Document:

KWESST Micro Systems Inc.: Exhibit 10.18 - Filed by newsfilecorp.com

    

    Certain portions of this exhibit have been excluded because the information is both (i) not material and (ii) the type that the registrant customarily and actually treats as private or confidential. Omitted information has been noted in this document with a placeholder identified by the mark "[***]".

    THIS LOAN AGREEMENT NO. 1 dated as of August 25, 2022

    	BETWEEN:	KWESST MICRO SYSTEMS INC., as Borrower;
	 	 
	AND:	[***], as Lender;

    
WITNESSETH:

    WHEREAS the Borrower wishes to borrow certain monies from the Lender, and the Lender is prepared to lend a portion of such monies to the Borrower upon the terms and subject to the conditions herein contained;

    NOW THEREFORE in consideration of the premises, the mutual covenants contained herein and for other consideration, the receipt and sufficiency of which are acknowledged, the Parties have agreed as follows:

    ARTICLE 1

INTERPRETATION

    1.1 General Definitions 

    The capitalized words and expressions, wherever used in this Agreement or in any agreement ancillary hereto, unless there be something in the subject or the context inconsistent therewith, shall have the meaning ascribed thereto in Schedule "A".

    1.2 References to Agreements

    Each reference in this Agreement to any agreement (including this Agreement and any other defined term that is an agreement) shall be construed so as to include such agreement (including any attached schedules) and each amendment, supplement, amendment and restatement, novation and other modification made to it at or before the time in question.  The terms "this Agreement", "this Loan Agreement", "hereof", "hereunder" and similar expressions refer to this agreement and not to any particular Article, Section, subsection, paragraph, subparagraph, clause or other portion of this agreement.

    

    
        Loan Agreement no. 1 - Page 2

    

    1.3 Headings, etc.

    The division of this Agreement into Articles, Sections and subsections and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Agreement.

    1.4 Number and Gender

    In this Agreement, words in the singular (including defined terms) include the plural and vice versa (the necessary changes being made to fit the context) and words in one gender include all genders.

    ARTICLE 2

THE LOAN

    2.1 Loan

    The Lender agrees, upon the terms and subject to the conditions of this Agreement, to lend to the Borrower, an amount of USD$ 200,000.00, on an unsecured basis.

    2.2 Expenses

    The Lender shall retain an amount of USD$ 2,500.00 from the Loan in order to cover its expenses disbursed in connection with this Agreement.

    2.3 Purpose of the Loan

    The Loan shall be used by the Borrower for general corporate purposes.

    2.4 Maturity Date 

    The Principal at Maturity and interest accrued thereon must be repaid on the earlier of (i) the date that is twelve (12) months and one (1) day from the Closing Date and (ii) the acceleration of the Loan pursuant to Section 12.1 below (such date, the "Maturity Date").

    2.5 Voluntary Repayment of Loan

    The Borrower may, at any time prior to the close of business on the Maturity Date, voluntarily repay the whole or any part of the Loan, without penalty or premium, by issuing a Repayment Notice to the Lender. Any Repayment Notice shall be delivered to the Lender at least three (3) Business Days prior to the effective date of the relevant voluntary repayment.

    

    
        Loan Agreement no. 1 - Page 3

    

    ARTICLE 3

INTEREST AND BONUS SHARES

    3.1 Interest on Loan

    The Borrower shall pay the Lender interest on the outstanding balance of the Loan at a rate per annum equal to six percent (6.0%), compounded monthly and not in advance. After an Event of Default, interest on the Loan will accrue, from the date of such Event of Default, at a rate per annum of eighteen percent (18%), compounded monthly.

    3.2 Computation of Interest

    3.2.1 Interest in respect of the Loan shall be computed on the basis of a 365-day year for the actual number of days elapsed;

    3.2.2 Interest payable on the Loan is calculated upon the daily outstanding balance of the Loan from and including the date it is advanced until, but excluding, the date it is repaid in full.

    3.3 Annual Equivalents

    For the purposes of the Interest Act (Canada), the annual rates of interest to which are equivalent the rate determined in accordance with the provisions of Section 3.1 are the following rate: (the quoted rate) x (number of days in the year) ÷ 365 = % per annum.

    3.4 Payment of Interest

    Interest shall be paid in cash by the Borrower at the Maturity Date (the "Interest Payment Date"). Interest shall accrue from the date of the Closing Date to the date of payment in full of the Principal at Maturity, together with any accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder. 

    3.5 [Bonus Shares

    On the Closing Date, the Borrower will issue in favour of the Lender an aggregate number of common shares in the share capital of the Borrower (collectively, the "Bonus Shares"). In connection therewith, the Lender acknowledges and recognizes the following:

    3.5.1 the Lender shall receive the number of Bonus Shares as is equal to twenty percent (20%) of the total dollar amount of the Loan, (i) multiplied by the average daily Canadian foreign exchange rate as published by the Bank of Canada, and (ii) divided by the Market Price of the common shares of the Borrower on the Exchange, on the date that is immediately prior to the date of the news release of the Borrower announcing the Loan; and

    3.5.2 the Bonus Shares will be subject to a four (4) month and one (1) day hold period from the date of issuance as required under Applicable Law.]

    

    
        Loan Agreement no. 1 - Page 4

    

    ARTICLE 4

MANNER OF PAYMENTS

    4.1 Currency of Payments

    All payments or repayments, as the case may be, of the Principal at Maturity or any part thereof or of interest shall be made in United States Dollars (USD) only.

    4.2 Payment on Any Business Day by 3:00 P.M. (Eastern Time)

    Whenever any payment or repayment falls due on a day which is not a Business Day, such payment or repayment shall be made on the next following Business Day. Furthermore, any amount received after 3:00 P.M. (Eastern Time) on any Business Day shall be applied to the appropriate payment or repayment which was required to be made on such Business Day, on the next following Business Day. Until so applied, interest shall continue to accrue as provided in this Agreement on the amount of such payment or repayment.

    ARTICLE 5

CONDITIONS PRECEDENT

    5.1 Closing Conditions

    Closing shall occur upon the following conditions precedent being met to the satisfaction of the Lender or, as the case may be, waived by the Lender (the date on which such conditions precedent shall be met shall be referred to herein as the "Closing Date"):

    5.1.1 the Parties shall have received satisfactory evidence that the board of directors of the Borrower has approved the transactions contemplated in this Agreement;

    5.1.2 the Parties shall have received an executed copy of this Agreement;

    5.1.3 the Lender shall have received satisfactory evidence that the Borrower has received all necessary third-party acknowledgements and consents in connection with this Agreement and the other Loan Documents;

    5.1.4 the Lender shall have received a certificate or a direct registration statement evidencing the Bonus Shares and the issue thereof;

    5.1.5 the Lender shall have received satisfactory evidence that the Borrower has received all required regulatory approvals including the approval of the Exchange;

    5.1.6 no Default or Event of Default shall have occurred and be continuing;

    5.1.7 the representations and warranties made by the Borrower under this Agreement, are true and correct in all material respects as of the Closing Date;

    

    
        Loan Agreement no. 1 - Page 5

    

    5.1.8 no Material Adverse Effect, as determined by the Lender in its reasonable discretion, shall have occurred and be continuing;

    5.1.9 the Parties shall have received an executed copy of the Concurrent Loan Agreement; and

    5.1.10 the Parties shall have received executed copies of the Call Option Agreements.

    ARTICLE 6

REPRESENTATIONS AND WARRANTIES OF
THE BORROWER

    To induce the Lender to make the Loan available to the Borrower, the Borrower represents and warrants to and in favour of the Lender as follows:

    6.1 Existence 

    The Borrower is a corporation duly and validly incorporated or formed, organized, existing and in good standing under the Laws of its jurisdiction of organization.

    6.2 Authority

    The Borrower has the legal capacity to (i) enter into this Agreement and the other Loan Documents, (ii) own and hold under lease its property, and (iii) conduct business substantially as presently conducted.

    6.3 Due Authorization

    The Borrower has taken all necessary action to authorize the execution and delivery of this Agreement and the other Loan Documents, the creation and performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated herein and therein. The Borrower has duly executed and delivered this Agreement and the other Loan Documents.

    6.4 Enforceability

    Each of the Loan Documents constitutes legal, valid and binding obligations of the Borrower, enforceable against it in accordance with its terms, subject only to those provisions of applicable laws relating to bankruptcy, insolvency, winding-up, dissolution, administration, reorganization, arrangement or other statutes or judicial decisions affecting the enforcement of creditors' rights in general and to general principles of equity under which specific performance and injunctive relief may be refused by a court in its discretion.

    

    
        Loan Agreement no. 1 - Page 6

    

    6.5 Authorizations from Governmental Authorities and other Persons

    The Borrower has obtained all Authorizations of or from all Governmental Authorities or other Persons which are necessary or required to authorize the execution and delivery of this Agreement, the other Loan Documents and to execute its obligations hereunder and thereunder.

    6.6 Accuracy of Information

    No information furnished by the Borrower to the Lender in connection with any of the Loan Documents contains any material misstatement of fact or omits to state a material fact necessary to make the statements contained therein not misleading in light of the circumstances in which they were made and as of the date made. No undisclosed fact or liability is currently known to the Borrower which, in the Lender's reasonable discretion, has or could be expected to have a Material Adverse Effect.

    6.7 Validity of Loan Documents - Non-Conflict

    None of the authorization, execution, delivery or performance of the Loan Documents by the Borrower, nor the consummation of any of the transactions contemplated in the Loan Documents to which Borrower is a party conflicts with, contravenes or gives rise to any default under the provisions of any indenture, instrument, agreement or undertaking to which the Borrower is a party or by which the Borrower may be, or any of its Business Assets are or may become bound or any Applicable Law.

    6.8 No Material Adverse Effect

    Since March 31, 2022 (being the date of the last quarterly financial statements of the Borrower), there has been no undisclosed change and no undisclosed event has occurred which could reasonably be expected to have a Material Adverse Effect.

    6.9 No Default

    No Default has occurred which has not been disclosed to the Lender and either remedied or expressly waived by the Lender in writing.

    6.10 Taxes

    The Borrower has paid and discharged, and has caused its Material Subsidiaries to pay and discharge, all Taxes payable by it or its Material Subsidiaries when due except with respect to any such Tax which is being contested in good faith by appropriate proceedings and which is not required, by Applicable Law, to be paid prior to such contestation and for which appropriate reserves have been provided in its books and as to which neither any Lien has attached nor any foreclosure, distraint, seizure, attachment, sale or similar proceedings shall have been commenced, and the charges, accruals and reserves on its books in respect of Taxes are adequate, in its judgment.

    

    
        Loan Agreement no. 1 - Page 7

    

    ARTICLE 7

POSITIVE COVENANTS OF
THE BORROWER

    So long as the Principal at Maturity or any other amount payable hereunder is outstanding and unpaid, and unless the Lender shall otherwise consent in writing, the Borrower hereby covenants that:

    7.1 Payment of Principal, etc.

    The Borrower will pay when due any amount owed to the Lender under this Agreement or any other Loan Document in principal, interest and fees.

    7.2 Preservation of Existence, etc.

    The Borrower will preserve and maintain its existence and preserve and maintain all Authorizations and registrations necessary or required in the normal conduct of its business and qualify and remain qualified and authorized to do business in each jurisdiction in which it carries on business or owns or leases material Business Assets.

    7.3 Listing on the Exchange

    The Borrower's common shares shall remain listed on the Exchange and the Borrower shall comply in all material respects with the rules and policies of such exchange and all applicable securities laws, rules and regulations.

    7.4 Operations ran in the Normal Course of Business/Subsidiaries

    The Borrower will run its operations in the normal course of business as currently operated by the Borrower. The Borrower shall cause its Material Subsidiaries to abide by all the covenants set forth in Article 7 and Article 8 of this Agreement.

    7.5 Use of Loan

    The Borrower shall use the Loan exclusively for the purposes set out in Section 2.3.

    7.6 Authorizations

    The Borrower will maintain, and take all actions necessary to maintain, in full force and effect the action taken by it to authorize the execution, delivery and performance in accordance with their respective terms of this Agreement, of the other Loan Documents and the consummation of the transactions contemplated herein and therein. The Borrower will obtain and maintain any Authorization of or from any Governmental Authority necessary or required under Applicable Law in order to carry on its business.

    

    
        Loan Agreement no. 1 - Page 8

    

    7.7 Compliance with Applicable Law

    The Borrower will comply with Applicable Law in all material respects.

    7.8 Payment of Taxes and Claims

    The Borrower will pay and discharge all Taxes imposed upon it or upon its income, capital or profits or upon any properties belonging to it prior to the date on which penalties attach thereto, and all lawful claims for rents, labour, materials and supplies which, if unpaid, might become a Lien upon any of its properties; provided, however, that, no such Tax need be paid which is being contested in good faith by appropriate proceedings and for which appropriate reserves shall have been set aside on the appropriate books, but only so long as such Tax does not become a Lien, and no foreclosure, distraint, seizure, attachment, sale or similar proceedings shall have been commenced.

    ARTICLE 8

NEGATIVE COVENANTS OF
THE BORROWER 

    So long as the Principal at Maturity or any other amount payable hereunder is outstanding and unpaid and unless the Lender shall otherwise consent in writing, which consent shall not be unreasonably withheld, the Borrower hereby covenants that:

    8.1 Liens

    Other than any Liens existing on the Closing Date, which are listed in Schedule "B" hereto, and Liens securing Indebtedness incurred in respect of equipment financed by way of conditional sales contracts or capital lease agreements, the Borrower shall not grant or permit to exist any Lien of any kind with respect to any of the Borrower's or any of its Material Subsidiaries' Business Assets.

    8.2 Change in Business

    The Borrower will not change the nature of its business or the business of any of its Material Subsidiaries in any material respect.

    8.3 Affiliate Transactions

    The Borrower shall not (i) create any new Material Subsidiary not consistent with the Borrower's normal course of business or (ii) enter into or be a party to any transaction with any Material Subsidiary or director, officer, or employee of the Borrower or its Material Subsidiaries, except for routine employment and consulting transactions between the Borrower or its Material Subsidiaries and any of their respective directors, officers or employees regarding base salaries and customary employee benefits, consulting fees and equity incentive compensation made in the ordinary course of business.

    

    
        Loan Agreement no. 1 - Page 9

    

    ARTICLE 9

INFORMATION COVENANTS OF THE BORROWER

    So long as the Principal at Maturity or any other amount payable hereunder is outstanding and unpaid and unless the Lender shall otherwise consent in writing, the Borrower covenants and agrees that:

    9.1 Notice of Litigation and Other Matters

    The Borrower shall furnish to the Lender prompt notice of the following events after the Borrower has become aware thereof and has made a reasonable determination with respect thereto:

    9.1.1 the commencement of all litigations against the Borrower, or in any other way relating adversely to the Borrower or any of its Business Assets which, if adversely determined, singly or when aggregated with all other such litigations, could, in the Lender's reasonable discretion, have a Material Adverse Effect;

    9.1.2 any event or events which, singly or in the aggregate, could, in the Lender's reasonable discretion, reasonably be expected to have a Material Adverse Effect; and

    9.1.3 any Default or Event of Default.

    ARTICLE 10

REPRESENTATIONS AND WARRANTIES
OF THE LENDER

    The Lender hereby represents and warrants to and in favour of the Borrower as follows:

    10.1 Existence

    If the Lender is a corporation, it has been duly and validly incorporated or formed, organized, existing and in good standing under the Laws of its jurisdiction of organization.

    10.2 Authority and Enforceability

    The Lender has the legal capacity to enter into this Agreement and as applicable, the other Loan Documents.

    10.3 Due Authorization

    If the Lender is a corporation, it has taken all necessary action to authorize the execution and delivery of this Agreement and the other Loan Documents, the creation and performance of its obligations hereunder and thereunder, and the consummation of the transactions contemplated herein and therein. The Lender has duly executed and delivered this Agreement and the other Loan Documents.

    

    
        Loan Agreement no. 1 - Page 10

    

    10.4 Enforceability

    This Agreement constitutes legal, valid and binding obligations of the Lender, enforceable against it in accordance with its terms, subject only to laws relating to bankruptcy, insolvency, winding-up, dissolution, administration, reorganization, arrangement or other statutes or judicial decisions affecting the enforcement of creditors' rights in general and to general principles of equity under which specific performance and injunctive relief may be refused by a court in its discretion.

    10.5 Prospectus Exemption

    The Lender is acquiring the Bonus Shares and the Shares for Debt, if applicable, as principal pursuant to an exemption from the prospectus requirements under section 2.3(1) of NI 45-106, being an "accredited investor" as defined under paragraph (m) of such definition in NI 45-106.

    10.6 Source of Funds

    The funds representing the Loan do not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the "PCMLA") and the Lender acknowledges that the Borrower may in the future be required by law to disclose the Lender's name and other information relating to this Agreement and the Lender's Loan hereunder, on a confidential basis, pursuant to the PCMLA. To the best of the Lender's knowledge, none of the funds to be paid by the Lender: (i) have been or will be derived from or related to any activity that is deemed criminal under the laws of Canada, the United States or any other jurisdiction; or (ii) are being tendered on behalf of a person or entity who has not been identified to the Lender, and the Lender shall promptly notify the Borrower if the Lender discovers that any of such representations ceases to be true, and shall provide the Borrower with appropriate information in connection therewith.

    10.7 Counsel

    The Lender is solely responsible for obtaining such tax, investment, legal and other professional advice as it considers appropriate in connection with the execution, delivery and performance by it of this Agreement, any other Loan Document and the transactions contemplated hereunder.

    ARTICLE 11

EVENTS OF DEFAULT

    The occurrence of any one or more of the following events shall constitute an Event of Default (each such event being herein referred to as an "Event of Default"):

    11.1 Non-Payment

    The Borrower fails to pay when due (i) any amount of principal owed by it and outstanding hereunder or under any similar loan agreement or (ii) any amount of accrued interests outstanding hereunder or under any similar loan agreement, and such Default referred to in clause (ii) shall not be remedied within five (5) Business Days following written notice of such Default by the Lender to the Borrower.

    

    
        Loan Agreement no. 1 - Page 11

    

    11.2 Misrepresentation/Notice Failure

    Any representation or warranty made or deemed made by the Borrower under this Agreement or under any similar loan agreement, is found to have been, when made or deemed made, either incorrect or inaccurate in any material respect, or, Borrower fails to provide a Default Notice or a Similar Loan Default Notice as required under Section 15.1 hereunder.

    11.3 Covenants

    The Borrower fails to perform, observe or comply with any other term, covenant or agreement contained in this Agreement or in any similar loan agreement, and such failure remains unremedied for thirty (30) days following written notice of such failure by the Lender.

    11.4 Insolvency

    An Insolvency Event shall have occurred.

    11.5 Material Adverse Effect

    An event or series of events occurs that, in the Lender's reasonable discretion, results or could reasonably be expected to result in a Material Adverse Effect.

    11.6 Unsatisfied Awards

    Any one or more judgments are entered against the Borrower which judgments are not vacated, discharged, stayed or bonded pending appeal within thirty (30) days of the entry thereof or shall not have been vacated or discharged prior to the expiration of any such stay and involve a liability (not paid or fully covered by insurance) the amount of which, singly or when aggregated with all such liabilities of the Borrower exceeds CDN$1,000,000.

    11.7 Change of Control

    The Borrower is party to a Change of Control Transaction or otherwise agrees to sell or dispose of all or in excess of 33% of its Business Assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction).

    ARTICLE 12

REMEDIES

    12.1 Termination and Acceleration

    12.1.1 If an Event of Default shall have occurred and be continuing, the Lender may declare the Loan to be cancelled and accelerated (other than with respect to any Event of Default pursuant to Section 11.1 hereunder, in which case, the Principal at Maturity shall be automatically and immediately due and payable without need of any Lender action) or take any other action, commence any other suit, action or proceeding or exercise such other rights as may be permitted by Applicable Law (whether or not provided for under this Agreement) at such times and in such manner as the Lender may consider expedient, all without any additional notice, demand, presentment for payment, protest, noting of protest, dishonour, notice of dishonour or any other action being required.

    

    
        Loan Agreement no. 1 - Page 12

    

    12.1.2 If the Loan is declared cancelled and accelerated pursuant to Section 12.1.1 hereunder, the Borrower may, subject to the prior approval of the Lender, apply to the Exchange in order to repay the Principal at Maturity and any amount of accrued interests on the Loan outstanding in common shares in accordance with Policy 4.3.

    12.2 Compensation and Set-Off

    12.2.1 In addition to any rights now or hereafter granted under Applicable Law and not by way of limitation of any such rights, after the occurrence of an Event of Default, the Lender is hereby authorized by the Borrower, at any time and from time to time, without notice to the Borrower or to any other Person, any such notice being hereby expressly waived, to effect compensation, to set-off and to appropriate and to apply any and all deposits (general or special, time or demand, including Indebtedness evidenced by certificates of deposit, in each case whether matured or unmatured), and any other Indebtedness at any time held or owing by the Lender to or for the credit or the account of the Borrower against and on account of the obligations and liabilities of the Borrower to the Lender hereunder, although said obligations and liabilities, or any of them, shall be contingent or unmatured.

    12.2.2 For the purposes of the application of this Section, the Parties agree that the benefit of any term applicable to any Lender's deposit, credit indebtedness, liability or obligation referred to in this Section shall be lost immediately before the time when the Lender exercises its rights under this Section in respect of such deposit, credit indebtedness, liability or obligation of the Lender.

    12.2.3 Furthermore, in the exercise of its rights under this Section, where any Indebtedness of the Lender to the Borrower is not outstanding in the same currency as the Indebtedness of the Borrower to the Lender, then the Lender may effect all currency conversions with respect to any such Indebtedness as it considers appropriate in accordance with its normal practices by using its own rate of exchange in effect on the Business Day preceding that on which it exercised its rights under this Section.

    

    
        Loan Agreement no. 1 - Page 13

    

    ARTICLE 13

TAXES AND OTHER CHARGES

    13.1 No Payment of Additional Amounts

    To the best of the knowledge of the Parties, as of the date of this Agreement, the Borrower is not required by Law to make any deduction or withholding in respect of any Taxes imposed on the Lender from any amount payable under this Agreement (the "Withholding Taxes"). However, if the Borrower, after the date hereof, becomes aware of circumstances giving rise to Withholding Taxes (including pursuant to a change in Law), then the Borrower shall inform the Lender in writing of the reasons giving rise to such Withholding Taxes and remit to the relevant Governmental Authority such Withholding Taxes. To the extent the Borrower deducts or retains any amount otherwise due and payable hereunder to the Lender to cover any Withholding Taxes, such amount shall be increased so that the Lender receives an amount equal to the total amount the Lender would have received had no amount been deducted or retained by the Borrower for such Withholding Taxes.

    ARTICLE 14

PARTICIPATION RIGHT AND AGREEMENT TO LOCK-UP

    14.1 Participation right

    14.1.1 The Lender shall have the right to participate in any Subsequent Financing, on the same terms and at the same price per security as the investors in the Subsequent Financing, by purchasing up to such number of securities to be issued in such Subsequent Financing representing a hundred percent (100%) of the aggregate amount of the Principal at Maturity.

    14.1.2 The Borrower shall provide at least five (5) days' notice to the Lender prior to the initial closing of the Subsequent Financing.

    14.2 Agreement to Lock-Up 

    14.2.1 The Lender hereby agrees that it will not, without the prior written consent of the Borrower, during the period commencing on the date of the closing of the Qualified Offering and ending ninety (90) days thereafter: (a) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any Bonus Shares or any Shares for Debt held immediately prior to the closing of the Qualified Offering; or (b) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of  such securities.

    

    
        Loan Agreement no. 1 - Page 14

    

    14.2.2 The Lender further agrees to execute such agreements as may be reasonably requested by the Borrower that are consistent with this Section 14.2 or that are necessary to give further effect thereto.

    ARTICLE 15

MISCELLANEOUS

    15.1 Seniority

    The indebtedness evidenced by this Loan Agreement and the payment of the principal, interest, fees, penalties or other amounts due or payable hereunder shall be Senior to, and have priority in right of payment over, all indebtedness of the Borrower, now outstanding or hereinafter incurred. "Senior" as used herein shall be deemed to mean that, in the event of any default in the payment of the obligations represented by this Loan Agreement (after giving effect to "cure" provisions, if any) or of any liquidation, insolvency, bankruptcy, reorganization, or similar proceedings relating to the Borrower, all sums payable on this Loan Agreement shall first be paid in full, with interest, if any, before any payment is made upon any other indebtedness, now outstanding or hereinafter incurred, and, in any such event, any payment or distribution of any character which shall be made in respect of any other indebtedness of the Borrower, shall be paid over to the Lender for application to the payment hereof, unless and until the obligations under this Loan Agreement (which shall mean the Principal at Maturity and other obligations arising out of, premium, if any, interest on, and any costs and expenses payable under, this Loan Agreement) shall have been paid and satisfied in full.

    15.2 Notices

    Except as otherwise specified herein, all notices, requests, demands or other communications to or upon the respective Parties shall be deemed to have been duly given or made to the Party to which such notice, request, demand or other communication is required or permitted to be given or made under this Agreement, when delivered to such Party (by certified mail, postage prepaid, hand delivered, telecopier, email or other acceptable form of electronic communication) at its address and attention set forth with its signature below or at such other address as any of the Parties may hereafter notify the others in writing. The Borrower shall be required to provide written notice to Lender of any default under this Agreement (a "Default Notice") or with respect to any similar loan agreement (a "Similar Loan Default Notice") within five (5) days of the occurrence of such default. This Agreement and any other Loan Document may not be amended or otherwise modified without the prior written consent of the Lender.

    15.3 Rights and Recourses Cumulative

    The rights and remedies of the Parties under this Agreement shall be cumulative and not exclusive of any right or remedy which the Parties would otherwise have and no failure or delay by the Parties in exercising any right shall operate as a waiver thereof, nor shall any single or partial exercise of any power or right preclude its other or further exercise or the exercise of any other power or right.

    

    
        Loan Agreement no. 1 - Page 15

    

    15.4 Assignments by the Borrower

    The rights of the Borrower hereunder are declared to be purely personal and may therefore not be assigned or transferred, nor can the Borrower assign or transfer any of its obligations, any such assignment being null and void insofar as the Lender is concerned and rendering any balance then outstanding of the Principal at Maturity immediately due and payable at the option of the Lender.

    15.5 Assignment by the Lender

    The Lender may at any time assign all or any portion of the Loan with the prior written consent of the Borrower, which shall not be unreasonably withheld.

    15.6 Counterparts

    This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such separate counterparts shall together constitute but one and the same instrument.

    15.7 Severability

    Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in that jurisdiction or affecting the validity or enforceability of such provision in any other jurisdiction.

    15.8 Replacement of Previous Agreements

    This Agreement replaces and supersedes all verbal or oral agreements, understandings and undertakings between the Lender and the Borrower relating to the Loan.

    15.9 Obligation to Pay Absolute

    The obligations of the Borrower to make payments on the Principal at Maturity as and when due in accordance with this Agreement shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of this Agreement under all circumstances without any right of compensation or set-off and notwithstanding any defence, right of action or claim of any nature whatsoever which the Borrower may at any time have or have had against the Lender, whether in connection with this Agreement or otherwise.

    15.10 Usury Laws

    15.10.1 To the extent it may lawfully do so, the Borrower hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury Laws wherever enacted, now or at any time hereafter in force, in connection with any action or proceeding that may be brought by the Lender in order to enforce any right or remedy under this Agreement or any other Loan Document.

    

    
        Loan Agreement no. 1 - Page 16

    

    15.10.2 Notwithstanding any provision to the contrary contained in any Loan Document, it is expressly agreed and provided that the total liability of the Borrower under the Loan Documents for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable Law (the "Maximum Rate"), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Borrower may be obligated to pay under the Loan Documents exceed such Maximum Rate.

    15.10.3 It is agreed that if the maximum contract rate of interest allowed by Law and applicable to the Loan Documents is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate applicable to the Loan Documents from the effective date thereof forward, unless such application is precluded by Applicable Law.

    15.10.4 If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Borrower to the Lender with respect to the Loan, or the Lender otherwise collects moneys that are determined to constitute interest that would otherwise increase the interest on the Loan to an amount in excess of the Maximum Rate, such excess shall be applied by the Lender to the unpaid Principal at or be refunded to the Borrower, the manner of handling such excess to be at the Lender's election.

    15.11 Governing Law

    This Agreement and the interpretation and enforcement thereof shall be governed by and in accordance with the Laws of the Province of Ontario and the federal Laws of Canada applicable therein.

    [Signature pages to follow]

    

    
        Loan Agreement - Signature Page

    

    IN WITNESS WHEREOF, the Parties hereto have signed this Agreement on the date and in the place first herein above mentioned.

     

    	 	KWESST MICRO SYSTEMS INC.,
as Borrower 
	 	 
	Per:	 
	 	
 
	Address:	                                                       
                               
	 	 
	Attention:	Steve Archambault, Chief Financial Officer
	 	 
	Email:	                                             

    

    

    
        Loan Agreement - Signature Page

    

    

    	 	 
	 	[***]
as Lender 
	 	 
	Per:	 
	 	[***]

	Number of KWESST common
shares currently held  required
under TSX Venture Exchange rules

	
 
	 	 
	 	 
	Address:	 
	 	 
	 	 
	 	 
	 	 
	 	 
	Attention:	 
	 	 
	Telephone:	 
	 	 
	Email:	 

    

    

    SCHEDULE "A"

DEFINITIONS

    "Affiliate" has the meaning ascribed to it from time to time in the Business Corporations Act (British Columbia);

    "Applicable Law" means, with respect to any Person, any Law applicable to such Person or its properties or assets and any judgment or award binding on such Person or its properties or assets;

    "Authorization" means any authorization, approval, consent, exemption, licence, permit, franchise or no-action letter from any Governmental Authority having jurisdiction with respect to any specified Person, property, transaction or event, or with respect to any of such Person's properties or assets;

    "Bonus Shares" has the meaning ascribed thereto in Section 3.5;

    "Borrower" refers to KWESST Micro Systems Inc. and includes any successor thereto;

    "Business Assets" means the property and assets, tangible and intangible, corporeal and incorporeal, movable and immovable, of a specified Person;

    "Business Day" means any day excluding Saturday, Sunday or any other day which in Ottawa, Ontario is a legal holiday or a day on which banks are authorized by law or by local proclamation to close; provided for the avoidance of doubt that no such banks shall be considered to be authorized by law or by local proclamation to close as a result of "stay at home", "shelter-in-place", "non-essential employee" or other similar orders or restrictions or the closure of any physical branch locations at the direction of any Governmental Authority so long as the electronic funds transfer systems (including for wire transfers) of commercial banks in Ottawa, Ontario are generally open for use by customers on such day.

    "Call Option Agreements" means that certain Call Option Agreement No. 1 and Call Option Agreement No. 2, each of which are between the Lender and certain insiders (as such term is defined in Policy 1.1) of the Borrower providing for two call options, each for a period of sixty (60) months from the Closing Date, to purchase a certain number of common shares of the Borrower the insiders currently own, the whole in accordance with the terms and conditions set forth therein.

    "Capital Stock" means common shares, preferred shares or other equivalent equity interests (howsoever designated) of capital stock of a body corporate, equity preferred or common interests in a limited liability company, limited or general partnership interests in a partnership or any other equivalent such ownership interest;

    "Change of Control Transaction" means the occurrence after the Closing Date of any of (a) an acquisition after the date hereof by any Person of effective control (whether through legal or beneficial ownership of share capital of the Borrower, by contract or otherwise) of in excess of 50% of the voting securities of the Borrower, (b) the Borrower merges into or consolidates with any other Person, or any Person merges into or consolidates with the Borrower and, after giving effect to such transaction, the shareholders of the Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the Borrower or the successor entity of such transaction, (c) the Borrower (and all of its subsidiaries, taken as a whole) sells or transfers all or substantially all of its Business Assets to another Person and the shareholders of the Borrower immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after the transaction, or (d) the execution by the Borrower of an agreement to which the Borrower is a party or by which it is bound, providing for any of the events set forth in clauses (a) through (c) above.

    
        A - 1

    

    

    "Closing Date" has the meaning ascribed thereto in Section 5.1;

    "Concurrent Loan Agreement" means the loan agreement between the Borrower and the Lender for an amount of USD $200,000.00 to be entered into concurrently with this Agreement;

    "Control" has the meaning ascribed to it from time to time in the Business Corporations Act (British Columbia), and "Controls" and "Controlled" shall have the correlative meanings;

    "Default" means any Event of Default or any default, breach, failure, event, state or condition which, unless remedied or waived, with the lapse of time or giving of notice, or both, would constitute an Event of Default;

    "Distribution", with respect to any Person, means the payment or declaration of any dividend or the making of any distribution of any kind or character (whether in cash or property but expressly excluding any such distribution by way of the payment of dividends by the issuance of Capital Stock) in respect of any class of the Capital Stock of such Person or to the holders of any class of its Capital Stock;

    "Event of Default" means any of the events described in Article 11;

    "Exchange" means the TSX Venture Exchange;

    "Governmental Authority" means Canada, the Provinces thereof, any other sovereign country and any other regional, municipal, state, provincial, local or other subdivision of any jurisdiction, and any other governmental entity of any such jurisdiction and includes any agency, department, commission, office, régie, ministry, tribunal, central bank or other Person exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government;

    "Indebtedness" of any Person means: (a) all obligations of such Person, contingent or otherwise for borrowed money, including obligations for borrowed money evidenced by bonds, debentures, notes or similar instruments, (b) all obligations of such Person, contingent or otherwise, relative to the face amount of all letters of credit, whether or not drawn, and banker's acceptances issued for the account of such Person, (c) all capitalized lease liabilities and purchase money obligations of such Person, (d) net hedging obligations of such Person, (e) all obligations of such Person to pay the deferred purchase price of property or services to the extent such obligations bear interest (excluding trade accounts payable in the ordinary course of business), and (f) all contingent liabilities of such Person in respect of any of the foregoing;

    
        A - 2

    

    

    "Interest Payment Date" has the meaning ascribed thereto in Section 3.4;

    "Insolvency Event" means the occurrence of any of the following events:

    1. the Borrower applies for, consents to, or acquiesces in the appointment of a receiver, receiver and manager, statutory manager, trustee or similar official for all or substantially all of its assets; or

    2. the Borrower is declared to be insolvent in a final judgment or admits in writing that it is unable to pay its debts generally when they fall due; or

    3. the Borrower takes any steps to obtain or is granted protection from its creditors, under any Applicable Law; or

    4. (a) the commencement of an involuntary proceeding against the Borrower (i) seeking bankruptcy, liquidation, reorganization, dissolution, winding up, a composition or arrangement with creditors, a readjustment of debts, or other relief with respect to it or its debts under any bankruptcy laws or other customary insolvency actions or (ii) seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any substantial part of its assets, the issuance of a writ of attachment, execution, or similar process, or like relief, and such involuntary proceeding shall remain undismissed and unstayed for a period of 30 days, (b) an order for relief is entered against the Borrower under the Bankruptcy and Insolvency Act (Canada), the Companies' Creditors Arrangement Act (Canada) or any other present or future federal bankruptcy or insolvency Laws of Canada, (c) filing by the Borrower of an answer admitting the material allegations of a petition filed against it in any involuntary proceeding commenced against it, or (d) consent by the Borrower to any relief referred to in this paragraph or to the appointment of or taking possession by any such official in any involuntary proceeding commenced against it; or

    5. anything analogous or having a substantially similar effect to any of the events specified above happens under the Law of any applicable jurisdiction, including, without limitation, the Borrower taking steps towards filing any plan of arrangement proceeding seeking to restructure its Indebtedness;

    "Law" means any international treaty or any federal, provincial, territorial, state, municipal, county or local statute, law, ordinance, code, rule, regulation or order (including any consent, decree or administrative order) or any directive, guideline or policy of any Governmental Authority;

    "Lender" means [***], and shall include its successors and assigns;

    "Lien" means any interest in property securing an obligation owed to, or a claim by, a Person other than the owner (which for the purposes hereof shall include a possessor under a title retention agreement and a lessee under a capital lease) including by way of mortgage, pledge, charge, lien, assignment by way of security, hypothecation, security interest, conditional sale agreement, deposit arrangement, deemed trust, title retention, capital lease, factoring or securitization arrangement;

    
        A - 3

    

    

    "Loan" means, as at any time, the aggregate principal amount which the Lender has agreed to make available to the Borrower pursuant to Section 2.1, any and all interest accruing and owing hereunder and all other moneys which from time to time may be owing and payable to Lender hereunder;

    "Loan Documents" refers collectively to this Agreement, the certificates representing the Bonus Shares and the Shares for Debt, if applicable, the Concurrent Loan Agreement, the Call Option Agreements, and each other document, instrument or agreement entered into by or between the Borrower and the Lender in connection with the transactions contemplated herein or therein or which is supplemental hereto or thereto, and "Loan Document" refers to any one thereof;

    "Market Price" has the meaning set forth in Policy 1.1;

    "Material Subsidiary(ies)" means any Person (i) of which the Borrower, directly or indirectly, owns 50% or more of the equity securities of any kind in such Person, and (ii) the book value of the assets of such Person represents more than 50% of the total book value of the Borrower's consolidated assets;

    "Material Adverse Effect" means any undisclosed fact to the Lender which could have a material adverse effect upon (i) the business, financial condition, operations or properties of the Borrower, taken as a whole on an unconsolidated basis, (ii) the rights and remedies of the Lender under this Agreement or the other Loan Documents, or (iii) the ability of the Borrower to perform its obligations under this Agreement;

    "Maturity Date" has the meaning ascribed thereto in Section 2.4;

    "NI 45-106" means National Instrument 45-106 - Prospectus Exemptions;

    "Parties" refers collectively to the Borrower and the Lender, and "Party" refers to any one of them individually;

    "Person" means any individual, corporation, company, limited liability company, estate, limited or general partnership, trust, joint venture, other legal entity, unincorporated association or Governmental Authority;

    "Policy 1.1" means Policy 1.1 - Interpretation of the Corporate Finance Manual of the Exchange;

    "Policy 4.3" means Policy 40.3 - Shares for Debt of the Corporate Finance Manual of the Exchange;

    "Principal at Maturity" means USD $220,000.00;

    "Qualified Offering" means an equity offering which lists the Borrower's common shares onto the Nasdaq or the NYSE American exchanges;

    "Repayment Notice" means the notice to be sent to the Lender by the Borrower under Section 2.5;

    
        A - 4

    

    

    "Shares for Debt" means any common shares issued pursuant to Section 12.1.2 and in accordance with Policy 4.3;

    "Subsequent Financing" means any subsequent equity financing prior to the Qualified Offering;

    "Subsidiary(ies)" of any Person means any Person (i) which is Controlled, directly or indirectly by such first Person or (ii) a majority of whose voting Capital Stock, on a fully diluted basis, is owned directly or indirectly, beneficially or otherwise, by such first Person. A Person shall be deemed to be a Subsidiary of another Person if it is a Subsidiary of a Person that is that other's Subsidiary;

    "Taxes" means all taxes of any kind or nature whatsoever including federal large corporation taxes, provincial capital taxes, realty taxes (including utility charges which are collectible like realty taxes), business taxes, property transfer taxes, income taxes, sales taxes, levies, stamp taxes, royalties, duties, and all fees, deductions, compulsory loans and withholdings imposed, levied, collected, withheld or assessed as of the Closing Date or at any time in the future, by any Governmental Authority having power to tax, together with penalties, fines, additions to tax and interest thereon, and "Tax" shall have a correlative meaning;

    "United States Dollars" or "USD$" means the lawful currency of the United States;

    "Withholding Taxes" has the meaning scribed thereto in Section 13.1.

    
        A - 5

    

    

    SCHEDULE "B"

EXISTING LIENS

     

    [***]

    
        B - 1Exhibit 10.2

 

AMENDED AND RESTATED REVOLVING LOAN AND SECURITY
AGREEMENT

 

SNAIL GAMES USA INC.,

a California corporation

 

and

 

CATHAY BANK,

a California banking corporation

 

Dated as of June 17, 2021

 

     

     

    

 

THIS AMENDED AND RESTATED REVOLVING LOAN AND
SECURITY AGREEMENT (“Agreement”) is entered into as of June 17, 2021, by and among SNAIL GAMES USA INC., a
California corporation (“Borrower”) , on the one hand, and CATHAY BANK, a California banking corporation (“Lender”),
on the other hand. This Agreement amends, restates, replaces and supercedes in its entirety that certain Loan and Security Agreement
dated December 26, 2018, as amended from time to time.

 

	1.	DEFINITIONS AND INTERPRETATIONS.

 

1.1       Definitions.
As used in this Agreement, the following terms have the meanings set forth below. Capitalized terms not defined herein shall have
the meanings set forth in the Code, as defined below.

 

“Account” has the meaning set
forth in Section 9102(a)(2) of the Code.

 

“Account Debtor” means a Person
obligated on an Account, chattel paper or General Intangibles.

 

“Advance” shall mean each advance,
loan and financial accommodation from Lender to Borrower, whether now existing or hereafter arising and however evidenced, including
those advances, loans and financial accommodations described herein or described on any exhibit or schedule attached to this Agreement
from time to time.

 

“Affiliate” means, with respect
to any Person, a relative, partner, shareholder, director, officer, or employee of such Person, or any Parent or subsidiary of such Person,
or any Person controlling, controlled by or under common control with such Person.

 

“Agreement” means this Loan
and Security Agreement as amended, modified or supplemented from time to time. Each reference herein to “this Agreement ,”
 “this Loan Agreement” “herein,” “hereunder,” “hereof’ or other like words shall include
this Agreement, and any annex, exhibit or schedule attached hereto or referred to herein.

 

“Anti-Money Laundering Laws”
shall mean the USA Patriot Act of 2001, the Bank Secrecy Act, as amended through the date hereof, Executive Order 1 3324-Blocking Property
and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism, as amended through the date hereof, and
other federal laws and regulations and executive orders administered by OFAC which prohibit, among other things, the engagement in transactions
with, and the provision of services to, certain foreign countries, territories, entities and individuals (such individuals include specially
designated nationals, specially designated narcotics traffickers and other parties subject to OFAC sanction and embargo programs), and
such additional laws and programs administered by OFAC which prohibit dealing with individuals or entities in certain countries regardless
of whether such individuals or entities appear on any of the OFAC lists.

 

“Assignment of Deposit” shall
mean that certain that certain Security Agreement (Assignment of Deposit Account) dated June -_, 2021.

 

“Borrower’s Operating Account”
means Borrower’s demand deposit account with Lender, into which substantially all of Borrower receipts from its operations are
deposited and from which substantially all of Borrower disbursements for its operations are made.

 

     

     

    

 

“Borrowing Base” shall mean
an amount equal to $5,000,000.00 plus eighty percent (80%) of the balance due on Eligible Accounts Receivable . After calculating the
Borrowing Base as provided above, Lender may deduct such reserves as Lender may establish from time to time in its reasonable credit
judgment, including, without limitation, reserves for rent at leased locations subject to statutory or contractual landlord’s liens,
inventory shrinkage, dilution, customs charges, warehousemen’s or bailees’ charges, and the amount of estimated maximum exposure,
as determined by Lender from time to time, under any interest rate contracts which Borrower enters into with Lender (including interest
rate swaps, caps, floors, options thereon, combinations thereof, or similar contracts).

 

“Borrowing Base Certificate”
means a Borrowing Base Certificate substantially in the form of Exhibit “B” attached hereto.

 

“Borrowing Base Supporting Documentation”
has the meaning set forth in Section 9.3(a) of this Agreement.

 

“Business Day” means any day
that is not a Saturday, Sunday, or other day on which California banks are authorized or required to close.

 

“Change of Control” shall be
deemed to have occurred at such time as a “person” or “group” (within the meaning of Sections 13(d) and 14(d)(2)
of the Securities Exchange Act of 1934) (other than the current holders of the ownership interests in Borrower) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or indirectly, as a result of any single
transaction, of fifty percent (50%) or more, of the total voting power of all classes of stock or other ownership interests then outstanding
of any Borrower normally entitled to vote in the election of directors or analogous governing body.

 

“Closing Date” means the date
that all conditions precedent under Section 6.1 of this Agreement are satisfied.

 

“Code” means the Uniform Commercial
Code as adopted and in effect in the State of California, from time to time.

 

“Collateral” shall mean all
real and personal property of Borrower, or others, in which Lender has been and may hereafter be granted a lien, assignment or security
interest to secure payment and performance of Borrower’s obligation under the Loan.

 

“Contract Rate” shall have
the meaning set forth in Section 3.1 hereof .

 

“Current Liabilities” shall
mean at any date the current liabilities of Borrower determined as of such date in accordance with GAAP.

 

“Debt Service Coverage Ratio”
shall mean the ratio of (i) Borrower’s EBITDA, divided by (ii) the aggregate of all interests and the scheduled payments of principal
and interest payable by Borrower to Lender under the Note, and all other scheduled payments of principal and interest payable by Borrower
to Lender under any other notes.

 

“Default” means any event which,
with notice or passage of time or both, would constitute an Event of Default.

 

“Default Rate” shall have the
meaning set forth in Section 3.3 hereof.

 

“Deposit Account” means any
deposit account (as defined in the Code) now or hereafter maintained by or for the benefit of Borrower, and all amounts therein, whether
or not restricted or designated for a particular purpose, that has been pledged as collateral for any Obligation under this Agreement.

 

    3

     

    

 

“Dollars or $” means United
States dollars.

 

“EBITDA” means net income before
tax, plus interest expense (net of capitalized income expense), depreciation expense and amortization expense.

 

“Eligible Accounts Receivable”
means Accounts arising in the ordinary course of Borrower’s business from the sale of goods or rendition of services, which Lender,
in its sole judgment exercised in good faith, shall deem eligible for borrowing, based on such considerations as Lender may from time
to time deem appropriate. Eligible Accounts Receivable shall not include the following:

 

(a)       Accounts
with respect to which the Account Debtor is an employee, Affiliate, or agent of Borrower including, without limitation, SOE, Inc. and
Suzhou Snail Digital Technology Co.;

 

(b)       Accounts
with respect to which goods are placed on (i) consignment, (ii) guaranteed sale, (iii) sale or return, (iv) sale on approval, (v) bill
and hold, (vi) demonstration or promotion, (vii) credit memos or (viii) other terms by reason of which the payment by the Account Debtor
may be conditional;

 

(c)       [Reserved];

 

(d)       Accounts
with respect to which the Account Debtor is the United States or any department, agency, or instrumentality of the United States;

 

(e)       Accounts
with respect to which the Account Debtor is a creditor of Borrower, has or has asserted a right of setoff, has disputed its liability,
or has made any claim with respect to the Accounts;

 

(f)       Accounts
with respect to which the Account Debtor is subject to any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation proceeding , or becomes insolvent, or goes out of business, or has had a trustee or receiver appointed for
any part of its property, has made an assignment for the benefit of creditors, or has failed generally to pay its debts (including its
payroll) as such debts become due;

 

(g)       Accounts
the collection of which Lender, in its sole discretion, believes to be doubtful by reason of the Account Debtor’s financial condition
or which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor to be unsatisfactory;

 

(h)       Accounts
with respect to which the goods giving rise to such Account have not been shipped and billed to the Account Debtor, the services giving
rise to such Account have not been performed and accepted by the Account Debtor, or the Account otherwise does not represent a final
sale;

 

    4

     

    

 

(i)       Accounts
designated by Borrower with the term, “unapplied credits” (i.e. payments received but not yet applied to a specific Account);

 

(j)       Accounts
which arise from the sale of goods which remain in the Borrower’s possession or under the Borrower’s control;

 

(k)       Accounts
which are evidenced by a promissory note or chattel paper;

 

(I)       Accounts
that represent progress payments or other advance billings that are due prior to the completion of performance by Borrower of the subject
contract for goods or services;

 

(m)       Accounts
which have not been paid in full within one hundred twenty (120) days from the invoice date, or within sixty (60) days from the original
due date thereof or within sixty (60) days from the original due date there remains a balance of more than fifty percent (50%) of the
amount due.

 

(n)       Accounts
that do not arise from the sale of goods or performance of services by Borrower in the ordinary course of its business;

 

(o)       Accounts
that (i) are not owned by Borrower or (ii) are subject to any lien of any other person, other than Lender;

 

(p)       That
portion of the Accounts of any single Account Debtor which exceeds twenty percent (20%) of all of Borrower’s Accounts , provided
that such percentage shall be increased to one hundred percent (100%) for Valve, Microsoft and Sony;

 

(q)       Accounts
that the amount thereof is not yet represented by an invoice or bill issued in the name of the applicable Account Debtor;

 

(r)       Accounts
not covered by credit insurance acceptable to Lender naming Lender as loss payee;

 

(s)       Contra-Accounts
(that is, an Account payable to and receivable from the same payee-payor;)and

 

(t)       Cash-on-delivery
Accounts.

 

“Environmental Indemnity” shall
mean that certain Hazardous Substances Indemnity Agreement duly executed by Borrower, as it may from time to time be supplemented, modified
or amended, pursuant to which such parties shall indemnify and defend Lender from and against any loss or liability, direct or indirect,
with respect to the presence or release of any hazardous or toxic material in, on, about or under the Property.

 

“Environmental Laws” shall
mean all federal, state and local environmental land use, zoning, health, chemical use, safety and sanitation laws, statutes, ordinances
and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing,
handling, production or disposal of Hazardous Substances and the rules, regulations, policies, guidelines, interpretations, decisions,
orders and directives of federal, state and local governmental agencies and authorities with respect thereto.

 

    5

     

    

 

“Equipment” has the meaning
set forth in Section 9102(a)(33) of the Code and includes, without limitation, all of Borrower’s furniture, fixtures, trade fixtures,
tenant improvements owned by Borrower, all attachments, accessories, accessions, replacements, substitutions, additions or improvements
to any of the foregoing, wherever located .

 

“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended from time to time, or any successor statute, and any and all regulations thereunder.

 

“Event of Default” means any
of the events set forth in Section 10.1 of this Agreement.

 

“Fees and Costs” has the meaning
set forth in Section 11.12 of this Agreement.

 

“GAAP” means generally accepted
accounting principles as in effect from time to time in the United States, applied on a consistent basis, applied both to classification
of items and amounts.

 

“General Intangibles” has the
meaning set forth in Section 9102(a)(42) of the Code and shall include, without limitation, payment intangibles, all choses in action,
causes of action, corporate or other business records, inventions, designs, drawings, blueprints, patents, patent applications, trademarks
and the goodwill of the business symbolized thereby, names, trade names, trade secrets, goodwill, copyrights, registrations , licenses,
franchises, customer lists, security and other deposits, rights in all litigation presently or hereafter pending for any cause or claim
(whether in contract, tort or otherwise), and all judgments now or hereafter arising therefrom, all claims of Borrower against Lender,
rights to purchase or sell real or personal property, rights as a licensor or licensee of any kind, royalties, telephone numbers, proprietary
information , purchase orders, and all insurance policies and claims (including without limitation, life insurance, key man insurance,
credit insurance, liability insurance, property insurance and other insurance), tax refunds and claims, software, discs, tapes and tape
files, claims under guaranties, security interests or other security held by or granted to Borrower, all rights to indemnification and
all other intangible property of every kind and nature (other than Receivables).

 

“Goods” has the meaning set
forth in section 9102(a)(44) of the Code.

 

“Hazardous Substance” shall
mean, without limitation , any flammable explosives, radon, radioactive materials, asbestos, urea formaldehyde foam insulation, polychlorinated
biphenyls, petroleum and petroleum products, methane, hazardous materials, Hazardous Wastes, hazardous or Toxic Substances or related
materials as defined in CERCLA, the Hazardous Materials Transportation Act, as amended (49 U.S.C. Sections 1801, et seq.), RCRA,
or any other applicable Environmental Law and in the regulations adopted pursuant thereto.

 

“Hazardous Wastes” shall mean
all waste materials subject to regulation under CERCLA, RCRA or applicable state law, and any other applicable Federal and state laws
now in force or hereafter enacted relating to hazardous waste disposal.

 

“Indemnified Person” has the
meaning set forth in Section 10.4(c) of this Agreement.

 

    6

     

    

 

“Inventory” means all of Borrower’s
now owned and hereafter acquired goods, including software embedded in such goods, merchandise or other personal property, wherever located,
to be furnished under any contract of service or held for sale or lease (including without limitation all raw materials, work in process,
finished goods and goods in transit, and, including without limitation, all farm products), and all materials and supplies of every kind,
nature and description which are or might be used or consumed in Borrower’s business or used in connection with the manufacture,
packing, shipping, advertising, selling or finishing of such goods, merchandise or other personal property, and all warehouse receipts,
documents of title and other documents representing any of the foregoing.

 

“Loan Account” has the meaning
set forth in Section 2.4.

 

“Material Adverse Effect” means
a material adverse effect on (i) the business, assets, condition (financial or otherwise) or results of operations of Borrower or any
subsidiary of Borrower, (ii) the ability of Borrower to duly and punctually pay o’ r perform its obligations under this Agreement
(including, without limitation, repayment of the Obligations as they come due), (iii) the value of the Collateral, or Lender’s
liens on the Collateral or the privity of any such lien, or (iv) the validity or enforceability of this Agreement or any other agreement
or document entered into by any party in connection herewith, or the practical realization of the benefits of Lender’s rights or
remedies.

 

“Material Litigation” shall
have the meaning set forth in Section 7.10 hereof.

 

“Maturity Date” means December
31, 2023.

 

“Maximum Advance Amount” shall
mean $9,000,000.00, subject to Section 2.1 hereof.

 

“Note” shall mean the promissory
note issued by Borrower to Lender, which shall be in the form of Exhibit “A” attached hereto.

 

“Obligations” means all present
and future Advances, loans, overdrafts, debts, liabilities, obligations, including, without limitation, all obligations of Borrower under
any guaranties, covenants, duties and indebtedness at any time owing by Borrower to Lender, whether evidenced by this Agreement or any
note or other instrument or document or the Other Documents, whether arising from an extension of credit, opening of a letter of credit,
banker’s acceptance, trust receipt, loan, overdraft, guaranty, indemnification or otherwise, whether direct or indirect (including,
without limitation, those acquired by assignment and any participation by Lender in Borrower’s debts owing to others), absolute
or contingent, due or to become due, including, without limitation, all interest, charges, expenses, fees, attorneys’ fees (including
attorneys’ fees and expenses incurred in bankruptcy), expert witness fees and expenses , fees and expenses of consultants, audit
fees, letter of credit fees, closing fees, facility fees, termination fees, and any other sums chargeable to Borrower under this Agreement
or the Other Documents.

 

“OFAC” shall mean the United
States Department of the Treasury, Office of Foreign Assets Control.

 

“OFAC Prohibited Person” shall
mean a country, territory, individual or person (i) listed on, included within or associated with any of the countries, territories,
individuals or entities referred to on The Office of Foreign Assets Control’s List of Specially Designated Nationals and Blocked
Persons or any other prohibited person lists maintained by governmental authorities, or otherwise included within or associated with
any of the countries, territories, individuals or entities referred to in or prohibited by OFAC or any other Anti-Money Laundering Laws,
or (ii) which is obligated or has any interest to pay, donate, transfer or otherwise assign any property, money, goods, services, or
other benefits from the property directly or indirectly, to any countries, territories, individuals or entities on or associated with
anyone on such list or in such laws.

 

    7

     

    

 

“Official Body” means any government
or political subdivision or any agency, authority, bureau, commission, court or tribunal whether foreign or domestic.

 

“Other Documents” shall mean
the Notes and all other agreements, instruments and documents now or hereafter executed by Borrower and delivered to Lender in respect
of the transactions contemplated by this Agreement.

 

“Overadvance” has the meaning
set forth in Section 4.1.

 

“Parent” means any Person holding
a majority of the equity interest in a corporation or limited liability company.

 

“Permitted Encumbrances” shall
mean only those matters and exceptions to title to the Property, as shown in the preliminary report of title and all supplements thereto,
issued by the Title Company, and approved by Lender, in regard to the Property.

 

“Permitted Liens” means all
of the following:

 

(a)       liens
in favor of Lender;

 

(b)       purchase
money security interests in specific items of Equipment;

 

(c)       leases
of specific items of Equipment;

 

(d)       liens
for taxes not yet payable;

 

(e)       security
interests being terminated substantially concurrently with this Agreement; and

 

(f)       liens
of materialmen, mechanics, warehousemen, carriers, or other similar liens arising in the ordinary course of business and securing obligations
which are not delinquent.

 

“Person” means any individual,
sole proprietorship, general partnership, limited partnership, limited liability partnership, limited liability company, joint venture,
trust, unincorporated organization, association, corporation, government, or any agency or political division thereof, or any other entity.

 

“Potential Default” means any
event, act or condition which, with notice or lapse of time or both, would constitute an Event of Default.

 

“Prime Rate” means an interest
rate which is subject to change from time to time based on changes in an independent index, which is the Wall Street Journal Prime Rate
(the “Index “). The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable
during the term of this Agreement, Lender may designate a substitute index after notifying Borrower. The interest rate change will not
occur more often than each day. Borrower understands that Lender may make loans based on other rates as well. NOTICE: Under no circumstances
will the effective rate of interest on any Advance be more than the maximum rate allowed by applicable law.

 

    8

     

    

 

“RCRA” shall mean the Resource
Conservation and Recovery Act, 42 U.S.C. §§ 6901 et seq., as same may be amended from time to time.

 

“Receivables” means all of
Borrower’s now owned and hereafter acquired Accounts, letter of credit rights, license fees, contract rights, chattel paper (including
tangible chattel paper, electronic chattel paper, and intangible chattel paper), instruments (including promissory notes), drafts, securities,
documents, securities accounts, security entitlements, commodity contracts, commodity accounts, Investment Property, supporting obligations
and all other forms of obligations at any time owing to Borrower, all guaranties and other security therefor, all merchandise returned
to or repossessed by Borrower, and all rights of stoppage in transit and all other rights or remedies of an unpaid vendor, lienor or
secured party.

 

“Revolving Line of Credit”
shall mean the revolving credit facility described in Section 2.1 hereof.

 

“Solvent” means, with respect
to any Person on a particular date, that on such date (a) at fair valuations, all of the properties and assets of such Person are greater
than the sum of the debts, including contingent liabilities, of such Person, (b) the present fair salable value of the properties and
assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as
they become absolute and matured, (c) such Person is able to realize upon its properties and assets and pay its debts and other liabilities,
contingent obligations and other commitments as they mature in the normal course of business, (d) such Person does not intend to, and
does not believe that it will, incur debts beyond such Person’s ability to pay as such debts mature, and (e) such Person is not
engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s properties
and assets would constitute unreasonably small capital after giving due consideration to the prevailing practices in the industry in
which such Person is engaged. In computing the amount of contingent liabilities at any time, it is intended that such liabilities will
be computed at the amount that, in light of all the facts and circumstances existing at such time, represents the amount that reasonably
can be expected to become an actual or matured liability.

 

“Subordinated Liabilities”
means liabilities subordinated to the Borrower’s obligations to Lender in a manner acceptable to Lender, in its sole discretion.

 

“Subsidiary” of a Person means
a corporation, partnership, joint venture, limited liability company or other business entity of which a majority of the shares of securities
or other interests having ordinary voting power for the election of directors or other governing (other than securities or interest having
such power only by reason of the happening of a contingency) are at the time beneficially owned, or the management of which is otherwise
controlled, directly, or indirectly through one or more intermediaries, or both, by such Person.

 

“Supporting Obligations” has
the meaning set forth in Section 9102(77) of the Code.

 

“Toxic Substance” shall mean
and include any material present on any facility of Borrower which has been shown to have significant adverse effect on human health
or which is subject to regulation under the Toxic Substances Control Act (TSCA), 15 U.S.C. §§ 2601 et seq., applicable
state law, or any other applicable Federal or state laws now in force or hereafter enacted relating to toxic substances. “Toxic
Substance” includes but is not limited to asbestos, polychlorinated biphenyls (PCBs) and lead-based paints.

 

    9

     

    

 

1.2       Accounting
Terms and Determinations. Unless otherwise specified herein, all accounting terms used in this Agreement, unless otherwise indicated,
shall have the meanings given to such terms in accordance with GAAP. In addition, unless otherwise specified herein all accounting terms
used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be
delivered hereunder shall be prepared in accordance with GAAP. All other terms contained in this Agreement, unless otherwise indicated,
shall have the meanings provided by the Code, to the extent such terms are defined therein.

 

1.3       Construction.
Unless the context of this Agreement clearly requires otherwise, references to the plural include the singular and references to the
singular include the plural; references to any gender include any other gender; the part includes the whole; the term “including”
is not limiting, and the term “or” has, except where otherwise indicated, the inclusive meaning represented by the phrase
 “and/or”. The words, “hereof,” “herein,” “hereby,” “hereunder,” and similar
terms in this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Article, section, subsection,
clause, exhibit and schedule references are to this Agreement, unless otherwise specified. Any reference in this Agreement or any of
the Other Documents to this Agreement or any of the Other Documents includes any and all permitted alterations, amendments, changes,
extensions, modifications, renewals, or supplements thereto or thereof, as applicable.

 

1.4       Exhibits
and Schedules. All of the exhibits and schedules attached hereto shall be deemed incorporated herein by reference.

 

1.5       No
Presumption Against Any Party. Neither this Agreement , any of the Other Documents, any other documents, agreement, or instrument
entered into in connection herewith, nor any uncertainty or ambiguity herein or therein shall be construed or resolved using any presumption
against any party hereto, whether under any rule of construction or otherwise. On the contrary, this Agreement, the Other Documents,
and all other documents, instruments, and agreements entered into in connection herewith have been reviewed by each of the parties and
by their respective counsel and shall be construed and interpreted according to the ordinary meanings of the words used so as to accomplish
fairly the purposes and intentions of all parties hereto.

 

1.6       Independence
of Provisions. All agreements and covenants hereunder, under the Other Documents and the other documents , instruments, and agreements
entered into in connection herewith shall be given independent effect such that if a particular action or condition is prohibited by
the terms of any such agreement or covenant, the fact that such action or condition would be permitted within the limitations of another
agreement or covenant shall not be construed as allowing such action to be taken or condition to exist.

 

	2.	CREDIT FACILITIES.

 

2.1       Revolving
Line of Credit.

 

(a)       Subject
to the terms and conditions contained herein, Lender will make Advances to Borrower from the Closing Date until the Maturity Date, which
may be borrowed, repaid and reborrowed, in aggregate amounts outstanding at any one time equal to the lesser of:

 

(x) the sum of: (i) the Maximum Advance Amount,
less (ii) the outstanding Advances, or

 

(y)       an
amount equal to the sum of: (i) the Borrowing Base, minus (ii) the outstanding Advances, minus such reserves as Lender may reasonably
deem proper and appropriate from time to time (the “Revolving Line of Credit”).

 

    10

     

    

 

(b)       Borrowing
Base Calculations. The Borrowing Base shall be calculated by Lender upon receipt from Borrower of the Borrowing Base Certificate
and all supporting documentation required under this Agreement pursuant to Section 9.3 below. Lender will provide a Borrowing Base calculation
to Borrower setting forth its determination of the Borrowing Base, which calculation will be conclusive and binding in the absence of
manifest error. The Borrowing Base as determined by Lender will become effective upon calculation by Lender and will remain in effect
until a new Borrowing Base is calculated by Lender in accordance with this Agreement.

 

(c)       Advance
Request Procedures. Borrower shall notify Lender prior to 10:00 a.m., Los Angeles time, on a Business Day, of Borrower’s request
for a Advance that day. Each such notice shall specify the date such Advance is to be made, the amount of such Advance, and shall comply
with such other requirements as Lender determines are reasonable or desirable in connection therewith. Any written request for a Advance
received by Lender after 10:00 a.m. (Los Angeles time) shall not be considered by Lender until the next Business Day. Should any amount
be required to be paid as interest hereunder, or as fees or other charges under this Agreement or any Other Agreement, or with respect
to any Obligations, the same shall be deemed a request for a Advance as of the date such payment is due in the amount required to pay
in full such interest, fees, charges or Obligation under this Agreement or any Other Agreement, and such request shall be irrevocable.

 

(d)       Note.
Advances shall be evidenced by the Note issued by Borrower to Lender.

 

(e)       Payments.
The principal amount of each Advance shall be due and payable in full on the Maturity Date, subject to earlier prepayment as herein provided.
Interest shall be due and payable as set forth in Section 3.1 hereof. All payments of principal, interest and other amounts payable hereunder,
or under any of the Other Documents shall be made to Lender not later than 12:00 noon (Los Angeles time) on the due date therefore in
lawful money of the United States of America in federal funds or other funds immediately available to Lender. Lender shall have the right
to effectuate payment on any and all Obligations due and owing hereunder by charging Borrower’s Operating Account or by making
Advances as provided herein . Borrower shall pay principal, interest, and all other amounts payable hereunder, or under any of the Other
Documents, without any deduction whatsoever , including, but not limited to, any deduction for any setoff or counterclaim.

 

2.2       Use
of Proceeds

 

(a)       All
Advances made to or for the benefit of Borrower shall be used solely for working capital and general corporate purposes. Lender shall
have no obligation to monitor or verify the use or application of any Advance disbursed by Lender.

 

(b)       Borrower
shall not, directly or indirectly, use all or any part of any Advance for the purpose of purchasing or carrying any margin stock within
the meaning of Regulation U of the Board of Governors of the Federal Reserve System (the “Board of Governors”) or to extend
credit to any Person for the purpose of purchasing or carrying any such margin stock or for any purpose which violates or is inconsistent
with Regulation X of the Board of Governors, unless such use has been expressly approved in writing by Lender, in its discretion.

 

    11

     

    

 

2.3       Loan
Account/Deposit Account

 

Lender shall maintain on its books a record of account (“Loan
Account”) in which Lender shall make entries for each Advance and such other debits and credits as shall be appropriate in
connection with the credit facility set forth in this Agreement ; provided, however, the failure by Lender to so record
each Advance shall not adversely affect Lender. Each Advance made by Lender shall be deposited in Borrower’s Operating Account,
as applicable.

 

2.4       Manner
of Borrowing and Payment.

 

(a)       Except
as expressly provided herein, all payments (including prepayments) to be made by Borrower on account of principal, interest and fees
shall be made without set off or counterclaim and shall be made to Lender, in each case on or prior to 12:00 p.m., Los Angeles time,
in Dollars and in immediately available funds.

 

(b)       Notwithstanding
anything to the contrary contained in herein, commencing with the first Business Day following the Closing Date, each borrowing of an
Advance shall be advanced by Lender and each payment by Borrower on account of an Advance shall be applied first to those Advances advanced
by Lender.

 

	3.	INTEREST.

 

3.1       Interest
Rate. Each Advance shall bear interest at a per annum rate equal to the Prime Rate less two hundred fifty one thousandths percent
(0.250%), calculated on the basis of a 360-day year for the actual number of days elapsed (“Contract Rate”).

 

3.2       Interest
Payments. Except as otherwise provided herein, commencing on July 31, 2021, and continuing on the last day of each and every calendar
month thereafter until the Maturity Date, Borrower shall pay to Lender all accrued and unpaid interest on the outstanding principal balance
of the Advances under this Agreement. Borrower understands that that Lender is entitled to a minimum interest charge of $100.00 per month.

 

3.3       Default
Interest. Upon the occurrence and during the continuance of an Event of Default, Borrower shall pay interest on the unpaid principal
amount of each Advance or other Obligation owing to Lender and on the unpaid amount of all interest, fees and other amounts payable hereunder
that is not paid when due, payable on demand by Lender, at a rate per annum (the “Default Rate”) equal at all times
to five percent (5%) per annum above the Contract Rate.

 

	4.	PAYMENT OF OBLIGATIONS.

 

4.1       Overadvance.
If, at any time and for any reason, the aggregate principal amount of the outstanding Advances exceeds the lesser of (i) the Maximum
Advance Amount or (ii) the Borrowing Base (an “Overadvance”), Borrower shall immediately pay Lender, in cash, the amount
of such Overadvance. Lender may apply such payments to the outstanding Advances or Obligations in such order and manner as Lender, in
its sole and absolute discretion, may determine.

 

4.2       Maturity
Date. On the Maturity Date, Borrower shall pay and perform in full all outstanding Advances and all other Obligations arising thereunder,
whether for principal, interest, costs, fees or otherwise.

 

    12

     

    

 

4.3       Manner
of Payment. Payment of the Advances and all other Obligations shall be withdrawn from Borrower’s Operating Account with Lender,
or such other account with Lender as designated in writing by Borrower.

 

4.4       Late
Charge. If any payment due hereunder is not received or made within ten (10) days of the due date or there are insufficient funds
in the Operating Account on the date Lender enters any debit authorized by this Agreement, without limitation, Lender’s other remedies
in such an event, Lender shall apply a late charge in an amount equal to five percent (5%) of the unpaid portion of the scheduled payment
or $35.00, whichever is less.

 

	5.	SECURITY INTEREST.

 

5.1       Grant
of Interest. To secure the payment and performance of all of the Obligations as and when due, Borrower hereby grants to Lender a
first priority security interest in all Collateral and those evidenced by the Assignment of Deposit Account.

 

5.2       Perfection.

 

(a)       Lender
may file or amend one or more financing statements disclosing Lender’s security interest in the Collateral. Borrower agrees that
a photographic, photostatic or other reproduction of this Agreement or of a financing statement is sufficient as a financing statement.
Borrower approves, authorizes and ratifies any filings or recordings made by or on behalf of Lender in connection with the perfection
and continuation of Lender’s security interest with respect to the Collateral.

 

(b)       Lender
may file UCC-1 financing statements against specific items of Equipment, (or amend existing UCC-1 financing statements) in Lender’s
sole discretion, and Borrower agrees to furnish to Lender sufficient identifying information, such as make, model and serial numbers,
as Lender may request. Lender may also file a fixture filing in the real property records of the applicable county in California, to
perfect its security interest in such items of Equipment as are or become fixtures.

 

(c)       Upon
demand, Borrower will deliver to Lender such other items of Collateral or will execute such documents as are appropriate to grant Lender
possession or control of such Collateral as necessary to further perfect Lender’s security interest therein.

 

	6.	CONDITIONS PRECEDENT.

 

6.1       Conditions
to Initial Advance. The obligation of Lender to make the initial Advance is subject to the satisfaction, in the sole discretion of
Lender, at or prior to the first Advance hereunder, of each, every and all of the following conditions:

 

(a)       Accuracy
of Representations and Warranties; No Default. The representations and warranties contained in Sections 7 and 8 below shall have
been true and correct when made and shall be true and correct on and as of the Closing Date; and on the Closing Date, no Event of Default
and no Potential Default shall have occurred and be continuing.

 

    13

     

    

 

(b)       Documents
and Agreements. Borrower shall deliver to Lender the following documents, in form and substance satisfactory to Lender, in its sole
and absolute discretion :

 

		(i)	An executed original of this Agreement;

 

		(ii)	The Note;

 

		(iii)	A Borrowing Base Certificate,
                                            showing borrowing availability pursuant to the terms hereof;

 

		(iv)	Such other documents, instruments
                                            and information as Lender shall require.

 

(c)       Priority
of Lender’s Liens. Lender shall have received the results of “of record” searches satisfactory to Lender in its
sole and absolute discretion, reflecting its Uniform Commercial Code filing against Borrower indicating that Lender has a perfected,
first priority lien in and upon all of the Collateral, subject only to such Permitted Liens which are also permitted to be senior to
the lien of Lender.

 

(d)       Insurance.
Lender shall have received copies of the insurance binders or certificates evidencing Borrower’s compliance with Section 9.2 of
this Agreement, including lender’s loss payee endorsements.

 

(e)       Organizational
Documents. Lender shall have received copies of Borrower’s articles of incorporation or articles of organization, as applicable,
and all amendments thereto, and a certificate of good standing (each certified by the California Secretary of State, and dated a recent
date prior to the Closing Date), and Lender shall have received Certificates of Foreign Qualification for Borrower from the Secretary
of State of each state wherein the failure to be so qualified could have a Material Adverse Effect.

 

(f)       Certified
Resolutions/Authorizations. Lender shall have received (i) copies of Borrower’s by-laws or operating agreement, as applicable,
and all amendments thereto, and (ii) copies of the resolutions of the board of directors of Borrower or authorization of the managers
of Borrower, as applicable, authorizing the execution and delivery of this Agreement, and the other documents contemplated hereby, and
authorizing the transactions contemplated hereunder and thereunder, and authorizing specific officers or managers of Borrower to execute
the same on behalf of Borrower certified by the Secretary or other acceptable officer, or the manager, as applicable, of Borrower as
of the Closing Date.

 

(g)       Landlord
Waivers. If required by Lender, Lender shall have received duly executed landlord waivers and access agreements, in form and substance
satisfactory to Lender, in Lender’s sole and absolute discretion, and, when deemed appropriate by Lender, in form for recording
in the appropriate recording office, with respect to all leased locations where Borrower maintains any Collateral.

 

(h)       Third
Party Custody. In the event that any Collateral is in the possession of a third party, Borrower shall join with Lender in notifying
such third party of Lender’s security interest and obtaining an acknowledgement from such third party that it is holding such Collateral
for the benefit of Lender.

 

(i)       Permits
and Approvals. Verification and approval of all permits, approvals and authorizations required to pledge the Collateral to Lender.

 

    14

     

    

 

(j)       Fees.
Borrower shall have paid all Fees and Costs payable by Borrower hereunder, including legal fees and costs incurred by Lender in connection
with the preparation, negotiation and closing of this Agreement.

 

(k)       Field
Audit. Review and approval of field audit of Borrower verifying methodology and valuation of accounts receivable and inventory, performed
by an agent designated by Lender, all to the satisfaction of Lender in its sole opinion and judgment.

 

(l)       Borrower’s
Financial Statements. Review and approval of Borrower’s latest year to date month-end internally prepared consolidated financial
statements and tax returns (with all forms K-1 attached), together with the similar dated aged accounts receivable and inventory reports,
and any other financial statements and reports as required by Lender.

 

(m)       Other
Documents and Agreements. Lender shall have received such other agreements , instruments and documents as Lender may require in connection
with the transactions contemplated hereby, all in form and substance satisfactory to Lender in Lender’s sole and absolute discretion,
and in form for filing in the appropriate filing office, including, but not limited to, those documents listed in Section 6.1(c).

 

6.2       Conditions
to all Advances. The obligation of Lender to make any Advance to Borrower (including the initial Advance) is further subject to and
contingent upon the fulfillment of each of the following conditions to the satisfaction of Lender:

 

(a)       The
fact that, immediately before and after the making of any Advance, no Event of Default or Default shall have occurred or be continuing;
and

 

(b)       The
fact that the representations and warranties of Borrower contained in this Agreement shall be true and correct on and as of the date
of such borrowing.

 

	7.	REPRESENTATIONS, WARRANTIES AND COVENANTS
                                            OF BORROWER. In order to induce Lender to enter into this Agreement and to make the Advances,
                                            Borrower represents and warrants to Lender as follows, and Borrower covenants that the following
                                            representations will continue to be true, and that Borrower will at all times comply with
                                            all of the following covenants:

 

7.1       State
of Organization, Existence and Authority.

 

(a)       Borrower
is and will continue to be, duly organized, validly existing and in good standing under the laws of the State of California. Borrower
has all requisite corporate power and authority to own and operate its properties and to carry on its business as now conducted and as
presently planned to be conducted. Borrower is and will continue to be qualified and licensed to do business in California and all jurisdictions
in which any failure to do so would have a Material Adverse Effect.

 

(b)       Borrower
is not in violation of any term of any of its organizational documents, agreement or instrument to which Borrower is a party or by which
it or any of its properties (now or hereafter acquired) may be bound (except for violations which in the aggregate do not have a Material
Adverse Effect).

 

    15

     

    

 

(c)       The
execution, delivery and performance by Borrower of this Agreement, and all other documents contemplated hereby, and the creation of the
lien granted under this Agreement: (i) have been duly and validly authorized, (ii) create legal, valid and binding obligations of Borrower
enforceable against Borrower in accordance with their terms (except as enforcement may be limited by equitable principles and by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to creditors’ rights generally), (iii) do not violate Borrower’s
articles or certificate of incorporation, or Borrower’s by-laws, or any law which is binding upon Borrower or its property, (iv)
do not constitute a breach of, or grounds for acceleration of, any material indebtedness or obligation under any material agreement or
instrument which is binding upon Borrower or its property and (v) do not require any consent, approval, license exemption or other action
by any Official Body or any other person or entity except such as have already been given or shall be obtained on or before the Closing
Date.

 

7.2       Name;
Trade Names and Styles. The name of Borrower set forth in the heading to this Agreement is its correct name. All prior names of Borrower
and all of Borrower’s present and prior trade names are listed on Exhibit “C” attached hereto . Borrower shall give
Lender thirty (30) days’ prior written notice before changing its name or doing business under any other trade name. Borrower has
complied, and will in the future comply, with all laws relating to the conduct of business under a fictitious business name.

 

7.3       Place
of Business; Location of Collateral. Borrower’s address set forth in Section 11.4 hereof is the address and location of Borrower’s
chief executive office. In addition, Borrower has places of business and tangible Collateral located only at the locations set forth
on Exhibit “D” attached hereto. Borrower will give Lender at least thirty (30) days’ prior written notice before opening
any additional place of business, changing its chief executive office, or moving any of the Collateral to a location other than Borrower’s
address set forth in Section 11.4 or one of the locations set forth on Exhibit “D” hereto.

 

7.4       Title
to Collateral; Permitted Liens. Borrower is now, and will at all times in the future, be the sole owner of all the Collateral. Borrower
has rights in and the power to transfer the Collateral. The Collateral is now, and will remain, free and clear of any and all liens,
charges, security interests, encumbrances and adverse claims, except for Permitted Liens. Lender has now, and will continue to have,
a first-priority perfected and enforceable security interest in all of the Collateral, subject only to the Permitted Liens which are
also permitted to be senior to the lien of Lender, and Borrower will at all times defend Lender and the Collateral against all claims
of others. Borrower is not and will not become a lessee under any real property lease which does, or will, prohibit, restrain, impair
Borrower’s right to remove any Collateral from the leased premises. Borrower will keep in full force and effect, and will comply
with all the terms of, any lease of real property where any of the Collateral now or in the future may be located.

 

7.5       Maintenance
of Collateral. Borrower will maintain the Collateral consisting of Equipment in good working condition, and Borrower will not use
the Collateral for any unlawful purpose. Borrower will immediately advise Lender in writing of any material loss or damage to the Collateral.

 

7.6       Books
and Records. Borrower has maintained and will maintain at Borrower’s Address complete and accurate books and records, comprising
an accounting system in accordance with GAAP.

 

    16

     

    

 

7.7       Financial
Condition, Statements and Reports. All financial statements now or in the future delivered to Lender have been, and will be, prepared
in conformity with GAAP (except, in the case of unaudited financial statements, for the absence of footnotes and subject to normal year-end
adjustments) and now and in the future will fairly reflect the financial condition of Borrower, at the times and for the periods therein
stated. Between the last date covered by any such statement provided to Lender and the date hereof, there has been no Material Adverse
Effect. Borrower is now and will continue to be Solvent.

 

7.8       Tax
Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely file, all tax returns and reports required
by foreign, federal, state and local law; and Borrower has timely paid, and will timely pay, all foreign, federal, state and local taxes,
assessments, deposits and contributions now or in the future owed by Borrower. As of the date hereof, Borrower is unaware of any claims
or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by
Borrower. To the best of Borrower’s knowledge, Borrower has paid, and shall continue to pay all amounts necessary to fund all present
and future pension, profit sharing and deferred compensation plans in accordance with their terms; and Borrower has not and will not
withdraw from participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to,
any such plan which could result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or
its successors or any other governmental agency.

 

7.9       Compliance
with Law. Borrower has complied, and will comply, in all material respects, with all provisions of all material foreign, federal,
state and local laws and regulations relating to Borrower, including, but not limited to, the Fair Labor Standards Act, and those relating
to Borrower’s ownership of real or personal property, the conduct and licensing of Borrower’s business, and environmental
matters.

 

7.10       Litigation.
There is no claim, suit, litigation, proceeding or investigation, pending, or to the best of Borrower’s knowledge, threatened by
or against or affecting Borrower in any court or before any governmental agency (or any basis therefor known to Borrower) which if adversely
determined against Borrower would result, either separately or in the aggregate, in a Material Adverse Effect (collectively, the “Material
Litigation”). Borrower will promptly inform Lender in writing of any Material Litigation.

 

7.11       No
Default. No event has occurred and is continuing and no condition exists which constitutes an Event of Default or Potential Default.

 

7.12       No
Advice. Borrower is not relying on Lender, Lender’s agents, or Lender’s consultants or attorneys as to the legal sufficiency,
legal effect or tax consequences of this Agreement or the acquisition of assets relating hereto.

 

7.13       Continuing
Warranties. Borrower’s representations and warranties set forth in this Agreement shall be true and correct at the time of
execution of this Agreement and as of the Closing Date and shall survive the Closing Date and shall remain true and correct as of the
date given.

 

	8.	RECEIVABLES/ ACCOUNTS.

 

8.1       Representations
Relating to Documents and Legal Compliance.

 

Borrower represents and warrants to Lender
as follows:

 

(a)       All
statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing the Accounts are and shall
be true and correct in all material respects and all such invoices, instruments and other documents and all of Borrower’s books
and records are and shall be genuine and in all respects what they purport to be.

 

    17

     

    

 

(b)       All
sales and other transactions underlying or giving rise to each Account shall fully comply with all applicable laws and governmental rules
and regulations.

 

(c)       All
documents, instruments, and agreements relating to all Accounts are and shall be legally enforceable in accordance with their terms.

 

8.2       Account
Debtor Notifications. Borrower agrees and understands that this Loan shall be on a notification basis pursuant to which Lender shall
directly collect and receive all proceeds and payments from the Accounts in which Lender has a security interest. In order to
facilitate the foregoing, Borrower agrees to deliver to Lender, upon demand, any and all of Borrower’s records, ledger sheets,
payment cards, and other documentation, in the form requested by Lender, with regard to the Accounts. Borrower further agrees that Lender
shall have the right to notify each Account Debtor, pay such proceeds and payments directly to Lender, and to do any and all other things
as Lender may deem to be necessary and appropriate, within its sole discretion, to carry out the terms and intent of this Agreement.
Lender shall have the further right, where appropriate and within Lender’s sole discretion, to file suit, either in its own name
or in the name of Borrower, to collect any and all such Accounts. Borrower further agrees that Lender may take such other actions, either
in Borrower’s name or Lender’s name, as Lender may deem appropriate and within its sole judgment, with regard to collection
and payment of the Accounts , without affecting the liability of Borrower under this Agreement or on the Indebtedness.

 

8.3       Verification.
Lender may conduct monthly verifications of the outstanding balances of the account debtors to ensure accuracy of the aging and validity
of the balances or the Collateral. Lender shall conduct verification requests from balances based on the most recent reporting period
account receivables aging report. Any discrepancy found in such verification shall be treated as an ineligible item for the purpose of
calculating the borrowing base unless Lender decides otherwise in its sole discretion.

 

8.4       Lock
Box. Borrower agrees that Lender may at any time require Borrower to institute procedures whereby the payments and other proceeds
of the Accounts shall be paid by the Account Debtors under a remittance account or lock box arrangement with Lender, or Lender’s
agent, or with one or more financial institutions designated by Lender. Borrower further agrees that, if no Event of Default exists under
this Agreement, any and all of such funds received under such a remittance account or lock box arrangement shall, at Lender’s sole
election and discretion, either be (1) paid or turned over to Borrower; (2) deposited into one or more accounts for the benefit of Borrower
(which deposit accounts shall be subject to a security assignment in favor of Lender); (3) deposited into one or more accounts for the
joint benefit of Borrower and Lender (which deposit accounts shall likewise be subject to a security assignment in favor of Lender; (4)
paid or turned over to Lender to be applied to the Indebtedness in such order and priority as Lender may determine within its sole discretion;
or (5) any combination of the foregoing as Lender shall determine from time to time. Borrower further agrees that, should one or more
Events of Default exist, any and all funds received under such a remittance account or lock box arrangement shall be paid or turned over
to Lender to be applied to the Indebtedness, again in such order and priority as Lender may determine within its sole discretion .

 

    18

     

    

 

 

		 9.	ADDITIONAL COVENANTS OF THE BORROWER.

 

9.1       Financial
and Other Covenants. Borrower shall at all times comply with the following covenants:

 

(a)       Operating
Account. Borrower shall, so
long as any Advance remains unpaid and any commitment to make any Advance remains outstanding, maintain Borrower’s
Operating Account with Lender.

 

(b)       [Reserved]

 

(c)       Minimum
Debt Service Coverage Ratio. Borrower
shall maintain a minimum Debt Service Coverage Ratio of at least 1.50
to 1.00, which
shall be measured quarterly, beginning with the calendar quarter ending June 30, 2020.”

 

(d)       [Reserved]

 

9.2       Insurance.
Borrower shall, at all times, insure all of the tangible personal property Collateral and carry such other business insurance, with insurers
reasonably acceptable to Lender, in such form and amounts as Lender may reasonably require (including,
without limitation, credit insurance), and Borrower shall provide evidence of such insurance to Lender, so
that Lender is satisfied that such insurance is, at all times, in full force and effect. All liability
insurance policies of Borrower with respect to the Collateral shall name Lender as an additional insured,
and all property, casualty and related insurance policies of Borrower with respect to the Collateral shall name Lender as a loss payee
thereon and Borrower shall cause the issuance of a lender’s loss payee endorsement in form reasonably acceptable to Lender. Upon
receipt of the proceeds of any such insurance, Lender, at its
sole option, either (i) shall apply such proceeds to the prepayment of the Obligations in such order or manner as Lender may elect, or
(ii) shall disburse such proceeds to Borrower for application to the cost of repairs, replacements, or
restorations. All repairs, replacements or restorations shall
be effected with reasonable promptness and shall be of a value at least equal to the value of the items or property destroyed prior to
such damage or destruction. Lender may require reasonable assurance that the insurance proceeds so
released will be so used. If Borrower fails to provide or pay for any insurance ,
Lender may, but is not obligated to, obtain the same at Borrower’s
expense. Borrower shall give Lender no less than thirty (30) days written notice of any cancellation of any
insurance required hereunder and shall promptly forward any Notice of Cancellation it receives from any of its insurers.

 

9.3       Reports.
Borrower, at its expense, shall provide Lender with the written reports set forth below, (all in form,
substance and detail satisfactory to Lender) by the dates specified:

 

(a)       As
soon as available but in no event later than forty-five (45) days following the end of each calendar quarter, commencing with the calendar
month ending June 30, 2021, Borrower shall deliver to Lender (i)
an accounts receivable aging report as of the last day of the prior calendar month, and
(ii) an accounts payable aging report as of the last day of the prior calendar month, accompanied
by any and all supporting documentation requested by Lender in its sole and absolute discretion, duly
certified by Borrower’s authorized signatory.

 

(b)       As
soon as available but in no event later than sixty (60) days following the end of each calendar quarter, commencing
with the calendar quarter ending June 30, 2021, Borrower
shall deliver to Lender company prepared consolidated and consolidating quarterly financial statements of Borrower.

 

    19

     

    

 

(c)       As
soon as available but in no event later than forty-five (45) days following the end of each calendar quarter,
commencing with the calendar quarter ending June 30, 2021,
Borrower shall deliver to Lender its Borrowing Base Certificate.

 

(d)       As
soon as available but in no event later than one hundred fifty (150) days following the end of Borrower’s fiscal year, a detailed
customer address listing report for that fiscal year, including the customer’s
name, address, telephone
number and such other information required by Lender.

 

(e)        [Reserved]

 

(f)       As
soon as available, and in no event later than one hundred fifty (150) days after the end of Borrower’s
fiscal year, commencing with the fiscal year ending December 31,
2021, Borrower shall deliver to Lender annual consolidated financial statements of Borrower audited by an independent certified public
accountant acceptable to Lender.

 

(g)       Commencing
with the 2020 tax year, as soon as available, and in no event later than 30 days after filing, Borrower
shall deliver to Lender true and correct copies of Borrower’s Federal income tax returns (including all schedules and attachments)
of Borrower (and copies of any filing extensions) prepared by an independent certified public accountant acceptable to Lender.

 

(h)       No
later than forty-five (45) calendar days following the end of each period, Borrower shall deliver to Lender (i) quarterly royalty reports
from each of Microsoft, Sony and Valve, beginning with the calendar quarter ending June 30, 2021, and (ii) If required by Bank, within
twenty (20) days of Bank’s request, Borrower shall provide monthly bank statements describing any and all royalty payments from
Microsoft and Sony for the prior time period.
The royalty reports submitted to Lender shall contain supporting bank statements.

 

(i)       Borrower
shall, during normal business hours, from time to time upon two
(2) Business Days’ prior notice as frequently as Lender
reasonably determines to be appropriate, but in no event less
than once each year: (a) provide Lender and its officers, employees
and agents access to its properties, facilities, advisors, officers and employees of Borrower and to the Collateral of Borrower, and
(b) permit Lender and any of its officers, employees and agents, to inspect, audit and make extracts from Borrower’s books and
records. Borrower shall, during normal business hours, from time to time upon two (2) Business Days’ prior notice permit Lender
and its officers, employees and agents, to inspect,
review, evaluate and make test verifications and counts for the Accounts, Inventory and other Collateral
of Borrower. If an Event of Default has occurred and is continuing, Borrower shall provide such access to Lender at all times and without
advance notice. Furthermore, so long as any Event of Default has occurred and is continuing, Borrower
shall provide Lender with access to each of its suppliers and customers. Borrower shall make available to Lender and its counsel reasonably
promptly originals or copies of all books and records that Lender may reasonably request. Borrower shall delivery any document or instrument
necessary for Lender as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains
records for Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned
by Borrower. Lender will give Borrower at least two (2) days’
prior written notice of regularly scheduled audits.

 

    20

     

    

 

(j)       Promptly
upon Lender’s request, such other books, records, statements, lists of property and accounts, budgets, forecasts or reports as
to Borrower as Lender may reasonably request.

 

9.4       Information.

 

(a)       Borrower
shall also furnish, or cause to be furnished, to Lender such additional information as Lender may from time to time reasonably request
concerning Borrower’s business, and/or financial condition, or any item of Collateral.

 

(b)       Promptly
upon Borrower becoming aware of any Event of Default or Potential Default, Borrower shall give Lender notice thereof, together with a
written statement setting forth the nature thereof and the steps which Borrower has taken or is taking to cure the same.

 

(c)       Promptly
upon Borrower becoming aware thereof, Borrower shall give Lender written notice of: (i)
any Material Adverse Effect and (ii) the commencement or existence of any proceeding by or before any Official Body against or affecting
Borrower which is reasonably likely to be adversely determined and, if adversely decided, would
have a Material Adverse Effect.

 

9.5       Access
to Books and Records and Collateral.

 

(a)       Borrower
agrees to reimburse Lender immediately upon demand for all fees and out-of-pocket expenses for field exams and audits incurred a the result
of the occurrence of an Event of Default which is continuing.

 

(b)       Borrower
will not enter into any agreement with any accounting firm, service bureau or third party to store Borrower’s books or records at
any location other than the location identified in Section 11.4 hereof without first notifying Lender of the same and obtaining the written
agreement from such accounting firm, service bureau or other third party to give Lender the same rights with respect to access to books
and records and related rights as Lender has under this Agreement.

 

9.6       Negative
Covenants. Borrower shall not, without Lender’s prior written consent, do any of the following:

 

(a)       create,
incur, assume or permit to exist any indebtedness or liabilities resulting from borrowings, guaranties, leasing, loans or advances, whether
secured or unsecured, matured or un-matured, liquidated or unliquidated, direct or contingent, joint
or several, except the liabilities of Borrower to Lender, and any other liabilities of Borrower existing as of, and disclosed to Lender
prior to, the date of this Agreement;

 

(b)       loan,
invest in, or advance money or assets to any other person, enterprise or entity other than any loan,
investment or advance to Borrower’s affiliates and subsidiaries;

 

(c)       purchase,
create or acquire any interest in any other enterprise or entity other than any purchase, creation or acquisition of interests in Borrower’s
affiliates and subsidiaries;

 

    21

     

    

 

(d)       incur
any obligation as surety or guarantor other than in the ordinary course of business;

 

(e)       use
any of the proceeds extended pursuant to this Agreement except for the purposes stated in this Agreement and related documents;

 

(f)       declare
or pay any dividends or other distributions with respect to, purchase, redeem, or otherwise acquire for value any of its outstanding stock,
partnership interests or membership interests or return any capital of its shareholders, partners, members or managers without Lender’s
prior written consent;

 

(g)       merge
or consolidate with another entity;

 

(h)       make
any substantial change in the nature of Borrower’s business as conducted as of the date hereof;

 

(i)       acquire
all or substantially all of the assets of any other entity;

 

(j)       sell,
transfer, assign, lease, license, or dispose of, all or a substantial or material portion of Borrower’s assets, except in the ordinary
course of its business;

 

(k)       mortgage,
pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Borrower’s assets owned as of the date
of this Agreement or hereafter acquired, or accelerate payment on any existing debt, except any of the foregoing in favor of Lender or
which is existing as of, and disclosed to Lender in writing prior to, the
date of this Agreement;

 

(l)       make
any change in Borrower’s capital structure which would have a Material Adverse Effect;

 

(m)       dissolve
or elect to dissolve;

 

(n)       change
the state of its incorporation;

 

(o)       change
its legal name; or

 

(p)       use
the loan proceeds for any purpose other than as set forth in this

 

(q)       Agreement.

 

Transactions permitted by the foregoing provisions of this Section
are only permitted if no Potential Default or Event of Default is continuing or would occur as a result of such transaction.

 

9.7       Litigation
Cooperation. Borrower shall promptly inform Lender in writing of any proceedings (whether or not
purportedly on behalf of Borrower) against Borrower involving an amount in excess of $150,000.00.
Should any third-party suit or proceeding be instituted by or against Lender with respect to any Collateral or relating to Borrower,
Borrower shall, without expense to Lender, make available Borrower and its officers, employees and agents and Borrower’s books and
records, to the extent that Lender may deem them reasonably necessary in order to prosecute or defend
any such suit or proceeding.

 

    22

     

    

 

9.8       Further
Assurances. Borrower agrees, at its expense, on request by Lender, to execute all documents and take all actions, as Lender, may deem
reasonably necessary or useful in order to perfect and maintain Lender’s perfected security
interest in the Collateral, and in order to fully consummate the transactions contemplated by this Agreement.

 

9.9       Operating
Account. Until such time as all of Borrower’s Advances have been paid in full and this Agreement has been terminated, Borrower
agrees to maintain Borrower’s Operating Account at Lender. Borrower authorizes Lender to automatically deduct all payments required
to be made by this Agreement from Borrower’s Operating Account.

 

9.10       Field
Audits. Borrower shall permit Lender, on ten (10) Business Days’ prior notice, to conduct a field audit of Borrower verifying
Borrower’s methodology and valuation of the Accounts, Inventory and other Collateral of Borrower,
performed by an agent designated by Lender, all to the satisfaction of Lender in its sole opinion and judgment. In addition,
Borrower shall, during normal business hours, from time to time upon ten (10) Business Days
prior notice: (a) provide Lender and any of its officers, employees and agents access to its properties,
facilities, advisors, officers and employees of Borrower and to the Collateral of Borrower, and (b) permit Lender and any of its officers,
employees and agents to inspect, audit and make extracts from Borrower’s books and records.
Borrower shall, during normal business hours, from time to time upon one (1) Business Days prior notice permit Lender, and its
officers, employees and agents, to inspect, review, evaluate and make test verifications and counts for the Accounts, Inventory and other
Collateral of Borrower. If an Event of Default has occurred and is continuing, Borrower shall,
at Borrower’s expense, provide such access to Lender at all times and without advance
notice. Furthermore, so long as any Event of Default has occurred and is continuing, Borrower shall provide Lender with access to each
of its suppliers and customers. Borrower shall reasonably promptly make available to Lender and its
counsel originals or copies of all books and records that Lender may reasonably request. Borrower shall deliver any document or instrument
necessary for Lender as it may from time to time reasonably request, to obtain records from any service bureau or other Person that maintains
records for Borrower, and shall maintain duplicate records or supporting documentation on media, including computer tapes and discs owned
by Borrower. Lender will give Borrower at least ten (10) Business Days’ prior written notice of regularly scheduled field audits.
Borrower shall reimburse Lender for any cost incurred for such field audits. Unless an Event
of Default has occurred, Borrower shall be responsible for the cost of any such audit one (1) time each year
and, in no event, at a cost not to exceed $300.00. Borrower hereby authorized Lender to debit (without
offset) any such cost from Borrower’s primary operating account with Lender. In the event that Lender deems the results of any
such audit to be unsatisfactory, in Lender’s sole opinion and judgment, then in such event, Lender may declare an Event of Default
and terminate the Revolving Line of Credit.

 

9.11       Terrorism
and Anti-Money Laundering. Borrower warrants and agrees as follows:

 

(a)       As
of the date hereof and throughout the term of the Revolving Line of Credit: (i) Borrower; (ii) any Person controlling or controlled by
Borrower; (iii) if Borrower is a privately held entity, any Person having a beneficial interest in Borrower; or (iv) any Person for whom
Borrower is acting as agent or nominee in connection with this transaction, is not an OFAC Prohibited Person.

 

(b)       To
comply with applicable U.S. Anti-Money
Laundering Laws and regulations, all payments by Borrower to Lender or from Lender to Borrower will only be made in
Borrower’s name and to and from a bank account of a bank based or incorporated in or formed under the laws of the United
States or a bank that is not a “foreign shell bank”
within the meaning of the U.S. Bank Secrecy Act (31 U.S.C. §
5311 et seq.), as amended, and the regulations promulgated thereunder by the U.S. Department of the Treasury, as such regulations
may be amended from time to time.

 

    23

     

    

 

(c)       To
provide Lender at any time and from time to time during the term of the Revolving Line of Credit with such information as Lender determines
to be necessary or appropriate to comply with the Anti-Money Laundering Laws and regulations of any applicable jurisdiction, or to respond
to requests for information concerning the identity of Borrower, any Person controlling or controlled by Borrower or any Person having
a beneficial interest in Borrower, from any governmental authority, self-regulatory organization or financial institution in connection
with its anti-money laundering compliance procedures, or to update such information.

 

(d)       The
representations and warranties set forth in this Section 9.10 shall be deemed repeated and reaffirmed by Borrower as of each date that
Borrower makes a payment to Lender under this Agreement and the Other Documents or receives any payment from Lender. Borrower agrees promptly
to notify Lender in writing should Borrower become aware of any change in the information set forth in these representations.

 

		10.	EVENTS OF DEFAULT AND REMEDIES.

 

10.1       Events
of Default. The occurrence of any of the following events shall constitute an “Event of Default” under this Agreement:

 

(a)       Borrower
shall fail to pay any amounts owed under this Agreement or any interest thereon or any other monetary Obligation; or

 

(b)       Borrower
shall fail to provide to Lender any notices or financial reports specified in this Agreement; or

 

(c)       Borrower
shall fail to perform any other non-monetary Obligation; or

 

(d)       Any
warranty, representation, statement, report or certificate made or delivered to Lender by Borrower or any of Borrower’s
officers, employees or agents, now or in the future, shall be
untrue or misleading and results in a Material Adverse Effect; or

 

(e)       Borrower
shall fail to give Lender access to its books and records or the Collateral as provided herein, or shall breach any negative covenant
set forth in Section 9.6 above; or

 

(f)       Borrower
shall fail to comply with the financial covenants (if any) set forth in Section 9.1
or shall fail to perform any other non-monetary Obligation which by its nature cannot be cured; or

 

(g)       Any
levy, assessment, attachment, seizure, lien or encumbrance (other than a Permitted Lien) is made on all or any part of the Collateral;
or

 

    24

     

    

 

(h)       Any
default or event of default occurs under any obligation secured by a Permitted Lien, which is not cured within any applicable cure period
or waived in writing by the holder of the Permitted Lien; or

 

(i)       Borrower
breaches any material contract, lease or other obligation, which has or may reasonably be expected to have a Material Adverse Effect;
or

 

(j)       Dissolution,
termination of existence, termination of business, insolvency or business failure of Borrower; or the appointment of a receiver, trustee
or custodian, for all or any part of the other property of Borrower; or the assignment for the benefit of creditors by, or the commencement
of any proceeding by Borrower under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction ,
now or in the future in effect; or

 

(k)       Commencement
of any proceeding against Borrower under any reorganization, bankruptcy, insolvency, arrangement, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction, now or in the
future in effect, which is not dismissed within sixty (60) days
after the date commenced; or

 

(l)       Borrower
shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any transfer of any of its property which would constitute a fraudulent,
void or voidable transfer or transaction under the California Uniform Voidable Transactions Act; or

 

(m)       Revocation
or termination of, or limitation or denial of liability upon,
any pledge of any material asset of any kind pledged by any third party to secure any or all of the Obligations, or any attempt to do
any of the foregoing, or commencement of proceedings by or against
any such third party under any bankruptcy or insolvency law ; or

 

(n)       Borrower
makes any payment on account of any indebtedness or obligation which has been subordinated to the Obligations, other than as permitted
in the applicable subordination agreement, or if any Person who has subordinated such indebtedness or obligations terminates or in any
way limits his subordination agreement; or

 

(o)       Borrower
shall suffer or experience any Change of Control without Lender ‘s
prior written consent, which consent shall be in the discretion
of Lender in the exercise of its reasonable business judgment; or

 

(p)       Lender
shall not have a valid first priority security interest in any item of Collateral, except as to items of Collateral which are subject
to Permitted Liens that are also permitted to be prior; or

 

(q)       There
is any Material Adverse Effect; or

 

(r)       Borrower
or any of its Affiliates fails to comply with or to perform any other term, obligation,
covenant or condition contained in this Agreement or in any of the Other Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and Borrower or Affiliate of Borrower; or

 

(s)       Borrower
or any of its Affiliates commits a breach or default in the payment or performance of any other obligation of Borrower or such
Affiliate under any instrument , agreement, guaranty
or document evidencing, supporting or securing any other
loan or credit extended by any other creditor to Borrower or its Affiliates, or

 

    25

     

    

 

(t)       Borrower
commits a breach or default in the payment or performance of any other obligation of Borrower, or breaches any warranty or representation
of Borrower, under the provisions of any other instrument ,
agreement, guaranty, or document
evidencing, supporting, or securing any other loan or credit extended by Lender, or by any affiliate of Lender, to Borrower (said financing
is hereinafter referred to as “other financing”), including,
but not limited to, any and all term loans, revolving credits;
or flooring lines of credit extended from time to time to Borrower, or any Person signing this Agreement on behalf of Borrower,
or any other Person with which Borrower is affiliated and is conducting business on the Property;
or Borrower causes the other financing, or any portion thereof,
to be refinanced or repaid with funds lent, advanced, paid, or contributed, in whole or in part, directly
or indirectly, by any other commercial lender to or for the benefit of Borrower. For purposes of this Agreement ,
the term “commercial
lender”, shall mean any bank,
savings and loan association, savings association, savings
bank, credit union, insurance company, commercial finance lender,
and any other person or entity which engages in the business of lending money for commercial, investment, or business purposes.

 

10.2       Remedies.
Upon the occurrence and during the continuance of any Event of Default, Lender, at its option, and
without notice or demand of any kind (all of which are hereby expressly waived by Borrower), may do
any one or more of the following:

 

(a)       Cease
making any Advances under this Agreement or otherwise extending credit to Borrower under this Agreement or any other document or agreement;

 

(b)       Accelerate
and declare all or any part of the Obligations to be immediately due, payable
and performable, notwithstanding any deferred or installment payments allowed by any instrument evidencing or relating to any Obligation;

 

(c)       Exercise
all rights and remedies available to a secured party under the Code;

 

(d)       Take
possession of, or obtain the appointment of a receiver to take control of, any or all of the Collateral wherever it may be found.
For that purpose Borrower hereby authorizes Lender and Lender’s representatives to enter onto
any of Borrower’s premises without interference to take possession of any of the Collateral, and remain on the premises, without
charge for so long as Lender deems it reasonably necessary in order to complete the enforcement of its rights under this Agreement.

 

(e)       Require
Borrower to assemble any or all of the Collateral and make it available to Lender or Lender’s representatives at places designated
by Lender which are reasonably convenient to Lender or Lender’s representatives and Borrower;

 

(f)       Complete
the processing or repair of any Collateral prior to a disposition thereof; and, for such purpose and for the purpose of removal, Lender
shall have the right to use Borrower’s premises, vehicles and other equipment and all other property without charge. Lender is hereby
granted a license or other right to use, without charge, Borrower’s labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, as it pertains to the Collateral, in completing production of,
advertising for sale, and selling or otherwise disposing of any Collateral as provided in the Code;

 

    26

     

    

 

(g)       Sell,
lease, license or otherwise dispose of any of the Collateral as provided in the Code, in its condition at the time Lender obtains possession
of it or after further manufacturing, processing or repair, at one or more public and/or private dispositions, in lots or in bulk, for
cash, exchange or other property, or on credit, and to adjourn any such sale from time to time without notice other than oral announcement
at the time scheduled for sale. Lender shall have the right to conduct such disposition on Borrower’s premises without charge,
for such time or times as Lender deems reasonable, or on Lender’s premises, or elsewhere and
the Collateral need not be located at the place of disposition. Lender may directly or through any affiliated company purchase or lease
any Collateral at any such public disposition, and if permissible under applicable law, at any private disposition. Any sale, lease, license
or other disposition of Collateral shall not relieve Borrower of any liability Borrower may have if any Collateral is defective as to
title or physical condition or otherwise at the time of sale;

 

(h)       Demand
payment of, and collect any Receivables and General Intangibles comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Lender to endorse or sign Borrower’s name on all collections, receipts,
instruments and other documents, and, in Lender’s
sole discretion, to grant extensions of time to pay, compromise claims and settle Receivables and the like for less than face value; and

 

(i)       Demand
and receive possession of any of Borrower’s federal and state income tax returns and the books and records utilized in the preparation
thereof or referring thereto.

 

Notwithstanding the foregoing, Lender
shall not dispose of any trademarks , trade names, copyrights,
registrations, licenses, franchises or customer lists except in connection with foreclosure upon substantially all of Borrower’s
assets as provided in the Code.

 

All expenses, costs, liabilities and obligations incurred by Lender
(including attorneys’ Fees and Costs with respect to the foregoing) shall be due from Borrower to Lender on demand.
Lender may charge the same to Borrower’s Loan Account, and the same shall thereafter bear interest at the same rate as is
applicable in this Agreement.

 

10.3       Standards
for Determining Commercial Reasonableness.

 

(a)       Borrower
and Lender agree that any disposition, as defined in the Code (“disposition”)
of any Collateral which complies with the following standards will conclusively be deemed to be commercially reasonable:

 

(i)       Notice
of the disposition is given to Borrower at least ten (10) days prior to the sale, and,
in the case of a public sale, notice of the sale is published at least ten (10) days before the sale
in a newspaper of general circulation in the county where the sale is to be conducted;

 

(ii)       Notice
of the disposition describes the Collateral in general, non- specific terms ;

 

(iii)       The
disposition is conducted at a place designated by Lender, with or without the Collateral being present;

 

(iv)       The
disposition commences at any time between 8:00 a.m.
and 6:00 p.m., Los Angeles
time; and

 

(v)       With
respect to any disposition of any of the Collateral, Lender may (but is not obligated to) direct any prospective purchaser to ascertain
directly from Borrower any and all information concerning the same.

 

    27

     

    

 

(b)       Lender
shall be free to employ other methods of noticing and disposing of the Collateral, in
its discretion.

 

(c)       Lender
shall have no obligation to attempt to satisfy the Obligations by collecting them from any third Person which may be liable for them or
any portion thereof, and Lender may release, modify or waive any
collateral provided by any other third Person as security for the Obligation or any portion thereof, all without affecting Lender’s
rights against Borrower. Borrower waives any right it may have to require Lender to pursue any third Person for any of the Obligations.

 

(d)       Lender
may comply with any applicable state or federal law requirements in connection with a disposition of the Collateral,
and Lender’s compliance therewith will not be considered to adversely affect the commercial
reasonableness of any sale of the Collateral.

 

(e)       Lender
may dispose of the Collateral without giving any warranties as to the Collateral. Lender may specifically disclaim any warranties of title
or the like. This procedure will not be considered to adversely
affect the commercial reasonableness of any sale of the Collateral.

 

(f)       If
Lender disposes of any of the Collateral upon credit, Borrower
will be credited only with payments actually made by the purchaser, received by Lender and applied to the indebtedness of the purchaser.
In the event that the purchaser fails to pay for the Collateral,
Lender may resell the Collateral and Borrower will be credited with the proceeds of such disposition.

 

10.4       Power
of Attorney.

 

(a)       Borrower
grants to Lender an irrevocable power of attorney coupled with an interest, authorizing and permitting Lender (acting through any of its
employees, attorneys or agents) at any time, at its option, but without obligation, with or without notice to Borrower, and at Borrower’s
expense, to do any or all of the following, in Borrower’s name or otherwise, but Lender agrees to exercise the following powers
in a commercially reasonable manner:

 

(i)       Execute
on behalf of Borrower any documents that Lender may, in its sole discretion, deem advisable
in order to perfect and maintain Lender’s security interest in the Collateral, or in order to exercise
a right of Borrower or Lender, or in order to fully consummate all the transactions contemplated under this Agreement, and all other present
and future agreements;

 

(ii)       Execute
on behalf of Borrower any document exercising, transferring or assigning any option to purchase, sell or otherwise dispose of or to lease
(as lessor or lessee) any real or personal property which is part of Lender’s Collateral or in which Lender has an interest;

 

(iii)       Execute
on behalf of Borrower, any invoices relating to any Receivable, any draft against any Account Debtor
and any notice to any Account Debtor, any proof of claim in bankruptcy, any notice of lien, claim of mechanic’s,
materialman’s or other lien, or assignment or satisfaction of mechanic’s, materialman’s or other lien;

 

    28

     

    

 

(iv)       Take
control in any manner of any cash or non-cash items of payment or proceeds of Collateral; endorse the name of Borrower upon any instruments,
or documents, evidence of payment or Collateral that may come
into Lender’s possession;

 

(v)       Endorse
all checks and other forms of remittances received by Lender;

 

(vi)       Pay,
contest or settle any lien, charge, encumbrance, security interest and adverse claim in or to any
of the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge
the same;

 

(vii)       Grant
extensions of time to pay, compromise claims and settle Receivables and General Intangibles
for less than face value and execute all releases and other documents in connection therewith;

 

(viii)       Pay
any sums required on account of Borrower’s taxes or to secure the release of any liens therefor, or both;

 

(ix)       Settle
and adjust, and give releases of, any insurance claim that relates to any of the Collateral and obtain payment therefor;

 

(x)       Instruct
any third party having custody or control of any books or records belonging to, or relating to, Borrower to give Lender the same rights
of access and other rights with respect thereto as Lender has under this Agreement; and

 

(xi)       Take
any action or pay any sum required of Borrower pursuant to this Agreement and any other present or future agreements.

 

(b)       Any
and all sums paid and any and all costs, expenses, liabilities, obligations and attorneys’ fees incurred by Lender (including attorneys’
fees and expenses incurred pursuant to bankruptcy) with respect to the foregoing shall be added to and become part of the Obligations,
and shall be payable on demand. Lender may charge the foregoing to Borrower’s Loan Account and the foregoing shall thereafter bear
interest at the same rate specified in this Agreement. In no event shall Lender’s rights under the foregoing power of attorney,
or any of Lender’s other rights under this Agreement, be deemed to indicate that Lender is in control of the business, management
or properties of Borrower.

 

(c)       Borrower
shall pay, indemnify, defend, and hold Lender, Lender’s affiliates and each of their respective officers, directors,
employees, counsel, agents, and attorneys-in-fact (each, an “Indemnified Person”) harmless (to the fullest extent
permitted by law) from and against any and all claims, demands, suits, actions, investigations, proceedings, and damages, and all
attorneys fees and disbursements and other costs and expenses actually incurred in connection therewith (as and when they are
incurred and irrespective of whether suit is brought), at any time asserted against, imposed upon, or incurred by any of them in
connection with, or as a result of, or related to: (i) the execution, delivery, enforcement, performance, and administration of this
Agreement and any Other Documents or the transactions contemplated herein, or (ii) any investigation, litigation, or proceeding
related to this Agreement, any Other Document, or (iii) the use of the proceeds of the Advances provided hereunder
(irrespective of whether any Indemnified Person is a party thereto), or (iv) any act, omission, event or circumstance in any manner
related thereto (all the foregoing, collectively, the “Indemnified Liabilities”).

 

    29

     

    

 

(d)       Borrower
shall have no obligation to any Indemnified Person hereunder with respect to any Indemnified Liability that a court of competent jurisdiction
finally determines to have resulted from the gross negligence or willful misconduct of such Indemnified Person. This Section 10.4 shall
survive the termination of this Agreement and the repayment of the Obligations.

 

10.5       Application
of Proceeds After Event of Default. Notwithstanding any other provisions of this Agreement to the contrary, after the occurrence and
during the continuance of an Event of Default, all amounts collected or received by Lender on account of the Obligations or any other
amounts outstanding under any of the Other Documents or in respect of the Collateral may, at Lender’s discretion, be paid over or
delivered as follows:

 

FIRST, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of Lender in connection with enforcing its rights and the rights of Lender under this Agreement
and the Other Documents and any protective advances made by Lender with respect to the Collateral under or pursuant to the terms of this
Agreement;

 

SECOND, to payment of any fees owed to Lender;

 

THIRD, to the payment of all reasonable out-of-pocket costs and expenses
(including reasonable attorneys’ fees) of Lender to the extent owing to Lender pursuant to the terms of this Agreement;

 

FOURTH, to the payment of interest and fees due with respect to the
Obligations; FIFTH, to the payment of the outstanding principal amount of the Obligations;

 

SIXTH, to all other Obligations and other obligations which shall have
become due and payable under the Other Documents or otherwise and not repaid pursuant to clauses “FIRST” through “FIFTH”
above; and

 

SEVENTH, to the payment of the surplus, if any, to the Borrower and/or
whoever may be lawfully entitled to receive such surplus.

 

In carrying out the foregoing, amounts received shall be applied in
the numerical order provided until exhausted prior to application to the next succeeding category; and (ii) Lender shall receive amounts
available to be applied pursuant to clauses “FOURTH” and “FIFTH” above.

 

10.6       Remedies
Cumulative. In addition to the rights and remedies set forth in this Agreement, Lender shall have all the other rights and remedies
accorded a secured party in equity and under all other applicable laws, and under any other instrument or agreement now or in the future
entered into between Lender and Borrower, and all of such rights and remedies are cumulative and none is exclusive. Exercise or partial
exercise by Lender of one or more of its rights or remedies shall not be deemed an election, nor bar Lender from subsequent exercise or
partial exercise of any other rights or remedies. The failure or delay of Lender to exercise any rights or remedies shall not operate
as a waiver thereof, but all rights and remedies shall continue in full force and effect until all of the Obligations have been indefeasibly
paid and performed.

 

    30

     

    

 

 

	11.	GENERAL PROVISIONS.

 

11.1       Application
of Payments. Subject to Section 10.5 of this Agreement, all payments with respect to the Obligations may be applied, and in Lender’s
sole discretion reversed and re-applied, to the Obligations, in
such order and manner as Lender shall determine in its sole discretion.

 

11.2       Charges
to Accounts. Lender may, in its discretion, require that Borrower pay monetary Obligations in cash to Lender,
or charge them to Borrower’s Loan Account, in which
event they will bear interest from the date due to the date paid at the same rate applicable to the Advances.

 

11.3       [Reserved]Notices.
Any notice, demand or request required hereunder shall be given in writing (at the addresses set forth below) by any of the following
means: (a) personal service; (b) electronic communication, whether
by telex, telegram or telecopying; (c) overnight courier; or (d) registered or certified, first class U.S. mail, return receipt requested.

 

	To Borrower:	To Lender:
	 	 
	SNAIL GAMES USA INC.	CATHAY BANK
	12049 Jefferson Boulevard	9650 Flair Drive, 7th Floor
	Culver City, California 90230	El Monte, CA 91731
	Attn: Heidy Chow, CFO	Attn: Jane Ho, SVP

 

or at such other address as such party may designate by ten (10) days’
advance written notice to the other party hereto pursuant to this section. Any notice, demand or request sent pursuant to subsection
(c), above, shall be deemed received on the business day immediately following deposit with the overnight
courier, and, if sent pursuant to subsection (d),
above, shall be deemed received
forty-eight (48) hours following deposit into the U.S.
mail.

 

11.5       Severability.
Should any provision of this Agreement be held by any court of competent jurisdiction to be void or unenforceable,
such defect shall not affect the remainder of this Agreement, which shall continue in full force and effect.

 

11.6       Integration.
This Agreement and the Other Documents and such other written agreements, documents and instruments
as may be executed in connection herewith are the final, entire and complete agreement between Borrower and Lender and supersede all prior
and contemporaneous negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral understandings, representations or agreements between
the parties which are not set forth in this Agreement or in
other written agreements signed by the parties in connection
herewith. Lender and Borrower agree that this Agreement and
the Other Documents reflect the intentions of the parties thereto and that parol evidence is not required to interpret them.

 

11.7       Amendment
and Waivers. The terms and provisions of this Agreement may not be waived or amended, except
in a writing executed by Borrower and a duly authorized officer of Lender and clearly specifying the extent of the amendment or the
waiver. Any waiver of an Event of Default or Potential Default shall not be deemed as continuing and shall not extend to any
subsequent or other Event of Default or Potential Default. The failure of Lender at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other present or future agreement between Borrower and Lender
shall not waive or diminish any right of Lender later to demand and receive strict compliance therewith .

 

    31 

     

    

 

11.8       Borrower
Waivers. Unless otherwise expressly required by this Agreement, Borrower hereby waives: (i) demand, protest,
notice of protest and notice of dishonor, notice of payment and nonpayment, release, compromise, settlement, extension or renewal
of any commercial paper, instrument, account, General Intangible, document or guaranty at any time held by Lender on which Borrower is
or may in any way be liable, (ii) notice of default and (iii) notice of any action taken by Lender,
unless expressly required by this Agreement.

 

11.9       No
Liability for Ordinary Negligence. Neither Lender, nor any of its directors, officers, employees,
agents, attorneys or any other Person affiliated with or representing Lender shall be liable for any claims, demands, losses or damages,
of any kind whatsoever, made, claimed, incurred or suffered by
Borrower or any other party through the ordinary negligence of Lender, or any of its directors, officers, employees, agents, attorneys
or any other Person affiliated with or representing Lender, but nothing herein shall relieve Lender from liability for its own gross negligence
or willful misconduct.

 

11.10       Actions.
Whether or not an Event of Default has occurred, Lender shall have the right, but not the obligation,
to commence, appear in, or defend any action or proceeding which affects or which Lender determines may affect {a) the Collateral;
{b) Borrower’s or Lender’s respective rights or obligations under this Agreement;
(c) the Advances; or (d) the disbursement of any proceeds of any Advance . Whether or not an Event
of Default or Potential Default has occurred, Lender shall at all times have the right to take any
or all actions which Lender determines to be necessary or appropriate to protect Lender’s interest
in connection with the Advances.

 

11.11       Time
of Essence. Time is of the essence in the performance by Borrower of each and every obligation under this Agreement.

 

11.12       Attorneys’
Fees, Costs and Charges.

 

(a)       On
demand, Borrower shall reimburse Lender for all costs and expenses, including, without
limitation, reasonable attorneys’ fees costs and disbursements (and fees and disbursements of Lender’s
in-house counsel) (collectively the “Fees and
Costs”) expended or incurred by Lender in any way in connection with: (i) the enforcement of this Agreement or any Other
Documents and the rights and remedies thereunder , including,
without limitation, Fees and Costs incurred in connection with any workout, attempted workout, and/or in connection with the
rendering of legal advice as to Lender’s rights, remedies
and obligations under this Agreement in connection with such enforcement or workout; (ii) collecting any sum which is or becomes due
to Lender; (iii) any proceeding, or any appeal; or (iv) the
exercise of the power of attorney granted to Lender in this Agreement. Fees and Costs shall include, without limitation, all
out-of-pocket fees and costs incurred by Lender in connection with the appraisal, inspection, assessment, evaluation
and insuring of the Collateral, and all fees and costs
incurred by Lender in connection with the negotiation and preparation of the this Agreement and the Other Documents, including
reasonable attorneys’ fees. If litigation or other legal action is filed or commenced in connection with this Agreement or any
of the Other Documents the prevailing party shall be entitled to its Fees and Costs. Fees and Costs shall include, without
limitation, attorneys’ fees and costs incurred in connection with the following: (1) contempt proceedings; (2) discovery; (3)
any motion, adversary proceeding, contested matter, submission or confirmation or opposition to plan of reorganization or any
other activity of any kind in connection with a bankruptcy case or relating to any petition or the filing thereof under Title 11 of
the United States Code; (4) garnishment, levy, and debtor and third party examinations; and (5) post judgment motions and
proceedings of any kind taken to clarify, collect or enforce any judgment or award.

 

    32 

     

    

 

(b)       All
Fees and Costs to which Lender may be entitled pursuant to this Agreement may be charged by Lender to Borrower’s Loan Account and
shall thereafter bear interest at the Contract Rate specified in this Agreement.

 

11.13       Benefit
of Agreement and Assignment.

 

(a)       The
provisions of this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns, heirs, beneficiaries
and representatives of Borrower and Lender; provided, however, that
Borrower may not assign or transfer any of its rights under this Agreement without the prior written consent of Lender, and any prohibited
assignment shall be void.

 

(b)       No
consent by Lender to any assignment shall release Borrower from its liability for the Obligations.
Lender may assign its rights and delegate their duties hereunder without the consent of Borrower.

 

(c)       Lender
reserves the right to syndicate all or a portion of the transaction
created herein or sell, assign, transfer, negotiate ,
or grant participations in all or any part of, or
any interest in Lender’s rights and benefits hereunder. In connection with any such syndication,
assignment or participation, Lender may disclose all documents and information which Lender now or hereafter
may have relating to Borrower or Borrower’s business.
Any such syndication by Lender shall not require the consent of the Borrower or any other Lender.
To the extent that Lender assigns its rights and obligations hereunder to a third Person, Lender thereafter shall be released from such
assigned obligations to Borrower.

 

11.14       Entire
Understanding.

 

(a)       This
Agreement and the documents executed concurrently herewith contain the entire understanding between Borrower and Lender and supersedes
all prior agreements and understandings, if any, relating to the subject matter hereof. Any
promises, representations, warranties or guarantees not herein contained and hereinafter made shall have no force and effect unless in
writing, signed by Borrower’s and Lender’s respective officers. Neither this Agreement nor any portion or provisions hereof
may be changed, modified, amended, waived, supplemented, discharged,
cancelled or terminated orally or by any course of dealing, or in any manner other than by an agreement in writing, signed by the party
to be charged. Borrower acknowledges that it has been advised by counsel in connection with the execution of this Agreement and Other
Documents and is not relying upon oral representations or statements inconsistent with the terms and provisions of this Agreement.

 

11.15       Successors
and Assigns; Participations; New Lenders.

 

(a)       This
Agreement shall be binding upon and inure to the benefit of Borrower, Lender,
all future holders of the Obligations and their respective successors and permitted assigns, except
that Borrower may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Lender.

 

    33 

     

    

 

(b)       Participations.

 

(i)       Lender
may at any time, without the consent of, or notice to Borrower,
sell participations (each a “Participation”) in all
or a portion of Lender’s rights and obligations under this Agreement ; provided
that (x) Lender’s obligations under this Agreement shall remain unchanged; (y) Lender shall remain solely responsible to the other
parties hereto for the performance of such obligation; and (z)
Borrower, Lender shall continue to deal solely and directly with
Lender in connection with Lender’s rights and obligations under this Agreement.
Any agreement pursuant to which Lender sells such a participation shall provide that Lender shall retain the right to enforce this Agreement
and approve any amendment, modification, or waiver of any provision of this Agreement.

 

(ii)       Borrower
acknowledges that in the regular course of commercial banking business one or more lenders may at any time and from time to time sell
participating interests in the Advances to other financial institutions (each such transferee or purchaser of a participating interest,
a “Participant”). Each Participant may exercise all rights of payment (including rights
of set-off) with respect to the portion of such Advances held by it or other Obligations payable hereunder as fully as if such Participant
were the direct holder thereof provided that Borrower shall not be required to pay to any Participant more than the amount which it would
have been required to pay to Lender which granted an interest in its Advances or other Obligations payable hereunder to such Participant
had Lender retained such interest in the Advances hereunder or other Obligations payable hereunder and in no event shall Borrower be required
to pay any such amount arising from the same circumstances and with respect to the same Advances or other Obligations payable hereunder
to both Lender and such Participant. Borrower hereby grants to any Participant a continuing security interest in any deposits, moneys
or other property actually or constructively held by such Participant as security for the Participant’s interest in the Advances.

 

(iii)       Borrower
authorizes Lender to disclose to any Participant, or any prospective
Participant, any and all financial information in Lender’s possession concerning Borrower which has been delivered to such Lender
by or on behalf of Borrower pursuant to this Agreement or in connection with such Lender’s credit evaluation of Borrower.

 

11.16       Application
of Payments. Lender shall have the continuing and exclusive right to apply or reverse and re-apply any payment and any and all proceeds
of Collateral to any portion of the Obligations. To the extent that Borrower makes a payment or Lender
receives any payment or proceeds of the Collateral for Borrower’s benefit, which are subsequently
invalidated, declared to be fraudulent or preferential, set aside or required to be repaid to a trustee, debtor in possession, receiver,
custodian or any other party under any bankruptcy law, common law or equitable cause, then, to such
extent, the Obligations or part thereof intended to be satisfied shall be revived and continue as if such payment or proceeds had not
been received by Lender.

 

    34 

     

    

 

11.17       Indemnity.
Borrower shall indemnify Lender and each of Lender’s respective officers, directors, Affiliates, attorneys, employees and
agents from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses
and disbursements of any kind or nature whatsoever (including fees and disbursements of counsel) which may be imposed on, incurred
by, or asserted against Lender in any claim, litigation, proceeding or investigation instituted or conducted by any Governmental
Body or instrumentality or any other Person with respect to any aspect of, or any transaction
contemplated by, or referred to in, or any matter related to, this Agreement or the Other Documents, whether or not Lender is a
party thereto, except to the extent that any of the foregoing arises out of the willful misconduct of the party being indemnified
(as determined by a court of competent jurisdiction in a final and non-appealable judgment). Without limiting the generality of the
foregoing, this indemnity shall extend to any liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses and disbursements of any kind or nature whatsoever (including reasonable fees and disbursements of counsel) asserted
against or incurred by any of the indemnitees described above in this Section 11.17 by any Person under any Environmental Laws or
similar laws by reason of Borrower’s or any other Person’s failure to comply with laws applicable to solid or hazardous
waste materials, including Hazardous Substances and Hazardous Waste, or other Toxic Substances . Additionally,
if any taxes (excluding taxes imposed upon or measured solely by the net income of Lender, but including any intangibles taxes,
stamp tax, recording tax or franchise tax) shall be payable by Lender or Borrower on account of the execution or delivery of this
Agreement, or the execution, delivery, issuance or recording of any of the Other Documents, or the creation or repayment of any of
the Obligations hereunder, by reason of any applicable law now or hereafter in effect, Borrower will pay (or will promptly reimburse
Lender for payment of) all such taxes, including interest and penalties thereon, and will
indemnify and hold the indemnitees described above in this Section 11.17 harmless from and against all liability in connection
therewith.

 

11.18       Captions.
Headings have been set forth herein for convenience only and shall not affect the interpretation or meanings of any provisions of this
Agreement. Unless the contrary is compelled by the context, everything contained in each article and section applies equally to this entire
Agreement.

 

11.19       Independent
Counsel. Borrower and Lender each acknowledge that: (i) they have had the opportunity to be represented by independent counsel in
connection with this Agreement; (ii) they have executed this Agreement with the advice of such counsel, as
applicable; (iii) this Agreement is the result of negotiations between the parties hereto and the advice
and assistance of their representative counsel, as applicable;
and (iv) the fact that this Agreement was prepared by Lender’s counsel as a matter of convenience
shall have no import or significance.

 

11.20       Publicity.
Lender is hereby authorized, at its expense and in its sole discretion, to
issue appropriate press releases and to cause a tombstone to be published announcing the consummation of this transaction and the aggregate
amount thereof.

 

11.21       Governing
Law; Jurisdiction; Venue.

 

(a)       This
Agreement and all acts and transactions hereunder and all rights and obligations of Lender and Borrower shall be governed by the internal
laws of the State of California, without regard to its conflicts of law principles.

 

(b)       As
a material part of the consideration to Lender to enter into this Agreement , Borrower
(a) agrees that all actions and proceedings relating directly or indirectly to this Agreement shall, at Lender’s option, be litigated
in courts located within California, and that the exclusive venue therefor shall be Los Angeles County; (b) consents to the jurisdiction
and venue of any such court and consents to service of process in any such action or proceeding by personal delivery or any other method
permitted by law; and (c) waives any and all rights Borrower may have to object to the jurisdiction of any such court,
or to transfer or change the venue of any such action or proceeding.

 

    35 

     

    

 

11.22       Relationship
of Parties. Lender shall not be deemed to be, nor does Lender or Borrower intend that Lender shall ever become, a partner, joint venturer,
fiduciary, manager, controlling person or participant of any kind in the business or affairs of Borrower,
whether as a result of this Agreement or any of the transactions contemplated by this Agreement. In exercising its rights and remedies
under this Agreement, Lender shall at all times be acting only as a lender to Borrower within the normal and usual scope of activities
of a lender.

 

11.23       Counterparts.
This Agreement may be executed in counterparts, each of which shall constitute an original, and all of which together shall constitute
one and the same document.

 

11.24       WAIVER
OF RIGHT TO TRIAL BY JURY; JUDICIAL REFERENCE IN THE EVENT OF JURY TRIAL WAIVER UNENFORCEABILITY. EACH PARTY TO THIS AGREEMENT HEREBY
EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (1) ARISING UNDER THIS AGREEMENT OR ANY OTHER
INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH, OR (2) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER
NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH
PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY. NOTWITHSTANDING THE FOREGOING TO THE CONTRARY, IN THE EVENT THAT THE JURY TRIAL WAIVER CONTAINED HEREIN
SHALL BE HELD OR DEEMED TO BE UNENFORCEABLE, EACH PARTY HERETO HEREBY EXPRESSLY AGREES TO SUBMIT TO JUDICIAL
REFERENCE ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION ARISING HEREUNDER FOR WHICH A JURY TRIAL WOULD OTHERWISE BE APPLICABLE OR AVAILABLE.
PURSUANT TO SUCH JUDICIAL REFERENCE, THE PARTIES AGREE TO THE APPOINTMENT OF A SINGLE REFEREE AND SHALL USE THEIR BEST EFFORTS TO AGREE
ON THE SELECTION OF A REFEREE. IF THE PARTIES ARE UNABLE TO AGREE ON A SINGLE REFEREE, A REFEREE SHALL BE APPOINTED BY THE COURT TO HEAR
ANY DISPUTES HEREUNDER IN LIEU OF ANY SUCH JURY TRIAL EACH PARTY ACKNOWLEDGES AND AGREES THAT THE APPOINTED REFEREE SHALL HAVE THE POWER
TO DECIDE ALL ISSUES IN THE APPLICABLE ACTION OR PROCEEDING, WHETHER OF FACT OR LAW, AND SHALL REPORT A STATEMENT OF DECISION THEREON;
PROVIDED, HOWEVER, THAT ANY MATTERS WHICH WOULD NOT OTHERWISE BE THE SUBJECT OF A JURY TRIAL WILL BE UNAFFECTED BY THIS WAIVER AND THE
AGREEMENTS CONTAINED HEREIN. THE PARTIES HERETO HEREBY AGREE THAT THE PROVISIONS CONTAINED HEREIN HAVE BEEN FAIRLY NEGOTIATED ON AN ARM’S-LENGTH
BASIS, WITH BOTH SIDES AGREEING TO THE SAME KNOWINGLY AND BEING AFFORDED THE OPPORTUNITY TO HAVE THEIR RESPECTIVE LEGAL COUNSEL CONSENT
TO THE MATTERS CONTAINED HEREIN. ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT
AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY AND THE AGREEMENTS CONTAINED HEREIN
REGARDING THE APPLICATION OF JUDICIAL REFERENCE IN THE EVENT OF THE INVALIDITY OF SUCH JURY TRIAL WAIVER.

 

    36 

     

    

 

Borrower and Lender have initialed this Section 11.24 to further indicate
their awareness and acceptance of each and every provision hereof.

 

	/s/ H.C.	 	/s/ K.C
	Borrower Initials	 	Lender’s Initials

 

[signatures appear on following
pages]

 

    37 

     

    

 

 

IN WITNESS WHEREOF, the parties hereto have executed
this Agreement as of the date set forth in the heading to this Agreement.

 

BORROWER:

 

	SNAIL GAMES USA INC.,

a California corporation

 

	 
	By:	/s/ Heidy Chow	 
	Name:	Heidy Chow	 
	Its:	CFO	 

 

		Address:	12049 Jefferson Boulevard

Culver City, CA 90230

 

[Signatures Continued
on Next Page]

 

    38

     

    

 

[Signatures Continued from Previous
Page]

 

LENDER:

 

	CATHAY BANK,

a California banking corporation

 

	 
	By:	/s/ Kevin Chen	 
	Name:	Kevin Chen	 
	Its:	AVP LPO	 

 

		Address:	9650 Flair Drive

El Monte, CA 91731

Telephone: (626) 279-3676

Facsimile: (626) 279-3705

 

    39

     

    

 

EXHIBIT A

 

FORM OF NOTE

 

$9,000,000.00                              EL
MONTE, CALIFORNIA                               June 17, 2021

 

FOR VALUE RECEIVED, the undersigned (“Borrower”),
hereby promises to pay to CATHAY BANK, a California banking corporation or registered assigns (“Lender”), in accordance
with the provisions of the Loan Agreement (as hereinafter defined), the principal amount of each Advance from time to time made by Lender
to Borrower under that certain Loan and Security Agreement, dated as of June 17, 2021 (as amended,
restated, extended, supplemented or otherwise modified in writing from time to time, the “Loan Agreement”;
the terms defined therein being used herein as therein defined), among Borrower and Cathay Bank (“Lender”).

 

Borrower promises to pay interest on the unpaid
principal amount of each Advance from the date of such Advance until such principal amount is paid in full, at such interest rates and
at such times as provided in the Loan Agreement. All payments of principal and interest shall be made to Lender for the account of Lender
in Dollars in immediately available funds at Lender’s Office. If any amount is not paid in full when due hereunder, such unpaid
amount shall bear interest, to be paid upon demand, from the due date thereof until the date of actual payment (and before as well as
after judgment) computed at the per annum rate set forth in the Loan Agreement. This Note is issued pursuant to,
and evidences Advances and Obligations under the Loan Agreement, to which reference is made for a statement of the rights and obligations
of Lender and the duties and obligations of Borrower. The Loan Agreement contains provisions for acceleration of the maturity of this
Note upon the happening of certain stated events, and for the borrowing, prepayment and reborrowing of amounts upon specified terms and
conditions.

 

The holder of this Note is hereby authorized by
Borrower to record on a schedule annexed to this Note (or on a supplemental schedule or on a ledger or other account maintained by Lender)the
amounts owing with respect to Advances and Obligations, and the payments thereof. Failure to make any notation, however, shall not affect
the rights of the holder of this Note or any obligations of Borrower hereunder or under the Loan Agreement or the Other Documents.

 

Time is of the essence of this Note. Borrower and
all endorsers, sureties and guarantors of this Note hereby severally waive demand, presentment for payment, protest, notice of protest,
notice of intention to accelerate the maturity of this Note, diligence in collecting, the bringing of any suit against any party,
and any notice of or defense on account of any extensions, renewals, partial payments, or changes in any manner of or in this Note
or in any of its terms, provisions and covenants, or any releases or substitutions of any security, or any delay, indulgence or other
act of any trustee or any holder hereof, whether before or after maturity.

 

This Note is the Note referred to in the Loan Agreement,
is entitled to the benefits thereof and may be prepaid in whole or in part subject to the terms and conditions provided therein. Upon
the occurrence and continuation of one or more of the Events of Default specified in the Loan Agreement,
all amounts then remaining unpaid on this Note shall become, or may be declared
to be, immediately due and
payable all as provided in the Loan Agreement. Advances made by
Lender shall be evidenced by one or more loan accounts or records
maintained by Lender in the ordinary course of business. Lender may also attach schedules to this Note and endorse thereon the date, amount
and maturity of its Advances and payments with respect thereto.

 

    EXHIBIT A-1

     

    

 

Borrower, for itself, its
successors and assigns, hereby waives diligence, presentment, protest and demand and notice of protest, demand, dishonor and non-payment
of this Note.

 

THIS REVOLVING NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA.

 

	 	SNAIL GAMES USA INC.,

a California corporation

 

	 	By:	/s/ Heidy Chow
	 	Name:	Heidy Chow
	 	Its:	CFO

 

    EXHIBIT A-2

     

    

 

ADVANCES AND
PAYMENTS WITH RESPECT THERETO

 

	Date	 	Type of

 Advance 

Made	 	Amount of 

Advance

 Made	 	Amount of 

Principal or

 Interest Paid 

This Date	 	Outstanding

 Principal 

Balance 

This Date	 	Notation 

Made By
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 

 

    EXHIBIT A-3

     

    

 

EXHIBIT B

 

FORM OF BORROWING BASE CERTIFICATE

 

(to be attached)

 

    EXHIBIT B-1

     

    

 

EXHIBIT C

 

TRADE NAMES

 

N/A

 

    EXHIBIT C-1

     

    

 

EXHIBIT D

 

LOCATIONS OF COLLATERAL

 

1. 12049 Jefferson Boulevard, Culver
City, CA 90230

 

    EXHIBIT D-1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00348-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00348-of-00352.parquet"}]]