CONSENT
THIS
CONSENT
(this
“Consent”)
is
dated as of September 30, 2006, by and between COMPLIANCE SYSTEMS CORPORATION,
a
Nevada corporation (the “Company”),
CALL
COMPLIANCE, INC., a New York Corporation and wholly-owned subsidiary of the
Company (“Call
Compliance”)
and
XXXXXXXXXX EQUITY PARTNERS, LTD., a Delaware limited partnership (“Xxxxxxxxxx”)
(collectively, referred to hereinafter as the “Parties”).
RECITALS:
WHEREAS,
the
Parties have entered into that certain Securities Purchase Agreement, dated
as
of March 8, 2006 (the “SPA”),
pursuant to which the Company issued to Xxxxxxxxxx up to One Million Dollars
($1,000,000) of secured convertible debentures (the “Convertible
Debentures”)
which
were converted into shares of the Company’s common stock;
WHEREAS,
to
induce Xxxxxxxxxx to enter into the transactions contemplated by (a) the SPA,
(b) the Convertible Debentures, (c) that certain Investor Registration Rights
Agreement, of even date with the SPA, by and between the Parties, (d) that
certain Pledge and Escrow Agreement, by and among the Parties and Xxxxx
Xxxxxxxx, Esq. and (e) those certain Irrevocable Transfer Agent Instructions,
of
even date with the SPA, by and among the Company, Xxxxxxxxxx, the Transfer
Agent
and Xxxxx Xxxxxxxx (collectively, the “Transaction
Documents”),
Xxxxxxxxxx entered into a Security Agreement with each of the wholly-owned
subsidiaries of the Company, including Call Compliance, pursuant to which each
wholly-owned subsidiary of the Company, including Call Compliance, have agreed
to provide to Xxxxxxxxxx a security interest in the Pledge Property (as such
term is defined in each Security Agreement) to secure the Company’s obligations
under the Transaction Documents; and
WHEREAS,
Call
Compliance desires to grant a Promissory Note (the “Nascap
Note”)
in the
amount of One Hundred Fifty Thousand Dollars ($150,000.00) to Nascap Corp.,
a
New York corporation (“Nascap”);
WHEREAS,
in
connection with the Nascap Note, Call Compliance and Nascap shall enter into
(i)
a Security Agreement (the “Nascap
Security Agreement”),
pursuant to which Call Compliance shall grant to Nascap a security interest
which is limited to accounts receivable from the two vendors as set forth
therein (the “Secured
Obligations”),
and
(ii) a Guaranty Agreement (the “Nascap
Guaranty Agreement”),
made
by the Company in favor of Nascap, pursuant to which the Company unconditionally
and irrevocably guarantees to Nascap the payment and performance of Call Company
under the Nascap Note and the Nascap Security Agreement; and
WHEREAS,
the
Parties acknowledge that pursuant to Section 4(o) of the SPA, the Company is
required to obtain the prior express written consent from Xxxxxxxxxx to incur
indebtedness for borrowed money in excess of One Hundred Thousand Dollars
($100,000) or to become a guarantor or otherwise contingently liable for such
indebtedness; and
WHEREAS,
the
Parties acknowledge that pursuant to Section 7.1 of the Security Agreement,
by
and between Call Compliance and Xxxxxxxxxx, Call Compliance is required to
obtain the prior express written consent from Xxxxxxxxxx to directly or
indirectly make, create, incur, assume or permit to exist any assignment,
transfer, pledge, mortgage, security interest or other lien or encumbrance
of
any nature in, to or against any part of the Pledged Property, as such term
is
defined thereunder ( the “Negative
Covenants”);
and
WHEREAS,
Call
Compliance desires to obtain from Xxxxxxxxxx, and Xxxxxxxxxx desires to provide
to Call Compliance, the prior express written consent to enter into the Nascap
Note and the Nascap Security Agreement; and
WHEREAS,
the
Company desires to obtain from Xxxxxxxxxx, and Xxxxxxxxxx desires to provide
to
the Company, the prior express written consent to enter into the Nascap
Guaranty.
NOW,
THEREFORE,
for and
in consideration of the mutual and reciprocal covenants and agreements
hereinafter contained and other good and valuable consideration, the receipt
and
sufficiency of which is hereby acknowledged, the Parties hereto, intending
to be
legally bound, hereby agree as follows:
1.
Recitals.
The
recitals set forth above are true and are hereby incorporated by this
reference.
2.
Consent.
Xxxxxxxxxx hereby consents to Call Compliance entering into the Nascap Note
and
the Nascap Security Agreement. Xxxxxxxxxx further consents to the Company
entering into the Nascap Guaranty Agreement. These Consents are one-time
consents granted to the Company and to Call Compliance. Xxxxxxxxxx may enforce
the Negative Covenants against Call Compliance and its assigns for any and
all
future agreements or other instruments to which Call Compliance and its assigns
are a party.
3.
Counterparts.
This
Consent may be executed in one or more counterparts, and by the Parties hereto
in separate counterparts, each of which when executed shall be deemed to be
an
original but all of which taken together shall constitute one and the same
instrument.
4.
Governing
Law.
This
Consent shall be governed by the laws of the State of New Jersey, excluding
its
choice of law principles.
[SIGNATURE
PAGE TO FOLLOW]
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IN
WITNESS WHEREOF,
the
Parties hereto, through their duly authorized representatives, have executed
this instrument as of the day and year first written above.
| XXXXXXXXXX EQUITY PARTNERS, LTD. | ||
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Title:
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Date:
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COMPLIANCE
SYSTEMS CORPORATION,
a
Nevada corporation
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Title:
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Date:
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CALL
COMPLIANCE, INC.,
a
New York Corporation
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| Printed Name: | ||
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Title:
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Date:
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