Document:

Exhibit 10.1

 

BUSINESS
LOAN AGREEMENT (ASSET BASED)

 

	Borrower:	Surge
    Components, Inc.	Lender:	Citibank,
    N.A.
	 	95 East
    Jefryn Boulevard	 	6801 Colwell
    Boulevard
	 	Deer Park,
    NY 11729	 	Irving,
    TX 75039

 

THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) dated February 22, 2017, is made and executed between Surge Components, Inc. (“Borrower”)
and Citibank, N.A. (“Lender”) on the following terms and conditions. Borrower has received prior commercial loans from Lender
or has applied to Lender for a commercial loan or loans or other financial accommodations, including those which may be described
on any exhibit or schedule attached to this Agreement. Borrower understands and agrees that: (A) in granting, renewing, or extending
any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth in this Agreement; (B) the
granting, renewing, or extending of any Loan by Lender at all times shall be subject to Lender’s sole judgment and discretion;
and (C) all such Loans shall be and remain subject to the terms and conditions of this Agreement.

 

TERM.
This Agreement shall be effective as of February 22, 2017, and shall continue in full force and effect until such time as
all of Borrower’s Loans in favor of Lender have been paid in full, including principal, interest, costs, expenses, attorneys’
fees, and other fees and charges, or until such time as the parties may agree in writing to terminate this Agreement.

 

LINE
OF CREDIT. Lender agrees to make Advances to Borrower from time to time from the date of this Agreement to the Expiration
Date, provided the aggregate amount of such Advances outstanding at any time does not exceed the Borrowing Base. Within the foregoing
limits, Borrower may borrow, partially or wholly prepay, and reborrow under this Agreement as follows:

 

Conditions
Precedent to Each Advance. Lender’s consideration of Borrower’s request to make any Advance to or for the account of Borrower
under this Agreement is subject to the following conditions precedent, with all documents, instruments, opinions, reports, and
other Items required under this Agreement to be in form and substance satisfactory to Lender:

 

(1)  Lender
shall have received evidence that this Agreement and all Related Documents have been duly authorized, executed, and delivered
by Borrower to Lender.

 

(2)  Lender
shall have received such opinions of counsel, supplemental opinions, and documents as Lender may request.

 

(3)  The
security interests in the Collateral shall have been duly authorized, created, and perfected with first lien priority and shall
be in full force and effect.

 

(4)  All
guaranties required by Lender for the credit facility(ies) shall have been executed by each Guarantor, delivered to Lender, and
be in full force and effect.

 

(5)  Lender,
at its option and for its sole benefit, shall have conducted an audit of Borrower’s Accounts and Guarantor’s Accounts, Inventory,
books, records, and operations, and Lender shall be satisfied as to their condition.

 

(6)  Borrower
shall have paid to Lender all fees, costs, and expenses specified in this Agreement and the Related Documents as are then due
and payable.

 

(7)  There
shall not exist at the time of any Advance a condition which would constitute an Event of Default under this Agreement, and Borrower
shall have delivered to Lender the compliance certificate called for in the paragraph below titled “Compliance Certificate.”

 

(8)  Lender
to have received a fully executed Landlord waiver upon execution of this Agreement for 95 E Jefryn Blvd, Deer Park, NY 11729 in
form and substance satisfactory to Lender.

 

Making
Loan Advances. Advances under this credit facility, as well as directions for payment from Borrower’s accounts, may be requested
orally or in writing by authorized persons. Lender may, but need not, require that all oral requests be confirmed in writing.
Each Advance shall be conclusively deemed to have been made at the request of and for the benefit of Borrower (1) when credited
to any deposit account of Borrower maintained with Lender or (2) when advanced in accordance with the instructions of an authorized
person. Lender, at its option, may set a cutoff time, after which all requests for Advances will be treated as having been
requested on the next succeeding Business Day. Under no circumstances shall Lender be required to make any Advance in an amount
less than $10,000.00.

 

Mandatory
Loan Repayments. If at any time the aggregate principal amount of the outstanding Advances shall exceed the applicable Borrowing
Base, Borrower, immediately upon written or oral notice from Lender, shall pay to Lender an amount equal to the difference between
the outstanding principal balance of the Advances and the Borrowing Base. On the Expiration Date, Borrower shall pay to Lender
in full the aggregate unpaid principal amount of all Advances then outstanding and all accrued unpaid interest, together with
all other applicable fees, costs and charges, if any, not yet paid.

 

Loan
Account. Lender shall maintain on Its books a record of account in which Lender shall make entries for each Advance and such
other debits and credits as shall be appropriate in connection with the credit facility. Lender shall provide Borrower with periodic
statements of Borrower’s account, which statements shall be considered to be correct and conclusively binding on Borrower unless
Borrower notifies Lender to the contrary within thirty (30) days after Borrower’s receipt of any such statement which Borrower
deems to be incorrect.

 

    

     

    

 

COLLATERAL.
To secure payment of the Primary Credit Facility and performance of all other Loans, obligations and duties owed by Borrower
to Lender, Borrower (and others, if required) shall grant to Lender Security Interests in such property and assets as Lender
may require. Lender’s Security Interests in the Collateral shall be continuing liens and shall include the proceeds and products
of the Collateral, including without limitation the proceeds of any insurance. With respect to the Collateral, Borrower agrees
and represents and warrants to Lender:

 

Perfection
of Security Interests. Borrower agrees to execute all documents perfecting Lender’s Security Interest and to take whatever
actions are requested by Lender to perfect and continue Lender’s Security Interests in the Collateral. Upon request of Lender,
Borrower will deliver to Lender any and all of the documents evidencing or constituting the Collateral, and Borrower will note
Lender’s interest upon any and all chattel paper and instruments if not delivered to Lender for possession by Lender. Contemporaneous
with the execution of this Agreement, Borrower will execute one or more UCC financing statements and any similar statements as
may be required by applicable law, and Lender will file such financing statements and all such similar statements in the appropriate
location or locations. Borrower hereby appoints Lender as its irrevocable attorney-in-fact for the purpose of executing any documents
necessary to perfect or to continue any Security Interest. Lender may at any time, and without further authorization from Borrower,
file a carbon, photograph, facsimile, or other reproduction of any financing statement for use as a financing statement. Borrower
will reimburse Lender for all expenses for the perfection, termination, and the continuation of the perfection of Lender’s security
interest in the Collateral. Borrower promptly will notify Lender before any change in Borrowers name including any change to the
assumed business names of Borrower. Borrower also promptly will notify Lender before any change in Borrower’s Social Security
Number or Employer identification Number. Borrower further agrees to notify Lender in writing prior to any change in address or
location of Borrower’s principal governance office or should Borrower merge or consolidate with any other entity.

 

Collateral
Records. Borrower does now, and at all times hereafter shall, keep correct and accurate records of the Collateral, all of
which records shall be available to Lender or Lenders representative upon demand for inspection and copying at any reasonable
time. With respect to the Accounts, Borrower agrees to keep and maintain such records as Lender may require, including without
limitation information concerning Eligible Accounts and Account balances and agings. Records related to Accounts (Receivables)
are or will be located at Borrowers primary place of business. With respect to the Inventory, Borrower agrees to keep and maintain
such records as Lender may require, including without limitation information concerning Eligible Inventory and records itemizing
and describing the kind, type, quality, and quantity of Inventory, Borrower’s Inventory costs and selling prices, and the daily
withdrawals and additions to Inventory. Records related to Inventory are or will be located at Borrower’s primary place of business.
The above is an accurate and complete list of all locations at which Borrower keeps or maintains business records concerning Borrowers
collateral.

 

Collateral
Schedules. Concurrently with the execution and delivery of this Agreement, Borrower shall execute and deliver to Lender schedules
of Accounts and Inventory and schedules of Eligible Accounts and Eligible Inventory in form and substance satisfactory to the
Lender. Thereafter supplemental schedules shall be delivered according to the following schedule: With respect to Eligible Accounts,
schedules shall be delivered as hereinafter provided. With respect to Eligible Inventory, schedules shall be delivered as hereinafter
provided.

 

Representations
and Warranties Concerning Accounts. With respect to the Accounts, Borrower represents and warrants to Lender (1) Each Account
represented by Borrower to be an Eligible Account for purposes of this Agreement conforms to the requirements of the definition
of an Eligible Account; (2) All Account information listed on schedules delivered to Lender will be true and correct, subject
to immaterial variance; and (3) Lender, its assigns, or agents shall have the right at any time and at Borrower’s expense to inspect,
examine, and audit Borrower’s records and to confirm with Account Debtors the accuracy of such Accounts.

 

Representations
and Warranties Concerning inventory. With respect to the Inventory, Borrower represents and warrants to Lender (1) All Inventory
represented by Borrower to be Eligible Inventory for purposes of this Agreement conforms to the requirements of the definition
of Eligible Inventory; (2) All Inventory values listed on schedules delivered to Lender will be true and correct, subject to immaterial
variance; (3) The value of the Inventory will be determined on a consistent accounting basis; (4) Except as agreed to the contrary
by Lender in writing, all Eligible Inventory is now and at all times hereafter will be in Borrower’s physical possession and shall
not be held by others on consignment, sale on approval, or sale or return; (5) Except as reflected in the Inventory schedules
delivered to Lender, all Eligible Inventory is now and at all times hereafter will be of good and merchantable quality, free from
defects; (6) Eligible Inventory is not now and will not at any time hereafter be stored with a bailee, warehouseman, or similar
party without Lender’s prior written consent, and, in such event, Borrower will concurrently at the time of bailment cause any
such bailee, warehouseman, or similar party to issue and deliver to Lender, in form acceptable to Lender, warehouse receipts in
Lender name evidencing the storage of inventory; and (7) Lender, its assigns, or agents shall have the right at any time and at
Borrower’s expense to inspect and examine the Inventory and to check and test the same as to quality, quantity, value, and condition.

 

CONDITIONS
PRECEDENT TO EACH ADVANCE. The request for the initial Advance and each subsequent Advance under this Agreement shall be subject
to the fulfillment to Lender’s satisfaction of ail of the conditions set forth in this Agreement and in the Related Documents.

 

Loan
Documents. Borrower shall provide to Lender the following documents for the Loan: (1) the Note; (2) Security Agreements granting
to Lender security interests in the Collateral; (3) financing statements and all other documents perfecting Lender’s Security
Interests; (4) evidence of insurance as required below-, (5) guaranties; (6) together with all such Related Documents
as Lender may require for the Loan; all in form and substance satisfactory to Lender and Lender’s counsel.

 

Borrower’s
Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the Related Documents. In addition, Borrower shall have
provided such other resolutions, authorizations, documents and instruments as Lender or its counsel, may require.

 

    	 	2	 

     

    

 

Fees
and Expenses Under This Agreement. Borrower shall have paid to Lender all fees, costs, and expenses specified in this Agreement
and the Related Documents as are then due and payable.

 

Representations
and Warranties. The representations and warranties set forth in this Agreement, in the Related Documents, and in any document
or certificate delivered to Lender under this Agreement are true and correct.

 

No
Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default
under this Agreement or under any Related Document.

 

Requesting
Advances. Advances under this Agreement, as well as directions for payment from Borrower’s accounts, may be requested (i)
orally or in writing by Borrower, or (Ii) by use of Lender’s online banking system for Advances bearing or to bear interest at
the Prime Rate or the Minimum Interest Rate, as such terms are defined in a Note providing for borrowing at such interest rates,
pursuant to an online access agreement between Borrower and Lender. Lender may, but need not, require that all oral requests be
confirmed in writing. Borrower agrees to be liable for all sums either (a) advanced in accordance with the instructions of an
authorized person or online user, or (b) credited to any of Borrower’s accounts with Lender.

 

REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement
of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:

 

Organization.
Borrower is a corporation for profit which is, and except as permitted below, at all times shall be, duly organized, validly
existing, and in good standing under and by virtue of the laws of the State of Nevada. Borrower is duly authorized to transact
business in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses
and approvals for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified
as a foreign corporation in all states in which the failure to so qualify would have a material adverse effect on its business
or financial condition. Borrower has the full power and authority to own its properties and to transact the business in which
it is presently engaged or presently proposes to engage. Borrower maintains an office at 95 East Jefryn Boulevard, Deer Park,
NY 11729. Unless Borrower has designated otherwise in writing, the principal office is the office at which Borrower keeps its
books and records including its records concerning the Collateral. Provided Borrower notifies Lender prior to any change in the
location of Borrowers state of organization, Borrower may convert to a Delaware corporation subject to Bank’s receipt of (i) documentation
satisfactory to Bank in its sole discretion demonstrating that after conversion, except for the state of its Incorporation, Borrower
is the same Borrower as the Borrower prior to conversion, and (ii) any and all documents deemed necessary by the Bank to (a) maintain
its perfected security interest in the Collateral and (b) ensure all agreements and documents executed by Borrower, any Guarantor
and any Grantor in connection with the Loan, including but not limited to any guarantees, remain in full force and effect. Borrower
will notify Lender prior to any change in Borrower’s name. Borrower shall do all things necessary to preserve and to keep in full
force and effect its existence, rights and privileges, and shall comply with all regulations, rules, ordinances, statutes, orders
and decrees of any governmental or quasi-governmental authority or court applicable to Borrower and Borrowers business activities,

 

Assumed
Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower
does business: None.

 

Authorization.
Borrowers execution, delivery, end performance of this Agreement and all the Related Documents have been duly authorized by
all necessary action by Borrower and do not conflict with, result in a violation of, or constitute a default under (1) any provision
of (a) Borrower’s articles of incorporation or organization, or bylaws, or (b) any agreement or other instrument binding upon
Borrower or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties.

 

Financial
Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s financial
condition as of the date of the statement, and there has been no material adverse change in Borrowers financial condition subsequent
to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent obligations except
as disclosed in such financial statements.

 

Legal
Effect. This Agreement constitutes, and any Instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their
respective terms.

 

Properties.
Except as contemplated by this Agreement or as previously disclosed in Borrowers financial statements or in writing to Lender
and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns and has good
title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security documents or
financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s legal name, and Borrower
has not used or filed a financing statement under any other name for at least the last five (5) years.

 

    	 	3	 

     

    

 

Hazardous
Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During
the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment, disposal,
release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral. (2) Borrower
has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws; (b) any use,
generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on, under, about
or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened litigation or
claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent or other authorized
user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous Substance on,
under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable federal,
state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes Lender
and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine compliance
of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s expense and
for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part of Lender to Borrower
or to any other person. The representations and warranties contained herein are based on Borrower’s due diligence in investigating
the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives any future claims against
Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs under any such laws, and
(2) agrees to Indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities, damages, penalties,
and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section of the Agreement
or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of a hazardous waste
or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to indemnify and defend,
shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement and shall not
be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.

 

Litigation
and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s financial
condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged
by Lender in writing.

 

Taxes.
To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be filed, have
been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently being or
to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been provided.

 

Lien
Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.

 

Binding
Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective
terms.

 

AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:

 

Notices
of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial condition,
and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions affecting
Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition of any
Guarantor.

 

Financial
Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine
and audit Borrower’s books and records at all reasonable times.

 

Financial
Statements. Furnish Lender with the following:

 

Annual
Statements. As soon as available, but in no event later than one-hundred-twenty (120) days after the end of each fiscal year,
Borrower’s balance sheet and income statement for the year ended, prepared by Borrower.

 

Interim
Statements. As soon as available, but in no event later than sixty (60) days after the end of each of the first three fiscal
quarters, Borrower’s cumulative balance sheet and profit and loss statement for the period ended, prepared by Borrower.

 

Additional
Requirements. Such other financial statements and related information in such form and detail as may be satisfactory to Lender
within thirty (30) days of Lender’s request. For the avoidance of doubt, Borrower agrees that all financial statements and other
information required to be delivered to Lender under this Agreement or any Related Document will be delivered for the most recent
fiscal or calendar period (as applicable) ended immediately prior to the date hereof and each fiscal or calendar period thereafter
as required herein or in any Related Document.

 

All
financial reports required to be provided under this Agreement shall be prepared in accordance with GAAP, applied on a consistent
basis, and certified by Borrower as being true and correct.

 

    	 	4	 

     

    

 

Additional
Information. Furnish such additional information and statements, as Lender may request from time to time.

 

Financial
Covenants and Ratios. Comply with the following covenants and ratios:

 

Minimum
Income and Cash flow Requirements. Borrower shall comply with the following cash flow ratio requirements:

 

Debt
Service Coverage Ratio. Maintain a ratio of Debt Service Coverage equal to or in excess of 1.250 to 1.000. “Debt Service
Coverage Ratio” means, on a consolidated basis with its consolidated subsidiaries and/or affiliates, or on a combined basis with
its affiliates, EBITDA (earnings before interest expense, tax expense, depreciation expense and amortization expense) for the
then current fiscal year of Borrower less the sum of cash taxes, cash dividends/distributions and un-financed capital expenditures,
divided by the sum of current maturities of long-term debt and capital leases, and interest expense. This coverage ratio should
be maintained at all times and may be evaluated at any time.

 

Tangible
Net Worth Requirements. Borrower shall comply with the following net worth ratio requirements:

 

Total
Unsubordinated Liabilities/Tangible Net Worth Ratio. Maintain a ratio of Total Unsubordinated Liabilities/Tangible Net Worth
not in excess of 3.000 to 1.000. Total Unsubordinated Liabilities/Tangible Net Worth means, on a consolidated basis
with Its consolidated subsidiaries and/or affiliates, a ratio of Total Unsubordinated Liabilities divided by Tangible Net Worth.
“Total Unsubordinated Liabilities” means total liabilities less any debt subordinated to Lender, and “Tangible Net Worth”
means total assets less the sum of (1) total liabilities net of any debt subordinated to Lender, (2) net intangible assets, and
(3) all amounts due from shareholders, officers, employees, and affiliates. This leverage ratio should be maintained at all times
and may be evaluated at any time.

 

Except
as provided above, all computations made to determine compliance with the requirements contained in this paragraph shall be made
in accordance with generally accepted accounting principles, applied on a consistent basis, and certified by Borrower as being
true and correct.

 

Insurance.
Maintain fire and other risk insurance, public liability insurance, and such other insurance as Lender may require with respect
to Borrower’s properties and operations, in form, amounts, coverages and with insurance companies acceptable to Lender. Borrower,
upon request of Lender, will deliver to Lender from time to time the policies or certificates of insurance in form satisfactory
to Lender, including stipulations that coverages will not be cancelled or diminished without at least ten (10) days prior written
notice to Lender. Each insurance policy also shall include an endorsement providing that coverage in favor of Lender will not
be impaired in any way by any act, omission or default of Borrower or any other person. In connection with all policies covering
assets in which Lender holds or is offered a security interest for the Loans, Borrower will provide Lender with such lender’s
loss payable or other endorsements as Lender may require.

 

Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as
Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured;
(3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which Insurance
has been obtained, and the manner of determining those values; and (6) the expiration date of the policy.

 

Guaranties.
Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantor
named below, on Lender’s forms, and in the amount and under the conditions set forth in those guaranties.

 

	Name of Guarantor	 	 	Amount	 
	Challenge/Surge Inc.	 	 	Unlimited	 

 

Other
Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower
and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.

 

Loan
Proceeds. Use all Loan proceeds solely for Borrower’s business operations, unless specifically consented to the contrary by
Lender in writing.

 

Taxes,
Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, Imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such assessment,
tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate proceedings,
and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested assessment, tax,
charge, levy, lien, or claim in accordance with GAAP.

 

Performance.
Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower and Lender. Borrower shall notify Lender immediately in
writing of any default in connection with any agreement.

 

Operations.
Maintain executive and management personnel with substantially the same qualifications and experience as the present executive
and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.

 

    	 	5	 

     

    

 

Environmental
Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings as
may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance
defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.

 

Compliance
with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the conduct of Borrowers properties, businesses and operations, and to the use or occupancy of the Collateral,
including without limitation, the Americans With Disabilities Act. Borrower may contest in good faith any such law, ordinance,
or regulation and withhold compliance during any proceeding, including appropriate appeals, so long as Borrower has notified Lender
in writing prior to doing so and so long as, in Lenders sole opinion, Lenders interests in the Collateral are not jeopardized.
Lender may require Borrower to post adequate security or a surety bond, reasonably satisfactory to Lender, to protect Lenders
interest.

 

Inspection.
Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrowers
other properties and to examine or audit Borrower’s books, accounts, and records and to make copies end memoranda of Borrowers
books, accounts, and records. If Borrower now or at any time hereafter maintains any records (Including without limitation computer
generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrowers expense.

 

Environmental
Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission on Borrowers part or on the part of any third party,
on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal, state
or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt thereof
a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or instrumentality
concerning any intentional or unintentional action or omission on Borrowers part in connection with any environmental activity
whether or not there is damage to the environment and/or other natural resources.

 

Additional
Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence
and secure the Loans and to perfect all Security Interests.

 

Continuing
Certification for Advances. By requesting an Advance, Borrower shall be deemed to have certified as of the date of the request,
among other things, that all representations and warranties in this Agreement continue to be true and correct in all material
respects, that no Event of Default exists under this Agreement or will result from the taking of the Advance, and that the Advance,
when aggregated with all outstanding Advances hereunder, will not exceed the Borrowing Base.

 

Borrowing
Base Certificate. For the purpose of determining availability of funds under the Note, Borrower agrees to provide to Lender
as soon as available, but in any event within fifteen (15) days after the end of each calendar month, a Borrowing Base Certificate
in form and substance satisfactory to Lender.

 

Insurance
Requirements. For the avoidance of doubt regarding the requirement in this Agreement that Borrower maintain such insurance
as Lender shall require, and except to the extent specific insurance types, coverages or insurers are specified in this Agreement
or the Related Documents, Lender requires and Borrower agrees to maintain at all times with financially sound and reputable insurance
companies such public liability insurance, property damage insurance and casualty insurance with respect to liabilities, losses
or damage in respect of the assets and businesses of Borrower as may customarily be carried or maintained under similar circumstances
by businesses engaged in the same or similar enterprises, in each case in such amounts, with such deductibles, covering such risks
and otherwise on terms and conditions as shall be customary for such businesses.

 

Eligible
Accounts Aging. Within fifteen (15) days after the end of each month, furnish to Lender an Eligible Accounts (receivables
or payables) Aging Report, of Borrower, Challenge/Surge Inc. and Surge Components Limited, in form and substance satisfactory
to Lender and in any event to include the number of days each such Account has been outstanding and the payment terms of the Accounts
as of the last day of each month, together with a reconciliation with Borrowers general ledger or interim financial statement.

 

Eligible
Inventory Aging. Within fifteen (15) days after the end of each month, furnish to Lender an Eligible Inventory listing, in
form and substance satisfactory to Lender of Borrower, Challenge/Surge Inc. and Surge Components Limited in form and substance
satisfactory to Lender and in any event to include the location and status of the Inventory.

 

RECOVERY
OF ADDITIONAL COSTS. If the imposition of or any change in any law, rule, regulation, guideline, or generally accepted accounting
principle, or the interpretation or application of any thereof by any court, administrative or governmental authority, or standard-setting
organization (including any request or policy not having the force of law) shall impose, modify or make applicable any taxes (except
federal, state or local income or franchise taxes Imposed on Lender), reserve requirements, capital adequacy requirements or other
obligations which would (A) increase the cost to Lender for extending or maintaining the credit facilities to which this Agreement
relates, (B) reduce the amounts payable to Lender under this Agreement or the Related Documents, or (C) reduce the rate of return
on Lender’s capital as a consequence of Lenders obligations with respect to the credit facilities to which this Agreement relates,
then Borrower agrees to pay Lender such additional amounts as will compensate Lender therefor, within five (5) days after Lenders
written demand for such payment, which demand shall be accompanied by an explanation of such imposition or charge and a
calculation in reasonable detail of the additional amounts payable by Borrower, which explanation and calculations shall be conclusive
in the absence of manifest error.

 

    	 	6	 

     

    

 

LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would materially affect Lenders interest in the Collateral or
if Borrower fails to comply with any provision of this Agreement or any Related Documents, including but not limited to Borrower’s
failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrowers behalf may (but shall not be obligated to) take any action that Lender deems appropriate, including
but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other claims, at any lime levied
or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral. All such expenditures
incurred or paid by Lender for such purposes, with the exception of insurance premiums paid by Lender with respect to motor vehicles,
but including the payment of attorneys’ fees and expenses, will then bear interest at the rate charged under the Note from the
date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.

 

NEGATIVE
COVENANTS. Borrower covenants and agrees with Lender that while this Agreement is in effect, Borrower shall not, without the
prior written consent of Lender.

 

Indebtedness
and Liens. (1) Except for trade debt incurred in the normal course of business and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed money, including capital leases, (2) sell, transfer, mortgage,
assign, pledge, lease, grant a security interest in, or encumber any of Borrower’s assets (except as allowed as Permitted Liens),
or (3) sell with recourse any of Borrower’s accounts, except to Lender.

 

Continuity
of Operations. (1) Engage in any business activities substantially different than those in which Borrower is presently engaged,
(2) cease operations, liquidate, merge, transfer, acquire or consolidate with any other entity, change its name, dissolve or transfer
or sell Collateral out of the ordinary course of business, or (3) pay any dividends on Borrower’s stock (other than dividends
payable in its stock), provided, however that notwithstanding the foregoing, but only so long as no Event of Default has occurred
and is continuing or would result from the payment of dividends, if Borrower is a “Subchapter S Corporation” (as defined
in the Internal Revenue Code of 1986, as amended), Borrower may pay cash dividends on its stock to its shareholders from time
to time in amounts necessary to enable the shareholders to pay income taxes and make estimated income tax payments to satisfy
their liabilities under federal and state law which arise solely from their status as Shareholders of a Subchapter S Corporation
because of their ownership of shares of Borrower’s stock, or purchase or retire any of Borrower’s outstanding shares or alter
or amend Borrower’s capital structure.

 

Loans,
Acquisitions and Guaranties. (1) Loan, invest in or advance money or assets to any other person, enterprise or entity, (2)
purchase, create or acquire any interest in any other enterprise or entity, or (3) incur any obligation as surety or guarantor
other than in the ordinary course of business.

 

Agreements.
Enter into any agreement containing any provisions which would be violated or breached by the performance of Borrower’s obligations
under this Agreement or in connection herewith.

 

CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
is in default under the terms of this Agreement or any of the Related Documents or any other agreement that Borrower or any Guarantor
has with Lender, (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy
or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition,
in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (0) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender; or
(E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.

 

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower’s accounts with Lender
and its subsidiaries and affiliates (whether checking, savings, or some other account and whether evidenced by a certificate of
deposit). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower
authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the Indebtedness against any
and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect Lender’s
charge and setoff rights provided in this paragraph.

 

DEFAULT.
Default will occur if payment of the Indebtedness in full is not made immediately when due.

 

EFFECT
OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except where otherwise provided in this Agreement or the Related
Documents, any commitments and obligations of Lender under this Agreement or the Related Documents or any other agreement immediately
will terminate (including any obligation to make further Loan Advances or disbursements), and, at Lender’s option, all Indebtedness
immediately will become due and payable, all without notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the “Insolvency” subsection above, such acceleration shall be automatic and not optional. In
addition, Lender shall have all the rights and remedies provided in the Related Documents or available at law, in equity, or otherwise.
Except as may be prohibited by applicable law, all of Lender’s rights and remedies shall be cumulative and may be exercised singularly
or concurrently. Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make
expenditures or to take action to perform an obligation of Borrower or of any Grantor shall not affect Lender’s right to declare
a default and to exercise its rights and remedies.

 

    	 	7	 

     

    

 

PRIMARY
DEMAND DEPOSIT ACCOUNT. Until such time as all of Borrower’s Loans have been paid in full and this Agreement has been terminated,
Borrower agrees to maintain its Primary Demand Deposit Account with Lender. “Primary Demand Deposit Account” means the
business demand deposit account into which substantially all of Borrower’s receipts from its operations are deposited and from
which substantially all of Borrower’s disbursements for its operations are made. During any period of time Borrower fails to maintain
its Primary Demand Deposit Account with Lender, the rate of interest payable under the Note executed by Borrower in connection
with this Agreement shall be increased by one percent (1%) per annum. Borrower authorizes Lender to automatically deduct all payments
required to be made by this Agreement from Borrower’s Primary Demand Deposit Account.

 

UNCOMMITTED
LOANS. Notwithstanding anything to the contrary herein or elsewhere, Borrower acknowledges and agrees that, (i) each
Loan is uncommitted, (ii) Lender may refuse, at its sole and absolute discretion, to make an Advance without
prior notice to Borrower and (iii) Borrower’s performance or compliance with the terms of this Agreement or
any Related Document shall not obligate Lender to make an Advance or provide any other extension of credit.

 

JURY
WAIVER. BORROWER HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING HEREUNDER OR IN
CONNECTION HEREWITH TO THE EXTENT PERMITTED BY APPLICABLE LAW.

 

MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of this Agreement:

 

Amendments.
This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as
to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given in
writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

 

Attorneys’
Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable attorneys’
fees and Lender’s legal expenses, Incurred in connection with the enforcement of this Agreement. Lender may hire or pay someone
else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement. Costs and expenses include
Lenders reasonable attorneys’ fees and legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees
and legal expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), appeals,
and any anticipated post-judgment collection services. Borrower also shalt pay all court costs and such additional fees as may
be directed by the court.

 

Caption
Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to Interpret or define
the provisions of this Agreement.

 

Consent
to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more participation
interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without any limitation
whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have about Borrower
or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have with respect
to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as all notices of
any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation interests will
be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the participation
agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of offset or counterclaim
that it may have now or later against Lender or against any purchaser of such a participation interest and unconditionally agrees
that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such participation interests may
enforce its Interests irrespective of any personal claims or defenses that Borrower may have against Lender.

 

Governing
Law. This Agreement will be governed by federal law applicable to Lender and, to the extent not preempted by federal law,
the laws of the State of New York without regard to its conflicts of law provisions.

 

Choice
of Venue. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of New
York County, State of New York. Nothing herein shall affect the right of the Lender to bring any action or proceeding against
the Borrower or its property in the courts of any other jurisdiction.

 

No
Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No prior
waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute a
waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions. Whenever
the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld
in the sole discretion of Lender.

 

    	 	8	 

     

    

 

Notices.
Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight
courier, or, if mailed, when deposited in the United States mall, as first class, certified or registered mail postage prepaid,
directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s
address. For notice purposes, Borrower agrees to keep Lender Informed at all times of Borrower’s current address. Unless otherwise
provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed to be notice
given to all Borrowers.

 

Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal, Invalid, or unenforceable as to any other circumstance.
If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending
provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.

 

Subsidiaries
and Affiliates of Borrower. To the extent the context of any provisions of this Agreement makes it appropriate, including
without limitation any representation, warranty or covenant, the word “Borrower” as used in this Agreement shall include all of
Borrower’s subsidiaries and affiliates. Notwithstanding the foregoing however, under no circumstances shall this Agreement be
construed to require Lender to make any Loan or other financial accommodation to any of Borrower’s subsidiaries or affiliates.

 

Successors
and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Documents
shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this Agreement or any Interest therein, without the prior
written consent of Lender.

 

Survival
of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement or the Related Documents. Borrower further agrees that regardless of any investigation
made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time each
Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be paid in full,
or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.

 

Time
is of the Essence. Time is of the essence in the performance of this Agreement.

 

DEFINITIONS.
The following capitalized words and terms shalt have the following meanings when used in this Agreement. Unless specifically
stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words
and terms used in the singular shall include the plural, and the plural shall Include the singular, as the context may require.
Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial
Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the date of this Agreement:

 

Account.
The word “Account” means a trade account, account receivable, other receivable, or other right to payment for goods
sold or services rendered owing to Borrower (or to a third party grantor acceptable to Lender and, solely for reporting
purposes, to Surge Components, Limited).

 

Account
Debtor. The words “Account Debtor” mean the person or entity obligated upon an Account.

 

Advance.
The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s behalf under
the terms and conditions of this Agreement.

 

Agreement.
The word “Agreement” means this Business Loan Agreement {Asset Based), as this Business Loan Agreement (Asset Based)
may be amended or modified from time to time, together with all exhibits and schedules attached to this Business Loan Agreement
(Asset Based) from time to time.

 

Borrower.
The word “Borrower” means Surge Components, Inc. and includes all co-signers and co-makers signing the Note and
all their successors and assigns.

 

Borrowing
Base. The words “Borrowing Base” mean, as determined by Lender from time to time, the lesser of (1) $3,000,000.00
or (2) the sum of (a) 80.000% of the aggregate amount of Eligible Accounts of Borrower and Guarantor (not to exceed
in corresponding Loan amount based on Eligible Accounts $3,000,000.00), plus (b) 30.000% of the aggregate amount
of Eligible Inventory of Borrower and Guarantor (not to exceed in corresponding Loan amount based on Eligible Inventory $1,000,000.00).
In no event shall Eligible Accounts and Eligible Inventory of Surge Components Limited, which must be provided for reporting
purposes, be included in the Borrowing Base.

 

Business
Day. The words “Business Day” mean a day on which commercial banks are open in the Slate of New York.

 

    	 	9	 

     

    

 

Collateral.
The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or personal
property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form of a security
interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral chattel
mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or title retention
contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever, whether created
by law, contract, or otherwise. The word Collateral also includes without limitation all collateral described in the Collateral
section of this Agreement.

 

Default.
The word “Default” means the Default set forth in this Agreement in the section titled “Default”.

 

Eligible
Accounts. The words “Eligible Accounts’ mean at any time, all of Borrower’s Accounts and Guarantor’s Accounts which contain
selling terms and conditions acceptable to Lender and solely for reporting purposes, the Accounts of Surge
Component Limited. The net amount of any Eligible Account against which Borrower may borrow shall exclude all returns, discounts,
credits, and offsets of any nature. Unless otherwise agreed to by Lender in writing, Eligible Accounts do not include:

 

(1)  Accounts
with respect to which the Account Debtor is employee or agent of Borrower or Guarantor.

 

(2)  Accounts
with respect to which the Account Debtor is a subsidiary of, or affiliated with Borrower or Guarantor or their respective shareholders,
officers, or directors.

 

(3)
Accounts with respect to which goods are placed on consignment, guaranteed sale, or other terms by reason of which the payment
by the Account Debtor may be conditional.

 

(4) Accounts
with respect to which Borrower or Guarantor is or may become liable to the Account Debtor for goods sold or services rendered
by the Account Debtor to Borrower or Guarantor, as applicable.

 

(5)  Accounts
which are subject to dispute, counterclaim, or setoff.

 

(6)  Accounts
with respect to which the goods have not been shipped or delivered, or the services have not been rendered, to the Account Debtor.

 

(7)  Accounts
with respect to which Lender, in its sole discretion, deems the creditworthiness or financial condition of the Account Debtor
to be unsatisfactory.

 

(8)  Accounts
of any Account Debtor who has filed or has had filed against it a petition in bankruptcy or an application for relief under any
provision of any state or federal bankruptcy, Insolvency, or debtor-In-relief acts; or who has had appointed a trustee, custodian,
or receiver for the assets of such Account Debtor, or who has made an assignment for the benefit of creditors or has become insolvent
or fails generally to pay Its debts (including its payrolls) as such debts become due.

 

(9)  Accounts
which have not been paid in full within ninety (90) days from the invoice date. The entire balance of any Account of any single
Account Debtor will be ineligible whenever the portion of the Account which has not been paid within ninety (90) days from the
invoice date is in excess of 25.000% of the total amount outstanding on the Account.

 

(10)  That
portion of the Accounts of any single Account Debtor which exceeds 25.000% of all of Borrower’s Accounts and Guarantor’s
Accounts, determined both on an individual and combined basis.

 

(11)  Accounts
which have not been billed or which are subject to retainage or holdbacks by the Account Debtor.

 

(12)  All
Account Debtor deposits and all deferred revenue associated with any Account.

 

Eligible
Inventory. The words “Eligible Inventory” mean, at any time, all of Borrower’s Inventory and Guarantor’s Inventory
as defined below and solely for reporting purposes, the inventory of Surge Component Limited, except:

 

(1)  Inventory
which is not owned by Borrower or Guarantor free and clear of all security interests, liens, encumbrances, and claims of third
parties.

 

(2)  Inventory
which Lender, in its sole discretion, deems to be obsolete, unsalable, damaged, defective, or unfit for further processing.

 

(3)  Inventory
located outside the United States or in transit.

 

(4)  Inventory
held in a warehouse that is not subject to a landlord waiver acceptable to Lender.

 

(5)  All
Account Debtor deposits and all deferred revenue associated with any Inventory.

 

    	 	10	 

     

    

 

Environmental
Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances
relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C. Section
1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state or federal
laws, rules, or regulations adopted pursuant thereto.

 

Event
of Default. The words “Event of Default” mean any of the events of default set forth in this Agreement in the default
section of this Agreement.

 

Expiration
Date. The words “Expiration Date” mean the date of termination of Lender’s commitment to lend under this Agreement.
GAAP. The word “GAAP” means generally accepted accounting principles.

 

Grantor.
The word “Grantor” means each and all of the persons or entities granting a Security interest in any Collateral
for the Loan, inducing without limitation all Borrowers and Guarantors granting such a Security Interest.

 

Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan.

 

Hazardous
Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or physical,
chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment when
improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances,
materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.

 

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

 

Inventory.
The word “Inventory” means all raw materials, work in process, finished goods, merchandise, parts and supplies,
of every kind and description, and goods held for sale or lease or furnished under contracts of service of Borrower (or that of
a third party Grantor acceptable to Lender and solely for reporting purposes, that of Surge Components, Limited)
in which Borrower (or such third party Grantor or Surge Components Limited ) now has or hereafter acquires any right, whether
held by Borrower or others, and all documents of title, warehouse receipts, bills of lading, and all other documents of every
type covering all or any part of the foregoing. Inventory includes inventory temporarily out of Borrower’s (or such third party
Grantor’s or solely for reporting purposes, that of Surge Components Limited’s) custody or possession and
all returns on Accounts.

 

Lender.
The word “Lender” means Citibank, N.A., its successors and assigns.

 

Loan.
The word “Loan” means any and all loans and financial accommodations from Lender to Borrower whether now or hereafter
existing, and however evidenced, including without limitation those loans and financial accommodations described herein or described
on any exhibit or schedule attached to this Agreement from time to time.

 

Note.
The word “Note” means and includes without limitation Borrower’s promissory note or notes, if any, or any credit
agreements or loan agreements, evidencing Borrower’s Indebtedness, as well as any substitute, replacement or refinancing note
or notes or credit agreement or loan agreement therefor.

 

Permitted
Liens. The words “Permitted Liens” mean (1) liens and security interests securing Indebtedness owed by Borrower
to Lender, (2) liens for taxes, assessments, or similar charges either not yet due or being contested in good faith; (3) liens
of materialmen, mechanics, warehousemen, or carriers, or other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (4) purchase money liens or purchase money security interests upon or in any property
acquired or held by Borrower in the ordinary course of business to secure indebtedness outstanding on the date of this Agreement
or permitted to be incurred under the paragraph of this Agreement titled “Indebtedness and Liens”; (5) liens and security
interests which, as of the date of this Agreement, have been disclosed to and approved by the Lender in writing; and (6) those
liens and security Interests which in the aggregate constitute an immaterial and insignificant monetary amount with respect to
the net value of Borrower’s assets.

 

Primary
Credit Facility. The words “Primary Credit Facility” mean the credit facility described in the Line of Credit section
of this Agreement.

 

Related
Documents. The words “Related Documents” mean all promissory notes, credit agreements, loan agreements, environmental
agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages, and all other instruments,
agreements and documents, whether now or hereafter existing, executed in connection with the Loan.

 

    	 	11	 

     

    

 

Security
Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.

 

Security
Interest. The wards “Security Interest” mean, without limitation, any and all types of collateral security, present
and future, whether in the form of a lien, charge, encumbrance, mortgage, deed of trust, security deed, assignment, pledge, crop
pledge, chattel mortgage, collateral chattel mortgage, chattel trust, factors lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever
whether created by law, contract, or otherwise.

 

BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN AGREEMENT (ASSET BASED) AND BORROWER AGREES TO ITS TERMS. THIS
BUSINESS LOAN AGREEMENT (ASSET BASED) IS DATED FEBRUARY 22, 2017.

 

	BORROWER:	 	 	 
	 	 	 	 
	SURGE
    COMPONENTS, INC.	 	 	 
	 	 	 	 	 
	By: 	/s/ Ira Levy	 	By:	/s/ Steven
    Lubman
	 	Ira
    Levy, Chief Executive Officer of Surge Components, Inc.	 	 	Steven
    Lubman, President of Surge Components, Inc.

 

	LENDER:	 
	 	 
	CITIBANK,
    N.A.	 
	 	 	 
	By:		 
	 	Authorized
    Signer	 

 

 

 

12Exhibit 10.2

 

 

PROMISSORY
NOTE

 

 

 

	Borrower: 	Surge
    Components, Inc.	Lender:	Citibank,
    N.A.
	 	95
    East Jefryn Boulevard	 	6801
    Colwell Boulevard
	 	Deer
    Park, NY 11729	 	Irving,
    TX 75039

 

 

 

	Principal
    Amount: $3,000,000.00	 	Date
    of Note: February 22, 2017

 

PROMISE
TO PAY. To repay Borrower’s loan, Surge Components, Inc. (“Borrower”) promises to pay to Citibank, N.A. (“Lender”),
or order, In lawful money of the United States of America, on demand, the principal amount of Three Million & 00/100 Dollars
($3,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance calculated
from the date of the first advance until repayment of all advances.

 

PAYMENT.
Borrower will pay this loan In full Immediately upon Lender’s demand. Borrower will pay regular monthly payments of all
accrued unpaid interest due as of each payment date, beginning March 22, 2017, with all subsequent interest payments to be due
on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied to the
loan in the following order: (1) interest; (2) principal; and (3) charges, fees and penalties. Borrower will pay Lender at Lender’s
address shown above or at such other place as Lender may designate in writing.

 

ADVANCES.
Borrower understands and agrees that all advances under this Note are at Lender’s sole and absolute discretion and Lender,
without notice to the Borrower, may decline to make any advance requested by Borrower, regardless of the manner in which the request
is made.

 

VARIABLE
INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index
which is the greater of the Prime Rate or the Minimum Interest Rate, each as hereafter defined (the “Index”). The
Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon
Borrower’s request. The interest rate change will not occur more often than each day the Index changes. Borrower understands
that Lender may make loans based on other rates as well. Interest on the unpaid principal balance of this Note will be calculated
as described in the “INTEREST CALCULATION METHOD” paragraph using a rate equal to the Index. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by applicable law.

 

INTEREST
CALCULATION METHOD. Interest on this Note is computed on a 365360 basis; that is, by applying the ratio of the interest rate over
a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance
is outstanding. All interest payable under this Note is computed using this method.

 

PRIME
RATE. “Prime Rate” shall mean the prime rate of interest announced by Lender from time to time at its principal
office as its prime commercial lending rate.

 

MINIMUM
INTEREST RATE. “Minimum Interest Rate” shall mean two hundred (200) basis points in excess of the rate of Interest
determined by Lender in accordance with its customary procedures and utilizing such electronic or other quotation sources as it
considers appropriate to be the prevailing rate per annum in effect each banking day at which deposits in United States dollars
for a one month period, determined by Lender in its sole discretion, are offered to Lender by first class banks in the London
Interbank Market shortly after 11:00 a.m. (London time) two banking days prior to the date such rate of interest shall be effective
and applied to existing and future advances with respect to this Note.

 

PREPAYMENT.
Borrower may pay without fee all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed
to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments of accrued unpaid interest.
Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked “paid in
full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender may accept it without
losing any of Lenders rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All
written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment
constitutes “payment in full” of the amount owed or that is tendered with other conditions or limitations or as full
satisfaction of a disputed amount must be mailed or delivered to: Citibank, N.A.; 6801 Colwell Boulevard; Irving, TX 75039.

 

INTEREST
AFTER DEFAULT - RELATED DOCUMENTS. Upon the failure by Borrower to repay all amounts due under this Note upon Lender’s
demand or observe or comply with any of the terms or conditions herein or in any Related Documents, Lender, at its option, may,
if permitted under applicable law, increase the Interest rate on this Note by 3.00%. The interest rate will not exceed the maximum
rate permitted by applicable law. The words “Related Documents” mean all promissory notes, credit agreements, loan
agreements, environmental agreements, guaranties, security agreements, mortgages, deeds of trust, security deeds, collateral mortgages,
and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with any and all
loans and financial accommodations from Lender to Borrower whether now or hereafter existing, and however evidenced, including
without limitation those loans and financial accommodations described herein or described on any exhibit or schedule attached
to this Agreement from time to time. This section replaces and supersedes the section below entitled “Interest After Default,”
which shall be disregarded and have no force or effect.

 

     

     

    

 

	 	PROMISSORY
    NOTE	 
	 	(Continued)	Page
    2

 

 

LATE
CHARGE. If a regularly scheduled interest payment is 15 days or more late, Borrower will be charged 4.000% of the unpaid portion
of the regularly scheduled payment. If Lender demands payment of this loan, and Borrower does not pay the loan in full within
15 days after Lender’s demand, Borrower also will be charged 4.000% of the unpaid portion of the sum of the unpaid principal
plus accrued unpaid interest.

 

INTEREST
AFTER DEFAULT. Upon the failure of the Borrower to pay any amount hereunder on demand, Lender, at its option. may, if permitted
under applicable law, increase the interest rate on this Note to 3.000 percentage points above the index. The interest rate will
not exceed the maximum rate permitted by applicable law.

 

LENDER’S
RIGHTS. Upon the failure of the borrower to pay any amount hereunder on demand, Lender may declare the entire unpaid principal
balance on this Note and all accrued unpaid interest immediately due and payable.

 

ATTORNEYS’
FEES; EXPENSES. Borrower agrees to pay all costs and expenses Lender incurs to collect this Note. This includes, subject to
any limits under applicable law, Lenders reasonable attorneys’ fees and Lender’s legal expenses whether or not there
is a lawsuit, including reasonable attorneys’ fees and expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), and appeals. If not prohibited by applicable law, Borrower also will pay any court
costs, in addition to all other sums provided by law.

 

GOVERNING
LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws
of the State of New York without regard to Its conflicts of law provisions.

 

CHOICE
OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of
New York County, State of New York. Nothing herein shall affect the right of the Lender to bring any action or proceeding against
the Borrower or its property in the courts of any other jurisdiction.

 

RIGHT
OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrowers accounts with Lender
and its subsidiaries and affiliates (whether checking, savings, or some other account and whether evidenced by a certificate of
deposit). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future.
However, this does not include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law. Borrower
authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any
and all such accounts, and, at Lender’s option, to administratively freeze all such accounts to allow Lender to protect
Lender’s charge and setoff rights provided in this paragraph.

 

LINE
OF CREDIT. This Note evidences a revolving line of credit. Advances under this Note, as well as directions for payment from
Borrower’s accounts, may be requested orally or in writing by Borrower or by an authorized person. Lender may, but need
not, require that all oral requests be confirmed in writing. Borrower agrees to be liable for all sums either” (A) advanced
in accordance with the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The
unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender’s internal
records, including daily computer print-outs. Lender will have no obligation to advance funds under this Note if: (A) Borrower
or any guarantor is in default under the terms of this Note or any agreement that Borrower or any guarantor has with Lender, including
any agreement made in connection with the signing of this Note; (B) Borrower or any guarantor ceases doing business or is insolvent;
(C) any guarantor seeks, claims or otherwise attempts to limit, modify or revoke such guarantor’s guarantee of this Note
or any other loan with Lender; (D) Borrower has applied funds provided pursuant to this Note for purposes other than those authorized
by Lender; or (E) Lender in good faith believes itself insecure.

 

     

     

    

 

	 	PROMISSORY
    NOTE	 
	 	(Continued)	Page
    3

 

 

LINE
OF CREDIT - ONLINE ACCESS. Requests for advances under this Note to bear interest at the Prime Rate or the Minimum Interest
Rate, as well as payments from Borrower’s accounts, may also be made on Lender’s online banking system. Borrower agrees
to be liable for all sums either (A) advanced in accordance with the online instructions or (B) credited to any of Borrower’s
accounts with Lender.

 

JURY
WAIVER. BORROWER HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING HEREUNDER OR IN
CONNECTION HEREWITH TO THE EXTENT PERMITTED BY APPLICABLE LAW.

 

SUCCESSOR
INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

 

GENERAL
PROVISIONS. This Note is payable on demand. The inclusion of specific default provisions or rights of Lender shall not preclude
Lender’s right to declare payment of this Note on its demand. If any part of this Note cannot be enforced, this fact will
not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing
them. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive presentment,
demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in
writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability.
All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party
or guarantor or collateral; or Impair, fail to realize upon or perfect Lender’s security interest in the collateral; and
take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that
Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made.
The obligations under this Note are joint and several.

 

BORROWER:

 

	SURGE
    COMPONENTS, INC.	 	 	 
	 	 	 	 	 
	By:	/s/
    Ira Levy	 	By:	/s/
    Steven Lubman
	 	Ira
    Levy, President/Chief Executive Officer of Surge Components, Inc.	 	 	Steven
    Lubman, Vice President of Surge Components, Inc.

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