Document:

Blueprint

 

 Exhibit 10.1

 

LOAN AND SECURITY AGREEMENT

 

This
LOAN AND SECURITY AGREEMENT
is entered into as of October 6, 2017 by and between MusclePharm
Corporation, a Nevada Corporation (with Federal Tax Identification
# 77-0664193) and Canada MusclePharm Enterprises Corp., a Canada
Corporation (with Business #80389 8915 RC0001), (individually or
collectively, “Borrower”), and
Crossroads Financial Group, LLC, a
North Carolina limited liability company
(“Lender”).

 

RECITALS

 

A.   Borrower
has requested that Lender provide financial accommodations to
Borrower as more fully set forth herein and in the Loan
Documents.

 

NOW,
THEREFORE, in consideration of the premises, and intending to be
legally bound hereby, the Parties hereby agree as
follows:

 

AGREEMENT

 

1.   Certain
Definitions and Index to Definitions.

 

1.1   Accounting
Terms. Unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP consistently applied.

 

1.2   Definitions.
All other terms contained in this Agreement that are not
specifically defined herein shall have the meanings provided in the
UCC or the Personal Property Security Act of any relevant
jurisdiction, as applicable, to the extent the same are used
herein. All references herein to the singular or plural shall also
mean the plural or the singular, respectively. As used herein, the
following terms shall have the following meanings:

 

1.2.1 “Acceptable
Forum”- see Section 30 hereof.

 

1.2.2 “Additional
Loan Fee”- see Section 3.4.3 (e) hereof.

 

1.2.3 “Assurances”-
see Section 4.2 hereof.

 

1.2.4 “Advances”
- see Section 2.1.1 hereof.

 

1.2.5 “Agreement”
- this Loan and Security Agreement, together with all exhibits and
schedules hereto, as the same now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated, or
replaced.

 

1.2.6 “Allowable
Amount” - the lesser of (i) the Borrowing Base less
Availability Reserves and (ii) the Maximum Amount.

 

 

 

 

1

 

 

1.2.7 “Availability
Reserves” - as of any date of determination, such
amounts as Lender may from time to time establish and revise, in
its Permitted Discretion, reducing the amount of Advances which
would otherwise be available to Borrower hereunder:

 

(a) To reflect events,
conditions, contingencies or risks which, as determined by Lender,
which may affect either (i) the Collateral or any other property
which is security for the Obligations or its value, (ii) the
assets, business or prospects of Borrower or any Obligor, or (iii)
the security interest and other rights of Lender in the Collateral
(including the enforceability, perfection and priority
thereof);

 

(b) In the amount of
any Third Party Claim, until such time as Lender has determined in
good faith that the Third Party Claim is unlikely to be
asserted;

 

(c) To reflect Lender's
belief that any collateral report or financial information
furnished by or on behalf of Borrower or any Obligor to Lender is
or may have been incomplete, inaccurate or misleading in any
material respect; or

 

(d) In respect of any
state of facts that Lender determined constitutes an Event of
Default or may, with notice or passage of time or both, constitute
an Event of Default.

 

1.2.8 “Average
Unused Portion of the Maximum Amount” - the Maximum
Amount less: (a) the average Advances outstanding during the
immediately preceding month; and (b) the Availability
Reserves.

 

1.2.9 “Avoidance
Claim” - any claim that any payment received by Lender
from or for the account of Borrower or on account of any Collateral
is avoidable under the United States Bankruptcy Code or any other
state or federal debtor relief statute, or under any Canadian
Insolvency Legislation.

 

1.2.10 “Borrower”
- see Preamble hereof.

 

1.2.11 “Borrowing
Base” – the lower of the following, when applied
to Eligible Inventory plus Eligible In-Transit Inventory, by
Category:

 

(a) Up to 70% of
Inventory Cost; or

 

(b) Up to 75% of Net
Orderly Liquidation Value.

 

1.2.12 “Borrowing
Base Certificate” - a request for an Advance, in a
form acceptable to Lender, which form may be electronic or hard
copy.

 

1.2.13 “Business
Day” - any day which is not a Saturday, Sunday, or
other day on which national banks in the United States are
authorized or required to be closed.

 

 

 

2

 

 

1.2.14 “Canadian
Insolvency Legislation” shall mean any of the
Bankruptcy and Insolvency
Act (Canada), the Companies’ Creditors Arrangement
Act (Canada), and the Winding-Up and Restructuring Act
(Canada), each as now and hereafter in effect, any successors to
such statutes and any other applicable insolvency or other similar
law of any jurisdiction, including any law of any jurisdiction
permitting a debtor to obtain a stay or compromise of the claims of
its creditors against it.

 

1.2.15 “Category”
- The Inventory categories as defined by Lender on the Borrowing
Base Certificate, including Finished Goods, In-Transit Inventory,
and Ineligible Inventory, Work in Process, and any new Inventory
category added by Lender following a third party
appraisal.

 

1.2.16 “Chosen
State” – North Carolina.

 

1.2.17 “Clearance
Days” - One Business Day for wires and ACH receipts
and Three Business Days for check receipts.

 

1.2.18 “Clearance
Day Payments” - payments received by Lender, in
whatever form and from whatever source in reduction of the
Obligations.

 

1.2.19 “Collateral” –
All Borrower’s present and future Accounts, Chattel Paper,
Goods (including Inventory and Equipment), Instruments, Investment
Property, Documents, General Intangibles, Intangibles, Letter of
Credit Rights, Commercial Tort Claims, Deposit Accounts, Supporting
Obligations, Documents, Records and the proceeds
thereof.

 

1.2.20 “Collateral
Oversight Fee” – 0% per month of the Loan
Account balance to compensate Lender for the cost of monitoring the
Collateral.

 

1.2.21 “Complete
Termination” – Complete Termination occurs upon
satisfaction of the following conditions:

 

(a) Payment in full of
all Obligations;

 

(b) If Lender has
issued or caused to be issued guarantees, commitments to third
parties or letters of credit on behalf of Borrower, acknowledgement
from any beneficiaries thereof that Lender or any other issuer has
no outstanding direct or contingent liability therein.

 

(c) Borrower has executed and delivered to
Lender a general release in the form of Exhibit 1.2.20(c) attached
hereto.

 

1.2.22 “Contractual
Termination Date” – The end of the Initial Term
or any Renewal Term, as the case may be.

 

 

 

3

 

 

1.2.23 “Credit
Accommodation” - any Advance or other extension of
credit by Lender to or on behalf of Borrower
hereunder.

 

1.2.24 “Default
Interest Rate Spread” – 0.5% per
month.

 

1.2.25 “Default
Rate”- the Interest Rate plus the Default Interest
Rate Spread.

 

1.2.26 “Default
Waiver Fee” - $1,000.

 

1.2.27  “Early
Termination Date” – the date on which an Early
Termination Event occurs.

 

1.2.28 “Early
Termination Event” – the occurrence of any of
the following:

 

(a) The effective date
of termination of this Agreement by Borrower set forth in the
notice of termination that is not the Contractual Termination
Date;

 

(b) Borrower becomes a
debtor in a case filed under the United States Bankruptcy Code or
any similar state proceeding, or subject to any proceeding under
any Canadian Insolvency Legislation;

 

(c) Borrower repays or
is required to repay the Obligations (whether by acceleration or
otherwise) prior to the next Contractual Termination
Date.

 

1.2.29 “Early
Termination Fee” – In the event of an Early
Termination Event, Borrower shall pay Lender three percent (3%) of
the Maximum Amount. The Termination Fee shall be in addition to any
other fees due to Lender hereunder.

 

1.2.30  “Eligible
In-Transit Inventory” – as of any date of
determination thereof without duplication of any Eligible
Inventory, In-Transit Inventory:

 

(a) Subject to
Lender’s perfected and, subject to the Intercreditor
Agreement, first priority security interest;

 

(b) For which the
purchase order is in the name of Borrower and title has passed to
Borrower;

 

(c) For which full
payment has been delivered to the vendor of such Inventory and
evidence of such payment has been received by the
Lender;

 

(d) Which has been
delivered to a carrier in a foreign port or foreign airport for
receipt by Borrower in the United States or which has been
delivered to a carrier in the United States for receipt by Borrower
in the United States within 5 Business Days of the date of release
by U.S. Customs, but which has not yet been received by
Borrower;

 

 

 

4

 

 

(e) Which has been in
transit for 60 days or less from the date of shipment of such
Inventory;

 

(f) For which the Bill
of Lading reflects Lender as consignee;

 

(g) Which is insured in
accordance with the provisions of this Agreement, including cargo
insurance; and

 

(h) Which is otherwise
acceptable to Lender in its Permitted Discretion;

 

provided
that the Lender may, in its Permitted Discretion, exclude any
particular Inventory from the definition of “Eligible
In-Transit Inventory” in the event the Lender determines that
such Inventory is subject to any Person’s right or claim
which is (or is capable of being) senior to, or pari passu with,
the lien of the Lender (such as, without limitation, a right of
stoppage in transit) or may otherwise adversely impact the ability
of the Lender to realize upon such Inventory.

 

1.2.31 “Eligible
Inventory” – Inventory (including (i) raw
material used or consumed by Borrower in the ordinary course of
business in the manufacture or production of other Inventory and
(ii) Work in Process) of Borrower which is:

 

(a) Subject to
Lender’s perfected and, subject to the Intercreditor
Agreement, first priority security interest;

 

(b) In Borrower’s
possession and control and situated at a location in compliance
with this Agreement;

 

(c) Valued at the lower
of cost or market, and

 

(d) Otherwise
acceptable to Lender in its Permitted Discretion.

 

1.2.32 “Event
of Default” - see Section 12 hereof.

 

1.2.33 “Factor”
– Prestige Capital Corporation or any other entity that
agrees, pursuant to a factoring agreement or otherwise, to purchase
the Accounts of Borrower.

 

1.2.34 “Factoring
Documents” – That certain Purchase and Sale
Agreement between Factor and Borrower dated January 11, 2016 (as
amended or extended), and all documents executed in connection
therewith, or any other factoring or accounts receivable financing
agreement or related documents executed by Borrower and
Factor.

 

1.2.35 “Finished
Goods” – Inventory that is ready for shipment to
Borrower’s customers.

 

1.2.36 “GAAP”
- means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of
the American Institute of Certified Public Accountants and
pronouncements of the Financial Accounting Standards Board (or any
successor authority) that are applicable as of the date of
determination.

 

 

 

5

 

 

1.2.37 “Guarantors”
- all individuals and entities now or hereafter guaranteeing the
Obligations, including Ryan Drexler (who shall only be subject to a
Validity Guaranty).

 

1.2.38  “In-Transit
Inventory” – Inventory owned by Borrower that is
in transit to Borrower or an agent or contractor of or for
Borrower.

 

1.2.39 “Ineligible
Inventory” – Inventory of Borrower that is not
Eligible Inventory or Eligible In-Transit Inventory.

 

1.2.40 “Initial
Term” – Six months from the date
hereof.

 

1.2.41 “Insolvency
Proceeding”
means (a) any case, action or proceeding before any court or
other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for
the benefit of creditors composition, marshaling of assets for
creditors, or other, similar arrangement in respect of its
creditors generally or any substantial portion of its creditors; in
each case in (a) and (b) above, undertaken under U.S. federal or
foreign law, including the Bankruptcy Code and the Canadian
Insolvency Legislation.

 

1.2.42 “Intercreditor
Agreement” means that certain agreement, dated on or
about the date herewith, between Factor and Lender, as amended from
time to time.

 

1.2.43 “Interest
Rate” – 1.5% per month.

 

1.2.44 “Inventory
Cost” – As determined by Lender, the lesser of
(a) cost of Eligible Inventory or Eligible In-Transit Inventory, as
applicable, computed on a first-in-first-out basis in accordance
with GAAP, or (b) market value, as reasonably determined by Lender
in its Permitted Discretion utilizing, if available, a third-party
appraisal, of Eligible Inventory or Eligible In-Transit Inventory,
as applicable.

 

1.2.45 “Key
Employees” – Ryan Drexler.

 

1.2.46 “Late
Fee”- means two
percent (2%) of the amount of any payment of principal, fees,
interest or any other amount due hereunder.

 

1.2.47 “Loan
Account” – that portion of the Obligations which
accrue interest hereunder, including the sum of the unpaid balances
of:

 

(a) Advances;

 

(b) Other payments made
by Lender arising hereunder for which Borrower is liable to
Lender.

 

(c) Unpaid fees or
interest when due hereunder

 

 

 

6

 

 

1.2.48 “Loan
Documents” - this Agreement, together with any
documents, instruments and agreements, executed and/or delivered in
connection herewith, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or
replaced.

 

1.2.49 “Loan
Fee” – the Loan Fee Percent multiplied by the
Maximum Amount at the time this fee is earned.

 

1.2.50 “Loan
Fee Percent” – 2.5% annually.

 

1.2.51 “Maturity
Fee” – means two percent (2%) of the amount of
Obligations which remain unpaid and outstanding after the
Termination Date resulting from an Early Termination Event under
clause (a) of the definition thereof.

 

1.2.52 “Maximum
Amount” - $3,000,000.

 

1.2.53  “Minimum
Advance” - $10,000.00

 

1.2.54 “Minimum
Monthly Fee” – $22,500.

 

1.2.55 “Net
Orderly Liquidation Value” – The value of
Eligible Inventory or Eligible In-Transit Inventory, as applicable,
as determined by Lender in the exercise of its Permitted
Discretion, utilizing, if available, a third-party appraisal, which
could be obtained upon liquidation under distress
conditions.

 

1.2.56 “Obligor”
– the Borrower or any Guarantor.

 

1.2.57 “Obligations”
- all present and future obligations owing by Borrower to Lender
whether arising hereunder or otherwise and whether arising before,
during or after the commencement of any Insolvency Proceeding by or
against a Borrower.

 

1.2.58 “Over
Advance Fee”- a fee of 0.25% of the amount by which
the Obligations exceed the Allowable Amount for each day that the
Obligations exceed the Allowable Amount, with a minimum Over
Advance Fee of $25.00 per day.

 

1.2.59 “Parties”
- Borrower and Lender.

 

1.2.60 “Permitted
Discretion” – A determination made in good faith
and in the exercise of what the Lender believes is reasonable
business judgment.

 

1.2.61 “Personal
Property Security Act” means the Personal Property
Security Act as in effect in the Province of Ontario, the Civil
Code of Quebec as in effect in the Province of Quebec or any other
Canadian Federal or Provincial statute pertaining to the granting,
perfecting, priority or ranking of security interests, liens,
hypothecs on personal property, and any successor statutes,
together with any regulations thereunder, in each case as in effect
from time to time. References to sections of the Personal Property
Security Act shall be construed to also refer to any successor
sections.

 

 

 

7

 

 

1.2.62 “Renewal
Term” – six months.

 

1.2.63 “Subordinating
Creditor” – any creditor of the Borrower which
has executed a Subordination Agreement.

 

1.2.64 “Subordination
Agreement” - a subordination agreement in form and
substance acceptable to Lender whereby a Subordinating Creditor
subordinates, in favor of Lender, obligations owed to it by
Borrower.

 

1.2.65 “Termination
Date” - the earlier of (i) the Contractual Termination
Date or (ii) the date on which Lender elects to terminate this
Agreement pursuant to the terms herein, or (iii) the Early
Termination Date.

 

1.2.66 “Third
Party Claim” – claims asserted against Lender by
any person or entity relating in any way to the Lender’s
relationship with Borrower other than claims arising from
Lender’s gross negligence or willful misconduct.

 

1.2.67 “UCC”
- The Uniform Commercial Code in effect in the Chosen State at the
date on which a determination thereunder is to be
made.

 

1.2.68 “Unused
Line Fee” – 0.25% per annum of the Average
Unused Portion of the Maximum Amount.

 

1.2.69 “Work
In Process” – Borrower’s partially
finished Inventory.

 

2.   Credit
Facilities.

 

2.1   Advances. Subject to the terms and conditions of
this Agreement, from the date on which this Agreement becomes
effective until the Termination Date:

 

2.1.1 Lender, may, from time to time
in its Permitted Discretion, make advances (“Advances”) to Borrower,
so long as, before and after such Advance, the Obligations do not
exceed the Allowable Amount. The fact that the Borrower is bound to
various covenants herein, the breach of which may allow Lender to
accelerate the due date of Borrower's Obligations hereunder, shall
not be construed to constitute a commitment by Lender to make any
Advances hereunder, all of which are in the sole discretion of
Lender.

 

2.1.2 Lender
may, in its discretion, from time to time, upon not less than five
days prior notice to Borrower, reduce the amount available under
the Borrowing Base to the extent that Lender determines that the
number of days of the turnover of the Inventory for any period has
changed in any material respect, or the nature and quality of the
Inventory has deteriorated in any material respect.

 

 

 

8

 

 

2.2   General
Provisions.

 

2.2.1 Borrowing
Base Certificate. Each request from Borrower for a Credit
Accommodation shall be accompanied by a Borrowing Base Certificate,
completed and signed by Borrower. Such Borrowing Base Certificate
may be in either electronic or hard copy form, as acceptable to
Lender. The Borrowing Base Certificate shall at all times be a bona
fide and accurate representation of the Collateral and Advances and
comply with the representations and warranties herein.

 

2.2.2 Crediting
Borrower's Account. All Credit Accommodations by Lender may
be made by deposits or transfers to the account designated by
Borrower.

 

2.2.3 Authorization
for Credit Accommodations. Subject to the terms and
conditions of this Agreement, Lender is authorized to make Credit
Accommodations:

 

(a) Upon telephonic,
facsimile, electronic or other instructions received from anyone
purporting to be an officer, employee or representative of
Borrower; or

 

(b) At the sole
discretion of Lender, and notwithstanding any other provision in
this Agreement, if necessary to meet any Obligations, including but
not limited to any interest not paid when due.

 

3.   Payments by
Borrower.

 

3.1   In
General.

 

3.1.1 Place
of Payments. All payments hereunder shall be made by
Borrower to Lender at Lender’s address set forth herein or at
such other place as Lender may designate in writing.

 

3.1.2 ACH
Debits. In order to satisfy any of the Obligations, Lender
is hereby authorized by Borrower to initiate electronic debit
entries through the ACH or other electronic payment system to any
account maintained by Borrower. At the Lender's request, Borrower
shall execute and deliver to Lender an authorization agreement for
ACH debits.

 

3.1.3 Borrower
irrevocably waives the right to direct the application of any and
all payments received at any time by Lender from or on behalf of
Borrower and specifically waives any right to designate application
of payments. Borrower irrevocably agrees that Lender shall have the
exclusive right to determine the order and method of the
application of payments against the then due and payable
Obligations of Borrower in Lender's sole discretion and to revise
such application prospectively or retroactively in Lender's sole
discretion.

 

3.2  Demand Obligation.
Intentionally omitted.

 

 

 

9

 

 

3.3  Notwithstanding
anything to the contrary contained in any Loan Document, the
interest paid or agreed to be paid under the Loan Documents shall
not exceed the maximum rate permitted by applicable law including,
when applicable, the Criminal Code
of Canada (“Maximum Rate”). If Lender
shall receive interest in an amount that exceeds the Maximum Rate,
the excess interest shall be applied to the principal of the loans
hereunder or, if it exceeds such unpaid principal, refunded to
Borrower. In determining whether the interest contracted for,
charged, or received by Lender exceeds the Maximum Rate, Lender
may, to the extent permitted by applicable law,
(a) characterize any payment that is not principal as an
expense, fee, or premium rather than interest, (b) exclude
voluntary prepayments and the effects thereof, and
(c) amortize, prorate, allocate, and spread in equal or
unequal parts the total amount of interest throughout the
contemplated term of the Obligations hereunder.

 

3.4   Interest
and Fees.

 

3.4.1 Lender
is authorized to debit the Loan Account for interest, fees and
other charges due Lender hereunder as and when due.

 

3.4.2 Interest.

 

(a) Subject to
subsection (b) hereof, interest on the Loan Account balance shall
be payable monthly, in arrears, shall be computed at the Interest
Rate computed on the basis of a 360 day year, and shall be due on
the first day of each month following the prior calendar
month.

 

(b) Default
Interest. Immediately upon the occurrence of an Event of Default,
the interest rates otherwise applicable shall be increased to the
Default Rate.

 

3.4.3 Fees.

 

(a) Audit Fee. Borrower shall
immediately pay to Lender Lender’s out-of-pocket expenses in
connection with each audit Lender performs or causes to be
performed hereunder.

 

(b) Collateral Oversight Fee.
Borrower shall pay the Collateral Oversight Fee to Lender monthly,
prorated for partial months, in arrears, on the first day of each
month following the accrual thereof.

 

(c) Default Waiver Fee. Borrower
shall pay the Default Waiver Fee to Lender, immediately upon the
waiver by Lender of any Event of Default hereunder, so long as the
waiver was done at the Borrower’s request.

 

(d) Loan Fee. Borrower shall pay
the Loan Fee to Lender, which Loan Fee shall be fully earned and
nonrefundable and shall be due and payable on (i) the date hereof
and (ii) the first day of every other Renewal Term (commencing with
the second Renewal Term). Loan Fees shall be accelerated and
immediately due and payable upon the occurrence of an Event of
Default or upon termination of this Agreement.

 

 

 

10

 

 

(e) Additional Loan Fee.
Immediately upon any increase in the Maximum Amount, Borrower shall
pay to Lender a fee computed as the product of the Loan Fee Percent
and the amount of the increase in the Maximum Amount.

 

(f) Unused Line Fee. Borrower shall
pay the Unused Line Fee to Lender on the first day of each month
during the term of this Agreement. Notwithstanding anything to the
contrary herein, Borrower may elect, by written notice to Lender,
to reduce the Maximum Amount, to an amount not less than
$1,500,000, without penalty. Any such written notice of reduction
shall be irrevocable.

 

(g) Minimum Monthly Fee. Borrower
shall pay to Lender any amount by which the sum of the interest and
Collateral Oversight Fee earned in any month (prorated for partial
months) is less than the Minimum Monthly Fee, due on the first day
of the following month.

 

(h) Attorneys’ Fees. Borrower
shall pay to Lender all reasonable attorneys’ fees and costs
incurred in preparation of this Agreement and related
documents. 

 

(i) Standard Fees. Borrower shall
pay to Lender fees for such services as Lender customarily charges.
Lender shall have the right to change all or any of such fees upon
ten days’ notice to Borrower.

 

(j) Late Fee. Borrower shall pay to
Lender the Late Fee for each payment of principal, fees or interest
or any other amount due hereunder which is not paid within five
days of its due date (or any check that does not clear), to cover
the extra expense involved in handling delinquent payments,
provided that collection of said Late Fee shall not be deemed a
waiver by Lender of any of its other rights under this Agreement or
any other instrument given to secure this indebtedness. The
Borrower and Lender hereby agree that said fee is a fair and
reasonable charge for the late payment and shall not be deemed a
penalty. Additionally, Lender may exercise any and all other rights
and remedies Lender has as outlined herein or in the other loan
documents that secure the loan described herein.

 

(k) Maturity Fee. Borrower shall
pay to Lender the Maturity Fee on the first day of each month in
the event that any Obligations remain outstanding after the
Termination Date resulting from an Early Termination Event under
clause (a) of the definition thereof, to cover the extra expense
involved in handling a matured loan, provided that collection of
said Maturity Fee shall not be deemed a waiver by Lender of any of
its other rights under this Agreement or any other instrument given
to secure this indebtedness. The Borrower and Lender hereby agree
that said fee is a fair and reasonable charge for the failure to
repay the Obligations on the Termination Date resulting from such
Early Termination Event and shall not be deemed a penalty.
Additionally, Lender may exercise any and all other rights and
remedies Lender has as outlined herein or in the other loan
documents that secure the loan described herein. The Maturity Fee
shall be in addition to all other fees due to the
Lender.

 

 

 

11

 

 

(l) Over Advance Fee. Borrower
shall pay to Lender the Over Advance Fee for each day that the
Obligations exceed the Allowable Amount.

 

(m) Misdirected Payment Fee.
Borrower shall pay to Lender a misdirected payment fee, immediately
upon its accrual, in the amount of fifteen percent of the amount of
any payment received by Borrower from a customer or Account Debtor
that is not remitted to the Factor if required under the Factoring
Documents or, upon the occurrence of Event of Default and to the
extent such payment is not required to be remitted to Factor under
Factoring Documents, to the Lender, in each case within three (3)
business days following the date of receipt by the
Borrower.

 

(n) Early Termination Fee. Borrower
shall pay to Lender the Early Termination Fee immediately upon the
occurrence of an Early Termination Event under clause (a) of the
definition thereof; provided, that, in the event an Early
Termination Event under clause (a) of the definition thereof occurs
after the sixth (6th) month anniversary
of the date hereof upon not less than ninety (90) days prior
written notice from Borrower to Lender, such Termination Fee shall
be waived. In addition, in the event that payment of the
Obligations shall be accelerated by Lender as a result of the
occurrence and continuance of an Event of Default, the Early
Termination Fee in effect as of the date of such acceleration shall
be charged to Borrower on such date and such Early Termination Fee
shall also be added to the outstanding balance of the Obligations
in determining the payoff amount or the debt for the purposes of
any judgment of foreclosure of any loan documents given to secure
the Obligations.

 

3.4.4 Application
of Collections. Lender shall, for the purpose of the
computation of interest and the Collateral Oversight Fee due
hereunder, add the Clearance Days to any Clearance Day Payments,
which is acknowledged by the Parties to constitute an integral
aspect of the pricing of Lender's facility to Borrower, and shall
apply irrespective of the characterization of whether receipts are
owned by Borrower or Lender. Should any check or item of payment
not be honored when presented for payment, then Borrower shall be
deemed not to have made such payment, and interest shall be
recalculated accordingly.

 

4.   Indemnification
Protection.

 

4.1   Notwithstanding
payment in full of the Obligations and termination of this
Agreement, in the event that (i) a Third Party Claim has been
asserted against Lender, or (ii) Lender believes in good faith that
a Third Party Claim may be asserted against Lender, Lender may
retain its security interest in the amount of the Third Party Claim
together with Lender’s good faith estimate of its costs to be
incurred in the defense thereof, until such time as the Third Party
Claim is withdrawn or satisfied, unless Lender receives Assurances
(as defined below) regarding its exposure to the Third Party
Claim.

 

4.2   For the purposes hereof,
“Assurances” shall mean
collateral, a guaranty or a letter of credit from an entity so that
Lender reasonably believes in good faith that the likelihood of
loss resulting from the Third Party Claim is remote.

 

 

 

12

 

 

5.   Grant
of Security Interest.

 

5.1   To
secure the performance of the Obligations, Borrower grants to the
Lender a security interest in the Collateral, and all proceeds and
products thereof.

 

6.   Authorization
to File Financing Statements.

 

6.1   The
Borrower irrevocably authorizes the Lender to file in any Uniform
Commercial Code or the Personal Property Security Act, as
applicable, jurisdiction any initial financing statements and
amendments thereto that:

 

6.1.1 Indicate
the Collateral as all present and after acquired assets, property
and undertaking of the Borrower, or words of similar effect,
regardless of whether any particular asset comprised in the
Collateral falls within the scope of Article 9 of the UCC or any
comparable provision in the Personal Property Security Act, as
applicable, or as being of an equal or lesser scope or with greater
detail;

 

6.1.2 Contain
any other information required by part 5 of Article 9 of the UCC or
any comparable provision in the Personal Property Security Act, as
applicable, for the sufficiency or filing office acceptance of any
financing statement or amendment, including (i) whether the
Borrower is an organization, the type of organization, and any
organization identification number issued to the Borrower and, (ii)
in the case of a financing statement filed as a fixture filing or
indicating Collateral to be as-extracted collateral or timber to be
cut, a sufficient description of real property to which the
Collateral relates;

 

6.1.3 Contain
a notification that the Borrower has granted a negative pledge to
the Lender, and that any subsequent lien holder may be tortiously
interfering with Lender’s rights (it being understood and
agreed that the security interest granted by Borrower pursuant to
the Factoring Documents or Drexler Transaction (as defined below)
shall not itself be deemed tortious interference with
Lender’s rights);

 

6.1.4 Advises
third parties that any notification of Borrower’s Account
Debtors will interfere with Lender’s collection rights (it
being understood and agreed that, as between Lender and Factor,
such notification shall be subject to the Intercreditor
Agreement).

 

6.2   The
Borrower agrees to furnish any of the foregoing information to the
Lender promptly upon request;

 

6.3   The
Borrower ratifies its authorization for the Lender to have filed
any like initial financing statements or amendments thereto if
filed prior to the date hereof; and

 

6.4   The
Lender may add any supplemental language to any such financing
statement as Lender may determine to be necessary or helpful in
acquiring or preserving rights against third parties.

 

 

 

13

 

 

7.   Representations
and Warranties by Borrower.

 

7.1   There
are no actions or proceedings pending by or against Borrower or its
officers and Guarantors before any court or administrative or
regulatory agency and Borrower does not have knowledge or belief of
any pending, threatened, or imminent litigation, governmental
investigations, or claims, complaints, actions, or prosecutions
involving Borrower, its officers or any Guarantor of the
Obligations, except for (a) ongoing collection matters in which
Borrower is the plaintiff, (b) matters that have been previously
disclosed, prior to the date hereof, in Borrower’s 10-K or
10-Q filings with the Securities and Exchange Commission (the
“Prior
Filings”) or (c) matters which could not reasonably be
expected to result in monetary liability against Borrower in excess
of $100,000 for any such matter individually or $250,000 for all
such matters in the aggregate.

 

7.2   All
financial statements relating to Borrower that have been delivered
by Borrower to Lender have been prepared in accordance with GAAP
and fairly present Borrower’s financial condition as of the
date thereof and Borrower’s results of operations for the
period then ended. There has not been a material adverse change in
the financial condition of Borrower since the date of the latest
financial statements submitted to Lender on or before the date
hereof.

 

7.3   Borrower
agrees to maintain books and records and its records pertaining to
the Collateral in accordance with GAAP and in such additional
detail, form and scope, as Lender shall reasonably
require.

 

7.4   Borrower
certifies that, to the best of Borrower’s knowledge, Borrower
has not been designated, and is not owned or controlled, by a
“suspected terrorist” as defined in Executive Order
13224. Borrower hereby acknowledges that Lender seeks to comply
with all applicable laws concerning money laundering and related
activities. In furtherance of those efforts, Borrower hereby
represents, warrants and agrees that: (i) none of the cash or
property that Borrower will pay or will contribute to Lender has
been or shall be derived from, or related to, any activity that is
deemed criminal under United States or Canadian law; and (ii) no
contribution or payment by Borrower to Lender, to the extent that
they are within Borrower’s control shall cause Lender to be
in violation of the United States Bank Secrecy Act, the United
States International Money Laundering Control Act of 1986 or the
United States International Money Laundering Abatement and
Anti-Terrorist Financing Act of 2001, or any similar Canadian
statute and/or law. Borrower shall promptly notify Lender if any of
these representations ceases to be true and accurate. Borrower
shall provide Lender any additional information regarding Borrower
that Lender deems necessary or convenient to ensure compliance with
all applicable laws concerning money laundering and similar
activities. Borrower understands and agrees that if at any time it
is discovered that any of the foregoing representations are
incorrect, or if otherwise required by applicable law or regulation
related to money laundering similar activities, Lender may
undertake appropriate actions to ensure compliance with applicable
law or regulation, including but not limited to segregation and/or
redemption of Lender’s investment in Borrower. Borrower
further understands that Lender may release confidential
information about Borrower and, if applicable, any underlying
beneficial owners, to proper authorities if Lender, in its sole
discretion, determines that it is in the best interests of Lender
in light of relevant rules and regulations under the laws set forth
in subsection (ii) above.

 

 

 

14

 

 

7.5 Borrower
MusclePharm Corporation is a corporation, validly formed, existing
in the State of Nevada, and is in good standing under the laws of
the State of Nevada and is properly licensed and authorized to
operate its business in any other jurisdiction in which it conducts
business. Borrower’s organizational identification number
assigned by the above state is E05807520060. Borrower’s
taxpayer identification number, if applicable, for U.S. Federal
Income Tax purposes is 77-0664193. The undersigned signatory on
behalf of Borrower represents that he or she has full power and
authority to execute this Agreement and bind Borrower
hereto.

 

Borrower Canada
MusclePharm Enterprises Corp. is a corporation, validly formed,
existing in Canada, and is in good standing under the laws of
Canada and is properly licensed and authorized to operate its
business in any other jurisdiction in which it conducts business.
Borrower’s business number (BN) assigned by the above is
001858551. Borrower’s taxpayer identification number, if
applicable, for U.S. Federal Income Tax purposes is N/A. The
undersigned signatory on behalf of Borrower represents that he or
she has full power and authority to execute this Agreement and bind
Borrower hereto.

 

7.6 The execution,
delivery, and performance by Borrower of this Agreement and all
agreements and documents described herein does not constitute a
violation of any law, regulation, judgment, order, contract,
charter, by-laws, or other instrument to which Borrower is a party
or is otherwise bound or subject.

 

7.7 Borrower is not in
default under any loan agreement, mortgage, lease, trust deed, or
similar agreement relating to the borrowing of money to which
Borrower is a party or is otherwise bound.

 

7.8 Reserved.

 

7.9 To the best of
Borrower’s knowledge, each customer of Borrower is solvent
and Borrower has provided to Lender all documents and information
available to Borrower and requested by Lender concerning the
business and creditworthiness of each such customer.

 

7.10 Borrower
has entered into the Factoring Documents, a copy of which has been
provided to Lender. The Factoring Documents are in full force and
effect and no default exists or is threatened with respect thereto.
All payments due to Borrower under the Factoring Documents have
been duly and validly assigned by Borrower to Lender.

 

7.11  All
information, whether financial or otherwise, provided to Lender by
Borrower shall be true, accurate and correct in all material
respects.

 

7.12 Borrower
has not transferred, pledged or granted a security interest or
hypothec in its assets, or any of them, other than (a) to the
extent Borrower has fully disclosed the same in writing to Lender
as of the date of this Agreement, (b) pursuant to the Factoring
Documents or Drexler Transaction, in each case, subject to either a
subordination agreement, the Intercreditor Agreement or another
intercreditor agreement acceptable to the Lender.

 

 

 

15

 

 

7.13 Borrower
shall notify Lender immediately upon becoming aware of any issue
that may materially
affect the value or condition of any Inventory.

 

7.14 Borrower’s
Inventory is:

 

7.14.1 owned
by the Borrower free and clear of all encumbrances, except those
encumbrances subject to either a subordination agreement, the
Intercreditor Agreement or another intercreditor agreement
acceptable to the Lender;

 

7.14.2 with
regard to Eligible Inventory that is not In-Transit Inventory, at
all times at a location under the control of the Borrower and such
location(s) shall have been disclosed to the Lender in
writing;

 

7.14.3 reported
to Lender at the lower of cost or market value including reserves
for obsolescence or slow moving Inventory as would otherwise be
required under GAAP;

 

7.14.4 with
respect to Eligible Inventory, in salable condition as is and ready
for shipment; and

 

7.14.5 Is
not subject to any license agreement except as disclosed to Lender
in writing.

 

8.   Authorization
to Lender.

 

8.1   The
Borrower irrevocably authorizes Lender, subject to the below, to
take any and all appropriate action and to execute any and all
documents and instruments, in the name of Borrower, that may be
necessary or desirable to accomplish the purposes of this Agreement
including the filing on behalf of Borrower:

 

8.1.1 After
the occurrence and during the continuance of an Event of Default,
with such governmental authorities as are appropriate such
documents (including, without limitation, applications,
certificates, and tax returns) as may be required for purposes of
having Borrower qualified to transact business in a particular
state or geographic location.

 

8.1.2 Any
Correction Statement under Section 9-518 of the Uniform Commercial
Code or the Personal Property Security Act, as applicable, that
Lender reasonably deems necessary to preserve its rights
hereunder.

 

8.1.3 After
the occurrence and during the continuance of an Event of Default,
with any third party whose premises is used to store Inventory in
order to access, remove or otherwise deal with such
Inventory.

 

8.2   Subject
to the terms of the Intercreditor Agreement or any intercreditor or
similar agreement between Lender and Factor, Lender may notify
Borrower’s customers that the underlying Account has been
assigned to Lender and that payment thereof is to be made to the
order of Lender and sent directly to Lender. Such notification may
be in the form that is annexed hereto as Exhibit 8.2.

 

 

 

16

 

 

8.3 Borrower authorizes
Lender to accept, endorse and deposit on behalf of Borrower any
checks tendered by an account debtor “in full payment”
of its obligation to Borrower. Borrower shall not assert against
Lender any claim arising therefrom, irrespective of whether such
action by Lender effects an accord and satisfaction of Borrower's
claims, under §3-311 of the UCC or the Personal Property
Security Act, as applicable, or otherwise.

 

9.   Power of
Attorney.

 

9.1 Borrower
irrevocably appoints Lender, or any person(s) designated by Lender,
as its attorney-in-fact, which appointment is coupled with an
interest and shall remain in full force and effect until all
Obligations of Borrower to Lender have been fully satisfied and
discharged, with full power, at Borrower’s sole expense, to
exercise at any time in Lender’s discretion all or any of the
following powers:

 

9.1.1 Receive,
take, endorse, assign, deliver, accept and deposit, in the name of
Lender or Borrower, any and all cash, checks, commercial paper,
drafts, remittances and other instruments and documents relating to
the Collateral or the proceeds thereof; provided that, absent the
occurrence of an Event of Default, such power may be exercised by
Lender only in the ordinary course administration of this
Agreement;

 

9.1.2 After
the occurrence and during the continuance of an Event of Default,
change Borrower’s address on all invoices and statements of
Account mailed or to be mailed to Borrower’s customers and to
substitute thereon the designated address;

 

9.1.3 Receive
and open all mail addressed to Borrower, or to Borrower’s
trade name, at Lender’s address or, upon and during the
continuance of an Event of Default, any other designated
address;

 

9.1.4 After
the occurrence and during the continuance of an Event of Default,
take or bring, in the name of Lender or Borrower, all steps,
actions, suits or proceedings deemed by Lender necessary or
desirable to effect collection of or other realization upon any
Collateral;

 

9.1.5 After
the occurrence and during the continuance of an Event of Default,
create a “doing business as” entity (a
“d/b/a”) with a name
similar to Borrower and open any deposit accounts under such
name;

 

9.1.6 Execute
on behalf of Borrower any UCC-l and/or UCC-3 Financing
Statement(s), financing statements or financing change statements
pursuant to any relevant Personal Property Security Act, as
applicable, and, after the occurrence and during the continuance of
an Event of Default, any notices or other documents necessary or
desirable to carry out the purpose and intent of this Agreement,
and to do any and all things reasonably necessary and proper to
carry out the purpose and intent of this Agreement;

 

 

 

17

 

 

9.1.7 To
receive and open mail addressed to Borrower in the ordinary course
administration of this Agreement and, after the occurrence and
during the continuance of an Event of Default, to change the
address for delivery of Borrower’s mail to
Lender;

 

9.1.8 Endorse
and take any action with respect to bills of lading covering any
Inventory; provided such power may be exercised by Lender only
after the occurrence and during the continuance of an Event of
Default or, prior to the occurrence of an Event of Default, only in
connection with the ordinary course administration of this
Agreement.

 

9.1.9 After
the occurrence and during the continuance of an Event of Default,
prepare and deliver invoices to Borrower’s customers, in the
name of Lender or Borrower;

 

9.1.10 After
the occurrence and during the continuance of an Event of Default,
execute, file and serve, in its own name or in the name of
Borrower, mechanics lien or similar notices, or claims under any
payment or performance bond for the benefit of Borrower;
and

 

9.1.11 Unless
Borrower has paid the same within three (3) business days of demand
by Lender therefor, pay any sums necessary to discharge any lien or
encumbrance which is senior to Lender’s security interest in
the Collateral (other than (i) liens or encumbrances which, per the
Intercreditor Agreement, are senior to the security interest of
Lender or (ii) liens in respect of the Drexler Transaction, to the
extent subject to a Subordination Agreement), which sums shall be
included as Obligations hereunder, and which sums shall accrue
interest at the Default Rate until paid in full.

 

9.2 Release. Borrower hereby
releases and exculpates Lender, its officers, employees, agents,
designees, attorneys, and accountants from any liability arising
from any acts under this Agreement or in furtherance thereof,
whether of omission or commission, and whether based upon any error
of judgment or mistake of law or fact, except for gross negligence
or willful misconduct. In no event shall either party have any
liability to the other for lost profits or other special or
consequential damages.

 

9.3 Borrower shall
execute and deliver to Lender the Power of Attorney attached as
Exhibit 9.3 hereto provided that, notwithstanding anything to the
contrary therein, the exercise by Lender of such Power of attorney
shall be subject to the limits of Section 9.1 above.

 

10.   Affirmative
Covenants.

 

10.1 Until
full payment of the Obligations and termination of this Agreement,
Borrower shall:

 

10.1.1 At
such times as Lender may request and in the manner specified by
Lender, Borrower shall deliver to Lender original invoices,
agreements, proof of rendition of services and delivery of goods
and other documents evidencing or relating to the transactions
which gave rise to any of the Collateral, together with customer
statements, schedules describing the Collateral and confirmatory
assignments to Lender thereof, in form and substance satisfactory
to Lender, and duly executed by Borrower.

 

 

 

18

 

 

10.1.2 At
all times during the term of this Agreement, Borrower shall be obligated to maintain its
factoring relationship with Factor, submit all invoices issued for
sales of Inventory to the Factor within three days of creation to
the extent such invoices are required to be submitted to Factor
under the Factoring Documents, and remit the proceeds of all
Accounts as well as all other proceeds from the sale of Inventory
to Factor if required under the Factoring Documents or, upon the
occurrence of Event of Default and to the extent such payment is
not required to be remitted to Factor under Factoring Documents, to
Lender. Borrower shall not in any way interfere with the
notification instructions provided by Factor to its customers, and
shall at all times be in full compliance with the terms of the
Factoring Documents.

 

10.1.3 Immediately
advise Lender, in writing, of the assertion of any Third Party
Claim.

 

10.1.4 Furnish
to Lender, in form and substance satisfactory to
Lender:

 

(a) Weekly, a report
summarizing all Inventory, including a detailed synopsis and
description of the Inventory warehoused by Borrower at the time the
report is generated.    

 

(b) Delivered by email,
copies of any reports provided by Borrower to Factor under the
Factoring Documents, and such other reporting regarding Accounts
and/or credit card receipts, as Lender may from time to time
request.

 

(c) Promptly (and in
any event within 5 days) after filing its 10-K with the Securities
and Exchange Commission or, if no such filing shall be required,
within 90 days after the end of each fiscal year of
Borrower:

 

(i) A complete copy of
Borrower's financial statements, including but not limited to (a)
the management letter, if any, (b) the balance sheet as of the
close of the fiscal year, and (c) the income statement for such
year, together with a statement of cash flows, prepared by a
Borrower, and

 

(ii) A
statement certified by the chief financial officer of Borrower that
Borrower is in compliance with all the terms, conditions, covenants
and warranties of this Agreement.

 

(d) No later than 30
days after the close of each month (an “Accounting
Period”):

 

(i) Borrower's balance
sheet as of the close of such Accounting Period and its income
statement for such Accounting Period and year to date, in each case
setting in comparable form, as applicable, the figures of the
corresponding Accounting Period for the previous fiscal year,
certified by Borrower's chief financial officer as being complete,
correct, and fairly representing its financial condition and
results of operations.

 

 

 

19

 

 

(e) Tax Returns. Copies of
Borrower's:

 

(i) Federal income tax
returns, and any amendments thereto, within ten days of the filing
thereof with the Internal Revenue Service (or similar Canadian
governmental authority); and

 

(ii) Federal
payroll tax returns within ten days of filing, together with proof,
satisfactory to Lender, with proof that all taxes (and all other
statutory required remittances) have been paid.

 

(f) Reserved.

 

(g) As soon as
available but not later than 30 days before the end of each fiscal
year of Borrower, an annual operating budget (including monthly
balance sheet, statement of income and retained earnings, and
statement of cash flows), for the following fiscal year, along with
a comparison to the prior year;

 

(h) Inventory Reports. A listing of
all Borrower's Inventory, based upon a physical count taken by
Borrower every three months or whenever requested by Lender and a
slow moving Inventory report or Inventory aging upon request by
Lender.

 

10.1.5 Inspections.

 

(a) During usual
business hours, permit Lender, without notice to Borrower, to
periodically:

 

(i) Have access to all
premises where Collateral is located for the purposes of inspecting
(and removing, if after the occurrence and during the continuance
of an Event of Default) any of the Collateral,

 

(ii) To
inspect, audit, make copies of, and make extracts from Borrower's
records as Lender may request,

 

(iii) To
have a third party selected by Lender examine and inspect the
Collateral, at the sole cost of Borrower.

 

Notwithstanding the
foregoing, so long as no Event of Default has occurred, Borrower
shall not be liable for the cost of more than three such
inspections in any calendar year.

 

(b) Without expense to
Lender, Lender may use any of Borrower's personnel, equipment,
including computer equipment, programs, printed output and computer
readable media, supplies and premises for the collection of
accounts and realization on other Collateral as Lender, in its sole
discretion, deems appropriate.

 

 

 

20

 

 

10.1.6 Indemnification.
Indemnify and save Lender harmless from any and all liability with
respect to any Third Party Claim, including the costs incurred in
the defense thereof except where such liability is determined,
pursuant to a final, non-appealable order issued by a court of
competent jurisdiction, to have resulted from Lender’s gross
negligence or willful misconduct; provided, that to the extent Lender
intends to seek indemnity from Borrower for the same, Lender shall
use commercially reasonable efforts to notify Borrower in writing
before incurring any cost or expense to settle or defend a Third
Party Claim.

 

10.1.7 Enforcement
of Judgments. Reimburse Lender for all costs and expenses,
including reasonable attorneys' fees (at the usual and customary
rates for services actually rendered), which Lender incurs in
enforcing any judgment rendered in connection with this Agreement.
This provision is severable from all other provisions hereof and
shall survive, and not be deemed merged into, such
judgment.

 

10.1.8 Taxes
and Expenses Regarding Borrower's Assets.

 

(a) Make timely payment
when due of all taxes, assessments, contributions and other
statutory remittances required of Borrower. If Borrower fails to
make any such payment or deposit or furnish proof of such payment
immediately upon Lender's request, Lender may, in its sole
discretion and without notice to Borrower:

 

(i) Make payment of the
same or any part thereof; or

 

(ii) Set
up such reserves against the Obligations as Lender deems necessary
to satisfy the liability therefore, or both.

 

(b) Lender may
conclusively rely on statements of the amount owing or other
official statements issued by the appropriate governmental agency.
Any payment made by Lender shall constitute neither:

 

(i) An agreement by
Lender to make similar payments in the future; nor

 

(ii) A
waiver by Lender of any default under the Loan Documents. Lender
need not inquire into, nor contest the validity of, any expense,
tax, statutory required remittance, security interest, encumbrance
or lien, and the receipt of the usual official notice requiring the
payment thereof shall be conclusive evidence that the same was
validly due and owing.

 

10.1.9   Give
Lender written notice immediately upon forming an intention to
change its name, state of organization or form of business
organization.

 

 

 

21

 

 

10.1.10 Maintenance
of Insurance.

 

(a) The Borrower will
maintain with financially sound and reputable insurers insurance
reasonably acceptable to Lender with respect to its properties and
business against such casualties and contingencies as shall be in
accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in
such minimum amounts, but in no case less than the Advances made by
Lender, that the Borrower will not be deemed a co-insurer under
applicable insurance laws, regulations, and policies and otherwise
shall be in such amounts, contain such terms, be in such forms and
be for such periods as may be reasonably satisfactory to the
Lender. In addition, all such insurance shall be payable to the
Lender under a Lender Loss Payable Endorsement. Without limiting
the foregoing, the Borrower will:

 

(i) Keep all of its
physical property insured with casualty or physical hazard
insurance on an “all risks” basis, with broad form
flood and earthquake coverage and electronic data processing
coverage, with a full replacement cost endorsement and an
“agreed amount” clause in an amount equal to 100% of
the full replacement cost of such property;

 

(ii) Maintain
all such workers' compensation or similar insurance as may be
required by law; and

 

(iii) Maintain,
in amounts and with deductibles equal to those generally maintained
by businesses engaged in similar activities in similar geographic
areas, general public liability insurance against claims of bodily
injury, death, or property damage occurring, on, in or about the
properties of the Borrower; business interruption insurance; and
product liability insurance.

 

(b) In the event that
Borrower fails to maintain such insurance, Lender may obtain such
insurance at Borrower’s expense, and, after an Event of
Default, to adjust or settle any claim or other matter under or
arising pursuant to such insurance or to amend or cancel such
insurance.

 

10.1.11   Borrower
hereby permits Lender at any time to access electronically
information concerning any accounts maintained by Borrower with any
bank or other financial institution so long as such access is in
furtherance of, or to monitor compliance with, the terms of this
Agreement, and Borrower shall provide Lender with all necessary
access codes, passwords and the like to carry out the provisions
hereof.

 

10.2  Borrower
waives any claim it may now have against Lender arising out of any
unauthorized filing of any Financing Statement by
Lender.

 

10.3 In
the event any payments that are the proceeds of Collateral come
into Borrower’s possession, Borrower will hold the same in
trust and safekeeping, as the property of Factor or Lender, and
promptly (but in any event within three business days) turn over
such payment, in kind when possible, or by wire transfer otherwise,
to Factor if required under the Factoring Documents or, upon the
occurrence of Event of Default and to the extent such payment is
not required to be remitted to Factor under Factoring Documents, to
the Lender.

 

 

 

22

 

 

10.4 Borrower
shall ensure that Lender at all times has a list of all
Borrower’s deposit accounts.

 

11.   Negative
Covenants. Borrower
will not:

 

11.1 Negative
Pledge. Hereafter grant any lien upon the Collateral except
in favor of Lender, Factor or in respect of the Drexler Transaction
(to the extent such lien is subject to a Subordination
Agreement).

 

11.2 Mergers,
etc. Enter into any acquisition or sale, merger,
consolidation, reorganization, or recapitalization, or reclassify
its capital stock, or liquidate, wind up, or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, assign,
lease, transfer, or otherwise dispose of, in one transaction or a
series of transactions, all or any substantial part of its
business, property, or assets, whether now owned or hereafter
acquired, or acquire by purchase or otherwise all or substantially
all of the properties, assets, stock, or other evidence of
beneficial ownership of any entity.

 

11.3 Transfer
of Assets. 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, assets (other
than sales of Inventory to buyers in the ordinary course of
business, as defined in the UCC or Personal Property Security Act,
as applicable; provided, however, that a sale of Inventory shall
not be considered a sale to a buyer in the ordinary course of
business in the event that the Borrower is indebted to the
buyer).

 

11.4 Suspension
of Business. Suspend
or go out of a substantial portion of its business.

 

11.5 Debt.
Incur debt or contingent obligations, other than debt incurred
hereunder and trade debt incurred in the ordinary course of
business, or guaranty the debt of any other entity or
individual.

 

11.6 No
Dividends or Distributions. Borrower will not make any
distribution or declare or pay any dividends (in cash or in stock)
on, or purchase, acquire, redeem or retire any of its common stock,
membership or partnership interests, of any class, whether now or
hereafter outstanding without prior written consent of Lender.
Absent an Event of Default, Borrower may, upon prior written notice
to Lender, make distributions to its shareholders or members in the
ordinary and usual course of Borrower’s business to satisfy
such shareholder’s or member’s tax liability on income
of Borrower which is allocated to such shareholder or
member.

 

11.7  Sale
of Inventory to Non-Credit Approved Customers. The Borrower
agrees that all Accounts, whether credit approved or not, shall be
assigned to the Factor. In the event Accounts are not funded by the
Factor, Borrower agrees to immediately remit to Lender upon
Lender’s demand, any sums needed to eliminate any deficit in
the Borrowing Base Certificate. Lender may, but is not obligated
to, grant the same amount of credit as granted by Factor to each
customer which credit approvals are subject to change without
notice at Lender’s sole discretion.

 

 

 

23

 

 

11.8 Transactions
with Affiliates. Directly or indirectly enter into or permit
to exist any material transaction (either individually or in the
aggregate) with any affiliate of Borrower, except for (a)
transactions that are in the ordinary course of Borrower’s
business, upon fair and reasonable terms that are no less favorable
to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated entity or individual, (b) the
loan payable from Borrower to Ryan Drexler, and collateral security
granted by Borrower to Ryan Drexler therefor (the
“Drexler
Transaction”) in the approximate principal amount
outstanding, as of March 31, 2017, of $17,000,000 and (c) salary
and compensation payable to such affiliates, in the ordinary course
of business and consistent with the historical practices of
Borrower, as an officer or employee of Borrower

 

11.9 Leased
Locations or Warehouses. The Borrower will not store or locate
any Inventory or other Collateral in any leased premises or third
party warehouse unless the landlord or warehouseman, as the case
may be, of such leased premises or warehouse, as the case may be,
enter into a landlord waiver or warehouseman’s waiver, as the
case may be, in favor of and in form acceptable to
Lender.

 

11.10   Sales
Below Cost. The
Borrower shall not sell Inventory to any customer below the
Borrower’s cost without the prior written consent of
Lender.

 

11.11 Deposit Accounts. Borrower will
not maintain any deposit accounts, other than deposit accounts
existing as of the date hereof and disclosed to Lender in writing,
without the prior consent of Lender.

 

12.   Events of
Default. Each of the following events or conditions shall
constitute an “Event
of Default”:

 

12.1   Borrower
defaults in the performance of any payment obligation due
hereunder, or under any representation, covenant or warranty
hereunder;

 

12.2 (a)
Borrower defaults under any other material agreement which,
individually or in the aggregate with all other material agreements
under which Borrower may be in default, involve monetary liability
on the part of Borrower in excess of $100,000; provided, that defaults disclosed in the
Prior Filings shall be excluded from this clause (a) to the extent
such disclosures are true and correct in all material respects and
present fairly, in all material respects, the nature and extent of
such defaults; (b) Borrower defaults under the Factoring Documents
and such default continues beyond any cure period applicable
thereunder or (c) the Factoring Documents are terminated without
the written consent of Lender;

 

12.3   Any
entity shall have or acquire right in the Collateral which are
superior to Lender’s rights, other than as contemplated by
the Intercreditor Agreement or a result of Lender’s
intentional acts;

 

 

 

24

 

 

12.4   Borrower
fails to cure the breach of any Obligation other than a payment
obligation within three days after notice thereof is sent by Lender
to Borrower;

 

12.5   Borrower
is in default with respect to any present or future agreement with
Lender;

 

12.6   The
Obligations at any time exceed the Allowable Amount, and such
default is not cured within 2 days after Lender notifies Borrower
of the same;

 

12.7   An
order for relief is entered against any Obligor by any United
States Bankruptcy Court or any Insolvency Proceeding is brought
against any Obligor; or any Obligor does not generally pay its
debts as they become due (within the meaning of 11 U.S.C. 303(h) as
at any time amended, or any successor statute thereto or pursuant
to any relevant Canadian Insolvency Legislation, as applicable); or
any Obligor makes an assignment for the benefit of creditors; or
any Obligor applies for or consents to the appointment of a
custodian, receiver, trustee, or similar officer for it or for all
or any substantial part of its assets, or such custodian, receiver,
trustee, or similar officer is appointed without the application or
consent of any Obligor; or any Obligor institutes (by petition,
application, answer, consent, or otherwise) any bankruptcy,
insolvency, reorganization, moratorium, arrangement, readjustment
of debt, dissolution, liquidation or similar proceeding relating to
it under the laws of any jurisdiction; or any such proceeding shall
be instituted (by petition, application, or otherwise) against any
Obligor; or any judgment, writ, warrant of attachment, execution,
or similar process shall be issued or levied against a substantial
portion of the property of any Obligor;

 

12.8   An
adverse change occurs with respect to the financial condition or
operations of Borrower which results in a material impairment of
the prospect of repayment of the Obligations;

 

12.9   A
sale, hypothecation or other disposition is made of twenty percent
or more of the beneficial interest in any class of voting stock of
Borrower;

 

12.10   Any
Guarantor defaults in the performance of its obligations to Lender
or shall notify Lender of its intention to rescind, modify,
terminate or revoke its guaranty or it shall cease to be in full
force and effect for any reason whatsoever;

 

12.11   Any
of the Key Employees fails to devote, during any one month, such
efforts as necessary to perform the duties customarily associated
with the office or title held by such Key Employee, or any of the
Key Employees ceases to be employed by Borrower in the capacity
that such employee held as of the date of this
Agreement;

 

12.12   Any
provision of this Agreement or any of the Loan Documents ceases,
for any reason, to be valid and binding on Borrower.

 

12.13  A
default by the Borrower under its leases for real property where
any Collateral is kept, stored or maintained.

 

 

 

25

 

 

13.   Remedies.

 

13.1   Upon
the occurrence of any Event of Default all Obligations shall
thereafter accrue interest at the Default Rate and Lender
may:

 

13.1.1 Declare
this Agreement terminated;

 

13.1.2 Declare
all Obligations to be immediately due and payable, without
presentment, demand, protest, or notice of any kind, all of which
are hereby expressly waived by Borrower;

 

13.1.3 Take
or bring, in the name of Lender or Borrower, all steps, actions,
suits or proceedings deemed by Lender necessary or desirable to
effect collection of or other realization upon any
Collateral;

 

13.1.4 Change
the address for delivery of Borrower’s mail to Lender and to
receive and open mail addressed to Borrower;

 

13.1.5 Execute,
file and serve, in its own name or in the name of Borrower,
mechanics lien or similar notices, or claims under any payment or
performance bond for the benefit of Borrower.

 

13.1.6 Engage
a consulting, turnaround or similar firm to conduct an operational
assessment of Borrower. Borrower shall (a) bear all fees, costs and
other expenses associated with such services and (b) cooperate with
such firm in carrying out such services.

 

13.2   BORROWER
WAIVES ANY REQUIREMENT THAT LENDER INFORM BORROWER BY AFFIRMATIVE
ACT OR OTHERWISE OF ANY ACCELERATION OF BORROWER'S OBLIGATIONS
HEREUNDER. FURTHER, LENDER'S FAILURE TO CHARGE OR ACCRUE INTEREST
OR FEES AT ANY “DEFAULT” OR “PAST DUE” RATE
SHALL NOT BE DEEMED A WAIVER BY LENDER OF ITS CLAIM
THERETO.

 

14.   Standards for
Exercising Remedies.
To the extent that applicable law imposes duties on the Lender to
exercise remedies in a commercially reasonable manner, the Borrower
acknowledges and agrees that it is not commercially unreasonable
for the Lender:

 

14.1   To
not incur expenses to prepare Collateral for disposition or
otherwise to complete raw material or Work in Process into Finished
Goods or other finished products for disposition;

 

14.2   To
fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail
to obtain governmental or third-party consents for the collection
or disposition of Collateral to be collected or disposed
of;

 

 

 

26

 

 

14.3   To
fail to exercise collection remedies against any persons obligated
on Collateral or to remove liens or encumbrances on or any adverse
claims against Collateral;

 

14.4   To
exercise collection remedies against any persons obligated on
Collateral directly or through the use of collection agencies and
other collection specialists;

 

14.5   To
advertise dispositions of Collateral through publications or media
of general circulation, whether or not the Collateral is of a
specialized nature;

 

14.6   To
hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a
specialized nature;

 

14.7   To
dispose of Collateral by using Internet sites that provide for the
auction of assets of the types included in the Collateral or that
have the reasonable capability of doing so, or that match buyers
and sellers of assets;

 

14.8   To
dispose of assets in wholesale rather than retail
markets;

 

14.9   To
disclaim all disposition warranties; or

 

14.10   To
purchase insurance or credit enhancements to insure the Lender
against risks of loss, collection or disposition of Collateral or
to provide to the Lender a guaranteed return from the collection or
disposition of Collateral.

 

14.11   Borrower
acknowledges that the purpose of this Section 14 is to provide
non-exhaustive indications of what actions or omissions by the
Lender would not be commercially unreasonable in the Lender’s
exercise of remedies against the Collateral and that other actions
or omissions by the Lender shall not be deemed commercially
unreasonable solely on account of not being indicated in this
Section. Without limitation upon the foregoing, nothing contained
herein shall be construed to grant any rights to the Borrower or to
impose any duties on the Lender that would not have been granted or
imposed by this Agreement or by applicable law in the absence of
this Section 14.

 

15.   Proceeds
and Expenses of Dispositions.

 

15.1   Borrower
shall pay to the Lender on demand any and all expenses, including
reasonable attorneys' fees (at the usual and customary rates for
services actually rendered) and disbursements incurred or paid by
the Lender in protecting, preserving, defending priority or
enforcing the Lender's rights under or in respect of any of the
Obligations or any of the Collateral. After deducting all of said
expenses, the residue of any proceeds of collection or sale of the
Obligations or Collateral shall, to
the extent actually received in cash, be applied to the
payment of the Obligations in such order or preference as the
Lender may determine, notwithstanding contrary instructions
received by Lender from the Borrower or any other third
party.

 

 

 

27

 

 

16.   Reserved.

 

17.   Fees
and Expenses. Borrower
agrees to reimburse Lender on
demand for:

 

17.1   The
actual amount of all costs and expenses, including attorneys' fees
(on a substantial indemnity basis), which Lender has incurred or may incur
in:

 

17.1.1 Negotiating,
preparing, or administering this Agreement and any documents
prepared in connection herewith;

 

17.1.2 Any
way arising out of or in connection with this Agreement, including
based on tort, and whether or not arising out of a dispute which
does not involve Lender;

 

17.1.3 Protecting,
preserving or enforcing any lien, security interest or other right
granted by Borrower to
Lender or arising under
applicable law, whether or not suit is brought, including but not
limited to the defense of any Avoidance Claims;

 

17.2   The
actual costs, including photocopying (which, if performed by
Lender’s employees, shall
be at the rate of $.10/page), travel, and attorneys' fees and
expenses incurred in complying with any subpoena or other legal
process attendant to any litigation in which Borrower is a party; or

 

17.3   The
actual amount of all costs and expenses, including attorneys' fees
(on a substantial indemnity basis), which Lender may incur in enforcing this
Agreement and any documents prepared in connection herewith, or in
connection with any federal or state insolvency proceeding or any
insolvency proceeding under any Canadian Insolvency Legislation
commenced by or against Borrower, including those (i) arising out
the automatic stay, (ii) seeking dismissal or conversion of the
bankruptcy proceeding, (iii) opposing confirmation of Borrower's plan thereunder or (iv) any
other Insolvency Proceeding.

 

17.4 In
the event that any Party finds it necessary to retain counsel in
connection with a:

 

17.4.1 Contract
claim relating to the interpretation, defense, or enforcement of
this agreement, the prevailing Party shall recover its reasonable
attorney’s fees and expenses from the unsuccessful
Party.

 

17.4.2 Claim
other than a contract claim, then Lender shall recover its
attorney’s fees and expenses from Borrower, irrespective of
the outcome of the dispute, except to the extent such Claim
is determined, pursuant
to a final, non-appealable order issued by a court of competent
jurisdiction, to have resulted from Lender’s gross negligence
or willful misconduct.

 

17.5  In
the event that Borrower asserts a claim against Lender, Borrower
shall do so in writing prior to and as a condition of the
commencement of any litigation by Borrower, setting forth the
specific amount of Borrower’s claim against Lender (the
“Damage Claim”). If any dispute resolution process
results in a judgment against Lender of less than the Damage Claim,
the court shall find that Lender was the prevailing Party for the
purposes of this Section.

 

 

 

28

 

 

17.6   It
shall be presumed (subject to rebuttal only by the introduction of
competent evidence to the contrary) that the amount recoverable is
the amount billed to the prevailing Party by its counsel and that
such amount will be reasonable if based on the billing rates
charged to the prevailing Party by its counsel in similar
matters.

 

18.   Termination.

 

18.1   This
Agreement shall become effective upon the execution and delivery
hereof by Borrower and Lender and shall continue in full force and
effect until the end of the Initial Term.

 

18.2   This
Agreement shall be automatically extended for successive Renewal
Terms unless (i) Borrower has given Lender at least ninety
days’ and no more than one hundred twenty days prior written
notice before the end of the Contractual Termination Date, or (ii)
Lender has given Borrower at least sixty days’ prior written
notice, of their respective intention to have this Agreement
terminate.

 

18.3   Upon
the Termination Date, the unpaid balance of the Obligations shall
be due and payable without demand or notice.

 

19.   Revocation
of Borrower's Right to Sell Inventory Free and Clear of Lender's
Security Interest.

 

19.1 Lender
may, upon the occurrence and during the continuance of an Event of
Default, revoke Borrower's right to sell Inventory free and clear
of Lender's security interest therein.

 

20.   No
Lien Termination without Release

 

20.1 In
recognition of the Lender's right to have its attorneys' fees and
other expenses incurred in connection with this Agreement secured
by the Collateral, notwithstanding payment in full of all
Obligations by Borrower, Lender shall not be required to record any
terminations or satisfactions of any of Lender's liens on the
Collateral unless and until Complete Termination has occurred.
Borrower understands that this provision constitutes a waiver of
its rights under §9-513 of the UCC and any comparable
provisions in the Personal Property Security Act.

 

21.   Account
Stated.

 

21.1 Lender
shall render to Borrower a statement setting forth the transactions
arising hereunder either electronically or by mail. Each statement
shall be considered correct and binding upon Borrower, absent
manifest error, as an account stated, except to the extent that
Lender receives, within thirty days of such statement, written
notice from Borrower of any specific exceptions by Borrower to that
statement.

 

 

 

29

 

 

22.   Retention
of Records.

 

22.1 Lender
shall retain any documents, schedules, invoices or other papers
delivered by Borrower only for such period as Lender, at its sole
discretion, may determine necessary, after which time Lender may
destroy such records without notice to or consent from
Borrower.

 

23.   Notices
to Third Parties.

 

23.1 Lender
shall have the right at any time to give any Guarantor or
Subordinating Creditor notice of any fact or event relating to this
Agreement, as Lender may deem necessary or desirable in Lender's
sole discretion, including, without limitation, Borrower's
financial condition. Borrower shall provide to each Guarantor and
Subordinating Creditor a copy of each notice, statement or report
required to be given to Lender hereunder.

 

24. Information
to Participants.

 

24.1 Lender
may furnish any financial or other information concerning Borrower,
or any of its subsidiaries, heretofore or hereafter provided by
Borrower to Lender, pursuant to this Agreement or otherwise, to any
prospective or actual purchaser of any participation or other
interest in any loans made by Lender to Borrower (whether under
this Agreement or otherwise), to regulators, accountants, other
third parties, or to any prospective purchaser of any securities
issued or to be issued by Lender.

 

25.   Entire
Agreement.

 

25.1 No
promises of any kind have been made by Lender or any third party to
induce Borrower to execute this Agreement. No course of dealing,
course of performance or trade usage, and no parole evidence of any
nature, shall be used to supplement or modify any terms of this
Agreement.

 

26.   Notice.

 

26.1   All
notices shall be effective upon: (a) the sending of an email to one
of the email addresses below or (b) delivery to a recognized
overnight delivery service of a properly addressed notice, delivery
prepaid, with instructions to make delivery on the next business
day. For purposes hereof, the addresses of the Parties are as set
forth below or as may otherwise be specified from time to time in a
writing sent by one Party to the other in accordance with the
provisions hereof. All notices to Lender shall be deemed given upon
actual receipt by a responsible officer of Lender.

 

26.2   The
addresses of the Parties are as set forth below or as may otherwise
be specified from time to time in a writing sent by one Party to
the other in accordance with the provisions hereof:

 

 

 

30

 

 

BORROWERS

 

MusclePharm Corporation

 

Address:   4271
Ironton St. Denver, CO 80239

Attention:   Ryan
Drexler

Phone
Number:  (303) 653-2241

Fax
Number:   (800) 490-7165

Email
Address:  ryan.drexler@musclepharm.com

 

Canada MusclePharm Enterprises Corp

 

Address:   201-3390
South Service Road

Burlington, ON
Canada Postal code L&N 3J5 

Attention:   Ryan
Drexler

Phone
Number:  888-241-0996

Fax
Number:   800-610-9093

Email
Address:  ryan.drexler@musclepharm.com

 

LENDER

 

Crossroads Financial Group, LLC

 

Address:  c/o
The Forum at Stonecrest, LLC

11220
Elm Lane, Suite 200

Charlotte, NC
28277

Attention:  Portfolio
Department

Email:   Lhaskin@crossroadsfinancial.com

 

With
copy to:

 

Crossroads
Financial, LLC, as servicing agent for Crossroads Financial Group,
LLC

Address:  6001
Broken Sound Parkway NW, Suite 620

Boca
Raton, FL 33487

Attn:   Portfolio
Department

Phone
Number: 561-988-7098

Fax
Number:  561-994-5558

Email:   lhaskin@crossroadsfinancial.com

 

 

31

 

 

27.   Counterparts.

 

27.1 This
Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if all
signatures were upon the same instrument. Delivery of an executed
counterpart of the signature page to this Agreement by facsimile
shall be effective as delivery of a manually executed counterpart
of this Agreement, and any Party delivering such an executed
counterpart of the signature page to this Agreement by facsimile to
any other Party shall thereafter also promptly deliver a manually
executed counterpart of this Agreement to such other Party,
provided that the failure to deliver such manually executed
counterpart shall not affect the validity, enforceability, or
binding effect of this Agreement.

 

28.   Amendment
and Waiver.

 

28.1
Only a writing signed by all Parties hereto may amend this
Agreement. No failure or delay in exercising any right hereunder
shall impair any such right that Lender may have, nor shall any
waiver by Lender hereunder be deemed a waiver of any default or
breach subsequently occurring. Lender’s rights and remedies
herein are cumulative and not exclusive of each other or of any
rights or remedies that Lender would otherwise have. In case any
provision (or any part of any provision) contained in this
Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
enforceability shall not affect any other provision (or remaining
part of the affected provision) of this Agreement, but this
Agreement shall be construed as if such invalid, illegal or
unenforceable provision (or part thereof) had never been contained
herein, but only to the extent it is invalid, illegal or
unenforceable.

 

29.   Governing
Law.

 

29.1 This
Agreement and all transactions contemplated hereunder and/or
evidenced hereby shall be governed by, construed under, and
enforced in accordance with the internal laws of the Chosen
State.

 

30.   Venue.

 

30.1 Any
suit, action or proceeding arising hereunder, or the
interpretation, performance or breach hereof, shall, if Lender so
elects, be instituted in any court sitting in the Chosen State, in
the city in which Lender’s chief executive office is located,
or if none, any court sitting in the Chosen State
(“Acceptable
Forums”). Borrower agrees that the Acceptable Forums
are convenient to it, and submits to the jurisdiction of the
Acceptable Forums and waives any and all objections to jurisdiction
or venue. Should such proceeding be initiated in any other forum,
Borrower waives any right to oppose any motion or application made
by Lender to transfer such proceeding to an Acceptable
Forum.

 

 

 

32

 

 

31.   WAIVER
OF JURY TRIAL.

 

THE
PARTIES HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY
CLAIM BASED HEREON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER DOCUMENTS CONTEMPLATED TO BE EXECUTED
IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF
DEALINGS, STATEMENTS, WHETHER VERBAL OR WRITTEN, OR ACTIONS OF ANY
PARTY, INCLUDING, WITHOUT LIMITATION, ANY COURSE OF CONDUCT, COURSE
OF DEALINGS, STATEMENTS OR ACTIONS OF LENDER RELATING TO THE
ADMINISTRATION OF THE TRANSACTION CONTEMPLATED HEREBY OR
ENFORCEMENT OF THE DOCUMENTS EXECUTED IN CONNECTION HEREWITH, AND
AGREE THAT NEITHER PARTY WILL SEEK TO CONSOLIDATE ANY SUCH ACTION
WITH ANY OTHER ACTION IN WHICH A JURY TRIAL CANNOT BE OR HAS NOT
BEEN WAIVED. EXCEPT AS PROHIBITED BY LAW, THE BORROWER HEREBY
WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO CLAIM OR RECOVER ANY
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL
DAMAGES OR ANY DAMAGES OTHER THAN OR IN ADDITION TO, ACTUAL
DAMAGES. THE BORROWER CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF LENDER HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
LENDER WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER. THIS WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR
LENDER TO ENTER INTO THIS AGREEMENT AND ENTER INTO THE TRANSACTION
CONTEMPLATED HEREBY. 

 

32. ARBITRATION.

 

Notwithstanding
anything to the contrary contained herein, any dispute arising out
of or in connection with this Agreement shall, at Lender’s
discretion, be settled exclusively and finally by arbitration
conducted in the City of Charlotte, North Carolina, under the
commercial arbitration rules of the American Arbitration
Association (the “AAA”), such arbitration to apply the
laws of the State of North Carolina (without giving effect to
conflicts of law principles). The arbitration shall be conducted by
three neutral arbitrators, each Party selecting one arbitrator
within thirty days after the date either Party receives a written
demand for arbitration from the other; the two arbitrators shall
then agree upon and appoint a third neutral arbitrator within
thirty days. Should a Party fail to appoint an arbitrator within
the initial thirty day period, the arbitration shall be conducted
by the sole arbitrator appointed; should both arbitrators fail to
appoint the third arbitrator in the second thirty day period, such
arbitrator shall be appointed by the AAA. Nothing in this
arbitration provision shall be deemed to (i) limit the
applicability of any otherwise applicable statutes of limitation or
repose and any waivers contained in this instrument, agreement or
document; or (ii) be a waiver by the Lender of the protection
afforded to it by 12 U.S.C. sec. 91 or any substantially equivalent
state law; or (iii) limit the right of the Lender hereto (a) to
exercise self-help remedies such as (but not limited to) setoff, or
(b) to foreclose against any real or personal property collateral,
or (c) to obtain from a court provisional or ancillary remedies
such as (but not limited to) injunctive relief, writ of possession
or the appointment of a receiver. The Lender may exercise such
self-help rights, foreclose upon such property, or obtain such
provisional or ancillary remedies before, during or after the
pendency of any arbitration proceeding brought pursuant to this
instrument, agreement or document. Neither this exercise of
self-help remedies nor the institution or maintenance of an action
for foreclosure or provisional or ancillary remedies shall
constitute a waiver of the right of any Party, including the
claimant in any such action, to arbitrate the merits of the
controversy or claim occasioning resort to such
remedies.

 

 

 

33

 

 

 

33. Service
Of Process.

 

33.1 Borrower
agrees that Lender may effect service of process upon Borrower by
regular mail at the address set forth herein or at such other
address as may be reflected in the records of Lender, or at the
option of Lender by service upon Borrower’s agent for the
service of process.

 

34.   Assignment.

 

34.1 Lender
may assign its rights and delegate its duties hereunder. Upon such
assignment, Borrower shall be deemed to have agreed to such
assignee and shall owe the same obligations to such assignee and
shall accept performance hereunder by such assignee as if such
assignee were Lender.

 

35.   Time
of the Essence

 

35.1 It
is agreed that time is of the essence in all matters
herein.

 

36. Intercreditor
Agreement.

 

36.1 As
between Lender and Factor, the security interest granted to Lender
hereunder in the Collateral, and the exercise of rights and
remedies by Lender with respect to such Collateral, is subject to
the terms and conditions of the Intercreditor
Agreement.

 

 IN
WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first above
written.

 

BORROWERS:  MusclePharm Corporation, a Nevada
Corporation

 

By: /s/
Ryan Drexler  

      Name:
Ryan Drexler

      Title:
President and CEO

 

Canada
MusclePharm Enterprises Corp., a Canada Corporation

 

By: /s/
Ryan Drexler  

      Name:
Ryan Drexler

      Title:
President and CEO

 

LENDER: Crossroads
Financial Group, LLC, a North Carolina limited liability
company

 

By: /s/
Lee Haskin   

                                                                                        
       Name: Lee Haskin

       Title:
CEO

 

 

 

 

34Exhibit

Exhibit 4.1

	
		
	6.000% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, Par Value $0.01 per share
	6.000% Series A Cumulative Redeemable
Preferred Shares of Beneficial Interest, Par Value $0.01per share

	Number

	Shares

	FORMED UNDER THE LAWS
OF THE STATE OF MARYLAND
	CUSIP 637870 205
SEE REVERSE FOR IMPORTANT NOTICE ON
TRANSFER RESTRICTIONS AND
OTHER INFORMATION

FULLY PAID AND NONASSESSABLE 6.000% SERIES A CUMULATIVE REDEEMABLE PREFERRED SHARES OF BENEFICIAL INTEREST, $0.01 PAR VALUE PER SHARE OF
NATIONAL STORAGE AFFILIATES TRUST
(the "Trust") transferable on the books of the Trust by the holder hereof in person or by its duly authorized attorney upon surrender of this certificate duly endorsed or assigned. This certificate and the shares represented hereby are subject to the laws of the State of Maryland, and to the Declaration of Trust and Bylaws of the Trust, as now or hereafter amended. This certificate is not valid until countersigned by the Transfer Agent.
WITNESS the facsimile seal of the Trust and the facsimile signatures of its duly authorized officers.
	
				
	[SEAL]    Dated:
	 
	 
	 

	 
	Executive Vice President, Chief Financial Officer, Treasurer and Secretary
	 
	Chief Executive Officer

	
			
	COUNTERSIGNED AND REGISTERED:

	BROADRIDGE CORPORATE ISSUER SOLUTIONS, INC.

	TRANSFER AGENT

	 
	 
	 

	 
	 
	 

	 
	 
	 

	BY
	 
	 

	 
	AUTHORIZED SIGNATURE
	 

NATIONAL STORAGE AFFILIATES TRUST
IMPORTANT NOTICE
The Trust will furnish to any shareholder, on request and without charge, a full statement of the information required by Section 8-203(d) of the Corporations and Associations Article of the Annotated Code of Maryland with respect to the designations and any preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption of the shares of each class of beneficial interest which the Trust has authority to issue and, if the Trust is authorized to issue any preferred or special class in series, (i) the differences in the relative rights and preferences between the shares of each series to the extent set, and (ii) the authority of the Board of Trustees to set such rights and preferences of subsequent series. The foregoing summary does not purport to be complete and is subject to and qualified in its entirety by reference to the Declaration of Trust of the Trust, a copy of which will be sent without charge to each shareholder who so requests. Such request must be made to the Secretary of the Trust at its principal office or to the Transfer Agent.
The shares evidenced by this certificate are subject to restrictions on Beneficial Ownership and Constructive Ownership and Transfer for the purpose, among others, of the Trust’s maintenance of its qualification as a real estate investment trust under the Internal Revenue Code of 1986, as amended (the “Code”). Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, (i) no Person may Beneficially Own or Constructively Own Common Shares in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding Common Shares unless such Person is exempt from such limitation or is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (ii) no Person may Beneficially Own or Constructively Own Preferred Shares of any class or series in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the outstanding Preferred Shares of such class or series, unless such Person is exempt from such limitation or is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iii) no Person may Beneficially Own or Constructively Own Equity Shares in excess of 9.8 percent (in value or number of shares, whichever is more restrictive) of the total outstanding Equity Shares, unless such Person is exempt from such limitation or is an Excepted Holder (in which case the Excepted Holder Limit shall be applicable); (iv) no Person may Beneficially Own or Constructively Own Equity Shares that would result in the Trust being “closely held” under Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year) or otherwise cause the Trust to fail to qualify as a REIT; and (v) any Transfer of Equity Shares that, if effective, would result in the Equity Shares being beneficially owned by fewer than 100 persons (as determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio, and the intended transferee shall acquire no rights in such Equity Shares. Any Person who Beneficially Owns or Constructively Owns or attempts or intends to Beneficially Own or Constructively Own Equity Shares which causes or may cause a Person to Beneficially Own or Constructively Own Equity Shares in excess or in violation of the above limitations must immediately notify the Trust or, in the case of such a proposed or attempted transaction, give at least 15 days prior written notice. If any of the restrictions on transfer or ownership as set forth in (i), (ii), (iii) or (iv) above are violated, the Equity Shares in excess or in violation of the above limitations will be transferred automatically to a Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries. Furthermore, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio. All capitalized terms in this legend have the meanings defined in the Trust’s Declaration of Trust, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Equity Shares on request and without charge. Requests for such a copy may be directed to the Secretary of the Trust at its principal office or to the Transfer Agent.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN
OR DESTROYED, THE TRUST WILL REQUIRE A BOND OF INDEMNITY AS A
CONDITION TO THE ISSUANCE OF A REPLACEMENT CERTIFICATE.

The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations:
		
	TEN COM-
	as tenants in common

		
	TEN ENT-
	as tenants by the entireties

		
	JT TEN-
	as joint tenants with right of survivorship and not as tenants in common

	
						
	UNIF GIFT MIN ACT-
	 
	Custodian
	 
	 

	 
	 
	(Cust)
	 
	(Minor)
	 

	 
	 
	 
	 

	 
	under Uniform Gifts to Minors
	 
	 

	 
	 
	 
	 
	 
	 

	 
	Act
	 
	 

	 
	 
	(State)
	 

Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________________________ hereby sell, assign and transfer unto
	
	
	 

	(PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE)

	 

	(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

___________________________________________________________________________ 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest represented by the within Certificate, and do hereby irrevocably constitute and appoint ______________________________________________________________________________________ Attorney to transfer the said 6.000% Series A Cumulative Redeemable Preferred Shares of Beneficial Interest on the books of the within named Trust with full power of substitution in the premises.

Dated __________________________

___________________________________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.

THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE FACE OF THIS CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM.

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