Document:

Unassociated Document

    Exhibit
10.1

    

    SECOND
AMENDMENT TO FACILITY AGREEMENT

     

    This
SECOND AMENDMENT TO FACILITY AGREEMENT, dated June 17, 2010 (this “Amendment”), is made
by and between Insulet Corporation, a Delaware corporation (the “Borrower”), Deerfield
Private Design Fund, L.P., a Delaware limited partnership (“DPDF”), Deerfield
Private Design International, L.P., a British Virgin Islands limited partnership
(“DPDI”),
Deerfield Partners, L.P., a Delaware limited Partnership (“DP”), and Deerfield
International Limited, a British Virgin Islands corporation (“DI”, each of DPDF,
DPDI, DP and DI being a “Lender” and together,
the “Lenders”
and, collectively with the Borrower, the “Parties”).

     

    W
I T N E S S E T H:

     

    WHEREAS, the Parties are
parties to the FACILITY AGREEMENT, dated as of March 13, 2009 and amended by the
Amendment to Facility Agreement dated September 25, 2009 (as amended, the “Agreement”);
and

     

    WHEREAS, the Parties desire to
amend the Agreement as set forth herein.

     

    NOW, THEREFORE, the Lenders and the
Borrower agree as follows:

     

    1.           Capitalized
terms used but not otherwise defined herein shall have the respective meanings
assigned to them in the Agreement.

     

    2.           Sub-Clause
(1) of the definition of “Permitted Refinancing Indebtedness” is amended to
read:

     

    the
principal amount (or accreted value, if applicable) of such Permitted
Refinancing Indebtedness does not exceed by more than $50,000,000 the principal
amount (or accreted value, if applicable) of the Indebtedness renewed, refunded,
refinanced, replaced, defeased or discharged (plus all accrued interest on the
Indebtedness and the amount of all fees and expenses, including premiums,
incurred in connection therewith).

     

    3.           The
last sentence of Section
2.3 of the Agreement (“Payment”) is amended to read as
follows:

     

    Except in
the event that the Lenders deliver a Put Notice to the Borrower in accordance
with the terms of Section 5.4 of the Agreement, in which case the terms of
Section 5.4 of the Agreement shall apply and no additional amounts per this
Section 2.3 shall be due and payable, the Borrower may prepay the Loan at any
time upon payment of the principal amount outstanding and accrued and unpaid
interest thereon to the date of prepayment plus if such prepayment is effected
(a) from the date hereof to April 18, 2010 5% of such principal amount, (b) from
April 19, 2010 to October 18, 2010, 4% of such principal amount, (c) from
October 19, 2010 to April 18, 2011, 2% of such principal amount, (d) from April
19, 2011 to October 18, 2011, 1% of such principal amount, and (e) from and
after October 19, 2011, zero.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    4.           Section 5.5(k) of the
Agreement is amended and restated in its entirety to read as
follows:

     

    The sum
of Cash, Cash Equivalents, Receivables and Finished Goods Inventory on the last
day of each calendar quarter is less than the greater of $10,000,000 or fifty
percent (50%) of the Loan then outstanding.

     

    5.           In
consideration for, and as an inducement to, the entering into of this Amendment
by the Lenders, the Borrower agrees to pay to the Lenders upon the execution
hereof an Amendment Fee in the aggregate amount of $467,500.

     

    6.           Except
as amended by this Amendment, the Agreement remains in full force and effect.

     

    [SIGNATURE
PAGE FOLLOWS]

     

    
      
        
        

      

      
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    IN WITNESS WHEREOF, the
undersigned Lender and Borrowers have caused this Amendment to be duly executed
as of the date first written above.

     

     

     

     

     

    
      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        
                                          
                                            
                                              
                                                
                                                  
                                                    
                                                      
                                                        
                                                          
                                                            
                                                              
                                                                
                                                                  
                                                                    
                                                                      
                                                                        
                                                                          
                                                                            	
                                                                                    BORROWER:

                                                                                  	 	
                                                                                    LENDERS:

                                                                                  	 
	 	 	 	 	 	 
	
                                                                                    INSULET
      CORPORATION

                                                                                  	 	
                                                                                    DEERFIELD
      PRIVATE DESIGN FUND, L.P.

                                                                                  
	 	 	 	 	 	 
	By:	/s/
      Brian K. Roberts	 	By:      	Deerfield
      Capital, L.P., its General Partner
	Name:   	Brian
      K. Roberts     	 	 	 	 
	Title:  	Chief
      Financial
      Officer          	 	By:  	J.E.
      Flynn Capital LLC, its General Partner
	 	 	 	 	 	 
	 	 	 	By:   	/s/ James E. Flynn	 
	 	 	 	Name:  	James
      E. Flynn	 
	 	 	 	Title:  	President	 

                                                                          

                                                                        

                                                                      

                                                                    

                                                                  

                                                                

                                                              

                                                            

                                                          

                                                        

                                                      

                                                    

                                                  

                                                

                                              

                                            

                                          

                                        

                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

    

     

    
      
        
          
            
              
                
                  
                    
                      	 	 	
                              
                                DEERFIELD
      PRIVATE DESIGN

                                INTERNATIONAL,
      L.P.

                              

                            	 
	 	 	 	 	 	 
	 	 	 	By:      	Deerfield
      Capital, L.P., its General Partner
	 	 	 	 	 	 
	 	 	 	By:  	J.E.
      Flynn Capital LLC, its General Partner
	 	 	 	 	 	 
	 	 	 	By:   	/s/ James E. Flynn	 
	 	 	 	Name:  	James
      E. Flynn	 
	 	 	 	Title:  	President	 

                    

                  

                

              

            

          

        

      

       

    

    
      
        
          
            
              
                
                  
                    
                      
                        	 	 	
                                
                                  
                                    DEERFIELD  PARTNERS,
      L.P.

                                  

                                

                              	 
	 	 	 	 	 	 
	 	 	 	By:      	Deerfield
      Capital, L.P., its General Partner
	 	 	 	 	 	 
	 	 	 	By:  	J.E.
      Flynn Capital LLC, its General Partner
	 	 	 	 	 	 
	 	 	 	By:   	/s/ James E. Flynn	 
	 	 	 	Name:  	James
      E. Flynn	 
	 	 	 	Title:  	President	 

                      

                    

                  

                

              

            

          

        

         

        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    	 	 	
                                            
                                              DEERFIELD
      INTERNATIONAL LIMITED

                                            

                                          	 
	 	 	 	 	 	 
	 	 	 	By:   	/s/ James E. Flynn	 
	 	 	 	Name:  	James
      E. Flynn	 
	 	 	 	Title:  	Director	 

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

             

            
              
                
                

              

              
                3Unassociated Document

     

    EXHIBIT
10.1

    

    LOAN
AGREEMENT

    

    THIS LOAN AGREEMENT (the
“Loan
Agreement”), is dated as of the 15th day of
June, 2010, by and among GoldSpring, Inc., a Nevada corporation, having an
address at 1200 American Flat Road, P.O. Box 1118, Virginia City, NV 89440 (the
“Borrower”) and
those certain lenders set forth on Schedule
A hereto (each, a “Lender” and
collectively, the “Lenders”).

     

    W I T N E S S E T H:

    

    WHEREAS, the Lenders wish to
loan the Borrower an aggregate of $1,100,000 (collectively, the “Loans”) and, in
consideration therefor, the Borrower wishes to issue to the Lenders, upon the
terms and conditions stated in this Loan Agreement: (a) convertible promissory
notes in an aggregate principal amount of $1,100,000 (each, a “Note” and,
collectively, the “Notes”), in
substantially the form attached hereto as Exhibit
A; and (b) warrants to purchase that number of shares of the Borrower’s
Common Stock equal to fifty (50%) percent of the principal dollar amount of the
Notes divided by $2.00, at an exercise price of $3.50 per share (“Warrants”), in
substantially the form attached hereto as Exhibit
B; and

     

    WHEREAS, in order to further
induce the Lenders to make the Loans to the Borrower, the Borrower is willing to
grant to the Lenders a security interest in all of its assets, subject only to
security interests the Borrower granted to (a) Brockbank Trust (the “Brockbank Interest”);
(b) certain lenders (the “Additional Lenders”)
as of November 30, 2004, March 31, 2005, July 15, 2005, September 26, 2005,
December 12, 2007, June 27, 2008, December 8, 2008, May 1, 2009 and May 13,
2009, and December 10, 2009] as set forth on Schedule
B hereto (collectively, the “Additional Lenders’
Interests”).

     

    NOW, THEREFORE, it is agreed
as follows:

     

    

    ARTICLE
I

     

    COMMITMENT
OF LENDERS;

    BORROWING
CONDITIONS

     

    1.           Commitment.  Subject to the
terms and conditions of this Loan Agreement, the Lenders hereby agree to make
Loans to the Borrower as follows:

     

    (a)           On
the Closing Date (as defined in Article VIII hereof), the Lenders shall make
Loans to the Borrower of an aggregate of $1,100,000, as follows:

     

    
      	
              Lenders:

            	 	
              Principal

              Amount
      of Loans:

            	 
	
              John
      V. Winfield

            	 	$	125,000	 
	
              The
      Intergroup Corporation

            	 	$	50,000	 
	
              Portsmouth
      Square, Inc.

            	 	$	50,000	 
	
              Santa
      Fe Financial Corp.

            	 	$	25,000	 
	
              Josef
      Grunwald

            	 	$	500,000	 
	
              Paul
      Hertzberg

            	 	$	50,000	 
	
              David
      W. Unsworth, Jr.

            	 	$	50,000	 
	
              The
      Moelis Family Trust

            	 	$	150,000	 
	
              Mark
      Henkels

            	 	$	100,000	 
	
                                          TOTAL:

            	 	$	1,100,000	 

    

     

     

    
      
         

      

      
        - 1
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    (b)           The
actual date on which the Borrower receives any Loans from the Lenders shall be
referred to herein as the “Loan Date.”

     

    2.           Promissory
Notes.

     

    (a)           General.  The Loans shall
be evidenced by the Notes issued by the Borrower to the Lenders, in the
aggregate principal amount of up to $1,100,000 (the “Principal”).  The
Principal of each Note, shall be payable on or prior to the three (3) year
anniversary of the respective Loan Date (each, a “Maturity
Date”).

     

    (b)           Interest.  The unpaid
Principal from time to time outstanding on the Notes shall bear interest at the
rate of eight (8%) percent per annum
(“Interest”),
computed on the basis of the actual number of days elapsed in a year of 360
days.  Interest shall be payable every six (6) months after the date
of each Note, in arrears, on the unpaid Principal of each Note, up until the
respective Maturity Date (each such payment, an “Interest
Payment”).  Each Interest Payment shall be made, at each
Lender’s option, in either cash or Common Stock of the Borrower.  If
the Interest Payment is made in shares of Common Stock, the number of shares to
be received by the Lenders shall be determined as set forth in Section 2(d)(ii)
hereof.  If an Interest Payment is made in Common Stock of the
Borrower, the Borrower covenants such Common Stock shall be freely transferable
and issued without a restrictive legend, subject to Section 2(d)(vi)
hereof.

     

    Upon the
maturity of a Note, by acceleration or otherwise, and/or after judgment,
interest shall be payable at the rate of ten (10%) percent per annum or at the
judgment rate, whichever is higher, until the obligation is paid in
full.

     

    (c)           Maximum
Payment.  Notwithstanding
any provision contained herein or in the Notes, the total liability of Borrower
for payment pursuant hereto, including, without limitation late charges, shall
not exceed the maximum amount of interest permitted by law to be charged,
collected, or received from Borrower, and if any payments by Borrower include
Interest in excess of such a maximum amount, Lenders shall apply such excess to
the reduction of the unpaid Principal amount due pursuant hereto, or if none is
due, such excess shall be refunded to Borrower.

     

    
      
         

      

      
        - 2
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    (d)           Conversion
Rights.

     

    (i)           Conversion.  Each
Lender shall have the right at any time, and from time to time, on or prior to
such time as all Principal and Interest due under such Lender’s Note have been
repaid, to convert all or any part of the outstanding and unpaid Principal of a
Note issued on the Loan Date, and any Interest, when due and payable, into fully
paid and non-assessable shares of Common Stock (the “Conversion Shares”)
of the Borrower, as such Common Stock exists on the Loan Date, or any shares of
capital stock or other securities of the Borrower into which such Common Stock
shall hereafter be changed or reclassified, at the Conversion Price (as defined
in Section 2(d)(ii) below) determined as provided herein (a “Conversion”); provided, however, that in no
event shall the Lender be entitled to convert any portion of the Principal or
Interest in excess of that portion upon conversion of which the sum of (1) the
number of shares of Common Stock beneficially owned by the Lender and its
affiliates (other than shares of Common Stock which may be deemed beneficially
owned through the ownership of the unconverted portion of the Principal or
Interest, or the unexercised or unconverted portion of any other security of the
Borrower subject to a limitation on conversion or exercise analogous to the
limitations contained herein) and (2) the number of Conversion Shares issuable
upon the Conversion of the portion of the Principal or Interest due under the
Note with respect to which the determination of this proviso is being made,
would result in beneficial ownership by the Lender and its affiliates of more
than 4.9% of the outstanding shares of Common Stock.  For purposes of
the proviso in the immediately preceding sentence, beneficial ownership shall be
determined in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended, and Regulations 13D-G thereunder, except as otherwise provided
in clause (1) of such proviso.  A Lender may waive the limitations set
forth herein at its sole and absolute discretion by written notice of not less
than sixty-one (61) days to the Borrower.

     

    The
number of Conversion Shares to be issued upon each Conversion shall be
determined by dividing the Conversion Amount (as defined below) by the
applicable Conversion Price in effect on the date of the notice of conversion,
in the form attached hereto as Exhibit
C (the “Notice
of Conversion”), is delivered to the Borrower by the Lender in accordance
with subsection (v) below (the “Conversion
Date”).  The term “Conversion Amount” means, with respect to
any Conversion, the sum of (1) the outstanding Principal of such Note to be
converted in such Conversion, plus (2) accrued and
unpaid Interest, if any, on such outstanding Principal at the interest rates
provided in such Note to the Conversion Date, plus (3) default
interest, if any, on the amounts referred to in the immediately preceding
clauses (1) and/or (2) plus (4) at the
Lender’s option, any other amounts owed to the Lender pursuant to such
Note.

     

    (ii)           Conversion
Price.  The
term “Conversion Price” as used herein shall be equal to the lesser of (A) $1.20
per share, or (B) .85 multiplied by the “Volume Weighted Average Price” for the
Borrower’s Common Stock for the five trading days immediately prior to the
Conversion Date.  For the purposes hereof, the “Volume Weighted
Average Price” or “VWAP” for any security as of any date means the volume
weighted average sale price on the Principal Market, as reported by, or as
calculated based upon data reported by, Bloomberg Financial Markets or an
equivalent, reliable reporting service mutually acceptable to and hereafter
designated by Lenders of a majority in interest of the Notes and the Borrower
(“Bloomberg”)
or, if no volume weighted average sale price is reported for such security, then
the last closing trade price of such security as reported by Bloomberg, or, if
no last closing trade price is reported for such security by Bloomberg, the
average of the closing trade prices of any market makers for such security that
are listed in the “pink sheets” by the National Quotation Bureau,
Inc.  If the Volume Weighted Average Price is to be determined over a
period of more than one Trading Day, then Volume Weighted Average Price for the
period shall mean the volume weighted average of the daily Volume Weighted
Average Prices, determined as set forth above, for each Business Day during the
period.

     

    
      
         

      

      
        - 3
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    Upon a
Conversion, in the event of any deficiency of any amounts due a Lender
hereunder, Borrower agrees to pay Lender, at Lender’s option any such deficiency
in cash.  If the Lender elects to be paid such deficiency in Common
Stock, such Common Stock shall be valued at the Conversion Price then in
effect.

     

    (iii)           Application
of Conversion Amounts. Unless otherwise specified by any Lender or set
forth herein, any amounts converted by any Lender pursuant to subsection (i) or
paid by the Borrower shall be deemed to constitute payments of and applied, (1)
first, to any amounts owed other than accrued and unpaid Interest, (2) second,
against accrued and unpaid Interest, and (3) third, against the
Principal.

     

    (iv)           Reservation
of Authorized
Shares. For so long as the conversion right exists, the Borrower will
reserve (and, from time to time, amend its governing documents as appropriate,
so as to maintain reserved) from its authorized and unissued Common Stock a
sufficient number of shares, free from preemptive rights, to provide for the
issuance of Common Stock required to be issued or reserved for issuance, in
connection with the conversion of the Interest and Principal due under the
Notes, and the exercise of the Warrants issued pursuant to this Loan Agreement
(“Reserved
Amount”) upon the full conversion of such Note and all other convertible
securities, options or warrants of the Borrower. The Borrower represents that
upon issuance, such shares will be duly and validly issued, fully paid and
non-assessable.  In addition if the Borrower shall issue any
securities or make any change to its capital structure which would change the
number of shares of Common Stock into which such Note shall be convertible at
their then current conversion price, the Borrower shall at the same time make
proper provision so that thereafter there shall be a sufficient number of shares
of Common Stock authorized and reserved, free from preemptive rights, for
conversion of such Note.  The Borrower agrees that the issuance of
such Note by Borrower and execution hereof by Borrower shall constitute full
authority to its officers and agents who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for shares of
Common Stock in accordance with the terms and conditions of such
Note.

     

    Nothing
herein shall limit the Lender’s right to pursue actual damages against Borrower
for the Borrower’s failure to maintain a sufficient number of authorized shares
of Common Stock or to repay such Note, and each Lender shall have the right to
pursue all remedies available at law or in equity (including degree of specific
performance and/or injunctive relief or under any of the Loan
Documents).

     

    
      
         

      

      
        - 4
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    (v)           Method of
Conversion.

     

    (A)           Mechanics
of Conversion.  Subject to
subsection (i), such Note may be converted by the Lender in whole or in part at
any time from time to time, by (1) submitting to the Borrower a Notice of
Conversion (by facsimile or other reasonable means of communication dispatched
on the Conversion Date prior to 5:00 p.m., New York, New York time) and (2)
subject to subsection (v)(B), surrendering such Note at the principal office of
the Borrower.

     

    (B)           Surrender
of Note Upon Conversion.  Notwithstanding
anything to the contrary set forth herein, upon conversion of such Note in
accordance with the terms hereof, the Lender shall not be required to physically
surrender such Note to the Borrower unless the entire unpaid principal amount,
and any interest, penalties and fees due thereon, of such Note is so
converted.  The Borrower shall maintain records showing the principal
amount so converted and the dates of such conversions or shall use such other
method, reasonably satisfactory to the Lender and the Borrower, so as not to
require physical surrender of such Note upon each such
conversion.  Notwithstanding the foregoing, if any portion of such
Note is converted as aforesaid, the Lender may not transfer such Note unless the
Lender first physically surrenders such Note to the Borrower, whereupon the
Borrower will forthwith issue and deliver upon the order of the Lender a new
Note of like tenor, registered as the Lender (upon payment by the Lender of any
applicable transfer taxes) may request, representing in the aggregate the
remaining unpaid principal amount of such Note.  Lender shall have 60
days post transfer in which to return the old Note to Borrower.

     

                                               THE
LENDER AND ANY ASSIGNEE, BY ACCEPTANCE OF SUCH NOTE, ACKNOWLEDGE AND AGREE THAT,
BY REASON OF THE PROVISIONS OF THIS PARAGRAPH, FOLLOWING CONVERSION OF A PORTION
OF SUCH NOTE, THE UNPAID AND UNCONVERTED PRINCIPAL AMOUNT OF SUCH NOTE
REPRESENTED BY SUCH NOTE MAY BE LESS THAN THE AMOUNT STATED ON THE FACE
HEREOF.

    

    (C)           Payment
of Taxes.  The Borrower
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock or other
securities or property on conversion of such Note in a name other than that of
the Lender (or in street name), and the Borrower or its transfer agent (the
“Transfer
Agent”), as the case may be, shall not be required to issue or deliver
any such shares or other securities or property unless and until the person or
persons (other than the Lender or the custodian in whose street name such shares
are to be held for the Lender’s account) requesting the issuance thereof shall
have paid to the Borrower or the Transfer Agent, as the case may be, the amount
of any such tax or shall have established to the satisfaction of the Transfer
Agent, as the case may be, that such tax has been paid.

     

    (D)           Delivery
of Common Stock Upon Conversion. Upon receipt by the Borrower
from the Lender of a facsimile transmission (or other reasonable means of
communication) of a Notice of Conversion meeting the requirements for conversion
as provided in this subsection (v), the Borrower shall issue and deliver or
cause to be issued and delivered to or upon the order of the Lender certificates
for the Common Stock issuable upon such conversion within three (3) business
days (the “Deadline”) after such
receipt in accordance with the terms hereof.

     

    
      
         

      

      
        - 5
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    (E)           Obligation
of Borrower to Deliver Common Stock. Upon receipt by the Borrower of a
Notice of Conversion, the Lender shall be deemed to be the holder of record of
the Common Stock issuable upon such conversion (the “Conversion Shares”),
the outstanding Principal and the amount of accrued and unpaid Interest (and any
other unpaid amounts) on such Note shall be reduced to reflect such Conversion,
and, unless the Borrower defaults on its obligations under this Section 2(d),
all rights with respect to the portion of such Note being so converted shall
forthwith terminate except the right to receive the Common Stock or other
securities, cash or other assets, as herein provided, on such
Conversion.  If the Lender shall have given a Notice of Conversion as
provided herein, the Borrower’s obligation to issue and deliver the certificates
for Common Stock shall be absolute and unconditional, irrespective of the
absence of any action by the Lender to enforce the same, any waiver or consent
with respect to any provision thereof, the recovery of any judgment against any
person or any action to enforce the same, any failure or delay in the
enforcement of any other obligation of the Borrower to the holder of record, or
any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Lender of any obligation to the Borrower, and
irrespective of any other circumstance which might otherwise limit such
obligation of the Borrower to the Lender in connection with such
Conversion.  The Conversion Date with respect to a Notice of
Conversion shall be the date on which the Notice of Conversion is given so long
as the Notice of Conversion is received by the Borrower before 5:00 p.m., New
York, New York time, on such date; or if received after 5:00 p.m. New York, New
York time the Conversion Date shall be the following date.  Upon
failure of the Borrower to timely deliver the shares of Common Stock issuable
upon any such Conversion, the Lender shall be entitled, as liquidated damages
and not as a penalty, to a cash payment equal to 1.5% of the dollar amount of
any such Conversion for each 30-day period (or pro-rata for any portion thereof)
following the Conversion Date until delivery of the Conversion
Shares.

     

    (vi)           Concerning
the Shares.  The shares of Common Stock issuable upon
conversion of Principal or Interest due pursuant to a Note may not be sold or
transferred unless (A) such shares are sold pursuant to an effective
registration statement under the Securities Act of 1933, as amended (the “Act)
or (B) the Borrower or its Transfer Agent shall have been furnished with an
opinion of counsel (which opinion shall be in form, substance and scope
customary for opinions of counsel in comparable transactions) to the effect that
the shares to be sold or transferred may be sold or transferred pursuant to an
exemption from such registration or (C) such shares are sold or transferred
pursuant to Rule 144 of the Act (“Rule 144”) (or a successor rule) or (D) such
shares are transferred to an “affiliate” (as defined in Rule 144) of the
Borrower who agrees to sell or otherwise transfer the shares only in accordance
with this Section 2(d)(vi) and who is an Accredited Investor (as defined in the
Act).  Except as otherwise provided in this Loan Agreement (and
subject to the removal provisions set forth below), until such time as the
shares of Common Stock issuable upon conversion of such Note have been
registered under the Act or otherwise may be sold pursuant to Rule 144 without
any restriction as to the number of securities as of a particular date that can
then be immediately sold, each certificate for shares of Common Stock issuable
upon conversion of such Note that has not been so included in an effective
registration statement or that has not been sold pursuant to an effective
registration statement or an exemption that permits removal of the legend, shall
bear a legend substantially in the following form, as appropriate:

     

    
      
         

      

      
        - 6
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    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED.  THE SECURITIES MAY NOT BE SOLD,
TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER SAID ACT, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE
AND SCOPE CUSTOMARY FOR OPINIONS OF COUNSEL IN COMPARABLE TRANSACTIONS, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT UNLESS SOLD PURSUANT TO RULE 144
UNDER SAID ACT.”

     

    The
legend set forth above shall be removed and the Borrower shall issue to the
Lender a new certificate therefore free of any transfer legend if (A) the
Borrower or its Transfer Agent shall have received an opinion of counsel, in
form, substance and scope customary for opinions of counsel in comparable
transactions, to the effect that a public sale or transfer of such Common Stock
may be made without registration under the Act, including the provisions of Rule
144 and the shares are so sold or transferred, or (B) in the case of the Common
Stock issuable upon conversion of such Note, such security is registered for
sale by the Lender under an effective registration statement filed under the Act
or otherwise may be sold pursuant to Rule 144 without any restriction as to the
number of securities as of a particular date that can then be immediately
sold.  Nothing in such Note shall limit the Borrower’s obligation
under the Loan Agreement or affect in any way the Lender’s obligations to comply
with applicable prospectus delivery requirements upon the resale of the
securities referred to herein.

     

    For
purposes of determining the original date of issuance for Rule 144 “tacking”
purposes, each conversion request shall be construed to apply against that
portion of the Principal amount of the Note as of the original Loan
Date.

     

    (vii)           Effect of
Certain Events.

     

    (A)           Effect of
Merger, Consolidation, Etc.  The sale, conveyance or
disposition of all or substantially all of the assets of the Borrower to any
Person (as defined below) other than to a wholly-owned subsidiary of the
Borrower, the effectuation by the Borrower of a transaction or series of related
transactions in which more than 50% of the voting power of the Borrower is
disposed of, or the consolidation, merger or other business combination of the
Borrower with or into any other Person or Persons when the Borrower is not the
survivor shall:  (i) be deemed to be an Event of Default (as defined
in Article VI) and, at the sole and absolute discretion of Lender, may be
treated pursuant to Section 2(d)(vii)(B) hereof.  “Person” shall mean
any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.

     

    
      
         

      

      
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    (B)           Adjustment
Due to Merger, Consolidation, Etc. If, at any time when
such Note is issued and outstanding, there shall be any merger, consolidation,
exchange of shares, recapitalization, reorganization, or other similar event, as
a result of which shares of Common Stock of the Borrower shall be changed into
the same or a different number of shares of another class or classes of stock or
securities of the Borrower or another entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Borrower other than
in connection with a plan of complete liquidation of the Borrower and other than
to a wholly-owned subsidiary of the Borrower, then the Lender of such Note shall
thereafter have the right to receive upon conversion of such Note, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore issuable upon conversion, such
stock, securities or assets which the Lender would have been entitled to receive
in such transaction had such Note been converted in full immediately prior to
such transaction (without regard to any limitations on conversion set forth
herein), and in any such case appropriate provisions shall be made with respect
to the rights and interests of the Lender of such Note to the end that the
provisions hereof (including, without limitation, provisions for adjustment of
the Conversion Price and of the number of shares issuable upon conversion of the
Note) shall thereafter be applicable, as nearly as may be practicable in
relation to any securities or assets thereafter deliverable upon the conversion
hereof.  The Borrower shall not effect any transaction described in
this Section 2(d)(vii)(B) unless (a) it first gives, to the extent practicable,
thirty (30) days prior written notice (but in any event at least fifteen (15)
days prior written notice) of the record date of the special meeting of
stockholders to approve, or if there is no such record date, the consummation
of, such merger, consolidation, exchange of shares, recapitalization,
reorganization or other similar event or sale of assets (during which time the
Lender shall be entitled to convert such Note or, if such transaction results in
an Event of Default, declare such an Event of Default) and (b) the resulting
successor or acquiring entity (if not the Borrower) assumes by written
instrument the obligations of this Section 2(d)(vii)(B). The above provisions
shall similarly apply to successive consolidations, mergers, sales, transfers or
share exchanges.

     

    (C)           Adjustment
Due to Distribution. If the Borrower shall
declare or make any distribution of its assets (or rights to acquire its assets)
to holders of Common Stock as a dividend, stock repurchase, by way of return of
capital or otherwise (including any dividend or distribution to the Borrower’s
shareholders in cash or shares (or rights to acquire shares) of capital stock of
a subsidiary (i.e., a spin-off)) (a “Distribution”), then
the Lender of such Note shall be entitled, upon any conversion of such Note
after the date of record for determining shareholders entitled to such
Distribution, to receive the amount of such assets which would have been payable
to the Lender with respect to the shares of Common Stock issuable upon such
conversion had such Lender been the holder of such shares of Common Stock on the
record date for the determination of shareholders entitled to such
Distribution.

     

    (D)           Reclassification,
etc.  If the Borrower at any time shall, by reclassification or
otherwise, change the Common Stock into the same or a different number of
securities of any class or classes, such Note, as to the unpaid principal
portion thereof and accrued interest thereon, shall thereafter be deemed to
evidence the right to purchase an adjusted number of such securities and kind of
securities as would have been issuable as the result of such change with respect
to the Common Stock immediately prior to such reclassification or other
change.

     

    
      
         

      

      
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    (E)           Stock
Splits, Combinations and Dividends.  If the shares of Common
Stock are subdivided or combined into a greater or smaller number of shares of
Common Stock, or if a dividend is paid on the Common Stock in shares of Common
Stock, the Conversion Price shall be proportionately reduced in case of
subdivision of shares or stock dividend or proportionately increased in the case
of combination of shares, in each such case by the ratio which the total number
of shares of Common Stock outstanding immediately after such event bears to the
total number of shares of Common Stock outstanding immediately prior to such
event.

     

    (F)           Purchase
Rights.  If, at any time when such Note is issued and
outstanding, the Borrower issues any convertible securities or rights to
purchase stock, warrants, securities or other property (the “Purchase Rights”) pro
rata to the record holders of its Common Stock, then the Lender of such Note
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such Lender could have acquired if such
Lender had held the number of shares of Common Stock acquirable upon complete
conversion of such Note (without regard to any limitations on conversion
contained herein) immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights or, if no such record is taken,
the date as of which the record holders of Common Stock are to be determined for
the grant, issue or sale of such Purchase Rights.

     

    (G)           Spin-Off.  If, at any time while any portion of such
Note remains outstanding, the Borrower spins off or otherwise divests itself of
a part of its business or operations or disposes of all or of a part of its
assets in a transaction (the "Spin Off") in which
the Borrower, in addition to or in lieu of any other compensation received and
retained by the Borrower for such business, operations or assets, causes
securities of another entity (the "Spin Off Securities")
to be issued to security holders of the Borrower, the Borrower shall cause to be
reserved Spin Off Securities equal to the number thereof which would have been
issued to the Lender had all of the Lender's Note outstanding on the record date
(the "Record
Date") for determining the amount and number of Spin Off Securities to be
issued to security holders of the Borrower,(the "Outstanding Notes")
been converted as of the close of business on the trading day immediately before
the Record Date (the "Reserved Spin Off
Shares"). Notwithstanding the foregoing, nothing herein shall be demand
to permit any spin off that would result in any Event of Default.

     

    (H)           Stock
Issuance.  So long as the Notes are outstanding, if the
Borrower shall issue any Common Stock, prior to the complete repayment or
conversion of the Notes for a consideration less than the Conversion Price that
would be in effect at the time of such issuance, then, and thereafter
successively upon each such issuance, the Conversion Price shall be reduced to
such other lower issue price.  For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower, carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock or the modification of any of the
foregoing which may be outstanding shall result in an adjustment to the
Conversion Price upon the modification or issuance of the above-described
security, debt instrument, warrant, right, or option and again upon the issuance
of shares of Common Stock upon exercise of such conversion or purchase rights if
such issuance is at a price lower than the then applicable Conversion
Price.

     

    
      
         

      

      
        - 9
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    (I)           Notice of
Adjustments.  Upon the occurrence of each adjustment or
readjustment of the Conversion Price as a result of the events described herein,
the Borrower, at its expense, shall promptly compute such adjustment or
readjustment and prepare and furnish to the holder of a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based.  The Borrower shall, upon
the written request at any time of the Lender, furnish to such Lender a like
certificate setting forth (i) such adjustment or readjustment, (ii) the
Conversion Price at the time in effect and (iii) the number of shares of Common
Stock and the amount, if any, of other securities or property which at the time
would be received upon conversion of the Note.

     

    (viii)                      Status as
Stockholder.  Upon submission
of a Notice of Conversion by a Lender, (A) the shares covered thereby shall be
deemed converted into shares of Common Stock and (B) the Lender’s rights as a
Lender of such converted portion of such Note shall cease and terminate,
excepting only the right to receive certificates for such shares of Common Stock
and to any remedies provided herein or otherwise available at law or in equity
to such Lender because of a failure by the Borrower to comply with the terms of
such Note.  Notwithstanding the foregoing, if a Lender has not
received certificates for all shares of Common Stock prior to the third (3rd)
business day after the expiration of the Deadline with respect to a conversion
of any portion of such Note for any reason, then (unless the Lender otherwise
elects to retain its status as a Lender of Common Stock by so notifying the
Borrower) the Lender shall regain the rights of a Lender of such Note with
respect to such unconverted portions of such Note and the Borrower shall, as
soon as practicable, return such unconverted Note to the Lender or, if the Note
has not been surrendered, adjust its records to reflect that such portion of
such Note has not been converted.  In all cases, the Lender shall
retain all of its rights and remedies for the Borrower’s failure to convert such
Note Including ability to rescind the Notice if delivery is not made in a timely
manner.

     

    (ix)           Injunction;
Posting of Bond.  In the event a Lender shall elect to convert
a Note or part thereof, the Borrower may not refuse conversion based on any
claim that such Lender or any one associated or affiliated with such Lender has
been engaged in any violation of law, or for any other reason, unless, a final
non-appealable injunction from a court made on notice to the Lender, restraining
and or enjoining conversion of all or part of such Note shall have been sought
and obtained by the Borrower and the Borrower has posted a surety bond for the
benefit of the Lender in the amount of 120% of the outstanding Principal and
accrued but unpaid Interest of the Note, or aggregate purchase price of the
shares which are sought to be subject to the injunction, which bond shall remain
in effect until the completion of arbitration/litigation of the dispute and the
proceeds of which shall be payable to the Lender to the extent the judgment or
decision is in such Lender’s favor.

     

    3.           Warrants.  In
connection with each Loan made by a Lender, the Borrower shall issue to such
Lender three-year Warrants to purchase that number of shares of the Borrower’s
Common Stock equal to fifty (50%) percent of the principal dollar amount of the
Note issued in connection with the Loan divided by $2.00, at an exercise price
of $3.50 per share (“Warrants”), in
substantially the form attached hereto as Exhibit
B; provided, however, that if the
Borrower elects to effect an Optional Redemption pursuant to Section 4 below,
the Lender or Lenders receiving payment (the “Prepaid Principal”)
shall also receive additional three-year Warrants to purchase that number of
shares of the Borrower’s Common Stock equal to fifty (50%) percent of the dollar
amount of the Prepaid Principal divided by $2.00, at an exercise price of $3.50
per share.

     

    
      
         

      

      
        - 10
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    4.           Prepayment.

     

    (a)           Provided
an Event of Default has not occurred, whether or not such Event of Default has
been cured, the Borrower will have the option of prepaying any or all of the
outstanding Principal (“Optional
Redemption”), in whole or in part, up until the one (1) year anniversary
of the applicable Loan Date, by paying to any Lender a sum of money equal to one
hundred fifteen (115%) percent of the principal amount to be redeemed, together
with accrued but unpaid interest thereon and any and all other sums due, accrued
or payable to such Lender arising under the Note, this Agreement or any other
document through the Redemption Payment Date, as defined below (in each case,
the "Redemption
Amount").  Borrower’s election to exercise its right to prepay
must be by notice in writing to the applicable Lender (“Notice of
Redemption”).  The Notice of Redemption shall specify the date
for such Optional Redemption (the "Redemption Payment
Date"), which date shall be not less than thirty (30) business days after
receipt of the Notice of Redemption by the applicable Lender (the "Redemption
Period").

     

    (b)           Within
fifteen (15) days after receipt of a Notice of Redemption, a Lender shall give
written notice to the Borrower electing to do one of the following: (i) convert
the Redemption Amount pursuant to Article I, Section 2(d); or (ii) accept the
Borrower’s offer to prepay the Redemption Amount in accordance with the Notice
of Redemption.  The closing date (in this case, the “Redemption Closing
Date”) shall be the last day of the thirty (30) day Redemption
Period.  If a Lender exercises its right to convert the Redemption
Amount, then the Borrower’s offer to prepay the Redemption Amount contained in
the Notice of Redemption shall terminate and shall be of no further force and
effect.  In the event the Lender shall not timely provide the written
notice set forth in the first sentence of this Article I, Section 4(b), then the
Borrower shall be conclusively deemed to have made the election to prepay the
Redemption Amount pursuant to the Notice of Redemption.

     

    (c)           Following
the one (1) year anniversary of any Loan Date, the Borrower’s right to prepay
the respective Note shall automatically terminate.

     

    5.           Additional
Documentation.  In addition to the execution and delivery of
this Loan Agreement, the Notes and the Warrants, the Borrower shall deliver a
Security Agreement to the Lenders on or prior to the Closing Date, in
substantially the form of Exhibit
D attached hereto (the “Security Agreement”),
and any other documents, instruments or agreements reasonably requested by the
Lenders in order to effectuate the purposes of this Loan Agreement (together
with this Loan Agreement, the Notes, the Warrants, and the Security Agreement,
all such documents and agreements to be hereinafter referred to as the “Loan
Documents”).

     

    
      
         

      

      
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    ARTICLE
II

     

    SECURITY

     

    All of
the obligations of the Borrower under this Loan Agreement and the Notes shall be
secured by a security interest in and to all assets of the Borrower
(hereinafter, the “Collateral”), subject
only to (a) the Brockbank Interest, and (b) the Additional Lenders’ Interests,
as further set forth in the Security Agreement.  The Borrower hereby
irrevocably authorizes the Lenders at any time and from time to time to file in
any Uniform Commercial Code jurisdiction any initial financing statements and
amendments thereto that (i) indicate the Collateral regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article 9
of the Uniform Commercial Code of the State of New York as amended from time to
time (“NYUCC”),
or any other Uniform Commercial Code jurisdiction; and (ii) contain any other
information required by part 5 of Article 9 of the NYUCC for the sufficiency or
filing office acceptance of any financing statement or amendment, including
whether the Borrower is an organization, the type of organization and any
organization identification number issued to the Borrower. The Borrower agrees
to furnish any such information to the Lenders promptly upon
request.  The Borrower also ratifies its authorization for the Lenders
to have filed in any Uniform Commercial Code jurisdiction any like initial
financing statements or amendments thereto if filed prior to the date hereof
with respect to the Collateral.

     

    ARTICLE
III

     

    REPRESENTATIONS AND
WARRANTIES OF THE BORROWER

     

    The
Borrower makes the following representations and warranties:

     

    (a)           Organization
and Authorization.  The Borrower is a
corporation duly organized, validly existing and in good standing under the laws
of the state of its formation, is duly authorized to transact business and is in
good standing in every other jurisdiction where the failure to qualify to do
business would have a material adverse effect upon the Borrower, and the
Borrower is duly authorized and empowered to create, grant and issue the Notes,
and to execute and deliver this Loan Agreement and the other Loan
Documents.  The Borrower has the authority to own, lease and operate
its assets, and to carry on its business as presently conducted.  All
action on the part of the Borrower requisite for the due creation, issuance and
delivery of this Loan Agreement, the Notes, the Warrants and the other Loan
Documents has been duly and effectively taken.  This Loan Agreement,
the Notes, the Warrants and the other Loan Documents upon the granting, issuance
and delivery thereof, will be, valid, binding and enforceable obligations of the
Borrower in accordance with their respective terms and compliance herewith will
not violate any provision of law, the Certificate of Incorporation or By-Laws of
the Borrower, or any agreement, judgment, order or decree to which the Borrower
is a party or otherwise bound, subject to applicable bankruptcy, insolvency, or
reorganization, moratorium or other similar laws relating to or affecting
generally the enforcement of creditors’ rights.  No approval or
consent of any governmental agency or body of the United States or any state
thereof or of any other entity or person is required as of the Closing Date for
the legal and valid execution and delivery by the Borrower of this Loan
Agreement, the Notes and the Warrants pursuant to this Loan Agreement, or the
performance of any obligation of the Borrower hereunder.

     

    (b)           Litigation.  Except as set
forth in Schedule
C hereto, there is no litigation, legal or administrative proceeding,
investigation or other action of any nature pending or, to the knowledge of
Borrower, threatened, against or affecting the Borrower and/or its subsidiaries
which (i) involves the possibility of any judgments or liabilities aggregating
more than Five Thousand ($5,000) Dollars not fully covered by insurance or (ii)
which may materially and adversely affect the assets of the Borrower or the
right of the Borrower to carry on its business as now conducted or as
contemplated.

     

    
      
         

      

      
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    (c)           Other
Documents.  Unless this
requirement is waived by the Lenders, the following further documents shall be
delivered herewith, all of which are true, complete and accurate:

     

    (i)           Copies
of the Certificate of Incorporation and By-Laws (and all amendments thereto) of
the Borrower.

     

    (ii)           Certificate
of Good Standing of the Borrower to be supplied within thirty (30) days of the
Closing Date.

     

    (d)           Taxes.  All tax returns
of the Borrower and its subsidiaries, if any, which are shown to be due and
payable thereon have been paid.  The Borrower does not know of any
ongoing tax audit, proposed tax deficiency, assessment, charge or levy against
it, the payment of which is not adequately provided for on the books of the
Borrower.

     

    (e)           Full
Disclosure.  This Loan
Agreement and all of the exhibits or schedules attached hereto do not contain
any statement that is false or misleading with respect to any material fact and
do not omit to state a material fact necessary in order to make the statements
therein not false or misleading.

     

    (f)           Compliance
with Instruments; etc.  Other than
previously disclosed to the Lenders by the Borrower, the Borrower is not (i) in
default under any indenture, agreement or instrument to which it is a party or
by which it is bound, (ii) in violation of its Certificate of Incorporation,
By-Laws or of any applicable law, (iii) in default with respect to any order,
writ, injunction or decree of any court, administrative agency or arbitrator, or
(iv) in default under any order, license, regulation or demand of any government
agency, which default or violation would materially and adversely affect the
business, properties, condition (financial or otherwise) or business prospects
of the Borrower.

     

    ARTICLE
IV

     

    AFFIRMATIVE COVENANTS OF THE
BORROWER

     

    Except as
specifically set forth herein, so long as any part of the principal of or
interest on the Notes remains outstanding, without the prior written consent of
the Lenders:

     

    (a)           Discharge
Taxes and Indebtedness.  The Borrower will
pay and discharge, as they become due, all taxes, assessments, debts, claims and
other governmental or non-governmental charges lawfully imposed upon or incurred
by it or the properties and assets of the Borrower, except taxes, assessments,
debts, claims and charges contested in good faith in appropriate proceedings for
which the Borrower shall have set aside adequate reserves for the payment of
such tax, assessment, debt, claim or charge.  The Borrower shall
provide the Lenders, upon the Lenders’ request, evidence of payment of such
taxes, assessments, debts, claims and charges satisfactory to the
Lenders.

     

    
      
         

      

      
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    (b)           Insurance.  The Borrower
shall maintain such insurance on its properties and assets with financially
sound and responsible insurance companies, in such amounts as from time to time
are reasonably required by the Lenders.  The Borrower shall (i)
deliver to the Lenders, upon their request, a detailed list of insurance then in
effect, stating (A) the names of the insurance companies, (B) the amounts and
rates of the insurance, (C) dates of expiration thereof and the properties and
risks covered thereby; (ii) upon request, provide to the Lenders copies of all
insurance policies.

     

    (c)           Maintain
Properties.  The Borrower
shall maintain in full force and effect its corporate existence, rights and
franchises and all material terms of licenses and other rights to use licenses,
trademarks, trade names, service marks, copyrights, patents or processes owned
or possessed by it and necessary to the conduct of its business.  The
Borrower will maintain, preserve and keep all of its properties, equipment and
assets in good repair, working order and condition, and make, or cause to be
made, all necessary or appropriate repairs, renewals, replacements,
substitutions, additions, betterments and improvements thereto.

     

    (d)           Furnish
Information.  Promptly on
request of the Lenders, the Borrower will furnish such information as may
reasonably be necessary to determine whether (i) the Borrower is complying with
its covenants and agreements contained in this Loan Agreement or (ii) an Event
of Default (as hereunder defined) has occurred hereunder.

     

    (e)           Maintain
Office.  The Borrower will
maintain an office at the address set forth in this Loan Agreement or at such
other place as it shall determine upon not less than fifteen (15) days prior
notice to the Lenders, where notices, presentations and demands to or upon it
with respect to this Loan Agreement can be made.

     

    (f)           Copies of
Legal Process and Claims.  The Borrower
shall, within ten (10) days after receipt, forward to the Lenders at its address
set forth on the signature page hereto, a copy of any communication, notice,
legal process or other notification relating to an uninsured claim or alleged
claim against it in excess of Five Thousand ($5,000) Dollars and any proceedings
relating to the replevin of any personal property, or to recover possession of
any real property, leased or owned by the Borrower.  The Borrower
shall, within ten (10) days after receipt, forward to the Lenders notice of any
proceeding or hearing or threat thereof before any state or federal bureau,
agency, commission, board or department which could materially affect the
operation of its business.  With respect to any legal process,
proceeding or hearing, the return date of which is less than such ten (10) days,
notice shall be given forthwith.

     

    (g)           Additional
Documentation.  In furtherance of
the transactions herein contemplated, the Borrower will execute and cause to be
delivered to the Lenders such other certificates, documents, statements,
agreements and opinions as may be reasonably requested by the Lenders during the
term of this Loan Agreement.

     

    (h)           Notice of
Adverse Change.  The Borrower
shall promptly give notice to the Lenders (but in any event within seven (7)
business days) after becoming aware of the existence of any condition or event
which constitutes, or the occurrence of, any of the following:

     

    (i)           any
Event of Default as hereunder defined; or

     

    
      
         

      

      
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    (ii)           the
institution or threatening of institution of an action, suit or proceeding
against the Borrower before any court, administrative agency or arbitrator,
which, if adversely decided, could materially adversely affect the business,
prospects, properties, financial condition or results of operations of the
Borrower, whether or not arising in the ordinary course of
business.

     

    Any
notice given hereunder shall specify the nature and period of existence of the
condition, event, information, development or circumstance, the anticipated
effect thereof and what actions the Borrower has taken and/or proposes to take
with respect thereto.

     

    (i)           Use of
Proceeds.  The parties agree
that the Borrower intends to use the proceeds of the Loan for general working
capital purposes.

     

    (j)           Compliance
With Agreements; Compliance With Laws.  The Borrower
shall comply with the terms and conditions of all material agreements,
commitments or instruments to which the Borrower is a party or by which it may
be bound.  The Borrower shall duly comply in all respects with any
relevant laws, ordinances, rules and regulations of any foreign, federal, state
or local government or any agency thereof, or any writ, order or decree, and
conform to all valid requirements of governmental authorities relating to the
conduct of its business, properties or assets.

     

    (k)           Negative
Covenants of the Borrower.  On and after the
date hereof, and for so long as any part of the Principal or Interest on the
Notes shall remain unpaid, without the prior written consent of the
Lenders:

     

    (i)           No
Distribution of Profits or Assets.  The Borrower will
not declare or pay any distribution, in cash or otherwise, of any of its profits
or assets or redeem, return, purchase or otherwise acquire directly or
indirectly any of its shares of common stock now or hereafter
outstanding.

     

    (ii)           No
Guarantees.  The Borrower will
not assume, endorse or become liable for or guarantee the obligations of any
corporation, partnership, limited liability company, individual or other entity
excluding the endorsement of negotiable instruments for deposit or collection in
the ordinary course of business.

     

    (iii)           No
Liens.  The Borrower will
not allow the mortgage or pledge of, or creation of a security interest in, any
of its assets except as set forth herein.

     

    (iv)           No
Transfer of Assets.  The Borrower will
not (i) enter into any acquisition, merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate, wind up, or
dissolve itself (or suffer any liquidation or dissolution), (ii) convey, sell,
assign, lease, transfer, or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of the business, property, or
assets, whether now owned or hereafter acquired, of Borrower, or (iii) acquire
by purchase or otherwise all or substantially all of the property, assets,
stock, or other evidence of beneficial ownership of any person or
entity.

     

    
      
         

      

      
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    (v)           Extraordinary
Transactions and Disposal of Assets. The Borrower will not enter
into any transaction not in the ordinary and usual course of Borrower’s
business, including the sale, lease, or other disposition of, moving,
relocation, or transfer, whether by sale or otherwise, of any of Borrower’s
properties or assets.

     

    ARTICLE
V

     

    LIMITED
WAIVER

     

    To the
extent any of the provisions set forth in this Loan Agreement are inconsistent
with those of any prior documents entered into by and between the Borrower and
any of the Lenders or Additional Lenders, the Lenders and/or Additional Lenders
hereby grant a limited waiver of such provisions in order to carry out the
purposes set forth herein.

     

    ARTICLE
VI

     

    DEFAULTS AND
REMEDIES

     

    1.           Events of
Default.  Any one of the
following events shall be considered an event of default ("Event of Default") as
that term is used herein:

     

    (a)           If
the Borrower defaults in the payment of the Principal or Interest on the Notes
after the same shall become payable as therein or herein set forth and such
failure continues for a period of five (5) days; or

     

    (b)           If
default beyond ten (10) days from notice provided in accordance herewith shall
occur under the terms of the Notes (other than a default covered by clause (a)
above), of this Loan Agreement, or of any of the other Loan Documents, or in any
other document or instrument executed and delivered in connection herewith, or
under any agreement or instrument between the Borrower and any third party,
which upon default results in an acceleration of the making of Borrower’s
obligation to such third party or in the termination of such agreement or
results in the Borrower becoming immediately liable for any amount to a third
party in excess of $10,000; or

     

    (c)           If
any representation, warranty or covenant made by the Borrower herein proves to
have been untrue in any material respect as of any Closing Date, or any
information, statement, certificate or data furnished hereunder proves to have
been untrue in any material respect as of the date as of which the facts therein
set forth were stated or certified; or

     

    (d)           Except
for a default covered by clauses (a), (b), (c) and (e) hereof, if a default
shall be made in the due observance or performance of any other covenant,
affirmative or negative, or condition to be kept or performed by the Borrower
contained in this Loan Agreement; or

     

    (e)           If
the Borrower shall (i) make a general assignment for the benefit of creditors,
or (ii) apply for or consent to the appointment of a receiver, trustee, or
liquidator of the Borrower or of all or a substantial part of its assets, or
(iii) be adjudicated as bankrupt, or (iv) file a voluntary petition in
bankruptcy or a voluntary petition seeking reorganization or to effect a plan or
other arrangement with creditors or file a petition or answer seeking to take
advantage of any law (whether federal or state) relating to the relief of
debtors.

     

    
      
         

      

      
        - 16
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    (f)           A
default by the Borrower of a material term, covenant, warranty or undertaking of
any other agreement to which the Borrower and Lenders are parties, or the
occurrence of a material event of default under any such other agreement which
is not cured after any required notice and/or cure period.

     

    2.           Acceleration
of Loan.  During the continuation of any Event of Default
specified in Article VI, Section 1 hereof, the Lenders or any other holder of
the Notes may, by notice in writing delivered to the Borrower, declare the
entire outstanding Principal on the Notes held by such Lenders, and the Interest
accrued thereon, immediately due and payable, and said Principal and Interest
shall thereupon become and be immediately due and payable without presentment,
demand, protest, notice of protest or other notice of dishonor of any kind, all
of which are hereby expressly waived by the Borrower.  Any Principal
and Interest not paid when due and payable shall bear interest thereafter at the
lesser of ten (10%) percent per month or the maximum rate permitted by
applicable law.

     

    3.           Enforcement
of Rights.  Upon the happening of any Event of Default
specified in Article VI, Section 1 hereof, the Lenders or any other holder of
the Notes may proceed to protect and enforce its rights with respect to the
Notes and the other documents referred to herein either by suit in equity or
action at law, and proceed to obtain judgment or any other relief
whatsoever.

     

    4.           Payment
of Expenses.   The Borrower shall pay all expenses, court
costs and reasonable attorneys’ fees which may be incurred by the Lenders or any
other holder of the Notes in connection with or arising out of any Event of
Default hereunder upon a final nonappealable determination in Lenders’
favor.

     

    ARTICLE
VII

     

    CONDITIONS
PRECEDENT

     

    1.           Conditions
of Lender’s Obligations.  The obligations of the Lenders
hereunder shall be subject to the performance by the Borrower of all its
agreements theretofore to be performed hereunder and to the following further
conditions, or the waiver thereof by the Lenders:

     

    (a)           Officer's
Certificate.  The Lenders shall
have received a certificate or certificates of the Chief Executive Officer of
the Borrower dated as of the Closing Date to the effect that:

     

    (i)           The
representations and warranties of Borrower herein and in any of the Loan
Documents executed in connection with this Loan Agreement are true and correct
in all material respects at and as of the Closing Date; and

     

    (ii)           The
Borrower has performed all agreements herein contained to be performed at or
prior to the Closing Date.

     

    
      
         

      

      
        - 17
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    (b)           Certified
Copies of Resolutions.  The Lenders shall have received
certified copies of resolutions of the board of directors of the Borrower, in
form and substance satisfactory to the Lenders and its counsel, with respect to
the authorization and execution of this Loan Agreement and the issuance of the
Notes and Warrants.

     

    (c)           Delivery
of Instruments and Other Documents.  The Lenders shall have
received in form and content satisfactory to Lenders and its counsel, originally
executed Notes and Warrants and such other documents or instruments as the
Lenders may reasonably request.

     

    ARTICLE
VIII

     

    CLOSING

     

    The
closing of this transaction and the issuance of the applicable Notes and
Warrants to the Lenders shall occur at the offices of Kelley Drye & Warren,
LLP, 101 Park Avenue, New York, NY 10178, at such time and place as the parties
shall agree (the “Closing
Date’).

     

    ARTICLE
IX

     

    LEGAL
FEES

     

    The
parties hereto shall pay their own costs and expenses in connection
herewith.

     

    ARTICLE
X

     

    MISCELLANEOUS

     

    1.           Representation
to Survive Closing.  All warranties, representations, covenants
and agreements made by the Borrower herein shall survive the
Closing.

     

    2.           Specific
Enforcement, Consent to Jurisdiction.  The Borrower and
Lenders acknowledge and agree that irreparable damage would occur in the event
that any of the provisions of this Loan Agreement were not performed in
accordance with their specific terms or were otherwise breached.  It is
accordingly agreed that the parties shall be entitled to seek an injunction or
injunctions to prevent or cure breaches of the provisions of this Loan Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which any of them may be entitled by law or
equity.  Subject to Article X, Section 6 hereof, the Borrower hereby
irrevocably waives, and agrees not to assert in any such suit, action or
proceeding, any claim that it is not personally subject to the jurisdiction in
New York of such court, that the suit, action or proceeding is brought in an
inconvenient forum or that the venue of the suit, action or proceeding is
improper.  Nothing in this Article X, Section 2 shall affect or limit any
right to serve process in any other manner permitted by law.

     

    3.           Notice.  All
notices, requests, demands and communications under or in respect hereof shall
be deemed to have been duly given and made if in writing (including fax) if
delivered by hand or left at or posted by pre-paid registered or certified mail
(airmail if dispatched to a foreign county) to the party concerned at its
address appearing below or sent by fax to the number and with copy as below
indicated.  Service shall be deemed to be effective: so far as
delivery by hand is concerned when handed to the recipient or left at the
recipient’s address; by post three days after posting (seven days if sent to a
foreign country); by fax on the same day as dispatch and receipt is
confirmed.  The said addresses and fax numbers shall continue in force
until alternatives are notified and receipt of such notification has been
acknowledged:

     

    
      
         

      

      
        - 18
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    If to the
Lenders, to the addresses set forth on Schedule
A to this Loan Agreement.

     

    With
copies to:

     

    Blank Rome LLP

    405 Lexington Ave.

    New York, NY 10174

    Phone: (212) 885-5000

    Fax: (212) 885-5001

    Attn.: Jeffrey A. Rinde,
Esq.

    

    If to
Borrower, to its address first set forth at the beginning of this Loan
Agreement.

     

    With copies to:

    

    M. Ridgway Barker, Esq.

    Kelley Drye & Warren
LLP

    400 Atlantic Street

    Stamford,
CT  06901

    Phone:  203-
351-8032

    Fax:  203-327-2669

    

    

    4.           Binding
upon Successors.  All covenants and agreements herein contained
by or on behalf of the Borrower shall bind its successors and assigns and shall
inure to the benefit of the Lenders and their successors and assigns; Borrower
may not assign this Loan Agreement or any rights or duties hereunder without
Lenders’ prior written consent and any prohibited assignment shall be absolutely
void.  Lenders reserve the right to sell, assign, transfer, negotiate,
or grant participation in all or any part of, or any interest in Lenders’ rights
and benefits hereunder; provided, however, that Lenders
shall, for informational purposes but not as a requirement, notify the Borrower
of the identity of all other assignees or participants who have acquired an
ownership interest in the Notes, and upon conversion, in the equity of the
Borrower as a result thereof.  In connection with any such assignment
or participation, Lenders may disclose all documents and information which
Lenders now or hereafter may have relating to Borrower’s business.

     

    5.           Counterparts.  The
terms of the Loan Agreement are contractual and not merely recital. The Loan
Agreement may be executed in one or more counterparts, at one time or at
different times, each of which shall be deemed an
original.  Furthermore, facsimile copies shall be deemed the same as
originals.  The Loan Agreement shall be deemed fully executed and
effective when all Parties have executed at least one of the counterparts, even
though no single counterpart bears all such signatures.

     

    
      
         

      

      
        - 19
-

        
          

        

      

      
         

      

    

     

    6.           Governing
Law; Jurisdiction.  This Loan Agreement and the performance of
the parties hereunder shall be construed and interpreted in accordance with the
internal laws of the State of New York, wherein it was negotiated and executed,
and the parties hereunder consent and agree that the state and federal courts
which sit in the State of New York and the County of New York shall have
exclusive jurisdiction with respect to all controversies and disputes arising
hereunder.

     

    7.           Severability.  If
any provision of this Loan Agreement is held to be unenforceable for any reason,
the remainder of this Loan Agreement shall, nevertheless, remain in full force
and effect.

     

    8.           No Waiver
of Rights.  No course of dealing on the part of the Lenders,
nor any failure or delay on the part of the Lenders with respect to the exercise
of any right, power or privilege given or granted hereunder, the Notes or any
other document or instrument executed in connection herewith shall operate as a
waiver thereof as to any future defaults, or any single or partial exercise by
the Lenders of any right, power or privilege granted or contained herein or
therein shall preclude the Lenders from later or further exercise of any right,
power or privilege as to any future defaults.  The rights and remedies
of the Lenders are cumulative and not exclusive of any other remedies under
law.

     

    9.           Construction.  Unless
the context of this Loan Agreement clearly requires otherwise, references to the
plural include the singular, references to the singular include the plural, the
term “including” is not limiting, and the term “or” has, except where otherwise
indicated, the inclusive meaning represented by the phrase
“and/or.”  The words, “hereof,” “herein,” “hereby,” “hereunder,” and
similar terms in this Loan Agreement refer to this Loan Agreement as a whole and
not to any particular provision of this Loan Agreement.  Article,
Section, subsection, paragraph, clause, schedule, and exhibit references are to
this Loan Agreement unless otherwise specified.  Any reference in this
Loan Agreement to this Loan Agreement shall include all alterations, amendments,
changes, extension, modifications, renewals, replacement, substitutions and
supplements, thereto and thereof, as applicable.

     

    10.           Indemnification.  In
the event the Lenders are required to appear before, or participate in, or
become involved with, any proceeding initiated by or brought with respect to the
Borrower by any government or administrative agency, federal, state or local,
investigating the business operations or activities of the Borrower, the Lenders
shall be reimbursed by the Borrower for all expenses incurred by it in
connection therewith, including, but not limited to, attorney’s
fees.  Additionally, the Borrower will indemnify and hold harmless the
Lenders from each and every liability, loss, obligation, cost or expense which
may be imposed or arising out of (a) any such proceeding, or (b) any of the
transactions evidenced hereby, except for the Lenders’ gross negligence or
willful misconduct.

     

    
      
         

      

      
        - 20
-

        
          

        

      

      
         

      

    

     

    11.           Confidentiality.  The
Borrower agrees that it will not disclose, and will not include in any public
announcement, the name of the Lenders, unless expressly agreed to by the Lenders
unless and until disclosure is required by law or regulations, and then, only to
the extent of such requirement.

     

    12.           Term.  This
Loan Agreement shall become effective upon execution and delivery hereof by
Borrower and Lenders and shall continue in full force and effect until all
amounts of Principal and Interest on the Notes have been paid in
full.

     

    

    
      
         

      

      
        - 21
-

        
          

        

      

      
         

      

    

    IN WITNESS WHEREOF, the
parties hereto have caused this Loan Agreement to be duly executed as of the day
and year first above written.

     

    BORROWER:

    

    GOLDSPRING,
INC.

     

    By:  /s/ Corrado De Gasperis

    Name:
Corrado De Gasperis

    Title:   President
& CEO

    

    

    LENDERS:

    

    
      	
              THE
      INTERGROUP CORPORATION

               

               

              By:  /s/ John V.
Winfield

              Name:

              Title:

               

               

              PORTSMOUTH
      SQUARE, INC.

               

              By:  /s/ John V.
Winfield

              Name:

              Title:

               

               

              /s/
      Josef Grunwald

              Josef
      Grunwald

               

               

               

              /s/
      Mark Henkels

              Mark
      Henkels

               

            	
              SANTA
      FE FINANCIAL CORP.

               

               

              By:  /s/ John V.
Winfield

              Name:

              Title:

               

               

              /s/
      John V. Winfield

              John
      V. Winfield

               

               

              /s/
      Paul Hertzberg

              Paul
      Hertzberg

               

               

              /s/
      David W. Unsworth

              David
      W. Unsworth, Jr.

               

               

               

              /s/
      Kenneth Moelis

              The
      Moelis Family Trust

            
	 	 
	 	 

    

    

      - 22 -

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