Document:

Modification to Business Loan Agreement

 Exhibit 10.1 
 MODIFICATION TO 
 BUSINESS LOAN AGREEMENT 
 THIS MODIFICATION TO BUSINESS LOAN AGREEMENT (this “Modification Agreement”) is dated as of February 17, 2009 and is entered into between
RAINMAKER SYSTEMS, INC., a Delaware corporation (the “Borrower”), and BRIDGE BANK, a National Association (the “Lender”).

 RECITALS: 
 A.
On or about April 29, 2004, Borrower and Lender executed and exchanged certain documents evidencing a revolving credit facility (the “Loan”) in the original maximum principal amount of Three Million Thousand Dollars ($3,000,000),
which Loan is and was evidenced by that certain Promissory Note (the “Note”) in the amount of the Loan, executed by Borrower and dated April 29, 2004, that certain Business Loan Agreement (Asset Based) executed by Borrower and dated
April 29, 2004 (the “2004 BLA”), that certain Commercial Security Agreement (the “Borrower Security Agreement”) executed by Borrower and dated April 29, 2004, that certain Intellectual Property Security Agreement (the
“IP Security Agreement”) executed by Borrower and dated February 17, 2004, and various other documents, certificates and agreements respecting the Loan (alternatively and collectively, the “Original Borrower Loan
Documents”). The security interest granted by the Borrower Security Agreement and the IP Security Agreement were each duly perfected and continued in the manner prescribed by law. 
 B. Concurrently with the execution and delivery of the documents described in Recital A, as security for the obligations described in Recital A, for good
and valuable consideration, and as part of the same transaction, Rainmaker Services, Inc. (“Services”) executed and delivered that certain Commercial Security Agreement (the “Services Security Agreement”) dated April 29,
2004 and Rainmaker Service Sales, Inc. (“Sales”) executed and delivered that certain Commercial Security Agreement (the “Sales Security Agreement”) dated April 29, 2004 The security interest granted by the Services Security
Agreement and the security interest granted by the Sales Security Agreement were each duly perfected and continued in the manner prescribed by law. The Original Borrower Loan Documents, the Services Security Agreement, the Sales Security Agreement,
and the various other documents, certificates and agreements respecting the Loan are alternatively and collectively the “Original Loan Documents.” 
 C. On or about February 1, 2005 and at the request of Borrower, Services, and Sales, the Original Loan Documents were modified and amended in accordance with various written agreements, each dated
February 1, 2005 (the “February 2005 Modification Agreements”), including but not limited to that certain Change in Terms Agreement (the “February 2005 CIT”), that certain Modification to Business Loan Agreement, and various
other documents, certificates and agreements respecting the Loan. Among other things, the February 2005 CIT decreased the amount of the Loan from $3,000,000 to $2,000,000. 
  

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 D. Concurrently with the execution and delivery of the February 2005 Modification Agreements, for good
and valuable consideration, and as part of the same transaction, Quarter End, Inc., an Idaho corporation (“Quarter End”) executed and delivered that certain Commercial Security Agreement (the “Quarter End Security Agreement”)
dated February 2, 2005. The security interest granted by the Quarter End Security Agreement was duly perfected and continued in the manner prescribed by law. 
 E. On or about February 8, 2005, Quarter End changed its name to Sunset Direct, Inc. 
 F. On or about
June 14, 2005 and at the request of Borrower, Services, and Sales, the Original Loan Documents (as modified by the February 2005 Modification Agreements) were further modified and amended in accordance with various written agreements, each
dated June 14, 2005 (the “June 2005 Modification Agreements”), including but not limited to that certain Change in Terms Agreement (the “June 2005 CIT”), that certain that certain Business Loan Agreement (Asset Based) (the
“June 2005 BLA”), and various other documents, certificates and agreements respecting the Loan. Among other things, the June 2005 CIT extended the maturity date of the obligations from August 10, 2005 to May 10, 2006 and the June
2005 BLA amended and restated in its entirety the 2004 BLA (as modified by the Modification to Business Loan Agreement dated February 1, 2005). 
 G. On or about December 16, 2005 and at the request of Borrower, Services, and Sales, the Original Loan Documents (as modified, amended and/or restated by the February 2005 Modification Agreements and the June
2005 Modification Agreements) were further modified and amended in accordance with various written agreements, each dated December 16, 2005 (the “December 2005 Modification Agreements”), including but not limited to that certain
Change in Terms Agreement (the “December 2005 CIT”), that certain that certain Business Loan Agreement (Asset Based) (the “December 2005 BLA”), and various other documents, certificates and agreements respecting the Loan. Among
other things, the December 2005 CIT increased the amount of the Loan from $2,000,000 to $4,000,000 and extended the maturity date of the obligations from May 10, 2006 to December 10, 2006 and the December 2005 BLA amended and restated in
its entirety the June 2005 BLA. 
 H. On or about June 23, 2006 and at the request of Borrower, Services, and Sales, the Original Loan
Documents as modified, amended and/or restated by the February 2005 Modification Agreements, the June 2005 Modification Agreements, and the December 2005 Modification Agreements) were modified and amended in accordance with various written
agreements, each dated June 23, 2006 (the “June 2006 Modification Agreements”), including but not limited to that certain Change in Terms Agreement (the “June 2006 CIT”), that certain Modification to Business Loan Agreement,
and various other documents, certificates and agreements respecting the Loan. Among other things, the June 26 CIT extended the maturity date of the obligations from December 10, 2006 to October 10, 2007. 
  

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 I. The Original Loan Documents (as modified, amended and/or restated by the February 2005 Modification
Agreements, the June 2005 Modification Agreements, the December 2005 Modification Agreements, the June 2006 Modification Agreements, as otherwise modified and amended) were subsequently extended through a series of letter amendments to extend the
then maturity date until October 10, 2008. 
 J. On or about October 10, 2008 and at the request of Borrower, Services, and Sales,
the Original Loan Documents (as modified, amended and/or restated by the February 2005 Modification Agreements, the June 2005 Modification Agreements, the December 2005 Modification Agreements, the June 2006 Modification Agreements, as otherwise
modified and amended) we further modified and amended in accordance with various written agreements, each dated October 10, 2008 (the “October 2008 Modification Agreements”), including but not limited to that certain Change in Terms
Agreement (the “October 2008 CIT”), that certain Modification to Business Loan Agreement, and various other documents, certificates and agreements respecting the Loan. 
 K. Borrower, Services, and Sales have requested that Lender modify, amend, extend and renew the Original Loan Documents (as modified, amended and/or
restated by the February 2005 Modification Agreements, the June 2005 Modification Agreements, the December 2005 Modification Agreements, the June 2006 Modification Agreements, the October 2008 Modification Agreements, and as otherwise modified and
amended) and Lender is willing to do so in accordance with this Modification Agreement. The Original Loan Documents (as modified, amended and/or restated by the February 2005 Modification Agreements, the June 2005 Modification Agreements, the
December 2005 Modification Agreements, the June 2006 Modification Agreements, the October 2008 Modification Agreements, and as otherwise modified and amended) and this Agreement shall be collectively and alternatively referred to as the “Loan
Documents” and Borrower’s monetary and non-monetary duties and obligations under the Loan Documents shall be collectively and alternatively referred to as the “Indebtedness.” 
 L. To the extent Borrower and Lender are parties to any other credit facilities or extensions of credit that are not expressly modified or amended by
this Agreement, Borrower shall continue to pay and perform each obligation that is the subject of such other credit facilities or extensions of credit in the time and manner specified in the documents evidencing or comprising same. 
 AMENDMENT: 
 NOW, THEREFORE,
Borrower and Lender hereby agree as follows: 
 1. Effective Date, Definitions and Acknowledgment. Unless otherwise expressly provided
by this Modification Agreement, this Modification Agreement shall modify and, to the extent inconsistent with, amend the Loan Documents effective upon the last to occur of (i) the 

  

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date of full execution of this Modification Agreement or (ii) the satisfaction or waiver by Lender of all conditions precedent set forth herein. Any
capitalized term not specifically defined herein shall have the meaning ascribed to it in the Loan Documents. The foregoing recitals are incorporated into this Modification Agreement by reference and acknowledged by Borrower to be true, correct and
accurate. 
 2. Additional Financial Covenants/Performance Plan Requirements. In addition to the other financial covenants required to
be maintained by Borrower under the Loan Documents, and until all Indebtedness is repaid, Borrower agrees that Borrower shall not incur (as of the end of any of Borrower’s fiscal quarters) a year-to-date Non-GAAP Net Loss exceeding by ten
(10%) the amount of the Non-GAAP Net Loss recited in the approved Operating Plan. For purposes of this Modification Agreement, “Non-GAAP Net Income/Loss” is defined as: Net Income before (i) amortization of intangible assets,
generally associated with acquisitions, (ii) accounting for employee stock option plans as required by SFAS 123(R), and (iii) accounting for costs associated with the impairment or disposal of long-lived assets. 
 Lender hereby approves the Operating Plan provided by Borrower to Lender in PowerPoint format and
entitled “Rainmaker Forecast, December 2008, Adjusted Post December 4th Board Meeting.” 
 3. Compensating Balance Requirement. Until full and final payment of all Indebtedness, if Borrower fails to maintain the minimum balances
prescribed below, then Lender shall have the right (at Lender’s sole election) to retroactively increase to the date such minimum balances were not maintained the rate of interest chargeable on the Indebtedness by another one and one-quarter
percentage point (1.25%) per annum. The fee shall be calculated on the basis of a three hundred sixty (360) day year and actual days elapsed. If Borrower pays said fee, Borrower’s failure to maintain the required deposits shall not
constitute an Event of Default. 
 For purposes of this Modification Agreement, the minimum balance required to be maintained by Borrower are
the following: 
 (a) Borrower shall maintain in an account maintained with Lender an average monthly net free collected demand deposits in an
amount not less than Two Million Dollars ($2,000,000). For purposes of this Agreement, “net free collected demand deposits” means balances in non-interest bearing demand deposit accounts after deducting provisional credits for items in the
process of collection and balances required by Lender under its normal practices to compensate Lender for the maintenance of such deposit accounts. 
 (b) Borrower shall maintain a combined aggregate sum of unrestricted aggregate cash balances in all demand deposit, money market and other cash accounts maintained with Lender an average monthly outstanding balance in an amount not less
than Six Million Dollars ($6,000,000). 
  

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 To the extent Borrower has failed to satisfy any compensating balance requirements set forth above for
any periods prior to the date hereof, such failures and defaults are waived by Lender. 
 4. Conditions Precedent. Lender’s
duties to extend and renew the Indebtedness and to make advances in accordance with this Modification Agreement shall be subject to the satisfaction or written waiver by Lender of the following conditions precedent: 
 (i) there being no outstanding and uncured defaults under the Loan Documents or any other obligations owing by Borrower to Lender; 
 (ii) the satisfaction of each of the conditions precedent set forth in Loan Documents, each of which is incorporated herein by this reference; 

(iii) the execution and delivery of (a) this Modification Agreement, (b) written reaffirmations by Sales, Services, and Sunset Direct of
their obligations under that Sales Security Agreement, the Services Security Agreement, and the Quarter End Security Agreement with Lender, which reaffirmation(s) shall be in such form as may be acceptable to Lender in its sole and absolute
discretion; (c) written reaffirmations by Sales, Services, and Sunset Direct of their obligations under any guaranties, which reaffirmation(s) shall be in such form as may be acceptable to Lender in its sole and absolute discretion; and
(d) such other documents as Lender may request. 
 5. Further Assurances. The parties hereby agree, to the extent permitted by
law, from time to time, as and when requested by any other party hereto or by its successors or assigns, to execute and deliver, or cause to be executed and delivered, all such instruments, and to take, or cause to be taken, all such further or
other actions as may be reasonably necessary or desirable in order to implement the provisions hereof and otherwise to effect the intent and purposes hereof. 
 6. Further Modifications. Subject to the provisions of this Modification Agreement relating to further assurances, this Modification Agreement does not create any right in favor of Borrower nor any duty or
obligation on the part of Lender to enter in to any further modifications or amendments of the Loan Agreement or to provide any other or additional credit facilities to Borrower. 
 7. Counterparts. This Modification Agreement may be executed in counterparts, each of which, when so executed, shall be deemed to be an original,
and such counterparts together shall constitute one and the same instrument. For purposes of this Modification Agreement, a facsimile execution shall be considered as the equivalent of a wet ink signature and shall be deemed good and valid
acceptance of this Modification Agreement and shall be deemed to have been reasonably relied on by all other parties; provided, however, that any signature forwarded by facsimile shall be promptly followed by a wet ink original, but the failure to
forward a wet ink original shall not void or otherwise effect the acceptance evidenced by the facsimile execution. 
  

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 8. Rules of Construction. This Modification Agreement and all agreements relating to the subject
matter hereof are the product of joint negotiation by the parties and their respective attorneys. The parties waive the provisions of California Civil Code Section 1654 requiring that any ambiguities in this Modification Agreement be construed
against either of the parties. The parties agree that any deletion of language from this Modification Agreement prior to its mutual execution by Borrower and Lender shall not be construed to have any particular meaning or to raise any presumption,
canon of construction or implication, including, without limitation, any implication that the parties intended thereby to state the converse or opposite of the deleted language. 
 9. Continued Full Force and Effect. Except as amended hereby, the Loan Documents shall continue in full force and effect, the Indebtedness remains
secured by Borrower Security Agreement, the Sales Security Agreement, the Services Security Agreement and the IP Security Agreement (the “Security Agreements”) and each Security Agreement continues to encumber the property pledged thereby,
all without impairment or modification in and to its priority. 
 10. Reaffirmations. Borrower hereby ratifies, reaffirms, and remakes
as of the date hereof each and every representation and warranty contained in the Loan Agreement or in any document incident thereto or connected therewith as amended by this Modification Agreement. 
  

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 IN WITNESS WHEREOF, Borrower has executed and delivered this Modification Agreement to Lender on the date
first above written at San Jose, California. 
  

			
	“BORROWER”
	
	 RAINMAKER SYSTEMS, INC.,
 a Delaware corporation

		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary

 IN WITNESS WHEREOF, Lender hereby accepts this Modification Agreement to be effective as of
the date first above written in San Jose, California. 
  

			
	“Lender”
	
	 BRIDGE BANK,
 a National Association

		
	By:	 	 /s/ Martin Kriegler

	Its:	 	 Vice President

  

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 REAFFIRMATION OF PLEDGE 
 The undersigned (hereinafter referred to as “Pledgor”) hereby acknowledges and agrees that Pledgor has read, is familiar with, and consents to
all of the terms and conditions contained in that certain MODIFICATION TO BUSINESS LOAN AGREEMENT and that certain CHANGE IN TERMS AGREEMENT, each dated February 17, 2009, and various other documents, certificates and agreements in connection
with same (the “October 2008 Modification Agreements”) between RAINMAKER SYSTEMS, INC., a Delaware corporation (the “Borrower”), and BRIDGE
BANK, a National Association (the “Lender”), and to all of the agreements and documents referred to therein, and specifically consents to the financial accommodations extended and to be extended by Lender
to Borrower as set forth in such October 2008 Modification Agreements and in such agreements and documents. Pledgor hereby confirms, acknowledges, and agrees as follows: that all of the recitals contained in the October 2008 Modification Agreements
are true, correct and accurate; that all of the terms and provisions of Pledgor’s Commercial Security Agreement dated April 29, 2004 (each a “Security Agreement”) are hereby ratified and confirmed; that all of the terms and
provisions of the Security Agreement shall continue in full force and effect with respect to all of the Indebtedness (as that term is defined in the October 2008 Modification Agreements) owing by Borrower to Lender (however such Indebtedness may be
evidenced); that the Indebtedness to which Pledgor’s rights and interests are subordinate and subordinated by the Security Agreement include (without limitation) the financial accommodations extended and to be extended by Lender to Borrower and
the other obligations owing by Borrower to Lender under the October 2008 Modification Agreements. 
 In executing this reaffirmation, Pledgor
warrants, represents and agrees that (i) Pledgor executes and delivers this reaffirmation with full knowledge of the rights which Pledgor may have in respect to the Lender, (ii) Lender has advised Pledgor that (a) it may have
conflicts of interest among themselves and relative to Borrower, (b) it has interests adverse to that of Lender, and (c) each of them have a right to be represented by independent counsel of their own choosing, and (iii) Pledgor has
received (or has been given the opportunity to seek and obtain and has knowingly failed to do so) independent legal advice with respect to this reaffirmation and any documents to be executed and delivered in connection with this reaffirmation, with
respect to each such party’s rights and asserted rights arising out of said matters, and with respect to any waivers and releases contained in this reaffirmation and any documents to be executed and delivered in connection with this
reaffirmation. 
 Although Lender has informed Pledgor of the foregoing October 2008 Modification Agreements, and Pledgor has acknowledged
having read the same and consented to all of its terms and conditions, Pledgor understands and agrees that Lender is under no duty whatsoever (whether based upon an agreement with Borrower, the Security Agreement, or any other agreement with
Pledgor) to so notify Pledgor or to seek such an acknowledgment and consent and nothing contained in this document is intended to or shall create such a duty as to any advances or transactions hereafter. 
  

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 IN WITNESS WHEREOF, Pledgor has executed this Reaffirmation on the date of the October 2008 Modification
Agreements, for good and valuable consideration, and as part of the same transactions in which the Indebtedness were created, modified, amended, extended, or renewed. 
 Dated: February 17, 2009 
  

			
	RAINMAKER SERVICES, INC.
		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary
	
	RAINMAKER SERVICE SALES, INC.
		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary

  

 2 

 REAFFIRMATION OF PLEDGE 
 The undersigned (hereinafter referred to as “Pledgor”) hereby acknowledges and agrees that Pledgor has read, is familiar with, and consents to
all of the terms and conditions contained in that certain MODIFICATION TO BUSINESS LOAN AGREEMENT and that certain CHANGE IN TERMS AGREEMENT, each dated February 17, 2009, and various other documents, certificates and agreements in connection
with same (the “October 2008 Modification Agreements”) between RAINMAKER SYSTEMS, INC., a Delaware corporation (the “Borrower”), and BRIDGE
BANK, a National Association (the “Lender”), and to all of the agreements and documents referred to therein, and specifically consents to the financial accommodations extended and to be extended by Lender
to Borrower as set forth in such October 2008 Modification Agreements and in such agreements and documents. Pledgor hereby confirms, acknowledges, and agrees as follows: that all of the recitals contained in the October 2008 Modification Agreements
are true, correct and accurate; that all of the terms and provisions of Pledgor’s Commercial Security Agreement dated February 2, 2005 (the “Security Agreement”) are hereby ratified and confirmed; that all of the terms and
provisions of the Security Agreement shall continue in full force and effect with respect to all of the Indebtedness (as that term is defined in the October 2008 Modification Agreements) owing by Borrower to Lender (however such Indebtedness may be
evidenced); that the Indebtedness to which Pledgor’s rights and interests are subordinate and subordinated by the Security Agreement include (without limitation) the financial accommodations extended and to be extended by Lender to Borrower and
the other obligations owing by Borrower to Lender under the October 2008 Modification Agreements. 
 In executing this reaffirmation, Pledgor
warrants, represents and agrees that (i) Pledgor executes and delivers this reaffirmation with full knowledge of the rights which Pledgor may have in respect to the Lender, (ii) Lender has advised Pledgor that (a) it may have
conflicts of interest among themselves and relative to Borrower, (b) it has interests adverse to that of Lender, and (c) each of them have a right to be represented by independent counsel of their own choosing, and (iii) Pledgor has
received (or has been given the opportunity to seek and obtain and has knowingly failed to do so) independent legal advice with respect to this reaffirmation and any documents to be executed and delivered in connection with this reaffirmation, with
respect to each such party’s rights and asserted rights arising out of said matters, and with respect to any waivers and releases contained in this reaffirmation and any documents to be executed and delivered in connection with this
reaffirmation. 
 Although Lender has informed Pledgor of the foregoing October 2008 Modification Agreements, and Pledgor has acknowledged
having read the same and consented to all of its terms and conditions, Pledgor understands and agrees that Lender is under no duty whatsoever (whether based upon an agreement with Borrower, the Security Agreement, or any other agreement with
Pledgor) to so notify Pledgor or to seek such an acknowledgment and consent and nothing contained in this document is intended to or shall create such a duty as to any advances or transactions hereafter. 
  

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 IN WITNESS WHEREOF, Pledgor has executed this Reaffirmation on the date of the October 2008 Modification
Agreements, for good and valuable consideration, and as part of the same transactions in which the Indebtedness were created, modified, amended, extended, or renewed. 
 Dated: February 17, 2009 
 SUNSET DIRECT, INC., an Idaho
corporation f/k/a Quarter End, Inc. 
  

			
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary

  

 2 

 REAFFIRMATION OF GUARANTY 
 The undersigned (hereinafter referred to as “Guarantor”) hereby acknowledges and agrees that Guarantor has read, is familiar with, and consents
to all of the terms and conditions contained in that certain MODIFICATION TO BUSINESS LOAN AGREEMENT (the “Modification Agreement”) is dated as of February 17, 2009 and is entered into between RAINMAKER
SYSTEMS, INC., a Delaware corporation (the “Borrower”), and BRIDGE BANK, a National Association (the “Lender”), and to all of the agreements
and documents referred to therein, and specifically consents to the financial accommodations extended and to be extended by Lender to Borrower as set forth in such Modification Agreement and in such agreements and documents. Guarantor hereby
confirms, acknowledges, and agrees as follows: that all of the recitals contained in the Modification Agreement are true, correct and accurate; that all of the terms and provisions of (i) Guarantor’s Guaranty Agreement dated
October 10, 2008 (as same may have been modified, amended, restated, reaffirmed or renewed, the “Guaranty Agreement”) and (ii) any mortgage, deed of trust, security agreement, pledge agreement, or other instruments, documents, or
agreements securing the Guaranty Agreement (if any, including, without limitation, that certain Commercial Security Agreement executed by Borrower and dated April 29, 2004, that certain Intellectual Property Security Agreement (the “IP
Security Agreement”) executed by Borrower and dated February 17, 2004, that certain Commercial Security Agreement executed and delivered by Rainmaker Services, Inc. and dated April 29, 2004, and that certain Commercial Security
Agreement executed and delivered by Rainmaker Service Sales, Inc. and dated April 29, 2004; such documents being collectively and alternatively, the “Security Documents”) are each hereby ratified and confirmed; that all of the terms
and provisions of the Guaranty Agreement and any and all Security Documents shall each continue in full force and effect with respect to all of the Obligations (as that term is defined in the Guaranty Agreement) owing by Borrower to Lender (however
such Obligations may be evidenced); and that the Obligations secured by the Guaranty Agreement and any and all Security Documents include (without limitation) the financial accommodations extended and to be extended by Lender to Borrower and the
other obligations owing by Borrower to Lender under the Modification Agreement. 
 Although Lender has informed Guarantor of the foregoing
Modification Agreement, and Guarantor has acknowledged having read the same and consented to all of its terms and conditions, Guarantor understands and agrees that Lender is under no duty whatsoever (whether based upon an agreement with Borrower,
the Guaranty Agreement, any Security Documents, or any other agreement with Guarantor) to so notify Guarantor or to seek such an acknowledgment and consent and nothing contained in this document is intended to or shall create such a duty as to any
advances or transactions hereafter. 
  

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 IN WITNESS WHEREOF, the undersigned have executed this reaffirmation as of the date set forth below.

 Dated: February 17, 2009 
  

			
	RAINMAKER SERVICE SALES, INC.
		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary
	
	RAINMAKER SERVICES, INC.
		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary
	
	SUNSET DIRECT, INC.
		
	By:	 	 /s/ Steve Valenzuela

		 	Steve Valenzuela, Chief Financial Officer/Secretary

  

 2exhibit_10-2.htm

    
      

    
Exhibit
10.2

     

    

     

    Visualant
Incorporated

    500
Union Street, Suite 406

    Seattle,
Washington  98101

    

    

    November
10, 2006

    

    

    Mr.
Bradley E. Sparks

    5320 West
Mercer Way

    Mercer
Island, WA  98040

    

    Dear Mr.
Sparks:

    

    On behalf
of Visualant Incorporated (the "Company"), I am pleased to offer you the
position of Chief Executive Officer, President, and a member of the Board of
Directors of the Company commencing as of the Start Date indicated at the end of
this offer.  Your employment is subject to the following
terms:

    

    1.           Compensation.

    

    a.           Base
Salary.  In this exempt
position, you will earn a salary of Twenty Thousand Dollars ($20,000) per month,
which is equivalent to $240,000.00 on an annualized basis (the “Base
Salary”).  Payment of your Base Salary hereunder shall be made in
accordance with the relevant Company policies in effect from time to time,
including normal payroll practices, and shall be subject to all applicable
employment and withholding taxes.  The Company will review your Base
Salary on a yearly basis.

    

    b.           Incentive
Compensation.  You will be
eligible to earn an annual incentive bonus in accordance with the bonus policy
adopted by the Company for its senior executives.

    

    2.           Employee
Benefits.  The Company will provide you with the opportunity to
participate in the standard benefits plans as may be available to other senior
executives of the Company from time to time, subject to any eligibility
requirements imposed by such plans.  You will be subject to the
Company's standard vacation policy for its executive officers.

     

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    3.           Equity
Award.

    

    a.           Stock
Options.  In connection
with and upon the commencement of your employment, the Board of Directors has
approved a grant of stock options (the "Options") to you to purchase One Million
(1,000,000) shares of the Company's common stock under the Company’s Combined
Incentive and Non-Qualified Stock Option Plan (the “Stock Option Plan”)
at an
exercise price of $0.75 per share.  The Options will have a term of
five (5) years and will vest over a period of forty-two (42) months in
accordance with the following vesting schedule:  25% of the shares
covered by the Options will vest on the 6-month anniversary of the Start Date of
your employment (which shall also be the option grant date), and an additional
25% will vest on each of the three successive 12-month periods following the
6-month anniversary date in accordance with the Stock Option
Plan.  Vesting will, of course, depend on your continued employment
with the Company.  The Options will be a combination of incentive and
non-qualified stock options (in each calendar year the first 133,333 vested
options will be incentive stock options and the remainder of the vested options
will be non-qualified/non-statutory stock options), and will be subject to the
terms and conditions of the Stock Option Agreement to be entered into between
you and the Company in the form attached hereto.

    

    b.           Acceleration
Benefit.  If the Company is subject to the consummation of any
merger or consolidation of the Company with or into another corporation, or to
the consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company’s assets or securities to a majority-owned subsidiary corporation
(together, defined as a “Corporate Transaction”), and if your employment is
terminated without Cause (as defined in Section 9.b. below, provided, however,
that “Cause” shall include any breach of this letter agreement), and other than
as a result of your death or disability, or you voluntarily terminate your
employment for Good Reason (defined in Section 9.c. below,  provided,
however, that “Good Reason” shall include any breach of this letter agreement by
the Company), then you will receive the benefits set forth in sections 9.a.i,
9.a.ii, 9.a.iii and 9.d., below, provided, however, that you execute the
Company’s standard form of release of all claims agreement.

    

    4.           Employment
Conditions.

    

    a.           Confidentiality
Agreement; Policies.  Employment with
the Company is contingent upon: (a) the execution and delivery to the Company’s
Chairman, of the Company's Confidential Information Invention Assignment,
Non-Solicitation and Arbitration Agreement,  and (b) your
acknowledgment of and agreement with the Company's corporate policies, codes and
procedures as in effect at the time of your hire.

    

    b.           Right to
Work.  For purposes of
federal immigration laws, you will be required to provide to the Company
documentary evidence of your identity and eligibility for employment in the
United States upon request.

    

    c.           Verification
of Information.  This offer of
employment also is contingent upon the successful verification of the
information you provided to the Company during your application process, as well
as a general background check performed by the Company to confirm your
suitability for employment.  By accepting this offer of employment,
you warrant that all information provided by you is true and correct to the best
of your knowledge, and you expressly release the
Company from any claim or cause of action arising out of the Company's
verification of such information.

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    5.           No
Conflicting Obligations.  You understand
and agree that by accepting this offer of employment, you represent to the
Company that your performance will not breach any other agreement to which you
are a party and that you have not, and will not during the term of your
employment with the Company, enter into any oral or written agreement in
conflict with any of the provisions of this letter or the Company's
policies.  You are not to bring with you to the Company, or use or
disclose to any person associated with the Company, any confidential or
proprietary information belonging to any former employer or other person or
entity with respect to which you owe an obligation of confidentiality under any
agreement or otherwise.  The Company does not need and will not use
such information, and we will assist you in any way possible to preserve and
protect the confidentiality of proprietary information belonging to third
parties.  Also, we expect you to abide by any obligations to refrain
from soliciting any person employed by or otherwise associated with any former
employer and suggest that you refrain from having any contact with such persons
until such time as any non-solicitation obligation expires.

    

    6.           General
Obligations.  As an employee,
you will be expected to adhere to the Company's standards of professionalism,
loyalty, integrity, honesty, reliability and respect for all.  In
addition, you shall acknowledge, agree to, and comply with all of the Company's
corporate policies, codes and procedures as in effect at the time of your hire
and as modified or introduced from time to time.  The Company does not
permit, and will not tolerate, the unlawful discrimination or harassment of any
employees, consultants, or related third parties on the basis of sex, race,
color, religion, age, national origin or ancestry, marital status, veteran
status, mental or physical disability or medical condition, sexual orientation,
pregnancy, childbirth or related medical condition, or any other status
protected by applicable law.

    

    7.           At-Will
Employment.  Your employment
with the Company will be on an "at will" basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason,
without further obligation or liability except as provided herein and in the
Stock Option Plan and Confidentiality Agreement.  The Company also
reserves the right to modify or amend the terms of your employment at any time
for any reason.  This policy of at-will employment is the entire
agreement as to the duration of your employment and may only be modified in an
express written agreement signed by the Chairman of the Board of
Directors.

    

    8.           Outside
Activities.  During the time
you are employed by the Company, you agree that you will not engage in any other
employment, consulting or other business activity without the prior written
consent of the Company, it being understood that: (a) you may undertake civic,
charitable and other similar duties as long as, in the opinion of the Company's
Board of Directors, they do not interfere with the performance of your duties
hereunder; and (b) you may serve on the board of directors of two other public
or private companies as long as doing so, in the opinion of the Company's Board
of Directors, does not give rise to a conflict of interest with the
Company.  While you render services to the Company, you also will not
assist any person or entity (i) in competing with the Company, (ii) in preparing
to compete with the Company, or (iii) in soliciting or hiring any employees or
consultants of the Company.

    

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    9.           Termination and Severance
Benefits.

    

    a.           General
Terms.  Without in any
way limiting the Company's policy of at-will employment, if your employment is
terminated by the Company without Cause (as defined in Section 9.b. below), and
other than as a result of your death or disability, or you voluntarily terminate
your employment for Good Reason (as defined in Section 9.c. below), the Company
will offer certain severance benefits to you as set forth in Sections 9.a.(i)
and 9.a.(ii).  As a condition to your receipt of such benefits, you
are required to comply with your continuing obligations (including the return of
any Company property), resign from all positions you hold with the Company, and
execute the Company's standard form of release agreement releasing any claims
you may have against the Company.

    

    (i)           Cash
Payments.  The Company will
provide you with severance equal to100% of your then-current annualized Base
Salary paid out on a pro rata basis in accordance with the Company's regular
payroll schedule over the year following the effective date of your termination;
provided, however, that in the case of your termination for Good Reason under
Section 9.c.(v), such payment will be made in a lump sum on or as soon as
practicable after the effective date of termination.

    

    (ii)           Accelerated
Options.  The vesting of the Option will accelerate as to the
number of shares that would otherwise have vested and been exercisable as of the
date that is twelve (12) months from the date of termination; provided, however,
that in the event of acceleration as the result of a Corporate Transaction, the
Options will vest immediately before the consummation of the Corporate
Transaction.

    

    (iii)           Continued
Benefits.  As further
consideration, you will continue to receive all benefits specified in Section 2
of this letter agreement to the maximum extent allowed by the Company's benefit
plans, for a period not to exceed twelve (12) months following the effective
date of your termination.  If you elect continued group medical
insurance coverage pursuant to COBRA, the Company will reimburse you for the
applicable premiums (less any premium contributions payable by employees at the
time) for you and your eligible dependents for the first twelve
(12)  months of such coverage, up to a maximum of ten thousand dollars
($10,000) in the aggregate.

    

    b.           Definition
of Cause.  The Company may
terminate your employment and this agreement at any time for “Cause” immediately
upon written notice to you.  As used herein, the term “Cause” shall
mean that you have: (i) been convicted of a felony involving moral turpitude,
controlled substances, securities law violations, antitrust laws, tax or
financial reporting, or physical violence or a single act of fraud, or
embezzlement; or (ii) violated any material written Company policy or rules of
the Company, unless cured by you within thirty (30) days following written
notice to you of such violation; or (iii) repeatedly failed to perform your
duties as CEO and President of the Company, or refused to follow the reasonable
written directions given by the Company’s Chairman or the Board from time to
time, or breached any covenant or obligation under this agreement or other
agreement with the Company, unless cured by you within thirty (30) days
following written notice to you of such breach or failure; or (iv) engaged in
any illegal conduct which adversely affects the reputation of the
Company.  Notwithstanding anything to the contrary, “Cause” shall not
mean any act or omission believed by you in good faith to have been in, or not
opposed to, the best interest of the Company (without intent to personally gain, directly or indirectly, a
profit or advantage to which you were not legally entitled).

     

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    

    c.           Good
Reason.  You may end your
employment and terminate this agreement at any time, with or without “Good
Reason” (as defined herein), subject to giving thirty (30) days written notice
of said resignation or termination to the Board of Directors or the Chairman of
the Company.  For purposes of this Agreement, “Good Reason” shall mean
any of the following:

     

    
      	
               
      

            	
              (i)

            	
              A
      material breach of this agreement by the Company which is not cured within
      thirty (30) days after receipt of written notice of such breach from you
      to the Company, identifying the specific
breach;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              A
      change in your status, title, position or responsibilities (including
      reporting responsibilities) that, in your reasonable judgment, represents
      a substantial reduction in the status, title, position or responsibilities
      as in effect immediately prior thereto; the assignment to you of any
      duties or responsibilities that, in your reasonable judgment, are
      inconsistent with such status, title, position or responsibilities or any
      removal of you from or failure to reappoint or reelect you to any of such
      positions, except in connection with the termination of your employment
      for Cause, for Disability or as a result of your death, or by you other
      than for Good Reason;

            

    

     

    
      	
               
      

            	
              (iii)

            	
              Any
      requirement that you relocate, without your consent, your principal
      residence from the Seattle, Washington, metropolitan
  area;

            

    

     

    
      	
               
      

            	
              (iv)

            	
              The
      relocation, without your consent, of your primary place of work to a
      location which is more than thirty-five (35) highway miles from your
      designated location on your Start
Date;

            

    

     

    
      	
               
      

            	
              (v)

            	
              The
      failure of the Company to obtain a satisfactory agreement from any
      successor company to assume and perform the Company’s obligations under
      this agreement:

            

    

     

    
      	
               
      

            	
              (vi)

            	
              A
      reduction in your annual base salary,
or

            

    

     

    
      	
               
      

            	
              (vii)

            	
              Any
      purported termination of your employment or service for Cause by the
      Company that does not comply with the terms of the
    Agreement.

            

    

     

    d.           Excise
Tax Liability.  In the event that it is determined that any
payment, distribution or benefit of any type to or for the benefit of you made
by the Company, by any of its affiliates, by any person who acquires ownership
or effective control of ownership of a substantial portion of the Company’s
assets (within the meaning of section 280G of the Internal Revenue Code of 1986,
as amended (the “IRC”) and the regulations thereunder) or by any affiliate of
such person, whether paid or payable or distributed or distributable or
otherwise made available pursuant to the terms of an employment agreement or
otherwise, including the accelerated
vesting of stock options or other equity-based awards (the “Total Payments”),
would be subject to the excise tax imposed by section 4999 of the IRC or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest or penalties, are collectively referred to as the “Excise
Tax”), then you shall be entitled to receive an additional payment (an “Excise
Tax Restoration Payment”) in an amount that shall fund the payment by you of any
Excise Tax on the Total Payments as well as all income taxes imposed on the
Excise Tax Restoration Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties imposed with respect to taxes
on the Excise Tax Restoration or any Excise Tax.  The Excise Tax
Restoration Payment shall be calculated applying the then highest marginal tax
rates.

     

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    

    10.           Termination
for Cause.  Upon termination
of your employment by the Company for Cause (as defined in Section 9 above), the
Company shall be under no further obligation to you, except to pay all accrued
but unpaid Base Salary and accrued vacation time to you up to the effective date
of your termination of employment.

    

    11.           Surrender
of Records and Property.  Upon termination of your employment
with the Company for any reason, you shall promptly deliver to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company and which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in your possession
or under your control.

    

    We are
delighted to be able to extend you this offer and look forward to working with
you.  To indicate your acceptance of the Company's offer, please sign
this letter in the space provided below and return it to me.  The
Company requests that you begin work in this new position on November 10, 2006
(your “Start Date”).  This letter, together with the Confidentiality
Agreement, sets forth the terms of your employment with the Company and
supersedes any prior representations or agreements, whether written or
oral.  This letter will be governed by the laws of the State of
Washington.  This letter may not be modified or amended except by a
written agreement, signed by the Chairman of the Board of
Directors.

     

     

    
      
        
          
            
              
                
                  	 	 	Very
      truly yours,	 
	 	 	

                          Visualant
      Incorporated

                        	 
	 	 	 	 
	
                           

                        	
                           

                        	/s/  
      Ronald P. Erickson	 
	 	 	Ronald
      P. Erickson, Chairman	 

                

              

            

          

        

      

    

    ACCEPTED
AND AGREED TO:

    

    

    /s/ 
Bradley E. Sparks 

      
        

      

    

    Bradley
E. Sparks

     

     

    6

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