SILICON VALLEY BANK AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

     This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”)
dated as of April 23, 2007, to be effective March 26, 2007, between SILICON
VALLEY BANK, a California chartered bank, with its principal place of business
at 3003 Tasman Drive, Santa Clara, California 95054 (FAX (408) 980-6410)
(“Bank”) and COGNIGEN NETWORKS, INC., a Colorado corporation, with offices at
6405 218th Street, SW, Suite 305, Mountlake Terrace, WA 98043 (FAX (206)
297.6161)(“Borrower”), provides the terms on which Bank shall lend to Borrower
and Borrower shall repay Bank. This Agreement amends and restates that certain
Accounts Receivable Purchase Agreement between the parties, dated December 26,
2003 (the “Purchase Agreement”), in its entirety. The parties further agree as
follows:

  1         ACCOUNTING AND OTHER TERMS

     Accounting terms not defined in this Agreement shall be construed following
GAAP. Calculations and determinations must be made following GAAP. The term
“financial statements” includes the notes and schedules. The terms “including”
and “includes” always mean “including (or includes) without limitation,” in this
or any Loan Document. Capitalized terms in this Agreement shall have the
meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meanings provided by the Code, to the
extent such terms are defined therein.

           2        LOAN AND TERMS OF PAYMENT       2.1    Promise to Pay.
Borrower hereby unconditionally promises to pay Bank the unpaid  

principal amount of all Advances hereunder with all interest, fees and finance
charges due thereon as and when due in accordance with this Agreement.

            2.1.1   Financing of Accounts.              (a)    Availability.
Subject to the terms of this Agreement, Borrower may request that Bank finance
specific Eligible Accounts. Bank may, in its sole discretion in each instance,
finance such Eligible Accounts by extending credit to Borrower in an amount
equal to the result of the Advance Rate multiplied by the face amount of the
Eligible Account (the “Advance”). Bank may, in its sole discretion, change the
percentage of the Advance Rate for a particular Eligible Account on a case by
case basis. When Bank makes an Advance, the Eligible Account becomes a “Financed
Receivable.”

                     (b)     Maximum Advances. The aggregate face amount of all
Financed Receivables outstanding at any time may not exceed the Facility Amount.

                     (c)     Borrowing Procedure. Borrower will deliver an
Invoice Transmittal for each Eligible Account it offers. Bank may rely on
information set forth in or provided with the Invoice Transmittal.

                     (d)     Credit Quality; Confirmations. Bank may, at its
option, conduct a credit check of the Account Debtor for each Account requested
by Borrower for financing hereunder in order to approve any such Account
Debtor’s credit before agreeing to finance such Account. Bank may also verify
directly with the respective Account Debtors the validity, amount and other
matters relating to the Accounts (including confirmations of Borrower’s
representations in Section 5.3) by means of mail, telephone or otherwise, either
in the name of Borrower or Bank from time to time in its sole discretion.

                     (e)    Accounts Notification/Collection. Bank may notify
any Person owing Borrower money of Bank’s security interest in the funds and
verify and/or collect the amount of the Account.

 

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                         (f)   Maturity. This Agreement shall terminate and all
Obligations outstanding hereunder shall be immediately due and payable on the
Maturity Date.

                         (g)   Bank’s Discretion. Notwithstanding anything to
the contrary contained herein, Bank is not obligated to finance any Eligible
Accounts. Bank and Borrower hereby acknowledge and agree that Bank’s agreement
to finance Eligible Accounts hereunder is discretionary in each instance.
Accordingly, there shall not be any recourse to Bank, nor liability of Bank, on
account of any delay in Bank’s making of, and/or any decline by Bank to make,
any loan or advance requested hereunder. In addition, this Agreement may be
terminated by Borrower or Bank at any time.

               2.2     Collections, Finance Charges, Remittances and Fees. The
Obligations shall be subject to the following fees and Finance Charges. Unpaid
fees and Finance Charges may, in Bank’s discretion, accrue interest and fees as
described in Section 9.2 hereof.

               2.2.1  Collections. Collections will be credited to the Financed
Receivable Balance for such Financed Receivable, but if there is an Event of
Default, Bank may apply Collections to the Obligations in any order it chooses.
If Bank receives a payment for both a Financed Receivable and a non-Financed
Receivable, the funds will first be applied to the Financed Receivable and, if
there is no Event of Default then existing, the excess will be remitted to
Borrower, subject to Section 2.2.6.

               2.2.2  Facility Fee. A fully earned, non-refundable facility fee
of Three Thousand Dollars ($3,000.00) is due upon execution of this Agreement.

               2.2.3  Finance Charges. In computing Finance Charges on the
Obligations under this Agreement, all Collections received by Bank shall be
deemed applied by Bank on account of the Obligations three (3) Business Days
after receipt of the Collections. On each Reconciliation Day, Borrower will pay
a finance charge (the “Finance Charge”) on each Financed Receivable which is
equal to the Applicable Rate multiplied by the average daily outstanding
Financed Receivable Balance for such Financed Receivable during the
Reconciliation Period.

               2.2.4  Accounting. After each Reconciliation Period, Bank will
provide an accounting of the transactions for that Reconciliation Period,
including the amount of all Financed Receivables, all Collections, Adjustments,
Finance Charges and the Facility Fee. If Borrower does not object to the
accounting in writing within thirty (30) days it shall be considered accurate.
All Finance Charges and other interest and fees are calculated on the basis of a
360 day year and actual days elapsed.

               2.2.5  Deductions. Bank may deduct fees, Finance Charges,
Advances which become due pursuant to Section 2.3, and other amounts due
pursuant to this Agreement from any Advances made or Collections received by
Bank.

               2.2.6  Lockbox; Account Collection Services. Borrower shall
direct each Account Debtor (and each depository institution where proceeds of
Accounts are on deposit) to remit payments with respect to the Accounts to a
lockbox account established with Bank or to wire transfer payments to a cash
collateral account that Bank controls (collectively, the “Lockbox”). Upon
receipt by Borrower of such proceeds, the Borrower shall immediately transfer
and deliver same to Bank, along with a detailed cash receipts journal. Provided
no Event of Default exists or an event that with notice or lapse of time will be
an Event of Default, within three (3) days of receipt of such amounts by Bank,
Bank will turn over to Borrower the proceeds of the Accounts other than
Collections with respect to Financed Receivables and the amount of Collections
in excess of the amounts for which Bank has made an Advance to Borrower, less
any amounts due to Bank, such as the Finance Charge, the Facility Fee, payments
due to Bank, other fees and expenses, or otherwise; provided, however, Bank may
hold such excess amount with respect to Financed Receivables as a reserve until
the end of the applicable Reconciliation Period if Bank, in its discretion,
determines that other Financed Receivable(s) may no longer qualify as an
Eligible Account at any time prior to the end of the subject Reconciliation
Period. This Section does not impose any affirmative duty on Bank to perform any
act other than as specifically set forth herein. All Accounts and the proceeds
thereof are Collateral and if an Event of Default occurs, Bank may apply the
proceeds of such Accounts to the Obligations.

 

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            2.3        Repayment of Obligations; Adjustments.

            2.3.1     Repayment. Borrower will repay each Advance on the
earliest of: (a) the date on which payment is received of the Financed
Receivable with respect to which the Advance was made, (b) the date on which the
Financed Receivable is no longer an Eligible Account, (c) the date on which any
Adjustment is asserted to the Financed Receivable (but only to the extent of the
Adjustment if the Financed Receivable remains otherwise an Eligible Account),
(d) the date on which there is a breach of any warranty or representation set
forth in Section 5.3 or a breach of any covenant in this Agreement, or (e) the
Maturity Date (including any early termination). Each payment will also include
all accrued Finance Charges with respect to such Advance and all other amounts
then due and payable hereunder.

             2.3.2    Repayment on Event of Default. When there is an Event of
Default, Borrower will, if Bank demands (or, upon the occurrence of an Event of
Default under Section 8.5, immediately without notice or demand from Bank) repay
all of the Advances. The demand may, at Bank’s option, include the Advance for
each Financed Receivable then outstanding and all accrued Finance Charges,
attorneys and professional fees, court costs and expenses, and any other
Obligations.

             2.3.3    Debit of Accounts. Bank may debit any of Borrower’s
deposit accounts for payments or any amounts Borrower owes Bank hereunder. Bank
shall promptly notify Borrower when it debits Borrower’s accounts. These debits
shall not constitute a set-off.

             2.3.4    Adjustments. If at any time during the term of this
Agreement any Account Debtor asserts an Adjustment or if Borrower issues a
credit memorandum or if any of the representations, warranties or covenants set
forth in Section 5.3 are no longer true in all material respects, Borrower will
promptly advise Bank.

             2.4       Power of Attorney. Borrower irrevocably appoints Bank and
its successors and assigns as attorney-in-fact and authorizes Bank, regardless
of whether there has been an Event of Default, to: (i) sell, assign, transfer,
pledge, compromise, or discharge all or any part of the Financed Receivables;
(ii) demand, collect, sue, and give releases to any Account Debtor for monies
due and compromise, prosecute, or defend any action, claim, case or proceeding
about the Financed Receivables, including filing a claim or voting a claim in
any bankruptcy case in Bank’s or Borrower’s name, as Bank chooses; (iii)
prepare, file and sign Borrower’s name on any notice, claim, assignment, demand,
draft, or notice of or satisfaction of lien or mechanics’ lien or similar
document; (iv) notify all Account Debtors to pay Bank directly; (v) receive,
open, and dispose of mail addressed to Borrower; (vi) endorse Borrower’s name on
checks or other instruments (to the extent necessary to pay amounts owed
pursuant to this Agreement); and (vii) execute on Borrower’s behalf any
instruments, documents, financing statements to perfect Bank’s interests in the
Financed Receivables and Collateral and do all acts and things necessary or
expedient, as determined solely and exclusively by Bank, to protect, preserve,
and otherwise enforce Bank’s rights and remedies under this Agreement, as
directed by Bank.

              3         CONDITIONS OF LOANS

              3.1      Conditions Precedent to Initial Advance. Bank’s agreement
to make the initialAdvance is subject to the condition precedent that Bank shall
have received, in form and substance satisfactory to Bank, such documents, and
completion of such other matters, as Bank may reasonably deem necessary or
appropriate, including, without limitation, subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:

                        (a) duly executed original signatures to the Loan
Documents to which it is a party;

 

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                  (b)     duly executed original signatures to the completed
Corporate Borrowing Certificate for Borrower, plus all exhibits thereto;

                  (c)     good standing certificates/certificates of foreign
qualification from the Secretaries of State of the States of Washington and
Colorado, dated no later than 30 days prior to the Effective Date;

                  (d)     duly executed original signatures to the Subordination
Agreement by all parties thereto;

                  (e)      the Perfection Certificate executed by Borrower;

                  (f)       copies of all debt instruments with Vencore
Solutions, LLC being subordinated to Bank;

                  (g)      evidence satisfactory to Bank that the insurance
policies required by Section 6.4 hereof are in full force and effect, together
with appropriate evidence showing loss payable and/or additional insured clauses
or endorsements in favor of Bank; and

                  (h)      such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.

          3.2    Conditions Precedent to all Advances. Bank’s agreement to make
each Advance, including the initial Advance, is subject to the following:

                 (a)        receipt of the Invoice Transmittal;

                  (b)        Bank shall have (at its option) conducted the
confirmations and verifications asdescribed in Section 2.1.1 (d); and

                  (c)       each of the representations and warranties in
Section 5 shall be true on the date of the Invoice Transmittal and on the
effective date of each Advance and no Event of Default shall have occurred and
be continuing, or result from the Advance. Each Advance is Borrower’s
representation and warranty on that date that the representations and warranties
in Section 5 remain true.

         4      CREATION OF SECURITY INTEREST

         4.1    Grant of Security Interest.    Borrower hereby grants Bank, to
secure the payment and performance in full of all of the Obligations and the
performance of each of Borrower’s duties under the Loan Documents, a continuing
security interest in, and pledges and assigns to Bank, the Collateral, wherever
located, whether now owned or hereafter acquired or arising, and all proceeds
and products thereof. Borrower warrants and represents that the security
interest granted herein shall be a first priority security interest in the
Collateral (subject only to Permitted Liens that may have superior priority to
Bank’s Lien under this Agreement).

         Except as noted on the Perfection Certificate, Borrower is not a party
to, nor is bound by, any material license or other agreement with respect to
which Borrower is the licensee that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower’s interest in such license or
agreement or any other property. Without prior consent from Bank, Borrower shall
not enter into, or become bound by, any such license or agreement which is
reasonably likely to have a material impact on Borrower’s business or financial
condition. Borrower shall take such steps as Bank requests to obtain the consent
of, or waiver by, any person whose consent or waiver is necessary for all such
licenses or contract rights to be deemed “Collateral” and for Bank to have a
security interest in it that might otherwise be restricted or prohibited by law
or by the terms of any such license or agreement, whether now existing or
entered into in the future.

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           If the Agreement is terminated, Bank’s lien and security interest in
the Collateral shall continue until Borrower fully satisfies its Obligations. If
Borrower shall at any time, acquire a commercial tort claim, Borrower shall
promptly notify Bank in a writing signed by Borrower of the brief details
thereof and grant to Bank in such writing a security interest therein and in the
proceeds thereof, all upon the terms of this Agreement, with such writing to be
in form and substance satisfactory to Bank.

            4.2    Authorization to File Financing Statements. Borrower hereby
authorizes Bank to file financing statements, without notice to Borrower, with
all appropriate jurisdictions in order to perfect or protect Bank’s interest or
rights hereunder, which financing statements may indicate the Collateral as “all
assets of the Debtor” or words of similar effect, or as being of an equal or
lesser scope, or with greater detail, all in Bank’s discretion.

           5       REPRESENTATIONS AND WARRANTIES

  Borrower represents and warrants as follows:

          5.1     Due Organization and Authorization. Borrower and each
Subsidiary is duly existing and in good standing in its state of formation and
qualified and licensed to do business in, and in good standing in, any state in
which the conduct of its business or its ownership of property requires that it
be qualified except where the failure to do so could not reasonably be expected
to cause a Material Adverse Change. Borrower represents and warrants to Bank
that: (a) Borrower’s exact legal name is that indicated on the Perfection
Certificate and on the signature page hereof; and (b) Borrower is an
organization of the type, and is organized in the jurisdiction, set forth in the
Perfection Certificate; and (c) the Perfection Certificate accurately sets forth
Borrower’s organizational identification number or accurately states that
Borrower has none; and (d) the Perfection Certificate accurately sets forth
Borrower’s place of business, or, if more than one, its chief executive office
as well as Borrower’s mailing address if different, and (e) all other
information set forth on the Perfection Certificate pertaining to Borrower is
accurate and complete. If Borrower does not now have an organizational
identification number, but later obtains one, Borrower shall forthwith notify
Bank of such organizational identification number.

          The execution, delivery and performance of the Loan Documents have
been duly authorized, and do not conflict with Borrower’s organizational
documents, nor constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default under any agreement to which
or by which it is bound in which the default could reasonably be expected to
cause a Material Adverse Change.

          5.2     Collateral. Borrower has good title to the Collateral, free of
Liens except Permitted Liens. All inventory is in all material respects of good
and marketable quality, free from material defects. Borrower has no deposit
account, other than the deposit accounts with Bank and deposit accounts
described in the Perfection Certificate delivered to Bank in connection
herewith. The Collateral is not in the possession of any third party bailee
(such as a warehouse). Except as hereafter disclosed to Bank in writing by
Borrower, none of the components of the Collateral shall be maintained at
locations other than as provided in the Perfection Certificate. In the event
that Borrower, after the date hereof, intends to store or otherwise deliver any
portion of the Collateral to a bailee, then Borrower will first receive the
written consent of Bank and such bailee must acknowledge in writing that the
bailee is holding such Collateral for the benefit of Bank.

          5.3      Financed Receivables. Borrower represents and warrants for
each Financed Receivable:

          (a)      Each Financed Receivable is an Eligible Account.            
(b)      Borrower is the owner with legal right to sell, transfer, assign and
encumber such Financed Receivable;  

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                 (c) The correct amount is on the Invoice Transmittal and is not
disputed;

                  (d)  Payment is not contingent on any obligation or contract
and Borrower has fulfilled all its obligations as of the Invoice Transmittal
date;

                  (e)  Each Financed Receivable is based on an actual sale and
delivery of goods and/or services rendered, is due to Borrower, is not past due
or in default, has not been previously sold, assigned, transferred, or pledged
and is free of any liens, security interests and encumbrances other than
Permitted Liens;

                  (f)  There are no defenses, offsets, counterclaims or
agreements for which the Account Debtor may claim any deduction or discount;

                  (g)  Borrower reasonably believes no Account Debtor is
insolvent or subject to any Insolvency Proceedings;

                  (h)   Borrower has not filed or had filed against it
Insolvency Proceedings and does not anticipate any filing;

                  (i)    Bank has the right to endorse and/ or require Borrower
to endorse all payments received on Financed Receivables and all proceeds of
Collateral; and

                  (j)   No representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statement contained in the certificates or statement not misleading.

          5.4    Litigation. There are no actions or proceedings pending or, to
the knowledge of Borrower’s Responsible Officers or legal counsel, threatened by
or against Borrower or any Subsidiary in which an adverse decision could
reasonably be expected to cause a Material Adverse Change.

          5.5     No Material Deviation in Financial Statements. All
consolidated financial statements for Borrower and any Subsidiary delivered to
Bank fairly present in all material respects Borrower’s consolidated financial
condition and Borrower’s consolidated results of operations. There has not been
any material deterioration in Borrower’s consolidated financial condition since
the date of the most recent financial statements submitted to Bank.

         5.6      Solvency. Borrower is able to pay its debts (including trade
debts) as they mature.

         5.7      Regulatory Compliance. Borrower is not an “investment company”
or a company “controlled” by an “investment company” under the Investment
Company Act. Borrower is not engaged as one of its important activities in
extending credit for margin stock (under Regulations X, T and U of the Federal
Reserve Board of Governors). Borrower has complied in all material respects with
the Federal Fair Labor Standards Act. Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
cause a Material Adverse Change. None of Borrower’s or any Subsidiary’s
properties or assets has been used by Borrower or any Subsidiary or, to the best
of Borrower’s knowledge, by previous Persons, in disposing, producing, storing,
treating, or transporting any hazardous substance other than legally. Borrower
and each Subsidiary has timely filed all required tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP. Borrower and each Subsidiary has
obtained all consents, approvals and authorizations of, made all declarations or
filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted except where the
failure to obtain or make such consents, declarations, notices or filings would
not reasonably be expected to cause a Material Adverse Change.

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          5.8       Subsidiaries. Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

          5.9       Full Disclosure. No written representation, warranty or
other statement of Borrower in any certificate or written statement given to
Bank contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained in the certificates or
statements not misleading.

  6         AFFIRMATIVE COVENANTS

Borrower shall do all of the following:

          6.1      Government Compliance. Borrower shall maintain its and all
Subsidiaries’ legal existence and good standing in its jurisdiction of formation
and maintain qualification in each jurisdiction in which the failure to so
qualify would reasonably be expected to have a material adverse effect on
Borrower’s business or operations. Borrower shall comply, and have each
Subsidiary comply, with all laws, ordinances and regulations to which it is
subject, noncompliance with which could have a material adverse effect on
Borrower’s business or operations or would reasonably be expected to cause a
Material Adverse Change.

          6.2      Financial Statements, Reports, Certificates.

                    (a)   Borrower shall deliver to Bank: (i) as soon as
available, but no later than thirty (30) days after the last day of each month,
a company prepared consolidated balance sheet and income statement covering
Borrower’s consolidated operations during the period certified by a Responsible
Officer and in a form acceptable to Bank; (ii) as soon as available, but no
later than one hundred twenty (120) days after the last day of Borrower’s fiscal
year, audited consolidated financial statements prepared under GAAP,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm reasonably
acceptable to Bank; (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower’s security holders or
to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-K
filed with the Securities and Exchange Commission; (iv) a prompt report of any
legal actions pending or threatened against Borrower or any Subsidiary that
could result in damages or costs to Borrower or any Subsidiary of One Hundred
Thousand Dollars ($100,000.00) or more; (v) prompt notice of any material change
in the composition of the Intellectual Property Collateral, or the registration
of any copyright, including any subsequent ownership right of Borrower in or to
any Copyright, Patent or Trademark not shown in the IP Agreement or knowledge of
an event that materially adversely affects the value of the Intellectual
Property Collateral; and (vi) budgets, sales projections, operating plans or
other financial information reasonably requested by Bank.

                   (b)    Within thirty (30) days after the last day of each
month, Borrower shall deliver to Bank with the monthly financial statements a
Compliance Certificate signed by a Responsible Officer in the form of Exhibit B.

                   (c)     Borrower will allow Bank to audit Borrower’s
Collateral, including, but not limited to, Borrower’s Accounts and accounts
receivable, at Borrower’s expense, upon reasonable notice to Borrower; provided,
however, prior to the occurrence of an Event of Default, Borrower shall be
obligated to pay for not more than one (1) audit per year. After the occurrence
of an Event of Default, Bank may audit Borrower’s Collateral, including, but not
limited to, Borrower’s Accounts and accounts receivable at Borrower’s expense
and at Bank’s sole and exclusive discretion and without notification and
authorization from Borrower.

                   (d)     Upon Bank’s request, provide a written report
respecting any Financed Receivable, if payment of any Financed Receivable does
not occur by its due date and include the reasons for the delay.

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                   (e)  Provide Bank with, as soon as available, but no later
than twenty (20) days following each Reconciliation Period, an aged listing of
accounts receivable and accounts payable by invoice date, in form acceptable to
Bank.

                   (f)   Provide Bank with, as soon as available, but no later
than ten (10) days following each Reconciliation Period, (i) a report of
estimated commissions receivable (the “Commission Estimate”) and (ii) a report
of monthly commissions collections, each in form acceptable to Bank.

          6.3     Taxes. Borrower shall make, and cause each Subsidiary to make,
timely payment of all material federal, state, and local taxes or assessments
(other than taxes and assessments which Borrower is contesting in good faith,
with adequate reserves maintained in accordance with GAAP) and will deliver to
Bank, on demand, appropriate certificates attesting to such payments.

          6.4     Insurance. Borrower shall keep its business and the Collateral
insured for risks and in amounts as Bank may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are
satisfactory to Bank. All property policies shall have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show Bank as an additional insured and all policies shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling its
policy. At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. Proceeds payable under any policy shall,
at Bank’s option, be payable to Bank on account of the Obligations. If Borrower
fails to obtain insurance as required under this Section or to pay any amount or
furnish any required proof of payment to third persons and Bank, Bank may make
all or part of such payment or obtain such insurance policies required in this
Section and take any action under the policies Bank deems prudent.

         6.5      Accounts.

                    (a)  In order to permit Bank to monitor Borrower’s financial
performance and condition, Borrower, and all Borrower’s Subsidiaries, shall
maintain Borrower’s, and such Subsidiaries, primary depository accounts,
operating accounts and securities accounts with Bank.

                    (b)  Borrower shall identify to Bank, in writing, any bank
or securities account opened by Borrower with any institution other than Bank.
In addition, for each such account that Borrower or Guarantor at any time opens
or maintains, Borrower shall, at Bank’s request and option, pursuant to an
agreement in form and substance acceptable to Bank, cause the depository bank or
securities intermediary to agree that such account is the collateral of Bank
pursuant to the terms hereunder. The provisions of the previous sentence shall
not apply to deposit accounts exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of Borrower’s
employees.

          6.6     Further Assurances. Borrower shall execute any further
instruments and take further action as Bank reasonably requests to perfect or
continue Bank’s security interest in the Collateral or to effect the purposes of
this Agreement.

  7       NEGATIVE COVENANTS

          Borrower shall not do any of the following without Bank’s prior
written consent.

          7.1     Dispositions. Convey, sell, lease, transfer or otherwise
dispose of (collectively a “Transfer”), or permit any of its Subsidiaries to
Transfer, all or any part of its business or property, except for Transfers (i)
of inventory in the ordinary course of business; (ii) of non-exclusive licenses
and similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business; or (iii) of worn-out or
obsolete equipment.

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         7.2      Changes in Business, Ownership, Management or Business
Locations. Engage in or permit any of its Subsidiaries to engage in any business
other than the businesses currently engaged in by Borrower or reasonably related
thereto, or have a material change in its ownership (other than by the sale of
Borrower’s equity securities in a public offering or to venture capital
investors so long as Borrower identifies to Bank the venture capital investors
prior to the closing of the investment), or management. Borrower shall not,
without at least thirty (30) days prior written notice to Bank: (i) relocate its
chief executive office, or add any new offices or business locations, including
warehouses (unless such new offices or business locations contain less than Five
Thousand Dollars ($5,000.00) in Borrower’s assets or property), or (ii) change
its jurisdiction of organization, or (iii) change its organizational structure
or type, or (iv) change its legal name, or (v) change any organizational number
(if any) assigned by its jurisdiction of organization.

         7.3       Mergers or Acquisitions. Merge or consolidate, or permit any
of its Subsidiaries to merge or consolidate, with any other Person, or acquire,
or permit any of its Subsidiaries to acquire, all or substantially all of the
capital stock or property of another Person. A Subsidiary may merge or
consolidate into another Subsidiary or into Borrower.

         7.4      Indebtedness. Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

         7.5      Encumbrance. Create, incur, or allow any Lien on any of its
property, or assign or convey any right to receive income, including the sale of
any Accounts, or permit any of its Subsidiaries to do so, except for Permitted
Liens, or permit any Collateral not to be subject to the first priority security
interest granted herein. The Collateral may also be subject to Permitted Liens.

         7.6      Distributions; Investments. (i) Directly or indirectly acquire
or own any Person, or make any Investment in any Person, other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (ii) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock.

         7.7       Transactions with Affiliates. Directly or indirectly enter
into or permit to exist any material transaction with any Affiliate of Borrower,
except for transactions that are in the ordinary course of Borrower’s business,
upon fair and reasonable terms that are no less favorable to Borrower than would
be obtained in an arm’s length transaction with a non-affiliated Person.

         7.8        Subordinated Debt. Make or permit any payment on any
Subordinated Debt, except under the terms of the Subordinated Debt, or amend any
provision in any document relating to the Subordinated Debt, without Bank’s
prior written consent.

         7.9      Compliance. Become an “investment company” or a company
controlled by an “investment company”, under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock, or use the proceeds of any Advance for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower’s business or operations or would reasonably be expected to cause a
Material Adverse Change, or permit any of its Subsidiaries to do so.

  8         EVENTS OF DEFAULT

Any one of the following is an Event of Default:

          8.1      Payment Default. Borrower fails to pay any of the Obligations
when due;

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           8.2    Covenant Default. Borrower fails or neglects to perform any
obligation in Section 6 or violates any covenant in Section 7 or fails or
neglects to perform, keep, or observe any other material term, provision,
condition, covenant or agreement contained in this Agreement, any Loan
Documents, or in any present or future agreement between Borrower and Bank;

          8.3      Material Adverse Change. A Material Adverse Change occurs;

           8.4     Attachment. (i) Any portion of Borrower’s assets is attached,
seized, levied on, or  comes into possession of a trustee or receiver and the
attachment, seizure or levy is not removed in ten (10) days; (ii) the service of
process upon Borrower seeking to attach, by trustee or similar process, any
funds of Borrower on deposit with Bank, or any entity under the control of Bank
(including a subsidiary); (iii) Borrower is enjoined, restrained, or prevented
by court order from conducting any part of its business; (iv) a judgment or
other claim becomes a Lien on a portion of Borrower’s assets; or (v) a notice of
lien,levy, or assessment is filed against any of Borrower’s assets by any
government agency and not paid within ten (10) days after Borrower receives
notice;

           8.5     Insolvency. (i) Borrower is unable to pay its debts
(including trade debts) as they become due or otherwise becomes insolvent; (ii)
Borrower begins an Insolvency Proceeding; or (iii) an Insolvency Proceeding is
begun against Borrower and not dismissed or stayed within thirty (30) days (but
no Advances shall be made before any Insolvency Proceeding is dismissed);

           8.6     Other Agreements. If there is a default in any agreement to
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of One Hundred Thousand
Dollars ($100,000) or that could result in a Material Adverse Change;

           8.7     Judgments. If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least Two Hundred
Thousand Dollars ($200,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Advances will be made prior to the satisfaction or stay of such judgment);

           8.8     Misrepresentations. If Borrower or any Person acting for
Borrower makes any material misrepresentation or material misstatement now or
later in any warranty or representation in this Agreement or in any writing
delivered to Bank or to induce Bank to enter this Agreement or any Loan
Document;

           8.9     Subordinated Debt. A default or breach occurs under any
agreement between Borrower and any creditor of Borrower that signed a
subordination agreement with Bank, or any creditor that has signed a
subordination agreement with Bank breaches any terms of the subordination
agreement.

           9       BANK’S RIGHTS AND REMEDIES

           9.1    Rights and Remedies. When an Event of Default occurs and
continues Bank may, without notice or demand, do any or all of the following:

                   (a)  Declare all Obligations immediately due and payable (but
if an Event of Default described in Section 8.5 occurs all Obligations are
immediately due and payable without any action by Bank);

                   (b) Stop advancing money or extending credit for Borrower’s
benefit under this Agreement or under any other agreement between Borrower and
Bank;

                   (c) Settle or adjust disputes and claims directly with
Account Debtors for amounts, on terms and in any order that Bank considers
advisable and notify any Person owing Borrower money of Bank’s security interest
in such funds and verify the amount of such account. Borrower shall collect all
payments in trust for Bank and, if requested by Bank, immediately deliver the
payments to Bank in the form received from the Account Debtor, with proper
endorsements for deposit;

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                   (d)   Make any payments and do any acts it considers
necessary or reasonable to protect its security interest in the Collateral.
Borrower shall assemble the Collateral if Bank requests and make it available as
Bank designates. Bank may enter premises where the Collateral is located, take
and maintain possession of any part of the Collateral, and pay, purchase,
contest, or compromise any Lien which appears to be prior or superior to its
security interest and pay all expenses incurred. Borrower grants Bank a license
to enter and occupy any of its premises, without charge, to exercise any of
Bank’s rights or remedies;

                   (e)   Apply to the Obligations any (i) balances and deposits
of Borrower it holds, or (ii) any amount held by Bank owing to or for the credit
or the account of Borrower;

                   (f)   Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is
hereby granted a non-exclusive, royalty-free license or other right to use,
without charge, Borrower’s labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any similar property as it pertains to the Collateral, in
completing production of, advertising for sale, and selling any Collateral and,
in connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;

                   (g)   Place a “hold” on any account maintained with Bank
and/or deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral; and

                   (h)   Exercise all rights and remedies and dispose of the
Collateral according to the Code.

          9.2     Bank Expenses; Unpaid Fees. Any amounts paid by Bank as
provided herein shall constitute Bank Expenses and are immediately due and
payable, and shall bear interest at the Default Rate and be secured by the
Collateral. No payments by Bank shall be deemed an agreement to make similar
payments in the future or Bank’s waiver of any Event of Default. In addition,
any amounts advanced hereunder which are not based on Financed Receivables
(including, without limitation, unpaid fees and Finance Charges as described in
Section 2.2) shall accrue interest at the Default Rate and be secured by the
Collateral.

          9.3     Bank’s Liability for Collateral. So long as Bank complies with
reasonable banking practices regarding the safekeeping of collateral, Bank shall
not be liable or responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage to the Collateral; (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or
other Person. Borrower bears all risk of loss, damage or destruction of the
Collateral.

          9.4     Remedies Cumulative. Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements are cumulative. Bank has
all rights and remedies provided under the Code, by law, or in equity. Bank’s
exercise of one right or remedy is not an election, and Bank’s waiver of any
Event of Default is not a continuing waiver. Bank’s delay is not a waiver,
election, or acquiescence. No waiver hereunder shall be effective unless signed
by Bank and then is only effective for the specific instance and purpose for
which it was given.

          9.5     Demand Waiver. Borrower waives demand, notice of default or
dishonor, notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by Bank on which
Borrower is liable.

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          9.6   Default Rate. After the occurrence of an Event of Default, all
Obligations shall accrue interest at the highest rate allowed by applicable law
(the “Default Rate”).

  10    NOTICES.

     Notices or demands by either party about this Agreement must be in writing
and personally delivered or sent by an overnight delivery service, by certified
mail postage prepaid return receipt requested, or by fax to the addresses listed
at the beginning of this Agreement. A party may change notice address by written
notice to the other party.

          11    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER

          California law governs the Loan Documents without regard to principles
of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction
of the State and Federal courts in Santa Clara County, California; provided,
however, that nothing in this Agreement shall be deemed to operate to preclude
Bank from bringing suit or taking other legal action in any other jurisdiction
to realize on the Collateral or any other security for the Obligations, or to
enforce a judgment or other court order in favor of Bank. Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief
as is deemed appropriate by such court. Borrower hereby waives personal service
of the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in the opening paragraph of this Agreement and that service so made shall be
deemed completed upon the earlier to occur of Borrower’s actual receipt thereof
or three (3) Business Days after deposit in the U.S. mails, proper postage
prepaid.

          TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK
EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT.
EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

          WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE
THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a
trial by jury is not enforceable, the parties hereto agree that any and all
disputes or controversies of any nature between them arising at any time shall
be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Clara County,
California Superior Court) appointed in accordance with California Code of Civil
Procedure Section 638 (or pursuant to comparable provisions of federal law if
the dispute falls within the exclusive jurisdiction of the federal courts),
sitting without a jury, in Santa Clara County, California; and the parties
hereby submit to the jurisdiction of such court. The reference proceedings shall
be conducted pursuant to and in accordance with the provisions of California
Code of Civil Procedure §§ 638 through 645.1, inclusive. The private judge shall
have the power, among others, to grant provisional relief, including without
limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be
closed to the public and confidential and all records relating thereto shall be
permanently sealed. If during the course of any dispute, a party desires to seek
provisional relief, but a judge has not been appointed at that point pursuant to
the judicial reference procedures, then such party may apply to the Santa Clara
County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a
court under the rules of evidence applicable to judicial proceedings. The
parties shall be entitled to discovery which shall be conducted in the same
manner as it would be before a court under the rules of discovery applicable to
judicial proceedings. The private judge shall oversee discovery and may enforce
all discovery rules and order applicable to judicial proceedings in the same
manner as a trial court judge. The parties agree that the selected or appointed
private judge shall have the power to decide all issues in the action or
proceeding, whether of fact or of law, and shall report a statement of decision
thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing in
this paragraph shall limit the right of any party at any time to exercise
self-help remedies, foreclose against collateral, or obtain provisional
remedies. The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

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         12      GENERAL PROVISIONS

          12.1  Successors and Assigns. This Agreement binds and is for the
benefit of the successors and permitted assigns of each party. Borrower may not
assign this Agreement or any rights or Obligations under it without Bank’s prior
written consent which may be granted or withheld in Bank’s discretion. Bank has
the right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights and benefits under this Agreement, the Loan Documents
or any related agreement.

          12.2   Indemnification. Borrower hereby indemnifies, defends and holds
Bank and its officers, employees, directors and agents harmless against: (a) all
obligations, demands, claims, and liabilities asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b) all
losses or Bank Expenses incurred, or paid by Bank from, following, or
consequential to transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for losses caused by Bank’s gross
negligence or willful misconduct.

          12.3   Time of Essence. Time is of the essence for the performance of
all Obligations in this Agreement.

          12.4   Severability of Provision. Each provision of this Agreement is
severable from every other provision in determining the enforceability of any
provision.

          12.5   Amendments in Writing; Integration. All amendments to this
Agreement must be in writing signed by both Bank and Borrower. This Agreement
and the Loan Documents represent the entire agreement about this subject matter,
and supersede prior negotiations or agreements. All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of this Agreement and the Loan Documents merge
into this Agreement and the Loan Documents.

          12.6   Counterparts. This Agreement may be executed in any number of
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, are an original, and all taken together, constitute
one Agreement.

          12.7   Survival. All covenants, representations and warranties made in
this Agreement continue in full force while any Obligations remain outstanding.
The obligation of Borrower in Section 12.2 to indemnify Bank shall survive until
the statute of limitations with respect to such claim or cause of action shall
have run.

          12.8   Confidentiality. In handling any confidential information, Bank
shall exercise the same degree of care that it exercises for its own proprietary
information, but disclosure of information may be made: (i) to Bank’s
subsidiaries or affiliates in connection with their business with Borrower; (ii)
to prospective transferees or purchasers of any interest in the Advances
(provided, however, Bank shall use commercially reasonable efforts in obtaining
such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (iii) as required by law, regulation, subpoena, or other order, (iv)
as required in connection with Bank’s examination or audit; and (v) as Bank
considers appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (a) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (b) is disclosed to Bank by a third
party, if Bank does not know that the third party is prohibited from disclosing
the information.

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          12.9   Attorneys’ Fees, Costs and Expenses. In any action or
proceeding between Borrower and Bank arising out of the Loan Documents, the
prevailing party will be entitled to recover its reasonable attorneys’ fees and
other reasonable costs and expenses incurred, in addition to any other relief to
which it may be entitled.

          13      DEFINITIONS             13.1    Definitions. In this
Agreement:

          “Accounts” are all existing and later arising accounts, contract
rights, and other obligations owed Borrower in connection with its sale or lease
of goods (including licensing software and other technology) or provision of
services, all credit insurance, guaranties, other security and all merchandise
returned or reclaimed by Borrower and Borrower’s Books relating to any of the
foregoing.

          “Account Debtor” is as defined in the Code and shall include, without
limitation, any person liable on any Financed Receivable, such as, a guarantor
of the Financed Receivable and any issuer of a letter of credit or banker’s
acceptance.

          “Adjustments” are all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor for any Financed Receivable.

  “Advance” is defined in Section 2.1.1.

          “Advance Rate” (a) for Eligible Accounts, other than Eligible
Commissions, is eighty percent (80.0%), net of any offsets related to each
specific Account Debtor, including, without limitation, Deferred Revenue and (b)
for Eligible Commissions, is, for any month, eighty percent (80%) of the prior
two months’ actual commissions received less any adjustments.

          “Affiliate” is a Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common
control with the Person, and each of that Person’s senior executive officers,
directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.

          “Applicable Rate” is one and one-half percent (1.5%) .

          “Bank Expenses” are all audit fees and expenses and reasonable costs
or expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, administering, defending and enforcing the Loan Documents
(including appeals or Insolvency Proceedings).

          “Borrower’s Books” are all Borrower’s books and records including
ledgers, records regarding Borrower’s assets or liabilities, the Collateral,
business operations or financial condition and all computer programs or discs or
any equipment containing the information.

          “Business Day” is any day that is not a Saturday, Sunday or a day on
which Bank is closed.

  “Closing Date” is the date of this Agreement.

          “Code” is the Uniform Commercial Code as adopted in California, as
amended and as may be amended and in effect from time to time.

          “Collateral” is any and all properties, rights and assets of Borrower
granted by Borrower to Bank or arising under the Code, now, or in the future, in
which Borrower obtains an interest, or the power to transfer rights, as
described on Exhibit A.

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          “Collections” are all funds received by Bank from or on behalf of an
Account Debtor for Financed Receivables.

  “Commission Estimate” is defined in Section 6.2(f) .

“Compliance Certificate” is attached as Exhibit B.

          “Contingent Obligation” is, for any Person, any direct or indirect
liability, contingent or not, of that Person for (i) any indebtedness, lease,
dividend, letter of credit or other obligation of another such as an obligation
directly or indirectly guaranteed, endorsed, co-made, discounted or sold with
recourse by that Person, or for which that Person is directly or indirectly
liable; (ii) any obligations for undrawn letters of credit for the account of
that Person; and (iii) all obligations from any interest rate, currency or
commodity swap agreement, interest rate cap or collar agreement, or other
agreement or arrangement designated to protect a Person against fluctuation in
interest rates, currency exchange rates or commodity prices; but “Contingent
Obligation” does not include endorsements in the ordinary course of business.
The amount of a Contingent Obligation is the stated or determined amount of the
primary obligation for which the Contingent Obligation is made or, if not
determinable, the maximum reasonably anticipated liability for it determined by
the Person in good faith; but the amount may not exceed the maximum of the
obligations under the guarantee or other support arrangement.

  “Default Rate” is defined in Section 9.6.

           “Deferred Revenue” is all amounts received or invoiced, as
appropriate, in advance of performance under contracts and not yet recognized as
revenue.

          “Perfection Certificate” is a certain Schedule annexed hereto.

          “Eligible Accounts” are (a) billed Accounts in the ordinary course of
Borrower’s business that meet all Borrower’s representations and warranties in
Section 5.3, have been, at the option of Bank, confirmed in accordance with
Section 2.1.1(d), and are due and owing from Account Debtors deemed creditworthy
by Bank in its sole discretion and (b) Eligible Commissions. Without limiting
the fact that the determination of which Accounts are eligible hereunder is a
matter of Bank discretion in each instance, Eligible Accounts shall not include
the following Accounts (which listing may be amended or changed in Bank’s
discretion with notice to Borrower):

                     (a)      Accounts that the Account Debtor has not paid
within ninety (90) days of invoice date; 

                     (b)      Accounts for an Account Debtor, fifty percent
(50%) or more of whose Accountshave not been paid within ninety (90) days of
invoice date;

                     (c)      Accounts for which the Account Debtor does not
have its principal place of business in the United States, unless agreed to by
Bank in writing, in its sole discretion, on a case-by-case basis;

                     (d)      Accounts for which the Account Debtor is a
federal, state or local government entity or any department, agency, or
instrumentality thereof except for Accounts of the United States if the payee
has assigned its payment rights to Bank and the assignment has been acknowledged
under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

                     (e)       Accounts for which Borrower owes the Account
Debtor, but only up to the amount owed (sometimes called “contra” accounts,
accounts payable, customer deposits or credit accounts);

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                        (f)   Accounts for demonstration or promotional
equipment, or in which goods are consigned, sales guaranteed, sale or return,
sale on approval, bill and hold, or other terms if Account Debtor’s payment may
be conditional;

                        (g)  Accounts for which the Account Debtor is Borrower’s
Affiliate, officer, employee,or agent;

                        (h)  Accounts in which the Account Debtor disputes
liability or makes any claim and Bank believes there may be a basis for dispute
(but only up to the disputed or claimed amount), or if the Account Debtor is
subject to an Insolvency Proceeding, or becomes insolvent, or goes out of
business;

                        (i)   Accounts for which Bank reasonably determines
collection to be doubtful or any Accounts which are unacceptable to Bank for any
reason.

           “Eligible Commissions” are those commissions reported to Bank on the
monthly Commission Estimate that meet all Borrower’s representations and
warranties in Section 5.3, have been, at the option of Bank, confirmed in
accordance with Section 2.1.1(d), and are due and owing from Account Debtors
deemed creditworthy by Bank in its sole discretion.

           “ERISA” is the Employment Retirement Income Security Act of 1974, and
its regulations.

  “Events of Default” are set forth in Article 8.

           “Facility Amount” is One Million Two Hundred Fifty Thousand Dollars
($1,250,000.00) .

  “Facility Fee” is defined in Section 2.2.2.

“Finance Charges” is defined in Section 2.2.3.

           “Financed Receivables” are all those Eligible Accounts, including
their proceeds which Bank finances and makes an Advance, as set forth in Section
2.1.1. A Financed Receivable stops being a Financed Receivable (but remains
Collateral) when the Advance made for the Financed Receivable has been fully
paid.

           “Financed Receivable Balance” is the total outstanding gross face
amount, at any time, of any Financed Receivable.

  “GAAP” is generally accepted accounting principles.

           “Indebtedness” is (a) indebtedness for borrowed money or the deferred
price of property or services, such as reimbursement and other obligations for
surety bonds and letters of credit, (b) obligations evidenced by notes, bonds,
debentures or similar instruments, (c) capital lease obligations and (d)
Contingent Obligations.

           “Insolvency Proceeding” is any proceeding by or against any Person
under the United States Bankruptcy Code, or any other bankruptcy or insolvency
law, including assignments for the benefit of creditors, compositions,
extensions generally with its creditors, or proceedings seeking reorganization,
arrangement, or other relief.

           “Investment” is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

           “Invoice Transmittal” shows Eligible Accounts (including, without
limitation, Eligible Commissions) which Bank may finance and, for each such
Account, includes the Account Debtor’s, name, address, invoice amount, invoice
date and invoice number.

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                     “IP Agreement” is a certain Amended and Restated
Intellectual Property Security Agreement executed and delivered by Borrower to
Bank.

                     “Intellectual Property Collateral” is a defined in the IP
Agreement.

                    “Lockbox” is defined in Section 2.2.6.

                     “Lien” is a mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.

                     “Loan Documents” are, collectively, this Agreement, the IP
Agreement, the Perfection Certificate, any note, or notes or guaranties executed
by Borrower, and any other present or future agreement between Borrower and/or
for the benefit of Bank in connection with this Agreement, all as amended,
extended or restated.

                    “Material Adverse Change” is: (i) A material impairment in
the perfection or priority of Bank’s security interest in the Collateral or in
the value of such Collateral; (ii) a material adverse change in the business,
operations, or condition (financial or otherwise) of Borrower; or (iii) a
material impairment of the prospect of repayment of any portion of the
Obligations.

           “Maturity Date” is March 24, 2008.

                    “Obligations” are all advances, liabilities, obligations,
covenants and duties owing, arising, due or payable by Borrower to Bank now or
later under this Agreement or any other document, instrument or agreement,
account (including those acquired by assignment) primary or secondary, such as
all Advances, Finance Charges, Facility Fee, interest, fees, expenses,
professional fees and attorneys’ fees, or other amounts now or hereafter owing
by Borrower to Bank.

                   “Perfection Certificate” is attached hereto as Exhibit C.

                   “Permitted Indebtedness” is:

                           (a)    Borrower’s indebtedness to Bank under this
Agreement or the Loan Documents;

                           (b)    Subordinated Debt;

                           (c)    Indebtedness to trade creditors incurred in
the ordinary course of business; and

                           (d)    Indebtedness secured by Permitted Liens.

                   “Permitted Investments” are: (a) marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agency or any state maturing within 1 year from its acquisition, (b) commercial
paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor’s Corporation or Moody’s Investors Service,
Inc., (c) Bank’s certificates of deposit issued maturing no more than 1 year
after issue and (d) any other investments administered through Bank.

          “Permitted Liens” are:

                           (a)    Liens arising under this Agreement or other
Loan Documents;

                           (b)    Liens for taxes, fees, assessments or other
government charges or levies, either not delinquent or being contested in good
faith and for which Borrower maintains adequate reserves on its Books, if they
have no priority over any of Bank’s security interests;

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                       (c)   Purchase money Liens securing no more than $50,000
in the aggregate amount outstanding (i) on equipment acquired or held by
Borrower incurred for financing the acquisition of the equipment, or (ii)
existing on equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the equipment;

                       (d)   Leases or subleases and non-exclusive licenses or
sublicenses granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses permit granting Bank a security
interest;

                       (e)  Warrant for Unpaid Taxes issued by the Department of
Revenue of the State of Washington (“Washington DOR”) on October 30, 2006, for
$149,447.64 in taxes, interest and penalties, so long as (i) Borrower makes
payments pursuant to its current agreement with the Washington DOR, a copy of
which has been provided to Bank (the “Payment Agreement”), (ii) maintains
adequate reserves for the taxes due thereunder on its Books and (iii) the
Washington DOR does not at any time accelerate payment under the Payment
Agreement; and

                       (f)    Liens incurred in the extension, renewal or
refinancing of the indebtedness secured by Liens described in (a) through (e),
but any extension, renewal or replacement Lien must be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness may
not increase.

           “Person” is any individual, sole proprietorship, partnership, limited
liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

           “Reconciliation Day” is the last calendar day of each month.

  “Reconciliation Period” is each calendar month.

           “Responsible Officer” is each of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.

           “Subordinated Debt” is debt incurred by Borrower subordinated to
Borrower’s debt to Bank (pursuant to a subordination agreement entered into
between Bank, Borrower and the subordinated creditor), on terms acceptable to
Bank.

           “Subsidiary” is any Person, corporation, partnership, limited
liability company, joint venture, or any other business entity of which more
than 50% of the voting stock or other equity interests is owned or controlled,
directly or indirectly, by the Person or one or more Affiliates of the Person.

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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed as a sealed instrument under the laws of the State of California as
of the date first above written.

BORROWER:

COGNIGEN NETWORKS, INC.

By __________________________________________
Name: _______________________________________
Title: ________________________________________

BANK:

SILICON VALLEY BANK

By __________________________________________
Name: _______________________________________
Title: ________________________________________

 

 

 

 

 

 

 

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EXHIBIT A

           The Collateral consists of all of Borrower’s right, title and
interest in and to the following:

          All goods, equipment, inventory, contract rights or rights to payment
of money, leases, license agreements, franchise agreements, general intangibles
(including payment intangibles), accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and

          Any copyright rights, copyright applications, copyright registrations
and like protections in each work of authorship and derivative work, whether
published or unpublished, now owned or later acquired; any patents, trademarks,
service marks and applications therefor; trade styles, trade names, any trade
secret rights, including any rights to unpatented inventions, know-how,
operating manuals, license rights and agreements and confidential information,
now owned or hereafter acquired; or any claims for damages by way of any past,
present and future infringement of any of the foregoing; and

          All Borrower’s books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions,
attachments, accessories, accessions and improvements to and replacements,
products, proceeds and insurance proceeds of any or all of the foregoing.

 

 

 

 

 

 

 

 

 

 

 

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[cognigen9148kex104x21x1.jpg]

          I, as authorized officer of Cognigen Networks, Inc. (“Borrower”)
certify under the Loan and Security Agreement (the “Agreement”) between Borrower
and Silicon Valley Bank (“Bank”) as follows (all capitalized terms used herein
shall have the meaning set forth in the Agreement), that as of _____________,
200_:

Borrower represents and warrants for each Financed Receivable:

Each Financed Receivable is an Eligible Account.

Borrower is the owner with legal right to sell, transfer, assign and encumber
such Financed Receivable;

The correct amount is on the Invoice Transmittal and is not disputed;

Payment is not contingent on any obligation or contract and Borrower has
fulfilled all its obligations as of the Invoice Transmittal date;

Each Financed Receivable is based on an actual sale and delivery of goods and/or
services rendered, is due to Borrower, is not past due or in default, has not
been previously sold, assigned, transferred, or pledged and is free of any
liens, security interests and encumbrances other than Permitted Liens;

There are no defenses, offsets, counterclaims or agreements for which the
Account Debtor may claim any deduction or discount;

It reasonably believes no Account Debtor is insolvent or subject to any
Insolvency Proceedings;

It has not filed or had filed against it Insolvency Proceedings and does not
anticipate any filing;

Bank has the right to endorse and/ or require Borrower to endorse all payments
received on Financed Receivables and all proceeds of Collateral.

No representation, warranty or other statement of Borrower in any certificate or
written statement given to Bank contains any untrue statement of a material fact
or omits to state a material fact necessary to make the statement contained in
the certificates or statement not misleading.

Additionally, Borrower represents and warrants as follows:

Borrower and each Subsidiary is duly existing and in good standing in its state
of formation and qualified and licensed to do business in, and in good standing
in, any state in which the conduct of its business or its ownership of property
requires that it be qualified except where the failure to do so could not
reasonably be expected to cause a Material Adverse Change. The execution,
delivery and performance of the Loan Documents have been duly authorized, and do
not conflict with Borrower’s organizational documents, nor constitute an event
of default under any material agreement by which Borrower is bound. Borrower is
not in default under any agreement to which or by which it is bound in which the
default could reasonably be expected to cause a Material Adverse Change.

Borrower has good title to the Collateral, free of Liens except Permitted Liens.
All inventory is in all material respects of good and marketable quality, free
from material defects.

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Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act. Borrower is not engaged
as one of its important activities in extending credit for margin stock (under
Regulations X, T and U of the Federal Reserve Board of Governors). Borrower has
complied in all material respects with the Federal Fair Labor Standards Act.
Borrower has not violated any laws, ordinances or rules, the violation of which
could reasonably be expected to cause a Material Adverse Change. None of
Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or
any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous substance
other than legally. Borrower and each Subsidiary has timely filed all required
tax returns and paid, or made adequate provision to pay, all material taxes,
except those being contested in good faith with adequate reserves under GAAP.
Borrower and each Subsidiary has obtained all consents, approvals and
authorizations of, made all declarations or filings with, and given all notices
to, all government authorities that are necessary to continue its business as
currently conducted except where the failure to obtain or make such consents,
declarations, notices or filings would not reasonably be expected to cause a
Material Adverse Change.

Please indicate compliance status by circling Yes/No under “Complies” column.   
    Reporting Covenant    Required              Complies     Monthly financial
statements with Compliance Certificate    Monthly within 30 days    Yes No 
 Annual financial statement (CPA Audited) + CC    FYE within 120 days    Yes No 
 A/R & A/P Agings    Monthly within 20 days    Yes No   Commission
Estimates/Commissions Received    Monthly within 10 days    Yes No 

  The following Intellectual Property was registered after the Effective Date
(if no registrations, state “None”)
 
________________________________________________________________________________________

All representations and warranties in the Agreement are true and correct in all
material respects on this date, and the Borrower represents that there is no
existing Event of Default.

  Sincerely,

  COGNIGEN NETWORKS, INC.

By _________________________________________
Name: ______________________________________
Title: ________________________________________

 

 

 

 

 

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EXHIBIT C

PERFECTION CERTIFICATE

(Attached)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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