LIMITED NON-RECOURSE GUARANTY AGREEMENT
This
LIMITED NON-RECOURSE GUARANTY AGREEMENT is made as of the 6th
day of
May, 2008, by ▇▇▇▇ ▇▇▇▇▇▇▇▇▇, having an address at c/o ▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇ (the “Guarantor”), to and with Agile Opportunity Fund, LLC, a New York
limited liability company (“Lender”).
WITNESSETH:
Lender
has simultaneously entered into a Securities Purchase Agreement (the
“Agreement”) with Compliance Systems Corporation (“Borrower”), pursuant to which
Lender has purchased the Initial Debenture identified therein and may purchase
the Additional Debenture identified therein pursuant to the terms thereof
(collectively, the “Debentures”).
NOW,
THEREFORE, in order to induce Lender to enter into the Agreement with Borrower,
Guarantor agrees as follows:
1. Guarantor
hereby unconditionally and irrevocably guarantees to Lender the due and punctual
payment in full of all obligations of Borrower under the Debentures. The
obligations and liabilities of Borrower under the Debentures are collectively
referred to as the “Obligations.”
2. This
Guaranty is irrevocable, continuing, indivisible and unconditional and shall
remain in full force and effect regardless of, and shall not discharged,
terminated, impaired or modified in any manner by reason of (a) any amendment,
modification, extension or renewal of the Debentures; (b) the assertion or
exercise by Lender, or the failure of Lender to assert or exercise, against
Borrower any of the rights under or interest in the Debentures or any other
security instruments ; (c) the existence or continuance, or discontinuance,
of
Borrower as a legal entity; (d) the bankruptcy, insolvency, receivership or
reorganization of Borrower, or the making by Borrower of an assignment for
the
benefit of creditors; or (e) the acceptance, alteration, release or substitution
by Lender of any security for the Obligations, whether provided by Borrower,
Guarantor or any other person. This Guaranty is and shall be a direct and
primary obligation of Guarantor, and may be enforced by the Lender without
prior
resort to Borrower or the exhaustion of any rights or remedies that Lender
may
have against Borrower.
3. Notwithstanding
anything to the contrary herein, Guarantor’s Obligations under this Limited
Guaranty Agreement are non-recourse to Guarantor and are limited only to any
net
proceeds received by Lender in connection with any exercise by Lender of
Lender’s rights under the Stock Pledge Agreement executed by Guarantor in favor
of Lender and attached as Exhibit A hereto.
4. Guarantor
hereby expressly waives the following: (a) acceptance and notice of acceptance
of this Guaranty by Lender; (b) notice of extension of time of the payment,
performance and compliance with, or the renewal or alteration of the terms
and
conditions of, any Obligations; (c) notice of any demand for payment, notice
of
default or nonpayment as to any Obligations; (d) all other notices to which
the
Guarantor might otherwise be entitled in connection with the Guaranty or the
Obligations; and (e) trial by jury and the right thereto in any action or
proceeding of any kind or nature, arising on, under or by reason of, or relating
in any way to, this Guaranty or the Obligations.
5. Guarantor
has not and will not set up or claim any counterclaim, set-off or other
objection of any kind to the suit, action or proceeding at law, in equity,
or
otherwise, to any demand or claim that may be instituted or made under and
by
virtue of this Guaranty. All remedies of Lender by reason of or under this
Guaranty are separate and cumulative remedies, and it is agreed that no one
of
such remedies shall be deemed in exclusion of any other remedies available
to
Lender.
6. Guarantor
represents and warrants that the Guarantor has full power and authority to
execute, deliver and perform this Guaranty, and that neither the execution,
delivery nor performance of this Guaranty will violate any law or regulation,
or
any order or decree of any court or governmental authority, or will conflict
with, or result in the breach of, or constitute a default under, any agreement
or other instrument to which Guarantor is a party or by which Guarantor may
be
bound, or will result in the creation or imposition of any lien, claim or
encumbrance upon any property of Guarantor.
7. This
Guaranty may not be changed or terminated orally. No modification or waiver
of
any provision of this Guaranty shall be effective unless such modification
or
waiver shall be in writing and signed by Lender, and the same shall then be
effective only for the period and on the conditions and for the specific
instances and purposes specified in such writing. No course of dealing between
Guarantor and Lender in exercising any rights or remedies hereunder shall
operate as a waiver or preclude the exercise of any other rights or remedies
hereunder.
8. This
Guaranty shall be construed in accordance with, and governed by, the laws of
the
State of New York, without giving effect to such jurisdiction’s principles of
conflict of laws, except to the extent that the validity or the perfection
of
the security interest hereunder, or remedies hereunder, in respect of any
particular Collateral are governed by the laws of a jurisdiction other than
the
State of New York. Each of the parties hereto submits to the personal
jurisdiction of and each agrees that all proceedings relating hereto shall
be
brought in federal or state courts located within Nassau County in the State
of
New York.
9. This
Guaranty shall be binding upon and insure to the benefit of the parties hereto
and their respective heirs, executors, administrators, legal representatives,
successors and assigns.
2
IN
WITNESS WHEREOF, Guarantor has executed this Limited Non-Recourse Guaranty
Agreement as of the 6th day of May, 2008.
/s/
▇▇▇▇
▇▇▇▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇
Address:
▇▇
▇▇▇▇▇
▇▇▇▇
▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone
No.:
(▇▇▇)
▇▇▇-▇▇▇▇
Tax
I.D.
Number:
_____________________________
3
EXHIBIT
A
FORM
OF STOCK PLEDGE AGREEMENT
STOCK
PLEDGE AGREEMENT
This
Stock Pledge Agreement (this "Pledge
Agreement")
is
made as of May 6, 2008 by and between Agile Opportunity Fund, LLC, a Delaware
limited liability company (the "Lender"),
and
the parties indicated on Schedule I hereto (each, a “Pledgor").
WITNESSETH
WHEREAS,
Lender has entered into a Securities Purchase Agreement, dated as of the date
hereof (the “Securities Purchase Agreement”), with Compliance Systems
Corporation, a Nevada corporation (the “Borrower”),
pursuant to which Lender purchased the Initial Debenture identified therein
and
may purchase the Additional Debenture identified therein; and
WHEREAS,
each of the Pledgors has executed a Limited Non-Recourse Guaranty Agreement
and
has agreed to secure the Pledgor’s obligations therein by a pledge of shares of
preferred stock of the Company as set forth on Schedule I hereto (the
“Pledgor Shares”); and
WHEREAS,
capitalize terms not otherwise defined in this Pledge Agreement shall have
the
meanings assigned to such terms in the Securities Purchase
Agreement.
NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:
1. Pledge.
As
collateral security for the full and timely payment of the obligations under
the
Debentures issued pursuant to the Securities Purchase Agreement and the Limited
Non-Recourse Guaranty Agreement of even date herewith executed by Pledgors
in
connection therewith (the “Debenture
Obligations”),
each
of the Pledgors hereby delivers, deposits, pledges, transfers and assigns to
the
Lender and grants to the Lender a security interest in all of the Pledged Shares
and all certificates evidencing the Pledged Shares owned by Pledgor and
identified as such on Schedule I hereto and all other instruments or documents
evidencing the same now owned by the Pledgor and all dividends, cash,
instruments and other property from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of such
Pledged Shares.
The
Pledgors herewith deliver to the Lender the certificates evidencing the Pledged
Shares together with appropriate undated security transfer powers duly executed
in blank. The Pledgors agree that all certificates evidencing the Pledged Shares
shall be marked with the following legend:
THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE PROVISIONS OF A STOCK
PLEDGE AGREEMENT DATED AS OF MAY 6, 2008 BY AND BETWEEN AGILE OPPORTUNITY FUND,
LLC, A DELAWARE LIMITED LIABILITY COMPANY (THE "LENDER"), AND THE PLEDGORS
NAMED
THEREIN, A COPY OF WHICH IS ON FILE AT THE OFFICES OF THE
CORPORATION.
2. Administration
of Security.
The
following provisions shall govern the administration of the Pledged
Shares:
2.1. So
long
as the Pledgors are not in default in respect of any payment or any other
Debenture Obligation (an “Event of Default”), the
Pledgors shall be entitled to act with respect to the Pledged Shares in any
manner not inconsistent with this Pledge Agreement, the Securities Purchase
Agreement, the Debentures or any document or instrument delivered or to be
delivered pursuant to or in connection with any of the foregoing, including,
without limitation, transferring the Pledged Shares to a nominee for purposes
of
voting the Pledged Shares and receiving all cash distributions thereon and
giving consents, waivers and ratifications in respect thereof.
2.2. If,
while
this Pledge Agreement is in effect, any of the Pledgors shall become entitled
to
receive or shall receive any debt or equity security certificate (including,
without limitation, any certificate representing shares of stock received in
connection with the exercise of any option, any certificate representing a
stock
dividend or a distribution in connection with any reclassification, increase
or
reduction of capital, or any certificate issued in connection with any
reorganization), option or right, whether as a dividend or distribution in
respect of, in substitution of, or in exchange for any Pledged Shares, the
Pledgors agree to accept the same as the Lender's agent and to hold the same
in
trust on behalf of and for the benefit of the Lender and to deliver the same
forthwith to the Lender in the exact form received, with the endorsement of
such
Pledgor when necessary and/or appropriate undated security transfer powers
duly
executed in blank, to be held by the Lender, subject to the terms of this Pledge
Agreement, as additional collateral security for the Debenture Obligations.
Notwithstanding the foregoing, it is agreed that each of the Pledgors may
exercise any option or right received as contemplated in the preceding sentence,
and the Lender will exercise any such option or right upon receipt of written
instructions to that effect and any required payments or documents from the
Pledgor, and the securities received upon such exercise of any such option
or
right shall thereafter be held by the Pledgor or the Lender as contemplated
by
the preceding sentence.
2.3. Each
of
the Pledgors shall immediately upon request by the Lender and in confirmation
of
the security interests hereby created, execute and deliver to the Lender such
further instruments, deeds, transfers, assurances and agreements, in form and
substance as the Lender shall reasonably request, including any financing
statements and amendments thereto, or any other documents, as required under
New
York law and any other applicable law to protect the security interests created
hereunder.
2.4. Subject
to any sale by the Lender or other disposition by the Lender of the Pledged
Shares or other property pursuant to this Pledge Agreement and subject to
Sections 5 and 6 herein, the Pledged Shares shall be returned to the Pledgors
upon payment in full of the Debenture Obligations or the conversion in full
of
the Initial Debenture and, if issued, the Additional Debenture into Common
Stock.
2
3. Remedies
in Case of an Event of Default.
3.1. In
case
an Event of Default shall have occurred and be continuing, the Lender shall
have
in each case all of the remedies of a secured party under the Nevada Uniform
Commercial Code, and, without limiting the foregoing, shall have the right,
in
its sole discretion, to sell, resell, assign and deliver all or, from time
to
time, any part of the Pledged Shares, or any interest in or option or right
to
purchase any part thereof, on any securities exchange on which the Pledged
Shares may be listed, at any private sale or at public auction, with or without
demand of performance or other demand, advertisement or notice of the time
or
place of sale or adjournment thereof or otherwise (except that the Lender shall
give ten days' notice to the Pledgors of the time and place of any sale pursuant
to this Section 3), for cash, on credit or for other property, for immediate
or
future delivery, and for such price or prices and on such terms as the Lender
shall, in its sole discretion, determine, the Pledgors hereby waiving and
releasing any and all right or equity of redemption whether before or after
sale
hereunder. At any such sale the Lender may bid for and purchase the whole or
any
part of the Pledged Shares so sold free from any such right or equity of
redemption. The Lender shall apply the proceeds of any such sale first to the
payment of all costs and expenses, including reasonable attorneys' fees,
incurred by the Lender in enforcing its rights under the Debenture or this
Pledge Agreement, second to the payment of accrued and unpaid interest on the
Debenture and third to the payment of unpaid principal of the Debenture, and
the
Pledgors shall continue to be liable for any deficiency. All sales of Pledged
Shares shall be in a pro rata basis amongst the Pledged Shares owned by each
of
the Pledgors as set forth on Schedule I.
3.2. The
Pledgors recognize that the Lender may be unable to effect a public sale of
all
or a part of the Pledged Shares by reason of certain prohibitions contained
in
the Securities Act of 1933, as amended (the "Securities
Act"), or in the rules and regulations promulgated thereunder or
in
applicable state securities laws, but may be compelled to resort to one or
more
private sales to a restricted group of purchasers who will be obliged to agree,
among other things, to acquire the Pledged Shares for their own account, for
investment and not with a view to the distribution or resale thereof. The
Pledgors understand that private sales so made may be at prices and on other
terms less favorable to the seller than if the Pledged Shares were sold at
public sale, and agrees that the Lender has no obligation to delay the sale
of
the Pledged Shares for the period of time necessary to permit the registration
of the Pledged Shares for public sale under the Securities Act and under
applicable state securities laws. The Pledgors agree that a private sale or
sales made under the foregoing circumstances shall be deemed to have been made
in a commercially reasonable manner.
3.3. If
any
consent, approval or authorization of any state, municipal or other governmental
department, agency or authority should be necessary to effectuate any sale
or
disposition by the Lender pursuant to this Section 3 of the Pledged Shares,
each
of the Pledgors will execute all such applications and other instruments as
may
be reasonably required in connection with securing any such consent, approval
or
authorization, and will otherwise use the Pledgor’s best efforts to secure the
same.
3.4. Neither
failure nor delay on the part of the Lender to exercise any right, remedy,
power
or privilege provided for herein or by statute or at law or in equity shall
operate as a waiver thereof, nor shall any single or partial exercise of any
such right, remedy, power or privilege preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or
privilege.
3
4. Pledgors'
Obligations Not Affected.
The
obligations of the Pledgors under this Pledge Agreement shall remain in full
force and effect without regard to, and shall not be impaired or affected by:
(a) any subordination, amendment or modification of, or addition or supplement
to, the Securities Purchase Agreement or the Debentures, or any assignment
or
transfer of any thereof; (b) any exercise or non-exercise by the Lender of
any
right, remedy, power or privilege under or in respect of this Pledge Agreement,
the Securities Purchase Agreement or the Debentures, or any waiver of any such
right, remedy, power or privilege; (c) any waiver, consent, extension,
indulgence or other action or inaction in respect of this Pledge Agreement,
the
Securities Purchase Agreement or the Debentures, or any assignment or transfer
of any thereof; or (d) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like, of the Lender, whether
or
not the Pledgors shall have notice or knowledge of any of the
foregoing.
5. Transfer
by Pledgors.
Each of
the Pledgors will not sell, assign, transfer or otherwise dispose of, grant
any
option with respect to, or mortgage, pledge or otherwise encumber the Pledged
Shares or any interest therein. Notwithstanding the foregoing, the Pledgors
shall have the right to convert into Common Stock such number of Pledged Shares
identified on Schedule I so as to allow each of the Pledgors to sell up to
125,000 shares of Common Stock per month through June 30, 2009, provided
that
such shares of Common Stock are sold at a price not less than $0.05 per
share.
6. Attorney-in-Fact.
The
Lender is hereby appointed the attorney-in-fact of the Pledgors and the
Pledgors' transferees for the purpose of carrying out the provisions of this
Pledge Agreement and taking any action and executing any instrument which the
Lender reasonably may deem necessary or advisable to accomplish the purposes
hereof, including without limitation, the execution of the applications and
other instruments described in Section 3.3 herein, which appointment as
attorney-in-fact is irrevocable as one coupled with an interest.
7. Termination.
Upon
payment in full of the Debenture Obligations or the conversion of all
outstanding amounts due under the Initial Debenture and, if issued, the
Additional Debenture into Common Stock in accordance with the terms of the
Debentures, and upon the Company’s due performance of and compliance with all
the provisions of the Debentures, this Pledge Agreement shall terminate and
the
Pledgors shall be entitled to the return of such of the Pledged Shares as have
not theretofore been sold, released or otherwise applied pursuant to the
provisions of this Pledge Agreement.
8. Notices.
Any
demand upon or notice to a party hereunder shall be effective when delivered
by
hand, against written receipt therefor, two business days following the business
day on which it is properly deposited in the mails, postage prepaid, certified
or registered mail, return receipt requested, or one business day following
deposit with an overnight courier, in each case addressed to such party at
the
address shown below or such other address as the party may advise the other
party in writing:
4
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If
to Lender:
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Agile
Opportunity Fund, LLC
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▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
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▇▇ ▇▇▇▇▇
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With
a copy to:
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▇▇▇▇▇▇▇▇▇
Ball ▇▇▇▇▇▇ ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP
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▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
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Attn:
▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
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If
to a Pledgor:
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At
the Address of such Pledgor as set
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forth
below the Pledgor’s name on the
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signature
page to this Pledge Agreement
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With
a copy to:
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Moritt
▇▇▇▇ Hamroff & ▇▇▇▇▇▇▇▇ LLP
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▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attn:
▇▇▇▇▇▇ ▇. ▇’▇▇▇▇▇▇, Esq.
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9. Binding
Effect, Successors and Assigns.
This
Pledge Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns and, except as provided
below, nothing herein is intended or shall be construed to give any other person
any right, remedy or claim under, to or in respect of this Pledge Agreement.
10. Miscellaneous.
The
Lender and its assigns shall have no obligation in respect of the Pledged
Shares, except to hold and dispose of the same in accordance with the terms
of
this Pledge Agreement. Neither this Pledge Agreement nor any provision hereof
may be amended, modified, waived, discharged or terminated orally, but only
by
an instrument in writing signed by the party against which enforcement of the
amendment, modification, waiver, discharge or termination is sought. The
provisions of this Pledge Agreement shall be binding upon the heirs,
representatives, successors and permitted assigns of the Pledgors. The captions
in this Pledge Agreement are for convenience of reference only and shall not
define or limit the provisions hereof. This Pledge Agreement shall be governed
by and construed and enforced in accordance with the laws of the State of New
York, without regard to the conflicts of law rules thereof. This Pledge
Agreement may be executed simultaneously in several counterparts, each of which
is an original, but all of which together shall constitute one
instrument.
IN
WITNESS WHEREOF,
the
parties hereto, intending to be legally bound by the terms hereof, have caused
this Pledge Agreement to be executed as of the date first above
written.
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THE
LENDER:
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AGILE
OPPORTUNITY FUND, LLC
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By:
Agile Investments, LLC
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By:______________________________
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▇▇▇▇▇
▇▇▇▇▇▇
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Managing
Member
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THE
PLEDGORS:
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_________________________________
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Address:
▇▇ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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_________________________________
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Name:
▇▇▇▇ ▇▇▇▇▇▇▇▇▇
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Address:
▇▇ ▇▇▇▇▇ ▇▇▇▇
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▇▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
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SPIRITS
MANAGEMENT INC.
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By:_______________________________
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Address:
▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ - ▇▇▇▇▇ ▇
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▇▇▇▇▇▇▇▇▇▇,
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6
SCHEDULE
I
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Number
of Shares of
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Certificate
Number
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Name
of Preferred Stockholder
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Preferred
Stock Pledged
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Evidencing
the Pledged Shares
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▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
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Series
A Preferred
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Stock
- 200,000 shares
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AP5
1006
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Spirit
Management Inc.
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Series
B Preferred
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Stock
- 750,000 shares
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BPS
2001
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▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
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Series
B Preferred
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Stock
- 500,000 shares
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BPS
2002
|
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▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇
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Series
C Preferred
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Stock
- 65,000 shares
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CPS
3001
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Series
C Preferred
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||
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Stock
- 341,992 shares
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CPS
3011
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Spirits
Management Inc.
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Series
C Preferred
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Stock
- 288,851 shares
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CPS
3005
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Series
C Preferred
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||
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Stock
- 161,750 shares
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CPS
3010
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▇▇▇▇
▇▇▇▇▇▇▇▇▇
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Series
C Preferred
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Stock
- 161,750 shares
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CPS
3006
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Series
C Preferred
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||
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Stock
- 250,000 shares
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CPS
3007
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Series
C Preferred
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||
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Stock
- 55,000 shares
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CPS
3008
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7