ROSENTHAL & ROSENTHAL, INC. Financing Agreement

1.1. “Account Debtor” shall mean the account debtor with respect to a Receivable and any other person who is obligated on such Receivable.

1.2. “Affiliate” of a party shall mean any entity controlling, controlled by, or under common control with, the party, and the term "controlling" and such variations thereof shall mean ownership of a majority of the voting power of a party.

1.3.  “Business Day” shall mean a day on which Lender and major banks in New York City are open for the regular transaction of business.

1.4. “Certifying Officers” shall mean, respectively, and/or collectively, Jeffrey P. Lucas and Andrew Sculley, each of whom has concurrently hereto executed and delivered a certificate in form and substance satisfactory to Lender, and any replacement Certifying Officer, satisfactory to Lender.

1.5. “Closing Date” shall mean the date set forth in the first paragraph of this Agreement.

1.6. “Collateral” shall have the meaning given in Section 4 hereof.

1.7. “Collateral Documents” shall mean any and all security agreements, deposit account control agreements and other documents executed and delivered to Lender to secure the Obligations.

1.8. “Current Assets” shall mean, at a particular date, all amounts which would, in conformity with GAAP, be included under current assets on a balance sheet of Borrower, as at such date, including but not limited to (i) cash and cash equivalents, (ii) accounts, (iii) inventory; and (iv) prepaid current assets of Borrower provided however, that such amounts shall not include any amounts for any indebtedness owing by any Affiliate to Borrower.

1.9. “Current Liabilities” shall mean, at a particular date, all amounts which would, in conformity with GAAP, be included under current liabilities on a balance sheet of Borrower, as at such date, but in any event including, without duplications, the amounts of (a) all indebtedness payable on demand, or at the option of the person or entity to whom such indebtedness is owed, not more than twelve

1.10. “Event(s) of Default” shall have the meaning provided in Section 9.1 hereof.

1.11. “Effective Rate” shall have the meaning provided in Section 3.1 hereof.

1.12. “Eligible Inventory” shall mean Inventory consisting of only finished goods owned by Borrower in the ordinary course of its business in which Lender holds a perfected security interest pursuant to the terms hereof, ranking prior to and free and clear of all interests, claims and rights of others, and has received agreements executed by any landlords and bailees where such Inventory may be located in accordance with Section 6.15 hereof, and which is and at all times shall continue to be acceptable to Lender in all respects. Standards of eligibility may be fixed and revised from time to time solely by Lender in its exclusive judgment. In determining eligibility, Lender may, but need not, rely on certificates of inventory and reports furnished by Borrower, but reliance thereon by Lender from time to time shall not be deemed to limit Lender's right to revise standards of eligibility at any time. In general, Inventory shall not be deemed eligible unless it complies in all respects with the representations, covenants and warranties hereinafter set forth, made by Borrower with respect thereto and meets all standards imposed by any governmental agency or authority.

1.13. “Eligible Receivables” shall mean Receivables created by Borrower in the ordinary course of its business which have been validly assigned to Lender as security and in which Lender holds a perfected security interest pursuant to the terms hereof ranking prior to and free and clear of all interests, claims, and rights of others and which are and at all times shall continue to be acceptable to Lender in all other respects. Standards of eligibility may be fixed and revised from time to time solely by Lender in its exclusive judgment. In determining eligibility Lender may, but need not, rely on ageings, reports and schedules of Receivables furnished by Borrower, but reliance thereon by Lender from time to time shall not be deemed to limit Lender's right to revise standards of eligibility at any time. In general, a Receivable shall not be deemed eligible unless the Receivable complies with the Minimum Receivable Eligibility Requirements and the Account Debtor on such Receivable is and at all times continues to be acceptable to Lender and unless each Receivable complies in all respects with the representations, covenants and warranties hereinafter set forth and in the event such Receivable arises from the sale of goods and services, such goods and services meet all standards imposed by any governmental agency or authority; provided, however, that any Receivables owing to Borrower by Rockwell Collins, Inc., whether now existing or hereafter created shall not be “Eligible Receivables” at any time they are subject to a lien in favor of Citibank, N.A., as evidenced by a Uniform Commercial Code UCC-1 Financing Statement filed with the Delaware Department of State, filing number 20101331523.

1.14. “Equipment” shall mean equipment as now or hereafter defined in Article 9 of the UCC.

1.15. “ERISA” shall mean the Employee Retirement Income Security Act.

1.16. “GAAP” shall mean generally accepted accounting principles in the United States of America as in effect from time to time as set forth in the opinions and pronouncements of the Accounting Principles Board and the American Institute of Certified Public Accountants and the elements and pronouncements of the Financial Accounting Standards Board which are applicable to the circumstances as of the date of determination consistently applied.

1.17. “Inventory” shall mean inventory as now or hereafter defined in Article 9 of the UCC.

1.18. INTENTIONALLY OMITTED

1.19. “Lease” and “Leased Premises” shall have the meanings given in Section 9.1 hereof.

1.20. “Loan Account” shall mean the Loan Account as described in Section 2.2 hereof.

1.21. “Loan Availability” shall have the meaning given in Section 2.1 hereof.

1.22. “Loan Documents” shall mean, collectively, this Agreement, the Collateral Documents, and each guaranty, certificate, agreement, or document now or hereafter executed by Borrower, Certifying Officers or any future guarantors and delivered to Lender in connection with the foregoing, or as they may be amended.

1.23. “Margin” shall mean three percent (3%) per annum.

1.24. “Material Adverse Effect”  shall mean a fact, occurrence, act or omission pending or applying to the Borrower, any subsidiary of the Borrower or any of their assets, or which in the opinion of Lender, if adversely determined, could have a material adverse effect on the business, operations, results of operations, assets, liabilities or condition (financial or otherwise) of the Borrower, the impairment of the Borrower’s ability to perform its obligations under this Agreement or any loan document to which it is a party, the ability of the Lender to enforce the Obligations or realize upon the Collateral, or would have a material adverse effect on the value of the Collateral or the amount that Lender would likely to receive (after giving consideration to delays in payment and costs of enforcement) in the liquidation of the Collateral.

1.25. “Maximum Credit Facility” shall mean $5,000,000.

1.26. “Maximum Rate” shall have the meaning provided in Section 10.2 hereof.

1.27. “Minimum Receivable Eligibility Requirements” shall have the meaning given in Section 2.3 hereof.

1.28. “Net Amount of Eligible Receivables” shall mean the gross amount of Eligible Receivables less sales, excise or similar taxes, returns, discounts, claims, credits and allowances of any nature at any time issued, owing, granted, outstanding or claimed, and less (without duplication) all amounts payable by any Account Debtor on Eligible Receivables of such Account Debtor that are unpaid (i) more than 90 days following its invoice date arising from sales made to domestic or foreign customers; and (ii) more than 50 days following its invoice date arising from sales made to contract research and development customers.

1.29. “Obligations” shall mean all obligations, liabilities and indebtedness of Borrower to Lender or an Affiliate of Lender, however evidenced, arising under this Agreement, any other Loan Document (whether by reason of extension of credit, guaranty, indemnity or otherwise), or under any other or supplemental financing provided to Borrower by Lender or an Affiliate of Lender, or independent hereof or thereof, whether now existing or incurred from time to time hereafter and whether before or after termination hereof, absolute or contingent, joint or several, matured or unmatured, direct or indirect, primary or secondary, liquidated or unliquidated, and whether arising directly or acquired from others (whether acquired outright, by assignment unconditionally or as collateral security from another and including participations or interest of Lender in obligations of Borrower to others), and including (without limitation) all of Lender's charges, commissions, fees, interest, expenses, costs and reasonable attorneys' fees, whether incurred by in-house or outside counsel chargeable to Borrower in connection therewith.

1.30. “Over-advance” shall mean any portion of all loans and advances which on any day exceeds the Loan Availability.

1.31. “Permitted Liens” means the liens of Lender granted under the Loan Documents and any other liens, if any, described on the attached Exhibit A.

1.32. “Person” shall mean any person, firm, corporation, partnership, limited liability company, association, company, trust, estate, custodian, nominee or other individual or entity.

1.33. “Prime Rate” shall mean the prime rate from time to time publicly announced in New York City by JPMorgan Chase Bank.

1.34. “Receivables” shall mean all obligations to Borrower for the payment of money arising out of the sale of goods or services by Borrower, now existing or hereafter arising, however evidenced, including all accounts, contract rights, general intangibles (but shall exclude tradenames, trademarks, tradestyles, service marks, copyrights and patents) documents, chattel paper and instruments (as each of such terms is now or hereafter defined in the UCC).

1.35. INTENTIONALLY OMITTED

1.36. “Tangible Net Worth” shall mean, at a particular date (a) the aggregate amount of all assets of Borrower as may be properly classified as such in accordance with GAAP consistently applied excluding such other assets as are properly classified as intangible assets under GAAP, less (b) the aggregate amount of all liabilities of Borrower (excluding subordinated liabilities to Lender) determined in accordance with GAAP. 

1.37. “Working Capital” shall mean the excess, if any, of Current Assets less Current Liabilities.

1.38. “UCC” shall mean the Uniform Commercial Code as in effect from time to time in the State of New York, provided, however, that in the event by reason of mandatory provisions of law, any of the attachment, perfection, or priority of Lender’s security interest in any of the Collateral is governed by the Uniform Commercial Code as in effect in any jurisdiction other than the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such attachment, perfection or priority and for purposes of definitions related to such provisions.

2.1. Subject to the terms and conditions of this Agreement, Lender shall make loans to Borrower from time to time, at Borrower's request, which loans in the aggregate shall not exceed the lesser of (A) the Maximum Credit Facility; or (B) the Loan Availability, (the “Loan Availability”) which means the sum of (i) up to eighty-five percent (85%) of the Net Amount of Eligible Receivables arising from sales made by Borrower to customers located in the United States; plus (ii) the lesser of (x) up to eighty-five percent (85%) of the Net Amount of Eligible Receivables arising from sales made by Borrower to customers located outside of the United States, provided that such Receivables are subject to credit insurance acceptable and assigned to Lender and (y) $2,000,000; plus (iii) the lesser of (x) up to eighty five percent (85%) of the Net Amount of Eligible Receivables arising from contract research and development and (y) $700,000, plus (iv) the lesser of (x) up to fifty percent (50%) of the lower of cost or market value of Eligible Inventory; and (y) $2,000,000, minus such reserves as Lender may deem, in its sole discretion, to be necessary from time to time in good faith thereby reducing the amount of advances which would otherwise be available to Borrower hereunder to reflect events, conditions, contingencies or risks which, as determined by Lender

2.2. The making of any loan in excess of the percentages set forth above shall not be deemed to modify such percentages or create any obligation to make any further such loan. All loans (and all other amounts chargeable to Borrower under this Agreement or any supplement hereto) shall be charged to a Loan Account (the “Loan Account”) in Borrower's name on Lender's books. Lender shall render to Borrower each month a statement of the Loan Account (and all credits and charges thereto) which shall be considered correct and accepted by Borrower and conclusively binding upon Borrower as an account stated except for manifest error to the extent that Lender receives a written notice by registered mail of Borrower's exceptions within 30 days after such statement has been rendered to Borrower.

2.3. A Receivable meets the Minimum Receivable Eligibility Requirements (the “Minimum Eligibility Requirements”) if the Receivable arose from bona fide completed transactions and has not remained unpaid for more than the number of days after the invoice date set forth in Section 1.28;   the amount of the Receivable reported to Lender is absolutely owing to Borrower and payment is not conditional or contingent, (such as consignments, guaranteed sales or right of return or other similar terms); the Account Debtor's chief executive office or principal place of business is located in the United States; and if outside the United States, the Receivable is subject to credit insurance on such terms and conditions as Lender shall require;  the Receivable did not arise from progress billings (other than progress billings arising from contract research and development), retainages or bill and hold sales; there are no contra relationships, setoffs, counterclaims or disputes existing with respect thereto and there are no other facts existing or threatened which would impair or delay the collectability of all or any portion thereof, except, in each such case, as disclosed to Lender and deducted from the amount of the Receivable; the goods giving rise thereto were not at the time of the sale subject to any liens except those permitted in this Agreement; the Account Debtor is not an Affiliate of Borrower;  there has been compliance with the Assignment of Claims Act or similar State or local law, if applicable, if the Account Debtor is the United States or any domestic governmental unit; Borrower has delivered to Lender such documents as Lender may have requested pursuant to Section 4.1 hereof in connection with such Receivable and Lender shall have received verifications of such Receivable, satisfactory to it, if sent to the Account Debtor or any other obligors or any bailees; there are no facts existing or threatened which might result in any adverse change in the Account Debtor's financial condition; not more than 50% of the Receivables of the Account Debtor or its Affiliates owed to Borrower are more than (x) 90 days past their invoice date, for Receivables arising from sales made to domestic or foreign customers and (y) 50 days past their invoice date, for Receivables arising from sales made to contract research and development customers; the total indebtedness to Borrower of the Account Debtor does not exceed the amount of any customer credit limits as reasonably established from time to time on notice to Borrower; the Account Debtor is deemed

3.1. Borrower agrees to pay to Lender each month interest (computed on the basis of the actual number of days elapsed over a year of 360 days) (a) on that portion of the average daily balances in the Loan Account during the preceding month that does not exceed the Loan Availability at a rate per annum (the “Effective Rate”) equal to the Prime Rate plus the Margin and (b) on the amount of Over-advances, if any, at a rate of 3% per annum in excess of the Effective Rate. Any change in the effective interest rates due to a change in the Prime Rate shall take effect on the date of such change in the Prime Rate provided, that, with respect to Lender’s charges, no decrease in the Prime Rate below 3.5% per annum shall be given any effect.

3.2. Borrower shall pay a facility fee payable (i) on the Closing Date to Lender, in the amount of two percent (2%) of the Maximum Credit Facility (of which, half will be remitted by Lender to Michael Nedder); and (ii) on the anniversary of such date in each succeeding year, in the amount of one percent (1%) of the Maximum Credit Facility.

3.3. Borrower shall pay to Lender monthly an administration fee of $1,000 payable in arrears on the first day of each month with respect to the prior month for the stated term of this Agreement.

3.4. A statement of all of Lender's charges shall accompany each monthly statement of the Loan Account and such charges shall be payable by Borrower within 5 days after receipt of such statement. In lieu of the separate payment of charges, Lender at its option, shall have the right to debit the amount of such charges to Borrower's Loan Account, which charges shall be deemed to be first paid by amounts subsequently credited to the Loan Account. Borrower agrees that the minimum charges payable by Borrower to Lender each month under Section 3.1 hereof shall be $2,000.  As more fully provided in Section 10.2 hereof, in no event shall the interest charges hereunder exceed the Maximum Rate.

4.1. At Lender's request, Borrower will provide Lender with confirmatory assignment schedules in form  reasonably satisfactory to Lender, copies of customers' invoices, evidence of shipment or delivery, and such further information as Lender may reasonably require. Borrower will take any and all steps and observe such formalities as Lender may reasonably request from time to time to create and maintain in Lender's favor a valid and first lien upon, security interest in and pledge of all of Borrower's Receivables and all other Collateral, including executing all documents that may be requested by Lender to maintain such security interest in and pledge of the Collateral. Borrower hereby authorizes Lender to file any Financing Statements under the UCC, and renewals and amendments thereof, whether before or after an Event of Default, naming Borrower as debtor that are necessary to perfect and maintain the perfection of Lender’s security interest in the Collateral.  Borrower agrees to take all steps necessary to allow Lender to comply with any Federal or state statute, which, in Lender’s judgment, if not complied with, might afford to any Person an interest in the Collateral that would be superior to Lender’s security interest in the Collateral.

5.1. Borrower shall instruct all customers to remit payments on Receivables to a lockbox controlled by Lender and maintained at Borrower’s expense. Borrower will execute and deliver six (6) originals of the notice in the form of Annex A on its letterhead to be used by Lender as set forth in Section 8.1(d) hereof.  Borrower will, at its own expense and on Lender's behalf, collect as Lender's Collateral and in trust for Lender all payments and prepayments on Receivables which for any reason are not remitted by customers to the lockbox, and shall not commingle such collections with Borrower's own funds. As to all moneys so collected, including all prepayments by customers, Borrower shall on the day received remit all such collections to Lender in the form received by depositing such collections into the lockbox. All amounts collected on Receivables when received by Lender shall be credited to Borrower's Loan Account, adding one (1) Business Day for collection and clearance of remittances sent by wire transfer and three (3) Business Days for collection and clearance of all other remittances. Such credits shall be conditional upon final payment to Lender. Nothing contained in this Section 5.1, or otherwise in this Agreement, shall be deemed to limit Lender's rights and powers pursuant to Section 8 of this Agreement.

5.2. All records, ledger sheets, correspondence, contracts, documentation and computer hardware and software and media relating to or evidencing Receivables or containing information relating to the Receivables shall, until delivered to Lender or removed by Lender from Borrower's premises, be kept on Borrower's premises, without cost to Lender, in appropriate containers in safe places. Lender shall at all reasonable times have full access to and the right to examine and make copies of Borrower's books and

5.3. Borrower will promptly following obtaining knowledge thereof report to Lender all reclaimed, repossessed or returned merchandise, Account Debtor claims and any other matter, which in any case affects the value, enforceability or collectability of Receivables. Any merchandise reclaimed or repossessed by or returned to Borrower, after the occurrence and during the continuation of an Event of Default will, at the cost and expense of Borrower, be set aside marked with the name of the Lender and will be held by Borrower for the account of Lender and subject to Lender's security interest. All claims and disputes relating to Receivables are to be promptly adjusted by Borrower within a reasonable time, at its own cost and expense. Lender may, at its option, after the occurrence and during the continuance of an Event of Default, settle, adjust or compromise claims and disputes relating to Receivables which are not adjusted by Borrower within a reasonable time.  Following the occurrence and during the continuance of an Event of Default, Lender may, at its option, revoke Borrower’s authority to settle or adjust disputes or to further communicate with Account Debtors.

5.4. Borrower shall reimburse Lender on demand for all costs of collection incurred by Lender in efforts to enforce payment of Receivables, recovery of or realization upon any other Collateral, including reasonable attorneys' fees (whether incurred by in-house or outside counsel) and the fees and commissions of collection agencies. All and any fees, costs and expenses, of whatever kind and nature, including taxes of any kind, which Lender may incur in filing public notices, obtaining appraisals of the Collateral, and the reasonable charges of any attorney (whether incurred by in-house or outside counsel) whom Lender may engage in preparing and filing documents, making title or lien examinations and rendering opinion letters, as well as all fees, costs and expenses incurred by Lender (including all reasonable attorneys' fees and including Lender's out of pocket expenses in conducting reasonable periodic field examinations of Borrower and the Collateral (including any costs of third-party examiners) plus Lender's prevailing per diem charge for each of its examiners in the field and office, now $950 per person per day), in administering this Agreement, protecting, preserving, enforcing or foreclosing any security interests or rights granted to Lender hereunder, whether through judicial proceedings or otherwise (including advertising costs), enforcing or collecting the Receivables, or Loan Documents, recovery of or realization upon any other Collateral, or in defending or prosecuting any actions or proceedings arising out of or related to its transactions with Borrower, including actions or proceedings that may involve any person asserting a priority or claim with respect to the Collateral, shall be borne and paid for by Borrower on demand, shall constitute part of the Obligations and may at Lender's option be charged to Borrower's Loan Account. Borrower’s obligations under this section shall survive termination of this Agreement for any reason.

6.1. Borrower is and at all times during the term of this Agreement shall be a Corporation duly organized and presently existing in good standing under the laws of the State of Delaware;  At all times

6.2. The execution, delivery and performance of this Agreement are within the corporate powers of Borrower, have been duly authorized by appropriate corporate action and are not in contravention of the terms of Borrower's charter or by-laws or of any indenture, agreement or undertaking to which Borrower is a party or by which it may be bound. Borrower is not now the subject of any pending governmental investigation or proceeding which could reasonably be expected to have a Material Adverse Effect or of any insolvency proceeding. No receiver or custodian has been appointed for any of the property of Borrower. No consent, approval or authorization of any person, including stockholders of Borrower or any governmental or regulatory authority, that has not been obtained, is required in connection with the execution, delivery and performance by Borrower of this Agreement. Borrower warrants that all financial statements and other reports provided to Lender prior to the Closing Date are true and correct in all material respects.

6.3. There are no pending suits which could reasonably be expected to have a Material Adverse Effect, or any Federal or state tax liens, or judgment liens against Borrower or affecting its assets, except for Permitted Liens. No assets of Borrower are subject to any liens or encumbrances except for Permitted Liens. Borrower has no employee benefit plans subject to ERISA that have accumulated funding deficiencies or liquidity shortfalls as defined and calculated under ERISA or with respect to which Borrower presently has withdrawal liability.

6.4. Borrower is and shall be, with respect to all Inventory, Equipment, intellectual property collateral, cash collateral and other Collateral, the owner thereof free from any lien, security interest or encumbrance of any kind, except for Permitted Liens.  No Receivable or any other Collateral has been or shall hereafter be assigned, pledged or transferred to any person other than the Lender or in any way encumbered or subject to a security interest except to Lender, and except for Permitted Liens, and Borrower shall defend the same against the claims of all persons.

6.5. Borrower's books and records relating to the Receivables and Collateral are and shall be maintained at the office referred to in Section 11 below (except for certain books and records located at the Borrower’s office at 11747 NE First Street, Suite 320, Bellevue, WA through March 31, 2017, which books and records are being moved to 2070 Route 52, Hopewell Junction, NY). Except as otherwise stated below, the principal executive office of Borrower is located at such address and has been so located on a continuous basis for not less than six months. Borrower shall not change such location without Lender's prior written consent, and, upon making any such change, Lender shall be authorized to file any additional financing statements or other documents or notices which may be necessary under the UCC or other applicable law and Borrower shall execute and deliver to Lender any such documents requiring Borrower’s signature, failing which Lender shall be authorized to sign such documents on behalf of Borrower as Borrower’s attorney-in-fact. The listing of offices on Schedule 6.5 hereto represents all of Borrower’s domestic places of business.  Borrower shall notify Lender of the existence of any additional domestic places of business within five (5) Business Days after any such place of business is established.

6.6. All loans and advances requested by Borrower under this Agreement shall be used for the general corporate and business purposes of Borrower and in no event shall Borrower request Lender to remit a loan or advance to an account of Borrower that is used for the specific purpose of purchasing or carrying margin stock (within the meaning of Regulation U of the Federal Reserve Board); or to extend credit to others for the purpose of purchasing or carrying any such margin stock in contravention of

6.7. Borrower shall maintain its shipping forms, invoices and other related documents in a form reasonably satisfactory to Lender and shall maintain its books, records and accounts in accordance with sound accounting practice. Borrower shall furnish to Lender accounts receivable and accounts payable ageings, accounts receivable roll forward reports (in the form attached hereto as Exhibit B) and reconciliations of accounts receivable collateral and the loan balance on the monthly statements provided by Lender to Borrower’s records and inventory designations, monthly, not later than ten (10) Business Days after the end of each month, for accounts receivable reconciliations/loan balances and ten (10) Business Days after the end of each month for Inventory designations covering the previous month.  Borrower shall furnish to Lender such other information regarding the business affairs and financial condition of Borrower as Lender may, from time to time, reasonably request, including (a) audited financial statements as at the end of and for each fiscal year of Borrower, as soon as practical and in any event within ninety (90) days after the end of each such fiscal year, in such detail and scope as Lender may require including a balance sheet, a statement of income, a statement of cash flows and notes, audited by RSM US LLP or other Independent Registered Public Accounting Firm reasonably acceptable to Lender, and (b) financial statements prepared internally as at the end of and for each of the first, second and third fiscal quarterly period of Borrower, as soon as practical and in any event within sixty (60) days after the end of each such fiscal quarter of Borrower, in such detail and scope as Lender may require including without limitation, a balance sheet, a statement of income, a statement of cash flows and notes, certified by the Chief Financial Officer of Borrower (“CFO”); and concurrently with such financial statements, a written statement signed by the CFO to the effect that, (i) CFO has not obtained any knowledge of the existence of any Event of Default, or (ii) if such CFO has obtained from such examination any such knowledge, such CFO shall disclose in such written statement the Event of Default and the nature thereof.  Borrower shall also furnish to Lender such other information regarding the business affairs and financial condition of Borrower and Certifying Officers as Lender may, from time to time, request.   All such statements and information shall fairly present the financial condition of Borrower, and the results of its operations as of the dates and for the periods, for which the same are furnished, subject in the case of quarterly statements to year-end adjustments and the lack of footnotes.

6.8. Borrower shall duly pay and discharge all federal and all material state taxes, assessments, contributions and governmental charges upon or against it or its properties or assets prior to the date on which penalties attach thereto. Borrower shall be liable for any tax (excluding a tax imposed on the overall net income of Lender) imposed upon any transaction under this Agreement or giving rise to the Receivables or which Lender may be required to withhold or pay for any reason and Borrower agrees to indemnify and hold Lender harmless with respect thereto, and to repay Lender on demand the amount thereof.  Until paid by Borrower, Borrower’s liability under this paragraph shall be added to the Obligations secured hereunder, and may at Lender's option be charged to Borrower's Loan Account but shall nonetheless be independent hereof and continue notwithstanding any termination hereof.

6.9. With respect to each Receivable, Borrower hereby represents and warrants that: each Receivable represents a valid and legally enforceable indebtedness based upon an actual and bona fide sale and delivery of property in the ordinary course of Borrower's business which has been completed and finally accepted by the Account Debtor and for which the Account Debtor is unconditionally liable to make payment of the amount stated in each invoice, document or instrument evidencing the Receivable in accordance with the terms thereof, without offset, defense or counterclaim; each Receivable is required to

6.10. Borrower shall until payment in full of all Obligations to Lender and termination of this Agreement cause to be maintained at the end of each of its fiscal quarters, Tangible Net Worth in an amount not less than $13,000,000 and Working Capital of not less than $4,000,000. 

6.11. Prior to the making of the initial loans hereunder: Lender shall have received an opinion of Borrower’s counsel in the form, and as to the matters, reasonably required by Lender; Lender shall have received good-standing certificates and other certifications with respect to Borrower and any other Person liable on the Obligations from such governmental authorities as Lender shall require; Lender or its agents shall have completed such examinations and appraisals of the Collateral and such searches with regard to Borrower and its assets, as Lender shall require, all at Borrower’s expense; Lender shall have received from Borrower evidence of termination of the lien in favor of Access Business Finance, LLC as evidenced by a Uniform Commercial Code UCC-1 Financing Statement filed with the Department of State, filing number ###-###-####, and any other evidence Lender may require that on the Closing Date there shall be no liens on the Collateral other than Permitted Liens; a lockbox and deposit account complying with Section 5.1 shall have been established which is satisfactory to Lender; Lender shall have received evidence, in form satisfactory to Lender, that Borrower has obtained such casualty insurance policies meeting the requirements of Section 7 hereof; the Loan Availability shall be in an amount equal to or greater than $500,000 plus the sum of all amounts required to be disbursed at closing for the purpose of paying Lender’s expenses and attorneys’ fees chargeable to Borrower hereunder and all amounts required to be paid to creditors to induce them to release any liens in the Collateral that are not Permitted Liens; and,   Lender shall have received evidence that it has a perfected first and only security interest in all Collateral.

6.12. During the term of this Agreement, Borrower shall not make any sales to customers by accepting a credit card issued to such customers, except for sales not to exceed $50,000 per month unless Borrower has prior thereto entered into a merchant agreement with a processor, relating to sales made using such credit card, on terms that are acceptable to Lender, and such processor has agreed to remit the proceeds of such sales to an account of Borrower with respect to which Lender has control in accordance with Section 9-104 of the UCC.

6.13. Attached as Exhibit C is a listing of all of Borrower’s patents, trademarks, copyrights and domain names. So long as any Obligations remain outstanding, Lender is hereby irrevocably authorized to use any of Borrower’s patents, trademarks, copyrights and domain names for the purpose of enforcing Lender’s security interest in the Collateral and disposing of any of the Collateral.

6.14. So long as any Obligations remain outstanding, Borrower shall (i) advise Lender of the existence of any commercial tort claims in favor of and asserted by Borrower, which advice shall be given to Lender in writing no later than 10 days after Borrower asserts such a claim in its favor; (ii) within 5 Business Days after Lender’s request therefor, provide Lender with a listing of all deposit accounts and securities accounts maintained by Borrower and a listing of all letters of credit issued and outstanding in favor of Borrower as beneficiary and, if requested by Lender, arrange for the execution by each depository bank and financial intermediary of a control agreement in Lender’s favor with respect to such accounts, and

6.15. Until indefeasible payment in full of the Obligations, Borrower shall not (i) make any loans or advances to officers, directors, shareholders or Affiliates; (ii) engage in any other transactions with Affiliates except on terms similar to those that would be in effect in transactions between unrelated parties (iii) incur or repay indebtedness for borrowed money (except indebtedness to CIT Technology Financing SRVC Inc. (“CIT”) to finance Borrower’s insurance premiums) or guaranty the obligations of Affiliates or other Persons; (iv) sell, transfer or otherwise dispose of any assets except for sales of Inventory in the normal course and dispositions of old or obsolete assets or assets no longer used or useable by Borrower; (v) declare any dividends, redeem or repurchase any stock, or make any other distributions in respect of its stock; or (vi) enter into any agreements to buy or sell goods on consignment terms; or (vi) merge with or into any entity or undergo any other restructuring or reorganization including reorganizations that would result in Borrower being organized under the laws of a state other than Delaware.

6.16. Borrower shall not (i) conduct any business or engage in any transaction or dealing with any Blocked Person (as hereafter defined), including the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person; (ii) deal in, or otherwise engage in any transaction relating to any property or interests in property blocked pursuant to Executive Order No. 13224; or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224, the USA Patriot Act or any other Anti-Terrorism Law.  Borrower shall deliver to Lender any certification or other evidence requested from time to time by Lender in its sole discretion, confirming Borrower’s compliance with this Section.  Borrower is not in violation of any Anti-Terrorism Law  and Borrower is not a Person (a “Blocked Person”) that (a) is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (b) is owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224; (c) any financial institution is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law; (d) commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224; (e) is named as a “specially designated national” on the most current list published by the U.S. Treasury Department Office of Foreign Asset Control at its official website or any replacement website or other replacement official publication of such list, or is affiliated or associated with a person or entity listed above;  (f) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or deals in, or otherwise engages in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224.

6.17. Borrower shall deliver to Lender within 5 days of any of Borrower’s senior officers obtaining knowledge of any condition or event which constitutes, or might reasonably be expected to constitute, an Event of Default or that any Person has given notice to Borrower or any Affiliates of Borrower or taken any other action with respect to a claimed Event of Default, Borrower shall deliver to Lender an officer’s certificate describing the same and the period of existence thereof and specifying what action Borrower has taken, are taking and propose to take with respect thereto

7.1. Borrower covenants and agrees that, on and after the date hereof, until payment in full of the Obligations and termination of this Agreement, Borrower shall obtain and maintain in effect, at Borrower’s sole expense, policies of casualty insurance as more specifically set forth on Exhibit D annexed hereto, in form and substance satisfactory to Lender, each of which shall have ratings of at least “A-VIII” by A.M. Best Company, and shall otherwise be approved by Lender.

7.2. Subject to the provisions of Section 7.3 allowing Borrower to collect and apply certain insurance proceeds, Borrower hereby directs all insurers under such policies of casualty insurance to pay all proceeds of casualty insurance policies directly to Lender as herein provided.  Borrower irrevocably makes, constitutes and appoints Lender (and each officer, employee or agent designated by Lender) as Borrower’s true and lawful attorney-in-fact for the purpose of (i) making, settling and adjusting such claims under all such policies of casualty insurance if Borrower fails to make such claim within fifteen (15) days after any casualty or fails to diligently prosecute such claim, (ii) endorsing the name of Borrower on any check, draft, instrument or other item of payment pertaining to the Collateral received by Borrower or Lender pursuant to any such policies of casualty insurance, and (iii) making all determinations and decisions with respect to such policies of casualty insurance as they relate to the Collateral.  Borrower agrees to provide Lender with prompt written notice of any change, amendment or modification to any casualty insurance policy.

7.3. Lender is authorized to collect all such casualty insurance proceeds and, at Lender’s option:  (i) apply (A) such proceeds against the outstanding principal amount of the Obligations, or (ii) allow Borrower to use such proceeds, or a part thereof, to repair any damage or restore, replace or rebuild the Collateral that was the subject of such proceeds; provided, however, that in the absence of an Event of Default, if the proceeds of insurance are less than $75,000,  Borrower may collect such proceeds and shall use the proceeds to repair or replace the subject Collateral and shall provide notice thereof to Lender.  Notwithstanding anything herein to the contrary, at any time when an Event of Default has occurred and is continuing, if Lender receives proceeds of casualty insurance or is holding proceeds of casualty insurance theretofore received by Lender, Lender may apply the same to the Obligations at any time and from time to time as it may determine in its discretion.  If no Event of Default has occurred and is continuing and Borrower has been permitted to apply casualty insurance proceeds to repair, restore, replace or rebuild property, then Lender will return any casualty insurance proceeds to Borrower which Lender continues to hold after any such repair, restoration, replacement or rebuilding of such property is completed to Lender’s satisfaction as determined in its discretion.

7.4. If Borrower fails to provide Lender with evidence of the casualty insurance coverage required by this Agreement, Lender may purchase casualty insurance, at Borrower’s expense, to protect Lender’s interests in the Collateral.  This casualty insurance may, but need not, protect the interests of Borrower.  The coverage that Lender purchases may not pay any claim that Borrower may make or any

8.1. Borrower hereby constitutes Lender or its agent, or any other person whom Lender may designate, as Borrower's attorney, at Borrower's own cost and expense to exercise at any time all or any of the following powers which, being coupled with an interest, shall be irrevocable until all Obligations have been paid in full: (a) to receive, take, endorse, assign, deliver, accept and deposit, in Lender's or Borrower's name, any and all checks, notes, drafts, remittances and other instruments and documents relating to Receivables and proceeds thereof; (b) to receive, open and dispose of all mail addressed to Borrower and to notify, following the occurrence and during the continuation of an Event of Default, postal authorities to change the address for delivery thereof to such address as Lender may designate; (c) following the occurrence and during the continuation of an Event of Default, to transmit to Account Debtors indebted on Receivables notice of Lender's interest therein and to request from such Account Debtors at any time, in Borrower's name or in Lender's or that of Lender's designee, information concerning the Receivables and the amounts owing thereon; (d) following the occurrence and during the continuation of an Event of Default, to notify Account Debtors to make payment directly to Lender, including by sending the letter attached hereto as Annex A; and (e)following the occurrence and during the continuation of an Event of Default, to take or bring, in Borrower's name or Lender's, all steps, actions, suits or proceedings deemed by Lender necessary or desirable to effect collection of the Receivables. In addition, to the extent permitted by law, Lender may file one or more financing statements, naming Borrower as debtor and Lender as secured party and indicating therein the types or describing the items of Collateral. Without limitation of any of the powers enumerated above, Lender is hereby authorized to accept and to deposit all collections in any form, relating to Receivables, received from or for the account of Account Debtors (whether such collections are remitted directly to Lender by Account Debtors or are forwarded to Lender by Borrower), including remittances  which may reflect deductions taken by Account Debtors, regardless of amount, the Loan Account of Borrower to be credited only with amounts actually collected on Receivables in accordance with Section 5.1. Borrower hereby releases (i) any bank, trust company or other firm receiving or accepting such collections in any form, and (ii) Lender and its officers, employees and designees, from any liability arising from any act or acts hereunder or in furtherance hereof, whether of omission or commission, and whether based upon any error of judgment or mistake of law or fact, except for Lender’s gross negligence or willful misconduct.

9.1. Borrower agrees that all of the loans and advances made by Lender under the terms of this Agreement, together with all Obligations of Borrower as defined herein (unless otherwise provided in any instrument evidencing the same or agreement relating thereto), shall be payable by Borrower at Lender's demand at the office of Lender in New York, New York. In addition, all Obligations shall be, at Lender's option, due and payable without notice or demand upon termination of this Agreement or upon the occurrence of any one or more of the following “Event(s) of Default”: ( if Borrower shall fail to pay to Lender when due any amounts owing to Lender under any Obligation, or if there shall occur any Event of

9.2. The enumeration of the foregoing rights and remedies is not intended to be exhaustive, and such rights and remedies are in addition to and not by way of limitation of any other rights or remedies Lender may have under the UCC or other applicable law. Lender shall have the right, in its sole discretion, to determine which rights and remedies, and in which order any of the same, are to be exercised, and to determine which Collateral is to be proceeded against and in which order, and the exercise of any right or remedy shall not preclude the exercise of any others, all of which shall be cumulative. No act, failure or delay by Lender shall constitute a waiver of any of its rights and remedies. No single or partial waiver by Lender of any provision of this Agreement, or breach or default thereunder, or of any right or remedy which Lender may have shall operate as a waiver of any other provision, breach, default, right or remedy or of the same provision, breach, default, right or remedy on a future occasion. Borrower waives presentment, notice of dishonor, protest and notice of protest of all instruments included in or evidencing any of the Obligations or the Collateral and any and all notices or demands whatsoever (except as expressly provided herein). Lender may, at all times, proceed directly against Borrower to enforce payment of the Obligations and any of its other rights and remedies under the Loan Documents and shall not be required to first enforce its rights in the Collateral or any other security granted to it. Lender shall not be required to take any action of any kind to preserve, collect or protect its or Borrower's rights in the Collateral or any other security granted to it.

9.3. EACH OF BORROWER AND LENDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY LITIGATION WITH RESPECT TO ANY MATTER CONNECTED WITH THIS AGREEMENT, THE OBLIGATIONS, THE RECEIVABLES, OR ANY OTHER TRANSACTION BETWEEN THE PARTIES AND EACH OF BORROWER AND LENDER HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND OF ANY FEDERAL COURT LOCATED IN SUCH STATE IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE OBLIGATIONS. IN ANY SUCH LITIGATION BORROWER WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO BORROWER AT ITS PLACE OF BUSINESS SET FORTH ABOVE.

9.4. Borrower hereby agrees to indemnify Lender and hold Lender harmless from and against any liability, loss, damage, suit or proceeding ever suffered or incurred by Lender (including attorneys’ fee

10.1. This Agreement shall become effective upon acceptance by Lender at its office in the State of New York, and shall continue in full force and effect until December 31, 2019 (the “Renewal Date”) and from year to year thereafter, unless (a) sooner terminated as herein provided, or (b) as otherwise agreed by both Lender and Borrower in writing.  Following the Renewal Date and in addition to its rights following and during the continuance of an Event of Default, Lender shall have the right to terminate this Agreement at any time by giving Borrower sixty (60) days’ prior written notice.  Borrower may terminate this Agreement on the Renewal Date or on the anniversary of the Renewal Date in any year by giving Lender not less than sixty (60) days' prior written notice by registered or certified mail, return receipt requested (which notice may be rescinded by a notice given in the same manner prior to the expiration of the applicable sixty day period).  Should an Event of  Default occur and be continuing hereunder, this Agreement will be terminable by Lender at any time and Borrower shall, upon any such termination by Lender, or upon termination of this Agreement effective prior to the end of its current term for any reason other than termination by Lender in the absence of an Event of Default or termination by the Borrower as provided in the previous sentence, pay to Lender, as part of the Obligations, in addition to amounts payable under Section 9.1 hereof, an amount equal to (a) two percent (2%) of the Maximum Credit Facility then in effect, if such termination occurs on or prior to the first anniversary of the Closing Date; and (b) one half percent (0.5%) of the Maximum Credit Facility then in effect, if such termination occurs after the first anniversary of the Closing Date. In the event that Borrower terminates other than as provided herein, as a condition to such termination, Borrower shall pay to Lender the foregoing amounts in addition to performance of any other conditions to such termination.  No termination of this Agreement, however, shall relieve or discharge Borrower of its duties, obligations and covenants hereunder until such time as all Obligations have been paid in full, and the continuing security interest in Receivables and other Collateral granted to Lender hereunder or under any other agreement shall remain in effect until such Obligations have been indefeasibly paid and performed in full and any provision hereof that by its terms survives termination of this Agreement shall survive pursuant to such terms. No provision hereof shall be modified or amended orally or by course of conduct but only by a written instrument expressly referring hereto signed by both parties. This Agreement and the Loan Documents embody the entire agreement between Lender and Borrower as to the subject matter hereof and supersede all prior agreements (whether oral or written) as to the subject matter hereof.  This Agreement shall be binding upon and inure to the benefit of Borrower and Lender and their respective heirs, executors, administrators, successors and assigns, provided, however, that neither Lender nor Borrower may assign this Agreement or its rights hereunder without the prior written consent of the other party hereto.  Borrower consents to Lender’s sale of participations in the loans made under this Agreement, as long as Lender remains obligated as the lender hereunder and retains all rights of the Lender hereunder.

10.2. ALL LOANS SHALL BE DISBURSED BY LENDER FROM ITS OFFICE IN THE STATE OF NEW YORK, SHALL BE PAYABLE BY BORROWER AT SUCH OFFICE, AND THIS AGREEMENT AND ALL TRANSACTIONS THEREUNDER SHALL BE DEEMED TO BE CONSUMMATED IN SUCH STATE AND SHALL BE GOVERNED BY AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THAT STATE.  If any part or provision of this Agreement is invalid or in contravention of the applicable laws or regulations of any controlling jurisdiction, such part or

11.1. Unless otherwise specifically provided in this Agreement, any notices, requests, demands or other communications permitted or required to be given under this Agreement shall be in writing and shall be sent by facsimile, hand delivery or by a nationally recognized overnight delivery service, to the addresses and facsimile numbers of the parties set forth below (or to such other address or facsimile number as a party may hereafter designate by a notice to the other that complies with this section) and shall be deemed given (a) in the case of a notice sent by facsimile, when received by the recipient if the sending party receives a confirmation of delivery from its own facsimile machine;  and (b) in the case of a notice that is hand delivered or sent by such overnight courier, when delivered (provided that the sending party retains a confirmation of delivery).  Any notice which, pursuant to the terms hereof must be sent by Borrower by certified or registered mail shall be deemed given and effective when received by Lender, or Borrower, as the case may be.

11.2. Nothing contained herein shall impose on Lender any liability for any contracts, undertakings or other obligations of Borrower to others, including obligations of Borrower to any Account Debtor for breach of the terms of any contract of sale between Borrower and the Account Debtor.

11.3. Wherever in this Agreement unless otherwise provided (i) the term “including” appears, such term shall be deemed to mean “including without limitation”; (ii) the term “satisfactory” or “acceptable” to Lender appears, such terms shall be deemed to mean “acceptable” or “satisfactory” to Lender and its counsel in their sole  and absolute discretion; and (iii) the terms “in the opinion” or “in the judgment” of Lender appear, such terms shall be deemed to mean “in the sole opinion, reasonably exercised”,  and “in the sole judgment, reasonably exercised” of Lender and its counsel.

11.4. Terms used in this Agreement that are not defined in this Agreement but are defined in the UCC shall have the meanings given in the UCC.

11.5. DRAFTING PRESUMPTION. In the event of any ambiguity or dispute regarding the definition or meaning of any word, phrase, or other verbiage, or the construction of any provision in this Agreement, there shall be no presumption favoring the definition, meaning or construction propounded by