Document:

Exhibit 10.3

LIMITED GUARANTY

This Limited Guaranty (“Guaranty”) is made by the following individuals with residence and mailing addresses as set forth below (referred to herein as the “Guarantors”)

		
	Nancy Duitch

	Alan Gerson

	15950 Royal Oak Rd.

	4256 Valley Meadow Rd.

	Encino, CA 91436

	Encino, CA 91436

to and for the benefit of MARQUETTE COMMERCIAL FINANCE, INC. (“MCF”), a Minnesota corporation authorized to transact business in Texas.

A.

MCF has contemporaneously herewith entered into that certain Account Transfer and Purchase Agreement dated as of July 13, 2006 (such agreement, and all amendments and modifications thereof, collectively, the “Purchase Agreement”), to which reference is made for all purposes, with Adsouth Marketing, LLC (referred to herein as the “Seller”), pursuant to which MCF has purchased or will purchase all right, title and interest in certain accounts receivable of the Seller (the “Accounts”), on those terms and conditions set forth in the Purchase Agreement.

B.

MCF is willing to enter into the Purchase Agreement only if the Guarantors execute and deliver this Guaranty to MCF.

NOW, THEREFORE, in consideration of the aforesaid premises and other good and valuable consideration, and for the purpose of inducing MCF to enter into the Purchase Agreement and to purchase accounts receivable from the Seller pursuant to the terms thereof, the sufficiency of which is hereby acknowledged, the Guarantors hereby covenant and agree as follows:

1.

The Guarantors hereby unconditionally and irrevocably guarantee the payment in full of any losses incurred by MCF under the Purchase Agreement (collectively the “Obligations”) to the extent that such losses are related to or attributable to any of the following limited circumstances only:

(a)

In the event that the Seller takes any affirmative actions which result in the failure of MCF to obtain payment and which result in losses to MCF under the Purchase Agreement as a result of any of the following:

1.  a representation to MCF by Seller under Section 9 of the Purchase Agreement was not true when made, and that misrepresentation results in losses to MCF under the Purchase Agreement;

2.  the Seller takes an affirmative action to discount or subordinate an Account sold to MCF under the Purchase Agreement, and such action results in losses to MCF; and

3.    provided that the Seller fails to make good or offer satisfactory restitution to MCF within a period of 90 days after the occurrence of any losses to MCF under this Purchase Agreement, after receipt of notice from MCF of such loss.

(b)

In the event that the Seller, the Guarantors, or any other person, without receiving prior written consent from MCF, shall cash, deposit, or retain, any checks, drafts, monies or proceeds of the Accounts purchased by MCF, and the Seller shall fail to tender the entire amount of the same to MCF. 

2.

MCF shall be required, as a condition precedent to making a demand upon the Guarantors or to bringing an action against the Guarantors under this Guaranty, to act in a commercially reasonable manner with respect to making demand upon, or to institute any action or proceeding, at law or in equity against the Seller or anyone else, or to exhaust its remedies against the Seller, or anyone else, or against any collateral security.  All remedies afforded to MCF by reason of this Guaranty are separate and cumulative remedies and it is agreed that not one of such remedies, whether exercised by MCF or not, shall be deemed to be exclusive of any of the other remedies available to MCF and shall not limit or prejudice any other remedy which MCF may have against any party, including the Guarantors.

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3.

The Guarantors shall remain liable on this Guaranty notwithstanding any change or changes in the terms, covenants or conditions of the Purchase Agreement, or any amendment thereto, hereafter made or granted, or any delay on the part of MCF in exercising its rights hereunder or thereunder, it being the intention hereof that the Guarantors shall remain liable as principal until the full amount of the Obligations guaranteed hereby, with interest and any sums which may be due thereon, shall have been fully paid, notwithstanding any act or omission which might otherwise operate as a legal or equitable discharge of the Guarantors.  Should Guarantors cease to remain as an executive officer or director of Seller, this Guaranty will cease to be valid only with written notification to MCF.  All Obligations incurred prior to effective date of written notice of Guarantors’ termination from such position, including any losses associated with such Obligations prior to the effective date, will be the responsibility of Guarantors.  If the Guarantors’ Guaranty is no longer valid, Seller will lose  the ability to increase the Obligations until an acceptable guarantor is presented to MCF, and if an acceptable guarantor is not presented, MCF may use all remedies afforded by the Purchase Agreement to repay the outstanding Obligations owed to MCF by Seller.  

4.

The Guarantors hereby waive (a) notice of acceptance of this Guaranty; (b) presentment and demand for payment of the Obligations or any portion thereof; (c) protest and notice of dishonor or default to the Guarantors or to any other person or party with respect to the Obligations or any portion thereof; (d) all other notices to which the Guarantors might otherwise be entitled; (e) any demand for payment or performance of this Guaranty; and (f) all Guaranty and suretyship defenses or other defenses in the nature thereof (including, without limitation, all rights Guarantors have under, or the requirements imposed by, Chapter 34 of the Texas Business and Commerce Code, as may be amended from time to time).

5.

Guarantors shall promptly furnish to MCF at any time and from time to time such financial statements and other financial information of Guarantor as MCF may require, in form and detail satisfactory to MCF (including, without limitation, annual financial statements within 45 days after the end of each calendar year).

6.

This Guaranty shall inure to the benefit of, and may be enforced by MCF, and its respective successors and assigns, and shall be binding upon and enforceable against the Guarantors and their respective heirs, executors, legal representatives, administrators, or successors and assigns thereof.  The obligations of the Guarantors hereunder shall not be joint and several, but rather each individual Guarantor shall be severally liable for fifty percent (50%) of the amounts guaranteed hereunder.

7.

The Guarantors agree that in the event this Guaranty is placed in the hands of an attorney for enforcement, the Guarantor will reimburse MCF for all expenses incurred, including reasonable attorneys' fees.

8.

This Guaranty cannot be modified or amended except in writing, duly executed by the Guarantors and MCF.

9.

The Guarantors have received, and will receive, direct and/or indirect benefits by and from the making of this Guaranty and the execution of the Purchase Agreement by MCF.

10.

THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAWS THEREOF, EXCEPT WITH RESPECT TO THE LAWS OF TEXAS GOVERNING THE MAXIMUM RATE OF INTEREST OR USURY.  MCF IS A WHOLLY OWNED SUBSIDIARY OF MERIDIAN BANK, N.A. WHICH HAS ITS HOME OFFICE IN ARIZONA.  THEREFORE, TEXAS LAWS AND THE LAWS OF OTHER STATES, EXCEPT ARIZONA, ARE PREEMPTED BY THE NATIONAL BANK ACT, 12 U.S.C. §§ 21, ET. SEQ., AND THE REGULATIONS PROMULGATED THEREUNDER.  ACCORDINGLY, THE LAWS OF THE STATE OF ARIZONA REGARDING MAXIMUM RATES OF INTEREST AND USURY, A.R.S. §§ 44-1201 ET. SEQ., SHALL GOVERN THIS GUARANTY.  THIS GUARANTY IS PERFORMABLE BY THE PARTIES IN TARRANT COUNTY, TEXAS.  GUARANTORS AND MCF EACH AGREE THAT THE STATE COURTS OF TARRANT COUNTY, TEXAS SHALL BE THE EXCLUSIVE VENUE FOR ALL LITIGATION OF ANY DISPUTE OR CLAIM ARISING UNDER OR RELATING TO THIS GUARANTY, AND THAT SUCH COUNTY IS A CONVENIENT FORUM IN WHICH TO DECIDE ANY SUCH DISPUTE OR CLAIM.  THE PARTIES HERETO EACH CONSENT TO THE PERSONAL JURISDICTION OF THE STATE COURTS LOCATED IN TARRANT COUNTY, TEXAS FOR THE LITIGATION OF ANY SUCH DISPUTE OR CLAIM.  GUARANTORS IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVIENENT FORUM.

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11.

GUARANTORS HEREBY IRREVOCABLY WAIVE, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY RIGHT GUARANTORS MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS GUARANTY OR ANY TRANSACTION CONTEMPLATED HEREBY OR ASSOCIATED HEREWITH.

12.

THIS GUARANTY REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES HERETO WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREIN AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS WHEREOF, the undersigned has executed this Guaranty this 8th day of November, 2006.

GUARANTORS:

/s/ NANCY DUITCH

_____________________________________________

NANCY DUITCH

SSN:  XXX-XX-XXXX

/s/ ALAN GERSON

_____________________________________________

ALAN GERSON

SSN:  XXX-XX-XXXX

STATE OF ______________________________

COUNTY OF ____________________________

The foregoing instrument was acknowledged before me this _________ day of November, 2006, by Nancy Duitch.

Witness my hand and official seal.

My Commission expires: _____________________________

_________________________________________

(Notary Public)

STATE OF ______________________________

 

  

COUNTY OF ____________________________

 

The foregoing instrument was acknowledged before me this _________ day of November, 2006, by Alan Gerson.

Witness my hand and official seal.

My Commission expires: _____________________________

_________________________________________

(Notary Public)

3RELEASE OF SECURITY INTEREST AND SUBORDINATION AGREEMENT

Exhibit 10.4

RELEASE OF SECURITY INTEREST AND SUBORDINATION AGREEMENT

(Liens)

 

This Release of Security Interest and Subordination Agreement is made and entered into as of the 17th day of October, 2006, by and between MARQUETTE COMMERCIAL FINANCE, INC. (“MCF”) and GOTTBETTER 

CAPITAL MASTER, LTD. (“Creditor”) and is to witness the following: 

 

WHEREAS, MCF and Adsouth Marketing, LLC (“Client”) entered into an Account Transfer and Purchase Agreement (the “Purchase Agreement”) under which MCF from time-to-time, purchases accounts receivable (the "Accounts") from the Client; and 

WHEREAS, to secure all present and future indebtedness, obligations and liabilities of the Client to MCF (including, without limitation, under the Purchase Agreement), Client granted MCF a security interest in, inter alia, all of its present and future Accounts, general intangibles, documents, instruments, chattel paper, contract rights and inventory (all of which will hereafter collectively be referred to as the “Collateral”); and 

WHEREAS, Client also grants MCF a security interest in each and every Account purchased by MCF under the Purchase Agreement (“Purchased Accounts”); and 

WHEREAS, Client has borrowed or has the right to borrow certain sums of money from, obtained credit from or is otherwise obligated to Creditor; and 

WHEREAS, to secure the indebtedness and obligations of Client to Creditor, Client has granted or will grant to Creditor a security interest in certain of its assets, including all of its Accounts and inventory; and 

WHEREAS, MCF and Creditor desire to establish, as between themselves, the relative priority and manner of enforcing their respective security interests in, and rights with respect to, the Collateral and the Purchased Accounts and to provide for certain other matters. 

NOW, THEREFORE, for and in consideration of the foregoing, the mutual benefits to be received by the 

parties hereto, and the covenants and agreements contained herein, MCF and Creditor agree to the following: 

1. Release of Creditor's Security Interests. In consideration of the increased liquidity provided to Client by the MCF purchase of Purchased Accounts, which Creditor acknowledges is for a full, fair and valuable consideration to Client, and which liquidity may be instrumental in a reduction of the indebtedness or obligations by Client to Creditor, Creditor hereby releases and discharges any security interest in all Purchased Accounts and hereby waives any and all claims or interest it has or might have in and with respect to the Purchased Accounts, regardless of (a) when its interest became perfected, (b) when the Purchased Accounts were purchased, (c) the value of the Purchased Accounts, (d) the consideration given or promised therefore, or (e) the amount Creditor is owed by Client. 

 

Creditor waives, releases and discharges any interest it has or might have in any Purchased Accounts as representative of the proceeds of any of Client’s inventory or any payments received by MCF on the Purchased Accounts as well as all goods returned under the Purchased Accounts. Creditor further acknowledges and understands that it has no interest of any kind or character, security or otherwise, in the Purchased Accounts or the proceeds therefrom. Creditor further waives any right it might have, by law or otherwise, to receive notice, or any obligation on the part of MCF to give notice, of any kind, at any time, of the purchase by MCF of any or all of the Accounts. Upon such purchase, any interest, security or otherwise, that Creditor has in such Purchased Accounts, is automatically waived and released in and to such Purchased Accounts without further action of any kind on the part of MCF or Client. 

2. Subordination of Creditor's Security Interests. Without limiting or altering the validity or effectiveness of the provisions in Section 1 herein pertaining to the release and waiver of security interests in Purchased Accounts, Creditor hereby subordinates its security interest in the Collateral to the security interest of MCF in the Collateral and Creditor agrees that its security interest, whenever granted and/or perfected in the Collateral, will be inferior, junior and secondary to the security interests held by MCF in the Collateral. Creditor agrees that if Creditor from time to time comes into possession of any payment on Accounts owing by any account debtors, all of such payments shall be held in trust for the benefit of MCF and shall be paid immediately to MCF. 

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3. Reliance by MCF. This Agreement is an irrevocable and continuing agreement of subordination and MCF may continue to rely upon same in providing financing and other financial accommodations to or for the benefit of Client. In connection therewith, MCF may without notice to or consent from Creditor and without impairing the rights and obligations of the parties under this Agreement (a) release any person or entity now or hereafter liable upon any of the MCF Obligations, (b) renew, extend or modify the terms of any document or instrument evidencing, governing, securing or guaranteeing any of the MCF Obligations, and/or (c) provide additional financing to Client after the date hereof. 

4. No Commitment. It is understood and agreed that this Agreement shall in no way be construed as a commitment or agreement by MCF to continue financing arrangements with Client and that MCF may terminate such arrangements at any time, in accordance with MCF’s agreements with Client. 

5. Financial Condition of Client. Creditor has adequate means to obtain from Client on a continuing basis information concerning the financial condition of Client and Creditor is not relying on MCF to provide such information now or in the future. Creditor acknowledges and agrees that MCF is not obligated to keep Creditor informed of Client’s financial condition. 

 6. Enforcement of Remedies and Notice. The Client shall not be entitled for any purpose or under any circumstances to rely upon the failure of MCF or Creditor to comply with the terms hereof. Nothing herein contained shall be deemed to authorize Client to take any action not permitted under any agreement between Client and MCF or Creditor. Client shall not be deemed to be a third party beneficiary to this Agreement or to have any rights hereunder whatsoever. Until termination of this Agreement, Creditor agrees not to (a) take any action to foreclose, repossess, marshall, control or exercise any remedies with respect to any property included within the Collateral, (b) not to join in any petition for bankruptcy or assignment for the benefit of creditors agreement affecting Client or any of its assets, or seek to appoint a receiver for all or any portion of Client’s assets, (c) take any action with respect to any property included within the Collateral which could reasonably be expected to interfere with the day-to-day operation of the business of Client, or (d) make any contact or communications, directly or indirectly, (including without limitation notification or confirmation) with any account debtor or obligor with respect to any Accounts, chattel paper, instruments or general intangibles. Creditor agrees to deliver to MCF and/or authorize the filing of duly executed UCC amendments with respect to any UCC financing statements on file between Creditor and Client in order to reference that Creditor’s security interest in the subject collateral is subject to the terms and provisions of this Agreement. 

 

7. No Challenge to Validity. Both MCF and Creditor covenant and agree not to take any action to seek to avoid or set aside the perfected security interest in the Purchased Accounts or the Collateral or to seek to rescind, modify, or circumvent the provisions of this Agreement. 

8. Termination. This Agreement shall terminate when both of the following events have occurred and exist simultaneously: (a) full and final payment in cash of all amounts owing to MCF by Client, and (b) termination or expiration of the Purchase Agreement and of all obligations and commitments of MCF to provide financing to Client. 

9. Amendment. This Agreement may not be amended except by written agreement executed by both MCF and Creditor. 

10. Captions. Captions as used in this Agreement are for convenience only, and shall not affect the construction of this Agreement. 

11. GOVERNING LAW; JURY WAIVER. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS. THE PARTIES HERETO AGREE THAT TARRANT COUNTY, TEXAS WILL BE THE EXCLUSIVE VENUE FOR LITIGATION OF ANY DISPUTE OR CLAIM ARISING UNDER OR RELATED TO THIS AGREEMENT. THE PARTIES HERETO WAIVE THE RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING OF ANY KIND ARISING OUT OF OR RELATING TO THIS AGREEMENT. 

12. Successors and Assigns. Unless otherwise herein provided, this Agreement shall be binding upon and inure to the benefit of all successors and assigns, including, without limitation, such transferee of any of the obligations of Client to MCF or to Creditor under any agreement or by law. Any transferee of the obligations or indebtedness owed by Client to Creditor or any part thereof, shall take such obligations or indebtedness or any part thereof subject to the provisions of this Agreement. 

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13. Entire Agreement. This Agreement constitutes the complete and integrated agreement of both MCF and Creditor with respect to the subject matter hereof, supersedes all prior or contemporaneous oral agreements, discussions or negotiations, and may not be orally modified or supplemented by parol or extrinsic evidence. 

 

14. Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be an original, but all of which constitute but one agreement. Delivery of an executed counterpart of this Agreement by telefacsimile shall be equally effective as delivery of a manually executed counterpart of this Agreement. 

 

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

 

 

GOTTBETER CAPITAL MASTER, LTD. 

 By: /s/ ADAM S. GOTTBETTER

 Printed Name: Adam S. Gottbetter

 Title: Director

 

 

 MARQUETTE COMMERCIAL FINANCE, INC. 

  By: 

 Printed Name: 

 Title: 

 

 

ACKNOWLEDGMENT BY CLIENT 

The undersigned, being the Client named in the foregoing Agreement, hereby (i) accepts and consents to such Agreement, (ii) agrees to be bound by all of the provisions thereof, (iii) agrees to recognize all priorities and other rights granted thereby, and (iv) acknowledges and agrees that such Agreement may be altered, modified or amended by MCF and Creditor without notice to or consent of Client. 

 

ADSOUTH MARKETING, LLC 

By: MFC Development Corp., its sole Member 

By: /s/ NANCY DUITCH

Name: Nancy Duitch 

Title: CEO 

Date: November 7, 2006

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