Document:

Exhibit
10.26

    Imagenetix
Inc.

    

    7%
Renewable Convertible Debenture

    

    This
7% Renewable Convertible Debenture is entered into by and between Imagenetix,
Inc., a Nevada corporation, with its principal place of business at 10845 Rancho
Bernardo Dr., Ste. 105, San Diego, CA 92127 and
________________________________________, an individual, as of this _____ day of
May, 2010, under the following terms and conditions:

    

    
      	
              Issuer:

            	
              Imagenetix
      Inc. (the “Company”)

            

    

    

    
      	
              Investors:

            	
              A
      small number of Qualified Institutional Buyers/Accredited Investors
      approved by the Company.

            

    

    

    
      	
              Issue:

            	
              A
      mini-max offering of $500,000 - $600,000 Convertible Debentures with
      Warrants (the “Units”)

            

    

    

    
      	
              Closing
      Date:

            	
              May
      25, 2010

            

    

    

    
      	
              Unit
    Price:

            	
              $25,000
      per unit

            

    

    

    
      	
              The
Unit:

            	
              Each
      Unit shall consist of one 7% Renewable Convertible Debenture with a face
      amount of $25,000 plus a five-year warrant to purchase up to 12,500 shares
      of common stock at $0.50 per share

            

    

    

    
      	
              Minimum
      Subscription:

            	
              $25,000

            

    

    

    
      	
              Interest
      Rate:

            	
              The
      Company shall pay quarterly in cash interest at an annual percentage rate
      of 7%. The
      quarterly payments will be due on January 1, April 1, July 1 and October 1
      of each year.

            

    

    

    
      	
              Renewable
      Maturity:

            	
              Any portion of the 7%
      Renewable Convertible Debenture plus accrued interest not paid or
      converted previous to November 25, 2010 shall be due and paid in cash on
      November 25, 2010.  At the option of the
      investor, the 7% Renewable Convertible Debenture plus accrued
      interest not paid or converted as of November 25, 2010 may be renewed for
      successive six month terms (May 25 and November 25) until May 25, 2013 at
      which time all principal and accrued interest not converted shall be due
      and payable.

            

    

    

    
      	
              Call and
      Conversion

            	
              At the Company’s option,
      the Company may call the 7% Renewable Convertible Debenture for cash at
      any time up to November 25, 2010 providing the Company pays a 7% premium
      to the Investor which shall be in addition to any accrued interest through
      the date of the call.  Subsequent to November 25, 2010, until
      paid, converted or May 25, 2013, at the option of the
      Investor, the Investor may convert the 7% Renewable Convertible
      Debenture into common shares of the Company at a conversion price of $.50
      per share.

            

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      	
              Additional
      Warrant

            	
              If
      the Company does not call the note on or before November 25, 2010, a
      second five-year warrant to purchase up to 12,500 shares of common stock
      at $0.50 per share shall be issued to the investor on November 25,
      2010.

            

    

    

    
      	
              Registration:

            	
              The
      Company shall not be required to register either the common stock issuable
      on the conversion of the note or the common stock purchase
      warrants.  The investor may sell his shares received as a matter
      of conversion subject to Rule 144 after a period of at least six months
      from the date payment was made to the company of the principal amount
      (tracking period) and may sell his shares received as a matter of
      converting warrants, six months after the issuance of the warrant
      shares.

            

    

    

    
      	
              Over
      allotment:

            	
              At
      the Company’s discretion, any subscription amounts in excess of the
      maximum offering amount may be accepted on the same terms as the offering
      or pro-rated based on the percentage total subscriptions bears to the
      maximum offering amount.

            

    

    
      

    

    
      
        	
                Subsciption:

              	
                Dollar
      amount   $__________

              

      

    

    
      

    

    
      
        	
                Investor:

              	
                Name                 __________________

              

      

    

    
      

    

    
      
        	
                 
      

              	
                Address              __________________

              

      

    

    
      

    

    
      
        	
                 
      

              	
                City,
      State, .Zip
__________________

              

      

    

    
      

    

    
      
        	
                 
      

              	
                Phone                 __________________

              

      

    

    
      

    

    
      
        	
                 
      

              	
                Taxpayer
      ID
#   __________________

              

      

    

    
      

    

    
      
        	
                 
      

              	
                Signature           __________________

              

      

    

     

    
      
        	
                 
      

              	
                Date                 ___________________

              

      

    

    
      

    

    
      Amount
of 7% Renewable Convertible Note (after
pro-ration)         $______________

    

    
      

    

    
      Initial
number of warrants (memorialized under a separate warrant
agreement)  ___________

    

    
      

    

    
      Imagenetix,
Inc.

    

    
      

    

    
      
        
          
            	
                    By

                  	 
      
	 
      	 
      
	 
      	 
      
	
                    William
      Spencer

                  	 
      
	
                    President
      and CEO

                  	 
      

          

        

      

    

     

    
      
         

      

      
        2Exhibit
10.27

     

    BUSINESS
FINANCING AGREEMENT

    
      
        
          
            
              
                
                  	 	 	 	 
	
                          Borrower:

                        	
                          IMAGENETIX,
      INC.

                        	
                          Lender:

                        	
                          BRIDGE
      BANK, National Association

                        
	 
      	
                          10845
      Rancho  Bernardo Road, Suite 105

                        	 
      	
                          55
      Almaden Boulevard, Suite 100

                        
	 
      	
                          San
      Diego, CA 92127

                        	 
      	
                          San
      Jose, CA 95113

                        
	 	 	 	 

                

              

            

          

        

      

    

     

    This
BUSINESS FINANCING AGREEMENT, dated as of June __, 2010, is made and entered
into between BRIDGE BANK, NATIONAL ASSOCIATION (“Lender”)
and IMAGENETIX, INC., a Nevada corporation (“Borrower”)
on the following terms and conditions:

     

    
      	
              1.

            	
              REVOLVING CREDIT
      LINE.

            

    

     

    
      	
               
      

            	
              1.1

            	
              Advances.  Subject
      to the terms and conditions of this Agreement, from the date on which this
      Agreement becomes effective until the Maturity Date, Lender will make
      Advances to Borrower not exceeding the Credit Limit or the Borrowing Base,
      whichever is less; provided that in no event shall Lender be obligated to
      make any Advance that results in an Overadvance or while any Overadvance
      is outstanding.  On the date this Agreement is executed, or as
      soon thereafter as is practical, Lender shall make an Advance to Borrower
      which shall be used to repay all outstanding Indebtedness other than
      Permitted Indebtedness.  Amounts borrowed under this Section may
      be repaid and reborrowed during the term of this Agreement.  It
      shall be a condition to each Advance that (a) a Advance Request acceptable
      to Lender has been received by Lender, (b) all of the representations
      and warranties set forth in Section 3 are true and correct on the
      date of such Advance as though made at and as of each such date, and
      (c) no Default has occurred and is continuing, or would result from
      such Advance.  

            

    

     

    
      	
               
      

            	
              1.2

            	
              Advance
      Requests.  Borrower may request that Lender make an
      Advance by delivering to Lender a Advance Request therefor and Lender
      shall be entitled to rely on all the information provided by Borrower to
      Lender on or with the Advance Request.  The Lender may honor
      Advance Requests, instructions or repayments given by the Borrower (if an
      individual) or by any Authorized
Person.

            

    

     

    
      	
               
      

            	
              1.3

            	
              Due
      Diligence.  Lender may audit Borrower’s Receivables and
      any and all records pertaining to the Collateral, at Lender’s sole
      discretion and at Borrowers expense, but no less often than once every six
      (6) months.  Lender may at any time and from time to time
      contact Account Debtors and other persons obligated or knowledgeable in
      respect of Receivables to confirm the Receivable Amount of such
      Receivables, to determine whether Receivables constitute Eligible
      Receivables, and for any other purpose in connection with this
      Agreement.  If any of the Collateral or Borrower's books or
      records pertaining to the Collateral are in the possession of a third
      party, Borrower authorizes that third party to permit Lender or its agents
      to have access to perform inspections or audits thereof and to respond to
      Lender's requests for information concerning such Collateral and
      records.

            

    

     

    
      	
               
      

            	
              1.4

            	
              Collections. Lender
      shall have the exclusive right to receive all Collections on all
      Receivables.  Borrower shall (i) immediately notify,
      transfer and deliver to Lender all Collections Borrower receives,
      (ii) deliver to Lender a detailed cash receipts journal on Friday of
      each week until the lockbox is operational, and (iii) immediately enter
      into a collection services agreement acceptable to Lender (the “Lockbox
      Agreement”). Borrower shall use the lockbox address as the remit to
      and payment address for all of Borrower’s Collections and it will be
      considered an immediate Event of Default if this does not occur or the
      lockbox is not operational within 60 days of the date of this
      Agreement.  Lender shall credit Collections with respect to
      Receivables received by Lender to Borrower’s Account Balance within three
      business days of the date received; provided that
      upon the occurrence and during the continuance of any Default, Lender may
      apply all Collections to the Obligations in such order and manner as
      Lender may determine.  Lender has no duty to do any act other
      than to apply such amounts as required above.  If an item of
      Collections is not honored or Lender does not receive good funds for any
      reason, the amount shall be included in the Account Balance as if the
      Collections had not been received and Finance Charges shall continue to
      accrue thereon.  All Collections received to the lockbox or
      otherwise received by Lender will, until credited as above provided, be
      deposited to a non-interest bearing cash collateral account maintained
      with Lender and Borrower will not have access to that
      account.  Lender shall have, with respect to any goods related
      to the Receivables, all the rights and remedies of an unpaid seller under
      the California Uniform Commercial Code and other applicable law, including
      the rights of replevin, claim and delivery, reclamation and stoppage in
      transit.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              1.5

            	
              Receivables Activity
      Report.  Within 30 days after the end of each Monthly
      Period, Lender shall send to Borrower a report covering the transactions
      for that Monthly Period, including the amount of all Advances,
      Collections, Adjustments, Finance Charges, and other fees and
      charges.  The accounting shall be deemed correct and conclusive
      unless Borrower makes written objection to Lender within 30 days after the
      Lender sends the accounting to
Borrower.

            

    

     

    
      	
               
      

            	
              1.6

            	
              Adjustments.  In
      the event any Adjustment or dispute is asserted by any Account Debtor,
      Borrower shall promptly advise Lender and shall, subject to the Lender’s
      approval, resolve such disputes and advise Lender of any Adjustments;
      provided
      that in no case will the aggregate Adjustments made with respect to any
      Receivable exceed 2% of its original Receivable Amount unless Borrower has
      obtained the prior written consent of Lender.  So long as any
      Obligations are outstanding, Lender shall have the right, at any time, to
      take possession of any rejected, returned, or recovered personal property.
      If such possession is not taken by Lender, Borrower is to resell it for
      Lender’s account at Borrower’s expense with the proceeds made payable to
      Lender. While Borrower retains possession of any returned goods, Borrower
      shall segregate said goods and mark them as property of
      Lender.

            

    

     

    
      	
               
      

            	
              1.7

            	
              Recourse;
      Maturity.  Advances and the other Obligations shall be
      with full recourse against Borrower.  On the Maturity Date, the
      Borrower will pay all then outstanding Advances and other Obligations to
      the Lender or such earlier date as shall be herein
    provided.

            

    

     

    
      	
               
      

            	
              1.8

            	
              Overadvances.  Upon
      any occurrence of an Overadvance, Borrower shall immediately pay down the
      Advances so that, after giving effect to such payments, no Overadvance
      exists.

            

    

     

    
      	
              2.

            	
              FEES AND FINANCE
      CHARGES.

            

    

     

    
      	
               
      

            	
              2.1

            	
              Finance
      Charges.  Lender may, but is not required to, deduct the
      amount of accrued Finance Charge from Collections received by
      Lender.  Within 10 days of each Month End, Borrower shall pay to
      Lender any accrued and unpaid Finance Charge as of such Month
      End.

            

    

     

    
      	
               
      

            	
              2.2

            	
              Fees.

            

    

     

    
      	
               
      

            	
              (a)

            	
              Termination
      Fee.  In the event this Agreement is terminated prior to
      the first anniversary of the date of this Agreement, Borrower shall pay
      the Termination Fee to Lender.  The Termination Fee will be
      waived if Borrower transfers to a different facility or division of Lender
      so long as the transfer is not a result of an Event of
      Default.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Facility
      Fee.  Borrower shall pay the Facility Fee to Lender
      promptly upon the execution of this Agreement and annually
      thereafter.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Maintenance
      Fee.  Within ten days after each Month End, Borrower
      shall pay to Lender the Maintenance
Fee.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Due Diligence
      Fee.  Borrower shall pay the Diligence Fee to Lender
      promptly upon the execution of this Agreement and annually
      thereafter.

            

    

     

    
      	
              3.

            	
              REPRESENTATIONS AND
      WARRANTIES.  Borrower represents and
      warrants:

            

    

     

    
      	
               
      

            	
              3.1

            	
              No
      representation, warranty or other statement of Borrower in any certificate
      or written statement given to Lender contains any untrue statement of a
      material fact or omits to state a material fact necessary to make the
      statement contained in the certificates or statement not
      misleading.

            

    

     

    
      	
               
      

            	
              3.2

            	
              Borrower
      is duly existing and in good standing in its state of formation and
      qualified and licensed to do business in, and in good standing in, any
      state in which the conduct of its business or its ownership of property
      requires that it be qualified.

            

    

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              3.3

            	
              The
      execution, delivery and performance of this Agreement has been duly
      authorized, and does not conflict with Borrower’s organizational
      documents, nor constitute an Event of Default under any material agreement
      by which Borrower is bound. Borrower is not in default under any agreement
      to which or by which it is bound.

            

    

     

    
      	
               
      

            	
              3.4

            	
              Borrower
      has good title to the Collateral and all inventory is in all material
      respects of good and marketable quality, free from material
      defects.

            

    

     

    
      	
               
      

            	
              3.5

            	
              Borrower’s
      name, form of organization, chief executive office, and the place where
      the records concerning all Receivables and Collateral are kept is set
      forth at the beginning of this Agreement, Borrower is located at its
      address for notices set forth in this
Agreement.

            

    

     

    
      	
               
      

            	
              3.6

            	
              If
      Borrower owns, holds or has any interest in, any copyrights (whether
      registered, or unregistered), patents or trademarks, and licenses of any
      of the foregoing, such interest has been specifically disclosed and
      identified to Lender in writing.

            

    

     

    
      	
              4.

            	
              MISCELLANEOUS
      PROVISIONS.  Borrower
will:

            

    

     

    
      	
               
      

            	
              4.1

            	
              Maintain
      its corporate existence and good standing in its jurisdictions of
      incorporation and maintain is qualification in each jurisdiction necessary
      to Borrower’s business or operations and not merge or consolidate with or
      into any other business organization, or acquire all or substantially all
      of the capital stock or property of a third party, unless (i) any such
      acquired entity becomes a “borrower” under this Agreement and (ii) Lender
      has previously consented to the applicable transaction in
      writing.

            

    

     

    
      	
               
      

            	
              4.2

            	
              Give
      Lender at least 30 days prior written notice of changes to its name,
      organization, chief executive office or location of
    records.

            

    

     

    
      	
               
      

            	
              4.3

            	
              Pay
      all its taxes including gross payroll, withholding and sales taxes when
      due and will deliver satisfactory evidence of payment to Lender if
      requested.

            

    

     

    
      	
               
      

            	
              4.4

            	
              Maintain:

            

    

     

    
      	
               
      

            	
              (a)

            	
              insurance
      satisfactory to Lender as to amount, nature and carrier covering property
      damage (including loss of use and occupancy) to any of the Borrower's
      properties, business interruption insurance, public liability insurance
      including coverage for contractual liability, product liability and
      workers' compensation, and any other insurance which is usual for the
      Borrower's business.  Each such policy shall provide for at
      least thirty (30) days prior notice to Lender of any cancellation
      thereof.

            

    

     

    
      	
               
      

            	
              (b)

            	
              all
      risk property damage insurance policies (including without limitation
      windstorm coverage, and hurricane coverage as applicable) covering the
      tangible property comprising the collateral.  Each insurance
      policy must be in an amount acceptable to Lender.  The insurance
      must be issued by an insurance company acceptable to Lender and must
      include a lender's loss payable endorsement in favor of Lender in a form
      acceptable to Lender.

            

    

     

    Upon the
request of Lender, Borrower shall deliver to Lender a copy of each insurance
policy, or, if permitted by Lender, a certificate of insurance listing all
insurance in force.

     

    
      	
               
      

            	
              4.5

            	
              Immediately
      transfer and deliver to Lender all Collections Borrower
      receives.

            

    

     

    
      	
               
      

            	
              4.6

            	
              Not
      create, incur, assume, or be liable for any indebtedness, other than
      Permitted Indebtedness.

            

    

     

    
      	
               
      

            	
              4.7

            	
              Immediately
      notify Lender if Borrower hereafter obtains any interest in any
      copyrights, patents, trademarks or licenses that are significant in value
      or are material to the conduct of its
business.

            

    

     

    
      	
               
      

            	
              4.8

            	
              Provide
      the following financial information and statements in form and content
      acceptable to Lender, and such additional information as requested by
      Lender from time to time.  Lender has the right to require
      Borrower to deliver financial information and statements to Lender more
      frequently than otherwise provided below, and to use such additional
      information and statements to measure any applicable financial covenants
      in this Agreement.

            

    

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (a)

            	
              Within
      180 days of the fiscal year end, the annual financial statements of
      Borrower, certified and dated by an authorized financial
      officer.  These financial statements must be audited (with an
      opinion satisfactory to the Lender) by a Certified Public Accountant
      acceptable to Lender.  The statements shall be prepared on a
      consolidated basis.

            

    

     

    
      	
               
      

            	
              (b)

            	
              No
      later than 30 days after the end of each month (including the last period
      in each fiscal year), monthly financial statements of Borrower, certified
      and dated by an authorized financial officer.  The statements
      shall be prepared on a consolidated
basis.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Promptly,
      upon sending or receipt, copies of any management letters and
      correspondence relating to management letters, sent or received by
      Borrower to or from Borrower's auditor.  If no management letter
      is prepared, Borrower shall, upon Lender's request, obtain a letter from
      such auditor stating that no deficiencies were noted that would otherwise
      be addressed in a management
letter.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Within
      120 days of filing, Borrower’s annual Federal Tax Return prepared by a
      Certified Public Accountant acceptable to
  Lender;

            

    

     

    
      	
               
      

            	
              (e)

            	
              Copies
      of the Form 10-K Annual Report, Form 10-Q Quarterly Report and Form 8-K
      Current Report for Borrower concurrent with the date of filing with the
      Securities and Exchange Commission.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Financial
      projections including an operating budget covering a time period
      acceptable to Lender and specifying the assumptions used in creating the
      projections.  Annual projections shall in any case be provided
      to Lender within 30 days prior to the end of each fiscal
    year.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Within
      30 days after the last day of each month, a compliance
      certificate of Borrower, signed by an authorized financial officer and
      setting forth (i) the information and computations (in sufficient detail)
      to establish compliance with all financial covenants at the end of the
      period covered by the financial statements then being furnished and (ii)
      whether there existed as of the date of such financial statements and
      whether there exists as of the date of the certificate, any default under
      this Agreement and, if any such default exists, specifying the nature
      thereof and the action Borrower is taking and proposes to take with
      respect thereto.

            

    

     

    
      	
               
      

            	
              (h)

            	
              Within
      5 business days of the 15th and last business day of each month, a
      borrowing base certificate, in form and substance satisfactory to Lender,
      setting forth Eligible Receivables and Receivable Amounts thereof and
      Eligible Inventory as of the 15th day of such month or the last day of the
      preceding calendar month, as
applicable.

            

    

     

    
      	
               
      

            	
              (i)

            	
              Within
      5 business days of the 15th and last business day of each month, a
      detailed aging of Borrower’s receivables by invoice or a summary aging by
      account debtor, together with payable aging, inventory analysis, deferred
      revenue report, and such other matters as Lender may
    request.

            

    

     

    
      	
               
      

            	
              (j)

            	
              Promptly
      upon Lender's request, such other books, records, statements, lists of
      property and accounts, budgets, forecasts or reports as to Borrower and as
      to each guarantor of Borrower's obligations to Lender as Lender may
      request.

            

    

     

    
      	
               
      

            	
              4.9

            	
              Maintain
      its primary depository and operating accounts with Lender and, in the case
      of any deposit accounts not maintained with Lender, grant to Lender a
      first priority perfected security interest in and “control” (within the
      meaning of Section 9104 of the California Uniform Commercial Code) of such
      deposit account pursuant to documentation acceptable to
      Lender.

            

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              4.10

            	
              Provide
      to Lender promptly upon the execution hereof, the following documents
      which shall be in form satisfactory to Lender:  (i) an
      Intellectual Property Security Agreement, (ii) Corporate Resolutions to
      Borrow, (iii) a Lockbox Remittance Processing Services Agreement, (iv) a
      Bailee Letter for each location where Inventory is held, (v) account
      control agreements with respect to any depository, operating or
      investments accounts held at another financial institution other than
      Lender, (vi) an Insurance Authorization Letter and (vii) evidence that all
      Indebtedness, other than Permitted Indebtedness, has been repaid in
      full.

            

    

     

    
      	
               
      

            	
              4.11

            	
              Promptly
      provide to Lender such additional information and documents regarding the
      finances, properties, business or books and records of Borrower or any
      guarantor or any other obligor as Lender may
  request.

            

    

     

    
      	
               
      

            	
              4.12

            	
              Maintain
      Borrower's financial condition as follows using generally accepted
      accounting principles consistently applied and used consistently with
      prior practices (except to the extent modified by the definitions
      herein):

            

    

     

    
      	
               
      

            	
              (a)

            	
              Adjusted
      Current Ratio not at any time less than 1.40 to 1.00, to be measured on a
      monthly basis.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Net
      loss (determined in accordance with GAAP) not to exceed $300,000 for the
      quarter ending June 30, 2010.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Net
      income after taxes not less than $50,000 measured on a rolling 90 day
      basis, beginning with the month ending September 30, 2010 (provided that
      measurement for the rolling 90 days will start on July 31, 2010 on a going
      forward basis with no look back).

            

    

     

    
      	
              5.

            	
              SECURITY
      INTEREST.  To secure the prompt payment and performance
      to Lender of all of the Obligations, Borrower hereby grants to Lender a
      continuing security interest in the Collateral.  Borrower is not
      authorized to sell, assign, transfer or otherwise convey any Collateral
      without Lender’s prior written consent, except for the sale of finished
      inventory in the Borrower’s usual course of business.  Borrower
      agrees to sign any instruments and documents requested by Lender to
      evidence, perfect, or protect the interests of Lender in the
      Collateral.  Borrower agrees to deliver to Lender the originals
      of all instruments, chattel paper and documents evidencing or related to
      Receivables and Collateral.  Borrower shall not grant or permit
      any lien or security in the Collateral or any interest therein other than
      Permitted Liens.

            

    

     

    
      	
              6.

            	
              POWER OF
      ATTORNEY.  Borrower irrevocably appoints Lender and its
      successors and as true and lawful attorney in fact, and authorizes Lender
      (a) to, whether or not there has been an Event of Default, (i) demand,
      collect, receive, sue, and give releases to any Account Debtor for the
      monies due or which may become due upon or with respect to the Receivables
      and to compromise, prosecute, or defend any action, claim, case or
      proceeding relating to the Receivables, including the filing of a claim or
      the voting of such claims in any bankruptcy case, all in Lender’s name or
      Borrower’s name, as Lender may choose; (ii) prepare, file and sign
      Borrower’s name on any notice, claim, assignment, demand, draft, or notice
      of or satisfaction of lien or mechanics’ lien or similar document; (iii)
      notify all Account Debtors with respect to the Receivables to pay Lender
      directly; (iv) receive and open all mail addressed to Borrower for the
      purpose of collecting the Receivables; (v) endorse Borrower’s name on any
      checks or other forms of payment on the Receivables; (vi) execute on
      behalf of Borrower any and all instruments, documents, financing
      statements and the like to perfect Lender’s interests in the Receivables
      and Collateral; (vii) debit any Borrower’s deposit accounts maintained
      with Lender for any and all Obligations due under this Agreement; and
      (viii) do all acts and things necessary or expedient, in furtherance of
      any such purposes, and (b) to, upon the occurrence and during the
      continuance of an Event of Default, sell, assign, transfer, pledge,
      compromise, or discharge the whole or any part of the
      Receivables.  Upon the occurrence and continuation of an Event
      of Default, all of the power of attorney rights granted by Borrower to
      Lender hereunder shall be applicable with respect to all Receivables and
      all Collateral.

            

    

     

    
      	
              7.

            	
              DEFAULT AND
      REMEDIES.

            

    

     

    
      	
               
      

            	
              7.1

            	
              Events of
      Default.  The occurrence of any one or more of the
      following shall constitute an Event of Default
  hereunder.

            

    

     

    
      	
               
      

            	
              (a)

            	
              Failure
      to Pay.  Borrower fails to make a payment when due under
      this Agreement.

            

    

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Lien
      Priority.  Lender fails to have an enforceable first lien
      (except for any prior liens to which Lender has consented in writing) on
      or security interest in the
Collateral.

            

    

     

    
      	
               
      

            	
              (c)

            	
              False
      Information.  Borrower (or any guarantor) has given
      Lender any materially false or misleading information or representations
      or has failed to disclose any material fact relating to the subject matter
      of this Agreement.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Death.  Borrower
      or any guarantor dies or becomes legally incompetent, or if Borrower is a
      partnership, any general partner dies or becomes legally
      incompetent.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Bankruptcy.  Borrower
      (or any guarantor) files a bankruptcy petition, a bankruptcy petition is
      filed against Borrower (or any guarantor) or Borrower (or any guarantor)
      makes a general assignment for the benefit of
  creditors.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Receivers.  A
      receiver or similar official is appointed for a substantial portion of
      Borrower’s (or any guarantor’s) business, or the business is
      terminated.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Judgments.  Any
      judgments or arbitration awards are entered against Borrower (or any
      guarantor), or Borrower (or any guarantor) enters into any settlement
      agreements with respect to any litigation or arbitration and the aggregate
      amount of all such judgments, awards, and agreements exceeds
      $50,000.

            

    

     

    
      	
               
      

            	
              (h)

            	
              Material
      Adverse Change.  A material adverse change occurs, or is
      reasonably likely to occur, in Borrower’s (or any guarantor’s) business
      condition (financial or otherwise), operations, properties or prospects,
      or ability to repay the credit.

            

    

     

    
      	
               
      

            	
              (i)

            	
              Cross-default.  Any
      default occurs under any agreement in connection with any credit Borrower
      (or any guarantor) or any of Borrower’s Affiliates has obtained from
      anyone else or which Borrower (or any guarantor) or any of Borrower’s
      Affiliates has guaranteed (other than trade amounts payable incurred in
      the ordinary course of business and not more than 60 days past
      due).

            

    

     

    
      	
               
      

            	
              (j)

            	
              Default
      under Related Documents.  Any default occurs under any
      guaranty, subordination agreement, security agreement, deed of trust,
      mortgage, or other document required by or delivered in connection with
      this Agreement or any such document is no longer in
  effect.

            

    

     

    
      	
               
      

            	
              (k)

            	
              Other
      Agreements.  Borrower (or any guarantor) or any of
      Borrower’s Affiliates fails to meet the conditions of, or fails to perform
      any obligation under any other agreement Borrower (or any guarantor) or
      any of Borrower’s Affiliates has with Lender or any Affiliate of
      Lender.

            

    

     

    
      	
               
      

            	
              (l)

            	
              Change
      of Control.  The holders of the capital ownership of the
      Borrower as of the date hereof cease to own and control, directly and
      indirectly, at least 90% of the capital ownership of the
      Borrower.

            

    

     

    
      	
               
      

            	
              (m)

            	
              Other
      Breach Under Agreement.  Borrower fails to meet the
      conditions of, or fails to perform any obligation under, any term of this
      Agreement not specifically referred to
above.

            

    

     

    
      	
               
      

            	
              7.2

            	
              Remedies. Upon the
      occurrence of an Event of Default, (1) without implying any
      obligation to do so, Lender may cease making Advances or extending any
      other financial accommodations to Borrower; (2) all or a portion of
      the Obligations shall be, at the option of and upon demand by Lender, or
      with respect to an Event of Default described in Section 7.1(e),
      automatically and without notice or demand, due and payable in full; and
      (3) Lender shall have and may exercise all the rights and remedies
      under this Agreement and under applicable law, including the rights and
      remedies of a secured party under the California Uniform Commercial Code,
      all the power of attorney rights described in Section 6 with respect to
      all Collateral, and the right to collect, dispose of, sell, lease, use,
      and realize upon all Receivables and all Collateral in any commercial
      reasonable manner.

            

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    
      	
              8.

            	
              ACCRUAL OF INTEREST.  All
      interest and finance charges hereunder calculated at an annual rate shall
      be based on a year of 360 days, which results in a higher effective rate
      of interest than if a year of 365 or 366 days were used.  If any
      amount due under Section 2.2, amounts due under Section 9, and any other
      Obligations not otherwise bearing interest hereunder is not paid when due,
      such amount shall bear interest at a per annum rate equal to the Finance
      Charge Percentage until the earlier of (i) payment in good funds or
      (ii) entry of a trial judgment thereof, at which time the principal
      amount of any money judgment remaining unsatisfied shall accrue interest
      at the highest rate allowed by applicable
law.

            

    

     

    
      	
              9.

            	
              FEES, COSTS AND EXPENSES;
      INDEMNIFICATION. The Borrower will pay to Lender upon demand all
      fees, costs and expenses (including fees of attorneys and professionals
      and their costs and expenses) that Lender incurs or may from time to time
      impose in connection with any of the following: (a) preparing,
      negotiating, administering, and enforcing this Agreement or any other
      agreement executed in connection herewith, including any amendments,
      waivers or consents in connection with any of the foregoing, (b) any
      litigation or dispute (whether instituted by Lender, Borrower or any other
      person) in any way relating to the Receivables, the Collateral, this
      Agreement or any other agreement executed in connection herewith or
      therewith, (c) enforcing any rights against Borrower or any
      guarantor, or any Account Debtor, (d) protecting or enforcing its
      interest in the Receivables or the Collateral, (e) collecting the
      Receivables and the Obligations, or (f) the representation of Lender
      in connection with any bankruptcy case or insolvency proceeding involving
      Borrower, any Receivable, the Collateral, any Account Debtor, or any
      guarantor. Borrower shall indemnify and hold Lender harmless from and
      against any and all claims, actions, damages, costs, expenses, and
      liabilities of any nature whatsoever arising in connection with any of the
      foregoing.

            

    

     

    
      	
              10.

            	
              INTEGRATION, SEVERABILITY
      WAIVER, CHOICE OF LAW, FORUM AND
      VENUE.  This Agreement and any related security or other
      agreements required by this Agreement, collectively: (a) represent
      the sum of the understandings and agreements between Lender and Borrower
      concerning this credit; (b) replace any prior oral or written
      agreements between Lender and Borrower concerning this credit; and
      (c) are intended by Lender and Borrower as the final, complete and
      exclusive statement of the terms agreed to by them. In the event of any
      conflict between this Agreement and any other agreements required by this
      Agreement, this Agreement will prevail. If any provision of this Agreement
      is deemed invalid by reason of law, this Agreement will be construed as
      not containing such provision and the remainder of the Agreement shall
      remain in full force and effect. Lender retains all of its rights, even if
      it makes an Advance after a default. If Lender waives a default, it may
      enforce a later default. Any consent or waiver under, or amendment of,
      this Agreement must be in writing, and no such consent, waiver, or
      amendment shall imply any obligation by Lender to make any subsequent
      consent, waiver, or amendment.  THIS AGREEMENT SHALL BE GOVERNED
      BY AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
      CALIFORNIA. THE PARTIES HERETO AGREE THAT ALL ACTIONS OR PROCEEDINGS
      ARISING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER RELATED DOCUMENTS
      SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND FEDERAL COURTS LOCATED
      IN THE COUNTY OF SANTA CLARA, CALIFORNIA, OR, AT THE SOLE OPTION OF
      LENDER, IN ANY OTHER COURT IN WHICH LENDER SHALL INITIATE LEGAL OR
      EQUITABLE PROCEEDINGS AND WHICH HAS JURISDICTION OVER THE SUBJECT MATTER
      AND PARTIES IN CONTROVERSY.  EACH PARTY HERETO WAIVES ANY RIGHT
      TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO
      THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SUBSECTION (b)
      AND STIPULATES THAT THE STATE AND FEDERAL COURTS LOCATED IN THE COUNTY OF
      SANTA CLARA, CALIFORNIA SHALL HAVE IN PERSONAM JURISDICTION AND VENUE OVER
      EACH SUCH PARTY FOR THE PURPOSE OF LITIGATING ANY SUCH DISPUTE,
      CONTROVERSY, OR PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT, OR
      ANY OTHER RELATED DOCUMENTS.  SERVICE OF PROCESS SUFFICIENT FOR
      PERSONAL JURISDICTION IN ANY ACTION AGAINST THE BORROWER MAY BE MADE BY
      REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ITS ADDRESS
      SPECIFIED FOR NOTICES PURSUANT TO SECTION 11.

            

    

     

    
      	
              11.

            	
              NOTICES; TELEPHONIC AND TELEFAX AUTHORIZATIONS.  All notices
      shall be given to lender and borrower at the addresses or faxes set forth
      on the signature page of this agreement and shall be deemed to have been
      delivered and received: (a) if mailed, three (3) calendar days after
      deposited in the United States mail, first class, postage pre-paid,
      (b) one (1) calendar day after deposit with an overnight mail or
      messenger service; or (c) on the same date of confirmed transmission
      if sent by hand delivery, telecopy, telefax or telex.  Lender
      may honor telephone or telefax instructions for Advances or repayments
      given, or purported to be given, by any one of the Authorized
      Persons.  Borrower will indemnify and hold Lender harmless from
      all liability, loss, and costs in connection with any act resulting from
      telephone or telefax instructions Lender reasonably believes are made by
      any Authorized Person.  This paragraph will survive this
      Agreement's termination, and will benefit Lender and its officers,
      employees, and agents.

            

    

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    
      	
              12.

            	
              DEFINITIONS AND
      CONSTRUCTION.

            

    

     

    
      	
               
      

            	
              12.1

            	
              Definitions.  In
      this Agreement:

            

    

     

    “Account
Balance” means at any time the aggregate of the Advances outstanding as
reflected on the records maintained by Lender, together with any past due
Finance Charges thereon.

     

    “Account
Debtor” has the meaning in the California Uniform Commercial Code and
includes any person liable on any Receivable, including without limitation, any
guarantor of any Receivable and any issuer of a letter of credit or banker’s
acceptance assuring payment thereof.

     

    “Adjustments”
means all discounts, allowances, disputes, offsets, defenses, rights of
recoupment, rights of return, warranty claims, or short payments, asserted by or
on behalf of any Account Debtor with respect to any Receivable.

     

    “Advance”
means an advance made by Lender to Borrower under this Agreement.

     

    “Advance
Rate” means 60% in the case of the Eligible Receivables and 35% in the
case of the Eligible Inventory, or, in either case, such greater or lesser
percentage as Lender may from time to time establish in its sole discretion upon
notice to Borrower.

     

    “Advance
Request” means a writing in form and substance satisfactory to Lender and
signed by an Authorized Person requesting an Advance.

     

    “Agreement”
means this Business Financing Agreement.

     

    “Adjusted
Current
Ratio” means (i) the aggregate of unrestricted cash and receivables
convertible into cash (net of doubtful accounts) plus Borrower’s Eligible
Inventory up to $1,000,000 divided by (ii) total
current liabilities.

     

    "Affiliate"
means, as to any person or entity, any other person or entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such person or entity.

     

    “Authorized
Person” means Borrower (if an individual) or any one of the individuals
authorized to sign on behalf of the Borrower, and any other individual
designated by any one of such authorized signers.

     

    "Borrowing
Base" means at any time the sum of (i) the Eligible Receivable Amount
multiplied by the applicable Advance Rate plus (ii) the lesser of (x) the value
of Eligible Inventory multiplied by the applicable Advance Rate or (y) the
Inventory Sublimit minus (iii) such reserves as Lender may deem proper and
necessary from time to time,  including, but not limited to a reserve
for any Eligible Inventory with respect to which there is a delinquent A/P
balance owed to a third party vendor who warehouses such Eligible
Inventory.

     

    “Collateral”
means all of Borrower’s rights and interest in any and all personal property,
whether now existing or hereafter acquired or created and wherever located, and
all products and proceeds thereof and accessions thereto, including but not
limited to the following (collectively, the “Collateral”):  (a) all
accounts (including health care insurance receivables), chattel paper (including
tangible and electronic chattel paper), inventory (including all goods held for
sale or lease or to be furnished under a contract for service, and including
returns and repossessions), equipment (including all accessions and additions
thereto), instruments (including promissory notes), investment property
(including securities and securities entitlements), documents (including
negotiable documents), deposit accounts, letter of credit rights, money, any
commercial tort claim of Borrower which is now or hereafter identified by
Borrower or Lender, general intangibles (including payment intangibles and
software), goods (including fixtures) and all of Borrower’s books and records
with respect to any of the foregoing, and the computers and equipment containing
said books and records; and (b) any and all cash proceeds and/or noncash
proceeds thereof, including without limitation, insurance proceeds, and all
supporting obligations and the security therefore or for any right to
payment.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

     

    “Collections”
means all payments from or on behalf of an Account Debtor with respect to
Receivables.

     

    “Compliance
Certificate” means a certificate in the form attached as Exhibit A to this
Agreement by an Authorized Person that, among other things, the representations
and warranties set forth in this Agreement are true and correct as of the date
such certificate is delivered.

     

    “Credit
Limit” means $1,500,000, which is intended to be the maximum amount of
Advances at any time outstanding.

     

    “Default”
means any Event of Default or any event that with notice, lapse of time or
otherwise would constitute an Event of Default.

     

    “Due
Diligence
Fee” means a payment of an annual fee equal to $500, due upon the date of
this Agreement and each anniversary thereof so long as any Advance is
outstanding or available hereunder.

     

    "Eligible
Inventory" means Inventory (which shall be valued at the lower of
cost determined on a average cost basis or forced liquidation value, and
which satisfies the following requirements:

     

    
      	
               
      

            	
              (a)

            	
              the
      Inventory is owned by Borrower free of any title defects or any liens or
      interests of others except the security interest in favor of
      Lender;

            

    

    
      	
               
      

            	
              (b)

            	
              the
      Inventory is held for sale or use in the ordinary course of Borrower's
      business and is of good and merchantable quality.  Display
      items, work-in-process, parts, samples, and packing and shipping materials
      are not eligible.  Inventory which is obsolete, unsalable,
      damaged, defective, used, discontinued, perishable or slow-moving, or
      which has been returned by the buyer, is not
  eligible;

            

    

    
      	
               
      

            	
              (c)

            	
              the
      Inventory is covered by insurance as required in Section 4.4 of this
      Agreement;

            

    

    
      	
               
      

            	
              (d)

            	
              the
      Inventory has not been manufactured to the specifications of a particular
      Account Debtor;

            

    

    
      	
               
      

            	
              (e)

            	
              the
      Inventory is not subject to any licensing agreements which would prohibit
      or restrict in any way the ability of Lender to sell the Inventory
      (including its packaging) to third
parties;

            

    

    
      	
               
      

            	
              (f)

            	
              the
      Inventory has been produced in compliance with the requirements of the
      U.S. Fair Labor Standards Act (29 U.S.C. §§201 et
  seq.);

            

    

    
      	
               
      

            	
              (g)

            	
              the
      Inventory is not on consignment;

            

    

    
      	
               
      

            	
              (h)

            	
              the
      Inventory is not related to an "undesirable" industry, as determined by
      Lender from time to time in its sole
discretion;

            

    

    
      	
               
      

            	
              (i)

            	
              the
      Inventory is located at a location for which Lender has received an
      executed Bailee Letter in form and substance acceptable to
      Lender;

            

    

    
      	
               
      

            	
              (j)

            	
              the
      Inventory does not have any foreign
components;

            

    

    
      	
               
      

            	
              (k)

            	
              Lender
      has received an audit on the Inventory satisfactory to Lender;
      and

            

    

    
      	
               
      

            	
              (k)

            	
              the
      Inventory is otherwise acceptable to
Lender.

            

    

     

    “Eligible
Receivable” means a Receivable that satisfies all of the
following:

     

    
      	
               
      

            	
              (a)

            	
              The
      Receivable has been created by Borrower in the ordinary course of
      Borrower’s business and without any obligation on the part of Borrower to
      render any further performance.

            

    

     

    
      	
               
      

            	
              (b)

            	
              There
      are no conditions which must be satisfied before Borrower is entitled to
      receive payment of the Receivable, and the Receivable does not arise from
      COD sales, consignments or guaranteed
sales.

            

    

     

    
      	
               
      

            	
              (c)

            	
              The
      Account Debtor upon the Receivable does not claim any defense to payment
      of the Receivable, whether well founded or
  otherwise.

            

    

     

    
      	
               
      

            	
              (d)

            	
              The
      Receivable is not the obligation of an Account Debtor who has asserted or
      may be reasonably be expected to assert any counterclaims or offsets
      against Borrower (including offsets for any “contra accounts” owed by
      Borrower to the Account Debtor for goods purchased by Borrower or for
      services performed for Borrower).

            

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (e)

            	
              The
      Receivable represents a genuine obligation of the Account Debtor and to
      the extent any credit balances exist in favor of the Account Debtor, such
      credit balances shall be deducted in calculating the Receivable
      Amount.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Borrower
      has sent an invoice to the Account Debtor in the amount of the
      Receivable.

            

    

     

    
      	
               
      

            	
              (g)

            	
              Borrower
      is not prohibited by the laws of the state where the Account Debtor is
      located from bringing an action in the courts of that state to enforce the
      Account Debtor’s obligation to pay the Receivable. Borrower has taken all
      appropriate actions to ensure access to the courts of the state where
      Account Debtor is located, including, where necessary; the filing of a
      Notice of Business Activities Report or other similar filing with the
      applicable state agency or the qualification by Borrower as a foreign
      corporation authorized to transact business in such
  state.

            

    

     

    
      	
               
      

            	
              (h)

            	
              The
      Receivable is owned by Borrower free of any title defects or any liens or
      interests of others except the security interest in favor of Lender, and
      Lender has a perfected, first priority security interest in such
      Receivable.

            

    

     

    
      	
               
      

            	
              (i)

            	
              The
      Account Debtor on the Receivable is not any of the
      following:  (1) an employee, Affiliate, parent or subsidiary of
      Borrower, or an entity which has common officers or directors with
      Borrower; (2) the U.S. government or any agency or department of the U.S.
      government unless Borrower complies with the procedures in the Federal
      Assignment of Claims Act of 1940 (41 U.S.C.§15) with respect to the
      Receivable, and the underlying contract expressly provides that neither
      the U.S. government nor any agency or department thereof shall have the
      right of set-off against Borrower; (3) any person or entity located in a
      foreign country (other than Canada) unless (A) the Receivable is supported
      by an irrevocable letter of credit issued by a bank acceptable to Lender,
      and (B) if requested by Lender, the original of such letter of credit
      and/or any usance drafts drawn under such letter of credit and accepted by
      the issuing or confirming bank have been delivered to Lender; or (4) an
      Account Debtor as to which 25% or more of the aggregate dollar amount of
      all outstanding Receivables owing from such Account Debtor have not been
      paid within 90 days from invoice
date.

            

    

     

    
      	
               
      

            	
              (j)

            	
              The
      Receivable is not in default (a Receivable will be considered in default
      if any of the following occur:  (i) the Receivable is not
      paid within 90 days from its invoice date; (ii) the Account Debtor
      obligated upon the Receivable suspends business, makes a general
      assignment for the benefit of creditors, or fails to pay its debts
      generally as they come due; or (iii) any petition is filed by or
      against the Account Debtor obligated upon the Receivable under any
      bankruptcy law or any other law or laws for the relief of
      debtors).

            

    

     

    
      	
               
      

            	
              (k)

            	
              The
      Receivable does not arise from the sale of goods which remain in
      Borrower’s possession or under Borrower’s
  control.

            

    

     

    
      	
               
      

            	
              (l)

            	
              The
      Receivable is not evidenced by a promissory note or chattel paper, nor is
      the Account Debtor obligated to Borrower under any other obligation which
      is evidenced by a promissory note.

            

    

     

    
      	
               
      

            	
              (m)

            	
              the
      Receivable is not that portion of Receivables due from an Account Debtor
      which is in excess of 35% of Borrower's aggregate dollar amount of all
      outstanding Receivables.

            

    

     

    
      	
               
      

            	
              (n)

            	
              The
      Receivable is otherwise acceptable to
Lender.

            

    

     

    "Eligible
Receivable Amount" means at any time the sum of
the Receivable Amounts of the Eligible Receivables, net of pre-paid deposits,
pre-billed invoices, deferred revenue, offsets, progress billings, retention
billing, bill and hold accounts and contras related to each specific
debtor.

     

    “Event of
Default” has the meaning set forth in Section 7.1.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    “Facility
Fee” means a payment of an annual fee equal to 1.00 percentage points of
the Credit Limit due upon the date of this Agreement and each anniversary
thereof so long as any Advance is outstanding or available
hereunder.

     

    “Finance
Charge” means for each Monthly Period an interest amount equal to the
Finance Charge Percentage of the average daily Account Balance outstanding
during such Monthly Period.

     

    “Finance
Charge Percentage” means a rate per year equal to the Prime Rate plus
1.75 percentage points plus an additional 5.00 percentage points during any
period that an Event of Default has occurred and is continuing.

     

    “Indebtedness”
means (a) all indebtedness for borrowed money or the deferred purchase
price of property or services, including without limitation reimbursement and
other obligations with respect to surety bonds and letters of credit,
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations.

     

    "Inventory"
means and includes all of Borrower's now owned or hereafter acquired goods,
merchandise and other personal property, wherever located, to be furnished under
any consignment, arrangement, contract of service or held for sale or lease, all
raw materials, work in process, finished goods and materials and supplies of any
kind, nature or description which are or might be used or consumed in Borrower's
business or used in selling or furnishing such goods, merchandise and other
personal property, and all documents of title or other documents representing
them.

     

    "Inventory
Sublimit" means the lesser of (i) $300,000 or (ii) an amount equal to 25%
of the aggregate outstanding Advances with respect to Eligible
Receivables.

     

    “Lender”
means Bridge Bank, National Association, and its successors and
assigns.

     

    "Maintenance
Fee" means for any Monthly Period, the amount equal to 0.25 percentage
points of the average daily Account Balance for such Monthly
Period.

     

    “Maturity
Date” means one year from the date hereof or such earlier date as Lender
shall have declared the Obligations immediately due and payable pursuant to
Section 7.2.

     

    “Month
End” means the last calendar day of each Monthly Period.

     

    “Monthly
Period” means each calendar month.

     

    “Obligations”
means all liabilities and obligations of Borrower to Lender of any kind or
nature, present or future, arising under or in connection with this Agreement or
under any other document, instrument or agreement, whether or not evidenced by
any note, guarantee or other instrument, whether arising on account or by
overdraft, whether direct or indirect (including those acquired by assignment)
absolute or contingent, primary or secondary, due or to become due, now owing or
hereafter arising, and however acquired; including, without limitation, all
Advances, Finance Charges, fees, interest, expenses, professional fees and
attorneys’ fees.

     

    “Overadvance”
means at any time an amount equal to the amount (if any) by which the total
amount of (i) the outstanding Advances exceeds the lesser of the Credit Limit or
the Borrowing Base or (ii) the total outstanding Advances with respect to
Eligible Inventory exceed the Inventory Sublimit.

     

    “Permitted
Indebtedness” means:

     

    
      	
               
      

            	
              (a)

            	
              Indebtedness
      under this Agreement or that is otherwise owed to the
    Lender.

            

    

     

    
      	
               
      

            	
              (b)

            	
              Indebtedness
      existing on the date hereof and specifically disclosed on a schedule to
      this Agreement.

            

    

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (c)

            	
              Purchase
      money indebtedness (including capital leases) incurred to acquire capital
      assets in ordinary course of business and not exceeding $25,000 in total principal amount at any time
      outstanding.

            

    

     

    
      	
               
      

            	
              (d)

            	
              Other Indebtedness in an aggregate amount not to
      exceed $25,000 at any time outstanding; provided that such
      indebtedness is junior in priority (if secured) to the Obligations and
      provided that the incurrence of such Indebtedness does not otherwise cause
      and Event of Default
hereunder.

            

    

     

    
      	
               
      

            	
              (e)

            	
              Indebtedness incurred in the refinancing of any
      indebtedness set forth in (a) through (d) above, provided that the
      principal amount thereof is not increased or the terms thereof are not
      modified to impose more burdensome terms upon the
      Borrower.

            

    

     

    
      	
               
      

            	
              (f)

            	
              Subordinated
  Debt.

            

    

     

    “Permitted
Liens” means the following but only with respect to property not
consisting of Receivables or Inventory:

     

    
      	
               
      

            	
              (g)

            	
              Liens
      securing any of the indebtedness described in clauses (a) through (d) of
      the definition of Permitted
Indebtedness.

            

    

     

    
      	
               
      

            	
              (h)

            	
              Liens
      for taxes, fees, assessments or other governmental charges or levies,
      either not delinquent or being contested in good faith by appropriate
      proceedings, provided the same have no priority over any of Lender’s
      security interests.

            

    

     

    
      	
               
      

            	
              (i)

            	
              Liens
      incurred in connection with the extension, renewal or refinancing of the
      indebtedness described in clause (e) of the definition of Permitted
      Indebtedness, provided that any extension, renewal or replacement lien
      shall be limited to the property encumbered by the existing lien and the
      principal amount of the indebtedness being extended, renewed or refinanced
      does not increase.

            

    

     

    
      	
               
      

            	
              (j)

            	
              Liens
      securing Subordinated Debt.

            

    

     

    “Prime
Rate” means the greater of 3.25 percent per year, or the variable rate of
interest, per annum, most recently announced by Lender, as its “prime rate”,
whether or not such announced rate is the lowest rate available from
Lender.

     

    “Receivable
Amount” means as to any Receivable, the Receivable Amount due from the
Account Debtor after deducting all discounts, credits, offsets, payments or
other deductions of any nature whatsoever, whether or not claimed by the Account
Debtor.

     

    “Receivables”
means Borrower’s rights to payment arising in the ordinary course of Borrower’s
business, including accounts, chattel paper, instruments, contract rights,
documents, general intangibles, letters of credit, drafts, and bankers
acceptances.

     

    “Subordinated
Debt” means indebtedness of Borrower that is expressly subordinated to
the indebtedness of Borrower owed to Lender pursuant to a subordination
agreement satisfactory in form and substance to Lender.

     

    “Termination
Fee” means a payment equal to 1.00% of the Credit Limit.

     

    
      	
               
      

            	
              12.2

            	
              Construction:

            

    

     

    
      	
               
      

            	
              (a)

            	
              In
      this Agreement: (i) references to the plural include the singular and
      to the singular include the plural; (ii) references to any gender
      include any other gender; (iii) the terms “include” and “including”
      are not limiting; (iv) the term “or” has the inclusive meaning
      represented by the phrase “and/or,” (v) unless otherwise specified,
      section and subsection references are to this Agreement, and (vi) any
      reference to any statute, law, or regulation shall include all amendments
      thereto and revisions thereof.

            

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              (b)

            	
              Neither
      this Agreement nor any uncertainty or ambiguity herein shall be construed
      or resolved using any presumption against either Borrower or Lender,
      whether under any rule of construction or otherwise.  On the
      contrary, this Agreement has been reviewed by each party hereto and their
      respective counsel.  In case of any ambiguity or uncertainty,
      this Agreement shall be construed and interpreted according to the
      ordinary meaning of the words used to accomplish fairly the purposes and
      intentions of all parties hereto.

            

    

     

    
      	
               
      

            	
              (c)

            	
              Titles
      and section headings used in this Agreement are for convenience only and
      shall not be used in interpreting this
  Agreement.

            

    

     

    
      	
              13.

            	
              JURY TRIAL
      WAIVER.  THE UNDERSIGNED ACKNOWLEDGE THAT THE RIGHT TO
      TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED UNDER
      CERTAIN CIRCUMSTANCES.  TO THE EXTENT PERMITTED BY LAW, EACH
      PARTY, AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT) WITH
      COUNSEL OF ITS, HIS OR HER CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THE
      MUTUAL BENEFIT OF ALL PARTIES, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE
      EVENT OF LITIGATION ARISING OUT OF OR RELATED TO THIS AGREEMENT OR ANY OTHER
      DOCUMENT, INSTRUMENT OR AGREEMENT BETWEEN THE UNDERSIGNED
      PARTIES.

            

    

     

    
      	
              14.

            	
              JUDICIAL REFERENCE
      PROVISION.

            

    

     

    
      	
               
      

            	
              14.1

            	
              In
      the event the Jury Trial Waiver set forth above is not enforceable, the
      parties elect to proceed under this Judicial Reference
      Provision.

            

    

     

    
      	
               
      

            	
              14.2

            	
              With
      the exception of the items specified in Section 14.3, below, any
      controversy, dispute or claim (each, a “Claim”)
      between the parties arising out of or relating to this Agreement or any
      other document, instrument or agreement between the undersigned parties
      (collectively in this Section, the “Loan
      Documents”), will be resolved by a reference proceeding in
      California in accordance with the provisions of Sections 638 et seq. of
      the California Code of Civil Procedure (“CCP”),
      or their successor sections, which shall constitute the exclusive remedy
      for the resolution of any Claim, including whether the Claim is subject to
      the reference proceeding. Except as otherwise provided in the Loan
      Documents, venue for the reference proceeding will be in the state or
      federal court in the county or district where the real property involved
      in the action, if any, is located or in the state or federal court in the
      county or district where venue is otherwise appropriate under applicable
      law (the “Court”).

            

    

     

    
      	
               
      

            	
              14.3

            	
              The
      matters that shall not be subject to a reference are the following: (i)
      nonjudicial foreclosure of any security interests in real or personal
      property, (ii) exercise of self-help remedies (including, without
      limitation, set-off), (iii) appointment of a receiver and (iv) temporary,
      provisional or ancillary remedies (including, without limitation, writs of
      attachment, writs of possession, temporary restraining orders or
      preliminary injunctions). This reference provision does not limit the
      right of any party to exercise or oppose any of the rights and remedies
      described in clauses (i) and (ii) or to seek or oppose from a court of
      competent jurisdiction any of the items described in clauses (iii) and
      (iv). The exercise of, or opposition to, any of those items does not waive
      the right of any party to a reference pursuant to this reference provision
      as provided herein.

            

    

     

    
      	
               
      

            	
              14.4

            	
              The
      referee shall be a retired judge or justice selected by mutual written
      agreement of the parties. If the parties do not agree within ten (10) days
      of a written request to do so by any party, then, upon request of any
      party, the referee shall be selected by the Presiding Judge of the Court
      (or his or her representative). A request for appointment of a referee may
      be heard on an ex parte or expedited basis, and the parties agree that
      irreparable harm would result if ex parte relief is not
      granted.  Pursuant to CCP § 170.6, each party shall have one
      peremptory challenge to the referee selected by the Presiding Judge of the
      Court (or his or her
representative).

            

    

     

    
      	
               
      

            	
              14.5

            	
              The
      parties agree that time is of the essence in conducting the reference
      proceedings. Accordingly, the referee shall be requested, subject to
      change in the time periods specified herein for good cause shown, to (i)
      set the matter for a status and trial-setting conference within fifteen
      (15) days after the date of selection of the referee, (ii) if practicable,
      try all issues of law or fact within one hundred twenty (120) days after
      the date of the conference and (iii) report a statement of decision within
      twenty (20) days after the matter has been submitted for
      decision.

            

    

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              14.6

            	
              The
      referee will have power to expand or limit the amount and duration of
      discovery.  The referee may set or extend discovery deadlines or
      cutoffs for good cause, including a party’s failure to provide requested
      discovery for any reason whatsoever.  Unless otherwise ordered
      based upon good cause shown, no party shall be entitled to “priority” in
      conducting discovery, depositions may be taken by either party upon seven
      (7) days written notice, and all other discovery shall be responded to
      within fifteen (15) days after service.  All disputes relating
      to discovery which cannot be resolved by the parties shall be submitted to
      the referee whose decision shall be final and
  binding.

            

    

     

    
      	
               
      

            	
              14.7

            	
              Except
      as expressly set forth herein, the referee shall determine the manner in
      which the reference proceeding is conducted including the time and place
      of hearings, the order of presentation of evidence, and all other
      questions that arise with respect to the course of the reference
      proceeding.  All proceedings and hearings conducted before the
      referee, except for trial, shall be conducted without a court reporter,
      except that when any party so requests, a court reporter will be used at
      any hearing conducted before the referee, and the referee will be provided
      a courtesy copy of the transcript.  The party making such a
      request shall have the obligation to arrange for and pay the court
      reporter.  Subject to the referee’s power to award costs to the
      prevailing party, the parties will equally share the cost of the referee
      and the court reporter at trial.

            

    

     

    
      	
               
      

            	
              14.8

            	
              The
      referee shall be required to determine all issues in accordance with
      existing case law and the statutory laws of the State of
      California.  The rules of evidence applicable to proceedings at
      law in the State of California will be applicable to the reference
      proceeding.  The referee shall be empowered to enter equitable
      as well as legal relief, enter equitable orders that will be binding on
      the parties and rule on any motion which would be authorized in a court
      proceeding, including without limitation motions for summary judgment or
      summary adjudication. The referee shall issue a decision at the close of
      the reference proceeding which disposes of all claims of the parties that
      are the subject of the reference.  Pursuant to CCP § 644, such
      decision shall be entered by the Court as a judgment or an order in the
      same manner as if the action had been tried by the Court and any such
      decision will be final, binding and conclusive.  The parties
      reserve the right to appeal from the final judgment or order or from any
      appealable decision or order entered by the referee.  The
      parties reserve the right to findings of fact, conclusions of laws, a
      written statement of decision, and the right to move for a new trial or a
      different judgment, which new trial, if granted, is also to be a reference
      proceeding under this provision.

            

    

     

    
      	
               
      

            	
              14.9

            	
              If
      the enabling legislation which provides for appointment of a referee is
      repealed (and no successor statute is enacted), any dispute between the
      parties that would otherwise be determined by reference procedure will be
      resolved and determined by arbitration.  The arbitration will be
      conducted by a retired judge or justice, in accordance with the California
      Arbitration Act §1280 through §1294.2 of the CCP as amended from time to
      time.  The limitations with respect to discovery set forth above
      shall apply to any such arbitration
proceeding.

            

    

     

    
      	
               
      

            	
              14.10

            	
              THE
      PARTIES RECOGNIZE AND AGREE THAT ALL CONTROVERSIES, DISPUTES AND CLAIMS
      RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND
      NOT BY A JURY.  AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY
      TO CONSULT) WITH COUNSEL OF ITS, HIS OR HER OWN CHOICE, EACH PARTY
      KNOWINGLY AND VOLUNTARILY, AND FOR THE MUTUAL BENEFIT OF ALL PARTIES,
      AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY CONTROVERSY,
      DISPUTE OR CLAIM BETWEEN OR AMONG THEM ARISING OUT OF OR IN ANY WAY
      RELATED TO, THIS AGREEMENT OR THE OTHER LOAN
      DOCUMENTS.

            

    

     

    
      	
              15.

            	
              EXECUTION, EFFECTIVENESS,
      SURVIVAL.  This Agreement may be executed in counterparts (and
      by different parties hereto in different counterparts), each of which
      shall constitute an original, but all of which when taken together shall
      constitute a single contract.  This Agreement and the other
      documents executed in connection herewith constitute the entire contract
      among the parties relating to the subject matter hereof and supersede any
      and all previous agreements and understandings, oral or written, relating
      to the subject matter hereof.  Delivery of an executed
      counterpart of a signature page of this Agreement by telecopy shall be
      effective as delivery of a manually executed counterpart of this
      Agreement.  This Agreement shall become effective upon the
      execution and delivery hereof by Borrower and Lender and shall continue in
      full force and effect until the Maturity Date and thereafter so long as
      any Obligations remain outstanding hereunder. Lender reserves the
      right to issue press releases, advertisements, and other promotional
      materials describing any successful outcome of services provided on
      Borrower’s behalf. Borrower agrees that Lender shall have the right to
      identify Borrower by name in those
materials.

            

    

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    
      	
              16.

            	
              OTHER
      AGREEMENTS.  Any security agreements, liens and/or
      security interests securing payment of any obligations of Borrower owing
      to Lender or its Affiliates also secure the Obligations, and are valid and
      subsisting and are not adversely affected by execution of this
      Agreement.  An Event of Default under this Agreement constitutes
      a default under other outstanding agreements between Borrower and Lender
      or its Affiliates.

            

    

     

    IN
WITNESS WHEREOF, Borrower and Lender have executed this Agreement on the day and
year above written.

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                	
                                                        BORROWER:

                                                      	 
      	
                                                        LENDER:

                                                      
	 
      	 
      	 
      	 
      	 
      
	
                                                        IMAGENETIX,
      INC.

                                                      	 
      	
                                                        BRIDGE
      BANK, NATIONAL ASSOCIATION

                                                      
	 
      	 
      	 
      	 
      	 
      
	
                                                        By

                                                      	 
      	 
      	
                                                        By

                                                      	 
      
	
                                                        Name:

                                                      	 
      	 
      	
                                                        Name:

                                                      	 
      
	
                                                        Title:

                                                      	 
      	 
      	
                                                        Title:

                                                      	 
      
	 
      	 
      	 
      	 
      	 
      
	
                                                        Address
      for Notices:

                                                      	 
      	
                                                        Address for
      Notices:

                                                      
	
                                                        10845
      Rancho Bernardo Road, Suite 105

                                                      	 
      	
                                                        55
      Almaden Blvd.

                                                      
	
                                                        San
      Diego, CA 92127

                                                      	 
      	
                                                        San
      Jose, CA 95113

                                                      
	
                                                        Fax:
      (858) 674-8460

                                                      	 
      	
                                                        Fax:  (408)
      423-8510

                                                      

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
        

      

      
        15

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