Document:

Nexaira Wireless Inc.: Exhibit 10.1 - Filed by newsfilecorp.com

EXECUTION VERSION

LOAN AND SECURITY AGREEMENT 

between 

NEXAIRA, INC.

 as Borrower, 

and 

CENTURION CREDIT FUNDING LLC 

as Lender 

Dated as of May 16, 2011

Table of Contents

	SECTION
      1 	DEFINITIONS
      	1
      
	1.1
      	UCC
      Definitions 	1
      
	1.2
      	Accounting
      Definitions and Financial Statements 	1
      
	1.3
      	Certain
      Defined Terms 	1
      
	1.4
      	Other
      Definitional Provisions 	16
      
	1.5
      	Construction
      	16
      
	SECTION
      2 	LOAN,
      COLLATERAL AND CONVERSION 	17
      
	2.1
      	Loan
      	17
      
	2.2
      	Use
      of Proceeds 	19
      
	2.3
      	Interest
      	19
      
	2.4
      	Prepayment
      	19
      
	2.5
      	Fees
      and Expenses 	20
      
	2.6
      	General
      Provisions Regarding Payments and Principal Payments 	20
      
	2.7
      	Grant
      of Security Interest 	21
      
	2.8
      	Preservation
      of Collateral and Perfection of Security Interests Therein 	21
      
	2.9
      	Possession
      of Collateral and Related Matters 	23
      
	2.10
      	Release
      of Security Interests 	23
      
	2.11
      	Taxes
      	23
      
	2.12
      	Blocked
      Accounts 	24
      
	2.13
      	Conversion
      Option 	25
      
	2.14
      	Conversion
      Price 	25
      
	2.15
      	Mechanics
      of Conversion 	25
      
	SECTION
      3 	CONDITIONS
      TO CLOSING AND advances 	27
      
	3.1
      	Conditions
      to Closing 	27
      
	3.2
      	Conditions
      for Future Advances 	30
      
	SECTION
      4 	REPRESENTATIONS
      AND WARRANTIES 	31
      
	4.1
      	Organization,
      Powers, Capitalization 	31
      
	4.2
      	Authorization
      of Borrowing; No Conflict 	32
      
	4.3
      	Financial
      Condition 	33
      
	4.4
      	Indebtedness
      and Liabilities 	33
      
	4.5
      	Account
      Warranties 	33
      

-i-

	4.6
      	Names,
      Entity Changes 	34
      
	4.7
      	Jurisdictions;
      Locations; FEIN 	34
      
	4.8
      	Title
      to Properties; Liens 	35
      
	4.9
      	Litigation;
      Adverse Facts 	35
      
	4.10
      	Payment
      of Taxes 	35
      
	4.11
      	Performance
      of Agreements 	35
      
	4.12
      	Employee
      Benefit Plans 	35
      
	4.13
      	Intellectual
      Property 	36
      
	4.14
      	Broker’s
      Fees 	36
      
	4.15
      	Environmental
      Compliance 	36
      
	4.16
      	Solvency
      	37
      
	4.17
      	Disclosure
      	37
      
	4.18
      	Insurance
      	37
      
	4.19
      	Compliance
      with Laws 	37
      
	4.20
      	Bank
      Accounts 	37
      
	4.21
      	Subsidiaries
      and Affiliates 	37
      
	4.22
      	Employee
      Matters 	38
      
	4.23
      	Governmental
      Regulation 	38
      
	4.24
      	Trade
      Relations 	38
      
	4.25
      	Absence
      of Defaults 	38
      
	SECTION
      5 	AFFIRMATIVE
      COVENANTS 	38
      
	5.1
      	Financial
      Statements and Other Reports 	38
      
	5.2
      	Access
      to Accountants 	41
      
	5.3
      	Inspection
      	42
      
	5.4
      	Collateral
      Records 	42
      
	5.5
      	Account
      Covenants; Verification 	42
      
	5.6
      	Corporate
      Existence 	42
      
	5.7
      	Payment
      of Taxes 	43
      
	5.8
      	Maintenance
      of Properties; Insurance 	43
      
	5.9
      	Compliance
      with Laws 	43
      
	5.10
      	Further
      Assurances 	43
      
	5.11
      	Collateral
      Locations 	43
      
	5.12
      	Landlords
      and Bailees 	43
      

-ii-

	5.13
      	Use
      of Proceeds and Margin Security 	44
      
	5.14
      	Revisions
      or Updates to Schedules 	44
      
	5.15
      	Accuracy
      of Information 	44
      
	5.16
      	Delivery
      of Certain Collateral; Requirements to Give Notice of Future Acquisition
      of Certain Collateral 	44
      
	5.17
      	SEC
      Filings 	46
      
	SECTION
      6 	NEGATIVE
      COVENANTS 	46
      
	6.1
      	Indebtedness
      	46
      
	6.2
      	Guaranties
      	46
      
	6.3
      	Transfers,
      Liens and Related Matters 	46
      
	6.4
      	Restriction
      on Fundamental Changes 	47
      
	6.5
      	Transactions
      with Affiliates 	47
      
	6.6
      	Environmental
      Liabilities 	47
      
	6.7
      	Conduct
      of Business 	47
      
	6.8
      	Compliance
      with ERISA 	47
      
	6.9
      	Subsidiaries
      	47
      
	6.10
      	Fiscal
      Year 	47
      
	6.11
      	Press
      Release; Public Offering Materials 	48
      
	6.12
      	Payments
      on and Amendments to Subordinated Debt 	48
      
	6.13
      	Organizational
      Documents 	48
      
	6.14
      	No
      Impairment of Restricted Payments 	48
      
	6.15
      	Advances,
      Loans or Investments 	48
      
	6.16
      	Management
      or Consulting Fees 	48
      
	6.17
      	Anti-Terrorism
      Laws 	48
      
	6.18
      	Use
      of Revolving Loans 	48
      
	SECTION
      7 	DEFAULTS,
      RIGHTS AND REMEDIES 	49
      
	7.1
      	Event
      of Default 	49
      
	7.2
      	Acceleration
      	51
      
	7.3
      	Application
      of Proceeds 	51
      
	7.4
      	Remedies
      	52
      
	7.5
      	Appointment
      of Attorney-in-Fact 	53
      
	7.6
      	Limitation
      on Duty of Lender with Respect to Collateral 	53
      
	7.7
      	License
      of Intellectual Property 	53
      

-iii-

	7.8
      	Waivers,
      Non-Exclusive Remedies 	54
      
	SECTION
      8 	MISCELLANEOUS
      	54
      
	8.1
      	Assignments
      and Participations 	54
      
	8.2
      	Entire
      Understanding 	54
      
	8.3
      	Set
      Off 	55
      
	8.4
      	Expenses
      and Attorneys’ Fees 	55
      
	8.5
      	Indemnity
      	56
      
	8.6
      	Amendments
      and Waivers 	56
      
	8.7
      	Notices
      	56
      
	8.8
      	Survival
      of Warranties and Certain Agreements 	57
      
	8.9
      	Indulgence
      Not Waiver 	58
      
	8.10
      	Marshaling;
      Payments Set Aside 	58
      
	8.11
      	Entire
      Agreement 	58
      
	8.12
      	Independence
      of Covenants 	58
      
	8.13
      	Severability
      	58
      
	8.14
      	Headings
      	58
      
	8.15
      	APPLICABLE
      LAW 	59
      
	8.16
      	Successors
      and Assigns 	59
      
	8.17
      	No
      Fiduciary Relationship; Limitation of Liabilities 	59
      
	8.18
      	CONSENT
      TO JURISDICTION 	59
      
	8.19
      	WAIVER
      OF JURY TRIAL 	60
      
	8.20
      	Construction
      	60
      
	8.21
      	Counterparts;
      Effectiveness 	60
      
	8.22
      	No
      Duty 	60
      
	8.23
      	Communications
      by Borrower to Lender 	60
      
	8.24
      	Confidentiality
      	60
      
	8.25
      	Electronic
      Execution of Loan Documents 	61
      

-iv-

Exhibits and Schedules

	Exhibit A – Form of Request Letter 
	Exhibit B – Form of Perfection Certificate 
	 
	Schedule 1.1(A) – Existing Liens 
	Schedule 3.1(I) – Litigation 
	Schedule 4.1(B) – Capitalization 
	Schedule 4.2 - Conflicts 
	Schedule 4.3(C) – Pro Forma 
	Schedule 4.6 – Names 
	Schedule 4.7 – Locations; FEIN; Jurisdictions 
	Schedule 4.9 – Litigation; Adverse Facts
  
	Schedule 4.10 – Payment of Taxes 
	Schedule 4.12 – Pension Benefit Plans and
      Multiemployer Plans 
	Schedule 4.13 – Intellectual Property 
	Schedule 4.14 – Broker’s Fees 
	Schedule 4.15 – Environmental Compliance / Environmental
      Permits 
	Schedule 4.18 – Insurance 
	Schedule 4.20 – Deposit Accounts , Securities Accounts and
      Commodity Accounts 
	Schedule 4.21 – Subsidiaries 
	Schedule 4.22 – Employee Matters 
	Schedule 5.17(i) – Chattel Paper,
      Instruments and Documents 
	Schedule 5.17(ii) – Investment Property and Commodity
      Contracts 
	Schedule 5.17(iii) – Letters of Credit and
      Letter of Credit Rights 
	Schedule 5.17(iv) – Commercial Tort Claims 
	Schedule 6.1 –Indebtedness 
	Schedule 6.5 – Transactions with Affiliates 
	Schedule 6.15 – Permitted Investments

	Schedule 6.16 - Management Fees 

-v-

LOAN AND SECURITY AGREEMENT

     This LOAN AND SECURITY AGREEMENT
(“Agreement”) is dated as of May 16, 2011, and entered into by and
between NEXAIRA, INC., a California corporation (“Borrower”), and
CENTURION CREDIT FUNDING LLC, a Delaware limited liability company
(“Lender”), and, solely with respect to Sections 2.13, 2.14
and 2.15, Nexaira Wireless Inc., a Nevada corporation
(“Holdings”).

RECITALS

     WHEREAS, Borrower desires to
establish financing arrangements with Lender and Lender is willing to make loans
and extensions of credit to Borrower, which will be used by Borrower pursuant to
Section 2.2 hereof; and

     WHEREAS, Borrower desires to
secure the Obligations (as defined in Section 1.3), by, inter
alia, granting to Lender a security interest in and lien upon all of the
property and assets of Borrower.

     NOW, THEREFORE, in consideration
of the premises and the agreements, provisions and covenants herein contained,
Borrower and Lender agree as follows: 

SECTION 1 DEFINITIONS

     1.1 UCC Definitions.
Unless otherwise defined herein, the following terms shall have the respective
meanings given to them in Article 9 and/or Article 8 of the UCC: Accessions,
Accounts, Account Debtor, Chattel Paper (and Electronic Chattel Paper and
Tangible Chattel Paper), Commercial Tort Claim, Commodity Account, Commodity
Contract, Deposit Account, Documents, Electronic Chattel Paper, Equipment,
Fixtures, General Intangibles, Goods, Financial Assets, Instruments, Inventory,
Investment Property, Letter of Credit Rights, Money, Negotiable Instruments,
Payment Intangibles, Proceeds, Promissory Notes, Records, Securities Account,
Security (and Certificated Security and Uncertificated Security), Security
Entitlement, Software and Supporting Obligations.

     1.2 Accounting Definitions and
Financial Statements. As used in this Agreement, the other Loan Documents or
any certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 1.3 or elsewhere in
this Agreement shall have the respective meanings given to them under GAAP. All
financial statements and other financial information furnished to Lender
pursuant to Section 5.1 shall be prepared in accordance with GAAP and
past practices, consistently applied.

     1.3 Certain Defined Terms.
The following terms used in this Agreement shall have the following
meanings:

          “Advance(s)”
means any monies advanced or credit extended to Borrower by Lender under this
Agreement, including the Revolving Advances and the Bridge Loan.

          “Affiliate”
means, as to any Person, any other Person (the “affiliated Person”): (a)
directly or indirectly controlling, controlled by, or under common control with
such Person; (b) directly or indirectly owning, controlling or holding five
percent (5%) or more of any Capital Stock of such Person; (c) directly or
indirectly controlling or holding five percent (5%) or more of Capital Stock of
such affiliated Person having ordinary voting power for the election of members
of the Board of such Person or the power to direct or cause the direction of
management of such Person, is directly or indirectly owned or held by such
Person; or (d) which affiliated Person has a senior executive officer who is
also a senior executive officer of any such Person.

          “Agreement”
means this Loan and Security Agreement, as the same may be amended, restated,
supplemented or otherwise modified or extended or renewed from time to time.

          “Anti-Terrorism
Laws” means any Applicable Laws relating to terrorism or money laundering,
including Executive Order No. 13224, the USA Patriot Act, any applicable Laws
comprising or implementing the Bank Secrecy Act, and any applicable Laws
administered by the United States Treasury Department's Office of Foreign Asset
Control (as any of the foregoing applicable Laws may from time to time be
amended, renewed, extended, or replaced).

          “Asset
Disposition” means the disposition, in any transaction or series of related
transactions, whether by sale, lease or sublease (as lessor or sublessor), sale
and leaseback, assignment, conveyance, transfer or other disposition or exchange
of any of the assets of Borrower, any Guarantor or any Subsidiary (whether such
assets are now owned or hereafter acquired), including, without limitation, the
Capital Stock of Borrower, any Guarantor or any Subsidiary, in each case whether
or not consideration therefor consists of cash, Securities or other assets owned
by Borrower or any Guarantor; provided however that the issuance of Capital
Stock of Borrower or any Guarantor shall not be deemed an “Asset Disposition”.

          “Balance
Revolving Advance” means a Revolving Advance made to a Supplier on behalf of
and at the request of Borrower in an amount equal to the remaining amount due to
such Supplier for Inventory manufactured or supplied by such Supplier for
Borrower.

          “Bankruptcy
Code” means Title 11 of the United States Code entitled “Bankruptcy,” as now
and hereafter in effect, or any successor statute.

          “Blocked
Accounts” has the meaning assigned to that term in Section
2.12(B).

          “Blocked
Finance Account” has the meaning assigned to that term in Section
2.12(A).

          “Blocked
Operating Account” has the meaning assigned to that term in Section
2.12(B).

          “Board”
means, as to any Person other than an individual, the board of directors (or any
equivalent body of partners, members or managers) having governance and
management over such Person).

          “Borrower”
has the meaning assigned to that term in the preamble to this Agreement and
shall extend to all successors and permitted assigns of Borrower.

-2-

          “Bridge
Loan” means the Advances made pursuant to Section 2.1(B)(i) .

          “Bridge
Loan Note” means the secured promissory notes issued by Borrower in a form
acceptable to Lender, issued pursuant to Section 2.1(B)(ii) .

          “Bridge
Loan Repayment Date” means October 24, 2011. 

          “Business
Day” means any day excluding Saturday, Sunday and any day which is a legal
holiday under the laws of the State of New York or the Province of British
Columbia, or is a day on which banking institutions located in such jurisdiction
are permitted to be closed.

          “Capitalized
Lease” means: (a) any lease of property, real or personal, if the then
present value of the minimum rental commitment thereunder should, in accordance
with GAAP, be capitalized on a balance sheet of Holdings and its consolidated
Subsidiaries, and (b) any other such lease, the obligations under which are
capitalized on the balance sheet of Holdings and its consolidated
Subsidiaries.

          “Capitalized
Lease Obligation” means any and all indebtedness, obligations and
indebtedness under any Capitalized Lease.

          “Capital
Stock” means with respect to any Person, any and all shares, interests,
participations or other equivalents (however designated) of capital stock of a
corporation, any and all equivalent ownership interests in a Person (other than
a corporation), including, without limitation, partnership interests and
membership interests, and any and all warrants, rights or options to purchase or
other arrangements or rights to acquire any of the foregoing.

          “Casualty
Event” means the occurrence of any of the following events: (i) any asset or
property owned by Borrower or any Guarantor is damaged or destroyed, or suffers
any other loss or (ii) any asset or property owned by Borrower or any Guarantor
is condemned, confiscated or otherwise taken, in whole or in part, or the use
thereof is otherwise diminished so as to render impracticable or unreasonable
the use of such asset or property for the purpose for which such asset or
property was used immediately prior to such condemnation, confiscation or
taking, by exercise of the powers of condemnation or eminent domain or
otherwise.

          “Change
of Control” means the failure of Holdings to own, directly or indirectly,
one hundred percent (100%) of the Capital Stock of Borrower or of Nexaira
Wireless (BC) Ltd.

          “Closing
Date” means May 16, 2011.

          “Collateral”
means, collectively, any and all assets of Borrower on which a Lien in favor of
Lender has been created and/or granted to secure the Obligations, specifically
including without limitation, the property and assets of Borrower described in
Section 2.7. 

          “Confidential
Information” has the meaning assigned to that term in Section
8.24.

          “Control”
means, with respect to any Person (other than an individual), the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such Person, whether through the ownership of any
Capital Stock and/or the ability to exercise voting power, by contract or otherwise, and
“controlling” and “controlled” and “under common control”,
with respect to any Person (other than an individual), have meanings correlative
thereto.

-3-

          “Default”
means a condition, act or event that, after notice or lapse of time or both,
would constitute an Event of Default.

          “Default
Rate” has the meaning assigned to that term in Section 2.3(A).

          “Deposit
Revolving Advance” means a Revolving Advance made to a Supplier on behalf of
and at the request of Borrower in an amount equal to the initial deposit
required by such Supplier in connection with the manufacture or supply by such
Supplier of Inventory for Borrower.

          “Eligible
Purchase Order” means a purchase order from a customer of Borrower received
in the ordinary course of business of Borrower and which Lender, in its
commercially reasonable discretion, shall deem to be an Eligible Purchase Order.
A purchase order shall not be an Eligible Purchase Order unless it meets the
following specifications: (i) the Account that will arise from performance of
such purchase order by Borrower will be valid and enforceable representing the
undisputed indebtedness of an Account Debtor; (ii) the Account that will arise
from performance of such purchase order by Borrower will not be subject to any
defense, set-off, or counterclaim, deduction, discount, credit, chargeback,
freight claim, allowance or adjustment of any kind; (iii) no notice of the
bankruptcy, receivership, reorganization, liquidation, dissolution, or
insolvency of the applicable Account Debtor has been received by Lender or
Borrower; (iv) the applicable Account Debtor is not a Subsidiary or Affiliate of
Borrower; (v) the purchase order does not represent a sale pursuant to a
government contract unless Borrower has complied, for the benefit of Lender,
with the Federal Assignment of Claims Act or comparable state law; (vi) the
applicable Account Debtor has its principal place of business or executive
office inside the United States or Canada, unless the payment of any related
Account is guaranteed by an irrevocable letter of credit satisfactory to Lender
or by credit insurance satisfactory to Lender; (vii) the underlying transaction
complies in all respects with all applicable laws, rules and regulations of any
Governmental Authority; (viii) the purchase order directs the applicable Account
Debtor to make payment directly to a Blocked Finance Account; (ix) the
applicable Account Debtor is not determined by Lender, in its reasonable
discretion, not to be creditworthy at the time the related Revolving Advance is
to be made; and (x) each representation or warranty made in this Agreement as to
the applicable Account Debtor or purchase order is true and correct.

          “Employee
Benefit Plan” means any employee benefit plan within the meaning of Section
3(3) of ERISA (including a Pension Benefit Plan) which (a) is maintained for
employees of any member of the ERISA Affiliate Group or (b) has at any time
within the preceding six (6) years been maintained for the employees of any
current of former member of the ERISA Affiliate Group.

          “Environmental
Claims” means claims, liabilities, investigations, litigation,
administrative proceedings, judgments or orders relating to Hazardous
Materials.

-4-

          “Environmental
Laws” means any present or future Laws (as implemented and as interpreted)
governing the manufacture, possession, generation, processing, treatment,
control, removal, disposal, disposition, storage, transportation, handling,
spill, release or discharge of, or the abatement or remediation of or any
corrective or response action relating to, Hazardous Materials, including as
provided in the provisions of (a) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, (42 U.S.C. §§9601 et seq.) (b) the United
States federal Solid Waste Disposal Act, (c) the United States federal Clean
Water Act, (d) the United States federal Clean Air Act, (e) the Hazardous
Materials Transportation Act (49 U.S.C. §§1801, et seq.), (f) the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. §§6901 et seq.), (g) the United
States federal Water Pollution Control Act Amendments of 1972, (h) the Toxic
Substances Control Act (15 U.S.C. §§2601 et seq.), (i) any and all comparable
and/or similar Laws of any foreign government (whether of any foreign national
government or any agency or instrumentality of or province, county, district,
department, subdivision or local unit of any such foreign national government),
(j) the rules, regulations and ordinances of the United States Environmental
Protection Agency, (or any equivalent environmental regulatory or protection
agency or instrumentality of any state, territorial, provincial, local or
foreign government), and any departments of health services, regional water
quality control boards, state water resources control boards, and/or cities in
which Borrower’s assets are located and (k) any consent orders or consent
decrees or any similar voluntary agreements entered into between any applicable
Person and any applicable Governmental Authority (specifically including the
United States Environmental Protection Agency, (or any equivalent environmental
regulatory or protection agency or instrumentality of any state, territorial,
provincial, local or foreign government), or any injunctions, orders or decrees
issued by any such applicable Governmental Authority with respect to any such
applicable Person and/or its property and assets, regarding the manufacture,
possession, generation, processing, treatment, control, removal, disposal,
disposition, storage, transportation, handling, spill, release or discharge of,
or the abatement or remediation of or any corrective or response action relating
to, Hazardous Materials by such applicable Person and/or on any real property
owned or operated by such applicable Person.

          “Equipment”
means and includes all of Borrower’s goods (other than Inventory), farm products
or consumer goods, whether now owned or hereafter acquired and wherever
located.

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

          “ERISA
Affiliate Group” means, collectively, (i) Borrower, (ii) the Guarantors,
(iii) any Person who is or was at any time within the preceding six (6) years a
Subsidiary of Holdings and (iv) any other Person (and/or unincorporated trade
trades or business) which either now is, or was at any time within the preceding
six (6) years, treated as a single employer together with any one or more of
Holdings or any such Subsidiaries (or former Subsidiaries) within the meaning of
Section 414(b) and (c) of the IRC. 

          “Event
of Default” means any of the events set forth in Section 7.1.

-5-

          “Excess
Interest” has the meaning assigned to that term in Section 2.3(C).

          “Exchange
Act” means the Securities Exchange Act of 1934, as amended. 

          “Excluded
Taxes” has the meaning assigned to that term in Section 2.11.

          “Financed
Account” means any Account that arises from the sale of Inventory by
Borrower with respect to which Lender made a Deposit Revolving Advance or a
Balance Revolving Advance, regardless of whether such Deposit Revolving Advance
or Balance Revolving Advance has been repaid.

          “Financed
Account Debtor” means, with respect to any Financed Account, the Account
Debtor obligated to make payment on account of such Financed Account.

          “Financial
Statements” means (a) the audited consolidated and consolidating balance
sheet of Holdings its consolidated Subsidiaries for the Fiscal Year ended on
October 31, 2010, and the related consolidated and consolidating statement of
operations, shareholder’s or member’s (as applicable) equity and cash flows for
Holdings and its consolidated subsidiaries for the Fiscal Year then ended as
prepared by Holdings’ independent certified public accountants, and (b) the
unaudited consolidated and consolidating company prepared balance sheet of
Holdings and its consolidated Subsidiaries for the period ended January 31,
2011, and the related consolidated and consolidating statement of operations,
shareholder’s or member’s (as applicable) equity and cash flows for Holdings and
its consolidated Subsidiaries for such period then ended.

          “Fiscal
Year” means each twelve month fiscal measurement period for Holdings and its
consolidated Subsidiaries ending on October 31 of each year.

          “GAAP”
means, subject to the application of Section 1.2, generally accepted
accounting principles in effect from time to time in the United States, applied
on a consistent basis.

          “Governmental
Authority” means the government of the United States of America or any other
nation, or of any political subdivision thereof, whether state, territorial,
provincial or local, and any agency, authority, division, department,
instrumentality, regulatory body, court (including any administrative court) or
other judicial body or judicial authority, central bank or other entity
exercising the executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to any government.

          “Guarantors”
means, collectively, Holdings, Nexaira Wireless (BC) Ltd., a British Columbia
corporation, and any other Person that may hereafter from time to time execute
any guaranty and suretyship agreement in favor of Lender with respect to the
Obligations, and shall extend to all heirs, estates, successors and permitted
assigns of each such Person.

          “Guarantor
Security Documents” means, collectively, those various agreements,
instruments and documents, including all security agreements, charging
agreements, mortgages, etc., which may from time to time be executed by the
respective Guarantors pursuant to which any Guarantor shall at any time grant
Liens to Lender in such of its assets, real and/or personal, tangible and/or intangible, described therein as security for
the payment and performance of the Obligations, as each such agreement,
instrument or document may be amended, restated, supplemented or otherwise
modified from time to time.

-6-

          “Guaranty”
means, individually, and “Guarantees” means, collectively, the Guaranty
and any other unconditional guaranty and suretyship agreement executed by any
Guarantor in favor of Lender, pursuant to each of which the respective
Guarantor(s) shall give a continuing and unconditional agreement to guaranty and
stand surety for the Obligations, whether any such guaranty and suretyship
agreement shall be executed as of the date hereof or at any time in the future,
as any such agreement may be amended, restated, supplemented or otherwise
modified or extended or renewed from time to time.

          “Hazardous
Material” means all or any of the following: (a) substances that are defined
or listed in, or otherwise classified pursuant to, any Environmental Laws as
“hazardous substances”, “hazardous materials”, “hazardous wastes”, “toxic
substances” or any other formulation intended to define, list or classify
substances by reason of deleterious properties such as ignitability,
corrosivity, reactivity, carcinogenicity, toxicity or significant adverse effect
on human health or are otherwise subject to regulation under any Environmental
Laws, (b) oil, petroleum or petroleum derived substances or products, natural
gas, natural gas liquids or synthetic gas and drilling fluids, produced waters
and other wastes associated with the exploration, development or production of
crude oil, natural gas or geothermal resources, (c) any flammable explosives,
radon or any radioactive materials, (d) asbestos in any form, methane, urea
formaldehyde foam insulation, polychlorinated biphenyls (or electrical equipment
which contains any oil or dielectric fluid containing polychlorinated biphenyls)
or lead based paint, (e) all waste materials subject to regulation under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended by the Superfund Amendment and Reauthorization Act of 1986, (42 U.S.C.
§§9601 et seq), the Resource Conservation and Recovery Act of 1976 (42 U.S.C. §§
6901 et seq.), and any other applicable federal and state Laws now in force or
hereafter enacted relating to hazardous waste disposal.

          “Holdings”
has the meaning assigned to that term in the preamble to this Agreement and
shall extend to all successors and permitted assigns of Holdings.

          “Indebtedness”,
as applied to any Person, means without duplication: (a) all obligations of such
Person for borrowed money, (b) all obligations of such Person evidenced by
bonds, debentures, notes, drafts or similar instruments, (c) all obligations of
such Person upon which interest charges are customarily paid, (d) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (e) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of business
due and payable no more than ninety (90) days from the date of incurrence of
such obligation), (f) all indebtedness of others of a type described in any
other clause of this definition secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured by)
any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed by such Person or is non-recourse
to such Person, (g) all direct or indirect guarantees, endorsements (other than
for collection or deposit in the ordinary course of business), discountings with
recourse or sales with recourse by such Person of indebtedness of others of a type described in any
other clause of this definition, (h) that portion of any Capital Lease
Obligations that are properly classified as a liability on a balance sheet in
conformity with GAAP, (i) all obligations, contingent or otherwise, of such
Person in respect of letters of credit and letters of guaranty, (j) all
obligations, contingent or otherwise, of such Person in respect of bankers’
acceptances for the account of such Person or as to which such Person is
otherwise liable for reimbursement of drawings, (k) all obligations of such
Person the primary purpose or intent of which is to provide assurance to an
obligee that the obligation of the obligor thereof (other than such Person) will
be paid or discharged, or the holders thereof will be protected (in whole or in
part) against loss in respect thereof; and (l) all obligations of such Person in
respect of any exchange traded or over the counter derivative transaction, or
interest rate or commodity pricing speculation. The Indebtedness of Borrower
shall include the Indebtedness of any other entity (including any partnership in
which Borrower or any of its Subsidiaries is a general partner) to the extent
Borrower is liable therefor as a result of Borrower’s ownership interest in or
other relationship with such entity, except to the extent the terms of such
Indebtedness expressly provide that Borrower is not liable therefor.

-7-

          “Intellectual
Property” means, with respect to any Person, all patents, patent
applications and like protections, including improvements divisions,
continuation, renewals, reissues, extensions and continuations in part of the
same, trademarks, trade names, trade styles, trade dress, service marks, logos
and other business identifiers and, to the extent permitted under applicable
law, any applications therefore, whether registered or not, and the goodwill of
the business of such Person connected with and symbolized thereby, copyright
rights, copyright applications, copyright registrations and like protections in
each work of authorship and derivative works, whether published or unpublished,
technology, know-how and processes, operating manuals, trade secrets, computer
hardware and software, rights to unpatented inventions and all applications and
licenses therefor, used in or necessary for the conduct of business by such
Person and all claims for damages by way of any past, present or future
infringement of any of the foregoing.

          “IRC”
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor statute and all rules and regulations promulgated thereunder.

          “Law”
means, collectively, all statutes, laws, judicial decisions, regulations,
guidances, guidelines, ordinances, rules, judgments, orders, decrees, codes,
plans, injunctions, permits, concessions, grants, franchises, governmental
agreements and governmental restrictions (in each case whether federal, state,
provincial, territorial, local and foreign) applicable in any relevant
circumstance to any relevant Person, any relevant property and/or assets or any
relevant interest (including any Lien) in any such relevant property and/or
assets, and/or any relevant agreement, contract, instrument or document
(specifically including this Agreement and each other Loan Document), including
all applicable common law and equitable principles, all provisions of all
applicable federal, state, provincial, territorial, local and foreign
constitutions, and all orders, judgments, injunctions and decrees of all
relevant courts and other Governmental Authorities and other arbitrators with
respect to such relevant Person or relevant property or assets and all consent
orders and consent decrees and all similar voluntary agreements entered into
between any relevant Person and any applicable Governmental Authority with
respect to such relevant Person or relevant property or assets.

-8-

          “Liabilities”
has the meaning given that term in accordance with GAAP and shall include all
Indebtedness.

          “Lien”
means any lien (whether statutory or otherwise), mortgage, deed of trust,
pledge, hypothecation, assignment, security interest, charge or encumbrance of
any kind, whether voluntary or involuntary, (including any conditional sale or
other title retention agreement, any lease in the nature thereof, and any
agreement to give any security interest).

          “Loan”
means, collectively, the Revolving Advances and Bridge Loan. 

          “Loan
Documents” means this Agreement, the Notes, the Pledge Agreement, the
Guaranties, the Guarantor Security Documents, the Warrant and all other
instruments, documents, guaranties and agreements executed by or on behalf of
any Loan Party and delivered concurrently herewith or at any time hereafter to
or for Lender in connection with this Agreement, the Loan or any other
transaction contemplated by this Agreement, all as amended, restated,
supplemented or modified from time to time.

          “Loan
Party” means each of Borrower, and the Guarantors and shall extend to all
successors and permitted assigns of each such Person.

          “Material
Adverse Effect” means a material adverse effect upon or material adverse
developments with respect to (a) the businesses, operations, properties, assets,
condition (financial or otherwise), prospects or material agreements of Borrower
and Guarantors taken as a whole, (b) Borrower’s and Guarantors’ ability, taken
as a whole, to fully and timely perform their Obligations under any Loan
Document, (c) the validity or enforceability against any Loan Party of a Loan
Document to which it is a party, (d) the value of the Collateral or the Liens
(or the priority thereof) in favor of Lender on the Collateral, or (e) any of
the rights, remedies and benefits available to, or conferred upon, Lender under
any Loan Document and/or the ability of Lender to enforce or collect any of the
Obligations.

          “Maturity
Date” means the one year anniversary of the Closing Date. 

          “Maximum
Credit Amount” means $2,200,000.

          “Maximum
Rate” has the meaning assigned to that term in Section 2.3(C).

          “Multiemployer
Plan” means a “multiemployer plan” as defined in Sections 3(37)
and 4001(a)(3) of ERISA and to which (i) any member of the ERISA
Affiliate Group is currently making or accruing an obligation to make
contribution; or (ii) any current or former member of the ERISA Affiliate Group
has at any time within the preceding six (6) years made contributions.

          “Multiple
Employer Plan” means a Pension Benefit Plan which has two or more
contributing sponsors (including Borrower or any ERISA Affiliate) at least two
of whom are not under common control, as such a plan is described in Section
4064 of ERISA.

-9-

          “Net
Cash Proceeds” means (i) with respect to any issuance or sale of any equity
or debt securities or instruments by Borrower or any Guarantor or any other
financing obtained by Borrower or any Guarantor the aggregate cash proceeds
received by Borrower or any Guarantor in respect of such issuance, net of reasonable direct
costs (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) incurred by Borrower and/or Guarantor in connection
with such issuance, (ii) with respect to any Asset Disposition relating to any
property of Borrower or any Guarantor, the aggregate cash proceeds received by
Borrower in respect of such Asset Disposition, net of (a) reasonable direct
costs (including, without limitation, legal, accounting and investment banking
fees, and sales commissions) incurred by Borrower or any Guarantor, or any of
them, in connection with such Asset Disposition, (b) repayment of any
Indebtedness secured by such property or asset that is permitted to be
outstanding hereunder and (c) taxes paid or payable as a result thereof (it
being understood that “Net Cash Proceeds” shall include, without limitation, any
cash received upon the sale or other disposition of any non-cash consideration
received by Borrower or any Guarantor in any such Asset Disposition), and (iii)
with respect to any Casualty Event affecting any property of Borrower or any
Guarantor, the aggregate cash proceeds received by Borrower or any Guarantor in
respect of such Casualty Event (whether as the proceeds of any insurance,
payment of any condemnation or takings compensation by any Governmental
Authority or otherwise), net of (a) reasonable direct costs (including, without
limitation, legal fees) incurred by Borrower or any Guarantor, or any of them,
in obtaining such cash proceeds in respect of such Casualty Event and (b)
repayment of any Indebtedness secured by such property or asset that is
permitted to be outstanding hereunder. 

          “Notes”
means collectively, the Bridge Loan Note and the Revolving Note. 

          “Obligations”
means all loans, advances, debts, covenants, duties, obligations, liabilities
and indebtedness of every kind or nature of each and every Borrower now or
hereafter from time to time owed to Lender under or in connection with the Loan
Documents, specifically including the Loan and also specifically including all
accrued and unpaid interest on the Advances under the Loan and fees owing to,
and all obligations and liabilities for the costs and expenses of, Lender (in
each such case as and to the full extent provided for under the Loan Documents),
all whether primary or secondary, direct or contingent, fixed or otherwise, and
all whether heretofore, now and/or from time to time hereafter owing, due and/or
payable, including any interest, fees, costs and expenses accruing and owing at
any time under the Loan Documents, whether before or after default, maturity
and/or judgment, or after the filing of any petition in bankruptcy, or the
commencement of any insolvency, receivership, reorganization or like proceeding
relating to Borrower, whether or not a claim for post-filing or post-petition
interest is allowed or allowable in such proceeding).

          “Organizational
Documents” means, as to any Person, collectively: (a) any articles or
certificate of incorporation, organization or formation of such Person, (b) any
bylaws, operating agreement, limited liability agreement or partnership
agreement of such Person and (c) any other applicable documents relating to such
Person’s organization or formation as a legal entity or to the entity governance
matters of such Person (including any shareholders’ or equity holders’ agreement
to which such Person and/or its shareholders or equity holders are a party).

          “Other
Taxes” has the meaning assigned to that term in Section 2.11(B).

          “Overadvance”
has the meaning assigned to that term in Section 2.1(A)(iii).

-10-

          “Payment
Taxes” has the meaning assigned to that term in Section 2.11(A).

          “PBGC”
means the Pension Benefit Guaranty Corporation established pursuant to Subtitle
A of Title IV of ERISA or any successor.

          “Pension
Benefit Plan” means at any time any employee pension benefit plan (including
a Multiple Employer Plan, but not a Multiemployer Plan) which is covered by
Title IV of ERISA or is subject to the minimum funding standards under
Section 412 of the Code and either (i) is maintained by any member of the
ERISA Affiliate Group for the employees of any of them; or (ii) has at any time
within the preceding six (6) years been maintained by any current or former
member of the ERISA Affiliate Group for employees of any entity which was at
such time a member of the ERISA Affiliate Group.

          “Permitted
Encumbrances” means the following types of Liens:

          (A)
Liens securing the Obligations;

          (B)
Liens for taxes, assessments and governmental charges (other than Environmental
Claims or ERISA) the payment of which is not yet due and payable or that are
being Properly Contested;

          (C)
landlords’, common carriers’, mechanics’, workers’, materialmen’s or other like
Liens imposed by any applicable Law (but not voluntarily granted by Borrower)
arising in the ordinary course of business and securing obligations (other than
Indebtedness for borrowed money) that are not overdue by more than thirty (30)
days or are being Properly Contested;

          (D)
Existing Liens described on Schedule 1.1(A), but not the extension of
coverage thereof to other property or assets;

          (E)
Liens on fixed or capital assets (including Equipment) hereafter acquired to
secure a portion of the purchase price thereof or costs of repair or improvement
thereof, provided that any such Lien (1) shall not extend to or cover any other
property of Borrower, (2) shall secure Indebtedness permitted by clause (b) of
Section 6.1, (3) is incurred (together with the Indebtedness secured
thereby) prior to or within 20 days after such acquisition or the completion of
such construction or improvement, and (4) the principal amount of the
Indebtedness secured thereby does not exceed the lesser of (x) the fair market
value thereof or, (y) 100% of the cost of acquiring, constructing or improving
such fixed or capital assets;

          (F)
Liens arising from precautionary UCC financing statements in respect of
operating leases (but not Capitalized Lease Obligations);

          (G)
Liens in favor of custom and revenue authorities arising as a matter of law to
secure payment of custom duties in connection with the importation of goods so
long as such Liens attach only to the imported goods; 

-11-

          (H)
deposits and pledges of cash made in the ordinary course of business securing
(i) obligations incurred in respect of workers’ compensation, unemployment
insurance, social security or other forms of governmental insurance or benefits,
(ii) obligations incurred in respect of the performance of bids, tenders,
leases, contracts (other than for Indebtedness or for the payment of money) and
statutory obligations or (iii) obligations incurred with respect to surety or
appeal bonds, but only to the extent such obligations described in clauses (i)
through (iii) arise in the ordinary course of business and are not past due;

          (I)
easements, zoning restrictions, rights-of-way and similar encumbrances on real
property and minor irregularities in the title thereto that either (i) are in
existence on the date hereof and, in the case of any real property that is part
of the Collateral on the date hereof, have been accepted by Lender as an
exception under any policy of title insurance issued to Lender to secure its
Lien on such real property or (ii) are hereafter imposed by law or hereafter
arise in the ordinary course of business, and in any such case under clause (i)
or (ii) do not (1) secure Indebtedness or any other obligations for the payment
of money or (2) materially adversely impair the value of such property or its
use by Borrower in the normal conduct of Borrower’s business; and

          (J)
other Liens permitted to be incurred by Borrower for which Lender may, in its
sole discretion, hereafter consent.

          “Permitted
Investments” means: (a) investments of Borrower outstanding on the date
hereof and listed on Schedule 6.15 hereto, (b) marketable direct
obligations issued or unconditionally guaranteed by the United States of America
or any agency thereof maturing within one (1) year from the date of acquisition
thereof, (c) marketable obligations issued or unconditionally guaranteed by any
state of the United States of America or any political subdivision of any such
state maturing within one (1) year from the date of acquisition thereof and
having the highest rating obtainable from either Standard & Poor’s or
Moody’s Investor Services, Inc., (d) commercial paper maturing no more than one
(1) year from the date of creation thereof and having the highest rating
obtainable from either Standard & Poor’s or Moody’s Investor Services, Inc.,
(e) certificates of deposit maturing no more than one (1) year from the date of
investment therein issued by a commercial bank if such bank has a combined
capital and surplus of at least $250,000,000; (f) any U.S. money market fund, a
majority of the assets of which are invested in assets of the kind described in
clauses (a) through (e) hereof, (g) investments consisting of (1) the accounts
receivable of Borrower arising and trade credit granted by Borrower in the
ordinary course of business and (2) any securities received by Borrower from
financially troubled Account Debtors in complete or partial satisfaction of any
such accounts receivable or trade credit of Borrower, and (h) deposits,
prepayments and other credits to Suppliers made in the ordinary course of
business consistent with Borrower’s past practices.

          “Person”
means and includes natural persons, corporations, limited partnerships, general
partnerships, limited liability companies, joint stock companies, joint
ventures, associations, companies, trusts, banks, trust companies, land trusts,
business trusts or other organizations, whether or not legal entities, and
governments and agencies and political subdivisions thereof.

-12-

          “Pledge
Agreement” means the Collateral Pledge Agreement executed by the Pledgors,
dated as of the date hereof, as the same may be amended, restated, supplemented
or otherwise modified or extended or renewed from time to time.

          “Pledged
Collateral” has the meaning assigned to that term in the Pledge Agreement,
and shall in any event include any and all Capital Stock issued by Borrower and
now or hereafter owned or acquired by any Pledgor.

          “Pledgor”
means collectively, Guarantors and each other Person who shall from time to time
hereafter become a party to the Pledge Agreement, and shall extend to all
successors and permitted assigns (in each case as applicable) of each such
Person.

          “Pro
Forma” means the unaudited balance sheet of Holdings and its Subsidiaries on
a consolidated basis as of the Closing Date after giving effect to the
Transactions contemplated by this Agreement. The Pro Forma balance sheet of
Holdings and Borrower on a consolidated basis is annexed hereto as Schedule
4.3(C).

          “Properly
Contested” means, in the case of any Indebtedness and/or any other liability
of Borrower or any Guarantor (including any taxes) that is not paid as and when
due and payable by reason of Borrower’s or any Guarantor’s bona fide dispute
concerning its liability to pay same or concerning the amount thereof, (i) such
Indebtedness or liability is being properly contested in good faith by
appropriate proceedings promptly instituted and diligently conducted; (ii)
Borrower or any Guarantor has established appropriate reserves with respect to
its contingent obligations for such Indebtedness or liability as shall be
required in conformity with GAAP; (iii) the non-payment of such Indebtedness or
liability shall not have a Material Adverse Effect and shall not result in the
forfeiture of any assets of Borrower or any Guarantor; (iv) no Lien is imposed
upon any of Borrower’s or any Guarantor’s assets with respect to such
Indebtedness or liability, or, if any such Lien is so imposed, enforcement of
such Lien is stayed during the period prior to the final resolution or
disposition of such dispute, and, if the Lien is imposed with respect to any
property or assets that are part of the Collateral, such Lien shall not be
senior in priority to Lender’s Liens in the Collateral with respect to any
Obligations incurred through the date Borrower or any Guarantor shall have
commenced such contest; (v) if such Indebtedness or liability results from, or
is determined by the entry, rendition or issuance against a Borrower or any
Guarantor or any of their assets of a judgment, writ, order or decree,
enforcement of such judgment, writ, order or decree is stayed pending a timely
appeal or other judicial review; and (vi) if such contest is abandoned, settled
or determined adversely (in whole or in part) to Borrower or any Guarantor,
Borrower or any Guarantor forthwith and promptly pays such Indebtedness or
liability and all penalties, interest and other amounts due in connection
therewith. Furthermore, no such Indebtedness or liability shall be deemed to be
“Properly Contested” hereunder unless the applicable Parties shall give written
notice to Lender promptly upon (1) the commencement of any such contest
proceedings (which such notice shall include information as to whether any Lien
will be imposed on any assets or property of Borrower or any Guarantor during
the pendency of any such contest proceedings and whether or not such Lien will
have priority over Lender’s Liens in the Collateral with respect to any
Obligations, whether such Obligations are incurred prior to, during, or after
the commencement of such contest proceedings), (2) upon any development or
determination or decision that is materially adverse to the interests of Borrower, any Guarantor and/or any of their
property or assets in such contest proceeding, and (3) upon the resolution of
such contest proceeding.

-13-

          “Restricted
Payment” means: (a) any declaration or payment of any dividend or other
distribution or return of equity capital, direct or indirect, on account of any
shares or other interest of any class of the Capital Stock of any or any
Subsidiary now or hereafter outstanding, or the authorization or incurrence of
any liability to make any other payment, distribution or delivery of other
Property in respect of any shares or other interest of any class of the Capital
Stock of Borrower, any Guarantor or any Subsidiary, except a dividend payable
solely with shares or other interests of the Capital Stock of Borrower, any
Guarantor or any Subsidiary on which such dividend is declared or distribution
made, (b) any payment or prepayment of principal of, premium, if any, or
interest on, or any redemption, conversion, exchange, retirement, defeasance,
purchase or other acquisition for value, direct or indirect, of any debt that is
subordinated to the Obligations or any shares or other interests of any class of
the Capital Stock of Borrower, any Guarantor or any Subsidiary now or hereafter
outstanding, or any payment to any sinking fund or similar payment or setting
aside of any funds for any of the forgoing purposes, or the issuance of a notice
of an intention to do any of the foregoing, (c) any payment made to retire, or
to obtain the surrender of, any outstanding warrants, options or other rights to
acquire shares or other interest of any class of the Capital Stock of Borrower,
any Guarantor or any Subsidiary now or hereafter outstanding, or any payment to
any sinking fund or similar payment or setting aside of any funds for any of the
forgoing purposes, or the issuance of a notice of an intention to do any of the
foregoing, (d) any payment of a claim for the rescission of the purchase or sale
of, or for material damages arising from the purchase or sale of, any shares or
other interest of any class of the Capital Stock of Borrower, any Guarantor or
any Subsidiary or of a claim for reimbursement, indemnification or contribution
arising out of or related to any such claim for damages or rescission, (e) any
payment, loan, contribution, or other transfer of funds or other assets or
property to any holder of any shares or other interest of any class of the
Capital Stock of Borrower, any Guarantor or any Subsidiary other than payment of
compensation (including bonuses) in the ordinary course of business and
consistent with past practices of Borrower, any Guarantor and any Subsidiary to
stockholders or other equity holders who are officers and/or employees of
Borrower, any Guarantor or any Subsidiary for services actually rendered and (f)
any other payments by Borrower, any Guarantor or any Subsidiary restricted by
the terms of any of the Loan Documents.

          “Revolving
Advances” means the Advances made pursuant to Section 2.1(A)(i). 

          “Revolving
Credit Facility” has the meaning assigned to that term in Section
2.1(A)(i). 

          “Revolving
Note” means the secured revolving note issued by Borrower in a form
acceptable to Lender, issued pursuant to Section 2.1(A)(iv).

          “Standstill
Agreements” means, with respect to the holder of any Indebtedness set forth
on Schedule 6.1, or any officer of Borrower or any Guarantor party to a
consulting or employment agreement under which agreement there is an outstanding
balance of $25,000 or more as of the date of this Agreement, an agreement, in
form and substance satisfactory to Lender, among Borrower or such Guarantor,
Lender and such holder or such officer, as the case may be, pursuant to which such holder or such officer, as the
case may be, agrees, among other things, to (i) defer, in the case of such
holder, the payment of such Indebtedness and any interest thereon or other
amount payable with respect thereto or, in the case of such officer, any
compensation, fees or other amounts payable under or in connection with such
consulting or employment agreement, and (ii) refrain from taking any enforcement
action against Borrower with respect to such Indebtedness or such consulting or
employment agreement, as applicable, in each case, until the payment in full of
the Bridge Loan, all accrued and unpaid interest thereon and all unpaid fees and
expenses incurred by Lender in connection therewith.

-14-

          “Subsidiary”
means, if applicable, with respect to any Person, any corporation, partnership,
limited liability company, association, joint venture or other business entity
of which more than 50% of the total voting power of shares or other interests of
Capital Stock entitled (without regard to the occurrence of any contingency) to
vote in the election of the Person or Persons (whether directors, managers,
trustees or other Persons performing similar functions) having the power to
direct or cause the direction of the management and policies thereof is at the
time owned or controlled, directly or indirectly, by such Person (and/or any of
its other Subsidiaries). Each reference to a “Subsidiary” or “Subsidiaries”
herein shall be a reference to each and/or all Subsidiaries of Holdings, unless
such reference clearly indicates such reference is a Subsidiary or the
Subsidiaries of some other Person

          “Supplier”
means a seller, supplier and/or vendor of Inventory to Borrower.

          “Taxes”
means all present and future federal, state, territorial, provincial, municipal,
local, foreign and other governmental taxes, levies, imposts, duties,
deductions, withholdings, claims, assessments, fees or other charges imposed by
any Governmental Authority which are or may be due by Borrower, any Guarantor or
any Subsidiary with respect to its business, operations, Collateral or
otherwise, including any interest, additions to tax or penalties applicable
thereto.

          “Termination
Date” means the earlier to occur of (i) the Maturity Date, (ii) any date on
which Obligations are accelerated pursuant to Section 7.2 hereof, or
(iii) the date Borrower voluntarily prepays the Loan and all other Obligations
in full as provided for in Section 2.4 hereof and terminates this
Agreement.

          “Transactions”
means, the execution and delivery by Borrower of this Agreement and the other
Loan Documents, the making of the Loan and the consummation of the other
transactions contemplated under this Agreement and the other Loan Documents,
including without limitation, the issuance of the Warrant.

          “UCC”
means the Uniform Commercial Code in the State of New York, as in effect and/or
amended from time to time, and any successor statute, except that, when used in
connection with the perfection, effect of perfection or nonperfection or
priority of any Liens created hereunder or under any other Loan Documents, “UCC”
means the Uniform Commercial Code as in effect and/or amended from time to time
in the jurisdiction whose laws are required to govern such perfection, the
effect of perfection or nonperfection or priority of any such Lien under the
provisions regarding choice of law, conflicts of law and applicable governing
laws under the Uniform Commercial Code of the State of New York as
in effect and/or amended from time to time.

-15-

          “Warrant”
means the Warrant issued by Holdings to Lender on the Closing Date, in form and
substance satisfactory to Lender, permitting Lender to purchase up to 15,000,000
shares of Capital Stock of Holdings.

     1.4 Other Definitional
Provisions. References to “Sections”, “subsections”, “Exhibits” and
“Schedules”, shall be to Sections, subsections, Exhibits and Schedules,
respectively, of this Agreement unless otherwise specifically provided. Any of
the terms defined in Section 1.1 may, unless the context otherwise
requires, be used in the singular or the plural depending on the reference. In
this Agreement, (i) words importing any gender include the other genders; (ii)
the words “including,” “includes” and “include” (whether or not preceded by the
words “particularly” or “specifically”) shall be deemed to be followed by the
words “without limitation”; (iii) the words “herein”, “hereof” and “hereunder”
and other words of similar import refer to this Agreement as a whole and not to
any particular section, paragraph or subdivision; (iv) the word “will” shall be
construed to have the same meaning and effect as the word “shall; (v) the words
“asset” and “property” shall be construed to have the same meaning and effect
and to refer to any and all tangible and intangible assets and properties, real
and personal, including cash, Money, Securities, Accounts and contract rights;
(vi) unless otherwise provided, all references to any instruments or agreements,
including references to any of the other documents, shall be deemed to be a
reference to such instrument or agreement, as the same may be amended, restated,
supplemented or otherwise modified or extended or renewed from time to time, but
only if and to the extent such amendment, restatement, supplement, modification,
extension or renewal are permitted and/or not prohibited by the terms hereof;
(vii) references to Persons include their respective heirs, estates, successors
and permitted assigns (in each case as applicable) or, in the case of
governmental Persons, Persons succeeding to the relevant functions of such
Persons; and (vii) all references to statutes shall be deemed to include and
also be a reference to any related regulations issued by any Governmental
Authority under and/or in connection with such statues and all references to any
statues and/or related regulations shall include any amendments of same and any
successor statutes and regulations. A Default or Event of Default shall be
deemed to exist at all times during the period commencing on the date that such
Default or Event of Default occurs through the date on which such Default or
Event of Default is waived in writing by Lender pursuant to this Agreement (or,
in the case of a Default, is cured within any period of cure expressly provided
for in this Agreement prior to maturing into an Event of Default). All
references to particular times of day herein shall be a reference to the time as
in effect in New York, New York on the applicable date.

     1.5 Construction. Each of
the parties hereto acknowledges that (i) it has been represented by counsel in
the negotiation and documentation of the terms of this Agreement and the other
Loan Documents; (ii) it has had full and fair opportunity to review and revise
the terms of this Agreement and the other Loan Documents; (iii) this Agreement
and each of the other Loan Documents has been drafted jointly by all of the
parties hereto; and (iv) Lender has no fiduciary relationship with or duty to
Borrower or any Guarantor arising out of or in connection with this Agreement or
any of the other Loan Documents, and the relationship between the Lender, on the
one hand, and Borrower and the Guarantors (and each of them), on the other hand,
in connection herewith or therewith is solely that of debtor and creditor.
Accordingly, each of the parties hereto acknowledges and agrees that the
terms of this Agreement and the other Loan Documents shall not be construed
against or in favor of another party. 

-16-

SECTION 2 LOAN, COLLATERAL AND
CONVERSION

     2.1 Loan.

          (A)
Revolving Advances.

               (i)
Subject to the terms and conditions of this Agreement, Lender hereby establishes
for the benefit of Borrower a revolving credit facility (the “Revolving
Credit Facility”) which shall consist of cash advances (“Revolving
Advances”) extended by Lender to or for the benefit of Borrower from time to
time hereunder in Lender’s commercially reasonable discretion. The aggregate
principal amount of unpaid Revolving Advances shall not at any time exceed the
Maximum Credit Amount. Subject to such limitation, the outstanding balance of
Revolving Advances may fluctuate from time to time, to be reduced by voluntary
or required repayments made by Borrower and to be increased by future Revolving
Advances which may be made by Lender. 

               (ii)
Revolving Advance Procedures. Borrower shall provide Lender with not less
than five (5) days prior written notice of its request to obtain a Revolving
Advance. Such notice shall be irrevocable. Each request for a Revolving Advance
shall be accompanied by a request letter in the form of Exhibit A attached
hereto, a copy of the Eligible Purchase Order related to such request and (a) in
the case of a Deposit Revolving Advance, a preliminary invoice reasonably
acceptable to Lender from the applicable Supplier setting forth the amount of
deposit due to such Supplier to ensure the delivery of Inventory required to
fill the Eligible Purchase Order, or (b) in the case of a Balance Revolving
Advance, a copy of the final invoice reasonably acceptable to Lender from the
applicable Supplier and a certification by Borrower that the Inventory related
to such Inventory has been received by Borrower. The amount of any Deposit
Revolving Advance shall not be greater than fifty percent (50%) of the total
cost of the Inventory payable to Supplier. Each Revolving Advance made by Lender
shall be paid directly to the applicable Supplier on behalf Borrower.

               (iii)
Payment of Revolving Advances. Unless otherwise required to be prepaid
under the terms hereof, the outstanding balance of Revolving Advances under the
Revolving Credit Facility shall be due and payable on the Termination Date.
Notwithstanding the foregoing, the outstanding principal balance of any Deposit
Revolving Advance shall be due and payable on the earlier of receipt of funds
from the applicable Financed Account Debtor or one hundred and twenty (120) days
after the making of such Deposit Revolving Advance and the outstanding balance
of any Balance Revolving Advance shall be due and payable on the earlier of
receipt of funds from the applicable Financed Account Debtor or sixty (60) days
after the making of such Balance Revolving Advance. If the aggregate principal
amount of unpaid Revolving Advances at any time exceeds the Maximum Credit
Amount (such excess referred to as “Overadvance”), Borrower shall
immediately repay the Overadvance in full.

               (iv)
Revolving Note. On the Closing Date, and subject to Section 2.1(C)
below, Borrower shall execute and deliver a promissory note in the amount of
the Maximum Credit Amount (“Revolving Note”). The Revolving
Note shall evidence Borrower’s unconditional obligation to repay Lender for all
Revolving Advances made from time to time under the Revolving Credit Facility,
with interest as herein provided. Each Revolving Advance under the Loan shall be
deemed evidenced by the Revolving Note, which is deemed incorporated herein by
reference and made part hereof. The Revolving Note shall be in form and
substance satisfactory to Lender.

-17-

          (B)
Bridge Loan.

               (i)
Subject to the terms and conditions of this Agreement Lender will make a bridge
loan (“Bridge Loan”) to Borrower in a principal amount equal to $300,000.
The Bridge Loan shall be advanced on the Closing Date and the outstanding
principal amount thereof and all accrued and unpaid interest thereon shall be
due and payable on the earlier of the Bridge Loan Repayment Date or the
Termination Date. 

               (ii)
Bridge Loan Note. On the Closing Date, and subject to Section 2.1(C)
below, Borrower shall execute and deliver a promissory note to Lender in the
amount of the Bridge Loan (“Bridge Loan Note”). The Bridge Loan Note shall
evidence Borrower’s unconditional obligation to repay Lender for the Bridge
Loan, with interest as herein provided. The Bridge Loan shall be deemed
evidenced by the Bridge Loan Note, which is deemed incorporated herein by
reference and made part hereof. The Bridge Loan Note shall be in form and
substance satisfactory to Lender.

          (C)
Notes. The Notes issued hereunder shall be issued in registered form.
Borrower shall keep at its principal executive office (located at the address
set forth in Section 8.7) registers in which Borrower shall
provide for the registration and transfer (upon notice from Lender) of each Note
issued hereunder and such registration shall apply as to both principal and any
stated interest accruing on the Note. The name and address of each holder of the
Note shall be registered in such registers. The Borrower shall give to any
holder of any Note promptly (but in any event within ten (10) days) following
request therefor, a complete and correct list of the names and addresses of all
registered holders of the Notes and the amount and kind of Notes held by each.
Whenever any Note(s) shall be surrendered for transfer or exchange, within five
(5) days after the receipt of written notice of such transfer Borrower , at its
expense will execute and deliver in exchange therefor a new Note or Notes (in
such denominations and registered in such name or names as may be requested by
the holder of the surrendered Note or Notes ), in the same aggregate unpaid
principal amount as that of the Note or Notes so surrendered subject to the
terms and provisions of this Agreement. Borrower may treat the person in whose
name any Note is registered as the owner of such Note for all purposes. Notes
shall not be transferred in denominations of less than $100,000, provided that
if necessary to enable the registration of transfer by a holder of its entire
holding of Notes, one Note may be in a denomination of less than $100,000. In
connection with the foregoing, Borrower shall take such other actions reasonably
requested by a holder of Note(s) in order to effect such any applicable
transfer, registration or exchange.

          (D)
Maturity. The Revolving Advances shall become due and payable on the
Termination Date. On such date, unless having been sooner accelerated,
automatically or by Lender, pursuant to the terms hereof, all Obligations shall
be due and payable in full. 

-18-

     2.2 Use of Proceeds. The
proceeds of the Loan shall be used exclusively for Borrower’s working capital
purposes and for the purchase of Inventory from Suppliers.

     2.3 Interest.

          (A)
Rate of Interest. Outstanding Advances under the Loan shall bear interest
at the rate of thirty-six percent (36%) per annum. Following the occurrence and
during the continuance of an Event of Default (specifically including without
limitation any Event of Default under Section 7.1(F) or (G)
hereof), at Lender’s sole option, Advances under the Loan shall bear
interest at the contract rate otherwise applicable under this Agreement plus ten
percent (10%) per annum (the “Default Rate”). 

          (B)
Computation and Payment of Interest. Interest on the Loan and all other
Obligations shall be computed on the daily principal balance thereof on the
basis of a 360 day year for the actual number of days elapsed in the period
during which it accrues. Interest on the Advances shall be due and payable to
Lender in arrears (i) monthly on the last day of each calendar month, (ii) on
the date of any prepayment hereunder, and (iii) on the Termination Date.

          (C)
Interest Laws. Notwithstanding any provision to the contrary contained in
this Agreement or any other Loan Document, Borrower shall not be required to
pay, and Lender shall not be permitted to collect, any amount of interest in
excess of the maximum amount of interest permitted by applicable Law (“Excess
Interest”). If any Excess Interest is provided for or is finally determined
by a court of competent jurisdiction in a non-appealable decision to have been
provided for in this Agreement or in any other Loan Document, then in such
event: (1) the provisions of this Section shall govern and control; (2) Borrower
shall not be obligated to pay any Excess Interest; (3) any Excess Interest that
Lender may have received hereunder shall be, at Lender’s option, (a) applied as
a credit against the outstanding principal balance of the Obligations or any
other outstanding accrued and unpaid Obligations (other than interest), (b)
refunded to the payer thereof, or (c) any combination of the foregoing; (4) the
interest rate(s) provided for herein shall be automatically reduced to the
maximum lawful rate allowed from time to time under applicable Law (the
“Maximum Rate”), and this Agreement and the other Loan Documents shall be
deemed to have been and shall be, reformed and modified to reflect such
reduction; and (5) Borrower shall not have any action against Lender for any
damages arising out of the payment or collection of any Excess Interest.
Notwithstanding the foregoing, if for any period of time interest on any
Obligations is calculated at the Maximum Rate rather than the applicable rate
under this Agreement, and thereafter such applicable rate becomes less than the
Maximum Rate, the rate of interest payable on such Obligations shall remain at
the Maximum Rate until Lender shall have received the amount of interest which
Lender would have received during such period on such Obligations had the rate
of interest not been limited to the Maximum Rate during such period.

     2.4 Prepayment. Borrower
may elect, upon not less than five (5) days prior written notice to Lender, (a)
to prepay in cash a portion or the entire outstanding balance of the Bridge
Loan; provided that any prepayment shall not be in an amount less than $50,000,
or (b) to repay in cash all or a portion of the outstanding balance of the
Advances and all other Obligations and, if the Advances and other Obligations
are paid in full, terminate this Agreement without penalty.

-19-

     2.5 Fees and Expenses.
Borrower shall pay to Lender all reasonable and customary charges for returned
items and all other bank charges actually incurred by Lender, as well as
reasonable and customary wire transfer charges actually incurred by Lender for
each wire transfer made under this Agreement.

     2.6 General Provisions
Regarding Payments and Principal Payments.

          (A)
Manner and Time of Payment. All payments made with respect to the
Obligations shall be made in United States Dollars by wire transfer to such bank
account and in accordance with such wiring instructions as Lender may from time
to time designate to Borrower in writing, without deduction, defense, setoff or
counterclaim. In the absence of an Event of Default and unless otherwise
expressly provided for herein, all payments on account of the Obligations shall
be applied in the following manner: (i) first to the payment of any accrued and
unpaid fees and charges owing under the Loan Documents, (ii) second to any
Obligations for the payment of expenses, costs and indemnities owing under the
Loan Documents, (iii) third to the payment of accrued and unpaid interest owing
under the Loan Documents, (iv) fourth to the payment of outstanding principal
due and owing under the Bridge Loan Note, (v) fifth to the payment of
outstanding principal due and owing under the Revolving Note, (vi) sixth to the
payment of outstanding principal not yet due under the Loan Documents in such
order as Lender may determine, and (vii) seventh to any other Obligations or any
other Indebtedness of any kind of Borrower owing to Lender. Payment made by
check or similar type of remittance shall be considered conditional and not
final unless and until full clearance occurs under all applicable banking
procedures.

          (B)
Payments on Business Days. Whenever any payment to be made hereunder
shall be stated to be due on a day that is not a Business Day, the payment may
be made on the next succeeding Business Day and such extension of time shall be
included in the computation of the amount of interest or fees due hereunder.

          (C)
Repayment of Principal and Other Obligations. The entire then-outstanding
principal balance of the (i) Bridge Loan, together with all accrued and unpaid
interest thereon shall be due and payable in full on the Bridge Loan Repayment
Date, (ii) Revolving Advances, together with all accrued and unpaid interest and
fees hereunder and any and all costs and expenses and/or other Obligations of
any kind then outstanding under any and all Loan Documents, shall be due and
payable in full on the Termination Date, in each case without deduction,
defense, set off or counterclaim of any sort. In the absence of an Event of
Default, all payments on account of the Obligations received under this
paragraph (C) shall be applied as provided for in paragraph (A) above. Following
the occurrence of an Event of Default, payments and proceeds of Collateral may
be applied to the Obligations in such order as Lender may determine.

          (D)
Mandatory Prepayment. In the event Borrower or any Guarantor: (i) issues
or sells any equity or debt securities or instruments in excess of $1,000,000 in
one transaction or a series of transactions, (ii) makes an Asset Disposition
(other than sales of Inventory and dispositions of obsolete or excess Equipment
in the ordinary course of business) or (iii) subject to the provisions of
Section 5.8 hereof, suffers a Casualty Loss, then, an amount equal to the
entire Net Cash Proceeds thereof or the portion thereof up to the full extent of
the Obligations then outstanding hereunder, shall be paid to Lender
and applied to the Obligations. In the absence of an Event of Default, all
payments on account of the Obligations received under this paragraph (D) shall
be applied as provided for in paragraph (A) above.

-20-

     2.7 Grant of Security
Interest. To secure the full and prompt payment and performance of the
Obligations as and when due (whether at the stated maturity, by acceleration or
otherwise), including all renewals, extensions, amendments, restructurings and
refinancings of any or all of the Obligations, Borrower hereby grants to Lender
a continuing first priority (subject only to the Permitted Encumbrances (as
applicable)) Lien in and to all right, title and interest of Borrower in any and
all assets and all property of Borrower, all whether now owned or hereafter
created, arising or acquired and wherever located, including all of the
following: 

               (i)
all Accounts, Chattel Paper (including all Electronic Chattel Paper and Tangible
Chattel Paper), Commercial Tort Claims, Deposit Accounts, Documents (including
all warehouse receipts and bills of lading), Equipment, Fixtures, General
Intangibles (including all Payment Intangibles, Software, Intellectual Property,
goodwill, going concern value), Goods, Instruments (including all Promissory
Notes and Negotiable Instruments), Inventory (including all stock-in-trade, raw
materials, work in process, items held for sale or lease or furnished or to be
furnished under contracts of sale or lease, goods that are returned, reclaimed
or repossessed, and materials used or consumed in Borrower’s business),
Investment Property and Financial Assets (including all Commodity Accounts,
Commodity Contracts, Securities (including all Certificated Securities and
Uncertificated Securities), Security Entitlements and Securities Accounts),
Letter of Credit Rights and Money, 

               (ii)
all parts, substitutions or replacements to or of or accessories to any tangible
assets and property included in the foregoing, and all Software and computer
programs embedded the foregoing, and all Accessions to the foregoing, 

               (iii)
all Supporting Obligations for any of the foregoing and all rights of Borrower
in any property belonging to any third party in which a Lien of any kind or
nature has been granted to Borrower to secure the payment or performance of any
third party under or with respect to any of the foregoing, 

               (iv)
all Records, books, ledger cards, files, correspondence, customer lists,
blueprints, technical specifications, manuals, computer software, computer
printouts, tapes, disks and other electronic storage media and related data
processing software and similar items that at any time evidence or contain
information relating to any of the foregoing or are otherwise necessary or
helpful in the collection thereof or realization thereupon and all other
business books and Records of Borrower, and 

               (v)
all cash and non-cash Proceeds (including, without limitation, insurance
proceeds), products, rents and profits of all of the foregoing.

     2.8 Preservation of Collateral
and Perfection of Security Interests Therein.

-21-

          (A) Further Assurances. Borrower shall, at Lender’s reasonable request, at
any time and from time to time, execute and deliver to Lender within ten (10)
days of such request, such financing statements, assignments, consents,
landlord, warehousemen or other waivers, documents and other agreements and
instruments (and, where applicable, pay the cost of filing or recording the same
in all public offices deemed reasonably necessary or desirable by Lender) and do
such other acts and things as Lender may deem necessary or desirable in order to
establish and maintain a valid, attached and perfected security interest in the
Collateral in favor of Lender, (free and clear of all other liens, claims and
rights of third parties whatsoever, whether voluntarily or involuntarily
created, except Permitted Encumbrances) to secure payment of the Obligations,
and in order to facilitate the collection of the Collateral. Borrower
acknowledges and agrees that the Collateral is intended to encompass all assets
and property of Borrower and if at any time Borrower acquires any interest in
any assets or property and either (i) a security interest in such assets or
property cannot be perfected by the filing of a financing statement in the
appropriate jurisdiction or (ii) such assets or property are not covered by the
collateral description and security interest grant set forth in Section 2.7
above and/or in the collateral description and security interest grant
contained in any other applicable Loan Document (e.g., Commercial Tort Claims
not specifically described in Section 2.7 above, it being certified by
Borrower that it has no interest in any Commercial Tort Claims as of the Closing
Date), then Borrower will promptly notify Lender of the same and, if requested
by Lender, take such reasonable steps as Lender may require in accordance with
the first sentence of this Section 2.8 to cause such assets or property
to become part of the Collateral and for the Lien of Lender therein to be a
valid, attached and perfected Lien. At Lender’s request, Borrower shall also (i)
immediately deliver to Lender all items constituting Collateral for which Lender
must receive possession to obtain and/or perfect a first priority perfected
security interest, including, without limitation, all Instruments (including all
Promissory Notes) and Documents and (ii) immediately provide Lender with
“control” (as defined in Articles 8 and/or 9 of the UCC with respect to each
applicable item or type of Collateral) with respect to any of the Collateral
over which Lender must have such “control” to obtain and/or perfect a first
priority perfected security interest.

          (B)
Financing Statements. Borrower hereby authorizes Lender to prepare and
file such financing statements (and any continuations thereof and amendments
thereto) naming Borrower as the “debtor” and naming Lender as the “secured
party” (including financing statements (and continuations thereof and amendments
thereto) describing the Collateral as “all assets” or “all personal property” of
Borrower or words to that effect) as Lender may from time to time deem necessary
or appropriate in order to perfect and maintain the Liens granted by Borrower in
any Collateral hereunder and/or under any other Loan Document in accordance with
the UCC. 

          (C)
Power of Attorney. Borrower hereby irrevocably makes, constitutes and
appoints each of the officers of Lender or its representatives the true and
lawful attorney and attorney-in-fact for Borrower (without requiring any of them
to act as such) with full power of substitution to do the following: (a) execute
in the name of Borrower any financing statements; (c) execute in the name of
Borrower any and all schedules, assignments, instruments, documents and
statements that either (x) Borrower is obligated to give Lender hereunder and
which Borrower has not provided within the time frame provided for hereunder or
(y) are necessary to create, provide for the attachment or perfection of (or
continue the perfection of) the Liens of Lender in the Collateral provided
hereunder and under the other Loan Documents, (d) do such other and further acts
and deeds in the name of Borrower that Lender may reasonably deem necessary or
desirable to create, provide for the attachment or perfection of (or continue
the perfection of) the Liens of Lender in the Collateral provided
hereunder and under the other Loan Documents, (d) endorse the name of Borrower
upon any and all checks, drafts, money orders and other instruments for the
payment of monies that are payable to Borrower and constitute collections on
Borrower’s Accounts or other Collateral, and (e) do such other and further acts
and deeds in the name of Borrower that Lender may reasonably deem necessary or
desirable to enforce any of its rights and remedies under the Loan Documents or
under any applicable Law with respect to Borrower or any of the Collateral,
including any such rights and remedies to enforce, realize upon, dispose of or
collect any Collateral. This power of attorney is coupled with an interest and
is irrevocable until payment in full and complete performance of all of the
Obligations and termination of this Agreement.

-22-

     2.9 Possession of Collateral
and Related Matters. Until an Event of Default has occurred and is
continuing, Borrower shall have the right, except as otherwise provided in this
Agreement, to take any of the following actions in the ordinary course of their
respective businesses: (a) to sell or lease, in the ordinary course of business,
any of Borrower’s Inventory normally held by Borrower for any such purpose, in
the ordinary course of business, (b) to use and consume any raw materials, work
in process or other materials normally held by Borrower for such purpose, or (c)
subject to the provisions of Section 2.6(D) hereof, to sell or otherwise
dispose of any obsolete or excess Equipment no longer necessary to the ordinary
operation of their respective businesses, provided, however, that
a sale in the ordinary course of business shall not include any transfer or sale
in satisfaction, partial or complete, of a debt owed by Borrower, or any bulk
sale or transfer or sale of any business line or division of Borrower. 

     2.10 Release of Security
Interests. Upon payment and satisfaction in full in cash of the Obligations
and termination of this Agreement, Lender shall release all liens and security
interests granted by Borrower in the Collateral. In connection with such
releases, Lender shall execute and deliver, at Borrower’s expense and with
reasonable promptness, any Lien release documentation or instruments reasonably
requested by Borrower to effectuate such releases, provided that, under
no circumstances shall Lender have any obligation to deliver any such release
documentation or instruments on the date of any payment in full of the
Obligations and termination of this Agreement unless Borrower shall have given
Lender at least seven (7) days (or such longer time as may be otherwise
applicable hereunder) prior written notice of the intention to make such payment
in full and terminate this Agreement.

     2.11 Taxes.

          (A)
All payments made by Borrower hereunder or under any Note will be, except as
provided in Section 2.11(B), made free and clear of, and without
deduction or withholding for, any present or future taxes, levies, imposts,
duties, fees, assessments or other charges of whatever nature now or hereafter
imposed by any Governmental Authority or by any political subdivision or taxing
authority thereof or therein with respect to such payments (but excluding any
tax imposed on or measured by the net income or profits of a Lender pursuant to
the laws of the jurisdiction in which it is organized or the jurisdiction in
which the principal office or applicable lending office of such Lender is
located or any subdivision thereof or therein (the “Excluded Taxes”)) and
all interest, penalties or similar liabilities with respect thereto (all such
non-excluded taxes, levies, imposts, duties, fees, assessments or other charges
being referred to collectively as “Payment Taxes”). If any Payment Taxes
are so levied or imposed, Borrower agrees to pay the full amount of such Payment Taxes,
and such additional amounts as may be necessary so that every payment of all
amounts due under this Agreement or any other Loan Document, after withholding
or deduction for or on account of any Payment Taxes, will not be less than the
amount provided for herein or therein. Borrower agrees to indemnify and hold
harmless Lender, and reimburse such Lender upon its written request, for the
amount of any Payment Taxes so levied or imposed and paid by such Lender.

-23-

          (B)
In addition, Borrower agrees to pay any present or future stamp, documentary,
privilege, intangible or similar Taxes or any other excise or property Taxes,
charges or similar levies that arise at any time or from time to time (other
than Excluded Taxes) (i) from any payment made under any and all Loan Documents,
(ii) from the transfer of the rights of Lender under any Loan Documents, or
(iii) from the execution or delivery by Borrower of, or from the filing or
recording or maintenance of, or otherwise with respect to, any and all Loan
Documents (hereinafter referred to as “Other Taxes”).

          (C)
Borrower will indemnify Lender for the full amount of Payment Taxes (including,
without limitation and without duplication, any Payment Taxes imposed by any
jurisdiction on amounts payable under this Section 2.11), subject to the
exclusion set out in the first sentence of Section 2.11(A), and will
indemnify Lender for the full amount of Other Taxes (including, without
limitation and without duplication, any Payment Taxes imposed by any
jurisdiction on amounts payable under this Section 2.11) paid by Lender
in respect of payments made or to be made hereunder, and any liability
(including penalties, interest and expenses) arising solely therefrom or with
respect thereto, whether or not such Payment Taxes or Other Taxes were correctly
or legally asserted. Payment of this indemnification shall be made within ten
(10) days from the date Lender makes written demand therefor.

          (D)
Within thirty (30) days after the date of any payment of Payment Taxes or Other
Taxes, Borrower shall furnish to the Lender, at its address referred to in
Section 8.7, the original or certified copy of a receipt evidencing
payment thereof.

          (E)
Without prejudice to the survival of any other agreement of Borrower hereunder,
the agreements and obligations of Borrower contained in this Section 2.11
shall survive the payment in full of all Obligations hereunder and under the
Notes.

     2.12 Blocked Accounts.

          (A)
Borrower shall establish and maintain deposit accounts at a bank or banks
acceptable to Lender, which accounts shall be subject to deposit account control
agreements with and acceptable to Lender (each such account, a “Blocked
Finance Account”). Borrower shall instruct all Financed Account Debtors to
make all payments on related Financed Accounts into a Blocked Finance Account.
All collections of Financed Accounts which may nevertheless be directly received
at any time by Borrower shall be held in trust for the benefit of Lender and
deposited into a Blocked Finance Account immediately upon receipt by Borrower.
All payments received with respect to a Financed Account in the Blocked Financed
Account shall be applied by Lender to repay outstanding Revolving Loans, if any,
made to purchase Inventory that gave rise to such Financed Account and the
excess, if any, shall (i) prior to the occurrence of any Event of Default, be
transferred promptly by or at the direction of Lender to the Blocked Operating Account or (ii) after the occurrence of any Event of
Default, be applied by Lender to the Obligations in Lender’s sole discretion.
Borrower shall not have any right of access to or withdrawal from any Blocked
Finance Account.

-24-

          (B)
Borrower shall establish and maintain a deposit account at a bank acceptable to
Lender, which account shall be subject to a deposit account control agreement
with and acceptable to Lender (such account, a “Blocked Operating
Account” and, together with the Blocked Finance Accounts, the “Blocked
Accounts”). Borrower and Lender agree that prior to the occurrence of any
Event of Default, Borrower shall have the right of access to and withdrawal from
the Blocked Operating Account and after the occurrence of any Event of Default
Lender shall have the right to provide notice to the related bank to follow only
the instructions of Lender with respect to the Blocked Operating Account and the
funds on deposit therein.

     2.13 Conversion Option. At
any time and from time to time, the Obligations shall be convertible (in whole
or in part), at the option of the Lender (the “Conversion Option”), into
such number of fully paid and non-assessable shares of Capital Stock of Holdings
as is determined by dividing (x) an amount equal to (i) the sum of (A) that
portion of the outstanding principal balance of the Obligations that Lender
elects to convert, and (B) any accrued but unpaid interest under this Agreement
as of such date by (y) the Conversion Price (as defined in Section 2.14
hereof) in effect on the date on which Lender delivers a notice of
conversion (the “Conversion Notice”), duly executed, to Holdings
(the “Conversion Date”). With respect to partial conversions of the
Obligations, Lender shall keep written records of the amount of the Obligations
converted as of each Conversion Date.

     2.14 Conversion Price. The
term “Conversion Price” shall mean seventy (70) percent of the weighted average
sale price per share of Holdings over the thirty (30) day period prior to the
Conversion Date. 

     2.15 Mechanics of
Conversion.

          (A)
Not later than three (3) business Days after any Conversion Date, Holdings or
its designated transfer agent, as applicable, shall issue and deliver to the
Depository Trust Company (“DTC”) account on the Lender’s behalf via the
Deposit Withdrawal Agent Commission System (“DWAC”) as specified in the
Conversion Notice, registered in the name of the Lender or its affiliates, for
the number of shares of Capital Stock of Holdings to which the Lender shall be
entitled. In the alternative, not later than three (3) Business Days after any
Conversion Date, Holdings or its designated transfer agent, as applicable, shall
deliver to Lender by express courier a certificate or certificates which shall
be free of restrictive legends and trading restrictions representing the number
of shares of Capital Stock being acquired upon the conversion of the Obligations
(the “Delivery Date”); provided, that, notwithstanding the foregoing, (A)
if a Conversion Date occurs prior to the Bridge Loan Repayment Date, (i) the
certificate or certificates representing the shares of Capital Stock being
acquired upon the related conversion may have a restrictive legend and trading
restrictions and (ii) on the Bridge Loan Repayment Date and upon receipt by
Holdings and its counsel of a Rule 144 seller representation letter, Holdings
shall deliver to Lender, in exchange for such restricted certificate or
certificates, a certificate or certificate which shall be free of restrictive
legends and trading restrictions and (B) if a Conversion Date occurs on or after the Bridge Loan
Repayment Date upon receipt by Holdings and its counsel of a Rule 144 seller
representation letter, Holdings shall deliver to Lender a certificate or
certificate which shall be free of restrictive legends and trading
restrictions.

-25-

          (B)
Holdings and Borrower understand that a delay in the delivery of the shares of
Capital Stock of Holdings upon conversion of the Obligations beyond the Delivery
Date could result in economic loss to the Lender. If Holdings fails to deliver
to the Lender such shares via DWAC (or, if applicable, certificates) by the
Delivery Date, Borrower shall pay to Lender, in cash, an amount per Business Day
for Business Trading Day until such shares are delivered via DWAC or
certificates are delivered (if applicable), together with interest on such
amount at a rate of 10% per annum, accruing until such amount and any accrued
interest thereon is paid in full, equal to the greater of (A) 2% of the
aggregate principal amount of the Obligations requested to be converted for each
Business Day and (B) $2,000 per Business Day (which amount shall be paid as
liquidated damages and not as a penalty). Nothing herein shall limit Lender’s
right to pursue actual damages for Holdings’ failure to deliver certificates
representing shares of Capital Stock upon conversion within the period specified
herein and Lender shall have the right to pursue all remedies available to it at
law or in equity (including, without limitation, a decree of specific
performance and/or injunctive relief). Notwithstanding anything to the contrary
contained herein, Lender shall be entitled to withdraw a Conversion Notice, and
upon such withdrawal Borrower shall only be obligated to pay the liquidated
damages accrued in accordance with this Section 2.15(B) through the date
the Conversion Notice is withdrawn.

          (C)
In addition to any other rights available to Lender, if Holdings fails to cause
its transfer agent to transmit via DWAC or transmit to Lender a certificate or
certificates representing the shares of Capital Stock issuable upon conversion
of the Obligations (the “Conversion Shares”) on or before the Delivery
Date, and if after such date Lender is required by its broker to purchase (in an
open market transaction or otherwise) shares of Capital Stock of Holdings to
deliver in satisfaction of a sale by Lender of the shares of Capital Stock
issuable upon conversion of the Obligations which the Lender anticipated
receiving upon such conversion (a “Buy-In”), then Borrower shall pay in
cash to Lender the amount by which (x) Lender’s total purchase price (including
brokerage commissions, if any) for the shares of Capital Stock so purchased
exceeds (y) the amount obtained by multiplying (A) the number of shares of
Capital Stock issuable upon conversion of the Obligations that Holdings was
required to deliver to Lender in connection with the conversion at issue times
(B) the price at which the sell order giving rise to such purchase obligation
was executed.

          (D)
Accredited Investor Status. Lender represents and warrants to Holdings
that as of the date hereof it is: (i) an “accredited investor” as defined in
Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”),
and (ii) acquiring the Loan as principal and is an “accredited investor” as
defined in National Instrument 45-106, adopted by the British Columbia
Securities Commission. The Lender acknowledges that the Bridge Loan and any
shares of Holdings issued upon conversion of the Bridge Loan are “restricted
securities” and have not been registered under the Securities Act or any
applicable state securities law.

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          (E)
BCI 51-509. Lender represents and warrants to Holdings that, to the
extent Lender sells any Conversion Shares that contain a restrictive legend and
trading restrictions in Canada prior to the Bridge Loan Repayment Date, the
following statements are true, correct and complete as of the date of such
sale:

               (i)
Lender is not a resident of British Columbia or any other jurisdiction of
Canada;

               (ii)
a subsequent trade of any shares of Holdings in or from British Columbia or any
other jurisdiction of Canada will be a distribution subject to the prospectus
and registration requirements of applicable Canadian securities laws unless
certain conditions are met, which conditions include, among others, a
requirement that any certificate representing any shares of Holdings (or
ownership statement issued under a direct registration system or other book
entry system) bear the restrictive legend (the “BC Legend”) specified in British
Columbia Instrument 51-509 (“BCI 51-509”) or the restrictive legend (the “CSA
Legend”) specified in National Instrument 45-102 (“NI 45-102”);

               (iii)
Lender undertakes not to trade or resell any of shares of Holdings in or from
Canada unless the trade or resale is made in accordance with BCI 51-509 or NI
45-102, as applicable;

               (iv)
Lender, as a consequence of the representations and warranties made by Lender in
this Agreement, will have directed Holdings not to include the BC Legend or the
CSA Legend on any certificates representing any shares of Holdings which may be
issued to Lender. As a consequence, Lender will not be able to rely on the
resale provisions of BCI 51-509 or NI 45-102, and any subsequent trade in any of
shares of Holdings in or from British Columbia or any other jurisdiction of
Canada will be a distribution subject to the prospectus and registration
requirements of applicable Canadian securities laws; and

               (v)
if Lender wishes to trade or resell any of shares of Holdings in or from British
Columbia or any other jurisdiction of Canada, Lender agrees and undertakes to
return, prior to any such trade or resale, any certificate representing any
shares of Holdings to the transfer agent of Holdings to have the BC Legend or
the CSA Legend, as applicable, imprinted on such certificate or to instruct the
transfer agent of Holdings to include the BC Legend or the CSA Legend, as
applicable on any ownership statement issued under a direct registration system
or other book entry system.

SECTION 3 CONDITIONS TO CLOSING AND
ADVANCES

     3.1 Conditions to Closing.
Closing under this Agreement is subject to the satisfaction or express waiver by
Lender of the following conditions precedent (all instruments, documents and
agreements to be in form and substance satisfactory to Lender and Lender’s
counsel):

          (A)
Closing Deliveries. Lender shall have received each of the following
instruments, agreements, certificates and other documents:

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               (i)
Notes. The Notes, executed by Borrower in favor of Lender;

               (ii)
Warrant. The Warrant issued by Holdings in favor of Lender; 

               (iii)
Standstill Agreements. Standstill Agreements, executed by Borrower and
each other Person party thereto;

               (iv)
Perfection Certificate. A Perfection Certificate from Borrower and
Guarantor, substantially in the form attached as Exhibit B attached
hereto;

               (v)
Loan Documents. All other Loan Documents executed by Borrower or any
Guarantors, as applicable. 

               (vi)
Organizational Documents. A copy of Borrower’s and each Guarantor’s (i)
organization documents, certified as of a recent date by Borrower’s and each
Guarantor’s corporate secretary (or other appropriate officer), and (ii) bylaws,
partnership agreement or operation agreement, as applicable, certified as of a
recent date by Borrower’s and each Guarantor’s corporate secretary (or other
appropriate officer); together with certificates of good standing existence or
fact in Borrower’s and each Guarantor’s state of organization and in each
jurisdiction in which Borrower and each Guarantor is qualified to do business,
each dated within 30 days from the date of this Agreement;

               (vii)
Authorization Documents. A certified copy of resolutions of Borrower’s
and each Guarantor’s board of directors authorizing the execution, delivery and
performance of the Notes, this Agreement and all other Loan Documents, the
pledge of the Collateral to Lender as security for the Advances made and other
Obligations incurred hereunder and the borrowing evidenced by the Notes and
designating the appropriate officers to execute and deliver the Loan
Documents;

               (viii)
Incumbency Certificates. A certificate of Borrower’s and each Guarantor’s
corporate secretary (or other appropriate officer) as to the incumbency and
signatures of officers of Borrower and such Guarantor signing this Agreement,
the Notes and other Loan Documents;

               (ix)
Opinion of Counsel. Lender shall have received written opinions of
Borrower’s and Guarantors’ counsel addressed to Lender and covering such matters
as Lender shall determine in its sole discretion;

               (x)
Officer’s Certificate. A certificate, dated the date of this Agreement,
signed by the President of Borrower, to the effect that (i) all representations
and warranties set forth in this Agreement are true and correct as of the date
hereof and (ii) no Default or Event of Default hereunder has occurred,
Borrower’s corporate seal being affixed to such certificate and Borrower’s
corporate secretary attesting thereto;

-28-

               (xi)
Insurance Certificates. Insurance certificates and endorsements, as
requested by Lender, naming Lender as lender’s loss payee” under all casualty
policies of Borrower and “additional insured” under all liability policies of
Borrower;

               (xii)
Deposit Account Control Agreements. A deposit account control agreement,
executed by and among Lender, Borrower and any bank at which a Blocked Account
is maintained by Borrower; and

               (xiii)
Other Documents. All other agreements, notes, instruments, certificates,
orders, authorizations, financing statements, mortgages or other documents which
Lender may request.

          (B)
Security Interests; Pledge. Lender shall have received satisfactory
evidence that all security interests and Liens granted to Lender pursuant to
this Agreement or the other Loan Documents have been duly perfected and
constitute valid Liens on the Collateral, with priority over all other Liens,
subject only to Permitted Encumbrances. Without limiting the generality of the
foregoing:

               (i)
Pledgors shall have pledged and collaterally assigned to Lender the Pledged
Collateral pursuant to a Pledge Agreement; and

               (ii)
each Guarantor shall have executed and delivered all Guarantor Security
Documents required by Lender and its counsel (each such document to be in form
and substance satisfactory to Lender) in order to create and grant Liens in
favor of Lender on substantially all of such Guarantor’s property and all
appropriate public filings or registrations of or related to such Guarantor
Security Documents and/or the Liens created and granted thereunder have been
made.

          (C)
Representations and Warranties. After giving effect to the Transactions,
the representations and warranties contained herein and in the other Loan
Documents shall be true, correct and complete on and as of the Closing Date to
the same extent as though made on and as of that date, except for any
representation or warranty limited by its terms to a specific date.

          (D)
Fees and Expenses. Borrower shall have paid the fees and other amounts
payable on the Closing Date referred to in Section 2.5, Section
8.4, and all out of pocket expenses incurred by Lender in connection with
the analysis, negotiation, document preparation, due diligence and closing of
this Agreement and all related agreements and the Transactions described
below.

          (E)
No Default. After giving effect to the Transactions, no event shall have
occurred and be continuing or would result from the consummation of the
requested borrowing that would constitute an Event of Default or a Default.

          (F)
Performance of Agreements. Borrower and each Guarantor hall have
performed all agreements and satisfied all conditions which any Loan Document
provides shall be performed by it on or before the Closing Date.

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          (G)
No Prohibition. No order, judgment, injunction or decree of any
Governmental Authority shall purport to enjoin or restrain Lender from advancing
or Borrower from borrowing the Loan or to enjoin or restrain Lender or Borrower
or any Guarantor from entering into, consummating the transactions contemplated
by and/or incurring their respective duties and obligations (including in the
case of Borrower the Obligations) hereunder or under any other Loan
Document.

          (H)
No Material Adverse Effect. Lender shall have received evidence
reasonably satisfactory to it that nothing has occurred since January 31, 2011,
which is reasonably likely to have a Material Adverse Effect.

          (I)
No Litigation. There shall not be pending or, to the knowledge of
Borrower or any Guarantor, threatened, any action charge, claim, demand, suit,
proceeding, petition, governmental investigation or arbitration by, against or
affecting Borrower or any Guarantor or any property of Borrower or any Guarantor
that challenges, threatens or seeks to invalidate the Transactions, or any
portion thereof, or this Agreement or that has not been disclosed by Borrower
and Guarantor in Schedule 3.1(I), and there shall have occurred no
development in any such action, charge, claim, demand, suit, proceeding,
petition, governmental investigation or arbitration that, in the opinion of
Lender, could reasonably be expected to have a Material Adverse Effect.

          (J)
Searches. Lender shall have received UCC, tax, judgment and litigation
searches against Borrower and the Guarantors in those offices and jurisdictions
as Lender shall reasonably request which shall show that no financing statement,
liens, or assignments or other filings have been filed or remain in effect
against Borrower and the Guarantors or any Collateral or Pledged Collateral
except for those Liens (other than Permitted Encumbrances), financing
statements, assignments or other filings with respect to which the secured party
or existing lender (i) has delivered to Lender Uniform Commercial Code
termination statements or other documentation evidencing the termination of its
Liens and security interests in Collateral or Pledged Collateral, (ii) has
agreed in writing to release or terminate its Lien and security interest in
Collateral or Pledged Collateral upon receipt of proceeds of the Advances or
(iii) has delivered a Standstill Agreement to Lender with respect to its Lien
and security interest in the Collateral or Pledged Collateral, all in a form and
substance satisfactory to Lender in its sole discretion.

     3.2 Conditions for Future
Advances. The making of Revolving Advances under the Revolving Credit
Facility in any form following the Closing Date is subject to the following
conditions precedent (all instruments, documents and agreements to be in form
and substance satisfactory to Lender and its counsel) following the Closing
Date:

          (A)
Effectiveness of Agreements. This Agreement and each of the other Loan
Documents shall be effective;

          (B)
No Material Adverse Effect. No event or condition shall have occurred, or
would result from the making of any requested Advance, which is reasonably
likely to have a Material Adverse Effect;

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          (C)
No Default. No Default or Event of Default then exists or after giving
effect to the making of the Advance would exist;

          (D)
Compliance. Each Advance is within and complies with the terms and
conditions of this Agreement; 

          (E)
No Liens. No Lien (other than a Permitted Encumbrance) exists with
respect to any asset or property of Borrower; 

          (F)
Representations and Warranties. Each representation and warranty set
forth in Section 4 and any other Loan Document in effect at such time (as
amended or modified from time to time) is then true and correct in all material
respects as if made on and as of such date except to the extent such
representations and warranties are made only as of a specific earlier date; 

          (G)
Deposit Revolving Advances. With respect to Revolving Advances consisting
of Deposit Revolving Advances, Borrower shall deliver to Lender a copy of the
Eligible Purchase Order and an invoice from the Supplier indicating the deposit
amount; and 

          (H)
Balance Revolving Advances. With respect to Revolving Advances consisting
of Balance Revolving Advances, Borrower shall deliver to Lender evidence from
Supplier that the Inventory is ready to be shipped to Borrower and a copy of the
final invoice from such Supplier. 

SECTION 4 REPRESENTATIONS AND
WARRANTIES

     To induce Lender to enter into
this Agreement, Borrower hereby represents and warrants to Lender that the
following statements are true, correct and complete in each case after giving
effect to the Transactions. Such representations and warranties, and all other
representations and warranties made by Borrower, herein or in the other Loan
Documents, shall survive the execution and delivery of this Agreement and the
closing contemplated hereby:

     4.1 Organization, Powers,
Capitalization.

          (A)
Organization and Powers. Borrower, any Guarantor and each Subsidiary is
an entity of the type indicated on Schedule 4.7 that is duly organized,
validly existing and in good standing under the Laws of its jurisdiction of
organization as indicated on such Schedule 4.7, and is not and
does not purport to be organized under the Laws of any other or additional
jurisdiction, and each Borrower, any Guarantor or any Subsidiary is registered
with and/or qualified to do business and in good standing in each other
jurisdiction where the nature of Borrower’s, such Guarantor’s or such
Subsidiary’s business or property would require Borrower, such Guarantor or such
Subsidiary to register with and/or qualify to do business in such jurisdiction,
except where failure to be so qualified in any such jurisdiction(s)
(individually or cumulatively) is not reasonably likely to have a Material
Adverse Effect. Borrower, each Guarantor and each Subsidiary has all requisite
power and authority pursuant to the Laws under which it is organized to own and operate its respective
properties, to carry on its respective businesses as now conducted and proposed
to be conducted.

-31-

          (B)
Capitalization. Schedule 4.1(B) sets forth as to Borrower all
classes or categories of the Capital Stock of Borrower provided for under its
Organizational Documents as of the date hereof and the total amounts of all such
Capital Stock authorized to be issued and issued under each such class or
category as of the date hereof. All outstanding shares and interests of Capital
Stock of Borrower have been and are duly authorized and validly issued, fully
paid, non-assessable, and such shares of Capital Stock were issued in compliance
with all applicable federal, state and local laws concerning the issuance of
securities. All of the Capital Stock of Borrower is free and clear of all Liens.
No Capital Stock of Borrower, other than that described on Schedule 4.1(B)
is issued and outstanding. There are no preemptive or other outstanding
rights, options, warrants, conversion rights or similar agreements or
understandings for the purchase or acquisition of any Capital Stock from
Borrower except as set forth on Schedule 4.1(B).

     4.2 Authorization of
Borrowing; No Conflict. Borrower has all requisite power and authority
pursuant to all applicable Laws under which it is organized to enter into,
execute and deliver, and perform all of its Obligations under each Loan Document
to which it is a party, and to incur the Obligations and grant security
interests in the Collateral in each case as provided for in the Loan Documents.
The execution, delivery and performance by Borrower of the Loan Documents it
which it is a party have been duly authorized by all requisite entity action on
the part of Borrower and any applicable board or directors, and no further
actions or consents by or from any holder of any Capital Stock of Borrower are
required pursuant to any Organizational Documents of Borrower. The execution,
delivery and performance by Borrower of the Loan Documents to which it is a
party and the consummation of the transactions contemplated by each such Loan
Document does not conflict with, contravene, violate, or constitute a default or
breach (immediately or upon the passage of time or the giving of any notice or
both), or result in the creation of any security interest or lien upon any
property or asset of Borrower, under (1) any Organizational Document of
Borrower, (2) any applicable Laws to which Borrower or its property and assets
is subject, (3) any material contract, agreement or instrument to which Borrower
is a party or by which it or its property and assets is subject, except as set
forth on Schedule 4.2 attached hereto, or (4) any judgment, order,
injunction or decree issued by any Governmental Authority with respect to
Borrower or its property or assets. This Agreement and each other Loan Document,
including the Notes, have been duly executed and delivered by Borrower, and each
such Loan Document is, and will be, the legally valid and binding obligation of
each Borrower, enforceable against Borrower in accordance with their respective
terms except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, moratorium or other similar Laws affecting the
enforcement of creditors rights generally and subject to any equitable
principles limiting the right to obtain specific performance of any such
obligation.

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     4.3 Financial
Condition.

          (A)
Accuracy of Financial Statements. Subject to the provisions of paragraph
(C) of this Section 4.3 regarding the Pro Forma which have been or will
hereafter be furnished by Borrower to Lender hereunder, all financial statements
concerning Borrower and Holdings which have been or will hereafter be furnished
by Borrower to Lender pursuant to this Agreement (i) have been, or will be,
prepared in accordance with GAAP and past practices consistently applied
throughout the periods involved (except as disclosed therein); (ii) do, or will,
present fairly, the financial condition of Borrower and Holdings as at the dates
thereof and the results of their operations for the periods then ended; and
(iii) do, or will, accurately reflect the financial condition of Borrower and
Holdings in all respects.

          (B)
No Material Adverse Change. Since October 31, 2010 no event, development
or circumstance has occurred which has had, or is reasonably likely to have, a
Material Adverse Effect. 

          (C)
Accuracy of Pro Forma. The Pro Forma was prepared by Borrower based on
the audited annual consolidated balance sheet of Holdings and its consolidated
Subsidiaries for the fiscal year ended October 31, 2010 and the management
prepared financial statements for the fiscal quarter ended January 31, 2011. The
Pro Forma has been prepared in good faith on the basis of (i) assumptions,
methods, and tests which are reasonably believed by Borrower to have been
reasonable at the time made and (ii) information reasonably believed by Borrower
to have been accurate based upon the information available to Borrower at the
time the Pro Forma was furnished to Lender.

          (D)
Restatement of Representations for Future Financial Statements. Each
delivery of any financial statements by Borrower to Lender hereunder shall be
deemed to constitute a representation and warranty by Borrower as of the date of
such delivery that (i) all of the representations and warranties regarding
financial statements provided for in paragraph (A) of this Section 4.3
are true and correct as of such date with respect to such financial
statements and (ii) no event, development or circumstance has occurred which has
had, or is reasonably likely to have, a Material Adverse Effect since October
31, 2010.

     4.4 Indebtedness and
Liabilities. As of the Closing Date, Borrower has no (a) Indebtedness except
as (i) reflected on the Pro Forma and the most recent Financial Statements
delivered to Lender and (ii) as listed on Schedule 6.1 or as otherwise
permitted under Section 6.1; or (b) Liabilities other than as reflected
on the Pro Forma, the most recent Financial Statements or other written
information delivered to Lender on or before the Closing Date or as incurred in
the ordinary course of business following the date of the most recent Financial
Statements delivered to Lender. 

     4.5 Account Warranties. As
to each Financed Account of Borrower, at the time of its creation, (a) such
Financed Account is a valid, bona fide account, representing an undisputed
indebtedness incurred by the named Financed Account Debtor for goods actually
sold and delivered or for services completely rendered; (b) such Financed
Account is due and payable in accordance with its terms, no agreement exists
permitting any deduction or discount (other than any discount stated on the
invoice) with respect to such Financed Account and there are no setoffs, offsets or counterclaims, genuine or otherwise,
against such Financed Account (all of the foregoing subject to the customary
prompt payment discounts, standard warranty policies and promotional payment
arrangements between Borrower and the applicable Financed Account Debtor, all of
the foregoing as applied in the ordinary course of business of Borrower in
accordance with its past practices); (c) except as disclosed in writing to
Lender, such Financed Account does not represent a sale to an Affiliate or a
consignment, sale or return, or a bill and hold transaction; (d) Borrower is the
lawful owners of such Financed Account and has the right to assign the same to
Lender; (e) such Financed Account is free of all Liens; and (f) to the knowledge
of Borrower, the Financed Account Debtor with respect to such Financed Account
is not subject to any voluntary or involuntary proceedings under the Bankruptcy
Code or any other bankruptcy, receivership or insolvency law and there are no
proceedings or actions threatened or pending against such Financed Account
Debtor that is reasonably likely to have a material adverse effect on the
ability of such Financed Account Debtor to satisfy its obligation with respect
to such Financed Account or on such Financed Account Debtor’s general business,
assets and financial condition.

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     4.6 Names, Entity Changes.
Schedule 4.6 sets forth the exact legal name of Borrower and each
Guarantor as set forth in its articles or certificate of incorporation,
organization or formation as currently in effect and on record with its
jurisdiction of organization and all other names, trade names, fictitious names
and business names under which Borrower and each Guarantor currently conducts
business or has at any time during the past five years conducted business.
Except as set forth on Schedule 4.6, during the past five (5) years,
neither Borrower nor any Guarantor has (a) been the surviving entity of a merger
or consolidation or acquired all or substantially all of the assets of any
Person (or of any business or division of any Person), or (b) been organized
under the laws of any jurisdiction other than or in addition to the jurisdiction
of organization set forth for Borrower or any Guarantor on Schedule
4.6.

     4.7 Jurisdictions; Locations;
FEIN. Schedule 4.7 sets forth as to Borrower and each Guarantor: (a)
the jurisdiction of organization of Borrower and each Guarantor and each other
jurisdiction in which Borrower and each Guarantor is registered and/or qualified
to do business, (b) the location of Borrower’s and each Guarantor’s chief
executive office and principal place of business, (c) the location of each
additional office(s) other than such chief executive office and principal place
of business where Borrower’s and each Guarantor’s books and Records are kept
(including any books and Records regarding Accounts), and (d) the location of
all other offices or business locations of Borrower and each Guarantor and all
Collateral locations, including all such locations owned by Borrower and each
Guarantor, all such locations leased and operated by Borrower and each
Guarantor, and all such locations operated by a third party (including any
public warehouse, any consignment location, any locations where any of the
Collateral is held for processing and any other bailee location at which any of
the Collateral is located), and such locations as so set forth on Schedule
4.7 are the only locations for the businesses and the Collateral of each
Borrower and each Guarantor. Schedule 4.7 also indicates as to Borrower
and each Guarantor whether during the past five years, Borrower or any each
Guarantor had maintained any additional chief executive office and principal
place of business, location(s) for books and Records, or other business or
Collateral locations (excluding any such prior location that was not a chief
executive office and principal place of business, location at which books and
Records were stored nor a location at which any tangible Collateral other than
Inventory was kept). Borrower’s and each Guarantor’s federal employer
identification numbers and entity identification numbers in its state of incorporation or
formation (as applicable) is set forth on Schedule 4.7. Schedule 4.7 also indicates as to Borrower and each Guarantor whether Borrower and each
Guarantor is the owner of any fee interest in any real property, and, if so,
sets forth a list of each such real property location with the formal legal
description of each such real property location attached as an exhibit to such Schedule 4.7.

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     4.8 Title to Properties;
Liens. Borrower has good, sufficient and legal title to all of its
respective properties and assets. Except for applicable Permitted Encumbrances,
all such properties and assets are free and clear of Liens. There are no actual,
threatened or alleged defaults with respect to any leases of real property under
which Borrower is lessee or lessor which is reasonably likely to have a Material
Adverse Effect.

     4.9 Litigation; Adverse
Facts. Except as set forth on Schedule 4.9, there are no judgments
outstanding against Borrower or affecting any property of Borrower nor is there
any action, charge, claim, demand, suit, proceeding, petition, governmental
investigation or arbitration now pending, or, to the knowledge of Borrower,
threatened, against or affecting Borrower, or the property of Borrower, and no
such action, etc. (either individually or collectively) is reasonably likely to
have a Material Adverse Effect if determined adversely to Borrower. Borrower has
not received any opinion or memorandum or legal advice from legal counsel to the
effect that it is exposed to any liability which is reasonably likely to have a
Material Adverse Effect.

     4.10 Payment of Taxes.
Except as set forth on Schedule 4.10, all tax returns and reports of
Borrower required to be filed by them have been timely filed, and all Taxes upon
each Borrower and upon its properties, assets, income and franchises which are
shown on such returns as due and payable, have been paid (together with any and
all interest or penalties thereon if any such Taxes were not paid when due). As
of the Closing Date, none of the income tax returns of Borrower is under audit.
No tax liens of any kind or nature have been filed or are being asserted in any
jurisdiction or pursuant to any proceedings with respect to Borrower or any of
its respective properties or assets. The charges, accruals and reserves on the
books of Borrower in respect of any Taxes or other governmental charges are in
accordance with GAAP.

     4.11 Performance of
Agreements. Borrower is not in default or breach of the performance,
observance or fulfillment of any of the obligations, duties, covenants or
conditions contained in any contractual obligation of any such Person, and no
other condition exists that would allow the other party to any such contractual
obligations to terminate or cancel such contract, in any such case with respect
to any contract of Borrower, the termination or cancellation of which, or
non-renewal of which on substantially similar terms, is reasonably likely to
have a Material Adverse Effect.

     4.12 Employee Benefit
Plans. Each member of the ERISA Affiliate Group is in compliance in all
material respects with all applicable provisions of ERISA, the IRC and all other
applicable Laws and the regulations and interpretations thereof with respect to
all Employee Benefit Plans. Each Employee Benefit Plan which is intended to be a
qualified plan under Section 401(a) of the IRC as currently in effect has
been determined by the Internal Revenue Service to be qualified under Section
401(a) of the IRC and the trust related thereto is exempt from federal
income tax under Section 501(a) of the IRC. No liability which could reasonably be expected to have a Material Adverse Effect has
been incurred and remains unsatisfied for any funding obligation, taxes or
penalties with respect to any Employee Benefit Plan.

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     4.13 Intellectual
Property. Borrower owns, is licensed to use, or otherwise has the right to
use, all Intellectual Property used in or necessary for the conduct of its
business as currently conducted. Schedule 4.13 sets forth as to Borrower:
(a) all Intellectual Property of Borrower that is registered and/or filed with
and/or issued by any Governmental Authority (specifically including the United
States Patent and Trademark Office and the United States Copyright Office and
any equivalent office of any foreign Governmental Authority), (b) any license of
any such owned Intellectual Property described in the preceding clause (a) to
which Borrower is party as the licensor (including the title and date of such
license, the name and address of the licensee and the registered Intellectual
Property subject thereto), (c) any license for any Intellectual Property owned
by any third party Person that is registered and/or filed with and/or issued by
any Governmental Authority to which Borrower is party as a licensee (including
the title and date of such license, the name and address of the licensor and the
registered Intellectual Property of such licensor subject thereto) and (d) any
other Intellectual Property that is material to the business of Borrower.

     4.14 Broker’s Fees. Except
as set forth on Schedule 4.14, no broker’s or finder’s fee or commissions
will be payable by reason of any action of Borrower with respect to any of the
transactions contemplated hereby. Borrower and each Guarantor shall jointly and
severally indemnify, defend and hold harmless Lender with respect to any claim
or demand or asserted claim or demand (together with all costs and expenses of
Lender in respect thereof or in defending the same) of any kind or nature made
at any time by any broker or finder listed on Schedule 4.14 or otherwise
in regard to the Transactions.

     4.15 Environmental
Compliance. Borrower has been issued by the applicable Governmental
Authorities all required federal, state, territorial, provincial, local and
foreign licenses, certificates or permits relating to all applicable
Environmental Laws necessary to the operations of the business and properties of
Borrower and the ownership by Borrower of its properties and assets, all of
which such licenses, certificates or permits are listed on Schedule 4.15
and are in full force and effect and in good standing, and Borrower is not a
party to any consent order, consent decree or similar agreement or order
voluntarily entered into by Borrower with any applicable Governmental Authority
with respect to any Environmental Law except as set forth on Schedule
4.15. Except as set forth on Schedule 4.15, Borrower has been and is
currently in compliance in all material respects with all applicable
Environmental Laws, specifically including any and all licenses, certificates
and permits and any and all consent orders, consent decrees and similar
voluntary orders and agreements described in the foregoing sentence. Except as
set forth on Schedule 4.15, there are no claims, liabilities,
investigations, litigation, administrative proceedings, judgments or orders
relating to any Hazardous Materials asserted or, to Borrower’s knowledge,
threatened against Borrower or relating to any real property currently or
formerly owned, leased or operated by Borrower which is reasonably likely to
have a Material Adverse Effect, and Borrower does not have any knowledge of any
spill or other release or threatened spill or other release of Hazardous
Material at any real property currently or formerly owned, leased or operated by
Borrower for which Borrower is legally responsible to remediate under applicable laws or which may be
or could result in a material liability.

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     4.16 Solvency. Borrower
(a) assuming the ability of Borrower to raise future financing, has the ability
to meet its liabilities as they mature; and (b) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.

     4.17 Disclosure. No
representation or warranty of Borrower contained in this Agreement, the other
Loan Documents, or any other document, certificate or written statement
furnished to Lender by or on behalf of Borrower for use in connection with the
Loan Documents contains any untrue statement of a material fact, omits or will
omit a material fact necessary in order to make the statements contained herein
or therein not misleading in light of the circumstances in which the same were
made. There is no material fact known to Borrower that has had or could
reasonably be likely to have a Material Adverse Effect and that has not been
fully disclosed herein or in such other documents, certificates and statements
furnished to Lender for use in connection with the Transactions contemplated
hereby.

     4.18 Insurance. Borrower
maintains insurance policies for public liability, property damage for their
businesses and properties, product liability, business interruption, workers’
compensation, larceny, embezzlement or other criminal misappropriation insurance
of types, and in amounts acceptable to Lender in its sole and absolute
discretion and as described on the insurance certificates set forth as
Schedule 4.18 hereto; and, as of the Closing Date, no notice of
cancellation has been received with respect to such policies and Borrower is in
compliance in all material respects with all conditions contained in such
policies.

     4.19 Compliance with
Laws.

          (A)
Borrower is not in violation of any applicable Law or other requirement of any
Governmental Authority having jurisdiction over the conduct of its business or
the ownership of its properties, including, without limitation, any violation
relating to any Environmental Law or the use, release, storage, transport or
disposal of any Hazardous Material, which violation(s) would (individually or
collectively) subject Borrower or any of its officers to criminal liability or
have a Material Adverse Effect, and no notice of any such violation has been
received.

          (B)
Borrower holds all licenses, permits, approvals, consents and certifications
necessary to conduct its business, and all such licenses, permits, approvals,
consents and certifications are in full force and effect. 

     4.20 Bank Accounts.
Schedule 4.20 sets forth the account numbers and locations of all Deposit
Accounts, Securities Accounts and Commodity Accounts of Borrower.

     4.21 Subsidiaries and
Affiliates. Except as set forth on Schedule 4.21, Holdings and
Borrower have no Subsidiaries.

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     4.22 Employee Matters.
Except as set forth on Schedule 4.22, (a) none of the employees of
Borrower are subject or party to any collective bargaining agreement, management
agreement or consulting agreement, (b) no petition for certification or union
election is pending with respect to any of the employees of Borrower and no
union or collective bargaining unit has sought such certification or recognition
with respect to of the employees of Borrower and (c) there are no strikes,
slowdowns, work stoppages or controversies pending or threatened between
Borrower and its employees, other than employee grievances arising in the
ordinary course of business which is reasonably likely to have, either
individually or in the aggregate, a Material Adverse Effect. Except as set forth
on Schedule 4.22, Borrower is not party to any employment contract.

     4.23 Governmental
Regulation. Borrower is not subject to regulation under the Investment
Company Act of 1940 or to any applicable Law limiting its ability to incur
indebtedness for borrowed money.

     4.24 Trade Relations. As
of the Closing Date there exists no actual or, to the knowledge of Borrower,
threatened, termination or cancellation of, or any material adverse modification
or change in the business relationship of Borrower, with any Financed Account
Debtor (or group of Financed Account Debtors) or supplier (or group of
suppliers) that either individually or in the aggregate are material to its
operations.

     4.25 Absence of Defaults.
As of the Closing Date, Borrower is not in default under its Organizational
Documents, and no event has occurred, which has not been remedied (to the extent
expressly permitted hereunder) or waived in writing by Lender, which constitutes
a Default or an Event of Default.

SECTION 5 AFFIRMATIVE COVENANTS

     To induce Lender to enter into
this Agreement, Borrower hereby covenants and agrees that until indefeasible
payment in full in cash and performance in full of all Obligations and the
termination of the Loan and this Agreement, Borrower shall perform all covenants
in this SECTION 5.

     5.1 Financial Statements and
Other Reports. Borrower shall maintain a system of accounting and keep such
books, records and accounts (which shall be true and complete in all material
respects), as may be required or as may be necessary to permit the performance
of an annual audit and the preparation of financial statements in accordance
with GAAP and past practices, consistently applied. All financial statements and
reports to be delivered hereunder shall be in such form and contain such
information as Lender requires from time to time, and may be delivered by
facsimile, regular or express mail or by hand, but shall also be delivered in
electronic form using the Microsoft Excel.xls format.

          (A)
Quarterly Financials. As soon as available and in any event within
forty-five (45) days after the end of each quarter of each Fiscal Year, Borrower
will deliver the consolidated and consolidating balance sheet of Holdings and
its consolidated Subsidiaries, as adjusted in conformity with GAAP, as at the
end of such period and the related consolidated and consolidating statements of
income, shareholder’s or member’s (as applicable), equity and cash flow for such quarter of such Fiscal Year and for the period
from the beginning of the then current Fiscal Year to the end of such quarter of
such Fiscal Year. If Holdings file its quarterly report on Form 10-Q for the
applicable fiscal quarter and such quarterly report contains the financial
statements and reports described above, in a format acceptable to Lender, then
Borrower may satisfy their requirements under this Section (A)5.1(A) by
delivering a copy of such quarterly report.

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          (B)
Year-End Financials. In addition to the quarterly financial statements
referred to in Section 5.1(A), as soon as available and in any event
within ninety (90) days after the end of each Fiscal Year, Borrower will deliver
to Lender: (1) the audited consolidated and consolidating balance sheet of
Holdings and its consolidated Subsidiaries as at the end of such year and the
related consolidated and consolidating statements of income, shareholder’s or
member’s (as applicable) equity and cash flow for such Fiscal Year; (2) a
schedule of the outstanding Indebtedness of Borrower and Guarantors and their
consolidated Subsidiaries describing in reasonable detail each such debt issue
or loan outstanding and the principal amount and amount of accrued and unpaid
interest with respect to each such debt issue or loan; (3) a report with respect
to the financial statements from a firm of independent certified public
accountants selected by Holdings and reasonably acceptable to Lender (it being
agreed that as of the date of this Agreement BDO Seidman LP is reasonably
acceptable to Lender), which report shall be unqualified as to going concern and
scope of audit of Holdings and its consolidated Subsidiaries and shall state
that (a) such financial statements present fairly the financial position of
Holdings and its consolidated Subsidiaries as at the dates indicated and the
results of its operations and cash flow for the periods indicated in conformity
with GAAP applied on a basis consistent with prior years and (b) that the
examination by such accountants in connection with such financial statements has
been made in accordance with generally accepted auditing standards and (c) that
such accountants acknowledge that Lender is relying on such statements. If
Holdings files its annual report on Form 10-K for the applicable Fiscal Year and
such annual report contains the financial statements and reports described
above, then Borrower may satisfy their requirements under this Section 5.1(B)
by delivering a copy of such annual report.

          (C)
Accountants’ Certification and Reports. In connection with each annual,
interim or special audit or review of the financial statements or financial
controls of Holdings made by its independent public accountants (including the
audit made in connection with the financial statements required to be delivered
under Section 5.1(B) above), (i) Borrower will deliver to Lender promptly
upon receipt thereof copies of all reports submitted to Borrower or Holdings by
its independent public accountants in connection with each such annual, interim
or special audit or review, including the comment letter submitted by such
accountants to management or any member or committee of the board of directors
of Holdings in connection with such annual, interim or special audit or review,
and (ii) Borrower shall deliver to Lender promptly upon Holding’s receipt
thereof a certificate, to the effect that, in making the examination necessary
for such annual, interim or special audit or review, such accountants have
obtained no knowledge of any condition or event which constitutes a Default or
Event of Default, or if such accountants shall have obtained knowledge of any
such condition or event, specifying in such certificate each such condition or
event of which they have knowledge and the nature and status thereof.

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          (D)
Tax Returns. Within twenty (20) days after filing thereof Borrower shall
deliver to Lender a copy of the annual federal (and, if requested by Lender,
state or other) tax return (and any amended return) of Borrower certified by the
chief financial officer or chief executive officer of Borrower to be accurate
and complete in all material respects.

          (E)
Government Notices. (a) Borrower will deliver to Lender promptly after
receipt copies of all notices, requests, subpoenas, inquiries or other writings
received from any governmental agency concerning the violation or alleged
violation of any Environmental Laws, the storage, use or disposal of any
Hazardous Material, the violation or alleged violation of the Fair Labor
Standards Act or Borrower’s payment or non-payment of any taxes including any
tax audit; and (b) Borrower will notify Lender promptly after Borrower’s
knowledge thereof, of any of the following that affects Borrower or any
Guarantor.

          (F)
Notification of Events of Default, etc. On the first
Business Day following the day any officer of Borrower obtains knowledge of any
of the following events or conditions, Borrower shall deliver written notice
including a certificate signed by the chief executive officer or president of
Borrower specifying the nature and period of existence of such condition or
event and what action Borrower has taken, is taking, and proposes to take, with
respect thereto: (1) any condition, circumstance or event that constitutes an
Event of Default or Default; (2) any default or breach by Borrower of the
performance, observance or fulfillment of any of the obligations, duties,
covenants or conditions contained in any contractual obligation of Borrower, or
the occurrence of any condition or event that would allow the other party to any
such contractual obligations to terminate or cancel such contract, or the
receipt by Borrower of any notice from any such counterpart under any such
contractual obligation claiming that any such default or material condition or
event has occurred, in any such case with respect to any contract of Borrower
the termination or cancellation of which, or non-renewal of which on
substantially similar terms, is reasonably likely to have a Material Adverse
Effect; (3) any condition, circumstance or event which has had or is reasonably
likely to have a Material Adverse Effect; or (4) the resignation or termination
of the chief financial officer or the controller of Borrower or Holdings (or any
officer(s) or employee(s) of Borrower or Holdings performing the duties and
functions commonly performed by a chief financial officer and a controller) or
the head(s) of operations and sales of Borrower, or if any such person shall
leave his or her office for whatever reason or ceases to exercise the rights and
duties of such office. With respect to the foregoing clause (4), in addition to
giving written notice as provided for above, Borrower shall also provide notice
to Lender via e-mail and telephone to one of the managing partners of Lender of
such occurrence by the end of the first Business Day following the day any
officer of Borrower obtains knowledge of any such event described in clause
(4).

          (G)
Trade Names. Borrower will give Lender at least thirty (30) days advance
written notice of any new trade name or fictitious business name. Borrower’s use
of any trade name or fictitious business name will be in compliance with all
laws regarding the use of such names.

          (H)
Locations. Borrower will give Lender at least thirty (30) days advance
written notice of any change in Borrower’s address or of any new location for
its books and records or the Collateral (including any such new Collateral
location operated by a third party (and specifically including any public
warehouse, any consignment location, any locations where any of the Collateral is to be held for processing and any
other bailee location at which any of the Collateral is to be located)). With
respect to any such new location (which, with respect to Borrower, in any event
shall be within the continental United States), Borrower will execute such
documents and take such actions as Lender deems necessary to perfect and protect
the security interests of Lender in the Collateral prior to the transfer or
removal of any Collateral to such new location.

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          (I)
Deposit Accounts, Securities Accounts and Commodity Accounts.

               (i)
Borrower will give Lender at least ten (10) Business Days prior notice of any
new Deposit Account, Securities Account or Commodity Account Borrower intends to
establish prior to their opening same, and, without limiting the generality of
or contradicting anything set forth in Section 2.8(A), if required by
Lender, will prior to or concurrently with the opening of same provide Lender
with “control” (as defined in Articles 8 and/or 9 of the UCC with respect to
each applicable item or type of Collateral) with respect to such Deposit
Account, Securities Account or Commodity Account, including if applicable
causing such Deposit Account, Securities Account or Commodity Account to be
subject to a control agreement in favor of Lender.

               (ii)
Borrower will cause copies of all bank statements with respect to all accounts
of every kind to be provided to Lender contemporaneously with their being
provided to Borrower.

          (J)
Certified Public Accountants. Within three (3) Business Days of the
resignation or termination of Holdings’ current certified public accountants, or
any certified public accountants hereafter engaged by Holdings, Borrower shall
notify Lender in writing of such occurrence and the reason(s) therefor.

          (K)
Litigation. Within three (3) Business Days after Borrower obtains
knowledge of (1) the institution of any action, suit, proceeding, governmental
investigation or arbitration against or affecting Borrower or any property of
Borrower not previously disclosed by Borrower to Lender in writing or (2) any
material development in any action, suit, proceeding, governmental investigation
or arbitration at any time pending against or affecting Borrower or any property
of Borrower, which is reasonably likely to have a Material Adverse Effect,
Borrower will give written notice thereof to Lender and provide such other
information as may be reasonably available to them to enable Lender and its
counsel to evaluate such matter.

          (L)
Other Information. With reasonable promptness, Borrower shall deliver
such other information and data as may be available to and not legally
prohibited from disclosure by Borrower with respect to Borrower, any of the
property or assets of Borrower or Collateral as Lender may reasonably request
from time to time. 

     5.2 Access to Accountants.
Borrower hereby irrevocably authorize and request and instruct all accountants
and auditors employed by Borrower or Holdings at any time to exhibit and deliver
to Lender upon Lender’s request copies of any of the financial statements, trial
balances or other accounting records or reports of any sort of Borrower or
Holdings in the accountant’s or auditor’s possession (other than work papers or
other proprietary information of such accountants or auditors), and to disclose to Lender any
information such accountants or auditors may have concerning the financial
status and business operations of Borrower. Borrower hereby authorize all
Governmental Authorities to furnish Lender with copies of any reports or
examinations requested by Lender relating to Borrower. Notwithstanding the
foregoing, Lender will attempt to obtain such information or material directly
from Borrower prior to requesting any such information from any such
Governmental Authorities.

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     5.3 Inspection. Borrower
shall at Borrower’s cost and expense, upon prior reasonable notice, permit
Lender and any authorized representatives designated by Lender to visit and
inspect any of the properties, business locations, Collateral locations and
books and records of Borrower, including its financial and accounting records,
and in conjunction with such inspection, to audit Borrower’s books and records
and make copies and take extracts therefrom, and to discuss its affairs,
finances and business with its officers and independent public accountants, at
such reasonable times during normal business hours; provided that, prior
to the occurrence of an Event of Default, Borrower shall not be obligated to pay
the costs and expenses for more than two (2) such visits and inspections.

     5.4 Collateral Records.
Borrower shall, keep full and accurate books and records relating to the
Collateral and, promptly after being requested by Lender, shall mark such books
and records to indicate Lender’s security interests in the Collateral.

     5.5 Account Covenants;
Verification. Borrower shall, at its own expense, use its best efforts to
assure prompt payment of all amounts due or to become due under its Accounts. No
discounts, credits or allowances (other than normal prompt payment discounts and
customer promotional arrangements discounts) will be issued, granted or allowed
by Borrower to Financed Account Debtors. Borrower will promptly notify Lender in
the event that any Financed Account Debtor(s) allege(s) any material dispute or
claim with respect to a Financed Account or Financed Accounts in excess of Fifty
Thousand Dollars ($50,000) in the aggregate or of any other circumstances known
to Borrower that may impair, in any material respect, the validity or
collectibility of the Financed Accounts so as to cause a Material Adverse
Effect. Lender shall have the right, at any time or times hereafter, to verify
the validity, amount or any other matter relating to a Financed Account, by
mail, telephone or in person. After the occurrence and during the continuance of
an Event of Default, Borrower shall not, without the prior consent of Lender,
adjust, settle or compromise the amount or payment of any Financed Account, or
release wholly or partly any Financed Account Debtor or obligor thereof, or
allow any credit or discount thereon. 

     5.6 Corporate Existence.
Borrower shall, at all times preserve and keep in full force and effect its
existence as a legal entity and all rights and franchises material to its
businesses. Borrower shall promptly notify Lender of any change in the ownership
or corporate structure of Borrower, provided that this requirement of notice
shall not in any way or under any circumstances be deemed to permit (and no such
giving of notice shall cure or otherwise prevent the occurrence of any Event of
Default resulting from) any such change in the ownership or corporate structure
of Borrower that is otherwise prohibited or restricted hereunder or under any
other Loan Document.

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     5.7 Payment of Taxes.
Borrower shall, pay all Taxes imposed upon them or any of its properties or
assets or with respect to any of its franchises, businesses, income or property
before any penalty accrues thereon provided that no such tax need be paid if
Borrower are Properly Contesting the same.

     5.8 Maintenance of Properties;
Insurance. Borrower shall, maintain or cause to be maintained in good
repair, working order and condition, normal wear and tear excepted, all
properties used in the businesses of Borrower, and will make or cause to be made
all appropriate repairs, renewals and replacements thereof, and will protect and
preserve all material registered or registrable Intellectual Property (now or
hereafter existing). Borrower shall, maintain or cause to be maintained, with
financially sound and reputable insurers, public liability and property damage
insurance with respect to their businesses and properties against loss or damage
of the kinds customarily carried or maintained by corporations of established
reputation engaged in similar businesses and in amounts reasonably acceptable to
Lender. Borrower shall, cause Lender to be named as “lender’s loss payee” on all
insurance policies relating to any Collateral and as “additional insured” under
all liability policies, in each case pursuant to appropriate endorsements in
form and substance reasonably satisfactory to Lender and shall, collaterally
assign to Lender as security for the payment of the Obligations all business
interruption insurance of Borrower. Unless otherwise agreed to in writing by
Lender in its sole and absolute discretion, any Net Cash Proceeds received from
any policies of insurance relating to any Casualty Event relating to the
Collateral or any other assets and properties of Borrower shall be applied in
accordance with Section 2.6(A) in the absence of an Event of Default or
Section 7.3 upon the occurrence and during the continuance of an Event of
Default. 

     5.9 Compliance with Laws.
Borrower shall, comply in all material respects with the requirements of all
applicable Laws, including all such applicable Laws as now in effect and which
may be imposed in the future in all jurisdictions in which Borrower is now doing
business or may hereafter be doing business.

     5.10 Further Assurances.
Without limiting the generality of or contradicting anything set forth in
Section 2.8(A), Borrower shall, from time to time, execute such financing
or continuation statements, security agreements, reports and other documents or
deliver to Lender such instruments, certificates of title or other documents as
Lender at any time may reasonably request to evidence, perfect or otherwise
implement security for repayment of the Obligations.

     5.11 Collateral Locations.
Borrower shall keep the Collateral (other than in-transit Collateral) at the
locations specified on Schedule 4.7 (or any location of which Borrower
has given written notice to Lender in accordance with Section 5.1(H)
since the last time Borrower shall have delivered to Lender Schedule 4.7
or any update thereto).

     5.12 Landlords and
Bailees. If any Collateral is at any time in the possession or control of
any landlord, warehouseman, consignee, bailee or any of Borrower’s agents or
processors, Borrower shall, upon the request of Lender, notify such landlord,
warehouseman, bailee, agent or processor of the security interests in favor of
Lender created hereby, shall instruct such Person to hold all such Collateral
for Lender’s account subject to Lender’s instructions and shall cause such
Person to execute an access and waiver agreement acceptable to Lender.

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     5.13 Use of Proceeds and
Margin Security. Borrower shall use the proceeds of all Loans for proper
business purposes in accordance with Section 2.2 consistent with all
applicable laws, statutes, rules and regulations. No portion of the proceeds of
any Loan shall be used by Borrower for the purpose of purchasing or carrying of
margin stock within the meaning of Regulation U of the Board of Governors of the
Federal Reserve System as in effect from time to time, or in any manner that
might cause the borrowing or the application of such proceeds to violate
Regulation T or X of the Board of Governors of the Federal Reserve System as in
effect from time to time, or any other regulation of the Board of Governors of
the Federal Reserve System as in effect from time to time, or to violate the
Exchange Act.

     5.14 Revisions or Updates to
Schedules. Should any of the information or disclosures provided on any of
the Schedules originally attached hereto become outdated or incorrect in any
material respect, Borrower shall deliver to Lender such revisions or updates to
such Schedule(s) as may be necessary or appropriate to update or correct such
Schedule(s); provided that no such revisions or updates to any Schedule(s) shall
be deemed to have amended, modified or superseded such Schedule(s) as originally
attached hereto, or to have cured any breach of warranty or representation
resulting from the inaccuracy or incompleteness of any such Schedule(s), unless
and until Lender, in the exercise of its reasonable credit judgment, shall have
accepted in writing such revisions or updates to such Schedule(s). Each
representation and warranty contained in this Agreement and the other Loan
Documents shall be continuous in nature and shall remain accurate, complete and
not misleading in all material respects at all times during the term of this
Agreement, except for revisions or updates to any Schedule(s) approved by Lender
pursuant to the preceding sentence and such changes in the circumstances of
Borrower that are expressly permitted under this Agreement. 

     5.15 Accuracy of
Information. All written information, reports, statements and other papers
and data furnished to Lender, whether pursuant to this Section 5 or any
other provision of this Agreement or of any other Loan Document, shall be, at
the time the same is so furnished, complete and correct in all material respects
(subject to the provisions regarding the Pro Forma set forth in Section
4.3(C)) to the extent necessary to give Lender true and accurate knowledge
of the subject matter thereof, and shall not contain any untrue statement of a
material fact or omit any material fact necessary in order to make the
statements contained herein or therein not misleading in light of the
circumstances in which the same were made.

     5.16 Delivery of Certain
Collateral; Requirements to Give Notice of Future Acquisition of Certain
Collateral. Without limiting the generality of or contradicting anything set
forth in Section 2.8(A), Borrower hereby represents, warrants and
covenants as follows:

               (i)
Schedule 5.17(i) sets forth all of the Chattel Paper (both Tangible
Chattel Paper and Electronic Chattel Paper), Instruments, and Documents owned by
Borrower or in which Borrower has any rights, and Borrower shall hereafter give
prompt written notice to Lender of the future acquisition by Borrower of any
rights in any such Chattel Paper (both Tangible Chattel Paper and Electronic
Chattel Paper), Instruments and Documents. Upon reasonable request of Lender,
and in any event upon the occurrence of any Event of Default, Borrower shall
deliver to Lender all Tangible Chattel Paper and all Instruments and Documents
owned by Borrower duly endorsed and accompanied by duly executed instruments of
transfer or assignment, all in form and substance satisfactory to Lender. Upon
request of Lender, and in any event upon the occurrence of any Event of Default, Borrower
shall provide Lender with “control” (as defined in Article 9 of the UCC) of all
Electronic Chattel Paper owned by Borrower by having Lender identified as the
assignee on the records pertaining to the single authoritative copy thereof and
otherwise complying with the applicable elements of control set forth in the
UCC. Upon reasonable request of Lender, and in any event upon the occurrence of
any Event of Default, Borrower also shall deliver to Lender all security
agreements securing any such Chattel Paper and securing any such Instruments.
Borrower will mark conspicuously all such Chattel Paper and all such Instruments
and Documents with a legend, in form and substance satisfactory to Lender,
indicating that such Chattel Paper and such Instruments and Documents are
subject to the Liens in favor of Lender created pursuant to this Agreement and
the other Loan Documents.

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               (ii)
Schedule 5.17(ii) sets forth all of the Investment Property, Securities
(both Certificated Securities and Uncertificated Securities), Securities
Entitlements, Financial Assets and Commodity Contracts (other than any
Securities Accounts or Commodities Accounts (and any Securities, Securities
Entitlements, Financial Assets and Commodity Contracts held therein) owned by
Borrower. Borrower shall hereafter give prompt written notice to Lender of the
future acquisition by Borrower of any such Investment Property, Securities,
Securities Entitlements, Financial Assets and Commodity Contracts. Upon request
of Lender, and in any event upon the occurrence of any Event of Default,
Borrower shall provide Lender with “control” (as defined in Article 9 and/or
Article 8 (as applicable) of the UCC) of all such Investment Property,
Securities, Securities Entitlements, Financial Assets and Commodity
Contracts.

               (iii)
Schedule 5.17(iii) sets forth all of the letters of credit with an amount
available for future drawing thereunder as of the date hereof of at least
$100,000 on which Borrower is the beneficiary and which give rise to
Letter-of-Credit Rights owned by Borrower, and Borrower shall hereafter give
prompt written notice to Lender of the future acquisition by Borrower of any
such Letter-of-Credit Rights and/or Borrower being named beneficiary of or
otherwise receiving any such letter of credit. Upon request of Lender, and in
any event upon the occurrence of any Event of Default, Borrower shall deliver to
Lender all such letters of credit on which Borrower is the beneficiary and which
give rise to such Letter-of-Credit Rights owned by Borrower, in each case duly
endorsed and accompanied by duly executed instruments of transfer or assignment,
all in form and substance satisfactory to Lender and also shall take any and all
other actions as may be necessary or desirable, or that Lender may request, from
time to time, to cause Lender to obtain exclusive “control” (as defined in
Article 9 of the UCC) of any such letters of credit and related Letter-of-Credit
Rights in a manner acceptable to Lender.

               (iv)
Schedule 5.17(iv) sets forth all of the Commercial Tort Claims in which
Borrower has any rights or interest on the date hereof, including descriptions
of the events and circumstances giving rise to each such Commercial Tort Claim
and the dates such events and circumstances occurred, the potential defendants
with respect each such Commercial Tort Claim and any court proceedings that have
been instituted with respect to each such Commercial Tort Claim. Borrower shall
promptly give written notice to Lender upon Borrower becoming aware that it has
any rights or interests in any Commercial Tort Claim, which such notice shall
include all of the information with respect to such Commercial Tort Claim that
would have been required to be provided on Schedule 5.17(iv), and
Borrower shall, with respect to any such Commercial Tort Claim, execute and deliver to
Lender such documents as Lender shall request to perfect, preserve or protect
the Liens, rights and remedies of Lender with respect to any such Commercial
Tort Claim.

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               (v)
Upon request of Lender, Borrower shall promptly deliver to Lender any and all
certificates of title, applications for title or similar evidence of ownership
of all tangible Collateral which, under the provisions of Article 9 of the UCC
as in effect in any applicable state, is a type of asset with respect to which
such a certificate of title or other similar evidence of ownership is issued and
with respect to which perfection of any Lien therein must be accomplished by
notation of such Lien and the holder thereof on such certificate of title or
other similar evidence of ownership, and Borrower shall cause Lender to be named
as lienholder on any such certificate of title or other evidence of
ownership.

     5.17 SEC Filings. Borrower
shall cause Holdings to file all reports, filings and information with the
Securities and Exchange Commission as required by the Exchange Act, the
Securities Act of 1933 and any regulations promulgated thereunder.

SECTION 6 NEGATIVE COVENANTS

     To induce Lender to enter into
this Agreement, Borrower hereby covenants and agrees that until indefeasible
payment in full in cash and performance in full of all Obligations and the
termination of the Loan and this Agreement, Borrower shall not, without the
express prior written consent of Lender, take any of the following actions:

     6.1 Indebtedness. Borrower
shall not, directly or indirectly create, incur, assume, guaranty, or otherwise
become or remain directly or indirectly liable, on a fixed or contingent basis,
with respect to any Indebtedness except the Obligations and the Indebtedness
existing as of the date hereof and set forth on Schedule 6.1; provided
that Borrower may create, incur or otherwise become directly liable with
respect to any Indebtedness that is subordinate to the Obligations on terms and
conditions, and pursuant to a subordination agreement, reasonably acceptable to
Lender.

     6.2 Guaranties. Except for
the guaranties and endorsements of Instruments or items of payment for
collection in the ordinary course of business, Borrower shall not guaranty,
endorse, or otherwise in any way become or be responsible for any obligations of
any other Person, whether directly or indirectly.

     6.3 Transfers, Liens and
Related Matters.

          (A)
Transfers. Borrower shall not, make any Asset Distribution, or grant any
option with respect to any of the Collateral or other assets, except that
Borrower may sell Inventory in the ordinary course of business.

          (B)
Liens. Except for Permitted Encumbrances, Borrower shall not directly or
indirectly create, incur or assume (or agree to create, incur or assume) or
permit to exist any Lien on or with respect to any of the Collateral or other
assets or any proceeds, income or profits therefrom.

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          (C)
No Pledge Restrictions. Borrower shall not, enter into or assume any
agreement (other than the Loan Documents), restricting the creation or
assumption of any Lien upon any of its properties or assets, whether now owned
or hereafter acquired.

          (D)
Restricted Payments. Borrower shall not, directly or indirectly declare,
order, pay, make or set apart any sum for any Restricted Payment, except as
expressly permitted in this Agreement or any other Loan Document.

     6.4 Restriction on Fundamental
Changes. Borrower shall not: (a) acquire by purchase or otherwise all or any
material portion of the assets of, or Capital Stock or other evidence of
beneficial ownership, of any Person or any business or division of any Person or
(b) merge into or consolidate with any other Person.

     6.5 Transactions with
Affiliates. Except as disclosed on Schedule 6.5, Borrower shall not,
directly or indirectly, enter into or permit to exist any transaction (including
the purchase, sale or exchange of property or the rendering of any service) with
any Affiliate or with any officer, director or employee of Borrower, any
Guarantor or any Subsidiary, except for transactions in the ordinary course of
and pursuant to the reasonable requirements of the businesses of Borrower and
upon fair and reasonable terms and which are no less favorable to Borrower than
they would obtain in a comparable arm’s length transaction with an unaffiliated
Person. 

     6.6 Environmental
Liabilities. Without limiting the generality of Section 5.9 or the
representations and warranties of Section 4.15, Borrower shall not: (a)
violate in any respect any applicable Environmental Law; (b) dispose of any
Hazardous Materials (except in accordance with applicable Environmental Law)
into, onto or from, any real property owned, leased or operated by Borrower, any
Guarantor and their Subsidiaries; or (c) permit any Lien imposed pursuant to any
Environmental Law to be imposed or to remain on any real property owned, leased
or operated by Borrower, any Guarantor and their Subsidiaries.

     6.7 Conduct of Business.
Borrower shall not, (i) engage in any business other than businesses of the type
engaged in by Borrower on the Closing Date and any businesses reasonably related
thereto.

     6.8 Compliance with ERISA.
Borrower shall not, and shall not permit their Subsidiaries or any other member
of the ERISA Affiliate Group to, establish any new Employee Benefit Plan or
amend any existing Employee Benefit Plan after the Closing Date if the liability
or increased liability resulting from such establishment or amendment could
reasonably be expected to have a Material Adverse Effect. Borrower shall
establish, maintain and operate each Employee Benefit Plan in compliance in all
material respects with the provisions of ERISA, the IRC and all other applicable
laws and the regulations and interpretations thereof.

     6.9 Subsidiaries. Borrower
shall not create any Subsidiaries after the Closing Date. 

     6.10 Fiscal Year. Borrower
shall not change its fiscal year or adopt a fiscal year other than the Fiscal
Year for tax or accounting purposes.

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     6.11 Press Release; Public
Offering Materials. Borrower shall not, disclose the name of Lender in any
press release or in any prospectus, proxy statement or other materials filed
with any governmental entity except as may be required by law or with Lender’s
prior written approval.

     6.12 Payments on and
Amendments to Subordinated Debt. Borrower shall not make any payment on all
or part of any Indebtedness for borrowed money. Borrower shall not amend,
supplement or otherwise modify any document, instrument or agreement relating to
any Indebtedness for borrowed money.

     6.13 Organizational
Documents. Borrower shall not, amend or otherwise modify its Organizational
Documents in a manner which could impact Lender’s rights under the Loan
Documents and/or with respect to Borrower or the Collateral, and Borrower shall
not, enter into any new shareholder’s agreement or similar agreement after the
date hereof (and Borrower represents and warrants that true, complete and
correct copies of such Organizational Documents as in effect as of the date
hereof complete with all amendments have been delivered to Lender as of the date
hereof).

     6.14 No Impairment of
Restricted Payments. Borrower shall not, directly or indirectly enter into
or become bound by any agreement, instrument, indenture or other obligation
(other than this Agreement and the other Loan Documents) which could directly or
indirectly restrict, prohibit or require the consent of any Person with respect
to the making of any Restricted Payment by Borrower.

     6.15 Advances, Loans or
Investments. Except for Permitted Investments, Borrower shall not make
advances or loans to, or any investment in any Person or any business division
of any Person.

     6.16 Management or Consulting
Fees. Borrower shall not pay any management, consulting or other similar
fees incurred prior to the date of this Agreement to either Mark Sampson or
Ralph Proceviat prior to the payment in full of the Bridge Loan, all accrued and
unpaid interest thereon and all unpaid fees and expenses incurred by Lender in
connection therewith.

     6.17 Anti-Terrorism Laws.
Borrower is not and shall not be (i) a Person with whom Lender is restricted
from doing business under Executive Order No. 13224 or any other Anti-Terrorism
Law, (ii) engaged in any business involved in making or receiving any
contribution of funds, goods or services to or for the benefit of such a Person
or in any transaction that evades or avoids, or has the purpose of evading or
avoiding, the prohibitions set forth in any Anti-Terrorism Law, or (iii)
otherwise in violation of any Anti-Terrorism Law. Borrower shall provide to
Lender any certifications or information that Lender requests to confirm
compliance by Borrower with Anti-Terrorism Laws.

     6.18 Use of Revolving
Loans. Borrower shall not use any Revolving Advance to purchase Inventory
that will not be used for purposes of fulfilling an Eligible Purchase Order or
sell to any Account Debtor designated by Lender as not creditworthy any
Inventory purchased with all or any portion of any Revolving Advance.

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SECTION 7 DEFAULTS, RIGHTS AND REMEDIES

     7.1 Event of Default.
“Event of Default” means the occurrence or existence of any one or more
of the following:

          (A)
Payment. Failure to make payment of any of the Obligations when due; or

          (B)
Default in Other Agreements. (i) Failure of Borrower, any Guarantor or
any Subsidiary to pay when due (or within any applicable grace period) any
principal, interest, fees or other obligations on any Indebtedness, or (ii)
default by Borrower or any Guarantor under any agreement or agreements
evidencing any Indebtedness or pursuant to which such Indebtedness was issued or
governed if the effect of such default is to enable the holder of such
Indebtedness to accelerate the payment of such Person’s obligations which are
the subject thereof prior to the maturity date thereof or prior to the
regularly-scheduled date of payment thereof, and such default continues beyond
any applicable grace or cure period (whether or not the holder of such
Indebtedness actually accelerates such payment); or

          (C)
Breach of Covenants. (i) Failure of Borrower to perform or comply with
any term, condition, covenant, agreement or undertaking contained in Section
2.12, Section 5.1(A), Section 5.1(B), Section
5.1(C), Section 5.1(F), Section 5.1(I), Section 5.3,
Section 5.5(B), Section 5.11, Section 5.12,
Section 5.13, Section 5.16 and SECTION 6, (ii) failure of
Borrower to perform or comply with any other term, condition, covenant,
agreement or undertaking contained in this Agreement that continues unremedied
for a period of ten (10) days, or (iii) failure of any Guarantor to perform or
comply with any term, condition, covenant, agreement or undertaking contained in
this Agreement or in any other Loan Document; or

          (D)
Breach of Warranty. Any representation, warranty, certification or other
statement made by Borrower or any Guarantor in this Agreement or any other Loan
Document or in any statement or certificate (including any financial statement
or collateral report) at any time given by such Person in writing pursuant to or
in connection with any Loan Document is false or misleading in any material
respect on the date made or reaffirmed; or

          (E)
Change of Control. The occurrence of a Change of Control.

          (F)
Involuntary Bankruptcy; Appointment of Receiver, etc. (1) A court enters
a decree or order for relief with respect to Borrower, any Subsidiary or any
Guarantor or any of their respective properties in an involuntary case under the
Bankruptcy Code or any applicable other bankruptcy, receivership, insolvency or
similar Law now or hereafter in effect, or (2) a decree or order of a court for
the appointment of a receiver, liquidator, sequestrator, trustee, custodian or
other officer having similar powers over Borrower, or over all or a substantial
part of its property, is entered (whether or not such appointment is of a
temporary nature), or (3) an involuntary case is commenced against Borrower, any
Subsidiary or any Guarantor, under the Bankruptcy Code or any other applicable
bankruptcy, receivership, insolvency or similar Law now or hereafter in effect
and such case is not dismissed or discharged within sixty (60) days; or

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          (G) Voluntary Bankruptcy; Appointment of Receiver, etc. (1) An order for
relief is entered with respect to Borrower, any Subsidiary or any Guarantor or
any of their respective properties in, or Borrower, any Subsidiary or any
Guarantor commences a voluntary case under, under the Bankruptcy Code or any
applicable other bankruptcy, receivership, insolvency or similar Law now or
hereafter in effect, or (2) Borrower, any Subsidiary or any Guarantor consents
to the entry of an order for relief in an involuntary case or to the conversion
of an involuntary case to a voluntary case under a under the Bankruptcy Code or
any applicable other bankruptcy, receivership, insolvency or similar Law now or
hereafter in effect or consents to the appointment of or taking possession by a
receiver, trustee or other custodian for all or a substantial part of its
property, or (3) Borrower, any Subsidiary or any Guarantor makes any assignment
for the benefit of creditors, or (4) Borrower, any Subsidiary or any Guarantor
shall admit in writing the present or prospective inability to pay such Person
or Person’s debts as they become due or (5) the Board, member(s), manager(s) or
partner(s) of Borrower, any Subsidiary or any Guarantor adopt any resolution or
otherwise authorizes action to approve any of the actions referred to in this
Section 7.1(G); or

          (H)
Liens. Liens, levies, attachments, executions or assessments (or any of
them) are issued with respect to, attaches to or filed or recorded with respect
to or otherwise imposed upon all or any part of the Collateral, the Pledged
Collateral or the assets of Borrower, any Subsidiary or any Guarantor (other
than with respect to Collateral, Permitted Encumbrances) and such lien, levy or
assessment is not stayed, vacated, paid or discharged within ten (10) days;
or

          (I)
Judgments. Any money judgment involving an amount, individually or in the
aggregate, in excess of One Hundred Thousand Dollars ($100,000) (in either case
not adequately covered by insurance as to which the insurance company has
acknowledged coverage or undertaken the defense thereof subject only to
customary reservation of rights) is entered or filed against Borrower, any
Subsidiary or any Guarantor or any of their respective assets and remains
unsatisfied, undischarged, unvacated, unbonded or unstayed for a period of
thirty (30) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or

          (J)
Dissolution. Any order, judgment or decree is entered against Borrower,
any Guarantor or any Subsidiary decreeing the dissolution or split up of such
Person, or Borrower or any Guarantor voluntarily commences a liquidation,
dissolution or ceases to operate its business; or

          (K)
Solvency. Borrower or any Guarantor ceases to be solvent (as defined and
provided for in Section 4.16); or

          (L)
Injunction. Borrower, any Guarantor or any Subsidiary is enjoined,
restrained or in any way prevented by the order of any court or any
administrative or regulatory agency from conducting all or any material part of
its business and such order continues for more than thirty (30) days; or

          (M)
Invalidity of Loan Documents. Any of the Loan Documents for any reason
ceases to be in full force and effect (except pursuant to the express terms
thereof or due to solely to any act or omission by Lender) or is declared to be
null and void, or Borrower or any Guarantor denies that it has any further
liability under any Loan Documents to which it is party, or gives notice to such
effect, or any Guarantor who is a natural Person shall die; or

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          (N)
Failure of Security. Lender does not have or ceases to have a valid and
perfected first priority security interest in the Collateral (subject only to
Permitted Encumbrances) or Pledged Collateral; or

          (O)
Licenses and Permits. The loss, suspension or revocation of, or failure
to renew, any license or permit now held or hereafter acquired by Borrower, any
Guarantor or any Subsidiary, if such license or permit is not obtained or
reinstated within ten (10) day, unless such loss, suspension, revocation or
failure to renew could reasonably be expected to have a Material Adverse Effect;
or 

          (P)
Forfeiture. There is filed against Borrower, any Subsidiary, or any
Guarantor any civil or criminal action, suit or proceeding under any federal or
state racketeering statute (including, without limitation, the Racketeer
Influenced and Corrupt Organization Act of 1970), or any civil or criminal
action, suit or proceeding under any other applicable Law that could result in
the confiscation or forfeiture of any material portion of the Collateral or
other assets of such Person, or any other criminal action, suit or proceeding
under any other applicable criminal Law, and such action, suit or proceeding is
not dismissed within one hundred twenty (120) days; 

          (Q)
Material Adverse Change. Any event, development or condition shall have
occurred which has had or is reasonably expected to have a Material Adverse
Effect; or

     7.2 Acceleration. Upon the
occurrence of any Event of Default described in the foregoing Sections 7.1(F)
or 7.1(G), all Obligations shall automatically become immediately due
and payable, without presentment, demand, protest or other requirements of any
kind, all of which are hereby expressly waived by Borrower. Upon the occurrence
of any other Event of Default, Lender may declare all Obligations to be
immediately due and payable, without presentment, demand, protest or other
requirements of any kind, all of which are hereby expressly waived by Borrower.
Upon the occurrence of any Event of Default and without impairing the
discretionary nature of the Loan, Lender may elect, in its discretion, to
discontinue making Advances to Borrower.

     7.3 Application of
Proceeds. From and during the continuance of any Event of Default, any
monies or property actually received by the Lender pursuant to this Agreement or
any other Loan Document, the exercise of any rights or remedies under any Loan
Document or any other agreement with any Loan Party which secures any of the
Obligations, shall be applied in the following order:

          (A)
First, to payment of the reasonable expenses, liabilities, losses, costs,
duties, fees, charges or other moneys whatsoever (together with interest payable
thereon) as may have been paid or incurred in, about or incidental to any sale
or other realization of Pledged Collateral or Collateral, including reasonable
compensation to the Lender and its agents and counsel, and to the payment of any
unreimbursed reasonable expenses and indemnities for which the Lender is to be
reimbursed pursuant to this Agreement or any other Loan Document; 

          (B)
Second, to the payment of accrued but unpaid fees owing to the
Lender;

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          (C)
Third, to the payment of accrued but unpaid interest under this
Agreement;

          (D)
Fourth, according to the then unpaid amounts thereof, without preference
or priority of any kind among them, to the payment of principal of (x) first,
the Bridge Loan; (y) second, the Revolving Advances, and (z) third, all other
Obligations under this Agreement;

          (E)
Fifth, any excess after payment in full of all Obligations shall be paid
to such Person who may be lawfully entitled to receive such excess.

     7.4 Remedies. In addition
to the rights and remedies of acceleration provided for in Section 7.2
above, upon the occurrence and during the continuance of any Event of
Default, Lender may exercise against Borrower, their Subsidiaries and all
Guarantors, and their respective properties and assets including the Collateral,
any and all rights and remedies available to Lender under this Agreement, the
other Loan Documents, under any applicable Law or in equity, and may exercise
such rights and remedies in any order, against any one or more such Persons
and/or their respective properties and assets and after any delay all as Lender
may elect in its sole and absolute discretion. Without limiting the generality
of the foregoing, upon the occurrence and during the continuance of any Event of
Default, in addition to and not in limitation of any rights or remedies
available to Lender under this Agreement and any other Loan Documents (including
any Guarantor Security Documents), under any applicable Law or in equity, Lender
may exercise in respect of the Collateral all the rights and remedies of a
secured party on default under the UCC (whether or not the UCC applies to the
affected Collateral) and may also (a) notify any or all Account Debtors on the
Accounts to make all payments directly to Lender; (b) require Borrower to, and
Borrower hereby agrees that it will, at its expense and upon request of Lender
forthwith, assemble all or part of the Collateral as directed by Lender and make
it available to Lender at a place to be designated by Lender which is reasonably
convenient to both parties; (c) without notice or demand or legal process, enter
upon any premises of Borrower and take possession of the Collateral; (d) without
notice or demand or legal process, deliver to any bank at which a Blocked
Operating Account is maintained notice that such bank shall take directions with
respect to such Blocked Operating Account from only Lender; and (e) without
notice except as specified below, sell the Collateral or any part thereof in one
or more parcels at public or private sale, at any of Lender’s offices or
elsewhere, at such time or times, for cash, on credit or for future delivery,
and at such price or prices and upon such other terms as Lender may deem
commercially reasonable. Borrower agrees that, to the extent notice of sale
shall be required by law, at least ten (10) days notice to Borrower of the time
and place of any public sale or the time after which any private sale is to be
made shall constitute reasonable notification. At any sale of the Collateral, if
permitted by law, Lender may bid (which bid may be, in whole or in part, in the
form of cancellation of indebtedness) for the purchase of the Collateral or any
portion thereof for the account of Lender and/or disclaim all warranties. Lender
shall not be obligated to make any sale of Collateral regardless of notice of
sale having been given. Borrower shall remain liable for any deficiency. Lender
may adjourn any public or private sale from time to time by announcement at the
time and place fixed thereof, and such sale may, without further notice, be made
at the time and place to which it was so adjourned. To the extent permitted by
law, Borrower hereby specifically waives all rights of redemption, stay or
appraisal which it has or may have under any Law now existing or hereafter
enacted. Lender shall not be required to proceed against any Collateral but may
proceed against Borrower directly.

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     7.5 Appointment of
Attorney-in-Fact. Without limiting the provisions of Section
2.8(C) above, Borrower hereby irrevocably makes, constitutes and appoints
each of the officers of Lender or its representatives the true and lawful
attorney and attorney-in-fact for Borrower (without requiring any of them to act
as such) with full power of substitution from time to time in Lender’s
discretion while an Event of Default is continuing to take any action and to
execute any instrument that Lender may deem necessary or advisable to accomplish
the purposes of this Agreement, including: (a) to ask, demand, collect, sue for,
recover, compound, receive and give acquaintance and receipts for moneys due and
to become due under or in respect of any of the Collateral; (b) to adjust,
settle or compromise the amount or payment of any Account, or release wholly or
partly any Account Debtor or obligor thereunder or allow any credit or discount
thereon; (c) to receive, endorse, and collect any drafts or other Instruments,
Documents and Chattel Paper, in connection with clause (a) above; (d) to file
any claims or take any action or institute any proceedings that Lender may deem
necessary or desirable for the collection of any of the Collateral or otherwise
to enforce the rights of Lender with respect to any of the Collateral; and (e)
to sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts, assignments, verifications and notices in
connection with Accounts and other documents relating to the Collateral. This
power of attorney is coupled with an interest and is irrevocable until payment
in full and complete performance of all of the Obligations and termination of
this Agreement.

     7.6 Limitation on Duty of
Lender with Respect to Collateral. Beyond the safe custody thereof, Lender
shall not have any duty with respect to any Collateral in its possession or
control (or in the possession or control of any agent or bailee) or with respect
to any income on the Collateral or the preservation of rights against prior
parties or any other rights pertaining to the Collateral. Lender shall be deemed
to have exercised reasonable care in the custody and preservation of the
Collateral in its possession if the Collateral is accorded treatment
substantially equal to that which Lender accords its own property. Lender shall
not be liable or responsible for any loss or damage to any of the Collateral, or
for any diminution in the value thereof, by reason of the act or omission of any
warehouseman, carrier, forwarding agency, consignee or other agent or bailee
selected by Lender in good faith.

     7.7 License of Intellectual
Property. For the purposes of Lender exercising its rights and remedies with
respect to the Collateral, Borrower hereby grants, assigns, transfers and
conveys to Lender as a present grant and assignment as of the date hereof an
irrevocable, non-exclusive, royalty-free right and license to use Borrower’s
names (including trade names) and all Intellectual Property owned or used by
Borrower, together with any goodwill associated therewith, and all personal
property of Borrower imprinted with, containing or embodying any of the
foregoing and any similar property, at any time following the occurrence and
during the continuance of any Event of Default hereunder, all to the extent
necessary to enable Lender to complete production of, advertise for sale, and
sell any Collateral and to otherwise realize on the Collateral, and for any
successor or assign to enjoy the benefits of the Collateral. This right and
license shall inure to the benefit of all successors, assigns and transferees of
Lender and its successors, assigns and transferees, whether by voluntary
conveyance, operation of law, assignment, transfer, foreclosure, deed in lieu of
foreclosure or otherwise. Such right and license is granted free of charge,
without requirement that any monetary payment whatsoever be made to Borrower by
Lender. In connection with Lender’s exercise of its rights under this Article,
Borrower agrees that Borrower’s rights under all licenses and
all franchise agreements shall inure to Lender’s benefit.

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     7.8 Waivers, Non-Exclusive
Remedies. By making the Advances hereunder, Lender does not waive any breach
of any warranty or representation made by Borrower or any Guarantor hereunder or
under any of the other Loan Documents or a breach under any agreement, document,
or instrument delivered to Lender or otherwise referred to herein, and all of
Lender’s claims and rights resulting from any breach or misrepresentation by
Borrower or any Guarantor is specifically reserved by Lender. No failure on the
part of Lender to exercise, and no delay in exercising and no course of dealing
with respect to, any right under this Agreement or the other Loan Documents
shall operate as a waiver thereof; nor shall any single or partial exercise by
Lender of any right under this Agreement or any other Loan Document preclude any
other or further exercise thereof or the exercise of any other right. The rights
in this Agreement and the other Loan Documents are cumulative and are not
exclusive of any other remedies provided by law. Lender may exercise its rights
and remedies against any one or more of Borrower and/or Guarantors and/or their
respective property or assets (including the Collateral) at any time and from
time to time without regard to whether any one or more of such rights and
remedies have previously been exercised and/or are then concurrently being
exercised against any other one or more of Borrower and/or Guarantors, and
Lender may exercise any one or more of such rights and remedies in any order
without regard to whether any other one or more of such rights or remedies have
been and/or are then concurrently being exercised.

SECTION 8 MISCELLANEOUS

     8.1 Assignments and
Participations. Lender may assign its rights and delegate its obligations
under this Agreement, or sell participations in, all or any part of the Loan or
any other interest herein to an Affiliate or to another Person at any time and
from time to time without prior notice to or consent of Borrower;
provided, however, that Lender shall provide Borrower with notice
of any assignment of the Loan or any portion thereof within five (5) Business
Days after such assignment; provided, further, that failure to
provide such notice shall not affect the validity or enforceability of such
assignment or the Obligations. In the case of an assignment, the assignee shall
have, to the extent of such assignment, the same rights, benefits and
obligations as it would if it were a Lender hereunder and such Lender shall be
relieved of its obligations hereunder with respect to the commitments or
assigned portion thereof. Borrower hereby acknowledges and agrees that any
assignment will give rise to a direct obligation of Borrower to the assignee,
that the assignee shall be deemed to be a “Lender”, and that the assigning
Lender shall be relieved and discharged of any duties or obligations hereunder
to the extent of the interest assigned. Lender may furnish any information
concerning Borrower in its possession from time to time to assignees and
participants (including prospective assignees and participants), provided that
any such assignee or participant or prospective assignee or participant agrees
to maintain the confidentiality of such information in the same manner as
provided for in Section 8.24 below. 

     8.2 Entire Understanding.
This Agreement and the other Loan Documents executed concurrently herewith
contain the entire understanding among Lender and Loan Parties and supersede all
prior agreements and understandings, if any, relating to the subject matter
hereof. Any promises, representations, warranties or guarantees not herein
contained or in any other Loan Documents or hereinafter made shall have no force and
effect unless in writing signed by Lender. 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. Loan Parties acknowledge that they have been advised by
counsel in connection with the execution of this Agreement and the other Loan
Documents and are not relying upon oral representations or statements
inconsistent with the terms and provisions of this Agreement.

-54-

     8.3 Set Off. In addition
to any rights now or hereafter granted under applicable law and not by way of
limitation of any such rights, upon the occurrence, and during the continuance,
of any Event of Default, Lender, each assignee of Lender’s interest, and each
participant is hereby authorized by Borrower at any time or from time to time,
without notice to Borrower or to any other Person, any such notice being hereby
expressly waived, to set off and to appropriate and to apply any and all
balances held by it at any of its offices for the account of Borrower
(regardless of whether such balances are then due to Borrower) and any other
property at any time held or owing by that Lender or assignee to or for the
credit or for the account of Borrower against and on account of any of the
Obligations then outstanding; provided, that no participant shall exercise such
right without the prior written consent of Lender.

     Borrower, on behalf of itself and
its Subsidiaries, hereby agrees, to the fullest extent permitted by law, that
Lender, assignee or participant may exercise its right of setoff with respect to
amounts in excess of its pro rata share of the Obligations (or, in the case of a
participant, in excess of its pro rata participation interest in the
Obligations) and that such Lender, assignee or participant, as the case may be,
shall be deemed to have purchased for cash in the amount of such excess,
participations in each other Lender’s or holder’s share of the Obligations.

     8.4 Expenses and Attorneys’
Fees. Borrower agrees to promptly pay all fees, costs and expenses incurred
by Lender in connection with any matters contemplated by or arising out of this
Agreement or the other Loan Documents including the following, and all such
fees, costs and expenses shall be part of the Obligations, payable on demand and
secured by the Collateral: (a) fees, costs and expenses (including reasonable
attorneys’ fees, and fees of environmental consultants, accountants and other
professionals retained by Lender) incurred in connection with the examination,
review, negotiation, due diligence investigation, documentation and closing of
the financing arrangements evidenced by the Loan Documents; (b) fees, costs and
expenses (including reasonable attorneys’ fees and reasonable fees of
environmental consultants, accountants and other professionals retained by
Lender) incurred in connection with the review, negotiation, preparation,
documentation, execution and administration of the Loan Documents, the Loan, and
any amendments, waivers, consents, forbearance and other modifications relating
thereto or any subordination or intercreditor agreements; (c) fees, out of
pocket costs and expenses incurred in creating, perfecting and maintaining
perfection of Liens in favor of Lender including title insurance premiums, real
estate survey costs and mortgage or recording taxes and fees; (d) fees, out of
pocket costs and expenses incurred in connection with forwarding to Borrower the
proceeds of Loans including Lender’s standard wire transfer fee; (e) fees, out
of pocket costs, expenses and bank charges, including bank charges for returned
checks, incurred by Lender in establishing, maintaining and handling lock box
accounts, Blocked Accounts or other accounts for collection of the Collateral;
(f) fees, costs, expenses (including attorneys’ fees) and costs of settlement
incurred in collecting upon or enforcing, preserving and defining rights against the Collateral or incurred in any action to enforce
this Agreement or the other Loan Documents or to collect any Obligations owing
from Borrower or any Guarantor under this Agreement or any other Loan Document
or incurred in connection with any refinancing or restructuring of the credit
arrangements provided under this Agreement, whether in the nature of a “workout”
or in connection with any insolvency or bankruptcy proceedings or otherwise; and
(g) the cost of procuring background checks or updating background checks
previously obtained by Lender relating to officers of Borrower (and Borrower
shall use their best efforts to obtain the consent of all officers to such
checks or updated checks).

-55-

     8.5 Indemnity. In addition
to the payment of expenses pursuant to Section 8.4, whether or not the
transactions contemplated hereby shall be consummated, Borrower agrees to
indemnify, pay and hold Lender, its and their participants and its and their
assignees and their respective officers, directors, employees, agents,
consultants, auditors, Persons engaged by any of them to evaluate or monitor the
Collateral, affiliates and attorneys of any of them (collectively called the
“Indemnities”) harmless from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, claims,
costs, expenses and disbursements of any kind or nature whatsoever (including
the reasonable fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding
commenced or threatened, whether or not such Indemnitee shall be designated a
party thereto) that may be imposed on, incurred by, or asserted against that
Indemnitee, in any manner relating to or arising out of this Agreement or the
other Loan Documents, the consummation of the transactions contemplated by this
Agreement, the statements contained in any term sheet, if any, delivered by
Lender, Lender’s agreement to make the Advances hereunder, the use or intended
use of the proceeds of any of the Loan or the exercise of any right or remedy
hereunder or under the other Loan Documents (the “Indemnified
Liabilities”); provided that Borrower shall have no obligation to an
Indemnitee hereunder with respect to Indemnified Liabilities directly arising
from the gross negligence or willful misconduct of that Indemnitee as finally
determined by a court of competent jurisdiction.

     8.6 Amendments and
Waivers. No amendment, modification, termination or waiver of any provision
of this Agreement or of the other Loan Documents, or consent to any departure by
Borrower therefrom or any of the terms, conditions, or provisions thereof, shall
be effective unless the same shall be in writing and signed by Lender and
Borrower. Each amendment, modification, termination or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given.

     8.7 Notices. Unless
otherwise specifically provided herein, all notices shall be in writing
addressed to the respective party as set forth below and may be personally
served, sent by facsimile, sent by overnight courier service or sent by
certified United States mail, return receipt requested and postage prepaid, and
shall be deemed to have been given: (a) if delivered in person, when delivered;
(b) if delivered by facsimile, on the date of transmission if transmitted on a
Business Day before 4:00 p.m. Eastern standard time or, if not, on the next
succeeding Business Day, but only if the sending party shall have received a
confirmation of successful transmission from the sending facsimile machine; (c)
if delivered by overnight courier, two (2) Business Days after delivery to such
courier properly addressed; or (d) if by certified U.S. Mail, return receipt
requested, four (4) Business Days after depositing in the United States mail,
with postage prepaid and properly addressed.

-56-

	If to Borrower: 	Nexaira, Inc. 
	  	6650 Lusk Blvd 
	  	Suite B20 	  
	  	San Diego California 92121 
	  	Attention: 	Mark Sampson 
	  	Facsimile: 	(604) 682-1044 
	  	  	  
	With copies to: 	Clark Wilson LLP 
	  	800-855 West Georgia Street 
	  	Vancouver, BC V6C 3H1 
	  	Canada 	  
	  	Attention: 	Virgil Hlus 
	  	Facsimile: 	(604) 687-6314 
	  	  	  
	If to Lender: 	Centurion Credit Funding LLC 
	  	152 West 57th Street,
      54th Floor 
	  	New York, New York 10019 
	  	Attention: 	David Steinberg 
	  	Facsimile: 	(212) 582-2424 
	  	  	  
	With a copy to: 	Blank Rome LLP 
	  	The Chrysler Building 
	  	405 Lexington Avenue 
	  	New York, New York 10174 
	  	Attention: 	Eliezer M. Helfgott, Esq. 
	  	Facsimile: 	(212) 885-5001 

or to such other address as the party addressed shall have
previously designated by written notice to the serving party, given in
accordance with this Section 8.7.

     8.8 Survival of Warranties and
Certain Agreements.

          (A)
All representations and warranties made hereunder and in any other Loan Document
or other document delivered pursuant hereto or thereto or in connection herewith
or therewith shall survive the execution and delivery hereof and thereof. Such
representations and warranties have been or will be relied upon by Lender
regardless of any investigation made by Lender or on its behalf and
notwithstanding that Lender may not have had notice or knowledge of any breach
of a representation or warranty, and shall continue in full force and effect as
long as any Obligation shall remain outstanding.

          (B)
This Agreement and the other Loan Documents shall remain in full force and
effect until such time as the Obligations have been indefeasibly paid and
satisfied in cash, in full, at which time this Agreement shall be terminated;
provided, however, that the provisions set forth in Sections
2.10(C), 8.4, 8.5, 8.8, 8.19 and 8.20
(and any guaranty by the Guarantors of the Obligations of Borrower with
respect to such Sections 2.10(C), 8.4, 8.5, 8.19 and
8.20) shall survive termination of this Agreement. Notwithstanding the
foregoing, this Agreement and the other Loan Documents shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in whole
or in part, of any of the Obligations is rescinded or must otherwise be restored
or returned by Lender as a preference, fraudulent conveyance or otherwise, all
as though such payment had not been made.

-57-

     8.9 Indulgence Not Waiver.
No failure or delay on the part of Lender in the exercise of any power, right or
privilege shall impair such power, right or privilege or be construed to be a
waiver of any default or acquiescence therein, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege.

     8.10 Marshaling; Payments Set
Aside. Lender shall not be under any obligation to marshal any assets in
favor of Borrower, any Guarantor or any other party or against or in payment of
any or all of the Obligations. To the extent that Borrower or any Guarantor
makes a payment or payments to Lender or Lender enforces its security interests
or exercise its rights of setoff, and such payment or payments or the proceeds
of such enforcement or setoff or any part thereof are subsequently invalidated,
declared to be fraudulent or preferential, set aside and/or required to be
repaid to a trustee, receiver or any other party under any bankruptcy law, state
or federal law, common law or equitable cause, then to the extent of such
recovery, the Obligations or part thereof originally intended to be satisfied,
and all Liens, rights and remedies thereof, shall be revived and continued in
full force and effect as if such payment had not been made or such enforcement
or setoff had not occurred.

     8.11 Entire Agreement.
This Agreement, the Notes, and the other Loan Documents referred to herein
embody the final, entire agreement among the parties hereto and supersede any
and all prior commitments, agreements, representations, and understandings,
whether written or oral, relating to the subject matter hereof and may not be
contradicted or varied by evidence of prior, contemporaneous, or subsequent oral
agreements or discussions of the parties hereto. There are no oral agreements
among the parties hereto.

     8.12 Independence of
Covenants. All covenants hereunder shall be given independent effect so that
if a particular action or condition is not permitted by any of such covenants,
the fact that it would be permitted by an exception to, or be otherwise within
the limitations of, another covenant shall not avoid the occurrence of a Default
or an Event of Default if such action is taken or condition exists.

     8.13 Severability. The
invalidity, illegality or unenforceability in any jurisdiction of any provision
in or obligation under this Agreement or the other Loan Documents shall not
affect or impair the validity, legality or enforceability of the remaining
provisions or obligations under this Agreement, or the other Loan Documents in
such or any other jurisdiction, or of such provision or obligation in any other
jurisdiction.

     8.14 Headings. Section and
subsection headings in this Agreement are included herein for convenience of
reference only and shall not constitute a part of this Agreement for any other
purpose or be given any substantive effect.

-58-

     8.15 APPLICABLE LAW. THIS
AGREEMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER ARISING
UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

     8.16 Successors and
Assigns. This Agreement shall be binding upon and inure to the benefit of
the parties hereto and their respective successors and assigns except that no
Borrower may assign its rights or obligations hereunder.

     8.17 No Fiduciary
Relationship; Limitation of Liabilities.

          (A)
No Fiduciary Relationship. No provision in this Agreement or in any of
the other Loan Documents and no course of dealing between the parties shall be
deemed to create any fiduciary duty on the part of Lender to Borrower.

          (B)
Limitation of Liabilities. No Lender, or any affiliate, officer,
director, shareholder, employee, attorney, or agent of Lender shall have any
liability with respect to, and Borrower hereby waives, releases, and agrees not
to sue any of them upon, any claim for any special, indirect, incidental, or
consequential damages suffered or incurred by Borrower in connection with,
arising out of, or in any way related to, this Agreement or any of the other
Loan Documents, or any of the transactions contemplated by this Agreement or any
of the other Loan Documents. Borrower hereby waives, releases, and agrees not to
sue Lender or any of Lender’s affiliates, officers, directors, employees,
attorneys, or agents for punitive damages in respect of any claim in connection
with, arising out of, or in any way related to, this Agreement or any of the
other Loan Documents, or any of the transactions contemplated by this Agreement
or any of the transactions contemplated hereby.

     8.18 CONSENT TO
JURISDICTION. BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR
FEDERAL COURT LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND
IRREVOCABLY AGREES THAT, SUBJECT TO LENDER’S ELECTION, ALL ACTIONS OR
PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES, OR THE
OTHER LOAN DOCUMENTS OR THE OBLIGATIONS SHALL BE LITIGATED IN SUCH COURTS.
BORROWER ACCEPTS FOR ITSELF AND IN CONNECTION WITH ITS PROPERTIES, GENERALLY AND
UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF THE AFORESAID COURTS AND
WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND IRREVOCABLY AGREES TO BE BOUND
BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS AGREEMENT, THE NOTES,
THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. BORROWER WAIVES PERSONAL SERVICE OF
ANY AND ALL PROCESS AND AGREES THAT ALL SUCH SERVICE OF PROCESS MAY BE MADE UPON
BORROWER BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, DIRECTED TO
BORROWER, AT BORROWER’S ADDRESS AS SET FORTH IN SECTION 8.7 OR AS MOST
RECENTLY NOTIFIED BY BORROWER IN WRITING PURSUANT TO SECTION 8.7 AND SERVICE
SO MADE SHALL BE COMPLETE TEN (10) DAYS AFTER THE SAME HAS BEEN
POSTED AS AFORESAID.

-59-

     8.19 WAIVER OF JURY TRIAL.
BORROWER AND LENDER HEREBY WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT, THE NOTES
OR THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS. BORROWER AND LENDER ACKNOWLEDGE
THAT THIS WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP,
THAT EACH HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT, THE
NOTES AND THE OTHER LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE
WAIVER IN THEIR RELATED FUTURE DEALINGS. BORROWER AND LENDER FURTHER WARRANT AND
REPRESENT THAT EACH HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT
EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING
CONSULTATION WITH LEGAL COUNSEL.

     8.20 Construction.
Borrower and Lender each acknowledge that it has had the benefit of legal
counsel of its own choice and has been afforded an opportunity to review this
Agreement and the other Loan Documents with its legal counsel and that this
Agreement and the other Loan Documents shall be construed as if jointly drafted
by Borrower and Lender.

     8.21 Counterparts;
Effectiveness. This Agreement and any amendments, waivers, consents, or
supplements may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed and
delivered shall be deemed an original, but all of which counterparts together
shall constitute but one and the same instrument. This Agreement shall become
effective upon the execution of a counterpart hereof by each of the parties
hereto. Delivery of an executed counterpart of a signature page to this
Agreement, any amendments, waivers, consents or supplements, or to any other
Loan Document by facsimile or by email delivery of a copy of such an executed
counterpart in PDF format shall be as effective as delivery of a manually
executed counterpart thereof.

     8.22 No Duty. All
attorneys, accountants, appraisers, and other professional Persons and
consultants retained by Lender shall have the right to act exclusively in the
interest of Lender and shall have no duty of disclosure, duty of loyalty, duty
of care, or other duty or obligation of any type or nature whatsoever to
Borrower and their Subsidiaries or any of the holder of the Capital Stock of
Borrower and their Subsidiaries or any other Person.

     8.23 Communications by
Borrower to Lender. Nothing contained in any letter, email, written
notification, financial statement or other communication, written or oral, from
Borrower to Lender, shall be deemed to be binding on Lender, unless Lender
acknowledges same in writing and expressly agree to be bound thereby.

     8.24 Confidentiality. For
the purposes of this Section 8.24, “Confidential Information”
means all financial projections and all other information delivered to Lender by
or on behalf of Borrower in connection with the transactions contemplated by or
otherwise pursuant to this Agreement that is proprietary in nature or that is
clearly marked or labeled (or otherwise adequately identified) as being
confidential information of Borrower, provided, that such term does not include information that (a) was publicly known or
otherwise known to Lender prior to the time of such disclosure, (b) subsequently
becomes publicly known through no act or omission by Lender or any Person acting
on its behalf, (c) otherwise becomes known to Lender other than through
disclosure by Borrower, or (d) constitutes financial statements delivered
hereunder that are otherwise publicly available. Lender will maintain the
confidentiality of such Confidential Information in accordance with commercially
reasonable procedures adopted by Lender in good faith to protect confidential
information of third parties delivered to it, provided, that Lender may
deliver or disclose Confidential Information to:

-60-

          (i)
its directors, officers, employees, agents, attorneys and affiliates (to the
extent such disclosure reasonably relates to the administration of the
Loan);

          (ii)
its financial advisors and other professional advisors who are advised to hold
confidential the Confidential Information substantially in accordance with the
terms of this Section 8.24;

          (iii)
any other Lender or other assignees and participants (including prospective
assignees and participants), provided that any such assignee or participant or
prospective assignee or participant agrees to maintain the confidentiality of
such information in the same manner as provided for this Section 8.24;
or

          (iv)
any other Person (including auditors and other regulatory officials) to which
such delivery or disclosure may be necessary or appropriate (A) to comply with
any applicable law, rule, regulation or order, (B) in response to any subpoena,
examination, or other legal process, (C) in connection with any litigation to
which Lender is a party or (D) if an Event of Default shall have occurred and
remain outstanding, to the extent Lender may reasonably determine such delivery
and disclosure to be necessary or appropriate in the enforcement or for the
protection of the rights and remedies hereunder, under any other Loan Documents,
under any applicable Law or in equity. Each assignee and participant of Lender’s
interest, by its execution and delivery of documents to evidence its assignment
or participation (as the case may be), will be deemed to have agreed to be bound
by, and to be entitled to the benefits of, inter alia, this Section
8.24.

     Nothing contained in the
foregoing shall prevent or limit the ability of Lender to announce the closing
of the transactions under this Agreement.

     8.25 Electronic Execution of
Loan Documents. The words “execution,” “signed,” “signature,” and words of
like import in any Loan Document shall be deemed to include electronic
signatures or the keeping of records in electronic form, each of which shall be
of the same legal effect, validity or enforceability as a manually executed
signature or the use of a paper-based recordkeeping system, as the case may be,
to the extent and as provided for in any applicable law, including the Federal
Electronic Signatures in Global and National Commerce Act, the New York State
Electronic Signatures and Records Act, or any other similar state laws based on
the Uniform Electronic Transactions Act.

[THIS SPACE INTENTIONALLY LEFT BLANK – SIGNATURE PAGE
FOLLOWS.]

-61-

     Witness the due execution hereof
by the respective duly authorized officers of the undersigned as of the date
first written above.

	LENDER: 	 	CENTURION CREDIT
      FUNDING LLC 
	  	 	  	  
		 By:  	 
	  	 	Name: 	David Steinberg 
	  	 	Title: 	Authorized Signatory 
	  	 	  	  
	  	 	  	  
	BORROWER: 	 	NEXAIRA, INC.
  
	  	 	  	  
		 By:   	 
	  	 	Name: 	  
	  	 	Title: 	  

Solely with respect to Sections 2.13, 2.14 and
2.15:

NEXAIRA WIRELESS INC.

	By: 		 
	 	Name: 	 
	 	Title: 	 

[SIGNATURE PAGE TO LOAN AND SECURITY AGREEMENT]Nexaira Wireless Inc.: Exhibit 10.2 - Filed by newsfilecorp.com

SECURITY AGREEMENT

     This Security Agreement (this
“Agreement”) dated May 16, 2011, by and between among NEXAIRA WIRELESS, INC., a
Nevada corporation (“Guarantor”), with an address at 6650 Lusk Boulevard, Suite
B203 San Diego, California 92121 and CENTURION CREDIT FUNDING LLC, a Delaware
limited liability company (“Lender”), with an address at 152 West 57th Street,
54th Floor, New York, New York 10019, Attn: David Steinberg.

Background

     A. NEXAIRA, INC., a California
corporation (“Borrower”) has established certain financing arrangements with
Lender, pursuant to the terms of that certain Loan and Security Agreement, dated
of even date herewith, by and among Borrower and Lender (as it may hereafter be
amended, supplemented or replaced from time to time, “Loan Agreement”). All
capitalized terms used but not defined herein have the meanings given to them in
the Loan Agreement except that all references to “Guarantied Obligations” shall
have the meaning given to such term in the Guaranty (as defined below). All
other capitalized terms contained in this Agreement, unless defined herein, have
the meanings provided for by the UCC to the extent the same are used or defined
therein.

     B. Guarantor has executed and
delivered to Lender a General Continuing Guaranty, of even date herewith
(“Guaranty”), pursuant to which Guarantor guaranteed, as surety, all Obligations
of Borrower to Lender. Guarantor desires to grant to Lender security interests
in the property described herein to secure all of Guarantied Obligations.

     NOW, THEREFORE, the parties
hereto, intending to be legally bound hereby, agree as follows:

SECTION 1- SECURITY INTEREST

     1.1 Description: As
security for the payment of the Guarantied Obligations and all obligations and
undertakings of every kind or nature whatsoever of Guarantor to Lender, whether
now existing or hereafter incurred, matured or unmatured, direct or indirect,
primary or secondary, related or unrelated or due or to become due, arising
under the Guaranty, and any extensions, modifications, substitutions, increases
and renewals thereof, and substitutions therefor; the payment of all amounts
advanced by Lender to preserve, protect, defend, and enforce its rights
hereunder and in the following property in accordance with the terms of this
Agreement; and the payment of all expenses incurred by Lender in connection
therewith, Guarantor hereby assigns and grants to Lender a continuing lien on
and security interest in, upon and to the following property (“Collateral”):

          (a)
Accounts, Contract Rights, Etc. - All of Guarantor’s now owned and
hereafter acquired, created, or arising Accounts (including, without limitation,
all accounts receivable, notes receivable, contract rights, Chattel Paper,
Documents (including documents of title), Instruments and letters of credit and
Letter of Credit Rights; 

          (b)
Inventory - All of Guarantor’s now owned or hereafter acquired, created
or arising Inventory of every nature and kind, wherever located; 

          (c)
General Intangibles - All of Guarantor’s now owned and hereafter
acquired, created or arising General Intangibles of every kind and description,
including, but not limited, to all existing and future payment intangibles,
licenses, certificates of need, customer lists, telephone lists and directories,
choses in action, loans, claims, books, records, patents and patent
applications, copyrights, trademarks, tradenames, tradestyles, trademark
applications, blueprints, drawings, designs and plans, trade secrets, contracts,
contract rights, distributorship agreements, licenses, license agreements,
formulae, tax and any other types of refunds, and computer information,
software, records and data;

          (d)
Equipment - All of Guarantor’s now owned and hereafter acquired
Equipment, including, without limitation, machinery, vehicles, furniture,
leasehold improvements and fixtures, wherever located, and all replacements,
parts, accessories, accessions, substitutions and additions thereto;

          (e)
Investment Property. – All of Guarantor’s now existing and hereafter
acquired Investment Property (whether certificated or uncertificated);

          (f)
Deposit Accounts and Other Property - All of Guarantor’s now existing and
hereafter acquired or arising Deposit Accounts, lockboxes, investment accounts,
commercial paper, and certificates of deposit, of every nature, wherever
located, and all funds received thereby, deposited therein or associated;

          (g)
Property in Lender’s Possession - All property of Guarantor, now or
hereafter in Lender’s possession; 

          (h)
Other Property – All books and Records, supporting obligations,
commercial tort claims and all other personal property of Guarantor not
described above whether now existing or hereafter acquired; and 

          (i)
Proceeds - The collections, proceeds (including, without limitation,
casualty proceeds) and products in whatever form, whether cash or non-cash, of
all of the foregoing.

     1.2 Lien Documents: As
Lender deems necessary, and as Lender may request from time to time, Guarantor
shall execute and deliver to Lender, or have executed and delivered (all in form
and substance satisfactory to Lender), any agreements, documents, instruments
and writings, required to evidence, perfect or protect Lender’s lien and
security interest in the Collateral required hereunder. 

     1.3 Other Actions:

2

          (a)
Lender is hereby authorized to file financing statements and amendments to
financing statements without Guarantor's signature in accordance with the UCC.
Guarantor hereby authorizes Lender to file all financing statements and
amendments to financing statements describing the Collateral in any filing
office as Lender, in its sole discretion may determine, including financing
statements listing "All Assets" in the collateral description therein. Guarantor
agrees to comply with the requirements of all state and federal laws and
requests of Lender in order for Lender to have and maintain a valid and
perfected first security interest in the Collateral including, without
limitation, executing such documents as Lender may require to obtain Control (as
defined in the UCC) over all Deposit Accounts, Letter of Credit Rights and
Investment Property.

          (b)
In addition to the foregoing, Guarantor shall do anything further that may be
reasonably required by Lender to secure Lender and effectuate the intentions and
objects of this Agreement, including, without limitation, the execution and
delivery of security agreements, contracts and any other documents required
hereunder. At Lender's request, Guarantor shall also immediately deliver (with
execution by Guarantor of all necessary documents or forms to reflect, implement
or enforce the liens described herein) to Lender all items of which Lender must
receive possession to obtain a perfected security interest, including without
limitation, all notes, stock powers, letters of credit, certificates and
documents of title (other than motor vehicle titles unless an Event of Default
occurs), Chattel Paper, Investment Property. Warehouse Receipts, Instruments,
and any other similar instruments constituting Collateral.

     1.4 Filing Security
Agreement: A carbon, photographic or other reproduction or other copy of
this Agreement or of a financing statement is sufficient as and may be filed in
lieu of a financing statement.

     1.5 Power of Attorney:
Each of the officers of Lender or its representative is hereby irrevocably made,
constituted and appointed the true and lawful attorney for Guarantor (without
requiring it to act as such) with full power of substitution to do the
following: (a) execute in the name of Guarantor, schedules, assignments,
instruments, documents and statements that Guarantor is obligated to give Lender
hereunder or is necessary to perfect (or continue to evidence the perfection of
such security interest or lien); (b) endorse the name of Guarantor upon any and
all checks, drafts, money orders and other instruments for the payment of monies
that are payable to Guarantor and constitute collections on Guarantor’s Accounts
or other Collateral; (c) effectuate the transfer of any Investment Property on
the books of the issuer thereof to the name of Lender or to the name of Lender’s
nominee, designee or assignee; and (d) do such other and further acts and deeds
in the name of Guarantor that Lender may reasonably deem necessary or desirable
to enforce any Account or other Collateral or perfect Lender’s security interest
or lien in the Collateral.

3

SECTION 2- REPRESENTATIONS AND
  WARRANTIES

     2.1 Guarantor represents and
warrants to Lender that:

          (a)
Ratification - Each representation and warranty made by Borrower in the
Loan Agreement relating to Guarantor is hereby ratified and confirmed and
incorporated by reference as if set forth herein in full;

          (b)
Corporate Organization - Guarantor (i) is duly organized and validly
existing under the laws of its state of formation, (ii) has the power and
authority to operate its business and to own its assets, including without
limitation the Collateral, and (iii) is duly qualified, is validly existing and
in good standing and has lawful power and authority to engage in the business it
conducts in each state where the nature and extent of its business requires
qualification;

          (c)
Non-Contravention - The making and performance of this Agreement and
other agreements executed in connection herewith will not (immediately, with the
passage of time or with the giving of notice or both):

               (i)
violate the certificate or articles of formation or incorporation or operating
agreement or bylaws of Guarantor, as applicable, or result in a default under
any contract, agreement or instrument to which Guarantor is a party or by which
Guarantor or its assets are or may be bound, or

               (ii)
result in the creation or imposition of any security interest in, or lien or
encumbrance upon, any of the assets of Guarantor, except such as are in favor of
Lender;

          (d)
Power and Authority - Guarantor has the power and authority to enter into
and perform this Agreement and to incur the obligations herein and therein
provided for, and has taken all proper and necessary action, corporate, company
or otherwise, to authorize the execution, delivery and performance of this
Agreement;

          (e)
Enforceable - This Agreement is valid, binding and enforceable against
Guarantor in accordance with its terms except as such enforceability may be
limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors rights generally and subject to any
equitable principles limiting the right to obtain specific performance of any
such obligation;

          (f)
Consents and Approvals - All necessary consents, approvals or
authorizations of, or filing, registration or qualification with, any Person,
required to be obtained by Guarantor in connection with the execution and
delivery of this Agreement or the undertaking or performance of any obligation
hereunder have been obtained;

          (g)
Names and Intellectual Property

               (i)
Except as set forth on Schedule 2.1(g)(i) hereof, for the past five (5) years,
Guarantor has not conducted business under or used any other name (whether
corporate or assumed) except for the name set forth in the preamble to this
Agreement; 

4

               (ii)
All trademarks, trademark applications, service marks, patents, patent
applications, and copyrights Guarantor uses, plans to use or has a right to use
are shown on Schedule 2.1(g)(ii) attached hereto and made a part hereof and
Guarantor is the sole owner of such Property. Guarantor is not in violation of
any rights of any other Person with respect to such Property; 

          (h)
Title - The Collateral is free and clear of any and all liens, claims,
encumbrances or security interests other than the security interests created
hereby and security interests granted in favor of Lender pursuant to the Loan
Agreement;

          (i)
Perfection - This Agreement is effective to create in favor of Lender a
legal, valid and enforceable lien in all right, title and interest of Guarantor
in the Collateral, and when financing statements have been filed in the offices
of the jurisdiction under such Guarantor’s name, Lender will have perfected
liens in such Collateral as may be perfected by the filing of a financing
statement, superior in right to any and all other liens, existing or future;

          (j)
Places of Business - The only places of business of Guarantor, and the
places where Guarantor keeps and intends to keep its Collateral, is 6650 Lusk
Boulevard, Suite B203 San Diego, California 92121;

          (k)
Commercial Tort Claims - Guarantor does not hold or have any interest in
any Commercial Tort Claims (as defined in the UCC); and

          (l)
Investment Property

               (i)
Guarantor is pledging hereunder all of Guarantor’s interest and ownership in the
entities listed on Schedule 2.1(l)(i) attached hereto;

               (ii)
All Investment Property consisting of equity interests owned by Guarantor have
been duly and validly authorized and issued by the issuer thereof and such
Investment Property is fully paid for and non-assessable

               (iii)
Contemporaneously with the execution hereof, Guarantor is delivering to Lender
all stock and membership certificates or any certificates representing or
evidencing the Investment Property in the entities listed on Schedule
2.1(l)(i) hereof, accompanied by duly executed instruments of transfer or
assignments in blank to be held by Lender in accordance with the terms
hereof

          (m)
Governmental Consent - Neither the nature of Guarantor or of any
Guarantor’s business or assets, nor any relationship between Guarantor and any
other Person, nor any circumstance affecting Guarantor in connection with the
execution or delivery of this Agreement, is such as to require a consent,
approval or authorization of, or filing, registration or qualification with, any
governmental authority on the part of Guarantor in connection with the execution and delivery of this Agreement or the issuance or
delivery of the other Loan Documents to which it is a party.

5

SECTION 3- COVENANTS

     3.1 Guarantor covenants that:

          (a)
Payment of Taxes and Claims - Guarantor shall pay, before they become
delinquent,

               (i)
all taxes, assessments and governmental charges or levies imposed upon it or
upon any assets of Guarantor, including without limitation the Collateral,
and

               (ii)
all claims or demands of materialmen, mechanics, carriers, warehousemen,
landlords and other Persons entitled to the benefit of statutory or common law
liens, which, if unpaid, would result in the imposition of a lien, claim or
encumbrance upon its assets; provided, however, that Guarantor shall not be
required to pay any such tax, assessment, charge, levy, claim or demand if the
amount, applicability or validity thereof shall at the time be contested in good
faith and by appropriate proceedings by Guarantor, and if Guarantor shall have
set aside on its books adequate reserves in respect thereof, if so required in
accordance with GAAP; which deferment of payment is permissible so long as no
lien, claim or encumbrance has been entered and Guarantor’s title to, and its
right to use such assets are not materially adversely affected thereby;

          (b)
Property - Guarantor shall maintain its assets in good condition (normal
wear and tear excepted) and make all necessary renewals, replacements,
additions, betterments and improvements thereto and will pay and discharge when
due the cost of repairs and maintenance to its assets, and will pay all rentals
when due for all real estate leased by Guarantor; 

          (c)
Property Insurance, Public and Products Liability Insurance - Guarantor
shall maintain or cause to be maintained insurance against fire, flood, casualty
and such other hazards in such amounts, with such deductibles and with such
insurers as are customarily used by companies operating in the same industry as
Guarantor. At Lender’s request, Guarantor shall furnish Lender with insurance
certificates certified as true and correct and being in full force and effect or
such other evidence of insurance as Lender may require. In the event Guarantor
fails to procure or cause to be procured any such insurance or to timely pay or
cause to be paid the premium(s) on any such insurance, Lender may do so for
Guarantor, but Guarantor shall continue to be liable for the same. Guarantor
further covenants that all insurance premiums owing under its current casualty
policy have been paid. Guarantor also agrees to notify Lender, promptly, upon
Guarantor’s receipt of a notice of termination, cancellation, or non-renewal
from its insurance company of any such policy. The policies of all such
liability insurance shall contain standard additional insured clauses issued in
favor of Lender and the policies of all casualty insurance shall contain
standard lender loss payee endorsements issued in favor of Lender. Such policies shall expressly provide that the
requisite insurance cannot be altered or canceled without thirty (30) days prior
written notice to Lender and shall insure Lender notwithstanding the act or
neglect of the insured. In the event Guarantor fails to procure or cause to be
procured any such insurance or to timely pay or cause to be paid the premium(s)
on any such insurance, Lender may do so for Guarantor, but Guarantor shall
continue to be liable for the same. Guarantor hereby appoints Lender as its
attorney-in-fact, exercisable at Lender’s option, to endorse any check which may
be payable to Guarantor in order to collect the proceeds of such insurance.
Proceeds of such insurance policies shall be paid to the endorsees thereunder as
their interest may appear. Amounts paid to Lender under such policies shall be
applied by Lender to the outstanding Obligations.

6

          (d)
Financial Records - Guarantor shall keep current and accurate books of
records and accounts in which full and correct entries will be made of all of
its business transactions, and will reflect in its financial statements adequate
accruals and appropriations to reserves, all in accordance with GAAP. Guarantor
shall not change its fiscal year end date without the prior written consent of
Lender;

          (e)
Corporate Existence and Rights - Guarantor shall do (or cause to be done)
all things necessary to preserve and keep in full force and effect its
existence, good standing, rights and franchises. Guarantor shall maintain any
and all licenses, permits, franchises or other governmental authorizations
necessary to the ownership of its assets or to the conduct of its
businesses;

          (f)
Compliance with Laws - Guarantor: (i) shall be in compliance with any and
all laws, ordinances, governmental rules and regulations, and court or
administrative orders or decrees to which it is subject, whether federal, state
or local, (including, without limitation, Healthcare Laws and environmental
laws) and (ii) shall obtain any and all licenses, permits, franchises or other
governmental authorizations necessary to the ownership of its Property or to the
conduct of its businesses, which violation or failure to obtain causes or could
cause a Material Adverse Effect. Guarantor shall timely satisfy all assessments,
fines, costs and penalties imposed (after exhaustion of all appeals, provided a
stay has been put in effect during such appeal) by any Governmental Authority
against Guarantor or any assets of Guarantor;

          (g)
Issue Taxes - Guarantor shall pay all taxes (other than taxes based upon
or measured by any Lender’s income or revenues or any personal property tax), if
any, in connection with the recording of any lien documents. The obligations of
Guarantor hereunder shall survive the termination of this Agreement;

          (h)
Merger, Consolidation, Dissolution or Liquidation - Guarantor shall not
merge or consolidate with any other Person or commence a dissolution or
liquidation;

          (i)
Sale of Property - Guarantor shall not engage in any Asset Disposition
other than Inventory sold in the ordinary course of Guarantor’s business;

7

          (j)
Liens and Encumbrances - Guarantor shall not: (i) execute a negative
pledge agreement with any Person covering any of its assets except for the
benefit of Lender pursuant to the Loan Documents, or (ii) cause or permit or
agree or consent to cause or permit in the future (upon the happening of a
contingency or otherwise), its assets (including, without limitation, the
Collateral), whether now owned or hereafter acquired, to be subject to a lien,
claim or encumbrance or be subject to any claim except for such liens in favor
of Lender;

          (k)
Other Agreements - Guarantor shall not become or be a party to any
contract or agreement which at the time of becoming a party to such contract or
agreement materially impairs Guarantor’s ability to perform under this
Agreement, or under any other instrument, agreement or document to which
Guarantor is a party or by which it is or may be bound;

          (l)
Change of Location or Jurisdiction of Organization - Guarantor agrees
that it shall not change its name or jurisdiction of organization without
Lender’s consent and that if the location of its principal place of business
changes from that indicated on the signature pages of this Agreement, Guarantor
will immediately notify the Lender in writing; and

          (m)
Commercial Tort Claim: Guarantor shall provide written notice to Lender
of any Commercial Tort Claim (as defined in the UCC as in effect from time to
time) to which Guarantor is or becomes a party or which otherwise inures to the
benefit of Guarantor. Such notice shall contain a sufficient description of the
Commercial Tort Claim including the parties, the court in which the claim was
commenced (if applicable), the docket number assigned to the case (if
applicable) and an explanation of the events giving rise to such claim.
Guarantor shall grant Lender a security interest in such Commercial Tort Claim
to secure payment of the Indebtedness. Guarantor shall execute and deliver such
instruments, documents and agreements as Lender may require in order to obtain
and perfect such security interest including, without limitation, a security
agreement or amendment to any existing security agreement all in form and
substance satisfactory to Lender. Guarantor authorizes Lender to file (without
Guarantor's signature), financing statements or amendments to existing financing
statements as Lender deems necessary to perfect the security interest.

SECTION 4- DEFAULT

     4.1 Events of Default:
Each of the following events or conditions shall constitute an event of default
(“Event of Default”):

          (a)
failure of Guarantor to perform or observe any covenant or agreement contained
in this Agreement or pay or perform any obligation under the Guaranty;

          (b)
any warranty, representation or other statement by or on behalf of Guarantor
contained in or pursuant to this Agreement or the Guaranty is false, erroneous
or misleading in any material respect when made; or

8

          (c)
the occurrence of an Event of Default under the Loan Agreement, or any Loan
Documents.

     4.2 Upon the occurrence of an
Event of Default, Lender shall have the option to declare Guarantor in default
under this Agreement, and all other existing and future agreements of any kind
(related or unrelated) with Lender, and declare all existing and future
liabilities, indebtedness and obligations of Guarantor to Lender, including the
Guarantied Obligations, whether matured or contingent, related or unrelated, due
or to become due, immediately due and payable including, but not limited to,
interest, principal, expenses, advances to protect Lender’s position and all of
Lender’s rights hereunder and thereunder, all without demand, notice,
presentment or protest or further action of any kind.

     4.3 Rights and Remedies on
Default: In addition to all other rights, options and remedies granted to
Lender under this Agreement or otherwise available at law or in equity, (each of
which is also then exercisable by Lender), Lender may, upon the occurrence of an
Event of Default, exercise any other rights granted to it under the UCC and any
other applicable law, including, without limitation, the following rights and
remedies:

          (a)
the right to take possession of, send notices, and collect directly the
Collateral, with or without judicial process (including, without limitation the
right to notify the United States postal authority to redirect all mail
addressed to Guarantor to an address designated by Lender); 

          (b)
by its own means or with judicial assistance, enter Guarantor’s premises and
take possession of the Collateral, or render it unusable, or dispose of the
Collateral on such premises without any liability for rent, storage, utilities
or other sums, and Guarantor shall not resist or interfere with such action;

          (c)
require Guarantor at Guarantor’s expense to assemble all or any part of the
Collateral and make it available to Lender at any place designated by Lender;

          (d)
In addition to all other rights granted to Lender herein or otherwise available
at law or in equity, Lender shall have the following rights, each of which may
be exercised at Lender’s sole discretion (but without any obligation to do so),
at any time following the occurrence of an Event of Default, without further
consent of Guarantor: (i) transfer the whole or any part of the Investment
Property into the name of itself or its nominee or to conduct a sale of the
Investment Property pursuant to the UCC or pursuant to any other applicable law;
(ii) vote the Investment Property; (iii) notify the persons obligated on any of
the Investment Property to make payment to Lender of any amounts due or to
become due thereon; and (iv) release, surrender or exchange any of the
Investment Property at any time, or to compromise any dispute with respect to
the same.

          (e)
Guarantor hereby authorizes and instructs each issuer of the Investment Property
to comply with any instruction received by it from Lender in writing that states
that an Event of Default has occurred and without any other or further
instruction from Guarantor, and Guarantor agrees that each such issuer shall be
fully protected in so complying. 

9

Guarantor hereby agrees that a notice received by it at least
ten (10) days before the time of any intended public sale or of the time after
which any private sale or other disposition of the Collateral is to be made,
shall be deemed to be reasonable notice of such sale or other disposition. If
permitted by applicable law, any perishable inventory or Collateral which
threatens to speedily decline in value or which is sold on a recognized market
may be sold immediately by Lender without prior notice to Guarantor. Guarantor
covenants and agrees not to interfere with or impose any obstacle to Lender’s
exercise of its rights and remedies with respect to the Collateral, after the
occurrence of an Event of Default hereunder.

     4.4 Nature of Remedies:
Lender shall have the right to proceed against all or any portion of the
Collateral in any order and may apply such Collateral to the liabilities and
obligations of Guarantor to Lender in any order. All rights and remedies granted
Lender hereunder and under any agreement referred to herein, or otherwise
available at law or in equity, shall be deemed concurrent and cumulative, and
not alternative remedies, and Lender may proceed with any number of remedies at
the same time until all existing and future liabilities and obligations of
Guarantor to Lender, are satisfied in full. The exercise of any one right or
remedy shall not be deemed a waiver or release of any other right or remedy, and
Lender, upon the occurrence of an Event of Default, may proceed against
Guarantor, and/or the Collateral, at any time, under any agreement, with any
available remedy and in any order.

     4.5 Sales of Investment
Property. Guarantor recognizes that Lender may be unable to effect, or may
effect only after such delay which would adversely affect the value that might
be realized from the Investment Property, a public sale of all or part of the
Investment Property by reason of certain prohibitions contained in the
Securities Act of 1933, as amended (“Securities Act”) and may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such securities for their
own account, for investment and not with a view to the distribution or resale
thereof. Each Guarantor agrees that any such private sale may be at prices and
on terms less favorable to Lender or the seller than if sold at public sales,
and therefore recognizes and confirms that such private sales shall not be
deemed to have been made in a commercially unreasonable manner solely because
they were made privately. Guarantor agrees that Lender has no obligation to
delay the sale of any such securities for the period of time necessary to permit
the issuer of such securities to register such securities for public sale under
the Securities Act. Guarantor agrees that, in connection with any sale or other
disposition of the Investment Property, Guarantor may, at Guarantor’s option,
disclaim any and all warranties regarding the Investment Property and that any
such disclaimer shall constitute commercially reasonable conduct on the part of
Lender.

10

SECTION 5- MISCELLANEOUS

     5.1 Waiver:

          (a)
No omission or delay by Lender in exercising any right or power under this
Agreement or any other document will impair such right or power or be construed
to be a waiver of any default, or Event of Default or an acquiescence therein,
and any single or partial exercise of any such right or power will not preclude
other or further exercise thereof or the exercise of any other right, and no
waiver of Lender’s rights hereunder will be valid unless in writing and signed
by Lender, and then only to the extent specified.

          (b)
Guarantor releases Lender, its agents, administrators and executors, its
officers, employees and agents, of and from any claims for loss or damage
resulting from acts or conduct of any or all of them arising through the date
hereof, unless caused solely by the willful misconduct or gross negligence of
Lender.

     5.2 Modification: No
modification hereof or any agreement referred to herein shall be binding or
enforceable unless in writing and signed on behalf of the party against whom
enforcement is sought. The provisions of this Agreement and other agreements and
documents referred to herein are to be deemed severable, and the invalidity or
unenforceability of any provision shall not affect or impair the remaining
provisions which shall continue in full force and effect.

     5.3 Signatories: Each
individual signatory hereto represents and warrants that he is duly authorized
to execute this Agreement on behalf of his principal and that he executes the
Agreement in such capacity and not as a party.

     5.4 Successors and
Assigns: All provisions herein shall inure to, become binding upon the
successors, representatives, trustees, administrators, executors, heirs and
assigns of the parties hereto. Signature by facsimile or PDF shall bind the
parties hereto.

     5.5 APPLICABLE LAW.

          (a)
THIS AGREEMENT AND ALL MATTERS RELATING HERETO AND ARISING HEREFROM (WHETHER
ARISING UNDER CONTRACT LAW, TORT LAW OR OTHERWISE) SHALL BE GOVERNED BY, AND
SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.

          (b)
GUARANTOR HEREBY CONSENTS TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT
LOCATED WITHIN THE COUNTY OF NEW YORK, STATE OF NEW YORK, AND IRREVOCABLY AGREES
THAT, SUBJECT TO LENDOR’S ELECTION, ALL ACTIONS OR PROCEEDINGS ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS SHALL
BE LITIGATED IN SUCH COURTS. GUARANTOR ACCEPTS FOR ITSELF AND IN CONNECTION WITH
ITS PROPERTIES, GENERALLY AND UNCONDITIONALLY, THE NON-EXCLUSIVE JURISDICTION OF
THE AFORESAID COURTS AND WAIVES ANY DEFENSE OF FORUM NON CONVENIENS, AND
IRREVOCABLY AGREES TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.

11

          (c)
GUARANTOR AND LENDOR, BY ITS ACCEPTANCE HEREOF, EACH HEREBY WAIVES THEIR
RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR
ARISING OUT OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR THE OBLIGATIONS.
GUARANTOR AND LENDOR, BY ITS ACCEPTANCE HEREOF, EACH ACKNOWLEDGES THAT THIS
WAIVER IS A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT EACH
HAS ALREADY RELIED ON THE WAIVER IN ENTERING INTO THIS AGREEMENT AND THE OTHER
LOAN DOCUMENTS AND THAT EACH WILL CONTINUE TO RELY ON THE WAIVER IN THEIR
RELATED FUTURE DEALINGS. GUARANTOR FURTHER WARRANTS AND REPRESENTS THAT EACH HAS
REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT EACH KNOWINGLY AND
VOLUNTARILY WAIVES THEIR RESPECTIVE JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

     5.6 Notice.

          (a)
In any action or proceeding brought by Lender to enforce the terms hereof, the
Guarantor waives personal service of the summons, complaint, and any motion or
other process, and agrees that notice thereof may be served (i) in person, (ii)
by registered or certified mail, return receipt requested, or (iii) by
nationally recognized overnight courier (which in the case of (i) above, will be
deemed received on the date of delivery; in the case of (ii) above, will be
deemed received 3 days after deposit in the U.S. Mail; and in the case of (iii)
above, will be deemed received one (1) day after delivery to the courier).
Service may be made at the address of the Guarantor set forth in the preamble to
this Agreement or such other address at which the Guarantor is then located.

          (b)
Any and all notices which may be given to the Guarantor by Lender hereunder
shall be sent to the Guarantor at the address of the Guarantor set forth in the
preamble to this Agreement (or such other address at which the Guarantor is then
located) and shall be deemed given to and received by the Guarantor if sent by
facsimile transmission or if sent in the manner provided for service of process
in Section 5.6(a) above. Notices sent by facsimile shall be deemed received on
the date sent. Notices otherwise sent shall be deemed received on the applicable
date(s) provided for receipt of service of process under Section 5.6(a)
above

[SIGNATURE ON FOLLOWING PAGE]

12

     IN WITNESS WHEREOF, the
undersigned parties have executed this Agreement the day and year first above
written.

	GUARANTOR: 	NEXAIRA WIRELESS, INC. 
	  	 	  
	  	 	  
	  	By:	 
	  	 	Name: 
	  	 	Title: 

[SIGNATURE PAGE TO SECURITY AGREEMENT]

S-1

SCHEDULE 2.1(G)(i)

NAMES

	March 19, 2007 	Incorporated in Nevada under the name of
      Technology Publishing, Inc. 
	 	 
	October 28, 2009 	name changed to Nexaira Wireless Inc.
  

SCHEDULE 2.1(G)(ii)

INTELLECTUAL PROPERTY

None.

SCHEDULE 2.1(L)(i)

PLEDGED ENTITIES

Nexaira Wireless (BC) Inc.

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