Document:

Unassociated Document

EXHIBIT 10.1

 

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of September 15, 2011 (this “Agreement”), by and between ATRINSIC, INC., a Delaware corporation (the “Company”), and Nathan Fong (“Executive”).

W I T N E S S E T H:

WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions hereinafter set forth, and Executive desires so to be employed.

NOW, THEREFORE, in consideration of the premises and the mutual covenants hereinafter set forth, the parties agree as follows:

1.           Offices and Duties.

(a)           During the Term (as hereinafter defined), Executive shall serve as the Chief Financial Officer of the Company and shall have such duties and responsibilities that are commensurate with such position and such other duties and responsibilities consistent with such position as are from time to time reasonably assigned to Executive by the Company’s Chief Executive Officer or Board of Directors (the “Board”).  Such duties and responsibilities shall include but not be limited to general oversight and management over all financial operations of the Company and any subsidiaries of the Company.  Executive shall report to the Company’s Chief Executive Officer.  Executive hereby agrees that throughout the Term he shall faithfully, diligently and to the best of his ability, in furtherance of the business of the Company, perform the duties assigned to his or incidental to the offices assumed by him pursuant to this Section.  Executive shall devote all of his business time and attention to the business and affairs of the Company and the performance of Executive’s duties and responsibilities hereunder.  Notwithstanding the foregoing, Company acknowledges that Executive shall be permitted to render the services set forth in Schedule 1 hereto and such other activities that do not interfere or conflict with, or compromise his ability to perform, his duties hereunder, and do not create a potential business conflict, and with respect to which the Board has expressly consented and approved in advance in writing.  Executive represents and warrants to the Company that Executive has the legal right to enter into this Agreement and to perform all of the obligations on Executive’s part to be performed hereunder in accordance with its terms and that Executive is not a party to any agreement or understanding, written or oral, which could prevent Executive from entering into this Agreement or performing all of Executive’s obligations hereunder.  The Company represents and warrants to Executive that the Company has the legal right to enter into this Agreement and to perform all of the obligations on the Company’s part to be performed hereunder in accordance with its terms and that the Company is not a party to any agreement or understanding, written or oral, which could prevent the Company from entering into this Agreement or performing all of the Company’s obligations hereunder.

 

  

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(b)           Executive shall work at Company’s headquarters in New York, New York.

2.           Term. The employment of Executive hereunder shall commence on the date hereof (the “Commencement Date”) and continue for a term ending on December 31, 2014, subject to earlier termination upon the terms and conditions provided elsewhere herein (the “Term”). As used herein, “Termination Date” means the last day of the Term.  Subject to the provisions of Section 13 (in the event Executive’s employment is terminated prior to December 31, 2014), Executive shall be an “at-will” employee of the Company such that either the Company or Executive may terminate Executive’s employment with the Company and the Term upon written notice at any time and for any reason (or no reason).

3.           Compensation.

(a)           As compensation for Executive’s services hereunder, the Company shall pay to Executive during the Term an annual salary (the “Base Salary”), which shall initially be equal to Two Hundred Fifty Thousand Dollars ($250,000.00), payable in accordance with the ordinary payroll practices of the Company.  The Base Salary shall be subject to increase at the end of each year of the Term at the sole and complete discretion of the Company’s board of directors, provided that Executive’s Base Salary will not be less than $262,500 beginning the first anniversary of the Commencement Date, and not less than $275,000 beginning the second anniversary of the Commencement Date, and not less than $287,500 beginning the third anniversary of the Commencement Date.

(b)           Executive may also receive an annual bonus (the “Annual Bonus”) with a target of $35,000 for the fiscal year ending December 31, 2011, $125,000 for the fiscal year ending December 31, 2012, $130,000 for the fiscal year ending December 31, 2013, and $135,000 for the fiscal year ending December 31, 2014, if the Company’s business operations meet or exceed certain financial performance standards to be determined by the Board in accordance with this Section.  No later than the end of the first calendar quarter of each calendar year, the Board (or the Compensation Committed thereof), after reasonably thoroughly consulting with Executive and the Company’s Chief Executive Officer, shall adopt and approve the bonus targets and other performance standards (collectively, the “Bonus Matrix”) to be used to determine Executive’s annual bonus for such calendar year.  The Board shall deliver the Bonus Matrix to Executive promptly after its adoption and approval by the Board (or the Compensation Committed thereof).  If the Board does not adopt, approve and furnish to Executive the Bonus Matrix by the end of the first calendar quarter for any year, then Executive’s bonus for such year shall be no less than the targets set forth in the first sentence of this paragraph; provided, however, such period may be extended by the Board for up to 30 days in the event the Board and Executive are engaged in good faith discussions concerning the Bonus Matrix. The Bonus Matrix for the calendar year ending December 31, 2011 is set forth on the 2011 Bonus/RSU Schedule attached hereto as Exhibit A.  Notwithstanding the foregoing, if Company does not achieve the goals set forth on Exhibit A by December 31, 2011, but does achieve such goals by March 31, 2012, Executive will nonetheless be entitled to receive the full $35,000 bonus set forth therein which bonus shall be paid within thirty days of achieving such goals.  Any amounts payable under this Section shall be calculated using the results reported in the Company’s audited financial statements for the applicable fiscal year and shall be payable in the year following the applicable fiscal year by the later of (A) ninety (90) days after the end of the applicable fiscal year or (B) completion of the Company’s audited financial statements for such year, but not more than 120 days after the end of the applicable fiscal year in any event.

 

  

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(c)           The Company shall use its commercially reasonable efforts to procure medical, hospitalization, dental and disability insurance (in the case of disability insurance, providing for $25,000 coverage per month) for the benefit of executive and his children, and the Company shall pay all premiums and any other costs or expenses incurred to maintain such policies in effect during the Term, or as provided under Section 13, all consistent with the Company’s established practices and policies.  As an alternative to procuring such policies, the Company may authorize Executive to procure such policies, and the Company shall reimburse Executive for the reasonable costs incurred by him in connection with the procurement of such policies, plus a gross up for the taxes Executive is required to pay on such amount.

(d)           In addition to his Base Salary and other compensation provided herein, during the Term, Executive shall be entitled to participate, to the extent he is eligible under the terms and conditions thereof, in any stock, stock option or other equity participation plan and any profit-sharing, pension, retirement, insurance, medical service or other employee benefit plan available to any of the executive officers of the Company, and to receive any other benefits or perquisites generally available to the executive officers of the Company pursuant to any employment policy or practice, which may be in effect from time to time during the Term.  The Company shall be under no obligation hereunder to institute or to continue any such employee benefit plan or employment policy or practice.

(h)           During the Term, Executive shall not be entitled to additional compensation for serving in any office of the Company (or any subsidiary thereof) to which he is elected or appointed.

4.           Restricted Stock Units.

(a)           Within one hundred and twenty (120) days following the Commencement Date, the Company shall grant to Executive Restricted Stock Units with respect to One Hundred Seventeen Thousand Five Hundred (117,500) shares of Common Stock (the “Restricted Stock Units”), pursuant to the terms of a Restricted Stock Unit Agreement in the form attached as Exhibit B hereto (the “Restricted Stock Unit Agreement”) and the Company’s 2009 Stock Incentive Plan, as amended (the “2009 Stock Incentive Plan”).  Executive shall execute and deliver to the Company the Restricted Stock Unit Agreement as a condition to the Company’s obligation to issue the Restricted Stock Units.  The Restricted Stock Units shall be subject to forfeiture under the terms of the Restricted Stock Unit Agreement.  The Restricted Stock Units shall be subject to vesting as provided in the Restricted Stock Agreement, in accordance with and subject to the following vesting schedule:

 

  

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(i)           10,000 Restricted Stock Units shall vest upon the Commencement Date.

(ii)           10,000 Restricted Stock Units shall vest upon the successful completion, after the Commencement Date but on or prior to March 31, 2012, of one or more debt or equity raises by the Company in the aggregate minimum amount of $10,000,000 (including, without limitation, any amounts raised from or by current stockholders of the Company).

(iii)           32,500 Restricted Stock Units shall vest in each of calendar year 2012, 2013 and 2014 if the Company’s business operations meet or exceed certain financial performance standards to be determined by the Board in accordance with this Section.  No later than the end of the first calendar quarter of each calendar year, the Board (or the Compensation Committed thereof), after consulting reasonably thoroughly with Executive and the Company’s Chief Executive Officer, shall adopt and approve the bonus targets and other performance standards (collectively, the “RSU Matrix”) to be used to determine Executive’s vesting criteria for such calendar year.  The Board shall deliver the RSU Matrix to Executive promptly after their adoption and approval by the Board (or the Compensation Committed thereof).  If the Board does not adopt, approve and furnish to Executive the RSU Matrix by the end of the first calendar quarter for any year, Executive will be deemed to have achieved the bonus targets and other performance standards for such year and will vest in 100% of the RSU’s for such year and the Common Stock will be delivered at the same time that the Common Stock would have been delivered if the bonus targets and other performance standards had been set and achieved; provided, however, such period may be extended by the Board for up to 30 days in the event the Board and Executive are engaged in good faith discussions concerning the RSU Matrix.  The determination of the vesting under this Section shall be calculated using the results reported in the Company’s audited financial statements for the applicable fiscal year and the Common Stock will be delivered by the later of (A) ninety (90) days after the end of the applicable fiscal year or (B) completion of the Company’s audited financial statements for such year, but not more than 120 days after the end of the applicable fiscal year in any event.

(b)            As provided in the Restricted Stock Unit Agreement, except (as provided herein) in the event of a termination of the Executive’s employment by the Company without “cause” (as such term is used in Section 10 hereof) and except in the event of a termination of the Executive’s employment by Executive for “good reason” (as contemplated under Section 11 hereof), any and all of the Restricted Stock Units that remain unvested at the time of termination of Executive’s employment (and/or upon termination or expiration of the Term) (the “Unvested Restricted Stock Portion”) shall be subject to forfeiture and Executive’s entire ownership interest in the Unvested Restricted Stock Portion shall be forfeited, extinguished and cancelled and Executive shall have no rights or interest in the Unvested Restricted Stock Portion.   On and after the three (3) month anniversary of the Commencement Date, in the event of a Change of Control (as defined below) or in the event of a termination of the Executive’s employment by Company without “cause” or by Executive for “good reason” on or after such anniversary, any and all of the Restricted Stock Units that remain unvested at the time of termination of Executive’s employment (and/or upon termination or expiration of the Term) shall vest (except for those which did not vest pursuant to subparagraph 4(a)(iii) above for calendar years which ended prior to the Termination Date.)  Subject to the terms of the Restricted Stock Unit Agreement, the Company may issue stock unit certificates or otherwise evidence the Executive’s interest in the Restricted Stock Units by using a book entry account, and may maintain physical possession or custody of such stock certificates until such time as the Restricted Stock Units are vested in accordance with this Section, and may place a legend on the stock certificate(s) restricting the transferability of such certificates and referring to the terms and conditions (including forfeiture) of this Agreement.  Executive represents and warrants that he is acquiring the Restricted Stock Units for investment purposes only, and not with a view to distribution thereof.  Executive is aware that the Restricted Stock Units may not be registered under the federal or any state securities laws and that, in addition to the other restrictions on the Restricted Stock Units, the Restricted Stock Units will not be able to be transferred unless an exemption from registration is available or the Restricted Stock Units become registered.

  

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(c)           If there is any conflict between the provisions of this Agreement and the provisions of the Restricted Stock Agreement or the 2009 Stock Incentive Plan, the provisions of this Agreement shall control.

5.           Expense Allowance.  The Company shall pay directly, or reimburse Executive for, all out-of-pocket expenses reasonably incurred by him in connection with the performance of his duties hereunder and the business of the Company, in each case subject to and in accordance with the Company’s standard policies (including, without limitation, expense verification policies) regarding the reimbursement of business expenses, as in effect from time to time.   Without limiting the foregoing, the Company shall reimburse Executive for the reasonable legal costs incurred by him (up to a maximum of Two Thousand Five Hundred Dollars ($2,500) in connection with the preparation and execution of this Agreement.

6.           Vacation.  Executive shall be entitled to four (4) weeks paid vacation during each year of his employment hereunder (as pro rated for partial years), such vacation to be taken at such time or times as shall be agreed upon by Executive and the Company with due regard to the needs of the Company.  Vacation time shall be cumulative from year to year, except that Executive shall not be entitled to take more than six (6) weeks vacation during any period of twelve (12) consecutive months during the Term; and provided further that at no time shall Executive be entitled to accrue more than six (6) weeks of vacation time under this Agreement; and provided further that the rights of Executive to vacation shall be otherwise subject to the Company’s policies on vacation as in effect from time to time.

 

  

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7.           Key-Man Insurance.  The Company shall have the right from time to time to purchase, increase, modify or terminate insurance policies on the life of Executive for the benefit of the Company in such amounts as the Company may determine in its sole discretion.  In connection therewith, Executive shall, at such time or times and at such place or places as the Company may reasonably direct, submit himself to such physical examinations and execute and deliver such documents as the Company may deem necessary or appropriate, provided that Executive will not be required to submit to more than one physical in any twelve-month period.  Company shall keep the results of any such physical confidential, except as may be required to be disclosed by law or legal process.

8.           Ancillary Agreements.   As a material inducement to the Company for entering into this Agreement and as a condition to the obligations of the Company hereunder, Executive is hereby executing and delivering a Non-Competition, Non-Solicitation and Proprietary Information Agreement, dated of even date herewith, by and between Executive and the Company in the form of Exhibit C attached hereto (the “Non-Competition Agreement”).  Each of the Company and Executive hereby agrees and acknowledges that the rights and obligations of the parties under the Non-Competition Agreement and the terms and provisions thereof are an integral part of this Agreement and hereby are incorporated in this Agreement as if fully set forth herein.  Without limiting any other rights that the Company may have, if Executive materially breaches any provision of the Non-Competition Agreement and fails to cure such breach within ten (10) days of notice from Company of such breach, any right that Executive may have to receive any compensation or payments (other than vested Restricted Stock Units) from the Company hereunder shall be forfeited by Executive and extinguished in all respects.

9.           Termination of Employment.  Executive’s employment and the Term will terminate on the first of the following to occur:

(a)           Automatically upon Executive’s death.

(b)           Upon written notice by the Company to Executive of termination due to Disability (as defined below).  For the purposes of this Agreement, “Disability” shall mean a physical or mental disability which, in the reasonable judgment of the Board (following consultation with Executive’s physician, if so requested by Executive), is likely to render Executive unable to perform his duties and obligations under this Agreement for 180 days in any 12-month period.

(c)           Upon written notice by the Company to Executive of a termination for “cause” under Section 10 of this Agreement.

(d)           Upon termination for “good reason” under Section 11 of this Agreement.

(e)           Upon written notice by the Company to Executive of an involuntary termination without “cause”, other than for death or Disability.

 

  

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(f)           Upon “voluntary termination” by Executive under Section 12 of this Agreement.

10.           Termination for Cause.

(a)           In addition to any other rights or remedies provided by law or in this Agreement, the Company may terminate Executive’s employment under this Agreement for “cause” if:

	 	
(i)

	
Executive is convicted of, or enters a plea of guilty or nolo contendere to, a felony offense (unless, in the case of a conviction, the conviction shall have been reversed on appeal); or

	 	
(ii)

	
Executive has:

(A)           committed fraud against, or embezzled or misappropriated funds or other material assets of, the Company (or any subsidiary thereof);

(B)           violated, or caused the Company (or any subsidiary thereof) to violate, any material law, regulation or ordinance which causes, or is likely to cause, a material adverse impact on Company or, repeatedly violated, or caused the Company (or any subsidiary thereof) to violate, any material rule, regulation, policy or practice established by the Board of which he has been given notice;

(C)           willfully, or because of gross or persistent negligence, (A) failed to perform his duties hereunder or (B) acted in a manner detrimental to, or adverse to the interests of, the Company, and such failure or action has caused, or is likely to cause, the Company (or any subsidiary thereof) to suffer or incur a material casualty, loss, penalty, expense or other material liability or cost;

(D)           violated, or failed to perform or satisfy any material covenant, condition or obligation required to be performed or satisfied by Executive; or

(E)           habitually used illegal drugs or consumed alcohol and such consumption has caused material damage to the Company.

(b)           The Company may effect such termination for cause by giving Executive written notice to such effect, setting forth in reasonable detail the factual basis for such termination (the “Cause Notice”); provided, however, that Executive may avoid such termination if the termination is based on any occurrence, act or event described in clauses (A) to (E) of paragraph (ii) of Section 10(a) (each, a “For Cause Event”), if the matters giving rise to such termination (including without limitation, any breach or violation by Executive) are remedied or cured, if capable of remedy or cure, within 30 days after receipt of the Cause Notice (“30-Day Executive Cure Period”).  For the avoidance of doubt, Executive’s employment hereunder and the Term shall be terminated immediately upon delivery of the Cause Notice if Executive’s employment is being terminated due to the occurrence, act or event described in paragraph (i) of Section 10(a), and Executive’s employment hereunder and the Term shall be terminated immediately upon expiration of the 30-Day Executive Cure Period if Executive’s employment is terminated due to the occurrence, act or events described in clauses (A) to (E) of paragraph (ii) of Section 10(a) (assuming the matters, violations or conditions giving rise to such termination are capable of being cured or remedied, provided that if they are incapable of being so cured or remedied, then such termination shall be immediate upon delivery of the Cause Notice).

 

  

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(c)           In making any determination pursuant to paragraph (ii) of Section 10(a) based on or due to any For Cause Event, the Board may take into account each and all of the following:

	
  

	
(i)

	
if Executive is made a party to, or target of, any Proceeding arising under or relating to any For Cause Event, Executive’s failure to defend against such Proceeding or to answer any complaint filed against him therein, or to deny any claim, charge, averment, or allegation thereof asserting or based upon the occurrence of a For Cause Event;

	
  

	
(ii)

	
any judgment, award, order, decree or other adjudication or ruling in any such Proceeding finding or based upon the occurrence of a For Cause Event (that is not reversed or vacated on appeal); or

	
  

	
(iii)

	
any settlement or compromise of, or consent decree issued in, any such Proceeding in which Executive expressly admits the occurrence of a For Cause Event; provided that the Board shall not be required to treat any of the foregoing as dispositive or giving rise to an irrebuttable presumption of the occurrence of such For Cause Event; and provided further that the Board may rely on any other factor or event as convincing evidence of the occurrence of a For Cause Event.

(d)           In determining and assessing the detrimental effect of any For Cause Event on the Company and whether such For Cause Event warrants the termination of Executive’s employment hereunder, the Board shall take into account each and all of the following:

	
  

	
(i)

	
whether the Board directed or authorized Executive to take, or to omit to take, any action involved in such For Cause Event, or approved, consented to or acquiesced in him taking or omitting to take such action;

	
  

	
(ii)

	
any award of damages, penalty or other sanction, remedy or relief granted or imposed in any Proceeding based upon or relating to such For Cause Event, and whether such sanction, remedy or relief is sufficient to recompense the Company or any other injured person, or to prevent or to deter the recurrence of such For Cause Event;

 

  

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(iii)

	
whether any lesser sanction would be appropriate and effective; and

	
  

	
(iv)

	
any adverse effect that the loss of Executive's services would have, or be reasonably likely to have, upon the Company.

Nothing contained in this Section 10 shall be construed in any way to limit or restrict the right and ability of the Board to consider or base its determination on any other factors that the Board deems to be relevant in connection with any determination or assessment under this Section 10.

11.           Termination by Executive for Good Reason.

 

(a)           In addition to any other rights or remedies provided by law or in this Agreement, Executive may terminate his employment hereunder for “good reason” if (A) the Company violates, or fails to perform or satisfy any material covenant, condition or obligation required to be performed or satisfied by it hereunder, (B) as a result of any action or failure to act by the Company, there is a material adverse change in the nature or scope of the duties, obligations, rights or powers of Executive’s employment, (C) the Company moves its headquarters more than forty (40) miles from its location in New York, New York, (D) there is a diminution of Executive’s title, or (E) Executive is required to report to someone other than the Chief Executive Officer, in each case subject to the cure period and other terms set forth in this Section 11.

(b)           Executive may effect such termination for good reason by giving the Company written notice to such effect, setting forth in reasonable detail the factual basis for such termination (the “Good Reason Notice”); provided, however, that the Company may avoid such termination, if the matters giving rise to such termination (including without limitation, any breach or violation by the Company) are remedied or cured, within 30 days after receipt of the Good Reason Notice (“30-Day Company Cure Period”).  If the Company does not remedy or cure such matters, Executive’s employment hereunder and the Term shall be terminated immediately upon expiration of the 30-Day Company Cure Period in the case of a termination for “good reason” under this Section 11.

12.              Voluntary Termination by Executive.  In addition to any other rights or remedies provided by law or in this Agreement, Executive may terminate his employment hereunder at any time by giving the Company written notice to such effect at least ninety (90) days prior to the date of termination set forth therein, such termination to be irrevocable upon receipt of such notice by the Company.

 

  

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For the avoidance of doubt, the termination by Executive of his employment hereunder for “good reason” pursuant to Section 11 of this Agreement shall not constitute or be deemed to constitute for any purpose a “voluntary termination” of his employment under this Section 12.

13.           Compensation and Benefits upon Termination.

(a)           If Executive’s employment is terminated as a result of his death or Disability, the Company will pay or provide to Executive any Accrued Benefits (as hereinafter defined).  For the purposes of this Agreement, “Accrued Benefits” means: (1) any unpaid Base Salary through the date of termination; (2) reimbursement for any unreimbursed expenses incurred through the date of termination; (3) any unused vacation time accrued (through the date of termination) in accordance with Company policy or as otherwise required by law; and (4) any other payments, benefits or fringe benefits to which the Executive may be entitled under the terms of any applicable compensation arrangement or benefit plan or program or this Agreement, in all cases only through the date of termination, and (5) any unpaid Annual Bonus for a calendar year that ended prior to the Termination Date (collectively items (1) through (5) shall be hereafter referred to as “Accrued Benefits”).

(b)           If Executive’s employment is terminated for cause under Section 10, or if Executive’s employment is terminated by Executive voluntarily under Section 12 or voluntarily other than for good reason pursuant to Section 11 hereof, the Company will pay or provide to Executive any Accrued Benefits.  In addition, if Executive’s employment is terminated on a date prior to the three-month anniversary of the Commencement Date by Executive for good reason pursuant to Section 11 or by the Company other than for cause under Section 10, the Company will pay or provide the Executive any Accrued Benefits.

(c)           If Executive’s employment is terminated on a date that is on or after the three-month anniversary of the Commencement Date by Executive for good reason pursuant to Section 11 or by the Company other than for cause under Section 10, the Company will pay or provide the Executive with (i) any Accrued Benefits and (ii) conditioned upon Executive's execution of a severance agreement and general release of all claims that is reasonably acceptable to the Company and Executive within 30 days of such termination, a payment equal to six months of his Base Salary. Any amount due to Executive under clause (i) and (ii) of this Section shall be payable as follows:  fifty percent (50%) of such amount shall be payable in a lump sum within thirty (30) days of termination of employment, and the balance shall be payable in twelve (12) equal monthly installments over the period of twelve (12) months following such termination; provided, however, that if such amounts due to Executive become payable under this Section as a result of a termination of Executive’s employment occurring at any time before the first (1st) anniversary of the date of any Change of Control, such amounts shall be paid in a single lump sum payment within thirty (30) days of termination of employment, except as provided in Section 14 hereof.  Amounts payable to Executive under this Section 13(c), if any, are hereinafter referred to as the “Parachute Amount.”

 

  

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(d)           Except as expressly set forth herein, any amount payable to Executive upon termination of his employment hereunder shall be paid promptly, and in any event within thirty (30) days, after the Termination Date.

(e)           In addition to the foregoing, Executive’s rights to Restricted Stock Units upon termination of his employment hereunder will be determined in accordance with Section 4 above.

14.           Change of Control.

	
  

	
(a)

	
For the purposes of this Section 14:

(i)           The “Act” is the Securities Exchange Act of 1934, as amended.

(ii)           A “person” includes a “group” within the meaning of Section 13(d)(3) of the Act.

(iii)           “Control” is used herein as defined in Rule 12b-2 under the Act.

(iv)           “Beneficially owns” and “acquisition” are used herein as defined in Rules 13d-3 and 13d-5, respectively, under the Act.

(v)           “Non-Affiliated Person” means any person, other than Executive, an employee stock ownership trust of the Company (or any trustee thereof for the benefit of such trust), or any person controlled by Executive, the Company or such a trust.

(vi)           “Voting Securities” includes Common Stock and any other securities of the Company that ordinarily entitle the holders thereof to vote, together with the holders of Common Stock or as a separate class, with respect to matters submitted to a vote of the holders of Common Stock; provided, however, that securities of the Company as to which the consent of the holders thereof is required by applicable law or the terms of such securities only with respect to certain specified transactions or other matters, or the holders of which are entitled to vote only upon the occurrence of certain specified events (such as default in the payment of a mandatory dividend on preferred stock or a scheduled installment of principal or interest of any debt security), shall not be Voting Securities.

(vii)           “Right” means any option, warrant or other right to acquire any Voting Security (other than such a right of conversion or exchange included in a Voting Security).

(viii)           The “Code” is the Internal Revenue Code of 1986, as amended.

 

  

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(ix)           “Base amount,” “present value” and “parachute payment” are used herein as defined in Section 280G of the Code.

(b)           A “Change of Control” occurs when:

(i)           a Non-Affiliated Person acquires control of the Company; or

(ii)           upon an acquisition of Voting Securities or Rights by a Non-Affiliated Person or any change in the number or voting power of outstanding Voting Securities, such Non-Affiliated Person beneficially owns Voting Securities or Rights entitling such person to cast a number of votes (determined in accordance with Section 14(d)) equal to or greater than thrity five percent (35%) of the sum of (A) the number of votes that may be cast by all other holders of outstanding Voting Securities and (B) the number of votes that may be cast by such Non-Affiliated Person (determined in accordance with Section 14(f)).

(c)           Notwithstanding anything to the contrary contained herein, to the extent that any of the payments and benefits provided for herein or any other agreement or arrangement between Executive and the Company (collectively, the “Payments”) (i) constitute a “parachute payment” within the meaning of Section 280G of the Code and (ii) but for this provision, would be subject to the excise tax imposed by Section 4999 of the Code, then the Payments shall be payable either (i) in full or (ii) as to such lesser amount which would result in no portion of such Payments being subject to excise tax under Section 4999;  whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the excise tax imposed by Section 4999, results in Executive's receipt on an after-tax basis, of the greatest amount of benefits under this letter, notwithstanding that all or some portion of such benefits may be taxable under Section 4999.  Unless Executive and the Company otherwise agree in writing, any determination required under this provision shall be made in writing by the Company's independent public accountants (the “Accountants”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes. For purposes of making the calculations required by this provision, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely in reasonable, good faith interpretations concerning the application of Sections 280G and 4999.  Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this provision. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this provision. The reduction of Company payments, if applicable, shall be effected in the following order (unless Executive, to the extent permitted by Section 409A of the Code, elects another method of reduction by written notice to the Company prior to the Section 280G event): (i) any cash severance payments (starting with the last payments due), (ii) any other cash amounts payable to Executive (starting with the last payments due), (iii) any benefits valued as parachute payments, (iv) acceleration of vesting of any stock options for which the exercise price exceeds the then fair market value of the underlying stock (starting with the last vesting tranches), (v) acceleration of vesting of any equity award that is not a stock option (starting with the last vesting tranches) and (vi) acceleration of vesting of any stock options for which the exercise price is less then the fair market value of the underlying stock (starting with the last vesting tranches).

 

  

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(d)           The number of votes that may be cast by holders of Voting Securities or Rights upon the issuance or grant thereof shall be deemed to be the largest number of votes that may be cast by the holders of such securities or the holders of any other Voting Securities into which such Voting Securities or Rights are convertible or for which they are exchangeable or exercisable, determined as though such Voting Securities or Rights were immediately convertible, exchangeable or exercisable and without regard to any anti-dilution or other adjustments provided for therein.

15.              Other Termination Provisions.  The Company shall defend, indemnify and hold Executive harmless from any and all liabilities, obligations, claims or expenses which arise in connection with or as a result of Executive's service as an officer or director of the Company to the greatest extent now provided in the Company's Certificate of Incorporation and Bylaws and as otherwise allowed by law. During the Term and for a period of at least seven (7) years from the Termination Date, Executive shall be entitled to the same directors and officers' liability insurance coverage that the Company provides generally to its other directors and officers, as may be amended from time to time for such directors and officers.

16.           Limitation of Authority.  Except as expressly provided herein, no provision hereof shall be deemed to authorize or empower either party hereto to act on behalf of, obligate or bind the other party hereto.

17.           IRC 409A.  This Agreement is intended to satisfy the requirements of Section 409A(a)(2), (3) and (4) of the Code, including current and future guidance and regulations interpreting such provisions.  To the extent that any provision of this Agreement fails to satisfy those requirements, the provision shall automatically be modified in a manner that, in the good-faith opinion of the Company, brings the provisions into compliance with those requirements while preserving as closely as possible the original intent of the provision.  Notwithstanding anything to the contrary in this Agreement, no severance payments or benefits shall be paid to Executive during the six (6) month period following Executive's separation from service to the extent that the Company and Executive mutually determine in good faith that paying such amounts at the time or times indicated in this Agreement would cause Executive to incur an additional tax under Section 409A of the Code, in which case such amounts shall be paid at the time or times indicated in this Section. If the payment of any such amounts are delayed as a result of the previous sentence, then on the first day following the end of such six (6) month period, the Company will pay Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to Executive during such six (6) month period.

With respect to any reimbursements under this Agreement, such reimbursement shall be made on or before the last day of the Employees taxable year following the taxable year in which the expense was incurred by the Employee. The amount of any expenses eligible for reimbursement or the amount of any in-kind benefits provided, as the case may be, under this Agreement during any calendar year shall not affect the amount of expenses eligible for reimbursement or the amount of any in-kind benefits provided during any other calendar year.  The right to reimbursement or to any in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit. Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A. In addition, in no event shall any payment under this Agreement that constitutes “deferred compensation” for purposes of Section 409A be subject to offset by any other amount unless otherwise permitted by Section 409A.

 

  

13

  

 

18.           Notices.  All notices which are required by or may be given pursuant to the terms of this Agreement must be in writing and must be delivered personally; sent by certified mail, return receipt requested, postage prepaid; sent by facsimile (with written confirmation of transmission), provided that notice is also sent via first class mail, postage prepaid; or sent for next business day delivery by a nationally recognized overnight delivery service as follows:

If to the Company at:

469 7th Ave, 10th Floor

New York, NY 10018

Attn:  Chairman of the Board

Fax: (___) ___-____

with copies to:

Stubbs Alderton & Markiles LLP

15260 Ventura Blvd., 20th Floor

Sherman Oaks, California 91403

Attn: Scott Galer, Esq.

Fax: (818) 444-4520

If to Executive at:

[                            ]

Any of the addresses and other contact information set forth above may be changed from time to time by written notice (delivered in accordance with this Section) from the party requesting the change.

 

  

14

  

 

Such notices and other communications will be treated for all purposes of this Agreement as being effective immediately if delivered personally or by facsimile (with written confirmation of transmission) during normal business hours, or five (5) days after mailing by certified mail, return receipt requested, first class postage prepaid, or one business day after deposit for next business day delivery by a nationally recognized overnight delivery service.

 

19.           Amendment.  Except as otherwise provided herein, no amendment of this Agreement shall be valid or effective, unless in writing and signed by or on behalf of the parties hereto.

20.           Waiver.  No course of dealing or omission or delay on the part of either party hereto in asserting or exercising any right hereunder shall constitute or operate as a waiver of any such right.  No waiver of any provision hereof shall be effective, unless in writing and signed by or on behalf of the party to be charged therewith.  No waiver shall be deemed a continuing waiver or waiver in respect of any other or subsequent breach or default, unless expressly so stated in writing.

21.           Governing Law.  This Agreement shall be governed by, and interpreted and enforced in accordance with, the laws of the State of New York without regard to principles of choice of law or conflict of laws.

22.           Arbitration.  Except as set forth in Section 23, any dispute or controversy arising out of or related to this Agreement or any breach hereof shall be settled by binding arbitration by the American Arbitration Association (or any organization successor thereto) in New York, New York in accordance with its Employment Arbitration Rules then prevailing.  Judgment and the award rendered by the arbitration panel may be entered in any court or tribunal of competent jurisdiction.  This provision encompasses all disputes relating to Executive’s employment, this Agreement, the termination of Executive’s employment, and the amounts paid to the Executive upon termination, regardless of whether such dispute arises during or after the Executive’s employment.  In any arbitration proceeding conducted pursuant to this Section 22, both parties shall have the right to discovery, to call witnesses and to cross-examine the other party’s witnesses (through legal counsel, expert witnesses, or both).  All decisions of the arbitration panel shall be final, conclusive and binding upon the parties, and not subject to judicial review.  The arbitration panel shall have no power to change any of the provisions hereof in any respect or make an award of reformation, and the jurisdiction of the arbitrators is expressly limited accordingly.  All statutes of limitations that would otherwise be applicable shall apply to any arbitration proceeding hereunder.  Any arbitration shall be conducted by an arbitration plan consisting of one or more arbitrators jointly selected by the parties hereto; provided, however, that if the parties are unable to agree on an arbitrator or arbitrators, the arbitrator or arbitrators shall be selected in accordance with the aforementioned Employment Arbitration Rules then prevailing.  Each of the parties hereto shall pay the fees and expenses of its counsel, accountants and other experts incident to any such arbitration, provided, however, that if Executive shall prevail in such arbitration, Company shall pay the reasonable fees and expenses of Executive’s counsel, accountants and other experts incident to any such arbitration.  The fees and expenses of the arbitrator shall be paid by the Company.  Any notice or other process relating to any such arbitration may be effected in the manner provided by Section 18.

 

  

15

  

23.           Remedies.  In the event of any actual or prospective breach or default by either party hereto, the other party shall be entitled to seek equitable relief, including remedies in the nature of rescission, injunction and specific performance.  All remedies hereunder are cumulative and not exclusive, and nothing herein shall be deemed to prohibit or limit either party hereto from pursuing any other remedy or relief available at law or in equity for such actual or prospective breach or default, including the recovery of damages.

24.           Severability.  The provisions hereof are severable and in the event that any provision of this Agreement shall be determined to be invalid or unenforceable in any respect by a court of competent jurisdiction, the remaining provisions hereof shall not be affected, but shall, subject to the discretion of such court, remain in full force and effect, and any invalid or unenforceable provision shall be deemed, without further action on the part of the parties hereto, amended and limited to the extent necessary to render the same valid and enforceable.

25.           Counterparts.  This Agreement may be executed in counterparts, including, without limitation, by facsimile, each of which shall be deemed an original and which together shall constitute one and the same agreement.

26.           Assignment.  This Agreement, and each right, interest and obligation hereunder, may not be assigned by either party hereto without the prior written consent of the other party hereto, and any purported assignment without such consent shall be void and without effect, except that, subject to Section 14 above, this Agreement shall be assigned to, and assumed by, any person with or into which the Company merges or consolidates, or which acquires all or substantially all of its assets, or which otherwise succeeds to and continues the Company’s business substantially as an entirety, provided that no such assignment shall relieve Company of its obligations hereunder.  Except as otherwise expressly provided herein or required by law, Executive shall not have any power of anticipation, assignment or alienation of any payments required to be made to him hereunder, and no other person may acquire any right or interest in any thereof by reason of any purported sale, assignment or other disposition thereof, whether voluntary or involuntary, any claim in a bankruptcy or other insolvency proceeding against Executive, or any other ruling, judgment, order, writ or decree.

27.           Withholding.   The Company may withhold from any and all amounts payable under this Agreement such federal, state and local taxes, as may be required to be withheld pursuant to any applicable law or regulation, and all other applicable withholdings.

28.           Binding Effect.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  This Agreement is not intended, and shall not be deemed, to create or confer any right or interest for the benefit of any person not a party hereto.

 

  

16

  

29.           Titles and Captions.  The titles and captions of the Articles and Sections of this Agreement are for convenience of reference only and do not in any way define or interpret the intent of the parties hereto or modify or otherwise affect any of the provisions hereof.

30.           Grammatical Conventions.  Whenever the context so requires, each pronoun or verb used herein shall be construed in the singular or the plural sense and each capitalized term defined herein and each pronoun used herein shall be construed in the masculine, feminine or neuter sense.

31.           References.  The terms “herein,” “hereto,” “hereof,” “hereby,” and “hereunder,” and other terms of similar import, refer to this Agreement as a whole, and not to any Article, Section or other part hereof.

32.           No Presumptions.  Each party hereto acknowledges that it has had an opportunity to consult with counsel and has participated in the preparation of this Agreement.  No party hereto is entitled to any presumption with respect to the interpretation of any provision hereof or the resolution of any alleged ambiguity herein based on any claim that the other party hereto drafted or controlled the drafting of this Agreement.

33.              Certain Definitions.  As used herein:

(a)           “Person” includes, without limitation, a natural person, corporation, joint stock company, limited liability company, partnership, joint venture, association, trust, government or governmental authority, agency or instrumentality, or any group of the foregoing acting in concert.

(b)           A “Proceeding” is any suit, action, arbitration, audit, investigation or other proceeding before or by any court, magistrate, arbitration panel or other tribunal, or any governmental agency, authority or instrumentality of competent jurisdiction.

34.           Entire Agreement.  This Agreement embodies the entire agreement of the parties hereto with respect to the subject matter hereof and supersedes any prior or contemporaneous agreement, commitment or arrangement relating thereto, written or oral, if any, which shall terminate immediately upon the commencement of the Term.

 

  

17

  

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

 

	

ATRINSIC, INC.

	 	 
	
BY:

	
/s/ Stuart Goldfarb

	  	
Stuart Goldfarb

Chief Executive Officer and Director

(Principal Executive Officer)

	 	 
	 	

/s/ Nathan Fong

	 	

Nathan Fong

 

  

18KALI TUNA, d.o.o. za ulov, uzgoj i preradu ribe, Put Vele Luke 70, 23272 KALI; PIN: 92418838517 as the Credit Beneficiary, represented by Mr. Miro Mirković, Member of the Board (hereinafter referred to as: the Credit beneficiary) and

Croatian Bank for Reconstruction and Development, Strossmayerov trg 9, Zagreb; PIN: 26702280390, as the Creditor, represented pursuant to the Special Power of Attorney by Ms. Danijela Vukić, Independent Financial Representative and Mr. Miljenko Strika, Deputy Director of the Commercial Centre Zadar (hereinafter referred to as: the HBOR) and

Erste & Steiermärkische Bank d.d., Rijeka, Jadranski trg 3A; PIN: 23057039320, as the Creditor and the Agent, represented by Ms. Slađana Jagar, Member of the Board and Mr. Tomislav Vuić, Member of the Board (hereinafter referred to as: the Bank)

(hereinafter the HBOR and the Bank jointly referred to as: the Creditors),

considering that:

	
  

	
-

	
the Government of the Republic of Croatia on its 36th session passed the Decision class: 302-01/10-03/02, no.: 5030120-10-1 of January 14, 2010 on Measures for economic recovery and development and Decision class: 302-01/10-03/02, no.: 5030116-11-9 of January 27, 2011 on continuation of Measures for economic recovery and development;

	
  

	
-

	
the Government of the Republic of Croatia on its 38th session reached the Conclusion class: 302-01/10-03/02, no.: 5030120-10-3 dated January 28, 2010 on adoption of Measures for economic recovery and development – financing models - MODEL A, now pursuant to Decision of the Croatian Government of January 27, 2011 - MODEL A+

	
  

	
-

	
the Government of the Republic of Croatia passed the Decision class: 302-01/10-03/02, no.: 5030120-10-3-6 of February 11, 2010 by which the Plan for providing HBOR’s funds for implementation of Measures for economic recovery and development was approved;

	
  

	
-

	
the Business Cooperation Agreement regarding the implementation of Programme for supplying credit for the economic recovery and development - Model A+ no.: Mod-A-PLUS-08 (hereinafter referred to as the Business Cooperation Agreement) was concluded between the HBOR and the Bank on March 22 (twentysecond), 2011 (twothousandandeleven); 

	
  

	
-

	
the Credit Beneficiary meets the requirements for usage of funds provided through the Programme for supplying credit for the economic recovery and development Model A+ no.: Mod-A-PLUS-01, adopted on the 2nd theme session of the Board of the HBOR of January 26, 2011 (hereinafter referred to as: the Programme)

  

  

  

	
  

	
-

	
on May 5, 2011 the Bank passed a Decision no. 201104112050172-1 by which the loan was granted to the Credit Beneficiary to the amount of 80,000,000.00 HRK (in words: eightymillionkunas) together with interest, fees and expenses under the above described conditions;

concluded on June 8, 2011 the following

CLUB LOAN AGREEMENT no.: Mod-A-PLUS- 3A-15/11

	
1.

	
LOAN TERMS AND CONDITIONS

	
1.1.

	
Loan amount:

1.1.1. Creditors grant the loan to the Credit Beneficiary under terms and conditions stated in this Club Loan Agreement (hereinafter referred to as: the Agreement) to the total principal amount of 80,000,000.00 HRK (in words: eightymillionkunas), (hereinafter referred to as: the Loan), and the Credit Beneficiary is obliged to repay to the Creditors the agreed interest, fees and expenses, as well as to refund the principal of the Loan under terms and conditions, within the time limit and in the manner as agreed herewith.

1.1.2. Creditors supply the Loan funds as follows:

	  	 	
Amount in

	 	 	
Participation

	 
	
Creditors

	 	
HRK

	 	 	
rate

	 
	
HBOR

	 	 	32,000,000.00	 	 	 	40	%
	
Erste & Steiermärkische Bank d.d., Rijeka

	 	 	48,000,000.00	 	 	 	60	%
	
TOTAL

	 	 	80,000,000.00	 	 	 	100.00	%

1.1.3. If the HBOR should not pay its entire part of the Loan to the Bank in due time, the Bank shall not be obliged to pay its part of the Loan to the Credit Beneficiary.

	
1.2.

	
Loan Purpose:

1.2.1. The Credit Beneficiary is obliged to use the Loan funds according to the following purpose:

  

  

  

	
Purpose specification of the total Loan amount

	 	
(%)

	 
	
Working capital

	 	 	100	%
	
Fixed assets

	 	 	 	 
	
-     Land

	 	 	 	 
	
-     Buildings

	 	 	 	 
	
-     Equipment

	 	 	 	 
	
-     Plantations and flock

	 	 	 	 
	
-     Other

	 	 	 	 
	
Total

	 	 	100	%

1.2.2. Creditors reserve the right to supervise whether the Loan amount is being used in accordance with its purpose, under terms and conditions and in the manner as agreed herewith.

	
1.3.

	
The manner of the Loan usage and the time limit

1.3.1. The Bank can withdraw from the HBOR the Loan Quota approved at auction held, in accordance with the Measures for economic recovery and development – model A + of funding, on March 31, 2011, typically in 6 tranches (hereinafter referred to as: the Loan Tranches).

1.3.2. After prerequisites stated in Article 3.1. have been fulfilled, as well as all other terms and conditions stated in Article 3.2. of the Agreement, the Credit Beneficiary can use the entire or a part of the Loan, typically in 6 Tranches, by submitting to the Bank the duly completed Loan Application, as shown in the Attachment I of this Agreement, no later than 7 (seven) Business Days (as defined below) before usage dates determined by Paragraph 3 of this Article (hereinafter referred to as: the Usage Date).

1.3.3. The Bank shall subsequently, after conclusion of the Agreement, inform the Credit Beneficiary about possible Usage Dates which are always to be on a Business Day – on Thursdays, in accordance with the Business Cooperation Agreement. If it happens that a certain Thursday should be a non-business day, the funds shall be paid on the immediate previous Business Day as defined below, all due to Bank’s ability to withdraw Loan Tranches from the HBOR.

1.3.4. Credit Beneficiary can submit the Loan Application during the period of time which begins on the first Business Day (as defined below) after conclusion of this Agreement and after all prerequisites as stated in Article 3.1., as well as terms and conditions stated in Article 3.2. of this Agreement have been fulfilled, in accordance with the Usage Dates. This period of time terminates on December 31, 2011 (twothousandandeleven) (hereinafter referred to as: the Usage time limit).

  

  

  

1.3.5. Business Day is a working day for the banks in the Republic of Croatia (all days of the week except Saturday, Sunday and public holidays: hereinafter referred to as: the Business Day).

1.3.6. After expiration of the Usage time limit the Credit Beneficiary loses the right to apply for the Loan, regardless if up to that point in time the Beneficiary had used the Loan or not, i.e. if it had used just the part of the Loan. Used amount of the Loan shall be transferred to repayment status after expiration of the Usage time limit, regardless of the agreed Loan amount. 

1.3.7. If the Credit Beneficiary should not use the entire available Loan amount, the Creditors shall participate in the Loan amount transferred to repayment status in accordance with rates stated in Article 1.1.2. of the Agreement, i.e. the HBOR with 40%, and the Bank with 60% of the used Loan amount.

1.3.8. After expiration of the Usage time limit, i.e. transfer of Loan to repayment status, the Bank shall submit to the Credit Beneficiary repayment plans both for the HBOR’s and the Bank’s part of the Loan.

	
1.4. 

	
Time limit for the Loan repayment

1.4.1. Time limit for the Loan repayment is 36 months from transfer of Loan to the repayment status, including the grace period.

1.4.2. The grace period is 0 (zero) months from transfer of Loan to the repayment status.

1.4.3. The Credit Beneficiary has no right to ask for a debtor rallonge regarding the Loan principal repayment, as well as repayment of other claims under the Agreement.

	
1.5.

	
Interest

	
1.5.1.

	
Common provisions

1.5.1.1. The Credit Beneficiary is obliged to pay interest relating to the used Loan amount from the beginning of the Loan usage till the Final Due Date (as defined below), as follows:

	
  

	
·

	
interest described in Article 1.5.2. of the Agreement relating to HBOR’s part of the Loan;

	
  

	
·

	
interest described in Article 1.5.3. of the Agreement relating to Bank’s part of the Loan.

  

  

  

1.5.1.2. Interest is to be calculated by using the linear interest calculation method based on the real number of days elapsed in the Interest Period (as defined below) and a 360-day year, and is charged on the last day of every calendar quarter, i.e. on March 31, June 30, September 30 and December 31 of every calendar year.

	
1.5.2. 

	
  Interest relating to the HBOR’s part of the Loan

	
1.5.2.1.

	
Agreed interest

Interest rate relating to the HBOR’s part of the Loan amounts to 2.8% (twopointeightpercent) per year. Interest rate amount, as well as other terms and conditions of the Agreement relating to the HBOR’s part of the Loan, can be changed if terms and conditions listed in the Attachment II to the Club Loan Agreement, concluded on February 16, 2011 between the HBOR as the debtor and the club of domestic business banks as the creditors, should be changed.

Intercalary interest relating to the HBOR’s part of the Loan is to be calculated on the used amount of the HBOR’s part of the Loan, from the beginning of the Loan usage till transfer of Loan to the repayment status, at the agreed interest rate stated in the previous Paragraph, and is to be charged quarterly.

	
1.5.2.2.

	
Default interest

If any due amount mentioned in the Agreement regarding the HBOR’s part of the Loan should not be paid (principal, fees, expenses etc., as stipulated by regulations), on such an amount variable default interest shall be calculated over the period from the due date till the payment date, at the rate of 14% (fourteenpercent) per year, in accordance with provisions of the Decision on interest rates of the HBOR.

The Credit Beneficiary is obliged to immediately, in accordance with the submitted calculation and the payment instruction of the Bank, pay the default interest as described in the previous Paragraph.

	
1.5.3.

	
Interest relating to the Bank’s part of the Loan

	
1.5.3.1.

	
Agreed interest

Interest relating to the Bank’s part of the Loan is variable and calculated quarterly, based on the realised return on treasury notes of the Ministry of Finance of the Republic of Croatia, with maturity date of 91 days, plus the margin of 3% (threepercent) per year.

  

  

  

For the first Interest Period (as defined below) realised return on treasury notes of the Ministry of Finance of the Republic of Croatia, with maturity date of 91 days, at the last auction held before conclusion of this Agreement, shall be applied. For each following Interest Period (as defined below) realised return on treasury notes of the Ministry of Finance of the Republic of Croatia, with maturity date of 91 days, at the last auction held at least 2 (two) Business days before the beginning of the following Interest Period (as defined below), shall be applied.

Intercalary interest relating to the Bank’s part of the Loan is to be calculated on the used amount of the Bank’s part of the Loan, over the period of time from the beginning of the Loan usage till transfer of the Loan to the repayment status, at the agreed interest rate as stated in Article 1.5.3.1. of the Agreement, and is to be charged quarterly.

	
1.5.3.2.

	
Default Interest

The Bank shall calculate the default interest on any due outstanding amount relating to the Bank’s part of the Loan (principal, fees, expenses etc., as stipulated by regulations), at the highest rate stipulated by regulations.

The Credit Beneficiary is obliged to immediately, in accordance with the submitted calculation and the payment instruction of the Bank, pay the default interest as described in the previous Paragraph.

1.6. Repayment modality 

1.6.1. Loan repayment modality 

1.6.1.1. The Credit Beneficiary is obliged to repay the Loan amount in one instalment after the Loan is transferred to the repayment status / after the grace period. This instalment shall be due on the last day in the last quarter of the Time limit for Loan repayment, as defined in Article 1.4.1. of this Agreement.

1.6.1.2. Loan instalment amounts to 80,000,000.00 HRK, i.e. the used part of the Loan, and is due on December 31, 2014 (hereinafter referred to as: the Final Due Date).

1.6.2. Interest repayment modality 

1.6.2.1. Interest relating to both the HBOR’s and the Bank’s part of the Loan shall be due quarterly, on the last day of every calendar quarter, i.e. on March 31, June 30, September 30 and December 31 of every calendar year (hereinafter referred to as: the Interest Period).

1.6.2.2. The Final Interest Period ends on the Final due date.

  

  

  

1.6.2.3. At least 5 (five) Business Days before the end of every Interest Period the Bank shall calculate the interest amount to be charged to the Credit Beneficiary for a certain Interest Period relating to both the HBOR’s and the Bank’s part of the Loan, and shall immediately inform the Credit Beneficiary and the HBOR about it.

1.6.2.4. Due Loan instalment and due agreed interest are considered duly settled if paid effectively to the giro-account no. 2402006-1031262160 opened at the Bank, reference no. 260105104-92418838517, on the last day of the calendar quarter, as follows:

	
  

	
·

	
due Loan instalments according to the expressed amount and due dates in the repayment plan as described in Article 1.3.8., i.e. Article 1.10.3. of the Agreement and

	
  

	
·

	
due agreed interest according to the calculation and the payment instruction of the Bank.

1.6.3. Other

1.6.3.1. If fulfilment of any obligation assumed by Creditors under this Agreement, i.e. providing, funding or maintenance of the Loan is or should become illegal, the Bank shall immediately inform the Credit Beneficiary about that. In such a case the Credit Beneficiary shall be obliged to immediately early repay the withdrawn outstanding Loan amount and the Creditors’ obligations to provide Loan shall in this case immediately cease.

1.6.3.2. If any obligation of the Credit Beneficiary under the Agreement should be due on a non-business day, Beneficiary’s obligation shall instead become due on the immediate previous Business Day.

	
1.7.

	
Fees

1.7.1. For the Loan Application processing and the Loan authorization, the Credit Beneficiary is obliged to:

	
  

	
·

	
pay to the benefit of the HBOR the fee to the amount of 0.5% (in words: zeropointfivepercent) of the HBOR’s part of the Loan, as mentioned in Article 1.1.2. of the Agreement, calculated on the date of the Agreement.

	
  

	
·

	
pay to the benefit of the Bank the fee to the amount of 0.7% (in words: zeropointsevenpercent) of the Bank’s part of the Loan, as mentioned in Article 1.1.2. of the Agreement, calculated on the date of the Agreement.

1.7.2. The Credit Beneficiary is obliged to immediately, in accordance with the submitted calculation and the payment instruction of the Bank, pay the fee to the benefit of both the HBOR and the Bank.

  

  

  

	
1.8.

	
Taxes and expenses 

1.8.1. All payments made by the Credit Beneficiary to the Creditors based on or in relation to this Agreement shall be done without deductions based on any current or future taxes, tax advances or any other fees or expenses. If any such deduction should be required by the law, the Credit Beneficiary shall pay the additional amount necessary for Creditors to accept and keep the amount which they would have been able to receive if such deductions had not existed.

1.8.2. All expenses regarding the conclusion of this Agreement, submitting the Guarantee Instruments (as defined below) and execution of this Agreement, as well as realization of rights of both the Bank and the HBOR relating to the Guarantee Instruments (as defined below), expenses of forced foreclosure, including the expenses of termination notices, notary public expenses, fees, court expenses and fees, expenses of representation, removal from the Registry and other expenses under or in relation to the Agreement, shall be paid by the Credit Beneficiary.

 

	
1.9.

	
Repayment sequence

1.9.1. Every repayment of the principal or the interest, fees or any other amount arising from this Agreement or in relation to it, as a part of Beneficiary’s obligations, shall be paid by the Beneficiary in accordance with the payment instruction of the Bank, i.e. as stipulated by Article 1.6.2.4. of the Agreement.

1.9.2. The Bank shall forward the funds received from the Beneficiary to the HBOR no later than 1 (one) Business Day after receiving such funds, in proportion to the HBOR’s part of the total paid due debt, according to provisions of this Article.

1.9.3. By signing this Agreement the Credit Beneficiary accepts that the Bank shall close all registered entries received under this Agreement according to their priority, provisions of this Article and the law, in order to settle all due obligations of the Beneficiary according to the following sequence:

 

	
  

	
·

	
expenses relating to the Agreement,

	
  

	
·

	
fees relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
default interest relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
agreed interest relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
remainder of the paid funds is to be divided in ratio 60:40 in order to settle the due principal of the Bank and the HBOR.

1.9.4. By signing this Agreement the Credit Beneficiary agrees and accepts that all funds obtained through forced collection from the Beneficiary or third persons, as well as all funds collected (either forcibly or voluntary, from the Beneficiary or from third persons), in accordance with Article 2.2. of the Agreement, as a part of the forced settlement, shall be used to settle Creditors’ claims relating to the Agreement and according to the following sequence:

  

  

  

	
  

	
·

	
expenses of forced collection,

	
  

	
·

	
expenses relating to the Agreement,

	
  

	
·

	
fees relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
default interest relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
agreed interest relating to the Bank’s and the HBOR’s part of the Loan,

	
  

	
·

	
remainder of the paid funds is to be divided in ratio 60:40 in order to settle the principal of the Bank and the HBOR.

1.9.5. If paid, i.e. collected amounts (either forcibly or voluntary) stated in Article 1.9.3. and 1.9.4. should not be sufficient to settle all expenses, fees or interest of the Bank and the HBOR, debt shall be settled in proportion to the paid amounts; the corresponding percent of expenses, fees or interest shall be settled.

	
1.10.

	
Early Loan repayment

1.10.1. After the expiration of the Usage time limit, the Credit Beneficiary shall be able to partially or entirely repay the Loan early, on the last day of the calendar quarter, under the condition that the Bank receives adequate written notification at least 10 (ten) Business Days in advance. Obligatory fee for the early Loan repayment amounts to 1% of such early repaid amount.

1.10.2. In case of early Loan repayment, partial or full, made on a day other than the last day of the calendar quarter, the Credit Beneficiary shall be obliged to pay to the Creditors, apart from the fee mentioned in the previous Paragraph, all expenses and damages resulting directly or indirectly from such early Loan repayment made on a day other than the last day of the calendar quarter.

1.10.3. In case of the partial early Loan repayment the Bank shall submit the new repayment plan to the Credit Beneficiary relating to both the HBOR’s and the Bank’s part of the Loan.

1.10.4. Credit Beneficiary can not reuse the early repaid Loan amount or a part of it.

	
2.

	
Rights, obligations and powers of the Bank as an agent

	
2.1.

	
Appointment of the Bank as an agent

2.1.1. HBOR herewith appoints the Bank as its agent and authorizes the Bank to take all reasonable measures necessary to execute this Agreement relating to the HBOR’s part of the Loan, in the name and on behalf of the HBOR and in accordance with internal documents of the Bank.

2.1.2. Pursuant to this Agreement and in accordance with internal documents of the Bank, the Bank is obliged to do as follows:

  

  

  

	
  

	
·

	
conclude this Agreement with the Credit Beneficiary in relation to the HBOR’s part of the Loan,

	
  

	
·

	
take adequate measures to secure the entire Loan amount (together with auxiliary claims),

	
  

	
·

	
pay the Loan amount to the Credit Beneficiary,

	
  

	
·

	
supervise whether the Loan is being used in accordance with its purpose,

	
  

	
·

	
calculate the principal, interest, fees, expenses and according to that submit payment instructions to the Credit Beneficiary relating to the HBOR’s and the Bank’s part of the Loan,

	
  

	
·

	
collect total due Loan amount in due time, as well as interest, fees and other expenses according to Article 1.9. of the Agreement,

	
  

	
·

	
monitor business activity of the Credit Beneficiary during the Agreement period and inform the HBOR about eventual breach or non-execution of the Agreement provisions by the Credit Beneficiary,

	
  

	
·

	
cancel this Agreement and request payment of the full Loan amount together with interest, fees and other expenses in case of breach of the Agreement by the Credit Beneficiary, with approval of the HBOR and in accordance with internal documents of the Bank,

	
  

	
·

	
complete forced collection of the Loan amount, interest, fees and other expenses, if any due debt amount under the Agreement should not be paid by the Credit Beneficiary,

	
  

	
·

	
in case of forced collection, and after all expenses of such proceeding have been settled, divide all amounts collected from the Credit Beneficiary in accordance with Article 1.9. of the Agreement,

	
  

	
·

	
perform other duties pursuant to the Agreement.

2.1.3. By signing this Agreement the HBOR explicitly accepts all actions taken by the Bank towards the Credit Beneficiary, acting as its agent in the name and on behalf of the HBOR, as well as that all actions and debt settlement done by the Credit Beneficiary towards the Bank as the agent shall have full impact on the HBOR. For that purpose, among other things, in case that any due debt amount under the Agreement relating to the HBOR’s part of the Loan should not be paid by the Credit Beneficiary, the HBOR authorizes the Bank to request payment based on Guarantee Instruments submitted to the benefit of the HBOR (bill of exchange and promissory note) according to Article 3.3. of the Agreement, as well as to take all other measures in order to collect the said HBOR’s debt, according to this Agreement.

2.1.4. At the Bank’s request the HBOR shall be obliged to immediately submit all information, data and documentation so that the Bank could duly perform its duties as an agent, according to this Agreement.

2.1.5. The Bank shall not be liable for negligence regarding settlement of any monetary and/or related non-monetary obligation and/or right of the Credit Beneficiary and/or HBOR pursuant and in relation to this Agreement, unless the Bank committed it or contributed to it.

  

  

  

2.1.6. Contracting parties agree that, after receiving the written request of the HBOR (if it was sent also to the Bank), the Credit Beneficiary shall pay all the debt relating to the HBOR’s part of the Loan, typically paid to the Bank acting as an agent, directly according to requests and to the benefit of the HBOR. In this case the Bank shall not act as agent in relation to the HBOR’s part of the Loan any more.

	
2.2. 

	
Claim assignment for the purpose of collection

2.2.1. Contracting parties agree and accept that, in case of Agreement cancellation, the HBOR shall conclude the Claim Assignment Agreement with the Bank for the purpose of collection of its claims under this Agreement (hereinafter referred to as: the Claim Assignment Agreement). Pursuant to such an Agreement the HBOR shall assign to the Bank all its claims arising from the Agreement that HBOR has against the Credit Beneficiary, as well as assign all Guarantee Instruments submitted in relation to the HBOR’s part of the Loan till the final and valid ending of all forced collection proceedings. In cases stipulated by the Claim Assignment Agreement the Bank shall assign HBOR’s claims back to the HBOR, as well as all Guarantee Instruments relating to the HBOR’s part of the Loan, so that HBOR could continue with the forced collection proceeding regarding its due claims pursuant to this Agreement.

2.2.2. By signing this Agreement Creditors and the Credit Beneficiary agree that, after conditions stipulated in the Claim Assignment Agreement regarding the assignment of claims back to HBOR have been met and after Guarantee Instruments relating to the HBOR’s part of the Loan have been assigned back to the HBOR, all forcibly collected amounts (by activating mortgage loans / fiduciary duties and other liens) shall be used to settle Creditors’ claims, according to Article 1.9. of the Agreement.

	
3.

	
Guarantee Instruments and prerequisites

3.1. As a prerequisite to Loan usage the Credit Beneficiary must submit the following documents to the Bank:

	
a)

	
affidavit according to Article 125 of the Distraint Law (promissory note), duly issued, solemnized by the notary public and signed by the Credit Beneficiary in relation to the Bank’s part of the Loan;

	
b)

	
affidavit according to Article 125 of the Distraint Law (promissory note), duly issued, solemnized by the notary public and signed by the Credit Beneficiary in relation to the HBOR’s part of the Loan;

	
c)

	
2 (two) blank single accepted bills of the Credit Beneficiary with the clause "protest waived in case of dishonour" and the bill of exchange statement for the Bank’s part of the Loan;

  

  

  

	
d)

	
2 (two) blank single accepted bills of the Credit Beneficiary with the clause "protest waived in case of dishonour" and the bill of exchange statement for the HBOR’s part of the Loan;

	
e)

	
Security Agreement with the purpose of securing the monetary claim by putting a floating lien on tuna inventories (“Security Agreement”). Lien on tuna inventories (hereinafter referred to as: the Movable property) shall equal the total amount of the Loan and shall be the primary lien to the benefit of the Bank, relating to the Bank’s part of the Loan, together with the Bank’s agreed interest, default interest, fees and other expenses in accordance with the Agreement, as well as to the benefit of the HBOR for the HBOR’s part of the Loan, together with the HBOR’s agreed interest, default interest, fees and other expenses in accordance with the Agreement;

	
f)

	
proof of floating lien (entered in the Registry) on tuna inventories (on Movable property) being the primary lien to the benefit of the Bank, for the Bank’s part of the Loan with the purpose of securing the monetary claim of the Bank, as well as to the benefit of the HBOR for the HBOR’s part of the Loan with the purpose of securing the monetary claim of the HBOR, as well as proof of insured status of the tuna inventories by respectable Insurance company acceptable to the Bank, and the proof of the paid premium sum;

	
g)

	
Joint Guarantee Agreement concluded between the Creditors and the company MB LUBIN, RIBARSTVO d.o.o. Kali, PUT VELE LUKE 70, 23272 KALI; PIN: 72633995497, guaranteeing to the Creditors for Beneficiary’s debt arising from the Agreement;

	
h)

	
Joint Guarantee Agreement concluded between the Creditors and the company ATLANTIS GROUP HF, Stórhöfða 23, 110 Reykjavik, Island, ID-no: 700805-1580, guaranteeing to the Creditors for Beneficiary’s debt arising from the Agreement;

	
i)

	
Joint Guarantee Agreement concluded between the Creditors and the company UMAMI SUSTAINABLE SEAFOOD INC., 1230 Columbia Street Suite 1100, San Diego, California 92101, USA, guaranteeing to the Creditors for Beneficiary’s debt arising from the Agreement;

(all documents listed under (a-i) hereinafter referred to as: the Guarantee Instruments)

	
j)

	
copy of the valid Extract from the Court Registry relating to the Credit Beneficiary, confirmed as authentic by the authorized person of the Credit Beneficiary;

	
k)

	
signature card of the Credit Beneficiary’s representative authorized to sign this Agreement, the Guarantee Instruments and other documents which Credit Beneficiary must submit according to this Agreement;

	
l)

	
other document required by the Bank, acceptable to the Bank regarding their form and content.

Form and content of all listed documents must be entirely acceptable to the Bank.

  

  

  

3.2. Obligation of the Bank to pay the Loan amount to the Credit Beneficiary     depends on the following terms and conditions:

	
  

	
a)

	
at a time when the Loan Application was received and on the Loan Usage Date affidavits and guarantees listed in this Agreement must be authentic, accurate, complete, must not be misleading, must be valid as if issued at a time when the Loan Application was received and on the Loan Usage date;

	
  

	
(b)

	
there must be no events or circumstances representing the breach of Agreement regarding Beneficiary’s obligations under this Agreement, or events or circumstances for which it can be reasonably assumed that could represent the breach of Agreement regarding Beneficiary’s obligations under this Agreement by submitting the Loan Application, by expiration of time, by decision making or all of the above; or events or circumstances for which it can be reasonably expected to be a consequence of the Loan usage;

	
  

	
(c)

	
Credit Beneficiary must fully pay fees described in Article 1.7. of the Agreement;

	
  

	
(d)

	
the HBOR must pay to the Bank the entire amount corresponding to HBOR’s part of the Loan in due time;

	
  

	
e)

	
Beneficiary’s accounts must not be blocked due to any reason, unless the Creditors jointly agree on that.

3.3. By signing the Agreement the Credit Beneficiary irrevocably authorizes the Creditors to:

	
a)

	
enter the amount of due outstanding debt on the submitted blank bills, as well as all other necessary details, address them and request the payment if the Credit Beneficiary should not fulfil its obligations under this Agreement. If such payment would not be possible, the Creditors are authorized to take appropriate legal measures; and

by signing the Agreement the Credit Beneficiary irrevocably authorizes the Bank as an agent to:

	
  

	
b)

	
use all its funds (HRK or foreign exchange) from all its Bank deposits (dedicated or not, placed on time deposit or not), as well as funds on accounts opened with the Bank (currently or in the future), without any further notification, approval or court intervention, for collection of due Creditors’ claims, plus the accrued expenses.

	
  

	
c)

	
request payment at the Financial agency based on promissory notes relating to the HBOR’s or the Bank’s part of the Loan, according to the law.

  

  

  

3.4. The Credit Beneficiary is obliged to immediately submit additional guarantee instruments chosen by the Creditors (at request of the Bank) if during the Agreement period any of the Guarantee Instruments should become invalid, or any of the Creditors should consider them insufficient, or an Instrument should get activated, or new, more suitable instruments should emerge (according to the opinion of any Creditor), or creditworthiness of the Credit Beneficiary should be diminished (according to opinion of any Creditor). Besides, if necessary, Credit Beneficiary is obliged to immediately, at its own expense, take any action according to the law in order to ensure that Guarantee Instruments submitted to the Creditors according to the Agreement and/or Security Agreement are actionable, enforceable and legal.

	
4.

	
Incentive interest rates and State Aid Regulation

By signing this Agreement the HBOR and the Credit Beneficiary agree that the state aid amount granted to the Credit Beneficiary relating to the HBOR’s part of the Loan amounts to 0 HRK (zerokunas).

	
5.

	
Other terms and conditions

5.1. Credit Beneficiary declares and guarantees as follows:

	
  

	
·

	
all necessary authorizations and approvals for conclusion and execution of this Agreement and the Security Agreement have been prepared, all actions required for legality and validity of this Agreement and the Security Agreement have been taken, all measures required for ensuring that all Creditors’ claims under this Agreement can be binding and actionable have been taken;

	
  

	
·

	
Beneficiary’s State aid Affidavit, data regarding the possible status of the Beneficiary as the firm in difficulty and all other information and documentation of the Credit Beneficiary with the purpose of getting the Loan are authentic, integral and are not misleading;

	
  

	
·

	
conclusion of this Agreement and the Security Agreement is not against the applicable regulations and/or general documents of the Credit Beneficiary (including the Articles of Incorporation) and/or contracts it concluded and/or decisions of the court/arbitration/competent body referring to the Beneficiary;

	
  

	
·

	
all decisions, approvals and authorizations required for conclusion and/or execution of this Agreement and the Security Agreement are valid and have been obtained in due time;

	
  

	
·

	
there are no court, administrative, arbitration or other proceedings initiated against the Beneficiary or members of its Board or its related enterprises, the result of which could endanger the ability of the Credit Beneficiary to duly fulfil its obligations under this Agreement, nor is the Beneficiary informed of circumstances that could be the reason for initiation of such proceedings;

  

  

  

	
  

	
·

	
there are no circumstances that could diminish its creditworthiness and challenge its ability to repay in due time the entire Loan amount together with interest, fees and other expenses under the Agreement;

	
  

	
·

	
75% of its total Kuna and foreign exchange funds shall be directed to accounts opened with the Bank – until the entire Loan amount together with interest, fees and other expenses under the Agreement has been repaid; otherwise the Bank has the right to charge the fee of 2% on outstanding Loan amount.

5.2. From the date of the Agreement conclusion till repayment of all debts under this Agreement the Credit Beneficiary is obliged not to:

	
  

	
·

	
encumber its assets or assume obligations to the benefit of third persons that could encumber its assets, including the tuna in all cages, without the previous written approval of the Bank;

	
  

	
·

	
alienate its assets without the previous written approval of the Bank, except as a part of regular business activities and for monetary remuneration representing the equivalent value obligation which is due simultaneously;

	
  

	
·

	
make legal status changes (merger, acquisition or division) or take any other actions that could result in its ceasing to exist as an independent legal person, change of its organization or change of its business scope without the previous written approval of the Creditors;

	
  

	
·

	
grant loans (except to related enterprises Mb Lubin Ribarstvo d.o.o. and Bepina Komerc d.o.o. for the purpose of regular business activities); deposit funds, except in banks;

	
  

	
·

	
pay to its members any amounts relating to Loan repayment, i.e. make any other transaction with the same or similar economic effect;

	
  

	
·

	
guarantee and/or vouch for obligations of third persons who are not its related enterprises;

	
  

	
·

	
accept additional loans without the previous written approval of the Bank;

	
  

	
·

	
acquire stocks and business shares without the previous written approval of the Bank;

	
  

	
·

	
take actions that could result in diminishing its creditworthiness and challenging its ability to fully and in due time repay the Loan amount together with interest, fees and expenses under the Agreement.

5.3. From the date of the Agreement conclusion till repayment of all debts under this Agreement the Credit Beneficiary is obliged to:

	
  

	
·

	
take all necessary measures to protect its assets from rights, requests and interests of third persons;

	
  

	
·

	
ensure that its obligations under this Agreement have at least the same priority as all other present and future non-inferior obligations, except for obligations with legally guaranteed right of priority;

  

  

  

	
  

	
·

	
regularly deliver to the Bank (i) its financial statements (Profit and Loss Account, Balance Report, Cash Flow Statement, statistical reports), as well as audit reports as soon as those are available, (ii) information delivered to the stock market for public announcement or to other creditors, but at the same time when such information is delivered to these subjects, (iii) at the request of the Bank - other information relating to or that could relate to its business or financial status;

	
  

	
·

	
immediately inform the Bank about the change of the company name or the address;

	
  

	
·

	
at the request of the HBOR – settle all obligations relating to the HBOR’s part of the Loan that the Credit Beneficiary pays to the Bank (acting as an agent) according to requests and to the benefit of the HBOR; in this case the Bank shall not act as an agent in relation to the HBOR’s part of the Loan any more;

	
  

	
·

	
at the request of any Creditor – immediately show its business ledgers and other documents relating to the Loan (according to the opinion of the Creditors);

	
  

	
·

	
at the request of any Creditor – immediately submit all data and information requested by the Creditor regarding the Loan and business activities of the Credit Beneficiary, and allow access to its business facilities to the Creditors.

5.4. Further, the Credit Beneficiary is obliged to:

	
  

	
·

	
use the Loan funds according to the Loan purpose – financing of the working capital relating to tuna farming, but max. 33% of funds can be used for buying of new tuna,

	
  

	
·

	
participate in settlement of tuna farming costs with at least 45% of own funds,

	
  

	
·

	
use the Loan funds according to purpose; the funds shall be paid to suppliers’ accounts (based on submitted documentation – invoices, estimates etc.) or it can be paid to the Beneficiary’s account, but in this case the Credit Beneficiary is obliged to submit to the Bank all the necessary documents proving that the Loan funds are going to be used in accordance with the purpose of the Loan and that Credit Beneficiary shall also participate with its own funds. If the Bank should determine that the funds are not being used in accordance with the Loan purpose and/or that Credit Beneficiary participated with less than 45% of total costs approved by the Bank, further Loan usage shall be blocked by the Bank, and the Credit Beneficiary is hereby agreed with that (because otherwise the Bank has the right to charge the fee of up to 2% on outstanding Loan amount).

If the Credit Beneficiary should request complete or partial removal of the floating lien put on tuna inventory from the Registry, the Credit Beneficiary shall be obliged to:

  

  

  

	 	
·

	
obtain an irrevocable letter of credit acceptable to the Bank, at least of value equal to the insured tuna inventory for which removal of the floating lien was requested, transfer and assign to the Bank all rights from such letter of credit and submit to the Bank an adequate affidavit confirming such transfer and assignment and containing approval of the bank that issued the letter of credit, all with the purpose of partial early loan repayment, or

	
  

	
·

	
obtain and give to the Bank another movable property and put a floating lien on it, at least of value equal to the insured value of the part of the Movable property for which removal of the floating lien was requested.

5.5. By signing this Agreement the Credit Beneficiary authorizes the Bank to:

	
  

	
·

	
request and obtain all information relating to the Credit Beneficiary available to Related enterprises (related to the Bank in terms of the Company Act, Credit Institutions Act and other regulations relevant for financial business operations (hereinafter referred to as: Related enterprises)) and the HBOR, including without limitation to the creditworthiness information;

	
  

	
·

	
submit information relating to the Credit Beneficiary to Related enterprises and the HBOR

	
  

	
·

	
enable the HBOR to fully access the Bank’s business ledgers and other documentation regarding the loan application, Loan funds, payments under this Agreement, entries of payments under this Agreement, documentation regarding the Loan Guarantee Instruments and other issues relating to the execution of this Agreement and the Programme, as well as access to claim collection proceedings under this Agreement (forced or voluntary).

The Credit Beneficiary gives this authorisation solely for the purpose of collecting and analyzing data required for creditworthiness assessment, risk assessment, exposure control and risk management, conducted regularly by Related enterprises during approval and monitoring of products and placement, as well as by Creditors for the purpose of Loan usage supervision and supervision of fulfilment of Bank’s duties as an agent; and it can not be used for any other purpose. This authorisation also includes the right to exchange and forward data to the central database in the Republic of Croatia, as well as abroad, under the condition that the person who manages such database is obliged to ensure the level of personal data protection, at least equal to the prescribed one.

5.6 At the request of the Bank the Credit Beneficiary shall be obliged to allow the Bank to test the environmental protection status by providing services of an expert by the Bank’s choice, at the expense of the Credit Beneficiary.

5.7. Without the previous explicit joint approval of the Creditors, the Credit Beneficiary shall not pawn, assign or in any other way encumber any of its rights under this Agreement, nor take any actions in order to enable or complicate Creditors’ collection under this Agreement. Disposition of rights and/or obligations of the Credit Beneficiary under this Agreement can be done only with the previous explicit written joint approval of the Creditors.

  

  

  

 

5.8. With the previous written approval of another Creditor, any Creditor has the right to assign or transfer, at any time, any or all of its rights and/or obligations under this Agreement, Guarantee Instruments or any other contracts concluded under this Agreement.

5.9. Contracting parties agree that the Programme, as Attachment II to the Agreement, and the State aid Affidavit of the Credit Beneficiary represent integral parts of the Agreement.

5.10. Contracting parties agree that, in case of discrepancy between provisions of the Agreement and provisions of the Programme, provisions of the Agreement shall have priority.

5.11. For issues not stipulated by the Agreement, applicable legal regulations and general documents of the Bank shall be applied.

	
6.

	
Agreement Cancelation

6.1. If the Credit Beneficiary should violate any provision of this Agreement, the Creditors shall have the right to cancel the Agreement, declare the Loan entirely due for payment and request its immediate repayment, together with the accrued interest and all other due amounts under the Agreement.

6.2. At the time of the Agreement cancellation all amounts owed or amounts that shall be owed to the creditors by the Credit Beneficiary under this Agreement (including principal, interest, fees and other expenses) shall become due and payable, and the Creditors have the right to request payment pursuant to guarantee instruments as stipulated by this Agreement and in accordance with the legal regulations of the Republic of Croatia.

 

6.3. Particularly in the following cases it shall be assumed that the Credit Beneficiary violated provisions and obligations under this Agreement:

	
  

	
·

	
if on a due date the Credit Beneficiary should not fulfil any monetary obligation under this Agreement;

	
  

	
·

	
if the Credit Beneficiary should be late with fulfilment of any non-monetary obligation under this Agreement for more than 15 (fifteen) days;

	
  

	
·

	
if the Credit Beneficiary should become insolvent, terminate payment or its account should be blocked;

	
  

	
·

	
in case of other circumstances which the Creditors could reasonably consider as the negative influence on the ability of the Credit Beneficiary to duly fulfil its obligations under the Agreement;

  

  

  

	
  

	
·

	
if it should be determined that any affidavit or a guarantee of the Credit Beneficiary listed in this Agreement was not integral, accurate, authentic or up to date;

	
  

	
·

	
if against or in relation to the Credit Beneficiary a proceeding should be initiated and its course or the outcome could endanger the Beneficiary’s ability to duly fulfil its obligations under the Agreement, or, according to the opinion of the Creditors, such proceeding may be initiated;

	
  

	
·

	
if against the Credit Beneficiary a bankruptcy proceeding should be initiated;

	
  

	
·

	
if an important unfavourable change in business operations, assets, obligations, financial status or creditworthiness of the Credit Beneficiary should occur, or the ability of the Credit Beneficiary to duly fulfil its obligations under the Agreement becomes doubtful, or such circumstances should have occurred or may occur which the Creditors could reasonably consider as the negative influence on the ability of the Credit Beneficiary to duly fulfil its obligations under the Agreement;

	
  

	
·

	
if the Credit Beneficiary should use the Loan against its purpose or enable Creditors to financially or otherwise supervise the Loan usage;

	
  

	
·

	
if for any reason any Guarantee Instrument should become invalid or ceases to provide sufficient guarantee for the Beneficiary’s obligations under the Agreement, or payment should be requested pursuant to it, or a more suitable guarantee instrument should appear and the Credit Beneficiary should not submit it to the Creditors at the request of  the Bank in due time;

	
  

	
·

	
if at least 75% of its total Kuna and foreign exchange funds should not be directed to accounts opened with the Bank;

	
  

	
·

	
in case of any ownership changes made at the Credit Beneficiary which should not be acceptable to Creditors;

	
  

	
·

	
if the Credit Beneficiary should not fulfil or should be late with fulfilment of any monetary/non-monetary contract obligation on the basis of any existing or future placement used at the Bank by the Credit Beneficiary, including contract obligation regarding the guarantee instruments on the basis of the said placements;

	
  

	
·

	
if the Credit Beneficiary should act against any provision of the Agreement;

	
  

	
·

	
if the Credit Beneficiary should not fulfil any Additional condition listed in Article 5.4. of the Agreement;

	
  

	
·

	
if the Credit Beneficiary should not fulfil any other obligation under the Agreement or any Guarantee Instrument.

6.4. Creditors shall cancel the Agreement by written affidavit of cancellation and the Bank shall send it to the Credit Beneficiary by registered mail to the Beneficiary’s address as stated in the title of the Agreement, i.e. the address subsequently sent in written notification by the Credit Beneficiary to the Bank.

  

  

  

6.5. Cancellation of this Agreement begins by submitting the affidavit of cancellation to the post office (to be sent by the registered mail), i.e. to another person authorized to conduct postal services.

6.6. The Credit Beneficiary agrees that this Agreement shall be cancelled and that entire outstanding Loan amount together with interest and expenses shall be due for payment on the day when the affidavit of cancellation was submitted to the post office (to be sent by the registered mail), i.e. to another person authorized to conduct postal services. Therefore the Credit Beneficiary renounces the right of any complaint in terms of the above said.

6.7. By signing this Agreement contracting parties explicitly agree that all letters by the Bank, the HBOR or the notary public are to be sent to the address of the Credit Beneficiary as stated in this Agreement (unless the Credit Beneficiary subsequently informed the Bank of its new address by written notification), as well as that the date of delivery is to be the day when the affidavit of cancellation was submitted to the post office (to be sent by the registered mail), i.e. to another person authorized to conduct postal services.

6.8. Cancellation of this Agreement shall not affect the rights which Creditors gained under the Agreement and the Guarantee Instruments, as well as the obligations which the Beneficiary assumed under this Agreement and the Guarantee Instruments during the Agreement period.

6.9. By signing this Agreement the Credit Beneficiary explicitly agrees that excerpts from Creditors’ business ledgers represent a relevant proof of claim amount owed by the Credit Beneficiary under the Agreement.

	
7.

	
Final provisions

7.1. If any provision of this Agreement should subsequently be deemed null, this shall not affect the validity of other provisions of this Agreement. The entire Agreement shall remain valid and the contracting parties shall be obliged to replace the null provisin by a valid one, which shall maintain the sense and the aim of the replaced null provision.

7.2. The Bank acting as an agent concludes this Agreement in the name and to the benefit of the HBOR, pursuant to the Special Power of Attorney issued by the HBOR on March 31, 2011.

7.3. In case of dispute the court in Zagreb shall have jurisdiction.

7.4. By signing this Agreement the contracting parties declare that they have read and understood the terms of the Agreement and that they accept all rights and obligations arising from it since it represents their true will.

  

  

  

7.5. This Agreement was made in 6 (six) copies; one for the Credit Beneficiary; 3 (three) for the Bank and 2 (two) for the HBOR.

	  	
/s/

	 	 	 	
/s/

	  
	
CROATIAN BANK FOR RECONSTRUCTION AND DEVELOPMENT

	 	
KALI TUNA d.o.o.

	
 

	
/s/

	  	 
	
ERSTE & STEIERMÄRKISCHE BANK d.d.

	 

  

  

  

Attachment I

Loan Application Form

Att.: Erste & Steiermärkische Bank d.d.

Ref: Club Loan Agreement no. Mod-A-PLUS- 3A-15/11 of June 8, 2011 concluded between the Creditors – Croatian Bank for reconstruction and Development and the Erste & Steiermärkische Bank d.d., and the company KALI TUNA, d.o.o. za ulov, uzgoj i preradu ribe, Put Vele Luke 70, 23272 KALI, PIN: 92418838517, as the Credit Beneficiary („the Agreement”)

In relation to the Agreement:

1) We inform you that, in accordance with Article 1.3.2. of the Agreement, we intend to use the amount of  ____________ on  ———  and therefore invite you to pay this amount:

a)           to accounts as stated in the table and in accordance with invoices of the suppliers / contractors:

	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
Giro

	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	
account

	 
	  	 	 	 	 	
Amount

	 	 	 	 	 	 	 	 	
and

	 
	
Company

	 	
Payment

	 	 	
without

	 	 	 	 	 	
Total

	 	 	
reference

	 
	
name

	 	
description

	 	 	
the VAT

	 	 	
VAT

	 	 	
amount

	 	 	
number

	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	
TOTAL:

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 

b)           to account no. _______ with approval number  _______, in accordance with calculation ________

c)           other:

2) We confirm that:

  

  

  

	
  

	
i)

	
there are no events or circumstances representing the reason for cancelation of the Agreement according to Article 6 of the Agreement, or events or circumstances for which it can be reasonably assumed that could represent the reason for cancelation of the Agreement according to Article 6 of the Agreement, by submitting the Loan Application, by expiration of time, by decision making or all of the above;

	
  

	
ii)

	
affidavits and guarantees listed in this Agreement are authentic, accurate, complete, not misleading and valid as if submitted at a time when the Loan Application was received or the payment was made;

	
  

	
iii)

	
fees described in Article 1.7. of the Agreement have been paid;

	
  

	
iv)

	
our accounts are not blocked for any reason;

	
  

	
v)

	
we are authorized to use the Loan; all corporate actions have been taken in due time in order to obtain the approval for the Loan usage; by using the Loan we do not exceed the credit limit (set by binding regulations, by contract or in any other manner);

In the name and to the benefit of ________

Attachment II: Programme

Attachment III: State aid affidavit - original

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