICABLE, ISSUED PATENTS, NREL PROTECTED INFORMATION (AS DEFINED BELOW), OR LICENSED PRODUCTS MANUFACTURED, USED, OR SOLD BY LICENSEE.

7.4 NEITHER DOE, MRI NOR THE GOVERNMENT SHALL BE LIABLE FOR LOST PROFITS, LOST SAVINGS, SPECIAL, CONSEQUENTIAL, INCIDENTAL OR OTHER INDIRECT DAMAGES IN ANY EVENT, EVEN IF SUCH
PARTY IS MADE AWARE OF THE POSSIBILITY THEREOF.

7.5.
Except for any liability resulting from any negligent act or omission of DOE, the Government or MRI, Licensee shall indemnify DOE, the Government and MRI, and their respective officers,
employees, and agents, for all damages, costs, and expenses, including attorneys' fees, arising from death, personal injury or property damage to third parties occurring as a result of the
commercialization and utilization of the Licensed Inventions by Licensee, if any, including but not limited to, the making, using, selling, or exporting of products, processes, or services derived
therefrom. This indemnification shall include, but not be limited to, indemnification for any product liability resulting from the commercialization and utilization of the Licensed Inventions by
Licensee. No settlement affecting the validity or enforceability of the Licensed Inventions and for which Licensee shall be responsible shall be made without Licensee's consent unless required by
final decree of a court of competent jurisdiction. 

8.     Term of Agreement and Early Termination.  

8.1.
Subject to early termination as set forth in this Section and the terms and conditions set forth in Exhibits B and C, this Agreement shall be effective for as long as any claim of a
Licensed Invention is enforceable. 

8.2.
Either Party shall have the right to terminate this Agreement with cause and without judicial resolution or intervention upon written notice to the other after the non-breaching Party
notifies the asserted breaching Party of a breach of any provision of this Agreement and the asserted breach has not been cured by the asserted breaching Party within sixty
(60) calendar days from receipt of such notice ("Cure Period"). If at the end of the Cure Period the asserted breach has not been cured and there remains a dispute or controversy, the
Parties may agree to seek to resolve the matter through the use of the procedures set forth in Section 18.1 below. If MRI is the non-breaching Party under this Section 8.2,
then Licensee shall, within thirty (30) calendar days, owe MRI the Continuous Royalties due if greater than the prepaid Minimum Annual Royalty. Licensee acknowledges and agrees that MRI
shall be entitled to seek any additional remedies available at law or equity to MRI for Licensee's breach of this Agreement. 

5

 

8.3.
This Agreement shall terminate automatically upon a final adjudication of invalidity, unenforceability, or the extinguishment of all Licensed Inventions, for any reason. 

8.4.
If Licensee fails to (a) satisfy the requirements of Exhibits B and C; (b) maintain records which substantially meets the requirements of Section 4.1; (c) permit an
audit pursuant to Section 4.1; and (d) make a report which substantially meets the requirements of Section 4.2; or cure such breach within sixty (60) calendar days after
MRI has given written notice of such breach, then MRI shall have the right, at its sole discretion and with thirty (30) calendar days written notice to Licensee to terminate this
Agreement in accordance with its early termination requirements. 

8.5.
The Parties agree that MRI, at its sole discretion, may immediately terminate this Agreement upon any attempted transfer of Licensee's interest in this Agreement, in whole or in part, to any
other party except to a wholly owned subsidiary of the Licensee or as may be otherwise permitted by the terms of this Agreement. 

8.6.
Licensee agrees that this Agreement shall automatically terminate if Licensee attempts, in any way, to pledge its rights under this Agreement as collateral to a third party. 

8.7.
Licensee hereby agrees that in the event Licensee by its own actions or the action of any of its shareholders or creditors (if applicable), files or has filed against it, with an order for relief
being entered, a case under the Bankruptcy Code of 1978, as previously or hereafter amended, MRI shall be entitled to relief from the automatic stay of Section 362 of Title 11 of the
United States Code, as amended, on or against the exercise of the rights and remedies available to MRI; and Licensee hereby waives the benefits of such automatic stay and consents and agrees to raise
no objection to such relief. Licensee further agrees that MRI, at its sole discretion, may immediately terminate this Agreement by means of a written notice to Licensee in the event that a creditor or
other claimant takes possession of, or a receiver, administrator or similar officer is appointed over any of the assets of Licensee, or in the event that Licensee makes any voluntary arrangement with
its creditors or becomes subject to any court or administration order pursuant to any U.S. bankruptcy proceeding or insolvency law. Licensee will promptly inform MRI of its intention to file a
voluntary petition in bankruptcy or of another's communicated intention to file an involuntary petition in bankruptcy. 

8.8.
Licensee may terminate this Agreement without cause if Licensee provides MRI with sixty (60) calendar days prior written notice and pays MRI the Continuous Royalties due if greater
than the prepaid Minimum Annual Royalty. 

9.     Rights of Parties after Termination.  

9.1.
Neither Party shall be relieved of any obligation or liability under this Agreement arising from any act or omission committed prior to the termination date. 

9.2.
From and after any termination of this Agreement, Licensee shall have the right to sell only those Licensed Products in Licensee's inventory at the time of termination, provided that Licensee has
satisfied and continues to satisfy all financial obligations and reporting requirements required under this Agreement. Except as otherwise provided in this Section, Licensee shall not exercise any of
the rights granted under this Agreement after it is terminated. 

9.3.
The rights and remedies granted herein, and any other rights or remedies which the Parties may have, either at law or in equity, are cumulative and not exclusive of others. On any termination,
Licensee shall duly account to MRI and transfer to it all rights to which MRI may be entitled under this Agreement. 

9.4.
The following Sections are intended to survive the termination of this Agreement: 3.4, 4, 5, 6, 7, 8, 9, 13, 17, 18, and 19. 

6

 

10.   Force Majeure.  

No
failure or omission by MRI or by Licensee in the performance of any obligation under this Agreement shall be deemed a breach of this Agreement or create any liability if the same shall arise from
acts of God, acts or omissions of any government or agency thereof, compliance with rules, regulations, or orders of any governmental authority or any office, department, agency, or instrumentality
thereof, fire, storm, flood, earthquake, accident, acts of the public enemy or terrorism, war, rebellion, insurrection, riot, sabotage, invasion, quarantine, restriction, transportation embargoes, or
failures or delays in transportation. The circumstances surrounding such failure or omission shall be communicated to the affected Party in writing within fifteen (15) business days of
such event. 

11.   Notices and Payments.  

11.1.
All notices and reports shall be addressed to the Parties as follows: 

If
to MRI:

National Renewable Energy Laboratory

Attn: Office of Research and Technology Applications

1617 Cole Blvd., MS 1635

Golden, CO 80401

Facsimile No. (303)275-3040

Verify No. (303) 275-4269
 viktoriyaesayev@nrel.gov

If
to Licensee:

Attn: Janet Casteel

Ascent Solar Technologies, Inc.

8120 Shaffer Parkway

Littleton, CO 80127

Facsimile No. (303) 420-1551

Verify No. (303) 285-5111 

11.2.
All financial obligations due MRI shall be sent to: 

National
Renewable Energy Laboratory

Attn: Royalty Cashier

1617 Cole Blvd., MS 1723A

Golden, CO 80401 

A
copy of all financial obligations shall be sent to NREL's Office of Research and Technology Applications at the above address in Section 11.1. 

11.3.
Any notice, report or any other communication required or permitted to be given by one Party to the other Party by this Agreement shall be in writing and either: (a) served personally on
the other Party; (b) sent by express, registered or certified first-class mail, postage prepaid, addressed to the other Party at its address as indicated above, or to such other address as the
addressee shall have previously furnished to the other Party by proper notice; (c) delivered by commercial courier to the other Party; or (d) sent by facsimile to the other Party at its
facsimile number indicated above or to such other facsimile number as the Party shall have previously furnished to the other Party by proper notice, with machine confirmation of transmission. 

12.   Non-Abatement of Royalties.  

MRI
and Licensee acknowledge that certain of the Licensed Inventions may expire prior to the conclusion of the term of this Agreement. However, MRI and Licensee agree that the Continuous 

7

 

Royalty
rates provided for in Exhibit B shall be uniform and undiminished for as long as any claim of the Licensed Inventions are enforceable except as otherwise provided in this Agreement. 

13.   Confidential Information.  

13.1.
The Parties agree that all information, marked by Licensee as "Proprietary" or by MRI as "NREL Protected Information" and forwarded to one Party by the other Party for the purposes of this
Agreement (a) are to be received in strict confidence, (b) are to be used only for the purposes of this Agreement, and (c) are not to be disclosed by the recipient Party, its
agents or employees without the prior written consent of the other Party, except to the extent that the recipient Party can establish by competent written proof that such information: 

13.1.1.
was in the public domain at the time of disclosure; 

13.1.2.
later became part of the public domain through no act or omission of the recipient Party, its employees, agents, successors or assigns; 

13.1.3.
was lawfully disclosed to the recipient Party by a third party having the right to disclose it; 

13.1.4.
was already known by the recipient Party at the time of disclosure; 

13.1.5.
was independently developed by the recipient Party; or 

13.1.6.
is required by law or regulation to be disclosed, provided however, that the disclosing Party shall first give the recipient Party written notice and adequate opportunity to object to such
order for disclosure or to request confidential treatment. 

14.   Waivers.  

14.1.
The failure of MRI at any time to enforce any provisions of this Agreement or to exercise any right or remedy shall not be construed to be a waiver of such provisions or of such rights or remedy
or the right of MRI thereafter to enforce each and every provision, right or remedy. 

14.2.
The waiver of a specific breach hereunder may be effectuated only by a written document, signed by the waiving Party, and delivered to the breaching Party. Such formal waiver shall not
constitute a waiver of any other breach. 

15.   Entire Agreement and Legal Amendments.  

15.1.
The Parties expressly understand and agree that this instrument contains the entire agreement between the Parties with respect to the subject matter of this Agreement and that all prior
representations, warranties, or agreements relating to this subject matter have been merged into this instrument and are thus superseded in totality by this Agreement. This Agreement may be amended
only by a written instrument signed by the duly authorized representatives of both of the Parties. 

15.2.
The Parties agree that if any part, term, or provision of this Agreement shall be found illegal or in conflict with any valid controlling law, the validity of the remaining provisions shall not
be affected thereby. 

15.3.
In the event the legality of any provision of this Agreement is brought into question because of a decision by a court of competent jurisdiction of any country in which this Agreement applies,
MRI, by written notice to Licensee, may revise the provision in question or may delete it entirely so as to comply with the decision of said court. 

8

 

16.   Headings.  

The
headings for the Sections set forth in this Agreement are strictly for the convenience of the Parties hereto and shall not be used in any way to restrict the meaning or interpretation of
the substantive language of this Agreement. 

17.   Successor Contractor.  

Licensee
acknowledges and agrees that MRI may transfer or assign this Agreement and all rights, duties and obligations hereunder, to DOE or a successor contractor of NREL as may be required under the
Prime Contract with DOE. 

18.   Disputes and Governing Laws.  

18.1.
This Agreement shall be construed, interpreted, and applied in accordance with the laws of the State of Colorado. Any controversy or claim arising under or related to this Agreement shall be
settled by confidential arbitration in accordance with the Patent Arbitration Rules of the American Arbitration Association before a single arbitrator selected in accordance with those rules,
and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 

18.2.
If any provisions of this Agreement are held to be invalid, illegal, or unenforceable in any respect, that invalidity, illegality, or unenforceability will not affect any other provisions of
this Agreement. This Agreement will be construed as if the invalid, illegal, or unenforceable revision were never in this Agreement. 

18.3.
MRI or Licensee may release information concerning this Agreement if required by law. In publicizing anything made, used, offered for sale, sold or imported under this Agreement, Licensee shall
not use the name of MRI, NREL or DOE or otherwise refer to any organization related to MRI or DOE, except with the prior written approval of MRI and DOE. 

19.   Counterparts.  

This
Agreement may be executed in separate counterparts, each of which so executed and delivered shall constitute an original, but all such counterparts shall together constitute one and the same
instrument. Any such counterpart may comprise one or more duplicates or duplicate signature pages, any of which may be executed by less than all of the Parties, provided that each Party executes at
least one such duplicate or duplicate signature page. The Parties stipulate that a photostatic copy of an executed original will be admissible in evidence for all purposes in any proceeding as between
the Parties. 

IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed in their respective names by their duly authorized representatives. 

For
MRI 

	

By:	
 	

/s/  GILBERT R. MARGUTH      
	
 	

 

	Name: (typed)	 	Gilbert R. Marguth
	 	 

	Title:	 	Director of the Office of Research and Technology Applications
	 	 

	Date:	 	April 4, 2006
	 	 

9

 

For
Licensee 

	

By:	
 	

/s/  MATTHEW B. FOSTER      
	
 	

 

	Name: (typed)	 	Matthew B. Foster
	 	 

	Title:	 	President and CEO
	 	 

	Date:	 	March 16, 2006
	 	 

10

   EXHIBIT A

LICENSED INVENTIONS  

	Docket

No.
	 	Country
	 	Title
	 	Patent No.
	 	Issue Date

	ROI 92-49	 	U.S.	 	Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	 	Patent #

5,356,839	 	Issued

10/18/94
	

ROI 92-49	
 	

EU	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 BE	
 	

Belgium	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 FR	
 	

France	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 GB	
 	

United Kingdom	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 GR	
 	

Germany	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 NL	
 	

Netherlands	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent # EP

0694209	
 	

Issued

7/12/2000
	

ROI 92-49 JP	
 	

Japan	
 	

Enhanced Quality Thin Film

Cu(IN,GA)Se2 for Semiconductor

Device Applications by Vapor-Phase Recrystallization	
 	

Patent #

3130943	
 	

Issued

11/17/00
	

ROI 93-69	
 	

U.S.	
 	

Method of Fabricating High-

Efficiency CU(IN, GA)(SES)2 Thin Films for Solar Cells	
 	

Patent #

5,441,897	
 	

Issued

8/15/95
	

ROI 93-69 JP	
 	

Japan	
 	

Method of Fabricating High-

Efficiency CU(IN, GA)(SES)2 Thin Films for Solar Cells	
 	

Patent #

3258667	
 	

Issued

12/7/01
	 	 	 	 	 	 	 	 	 

11

 

	

ROI 94-39	
 	

U.S.	
 	

Recrystallization Method to

Selenization of Thin-film

Cu(in,Ga)Se2 for Semiconductor

Device Applications	
 	

Patent #

5,436,204	
 	

Issued

7/25/95
	

ROI 94-39 EU	
 	

EU

(Designated

Belgium,

France,

Germany, UK,

and

Netherlands)	
 	

Recrystallization Method to

Selenization of Thin-Film

Cu(In,Ga)Se2 for Semiconductor

Device Applications	
 	

Serial #

95929367.1	
 	

Filed

8/3/95
	

ROI 94-39 JP	
 	

Japan	
 	

Recrystallization Method to

Selenization of Thin-Film

Cu(In,Ga)Se2 for Semiconductor Device Applications	
 	

Serial #

8-508088	
 	

Filed

8/3/95

NOTICE  

This Exhibit contains commercial information that is BUSINESS CONFIDENTIAL and the Parties hereby agree not to use or disclose this Exhibit to any third party
without the advance written approval of the other Party, except: (1) to those necessary to enable the Parties to perform under this Agreement; (2) as may be required by the MRI Prime
Contract with the DOE under the same restrictions as set forth herein; (3) as required by law, including without limitation any statute, regulation, or any regulatory or judicial action, order
or decision; or (4) in event of breach of any provision of this Agreement by either Party, to those deemed necessary by the non-breaching Party to enforce the
non-breaching Party's rights under the Agreement.

Initials

	MRI:	 	/s/  GRM      
	 	Licensee:	 	/s/  MATTHEW B. FOSTER      

	

Date:	
 	

April 4, 2006
	
 	

Date:	
 	

March 16, 2006

12

   EXHIBIT B: FIELDS OF USE AND FINANCIAL CONSIDERATIONS  

	A.
	Fields of Use: Photovoltaic devices.

	B.
	Upfront Fee: Licensee shall pay MRI a one-time, nonrefundable, irrevocable, upfront-royalty in the
amount of [*], which shall be payable to MRI by Licensee within ten (10) calendar days after this Agreement is
executed by the last Party to sign.

	C.
	Continuous Royalty Rate Payments:  

Licensee
agrees to pay MRI a continuous royalty payment ("Continuous Royalties") at the rates set forth below, less discounted sales to the Government and the prepaid Minimum Annual Royalty. Payment
of such Continuous Royalty is due, with submission of the Annual Written Report, by January 31st of each succeeding calendar year in which Continuous Royalties earned from Net
Sales of Licensed Products exceeds the prepaid Minimum Annual Royalty. 

Royalties
from Net Sales shall be computed based upon the schedule set forth in Table B.1. 

Table B.1 Schedule of Royalty Rates Earned from Annual Net Sales  

	Annual Net Sales

(Millions of Dollars)
 
	 	Royalty Rate
 

	From $0 to $5	 	[*]
	From $5 to 10	 	[*]
	From $10 to $15	 	[*]
	From $15 to $20	 	[*]
	Amounts over $20	 	[*]

	D.
	Minimum Annual Royalty Payments: Licensee shall pay MRI, in advance, a Minimum Annual Royalty of  [*] by
January 31st of each calendar year, beginning in January of 2007 for that calendar year. Such
payment shall be made with the submission of the Annual Written Report as required in Section 4.2 of the Agreement.

	E.
	Technical Assistance:  

MRI
agrees, upon the written request of Licensee, to assist Licensee in obtaining technical assistance from NREL, subject to the availability of the required resources and under the appropriate
agreements. The Licensee shall pay full cost in accordance with the Prime Contract with the Government for the cost of such technical assistance. 

NOTICE  

This Exhibit contains financial and commercial information that is BUSINESS CONFIDENTIAL and the Parties hereby agree not to use or disclose this Exhibit to any
third party without the advance written approval of the other Party, except: (1) to those necessary to enable the Parties to perform under this Agreement; (2) as may be required by the
MRI Prime Contract with the DOE under the same restrictions as set forth herein; (3) as required by law, including without limitation any statute, regulation, or any regulatory or judicial
action, order or decision; or (4) in event of breach of any provision of this Agreement by either Party, to those deemed necessary by the non-breaching Party to enforce the
non-breaching Party's rights under the Agreement.

13

 

Initials 

	MRI:	 	/s/  GRM      
	 	Licensee:	 	/s/  MATTHEW B. FOSTER      

	

Date:	
 	

April 4, 2006
	
 	

Date:	
 	

March 16, 2006

14

   EXHIBIT C: DEVELOPMENT AND COMMERCIALIZATION PLAN  

Licensee represents and warrants that it will invest in the development of the technology and market for Licensed Products by committing Licensee's resources, at a minimum, to
the following requirements:

Background  

Licensee's
parent company, has been dedicated to the development of CIGS technologies for terrestrial, space and near-space (e.g. airship) applications since its inception in 1994. As a
leader in the advancement of thin-film CIGS, Licensee's parent company and its subsidiaries, including Ascent, have shown CIGS to be a promising technology in terms of high specific power
(with an appropriate array design) and small stowage volume. 

Formation of Ascent Solar Technologies, Inc.  

Beginning
in the fourth quarter of 2004, ITN began coordinating a business plan with key government agencies and customers to evolve an integrated CIGS technology insertion and manufacturing plan. At
the heart of this plan was a business strategy to leverage current programs along with its intellectual property and experience in roll-to-roll flexible CIGS manufacturing
(equipment design and fabrication, processing, monolithic integration, module design and fabrication, PV integration) with outside investment to create a dedicated flexible CIGS manufacturing
facility. Throughout 2005, Ascent's parent company pursued several avenues to generate the desired funding. In October of 2005, Ascent Solar Technologies, Inc. ("Ascent Solar") was
formed and is in the final stages of securing the capital investment resources necessary to establish a 500kW/shift/yr manufacturing plant. 

Key Manufacturing and Market Milestones  

Ascent
Solar's goal is to grow to a 25MW capacity within 10 years of commencing initial production on the 500kW line. The key milestones for the 500kW initial production are listed below: 

	•	 	Production Line Development, Installation, and Test	 	4th QTR 2007
	•	 	50% Yield at 6 inches/minute and 9% device efficiency	 	1st QTR 2008
	•	 	75% Yield at 6 inches/minute and 9% device efficiency	 	3rd QTR 2008
	•	 	90% Yield at 6 inches/minute and 9% device efficiency	 	2nd QTR 2009

Product
production should begin in the first quarter of 2008 and the modules produced will be used to begin seeding the markets and distribution channels. The focus initially will be on improving
manufacturing yield and product performance in order to reduce the product cost prior to commencing a capacity expansion plan. The initial manufacturing line will produce 1.5MW per year when operated
three shifts per day at a 6 inch/minute rate. Ascent Solar's experience has demonstrated that 12 inches/minute can be achieved using a metal foil substrate and Ascent Solar believes that this level
can also be achieved on a polymer substrate. Ascent Solar's goal will be to double the output of the initial line to 3MW per year after 2009. This will also have the complementary effect of reducing
the product cost enabling Ascent Solar to expand its markets and begin increasing capacity with new production lines. An expansion to 10MW by 2012 is feasible as the product costs and performance are
better advantaged in the marketplace than the current crystalline silicon technology. 

Progress and substantiation of Licensee meeting these development and commercialization requirements shall be provided to MRI in the form of a written report to be presented at
a meeting between the Parties to be held at the mutual convenience of said Parties but no later than each anniversary thereafter of the Effective Date.

15

 

NOTICE  

This Exhibit, including its Attachment, contains commercial information that is BUSINESS CONFIDENTIAL and the Parties hereby agree not to use or disclose this Exhibit to
any third party without the advance written approval of the other Party, except: (1) to those necessary to enable the Parties to perform under this Agreement; (2) as may be required by
the MRI Prime Contract with the DOE under the same restrictions as set forth herein; (3) as required by law, including without limitation any statute, regulation, or any regulatory or judicial
action, order or decision; or (4) in event of breach of any provision of this Agreement by either Party, to those deemed necessary by the non-breaching Party to enforce the
non-breaching Party's rights under the Agreement.

Initials

	MRI:	 	/s/  GRM      
	 	Licensee:	 	/s/  MATTHEW B. FOSTER      

	

Date:	
 	

April 4, 2006
	
 	

Date:	
 	

March 16, 2006

16

QuickLinks

EXHIBIT 10.15Exhibit 10.60

 

FACTORING, LOAN &
SECURITY AGREEMENT

 

This Factoring, Loan and Security Agreement
(this “Agreement”), dated and effective as of the Effective Date, and entered
into between Hana Financial, Inc., a California corporation, with offices
at 1055 Wilshire Blvd., Los Angeles, CA 90017, Telecopy No.: (213) 482-1212 (“Hana”),
and Liquidmetal
Technologies, Inc., a Delaware corporation, whose address is 25800
Commercentre Drive, Suite 100, Lake Forest, CA 92630, Telecopy No.: (949)
206-8088 (“Client”). Certain capitalized terms used herein will have the
meanings assigned to such terms in Section 12 of this Agreement.

 

WHEREAS, Client has requested and Hana has
agreed to purchase all of Client’s Accounts, issue factor and supplier
guaranties and provide certain services; and

 

NOW,
THEREFORE, in consideration of the agreements, provisions, and covenants herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Client and Hana agree as follows:

 

SECTION 1.                            Sale
and Approval of Accounts

 

1.1                                 Client hereby agrees to sell,
assign and transfer to Hana, and Hana hereby agrees to purchase, all of Client’s
Accounts, with full power to Hana to collect and otherwise deal with such
Accounts as the sole and exclusive owner thereof. Hana will purchase an Account
on the shortest selling terms for the Purchase Price thereof upon receipt by
Hana of the invoice copy evidencing such Account.

 

1.2                                 (a)                                  Client
will submit for Hana’s credit approval the credit requirements of Client’s
customers, a description of Client’s normal selling terms and such other
Information as Hana requests concerning Client’s customers. Hana may, in Hana’s
sole credit judgment, establish credit lines for sales to Client’s customers on
Client’s normal selling terms or on other selling terms approved by Hana by
Written Notice and/or Transmission. Client may also submit for Hana’s
credit approval specific orders from Client’s customers and Hana may, in Hana’s
sole credit judgment, approve such orders on a single order credit approval
basis. All of Hana’s credit approvals will be by Written Notice to Client. All
sales to a customer within the credit line established for such customer on
Client’s normal selling terms or within the single order credit approvals given
by Hana for orders from such customer will be Approved Accounts provided that: (i) Delivery
is completed while the credit line or single order credit approval remains in
effect and (ii) the Account is assigned to Hana within thirty (30) days of
Delivery and (iii) the Account is not past due at the time of assignment.

 

(b)                                 Hana may amend or
withdraw a credit line or single order credit approval at any time prior to
Delivery by notifying Client verbally and/or by Written Notice. A single order
credit approval will be automatically withdrawn: (i) in the event Delivery
is not made on or prior to the expiration date indicated on the single order
credit confirmation form Hana sends to Client by Written Notice; or (ii) in
the event any change is made in any of the terms of the Account without Hana’s
prior approval by Written Notice.

 

(c)                                  Hana will have no
liability to Client or to any customer for Hana’s refusal to credit approve an
Account or Hana’s withdrawal or amendment of a credit approval.

 

1

 

1.3                                 Hana
will assume only Eighty Percent (80%) of
the Credit Risk on all Approved Accounts which means that Hana shall
indemnify the Client for only Qualifying Losses incurred in
connection with Eligible Receivables and directly caused by the failure
of the Customer to pay the Client all or part of the Net
Invoice Value of the Eligible Receivable(s) due to the Insolvency
of the Customer, such Insolvency having occurred during the Agreement
or within six (6) months thereafter. The amount payable by Hana will be
calculated in accordance with Section 7, Proof and Payment of Claims, and
will be subject always to the Deductible, Financing Limits and
other applicable terms and conditions of the Agreement.

 

1.4                                 In
the event that monies are at any time owing by a Customer for both Approved
Accounts and Non-Approved Accounts, any amount when paid by or credited to the
customer will be applied as follows:

 

(a)                                  If
Hana issued single order approvals, all amounts paid by or credited to the
customer will be deemed applied first to Approved Accounts.

 

(b)                                 If
Hana established a credit line for such Customer and if the credit line was in
force at the time amounts were received from or credited to the customer, such
amounts will be deemed applied first to Non-Approved Accounts. If the credit
line is canceled, any amount thereafter received or credited will be deemed
applied first to Approved Accounts.

 

1.5                                 If
a bankruptcy or insolvency proceeding is instituted by or against a Customer
and if Hana agrees by Written Notice to Client to make a claim in such
proceeding for Non-Approved Accounts, all amounts distributed to Hana in such
proceeding will be shared pro rata between Approved Accounts and Non-Approved
Accounts.

 

SECTION 2.                            Advances,
Payments, Commissions and Fees.

 

2.1                                 (a)                                  Subject
to the terms and conditions of this subsection and this Agreement and
provided that there does not exist a Default or an Event of Default and in
reliance upon Client’s representation and warranties herein set forth, Hana
may, upon Client’s request, and in Hana’s sole discretion, make advances to
Client or for Client’s account against the Purchase Price of Eligible Accounts
in amounts determined by Hana, in Hana’s sole discretion, of up to the following
percentage of the Purchase Price of such Accounts:

 

(i)                                     if
the Eligible Account is an Approved Account, Hana may advance to Client up
to eighty percent (80%) of the
Purchase Price of such Approved Account;

 

(ii)                                  if
the Eligible Account is a Non-Approved Account, Hana may advance to Client
up to thirty percent (30%) of the
Purchase Price of such Non-Approved Account.

 

(b)                                 Hana shall establish
and may adjust, in its sole discretion, standards to determine whether an
Account purchased by Hana is eligible for an Advance (“Eligible Account(s)”)
and the percentage rate of such Advance at such time as Client requests an
Advance. Each such increase or decrease in the percentage rate or amount of any
Advance shall become effective immediately for the purposes of calculating
availability 

 

2

 

of Advances herein.

 

(c)                Without
limiting the generality of the foregoing, the following Accounts are not
Eligible Accounts:

 

(i)                                     Accounts which are Non-Approved Accounts
and which Hana deems, in its sole discretion, to be ineligible; and

 

(ii)                                  Accounts
with respect to which the customer is an Affiliate of Client’s or a director,
officer, agent, stockholder, or employee of Client’s or any of Client’s
Affiliates; and

 

(iii)                               Accounts
with respect to which there is any Dispute with the respective customer; and

 

(iv)                              any
Account with respect to which the customer is a person to which Client is
indebted, provided, however, that any such Account shall only be
ineligible as to that portion of such Account which is less than or equal to
the amount owed by Client to such person; and

 

(v)                                 Accounts
which have been charged back to Client pursuant to Sections 6.1, and 6.4
hereof; and

 

(vi)                              cash-on-delivery
Accounts; and

 

(vii)                           cash
sale Accounts; and

 

(viii) Approved
Accounts arising from sales to a single customer, in the aggregate, in excess
of an amount equal to thirty percent (30%)
of the total Net Amount of all Accounts from all customers outstanding at such
time five hundred thousand dollars
($500,000.00); and

 

(ix)                                Non-Approved
Accounts arising from sales to a single customer, in the aggregate, in excess
of an amount equal to fifteen percent (15%)
of the total Net Amount of all Accounts from all customers outstanding at such
time one hundred fifty thousand dollars
($150,000.00); and

 

(x)                                   Non-Approved
Accounts that are thirty (30) or
more days past due; and

 

(xi) All
Non-Approved Accounts from any single customer if forty percent (40%) or more of such customer’s outstanding
Accounts are forty five (45) or
more days past due; and

 

(xii)                             Accounts
due from a customer whose principal place of business is located outside the
United States of America or Canada that are not covered by a letter of credit,
in acceptable form to Hana, in its sole discretion or which are not
otherwise Approved Accounts.

 

(d)                                 Hana does not intend
to make any advances on any Non-Approved Accounts to the extent any such
advance would cause the aggregate amount of

 

3

 

outstanding advances with respect to Non-Approved Accounts to exceed five hundred thousand dollars ($500,000.00);
and Hana does not intend to make any advances on any Accounts to the extent any
such advance would cause the aggregate amount of outstanding Obligations to
exceed one million five hundred thousand
dollars ($1,500,000.00) (the “Credit Limit”).

 

(e)                                  Notwithstanding
the foregoing, in no event shall the total of outstanding Advances at any one
time exceed the Credit Limit. To the extent that the total of aggregate
outstanding Advances exceeds the Credit Limit, Client shall pay to Hana upon
its demand any and all amounts necessary to reduce the aggregate outstanding
Advances to or below the Credit Limit.

 

2.2                                 As
payment for an Account, the Collected Amount of the Purchase Price of an
Account will be credited to Client’s account as of the Collection Date and
disbursed to Client on the Remittance Date. The payments, when credited to
Client’s account, shall first be applied to all advances, interest, and other
amounts due Hana hereunder. If an Approved Account remains partially or fully
unpaid solely as a result of the financial inability of the customer thereon to
pay such Approved Account and if such Account is not subject to a Dispute, the
Purchase Price of such Approved Account less any Collected Amounts previously
credited to Client’s account with respect to such Approved Account and less
advances, interest and any other amounts due Hana will be credited to Client’s
account on the Approved Payment Date for
such Approved Account.

 

2.3                                 At
the time Hana purchases an Account, Hana will charge Client’s account with a
factoring commission equal to sixty five
hundredths of a whole percent (0.65%) of the Net Amount of the
Approved Accounts plus the Surcharge Amount, as applicable. At the time Hana
purchases an Account, Hana will charge Client’s account with a factoring
commission equal to sixty five hundredths of
a whole percent (0.65%) of the Net Amount of the Non-Approved
Accounts. On Accounts bearing payment terms in excess of sixty (60) days, the
factoring commission will be increased by one quarter of one percent (0.25%)
for each thirty (30) days or part thereof that the stated terms exceed
sixty (60) days.

 

2.4                                 During each Contract Year, Client agrees
to pay to Hana factoring commissions aggregating at least thirty thousand dollars ($30,000.00) (“Minimum
Annual Commission”). If at the end of any Contract Year the aggregate of
factoring commissions paid by Client is less than the Minimum Annual
Commission, then Client shall pay to Hana, or Hana may charge Client’s
account with, an amount equal to the difference between the Minimum Annual
Commission and the factoring commissions actually paid during that Contract
Year. If Client terminates this Agreement at any time during a Contract Year or
if Hana terminates this Agreement at any time during a Contract Year upon the
occurrence of an Event of Default, Client shall nevertheless remain obligated
to pay the Minimum Annual Commission for such Contract Year.

 

2.5                                 Client
will pay to Hana or Hana may charge Client’s account with (i) wire
transfer fees on all wire transfers; (ii) all data transmission telephone
charges relating to Transmissions; (iii) exchange on checks, charges for
returned items and all other bank charges; (iv) all Costs; (v) all
other amounts owing by Client to Hana under the Agreement; and (vi) all
other Obligations.

 

2.6                                 Client
will pay to Hana or Hana may charge Client’s account a fee for each new

 

4

 

customer set-up on our data base, as follows: (i) a fee of $10.00
will be charged when you submit an order or invoice for any customer that has
not had any activity with us for at least eighteen (18) months prior thereto
and is not established in our files; and (ii) a fee of $5.00 will be
charged when you submit an order or invoice for any customer that has not had
any activity with us for at least eighteen (18) months, but has been active
during such period with respect to other clients of ours; provided, however,
that no fees will be charged for new customers set-up during the first six (6) months
from the Effective Date of this Agreement.

 

2.7.                                        Proof and Payment of Claims and Recoveries

 

A.                 Payment by Hana
for Qualifying Losses shall be calculated as follows, subject always to the
Deductible, if any, Financing Limit, and other applicable terms and conditions
of the Agreement:

 

a)                    Calculate the
amount of the Qualifying Loss.

 

b)                   Subtract the
Non Qualifying Loss and the Deductible, if any from the amount of the
Qualifying Loss.

 

c)                    Should the sum
be equal to a number less than 0, then no payment shall be made by Hana.

 

B.                   The payment for
a Qualifying Loss shall be made promptly, in either U.S. Dollars or in Contract
Currency at Hana’s sole option, after the submission by the Client of a
satisfactory written proof of Loss together with evidence that the Customer is
Insolvent.

 

For the purpose of any calculation required
in the settlement of a Qualifying Loss, the rate of exchange shall be the rate
as offered on the date of such settlement by a commercial bank selected by
Hana.

 

C.                   The
responsibility for proving a Qualifying Loss under this Agreement and
evidencing that all conditions and warranties have been complied with shall at
all times rest with the Client.

 

D.                  For the purpose
of determining Hana’s liability under this Agreement, all funds or salvage
received from the Customer, or from any other source whatsoever as or towards
payment of the Customer’s obligations to the Client after the Customer is in
default of any payment obligation to the Client for more than one hundred
twenty (120) days, or is Insolvent, whichever happens first, shall be applied
in chronological order of due dates until Hana indemnifies the Client for the
Qualifying Loss.

 

The application of funds described in this
paragraph shall apply regardless of any designation of funds by the Customer or
any other party unless specifically agreed in writing by Hana.

 

After payment of a Qualifying Loss, any such
funds or salvage shall be immediately paid to Hana and shared between Hana and
the Client as follows:

 

5

 

1.                     Hana shall
receive the Client Percentage of all sums recovered, and the Client shall
receive the remaining percentage of such sums, until the amount of Hana’s
payment of a Qualifying Loss and Hana’s cost of recovery have been fully
reimbursed;

 

2.                     All further
sums recovered shall inure to the benefit of the Client.

 

This paragraph does not apply to any funds
received in payment for goods shipped to a “debtor in possession.”

 

E.                    Sums recovered
in respect of any Qualifying Loss retained by the Client under the Deductible
shall reinstate the Deductible by the same amount.

 

F.                    In the event
of any payment of a Loss under this Agreement, Hana shall be subrogated to all
of the Client’s rights of recovery therefore against any person or
organization, and the Client shall execute and deliver all instruments and
papers and do whatever else is necessary to secure such rights, including
rights with respect to amounts that have been applied to the Deductible. Hana
shall have the right to direct the manner in which such assets shall be
liquidated. The Client shall do nothing to prejudice such rights.

 

It shall be a condition to the obligation of
Hana to make any payment of a Qualifying Loss under this Agreement that the
receivables to which it shall be subrogated shall not be subject to any lien,
security interest or other third party claim superior to that of Hana.

 

2.8                                 Hana
shall charge Client for each audit Hana or Hana’s agent performs on behalf of
Client, at reasonable industry rates at that time, together with out-of-pocket
expenses.

 

2.9                                 Exclusions

 

A.                 Losses caused by
or resulting from the following shall not constitute Qualifying Losses and are
not covered under this Agreement:

 

1.                     Wrongful or
dishonest acts or omissions of the Client or its agents;

 

2.                     Any material
breach of or inaccuracy regarding any warranty or representations made herein
or failure to perform or to fulfill any warranty, covenant or agreement
made herein by the Client;

 

3.                     Nuclear
reaction or nuclear radiation or radioactive contamination;

 

4.                     War (i) between
the People’s Republic of China, France, the United Kingdom, states of the
former Soviet Union, and/or the United States of America; and/or (ii) between
the Customer’s country and the country of the Client.

 

B.                   Losses relating
to any of the following Customers and/or receivables shall not constitute
Qualifying Losses and are not covered under this Agreement:

 

6

 

1.                     Any Customer
that, as of the first day of the Agreement, is Insolvent or past due in any
payment obligations to the Client unless

 

(a)                the total
aggregate amount of such past due payment obligations does not exceed the Non
Qualifying Loss Amount (payment obligations that are disputed by the Customer
in writing will not be considered past due for the purposes of this paragraph);
or

 

(b)               the Agreement is
renewed, in which case the Client must disclose to Hana on the renewal date if
any particular Customer is Insolvent or past due in any payment obligation to
the Client at the time of the renewal. If the Client fails to make such a
disclosure, then any and all shipments to that particular Customer will be
automatically excluded from coverage of the Qualifying Losses under the
Agreement. If the Client makes the disclosures required herein, then the
provisions herein will be extended to that Customer unless that Customer is
specifically excluded by Hana;

 

2.                     Any Customer
with which the Client has, during the twelve (12) months immediately prior to
the first day of the Agreement, rescheduled or extended the due date of any
amounts owing for larger than the Maximum Extension Period unless coverage for
such Customer is specifically approved by Hana;

 

3.                     Any Customer
about which the Client knowingly provided inaccurate information to Hana. If
the inaccurate information was based on the representation or statements of
third parties and was true to the best knowledge of the Client after a
reasonable investigation, this exclusion shall not apply;

 

4.                     Any
receivables that are sold or otherwise transferred by the Client to any other
person or entity, unless otherwise agreed in writing by Hana;

 

5.                     Any
receivables that are past due as of the inception date of this Agreement.

 

6.                     Sales made on
terms of Confirmed or Unconfirmed Irrevocable Letter of Credit.

 

7.                     Sales made on
terms of Cash in Advance or Cash on Delivery.

 

SECTION 3.                            Factor/Supplier
Guaranties and Ledger Debt

 

3.1                                 The Factor/Supplier Guaranty facility shall
be subject to the following terms and conditions:

 

(a)                                  Subject to the terms
and conditions of this Agreement and provided that there does not exist a
Default or an Event of Default and in reliance upon Client’s representations and
warranties herein set forth and provided that there exists sufficient 

 

7

 

Factor/Supplier Availability, Hana may issue guaranties (“Factor/Supplier
Guaranties”) to factors and certain of Client’s domestic and foreign suppliers.

 

(b)                                 The Factor/Supplier
Guaranties shall be issued for valid purchases of merchandise. Client shall
furnish Hana with the application for issuance of each guarantee. Hana may issue
a Factor/Supplier Guaranty in connection with each such application if such
application, including the amount and all terms of the Factor/Supplier Guaranty
to be issued, shall be acceptable to Hana, in its sole discretion and so long
as each Factor/Supplier Guaranty has an expiration date which is at least
thirty (30) days before the Termination Date.

 

(c)                                  No extensions,
modifications or amendments to a Factor/Supplier Guaranty shall be made without
Hana’s prior written consent.

 

(d)                                 Hana’s Factor/Supplier
Guaranties shall in no way be construed to create any liability, obligation,
warranty or representation on Hana’s part with respect to any matter other
than Client’s payment at maturity of the invoices to which such Factor/Supplier
Guaranties relate.

 

(e)                                  Client shall, on
demand, reimburse Hana for any and all sums paid by Hana in any way relating to
the factor/Supplier Guaranties and Client shall indemnify Hana and hold Hana
harmless from and against any and all liability, loss, costs, fees and
expenses, including reasonable attorneys’ fees, that Hana may sustain or
incur based upon, arising under, or in any way relating to the Factor/Supplier
Guaranties provided; however, that the foregoing indemnity shall not apply to
any liabilities, losses , costs, fees and expenses sustained or incurred by
Hana solely from Hana’s gross negligence or willful misconduct. Client’s
obligation to reimburse and indemnify Hana shall be conclusive but shall not
prejudice any rights Client may have against any other person in the event
that Client disputes liability of amounts owing under invoices subject to a
Factor/Supplier Guaranty

 

(f)                                    As compensation for
the issuance of Factor/Supplier Guarantees, Client shall pay to Hana the
Factor/Supplier Guaranty Fee upon issuance of each Factor/Supplier Guaranty
issued.

 

3.2                                 Hana
may, in its sole discretion, approve credits for Client, in amounts determined
from time to time by Hana, to enable Client to purchase goods or services from
other factoring clients of Hana. There would be no charge for such credit
approval to the extent that Client did not pay ledger debt when due. All
indebtedness owing by Client for purchases from other factoring clients of Hana
is hereafter referred to as “Ledger Debt”. The aggregate amount of Ledger Debt
outstanding at any time shall not exceed the Ledger Debt Availability. Hana
would have the right to pay such amounts and to charge such payments to Client’s
account.

 

3.3                                 In no event shall the total amount of
outstanding Advances, Factor/Supplier Guaranties, and Ledger Debt, and any
other Obligations exceed the Credit Limit. To the extent that, at any time, the
foregoing limit is exceeded, Client shall pay on demand and all amounts
necessary to reduce the aggregate outstanding Obligations to or below the
Credit Limit.

 

8

 

SECTION 4.                            Interest
and Collection Clearance Charges

 

4.1                                 Client
will pay Hana interest on the Daily Balance. Interest will be calculated daily
at a rate equal to the sum of two whole
percent (2.0%) plus the Base Rate (the “Interest Rate”) and will be
paid by Client or charged to Client’s account monthly at the end of each month.
The Interest Rate will also be charged to Client on all other obligations,
except those specifying a different rate, from the date incurred through the
date paid. Any publicly announced decrease or increase in the Base Rate will
result in an adjustment to the Interest Rate on the next business day. After
the occurrence of an Event of Default and for so long as such Event of Default
continues, all the Obligations will, at Hana’s option, bear interest at a rate
per annum equal to five percent (5.0%) plus the Interest Rate. Interest will be
calculated on the basis of a 360-day year for the actual number of days elapsed.
In no event will the total amount of interest received by Hana exceed the
maximum rate permitted by applicable law and in the event excess interest is
determined by a court of competent jurisdiction to have been paid by Client to
Hana, such excess interest will be applied as a credit against the outstanding Obligations
and Client will not have any action against Hana for any damages arising out of
the payment or collection of such excess interest.

 

4.2                                 If
an Account or any payment is charged back to Client after the Collection Date
or Approved Payment Date, as applicable, Client will pay Hana interest at the
Interest Rate on the Net Amount of such Account or on such payment from such
date to the charge back date.

 

4.3                                 To
allow for collection clearance on all checks and other payments remitted by
Client’s customers, Client will, in addition to interest, pay Hana a collection
clearance charge computed as follows: (a) total cash collections for the
day, multiplied by (b) four (4) business
days, multiplied by (c) the Interest Rate, divided by (d) 360 days.

 

SECTION 5.                            Representations,
Warranties and Covenants

 

5.1                                 Client
represents, warrants and covenants as to each Account that, at the time of its
creation, the Account is a valid, bona fide account, representing an undisputed
indebtedness incurred by the named customer for goods actually sold and
delivered; there are no setoffs, offsets or counterclaims, genuine or
otherwise, against the Account; the Account does not represent a sale to any of
Client’s subsidiaries, affiliates, directors, officers, agents, stockholders,
or employees, or a consignment, guaranteed sale, or bill and hold transaction,
or a cash on delivery sale; no agreement exists permitting any deduction or
discount (other than the discount stated on the invoice); Client is the lawful
owner of the Account and has the right to sell and assign the same to Hana; the
Account is free of all security interests, liens and encumbrances (including
tax liens) other than those in favor of Hana, and the Account is due and
payable in accordance with its terms.

 

5.2                                 Client
represents, warrants and covenants that there are no liens on any of the
collateral security described in Section 8 of this Agreement as of the
Effective Date of this Agreement, and if, at any time, there is any lien that
is senior to Hana’s lien on the collateral security, Client will take all
actions necessary to subordinate the lien so that the lien is junior to Hana’s
lien on the collateral security.

 

5.3                                 Client
will not grant or suffer to exist in favor of any party other than Hana any
lien upon or security interest in Client’s inventory.

 

9

 

5.4                                 Client
will maintain or cause to be maintained in good repair, working order, and
condition all material properties used in Client’s business and will make or
cause to be made all appropriate repairs, renewals, and replacements thereof. Client
has and will maintain or cause to be maintained, with financially sound and
reputable insurers, public liability, product liability, and property damage
insurance with respect to Client’s business and properties against loss or
damage of the kinds customarily carried or maintained by corporations of
established reputation engaged in similar businesses and in amounts reasonably
acceptable to Hana, including business interruption insurance. At all times
Client shall have and maintain insurance with respect to all Inventory, to the
fullest extent of the insurable value thereof, against risks of fire, theft,
sprinklers, and such other risks as Hana may require, in such form, for
such periods, and written by such insurers as may be reasonably
satisfactory to Hana, such insurance to bear endorsements, in form acceptable
to Hana, naming Hana as additional insured and designating Hana as loss payee. Client
shall deliver to Hana promptly as rendered true copies of all monthly reports
made to insurance companies under any reporting forms of insurance policies. Client
shall promptly deliver to Hana copies of all such policies. Except as to
business record insurance, if Client fails to maintain such insurance, Hana
may, but need not, obtain the same and charge the cost thereof to Client’s
Factoring Agreement. The proceeds of any such insurance shall be applied in
reduction of Client’s Revolving Loans.

 

5.5                                 Client is a solvent corporation;
duly incorporated and in good standing under the laws of the State of Delaware
and qualified in all States where such qualification is required; the
execution, delivery and performance of this Agreement have been duly authorized
and are not in contravention of any applicable law, Client’s corporate charter
or by-laws or any agreement or order by which Client is bound; Client is not,
to the best of Client’s knowledge, in violation of any law, ordinance, rule,
regulation, order or other requirement of any government or any instrumentality
or agency thereof.

 

5.6                                 Client
will not change Client’s corporate name or the location of Client’s office or
open any new offices without giving Hana at least thirty (30) days prior
Written Notice. At the present time, Client carries on business only at the
above address and at the addresses set forth below:  None.

 

5.7                                 All
books and records pertaining to the Accounts or to any inventory owned by
Client will be maintained solely and exclusively at the above address or the addresses
listed in Section 5.5 hereof and no such books and records will be moved
or transferred without giving Hana thirty (30) days prior Written Notice.

 

5.8                                 After
Hana’s request, Client will hold all returned, replevined or reclaimed goods
relating to Accounts coming into Client’s possession in trust for Hana and all
such goods will be segregated and identified as held in trust for Hana’s
benefit and Client will, at Hana’s request, and at Client’s expense, deliver
such goods to such place or places as Hana may designate.

 

5.9                                 The
trade names or styles set forth below are the only trade names or styles under
which Client transacts business or has transacted business during the last five
(5) years; Accounts sold to Hana hereunder and represented by invoices
bearing such trade names or styles are wholly owned by Client; the
undertakings, representations and warranties made in connection therewith will
be identical to and of the same force and effect as those made with respect to
invoices bearing Client’s corporate name; Client’s

 

10

 

use of any trade names or styles is in compliance with all laws
regarding the use of such trade names or styles. Client will give Hana thirty
(30) days prior Written Notice of the change of any trade name or style or
Client’s use of any new trade name or style: None.

 

Client hereby assigns, transfers, and conveys to Hana, effective upon
the occurrence of any Event of Default hereunder, the non-exclusive right and
license to use all trade names and trade styles owned or used by Client
together with any goodwill associated therewith, all to the extent necessary to
enable Hana to realize on any assets of Client in which Client has granted Hana
a security interest. Such right and license is granted free of charge without
requirement that any monetary payment whatsoever be made to Client or third
party by Hana.

 

5.10                           Client
may, in the ordinary course of business and in good faith, issue, grant or
allow discounts, credits and allowances on Accounts to customers and accept
returns until: (a) there exists a Default or an Event of Default or (b) Hana
notifies Client to the contrary by Written Notice or Transmission. Such
discount, credit or allowance once issued may be claimed only by the
customer.  Client will promptly issue and
assign to Hana all full invoice credit memos and promptly notify Hana of any
other credit memos. Failure to promptly notify Hana of any discounts, credits,
and allowances or other adjustment on a customers account may result in
Hana’s disallowance of any such credit given.

 

5.11                           To
the best of Client’s knowledge, (a) there are no judgments outstanding
against or affecting Client, its officers, directors or affiliates or any of
Client’s property, (b) there are no actions, charges, claims, demands,
suits, proceedings, or governmental investigations now pending or threatened
against Client or any of Client’s property, and (c) none of Client’s
inventory has been produced in violation of the Fair Labor Standards Act or any
similar law, nor imported in violation of any United States customs regulation.

 

5.12                           Client
agrees that no provision in this Agreement and no course of dealing between the
parties shall be deemed to create any fiduciary duty by Hana to Client. Client
agrees that neither Hana nor any of Hana’s affiliates, officers, directors,
shareholders, employees, attorneys, or agents shall have any liability with
respect to, and Client hereby waives, releases, and agrees not to sue any of
them upon, any claim for any special, indirect, incidental, or consequential
damages suffered or incurred by Client in connection with, arising out of, or
in any way related to this Agreement of any of the transactions contemplated by
this Agreement. Client hereby waives, releases, and agrees not to sue Hana or
any of Hana’s affiliates, officers, directors, shareholders, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to this Agreement or any of the
transactions contemplated by this Agreement.

 

SECTION 6.                            Disputes
and Chargebacks

 

6.1                                 With
respect to any Account, upon the occurrence of a breach of any of the
representations or warranties contained in Section 4.1, or upon the
assertion by a customer of a Dispute, such Account may, at Hana’s option, be
charged back to Client.

 

6.2                                 Client
will notify Hana immediately, by Written Notice, in the event that a customer
alleges any Dispute, or returns or desires to return any goods purchased from
Client relating to an Account. After an Event of Default, Hana may but is
not obligated to

 

11

 

settle, compromise, adjust or litigate all such Disputes or returns
upon such terms as Hana deems advisable. If an unadjusted Dispute delays the
payment of any Approved Account when due, Hana will have the right to charge
back to Client that Account.

 

6.3                                 Client
will supply customers, in the format required by customers, with all forms,
documents, certificates, etc. that customer requires to process the Account for
payment. If Hana notifies Client verbally and/or by Written Notice that a
customer which only accepts invoices for payment from Client through
Transmission is requesting that Client review its invoice data for correctness
and re-transmit invoices by Transmission and if after thirty (30) days from the
date of such Notice such invoices remain unposted to such customer’s records,
Hana will place the Accounts evidenced by such invoices in Dispute.

 

6.4                                 Hana
may at any time charge back to Client’s account the amount of: (a) any
Approved Account which is not paid in full when due for any reason other than
Credit Risk; (b) any Approved Account which is not paid in full when due
because of an act of God, civil strife, or war; (c) anticipation
(interest) deducted by a customer on any Account; (d) customer claims; (e) any
Account for which there is a breach of any representation or warranty. A charge
back does not constitute a reassignment of an Account. Hana shall immediately
charge any deduction taken by a customer to Client’s account.

 

6.5                                 Client
will pay Hana, or Hana may charge Client’s account with, the amount of any
payment which Hana receives with respect to a Non-Approved Account if such
payment is subsequently disgorged by Hana, whether as a result of any
proceeding in bankruptcy or otherwise.

 

6.6                                 Client
shall purchase promptly all Accounts charged back by Hana, provided, however,
that until payment by Client to Hana of all monies due with respect to such
charged back account, title shall pass to Client subject, however, to Hana’s
security interest therein. Client agrees to indemnify and save Hana harmless
from and against any and all loss, costs and expenses caused by or arising out
of disputed Accounts, including, but not limited to, collection expenses and
attorney’s fees incurred with respect thereto.

 

6.7                                 Hana
may maintain such reserves as Hana, in Hana’s sole discretion, deems
advisable as security for the payment and performance of the Obligations,
including, without limitation, (i) reserves for the amount of any Account
which is subject to a Dispute, (ii) reserves for the amount of any
Approved Accounts from any single customer that is greater than thirty percent (30%) of all Accounts five hundred thousand dollars ($500,000.00),
(iii) reserves for the amount of any Non-Approved Accounts from any single
customer that is greater than fifteen percent
(15%) of all Accounts one hundred
fifty thousand dollars ($150,000.00), (iv) reserves for the
amount of any Non-Approved Account that is thirty
(30) or more days past due, and (v) reserves for the amount of
all Non-Approved Accounts from any single customer if forty percent (40%) or more of such
customer’s outstanding Accounts are forty
five (45) or more days past due.

 

SECTION 7.                            Administration

 

7.1                                 Client
will, from time to time, (i) execute and deliver to Hana confirmatory
schedules of Accounts assigned to Hana (each an Assignment Schedule), together
with

 

12

 

one copy of each invoice, acceptable evidence of shipment and such
other documentation and proofs of delivery as Hana may require or (ii) transmit
to Hana by Transmission information concerning Accounts in a format acceptable
to Hana and, upon Hana’s request, deliver to Hana copies of invoices,
acceptable evidence of shipment and such other documentation and proofs of
delivery as Hana may require relating to Accounts so transmitted. Client
will not deliver Assignment Schedules in connection with Transmissions, but
Client acknowledges and agrees that every invoice transmitted to Hana by
Transmission will be deemed to have been sent pursuant to the terms and
conditions of an Assignment Schedule. Each invoice relating to an Account and
all copies thereof will bear a notice, in form satisfactory to Hana, that
the Account has been sold and assigned to and is payable only to Hana. Client
agrees that Client will not change such notice on invoices and will not direct
its customers to pay Client or any third party amounts due under invoices. Client
agrees to prepare and mail all invoices relating to Accounts, but Hana may do
so at Hana’s option. Client agrees to execute and deliver to Hana such further
instruments of assignment, financing statements and instruments of further
assurance as Hana may reasonably require. Client authorizes Hana to
execute on Client’s behalf and file such UCC financing statements, as Hana may deem
necessary in order to perfect and maintain the security interests granted by
Client in accordance with this Agreement. Client further agrees that Hana may file
this Agreement or a copy thereof as such UCC financing statement.

 

7.2                                 Notwithstanding
that Client has agreed to pay the Misdirected Payment Fee pursuant hereto, if
any remittances are made directly to Client, Client’s employees or agents,
Client will act as trustee of an express trust for Hana’s benefit, hold the
same as Hana’s property and deliver the same to Hana forthwith in kind. Hana
and/or such designee as Hana may from time to time appoint are hereby
appointed Client’s attorney-in-fact to endorse Client’s name on any and all
checks or other forms of remittances received by Hana where such endorsement is
required to effect collection and to transmit notices to customers, in Client’s
or Hana’s name, that amounts owing by them have been assigned and are payable
directly to Hana; this power, being coupled with an interest, is irrevocable.

 

7.3                                 Client
shall permit Hana and any authorized representatives designated by Hana to
visit and inspect any of the properties of Client, including its financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its affairs, finances, and business with its officers at such times
during normal business hours and as often as Hana requests. Hana may, at any
time after the occurrence of an Event of Default, remove from Client’s premises
all such records, files and books relating to Accounts.

 

7.4                                 If
Hana determines that the credit standing of a customer has deteriorated after
Hana has assumed the Credit Risk on an Account, Client will, at Hana’s request,
exercise such rights as Client may have to reclaim or stop the goods in
transit, and Client hereby grants to Hana the right to take such steps in
Client’s or Hana’s name.

 

7.5                                 Hana
will render a monthly statement of account to Client within twenty (20) days
after the end of each month. Such statement of account will constitute an
account stated unless Client makes written objection thereto by Written Notice
within thirty (30) days from the date such statement is rendered to Client.

 

7.6                                 Client
will maintain a system of accounting established and administered in

 

13

 

accordance with sound business practice to permit preparation of
financial statements in conformity with GAAP. Client will promptly furnish Hana
with such statements prepared by or for Client showing Client’s financial
condition and the results of Client’s operations as Hana may request
verbally or by Written Notice; provided, however, that if the request is made
verbally, such request shall be promptly confirmed in writing. Client will
deliver to Hana the financial statements and other reports described below:

 

(i) Year-End Financials: As soon
as available and in any event within seventy-five (75) days after the end of
each of Client’s fiscal year Client will deliver the balance sheet of Client as
of the end of such period and the statements of income, stockholders’ equity
cash flows such Fiscal Year and such financial statements shall have been audited
by a firm of independent certified public accountants selected by Client and
reasonably acceptable to Hana. For the purposes of this Section and the Section below,
based upon the information currently available to Hana, the accountancy firm of
                              ,
shall be acceptable to Hana. If after the Effective Date Hana discovers
information that causes Hana to determine, in its sole and reasonable
discretion, that such firm is no longer acceptable to Hana, than Client shall
be required to retain the services on new accountants reasonably acceptable to
Hana.

 

(ii) Semi-Annual Financials. As
fairly soon as available but not later than forty-five (45) days after the end
of each six (6) month period of Client’s fiscal year, Client will deliver
the balance sheet of Client as of the end of such period and the related
statements of income, stockholders’ equity and cash flow for such six (6) month
period of a Fiscal Year and for the period from the beginning of the then
current Fiscal Year to the end of such six (6) month period of a Fiscal
Year and such have been prepared by Client and reasonably acceptable to Hana.

 

(iii) Access to Accountants.
Client authorizes Hana to communicate directly with Client’s independent
certified public accountants and authorizes such accountants to discuss Client’s
financial condition and financial statements directly with Hana.

 

7.7                                 Client
authorizes Hana to disclose such information, as Hana deems appropriate to
persons making credit inquiries about Client.

 

SECTION 8.                            Collateral
Security

 

As collateral security for all Obligations, Client hereby assigns and
grants to Hana a continuing security interest in all of the following property,
whether now owned by Client or hereafter acquired by Client or arising in Client’s
favor: (i) Factored Accounts; (ii) general intangibles including
payment intangibles; (iii) monies, securities and other property now or
hereafter held or received by, or in transit to Hana from or for Client,
whether for safekeeping, pledge, custody, transmission, collection or
otherwise, and all of Client’s deposits and credit balances in Hana’s
possession; (iv) books, records and other property at any time evidencing
or relating to any of the foregoing property and; (v) proceeds of any of
the foregoing property including, without limitation, the proceeds of any
insurance policies covering any of the foregoing property and deposit accounts.
Recourse to the collateral security herein provided will not be required, and
Client will at all times remain liable for the payment and performance of the
Obligations upon demand by Hana.

 

Client hereby grants to Hana a fully paid-up non-exclusive license (the
“License”) to use

 

14

 

all of the trademarks and trade names owned by Client in connection
with any sales of inventory by Hana made pursuant to the terms of this
Agreement. The grant of the License shall be irrevocable, but shall terminate
concurrently with the repayment in full by Client of all Obligations and the
termination of this Agreement pursuant to Section 9 of this Agreement. Client
agrees to use its best efforts to obtain the consent of its licensors, if any,
to permit Hana to sell inventory otherwise subject to a license in the manner
and to the extent permitted to Client under the applicable license agreement.

 

SECTION 9.                            Events of Default

 

The
occurrence of any of the following acts or events will constitute an Event of
Default: (a) if Client fails to make payment of any of the Obligations
when due; (b) if Client fails to make any remittance required by this
Agreement; (c) if Client commits any breach of any of the terms,
representations, warranties, covenants, conditions or provisions of this
Agreement, or of any present or future supplement or amendment hereto or of any
other agreement between Hana and Client; (d) if Client becomes insolvent
or unable to meet Client’s debts as they mature; (e) if Client fails to
pay when due any material obligations or liabilities owing by Client to any
person or entity (including without limitation, any United States and state
taxes); (f) if Client delivers to Hana a false financial statement or if
any representation, warranty, certification, or other statement made by Client
to Hana is false in any material respect when made; (g) if Client calls,
or has called by a third party, a meeting of creditors; (h) if any
bankruptcy proceeding, insolvency arrangement or similar proceeding is
commenced by or against Client; (i) if Client suspends or discontinues
doing business for any reason; (j) if a receiver or trustee of any kind is
appointed for Client or any of Client’s property; (k) if any guarantor of
Client’s Obligations dies or becomes insolvent or has commenced by or against
such guarantor any bankruptcy proceeding, insolvency arrangement or similar
proceeding; (l) if any guaranty of Client’s Obligations is terminated or any
guarantor alleges that the guaranty is unenforceable, or if there is a default
under any such guaranty; (m) if there shall be a change in the beneficial
ownership and control, directly or indirectly of the majority of the
outstanding voting securities or other interests entitled (without regard to
the occurrence of any contingency) to elect or appoint members of the board of
directors or other managing body of Client; or (n) if a notice of lien, money
judgment, levy, assessment, seizure or writ, or warrant of attachment is
entered or filed against Client or with respect to the Accounts or any other
collateral in which Client has granted Hana a security interest; or (o) if
Client sells, leases, transfers or otherwise disposes of all or substantially
all of Client’s property or assets, or consolidates with or merges into or with
any corporation or entity.

 

Upon
the occurrence and during the continuance of an Event of Default, Hana will
have the right to terminate this Agreement and all other arrangements existing
between Hana forthwith and without notice, and the Obligations will mature and
become immediately due and payable and Hana will have the right to withhold any
further payments to Client until all Obligations have been paid in full.

 

If
either party to this Agreement shall bring any action for any relief against
the other, declaratory or otherwise, arising out of this Agreement, the losing
party shall pay to the prevailing party a reasonable sum for attorney fees
incurred in bringing such suit and/or enforcing any judgment granted therein,
all of which shall be deemed to have accrued upon the commencement of such
action and shall be paid whether or not such action is prosecuted to judgment. Any
judgment or order entered in such action shall contain a 

 

15

 

specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment. For the purpose of this section, attorney fees shall
include, without limitation, fees incurred in the following: (1) postjudgment
motions; (2) contempt proceedings; (3) garnishment, levy, and debtor
and third party examination; (4) discovery; and (5) bankruptcy
litigation.

 

SECTION 10.                     Term and Termination

 

10.1                           This Agreement will continue in full force and
effect for one (1) year from
the Effective Date and shall renew for one (1) year terms thereafter
unless either party hereto gives the other party not less than sixty (60) days
prior Written Notice prior to the end of the initial or any renewal term of
their intention to terminate this Agreement as of the end of such term.

 

10.2                           In the event that this Agreement is terminated
by Client prior to an Anniversary Date, Hana shall be entitled to the unpaid
portion of the Minimum Annual Commission, if any, for such Period, as provided
in section 2.4 above, as of the effective date of termination. Except as
otherwise provided, Hana may terminate this Agreement at any time by
giving Client at least sixty (60) days prior written notice of termination. However,
Hana may terminate this Agreement immediately, without prior notice to
Client, upon the occurrence of an Event of Default (defined in section 8 above).

 

10.3                           Notice of termination shall be given by
messenger, registered or certified mail, facsimile or commercial delivery
service; provided, however, that Client will not terminate this
Agreement so long as Client is indebted or obligated to Hana in connection with
any other agreements between Hana and Client. Notwithstanding any such Written
Notice of termination, all of Hana’s rights, liens and security interests
hereinabove granted to Hana (including Accounts arising, acquired or created
after the date of termination of this Agreement) will continue and remain in
full force and effect after any termination of this Agreement and pending a
final accounting, Hana may withhold any balances in Client’s account
unless Hana is supplied with an indemnity satisfactory to Hana to cover all
Obligations. Client agrees to continue to assign accounts receivable to Hana
and to remit to Hana all collections on accounts receivable, until all
Obligations have been paid in full or Hana has been supplied with an indemnity
satisfactory to Hana to cover all Obligations. All of the representations,
warranties and indemnities and covenants made by Client herein will survive the
termination of this Agreement.

 

10.4                           Upon
termination, Client shall cause Hana to be released from all liability under
the outstanding Letters of Credit and factor/Supplier Guaranties, or, at Hana’s
option, Client will deposit cash collateral with Hana in an amount equal to one
hundred five percent (105%) of the Letter of Credit Liability and Factor/Supplier
Liability that will remain outstanding after repayment.

 

10.5                           Notice
of termination shall be given by messenger, registered or certified mail,
facsimile or commercial delivery service; provided, however, that
Client will not terminate this Agreement so long as Client is indebted or
obligated to Hana in connection with any other agreements between Hana and
Client. Notwithstanding any such Written Notice of termination, all of Hana’s
rights, liens and security interests hereinabove granted to Hana (including
Accounts arising, acquired or created after the date of termination of this
Agreement) will continue and remain in full force and effect after any
termination of this Agreement and pending a final accounting, Hana may withhold
any balances in Client’s

 

16

 

account unless Hana is supplied with an indemnity satisfactory to Hana
to cover all Obligations. Client agrees to continue to assign accounts
receivable to Hana and to remit to Hana all collections on accounts receivable,
until all Obligations have been paid in full or Hana has been supplied with an
indemnity satisfactory to Hana to cover all Obligations. All of the
representations, warranties and indemnities and covenants made by Client herein
will survive the termination of this Agreement.

 

10.6                           If
Client shall terminate during the term of this Agreement, Client shall pay to
Hana, in addition to all other Obligations, a termination fee (the “Termination
Fee”) equal to One Percent (1.0%) of Credit Limit.

 

SECTION 11.                     Governing Law, Venue and Waiver
of Jury

 

APPLICABLE LAW.                                 THIS AGREEMENT SHALL BE GOVERNED BY AND SHALL
BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
CALIFORNIA OR ANY OTHER JURISDICTION IN WHICH THE COLLATERAL SECURITY IS
LOCATED, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES.

 

CONSENT TO JURISDICTION.                         CLIENT HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA OR ANY OTHER
JURISDICTION IN WHICH THE COLLATERAL SECURITY IS LOCATED AND IRREVOCABLY AGREES
THAT, SUBJECT TO HANA’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT SHALL BE LITIGATED IN SUCH COURTS. CLIENT EXPRESSLY
SUBMITS AND CONSENTS TO THE JURISDICTION OF THE AFORESAID COURTS AND WAIVES ANY
DEFENSE OF FORUM NON CONVENIENS. CLIENT HEREBY WAIVES PERSONAL SERVICE OF ANY
AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE
UPON CLIENT BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED,
ADDRESSED TO CLIENT, AT THE ADDRESS SET FORTH IN THIS AGREEMENT AND SERVICE SO
MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN POSTED.

 

WAIVER OF JURY TRIAL.                                               CLIENT AND HANA HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF THIS AGREEMENT. CLIENT AND HANA ACKNOWLEDGE THAT THIS WAIVER IS A
MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP THAT EACH HAS RELIED
ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THAT EACH WILL CONTINUE TO
RELY ON THE WAIVER IN THEIR RELATED FUTURE DEALINGS. CLIENT AND HANA WARRANT
AND REPRESENT THAT EACH AS HAD THE OPPORTUNITY OF REVIEWING THIS JURY WAIVER
WITH LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS.

 

SECTION 12.                     Modifications, Waivers and
Miscellaneous Provisions

 

This Agreement may not be changed or
terminated orally; it constitutes the entire agreement between Client and Hana
and will be binding upon Client’s and Hana’s respective successors and assigns,
but may not be assigned by Client without Hana’s

 

17

 

prior written consent. No delay or failure on Hana’s part in
exercising any right, privilege, or option hereunder will operate as a waiver
thereof or of any other right, privilege or option. No waiver whatsoever will
be valid unless in a Written Notice, signed by Hana, and then only to the
extent therein set forth. If any term or provision of this Agreement is held
invalid under any statute, rule or regulation of any jurisdiction
competent to make such a decision, the remaining terms and provisions will not
be affected, but will remain in full force and effect.

 

Any
Written Notice to be given under this Agreement will be in writing addressed to
the respective party as set forth in the heading to this Agreement and will be
personally served, telecopied or sent by overnight courier service or United
States mail and will be deemed to have been given: (a) if delivered in
person, when delivered; (b) if delivered by telecopy, on the date of
transmission if transmitted on a Business Day before 4:00 p.m. (Los
Angeles time) or, if not, on the next succeeding Business Day; (c) if
delivered by overnight courier, two (2) days after delivery to such courier
properly addressed; or (d) if by U.S. Mail, four (4) Business Days
after depositing in the United States mail, with postage prepaid and properly
addressed.

 

Hana conducts business under California
commercial finance lender license number 6032324.

 

SECTION 13.                     Definitions

 

	
  “Accounts”

  	
  —

  	
  All presently existing or outstanding and all hereafter created or
  acquired accounts 

  
	
  (as that term is defined in the UCC), contract rights, documents,
  notes, drafts and other forms of obligations owed to or owned by Client
  arising or resulting from the sale of goods or the rendering of services by
  Client, all general intangibles relating thereto, all proceeds thereof, all
  guaranties and security therefore, and all goods and rights represented
  thereby or arising therefrom, including, but not limited to, returned,
  reclaimed and repossessed goods, and the rights of stoppage in transit,
  replevin and reclamation.

  
	
   

  	
   

  	
   

  
	
  “Agreement”

  	
  —

  	
  means this Agreement.

  
	
   

  	
   

  	
   

  
	
  “Anniversary Date”

  	
  —

  	
  twelve months after the Effective Date and each anniversary thereof.

  
	
   

  	
   

  	
   

  
	
  “Approved Account”

  	
  —

  	
  An Account representing a sale to a customer within the credit line
  established for 

  
	
  such customer on Client’s normal selling terms or within the single
  order credit approval given by Hana for orders from such customer provided
  that Delivery is completed while the credit line or single order credit
  approval remains in effect and which has not been charged back to Client.

  
	
   

  	
   

  	
   

  
	
  “Approved Payment Date”

  	
  —

  	
  The date which is one hundred twenty (120) days after the due date
  for payment of 

  
	
  an Approved Account.

  
	
   

  	
   

  	
   

  
	
  “Base Rate”

  	
  —

  	
  The highest prime rate publicly announced from time to time by Wall
  Street 

  
	
  Journal as its prime or base rate or equivalent rate.

  
	
   

  	
   

  	
   

  
	
  “Business Day”

  	
  —

  	
  Any day excluding Saturday, Sunday and any day which is a legal
  holiday under 

  
	
  the laws of the State of California or is a day on

  

 

18

 

	
  which banking institutions located in such State are closed.

  
	
   

  	
   

  	
   

  
	
  “Client Percentage”

  	
  —

  	
  means Eighty Percent (80%).

  
	
   

  	
   

  	
   

  
	
  “Client”

  	
  —

  	
  means the seller of goods or provider of services to the Customer and
  the 

  
	
  undersigned.

  
	
   

  	
   

  	
   

  
	
  “Collected Amount”

  	
  —

  	
  The amount received by Hana from a Customer in payment of an Account
  up to the 

  
	
  Net Amount of such Account.

  
	
   

  	
   

  	
   

  
	
  “Collection Date”

  	
  —

  	
  The date on which Hana receives payment of an Account.

  
	
   

  	
   

  	
   

  
	
  “Contract Currency”

  	
  —

  	
  means the currency in which the Customer is obligated to pay and to
  deliver to the 

  
	
  Client under the terms of the contract of sale.

  
	
   

  	
   

  	
   

  
	
  “Contract Year”

  	
  —

  	
  The twelve-month period immediately following the Effective Date and
  each 

  
	
  anniversary thereof.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “Costs”

  	
  —

  	
  All costs, fees and expenses (including audit fees, attorney’s fees
  and the allocated 

  
	
  costs of internal counsel) incurred by Hana in connection with (i) the
  creation, negotiation or administration of this Agreement, any related
  instrument, document or agreement, or any waiver, forbearance, amendment or
  modification thereof (ii) the perfection, protection, preservation or
  enforcement of Hana’s rights in any collateral in which Hana has been granted
  a security interest and (iii) all filing fees, filing taxes or search
  reports.

  
	
   

  
	
  “Credit Balance”

  	
  —

  	
  The amount determined by subtracting the Daily Balance from the
  amount of all 

  
	
  Accounts.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “Credit Risk”

  	
  —

  	
  The risk that a Customer will be financially unable to pay an Account
  at maturity, 

  
	
  provided that the merchandise has been received or services rendered
  and accepted by the Customer without Dispute.

  
	
   

  	
   

  	
   

  
	
  “Customer”

  	
  —

  	
  means i) a duly organized and legally existing corporation,
  proprietorship, 

  
	
  partnership or government entity in the Customer’s country,
  except for subsidiary or associated companies of the Client, which
  shall be excluded from coverage, or ii) the receiver, trustee, liquidator, custodian
  or similar representative of any Customer or its creditors, or the Customer
  as debtor in possession under Chapter 11 of Title 11 of the United States
  Code or any similar statute in another country (hereinafter “debtor in
  possession”). Any Customer referred to in clause (i) and any
  successor to such Customer referred to in clause (ii) shall be
  considered the same entity. For the purposes of applying the Customer
  Limit, the term Customer shall include the Customer and all
  corporations and other entities controlling, controlled by, or under common
  control with the Customer.

  
	
   

  
	
  “Customer Limit”

  	
  —

  	
  means (a) the limit specified in writing by Hana for that
  Customer or (b) where no 

  
	
  such limit has been specified by Hana, then an amount not exceeding
  the Discretionary Credit Limit, provided such amount has been approved in
  writing by Hana for that Customer.

  

 

19

 

	
  “Daily Balance”

  	
  —

  	
  The outstanding balance of all advances made by Hana to Client or for
  Client’s 

  
	
  account in accordance with Section 2 and 3 hereof less all
  amounts credited to Client’s account in accordance with subsection 2.2
  hereof.

  
	
   

  	
   

  	
   

  
	
  “Deductible”

  	
  —

  	
  means the sum of thirty thousand dollars ($30,000.00).

  
	
   

  	
   

  	
   

  
	
  “Default”

  	
  —

  	
  A condition or event that, after notice or lapse of time or both,
  would constitute an 

  
	
  Event of Default if that condition or event were not cured or removed
  within any applicable grace or cure period.

  
	
   

  	
   

  	
   

  
	
  “Delivery”

  	
  —

  	
  The delivery of goods or performance of services in accordance with
  the terms 

  
	
  agreed to in writing between Client and a customer, provided that if
  no such terms are specified in writing, delivery shall mean delivery of goods
  or performance of services at the customer’s place of business.

  
	
   

  	
   

  	
   

  
	
  “Dilution”

  	
  —

  	
  The amount determined by the following formula: (i) the total
  amount of all non-

  
	
  cash reductions to Accounts, including but not limited to
  chargebacks, discounts and returns, during the calendar month then ending;
  divided by (ii) the total amount of (a) all Accounts which have
  their Payment Date during such calendar month, plus, (b) the total
  amount of all chargebacks and returns during such calendar month.

  
	
   

  	
   

  	
   

  
	
  “Dilution Percentage”

  	
  —

  	
  The amount determined by multiplying the historical Dilution,
  expressed as a 

  
	
  percentage of all Accounts, by the current outstanding Accounts.

  
	
   

  	
   

  	
   

  
	
  “Discretionary Credit Limit”

  	
  —

  	
  means Five Thousand Dollars ($5,000.00)

  
	
   

  	
   

  	
   

  
	
  “Dispute”

  	
  —

  	
  A dispute or claim, bona fide or otherwise, as to price, terms,
  quantity, quality, 

  
	
  delivery, or any cause or defense to payment of an Account whatsoever
  other than financial inability of a customer to pay the Account.

  
	
   

  	
   

  	
   

  
	
  “Effective Date”

  	
  —

  	
  The date set forth below Hana’s signature hereto.

  
	
   

  	
   

  	
   

  
	
  “Eligible Credit Balance”

  	
  —

  	
  The Credit Balance less the Dilution Percentage of all
  outstanding Accounts.

  
	
   

  	
   

  	
   

  
	
  “Eligible
  Receivables”

  	
  —

  	
  means all accounts receivables evidenced by an invoice or other
  accounting entry 

  
	
  arising from the shipment of goods or the provision of services by
  the Client to a Customer provided that:

  
	
   

  	
   

  	
   

  
	
   

  	
  a)

  	
  Hana has approved and accepted the credit risk on the accounts
  receivables; and

  
	
   

  	
   

  	
   

  
	
   

  	
  b)

  	
  the terms of payment provided to the Customer are no longer
  than the Maximum Terms of Payment; and

  
	
   

  	
   

  	
   

  
					

 

20

 

	
   

  	
  c)

  	
  the accounts receivable are factored, owned or purchased by Hana
  during the Agreement.

  
	
   

  	
   

  	
   

  
	
  “Factor/Supplier Availability”

  	
  —

  	
  The sum of Eligible Credit Balance less the sum of all
  Factor/Supplier Guaranties 

  
	
  outstanding, approved Ledger Debt outstanding and approved backorder,
  but in no event in excess of the Credit Limit.

  
	
   

  	
   

  	
   

  
	
  “Factor/Supplier Guaranty Fee”

  	
  —

  	
  the greater of: (i) one hundred dollars ($100.00) or, (ii) one
  whole percent (1.00%) 

  
	
  of the original face amount of a Factor/Supplier Guaranty. On
  Factor/Supplier Guaranties bearing payment terms in excess of thirty (30)
  days, the Factor/Supplier Guaranty Fee will be increased by one whole percent
  (1.00%) for each thirty (30) days or part thereof that the stated terms
  exceed thirty (30) days.

  
	
   

  	
   

  	
   

  
	
  “Foreign Sales”

  	
  —

  	
  Sales to customers located outside of the United States and its
  Territories. U.S. 

  
	
  Territories include Puerto Rico, Bahamas, Guam and U.S. Virgin
  Islands.

  
	
   

  	
   

  	
   

  
	
  “GAAP”

  	
  —

  	
  Generally accepted accounting principles set forth in the opinions
  and 

  
	
  pronouncements of the Accounting Principles Boards of the American
  Institute of Certified Public Accountants and statements and pronouncements
  of the Financial Accounting Standards Board that are applicable to the
  circumstances as of the date of determination.

  
	
   

  	
   

  	
   

  
	
  “Goods Insured”

  	
  —

  	
  are limited to the Accounts Receivables.

  
	
   

  	
   

  	
   

  
	
  “Hana Clients”

  	
  —

  	
  Any persons, corporations, partnerships, companies, associations or
  entitles (other 

  
	
  than Client) which have entered into factoring, inter-credit or
  financing agreements with any of Hana’s offices.

  
	
   

  	
   

  	
   

  
	
  “Insolvent/Insolvency”

  	
  —

  	
  means that:

  
	
   

  	
   

  	
   

  
	
   

  	
  i)

  	
  a voluntary or involuntary petition for relief under the applicable
  chapter of Title 11 of the United States Code, or any similar statute in
  another country, has been filed by or against the Customer, or a receiver,
  trustee, liquidator, custodian or similar representative has been appointed
  for the Customer, or a court having jurisdiction has taken an equivalent
  action against the Customer; or

  
	
   

  	
   

  	
   

  
	
   

  	
  ii)

  	
  the Customer has made a valid assignment, composition or similar
  arrangement for the benefit of creditors generally; or

  
	
   

  	
   

  	
   

  
	
   

  	
  iii)

  	
  a judicial order has been made against the Customer for the
  winding-up or dissolution of the Customer; or

  
	
   

  	
   

  	
   

  
	
   

  	
  iv)

  	
  the Board of Directors (or comparable body) of the Customer has
  passed a resolution authorizing the voluntary winding-up or dissolution of
  the Customer; or

  
	
   

  	
   

  	
   

  
	
   

  	
  v)

  	
  a compromise or arrangement of the Customer’s debts has been made
  binding on all, or substantially all, of the Customer’s trade creditors.

  
							

 

21

 

	
   

  	
   

  	
  The date that such offer of compromise is accepted by the trade
  creditors shall be the date of Insolvency.

  
	
   

  	
   

  	
   

  
	
   

  	
  The date of Insolvency will be the date on which the first of the
  above events occurs.

  
	
   

  	
   

  
	
  “Ledger Debt”

  	
  —

  	
  Indebtedness owing by Client to Hana as a result of Hana’s purchases
  of invoices 

  
	
  evidencing sales to Client by Hana Clients.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “Ledger Debt Availability”

  	
  —

  	
  The sum of Eligible Credit Balance less the sum of all
  Factor/Supplier Guaranties 

  
	
  outstanding, approved Ledger Debt outstanding and approved backlog,
  but in no event in excess of the Credit Limit.

  
	
   

  	
   

  	
   

  
	
  “Loan Documents”

  	
  —

  	
  Collectively, means this Agreement, the Note, the Guaranties, {the
  Subordination 

  
	
  Agreement, the Assignment of Monies Due Under the Factoring
  Agreement}, and all other instruments, documents and agreements executed by
  or on behalf of Client and/or Guarantors(s) and delivered concurrently
  herewith or at any time hereafter to Hana in connection with the Advances,
  Ledger Debt, Factor/Supplier Guaranties, and other transactions contemplated
  by this Agreement, all as amended, restated, supplemented, or modified from
  time to time.

  
	
   

  	
   

  	
   

  
	
  “Maximum Terms of
  Payment

  	
  —

  	
  means the longest initial period of credit the Client may extend
  to the Customer, 

  
	
  except as may be otherwise specified.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “Misdirected Payment Fee”

  	
  —

  	
  Fifteen percent (15.00%) of the face amount of a purchased Account on
  which 

  
	
  payment has been received by Client and not delivered in kind to Hana
  within two (2) business days following the date of receipt by Client.

  
	
   

  	
   

  	
   

  
	
  “Net Amount”

  	
  —

  	
  The gross amount of an Account less the discount offered by Client
  and taken by 

  
	
  Hana at the time Hana purchases such Account.

  
	
   

  	
   

  	
   

  
	
  “Net Invoice Value”

  	
  —

  	
  means the gross invoice amount of the Goods Insured in the Contract
  Currency, 

  
	
  less:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (i)

  	
  any credits or similar allowances excluding trade discounts,

  
	
   

  	
   

  	
   

  
	
   

  	
  (ii)

  	
  all expenses saved by non-payment of the invoice,

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  before the Insolvency, any amount received from any source as
  or towards payment to the Client, including from the resale of the Goods
  Insured, and

  
	
   

  	
   

  	
   

  
	
   

  	
  (iv)

  	
  any interest charges, including post-maturity interest charges.

  
	
   

  	
   

  	
   

  
	
  “Non-Approved Account”

  	
  —

  	
  (a) An Account with respect to which Hana has not issued a
  credit approval or has 

  
	
  subsequently withdrawn a credit approval or (b) an Approved
  Account that has been charged back to Client.

  
	
   

  	
   

  	
   

  
	
  “Non-Qualifying Amount”

  	
  —

  	
  means Five Thousand Dollars ($5,000.00) per Customer.

  
							

 

22

 

	
  “Obligations”

  	
  —

  	
  All loans, advances, debts, liabilities, obligations, covenants and
  duties owing by 

  
	
  Client to Hana, direct or indirect, absolute or contingent, due or to
  become due, now existing or hereafter arising, including, without
  limitations, Ledger Debt and indebtedness arising under any guaranty made by
  Client for Hana’s benefit or issued by Hana on Client’s behalf.

  
	
   

  	
   

  	
   

  
	
  “Overadvance Fee”

  	
  —

  	
  An amount, as determined by Hana from time to time, on Advances made
  in excess 

  
	
  of amounts available as set forth in Section 2.1 and evidenced
  by the accepted Notice of Overadvance Fee letter agreement.

  
	
   

  	
   

  	
   

  
	
  “Purchase Price”

  	
  —

  	
  An amount equal to the Net Amount of an Account, less factoring commissions,
  

  
	
  credits (including, without limitation, merchandise returns and
  credit memos), charge backs, allowances, and all other charges provided
  thereunder.

  
	
   

  	
   

  	
   

  
	
  “Qualifying Loss”

  	
  —

  	
  means the total amount of the Net Invoice Values unpaid by the Customer
  due to its 

  
	
  Insolvency and established as a valid and legally sustainable
  obligation of the Customer to the Client, provided such amount is in excess
  of the Non Qualifying Loss Amount. If such amount does not exceed the Non
  Qualifying Loss Amount, then such amount shall be borne by the Client for its
  own account, and shall not be applied to the Deductible and shall otherwise
  be excluded for purposes of this Agreement. 

  
	
   

  	
   

  	
   

  
	
  “Remittance Date”

  	
  —

  	
  That date which is the Wednesday immediately following the previous
  week’s 

  
	
  Collection Dates; provided, however, that if any such Wednesday is
  not a Business Day, such Collected Amount of the Purchase Price shall be
  remitted to Client on the next Business Day thereafter.

  
	
   

  	
   

  	
   

  
	
  “Surcharge Amount”

  	
  —

  	
  An amount, as determined by Hana from time to time, on Approved
  Accounts 

  
	
  arising from Foreign Sales or high risk customers and evidenced by
  the accepted Notice of the Surcharge Amount agreement.

  
	
   

  	
   

  	
   

  
	
  “Takeover Account”

  	
  —

  	
  An Account created or existing prior to the Effective Date.

  
	
   

  	
   

  	
   

  
	
  “Transmission”

  	
  —

  	
  Transmission through Hana’s proprietary system or through Electronic
  Data 

  
	
  Exchange (“EDI”)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  “UCC”

  	
  —

  	
  The Uniform Commercial Code as in effect on the date hereof in
  the States of 

  
	
  California, as amended from time to time, and any successor statute.

  
	
   

  	
   

  	
   

  
	
  “Written Notice”

  	
  —

  	
  Notice given in writing in accordance with Section 9 of this
  Agreement.

  

 

//

//

 

23

 

In
Witness Whereof, the undersigned have caused this agreement to be executed and
delivered by their thereunto duly authorized officers as of the Effective Date.

 

 

	
  HANA FINANCIAL, INC.,

  	
  LIQUIDMETAL TECHNOLOGIES, INC.,

  
	
  a California corporation

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Ken Lee

  	
   

  	
  /s/ John Kang

  	
   

  
	
  Ken Lee

  	
  John Kang

  
	
  Assistant Vice President

  	
  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  Effective Date:

  	
  April 21, 2005

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  STATE OF

  	
  California)

  	
   

  
	
  COUNTY OF

  	
  Los Angeles) ss.

  	
   

  
					

 

On April 25,
2005 before me, Kyeong H. Cho, a Notary Public in and for said State,
personally appeared John Kang, personally known to me (or proved to me
on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are
subscribed to the within instrument and acknowledged to me that he/she/they
executed the same in his/her/their authorized capacity(ies), and that by
his/her/their signature(s) on the instrument the person(s), or the entity upon
behalf of which the person(s) acted, executed the instrument.

 

WITNESS my hand
and official seal.

 

	
  Signature

  	
  /s/ Kyeong H.
  Cho

  	
   

  
	
  Notary Public in
  and for said County and State

  

 

24

 

AMENDMENT #1 TO FACTORING, LOAN &
SECURITY AGREEMENT 

 

This Amendment to that certain
Factoring, Loan & Security Agreement (“Amendment”) is made as of January 27,
2006 by and between Liquidmetal Technologies, Inc. (“Client”) and Hana
Financial, Inc. (“Hana”) located at 1000 Wilshire Blvd., Suite 2000,
Los Angeles, CA 90017, with respect to the following:

 

RECITALS:

 

WHEREAS,
Client and Hana entered into that certain Factoring, Loan & Security
Agreement, dated April 21, 2005 (the “Agreement”); and

 

WHEREAS, Client and Hana now
desire to enter into this Amendment to amend the Agreement as herein provided.

 

AGREEMENT:

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency are
hereby acknowledged, Client and Hana agree to amend the Agreement as follows:

 

1.                                      Amendments.

 

Section 2                                               Paragraph
2.1(a) (i), 2.1(a)(ii), and 2.3 of the Agreement are hereby amended as
follows:

 

“2.1(a) (i)                                               if
the Eligible Account is an Approved Account, Hana may advance to Client up
to eighty five percent (85%) of
the Purchase Price of such Approved Account.”

 

“2.1(a)(ii)                                               if the
Eligible Account is a Non-Approved Account, Hana may advance to Client up
to fifty percent (50%) of the
Purchase Price of such Non-Approved Account.”

 

“2.3                           At the time Hana purchases
an Account, Hana will charge Client’s account with a factoring commission equal
to sixty five hundredths of a whole percent
(0.65%) of the Net Amount of the Accounts plus the Surcharge Amount,
as applicable, up to ten million dollars
($10,000,000.00) of Accounts purchased during each Contract Year. At
the time Hana purchases an Account, Hana will charge Client’s account with a
factoring commission equal to six tenths of a
whole percent (0.60%) of the Net Amount of the Accounts plus the
Surcharge Amount, as applicable in excess of ten
million dollars ($10,000,000.00) and up to fifteen million dollars ($15,000,000.00) of
Accounts purchased during each Contract Year. At the time Hana purchases an
Account, Hana will charge Client’s account with a factoring commission equal to
fifty five hundredths of a whole percent
(0.55%) of the Net Amount of the Accounts plus the Surcharge Amount,
as applicable in excess of fifteen million
dollars ($15,000,000.00) of Accounts purchased during each Contract
Year. On Accounts bearing payment terms in excess of sixty (60) days, the
factoring commission will be increased by one quarter of one percent (0.25%)
for each thirty (30) days or part thereof that the stated terms exceed
sixty (60) days.”

 

Section 4                                               Paragraph
4.1 of the Agreement is hereby amended as follows:

 

“4.1                           Client will pay Hana
interest on the Daily Balance. Interest will be calculated daily at a rate
equal to the sum of one and one half of a
whole percent (1.5%) plus the Base Rate (the “Interest Rate”) and
will be paid by Client or charged to Client’s account monthly at the end of
each month. The Interest Rate will also be charged to Client on all other
obligations, except those specifying a different rate, from the date incurred
through the date paid. Any publicly announced decrease or increase in the Base
Rate will result in an adjustment to the Interest Rate on the next business
day. After the occurrence of an 

 

1

 

Event of Default and for so long as such
Event of Default continues, all the Obligations will, at Hana’s option, bear
interest at a rate per annum equal to five percent (5.0%) plus the Interest
Rate. Interest will be calculated on the basis of a 360-day year for the actual
number of days elapsed. In no event will the total amount of interest received
by Hana exceed the maximum rate permitted by applicable law and in the event
excess interest is determined by a court of competent jurisdiction to have been
paid by Client to Hana, such excess interest will be applied as a credit
against the outstanding Obligations and Client will not have any action against
Hana for any damages arising out of the payment or collection of such excess
interest.”

 

2.                                     Interpretation.                                                                                                                  All
initial capitalized terms not herein defined shall have the meaning ascribed to
such terms in the Agreement.

 

3.                                      Continuing
Effectiveness.                                                     Except
to the extent specifically herein amended, the Agreement shall continue
unmodified and in full force and effect. In the event of any conflict between
the provisions of the Agreement and the provisions of this Amendment, the
provisions of this Amendment shall control.

 

IN WITNESS WHEREOF, the parties hereto have
executed this Amendment as of the date first written above.

 

	
  HANA FINANCIAL, INC.

  	
  LIQUIDMETAL TECHNOLOGIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Ken Lee

  	
   

  	
  /s/ Ricardo Salas

  	
   

  
	
  Ken Lee

  	
  Ricardo Salas

  
	
  Assistant Vice President

  	
  President

  
				

 

2

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