Exhibit 10.12

 

THIRD AMENDMENT

TO LOAN AND SECURITY AGREEMENT

 

This Third Amendment to Loan and Security Agreement (this “Amendment”) is
entered into as of July 29, 2004, by and between COMERICA BANK, successor by
merger to COMERICA BANK-CALIFORNIA (“Bank”) and TIPPINGPOINT TECHNOLOGIES, INC
(“Borrower”).

 

RECITALS

 

Borrower and Bank are parties to that certain Loan and Security Agreement dated
as of July 30, 2002, as amended from time to time, including by that certain
First Amendment to Loan and Security Agreement dated as of March 24, 2003 and
that certain Second Amendment to Loan and Security Agreement dated as of July
30, 2003 (collectively, the “Agreement”). The parties desire to amend the
Agreement in accordance with the terms of this Amendment.

 

NOW, THEREFORE, the parties agree as follows:

 

1. The following defined terms in Section 1.1 of the Agreement hereby are
amended or restated as follows:

 

“Adjusted Quick Ratio” means, with respect to Borrower and its Subsidiaries as
at any date of determination, the ratio of (a) Borrower’s and its Subsidiaries’
Quick Assets, plus Borrower’s and its Subsidiaries’ net accounts receivable, to
(b) Borrower’s and its Subsidiaries’ Current Liabilities (including without
limitation issued and undrawn Letters of Credit) plus, to the extent not already
included therein, all Indebtedness (including without limitation any Contingent
Obligations) owing from Borrower (or any Subsidiary) to Bank, minus Borrower’s
and its Subsidiaries’ deferred revenue, all as of such date.”

 

“Credit Extension” means each Advance, Equipment Advance, Facility B Equipment
Advance, Letter of Credit, or any other extension of credit by Bank for the
benefit of Borrower hereunder.

 

“Eligible Foreign Accounts” means Accounts with respect to which the account
debtor does not have its principal place of business in the United States and
that (i) are supported by one or more letters of credit in an amount and of a
tenor, and issued by a financial institution, reasonably acceptable to Bank,
(ii) insured by EXIM Bank, or (iii) that Bank approves in its sole discretion,
on a case-by-case basis, but not to exceed Two Million Dollars ($2,000,000).

 

“Facility B Equipment Advance” has the meaning set forth in Section 2.1(d).

 

“Facility B Equipment Line” means a credit extension of up to Four Million
Dollars ($4,000,000).

 

“Facility B Equipment Maturity Date” means July 29, 2008.

 

“Permitted Acquisition” means an acquisition by the Borrower or any of its
Subsidiaries which (a) is an acquisition of a Person or assets of a Person in a
similar line of business to that of Borrower, (b) for which the consideration
paid (i) consists solely of the capital stock of the Borrower or (ii) is any
combination of the capital stock of Borrower, cash, Permitted Indebtedness and
Permitted Investments by Borrower or any of its Subsidiaries in other Persons,
provided the aggregate cash and assumed indebtedness does not exceed $3,000,000,
(c) is approved by the Board of Directors or the requisite shareholders of the
Person being acquired or Person transferring the assets being acquired and (d)
if the Borrower or any of its Subsidiaries acquires the capital stock of a
Person, at least 51% of all issued and outstanding capital stock of such Person
is acquired; provided, however, that no default or Event of Default shall have
occurred or be continuing prior to, or a would result after giving effect to,
any such Permitted Acquisition.

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“Quick Assets” means, at any date as of which the amount thereof shall be
determined, the unrestricted cash, cash-equivalents and short-term liquid
investments of an aggregate amount of at least One Million Dollars ($1,000,000),
of Borrower and its Subsidiaries determined in accordance with GAAP.

 

“Revolving Line” means a credit extension of up to Ten Million Dollars
($10,000,000).

 

“Revolving Maturity Date” means July 31, 2006.

 

1.1 Subpart “(b)” of the defined term “Eligible Accounts” hereby is amended and
restated in its entirety to read as follows:

 

“(b) Accounts with respect to an account debtor, forty percent (40%) of whose
Accounts the account debtor has failed to pay within ninety (90) days of invoice
date;”

 

1.2 Subpart “(e)” of the defined term “Permitted Indebtedness” hereby is amended
and restated in its entirety to read as follows:

 

“(e) additional Indebtedness of the Borrower and its Subsidiaries not to exceed
$500,000 in the aggregate amount outstanding at any time during the term hereof;
and”

 

1.3 Subpart “(f)” of the defined term “Permitted Investment” hereby is deleted
in its entirety.

 

2. Section 2.1(a)(i) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(i) Subject to and upon the terms and conditions of this Agreement, from and
after an audit of the Collateral with results reasonably satisfactory to Bank,
Borrower may request Advances in an aggregate outstanding amount not to exceed
the lesser of (i) the Revolving Line or (ii) the Borrowing Base, minus, in each
case, the aggregate face amount of all outstanding Letters of Credit.
Notwithstanding the foregoing, Advances in an aggregate amount not to exceed
Five Hundred Thousand Dollars ($500,000) shall be available without regard to
the Borrowing Base. Subject to the terms and conditions of this Agreement,
amounts borrowed pursuant to this Section 2.1(a) may be repaid and reborrowed at
any time prior to the Revolving Maturity Date, at which time all Advances under
this Section 2.1(a) shall be immediately due and payable. Borrower may prepay
any Advances without penalty or premium.”

 

3. New Section 2.1(c) hereby is added to the Agreement to read as follows:

 

“(c) Letters of Credit.

 

(i) Subject to the terms and conditions of this Agreement, at any time prior to
the Revolving Maturity Date, Bank agrees to issue or cause to be issued letters
of credit for the account of Borrower (each, a “Letter of Credit” and
collectively, the “Letters of Credit”) in an aggregate outstanding face amount
not to exceed the Revolving Line minus the aggregate amount of the outstanding
Advances and Letters of Credit at any time, provided that the aggregate face
amount of all outstanding Letters of Credit shall not exceed One Million Dollars
($1,000,000). All Letters of Credit shall be, in form and substance, acceptable
to Bank in its sole discretion and shall be subject to the terms and conditions
of Bank’s form of standard application and letter of credit agreement (the
“Application”), which Borrower hereby agrees to execute, including Bank’s
standard fee equal to 1.25% per annum of the face amount of each Letter of
Credit. On any drawn but unreimbursed Letter of Credit, the unreimbursed amount
shall be deemed an Advance under Section 2.1(a). With respect to outstanding
Letters of Credit with expiry dates after the Revolving Maturity Date, Borrower
shall, within thirty (30) days prior to the Revolving Maturity Date, secure in
cash all obligations under any such outstanding Letters of Credit on terms
acceptable to Bank.

 

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(ii) The obligation of Borrower to reimburse Bank for drawings made under
Letters of Credit shall be absolute, unconditional and irrevocable, and shall be
performed strictly in accordance with the terms of this Agreement, the
Application, and such Letters of Credit, under all circumstances whatsoever.
Borrower shall indemnify, defend, protect, and hold Bank harmless from any loss,
cost, expense or liability, including, without limitation, reasonable attorneys’
fees, arising out of or in connection with any Letters of Credit, except for
expenses caused by Bank’s gross negligence or willful misconduct.”

 

4. New Section 2.1(d) hereby is added to the Agreement to read as follows:

 

“(d) Facility B Equipment Advances.

 

(i) Subject to and upon the terms and conditions of this Agreement, at any time
from the date of this Amendment through the day prior to the first anniversary
of such date, Bank agrees to make advances (each an “Facility B Equipment
Advance” and, collectively, the “Facility B Equipment Advances”) to Borrower in
an aggregate amount not to exceed the Facility B Equipment Line. Each Equipment
Advance shall not exceed one hundred percent (100%) of the invoice amount of
equipment and software on any invoice approved by Bank (which Borrower shall, in
any case, have purchased within 90 days of the date of the corresponding
Facility B Equipment Advance), excluding taxes, shipping, warranty charges,
freight discounts and installation expense. Facility B Equipment Advances for
software approved by Bank shall not exceed Seven Hundred Fifty Thousand Dollars
($750,000) in the aggregate of all Facility B Equipment Advances.
Notwithstanding the foregoing, subject to and upon the terms and conditions of
this Amendment and the Agreement, and subject to the limitation above on
software, Bank agrees to make a single Facility B Equipment Advance on or about
the date of this Amendment (the “Amendment Date Equipment Advance”) for
equipment and software approved by Bank (which Borrower shall have purchased
after January 1, 2004, and which may not already be financed by Bank).

 

(ii) Interest shall accrue from the date of each Facility B Equipment Advance at
the rate specified in Section 2.3(a), and shall be payable monthly on the last
day of each month so long as any Facility B Equipment Advances are outstanding.
The Amendment Date Equipment Advance shall be payable in thirty six (36) equal
monthly installments of principal, plus all accrued interest, beginning on the
last day of the first full month following the date of the Amendment Date
Equipment Advance, and continuing on the same day of each month thereafter until
paid in full. Any Facility B Equipment Advances (excluding the Amendment Date
Equipment Advance) that are outstanding on January 31, 2005 shall be payable in
thirty six (36) equal monthly installments of principal, plus all accrued
interest, beginning on February 28, 2005, and continuing on the same day of each
month thereafter until paid in full. Any Facility B Equipment Advances that are
outstanding on July 31, 2005 (excluding the Amendment Date Equipment Advance and
any Facility B Equipment Advances which were outstanding on January 31, 2005)
shall be payable in thirty six (36) equal monthly installments of principal,
plus all accrued interest, beginning on August 30, 2005, and continuing on the
same day of each month thereafter through the Facility B Equipment Maturity
Date, at which time all amounts owing under this Section 2.1(d) and any other
amounts owing under this Agreement shall be immediately due and payable.
Facility B Equipment Advances, once repaid, may not be reborrowed. Borrower may
prepay any Facility B Equipment Advances without penalty or premium.

 

(iii) When Borrower desires to obtain an Facility B Equipment Advance, Borrower
shall notify Bank by facsimile transmission to be received no later than 3:00
p.m. Pacific time three (3) Business Days before the day on which the Facility B
Equipment Advance is to be made. Such notice shall be substantially in the form
of Exhibit B. The notice shall be signed by a Responsible Officer or its
designee and include a copy of the invoice and proof of payment of such invoice
for any Equipment to be financed.”

 

5. Section 2.3(a) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

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“(a) Interest Rates.

 

(i) Advances. Except as set forth in Section 2.3(b), the Advances shall bear
interest, on the outstanding Daily Balance thereof, at a rate equal to one
quarter of one percent (0.25%) above the Prime Rate.

 

(ii) Equipment Advances. Except as set forth in Section 2.3(b), the Equipment
Advances shall bear interest, on the outstanding Daily Balance thereof, at a
rate equal to three quarters of one percent (0.75%) above the Prime Rate.

 

(iii) Facility B Equipment Advances. Except as set forth in Section 2.3(b), the
Facility B Equipment Advances shall bear interest, on the outstanding Daily
Balance thereof, at a rate equal to one half of one percent (0.50%) above the
Prime Rate.”

 

6. New Section 2.5(c) hereby is added to the Agreement to read as follows:

 

“(c) Non-Usage Fee. A fee equal to one eighth of one percent (0.125%) of the
difference between the amount then available under the Revolving Line, and the
average Daily Balance during the term hereof, paid quarterly in arrears, which
shall be nonrefundable.”

 

7. Bank hereby waives Borrower’s failure timely to deliver any of the items
required to be delivered pursuant to Section 6.3 of the Agreement as in effect
prior to the date of this Amendment.

 

8. Section 6.3(a) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(a) as soon as available, but in any event within fifty (50) days after the end
of each fiscal quarter (until such time as Borrower’s Adjusted Quick Ratio is
less than or equal to 1.75:1.00, at which time the delivery time shall be within
thirty (30) days after the end of each calendar month (except for the third
month of each of Borrower’s fiscal quarters)), a company-prepared consolidated
balance sheet, income, and cash flow statement covering Borrower’s consolidated
operations during such period, prepared in accordance with GAAP, consistently
applied, in a form reasonably acceptable to Bank and certified by a Responsible
Officer;”

 

9. Section 6.3(d) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(d) promptly upon receipt of notice thereof, a report of any legal actions
pending or threatened against Borrower or any Subsidiary that could reasonably
be expected to result in damages or costs to Borrower or any Subsidiary of Five
Hundred Thousand Dollars ($500,000) or more;”

 

10. Section 6.3(e) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(e) such budgets, sales projections, operating plans or other financial
information as Bank may reasonably request from time to time and generally
prepared by Borrower in the ordinary course of business, including but not
limited to annual financial projections (including balance sheet and income
statement for each fiscal year), no later than December 31 of each year;”

 

11. Section 6.3(f) of the Agreement hereby is amended and restated in its
entirety to read as follows:

 

“(f) within fifty (50) days of the last day of each fiscal quarter, a report
signed by Borrower, in form reasonably acceptable to Bank, listing any
applications or registrations that Borrower has made or filed in respect of any
Patents, Copyrights or Trademarks and the status of any outstanding applications
or registrations, as well as any material change in Borrower’s intellectual
property, including but not limited to any subsequent ownership right of
Borrower in or to any Trademark, Patent or Copyright not specified in Exhibits
A, B, and C of the Intellectual Property Security Agreement delivered to Bank by
Borrower in connection with this Agreement.”

 

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12. The first, unnumbered paragraph of Section 6.3 of the Agreement hereby is
amended and restated in its entirety to read as follows:

 

“Within twenty five (25) days after the last day of each month during which any
Advances are outstanding, Borrower shall deliver to Bank a Borrowing Base
Certificate signed by a Responsible Officer in substantially the form of Exhibit
C hereto, together with aged listings of accounts receivable and accounts
payable, and a report (signed by a Responsible Officer), by location, of
consigned inventory having an aggregate book value equal to or greater than
$500,000.”

 

13. The second, unnumbered paragraph of Section 6.3 of the Agreement hereby is
amended and restated in its entirety to read as follows:

 

“Borrower shall deliver to Bank with the quarterly (or monthly, as applicable)
financial statements a Compliance Certificate signed by a Responsible Officer in
substantially the form of Exhibit D hereto.”

 

14. Section 6.8 of the Agreement hereby is amended and restated in its entirety
to read as follows:

 

“6.8 Adjusted Quick Ratio. As long as (x) any Advances, Equipment Advances or
Facility B Equipment Advances are outstanding, or (y) any outstanding Letters of
Credit are not cash-secured, Borrower shall maintain at all times, measured as
of the last day of each of Borrower’s fiscal quarters, an Adjusted Quick Ratio
of at least 1.25 to 1.00.

 

15. Section 6.9(a) hereby is amended and restated in its entirety to read as
follows:

 

“(a) Performance to Plan. As long as (x) any Advances, Equipment Advances or
Facility B Equipment Advances are outstanding, or (y) any outstanding Letters of
Credit are not cash-secured, Borrower shall achieve at all times, measured as of
the last day of each of Borrower’s fiscal quarters, actual revenues of no less
than seventy percent (70%) of that projected in the Plan. As used herein, the
“Plan” means the Bank -approved projected financial plan attached hereto as
Annex I. The Plan shall be updated annually (unless an Event of Default has
occurred), and Bank and Borrower shall mutually agree in writing to any updates
or other modifications to the Plan.”

 

16. Section 6.9(b) hereby is amended and restated in its entirety to read as
follows:

 

“(b) Addition and Modification of Financial Covenants. Bank and Borrower agree
that on January 31, 2006, unless an Event of Default occurs before or after that
date, and subject to Borrower providing to Bank, by no later than December 31,
2005, Borrower’s fully-funded business plan for fiscal year 2007, in form and
content reasonably satisfactory to Bank (the “Business Plan”), Bank shall
modify, amend and/or restate Section 6.9(a) hereof. Any such modification,
amendment and/or restatement shall contemplate (and shall not be drafted in such
a way as to prohibit) Borrower’s compliance with Section 6.8 hereof for the
twelve (12) month period immediately following such modification, amendment
and/or restatement. In the event Borrower fails timely to deliver the Business
Plan, Bank shall have the right, in its reasonable discretion, to modify, amend
and/or restate Section 6.9(a) hereof. Notwithstanding the foregoing, after
Borrower has maintained a Debt Service Coverage of at least 1.50 to 1.00 for two
(2) consecutive quarters after the date of this Amendment, Borrower thereafter
shall, on a quarterly basis, be required to do only one of the following: (i)
continue to comply with the “Performance to Plan” (Revenue) covenant or (ii)
maintain a Debt Service Coverage of at least 1.50 to 1.00 as of the last day of
Borrower’s applicable fiscal quarter. All such modifications, amendments and/or
restatements shall be in writing and signed by Bank and Borrower and otherwise
in accordance with this Agreement. As used herein, “Debt Service Coverage”
means, as measured quarterly as of the last day of each fiscal quarter of
Borrower, on a consolidated basis determined in accordance with GAAP, the ratio
of (a) an amount equal to the sum of (i) earnings after tax plus interest and
non-cash (i.e., depreciation and amortization) expenses, to (b) the sum of (i)
current portion of long term debt and capitalized leases plus (ii) interest
expense; all annualized for the preceding three (3) months.”

 

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17. Notwithstanding Section 6.12 of the Agreement, Borrower hereby agrees to,
within sixty (60) days of the date of this Amendment, (a) cause each of
TippingPoint Holdings, Inc., a Delaware corporation, and TippingPoint
Technologies Europe B.V., a Netherlands company (collectively, the “New
Subsidiaries”), to execute and deliver to Bank a guaranty and security
agreement, in form and content reasonably satisfactory to Bank, and (b) tender
to Bank the certificates evidencing Borrower’s ownership interests in each of
the New Subsidiaries, together with assignments separate from certificate
related thereto.

 

18. Subsection (c) hereby is added to Section 7.6 of the Agreement, to read as
follows:

 

“and (c) dividends or other distributions by any Subsidiary to Borrower.”

 

19. The following shall be added to the end of the preamble to Article 7 of the
Agreement, after the phrase “Borrower will not do any of the following:”
“without Bank’s prior written consent, not to be unreasonably withheld.”

 

20. Section 8.4 of the Agreement hereby is amended and restated in its entirety
to read as follows:

 

“8.4 Attachment. If any material portion of Borrower’s assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any material portion of Borrower’s assets by the United
States Government, or any department, agency, or instrumentality thereof, or by
any state, county, municipal, or governmental agency, and the same is not paid
within thirty (30) days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith contest
by Borrower (provided that no Credit Extensions will be required to be made
during such cure period);”

 

21. Section 8.6 of the Agreement hereby is amended and restated in its entirety
to read as follows:

 

“8.6 Other Agreements. If there is a default or other failure to perform in any
agreement to which Borrower is a party or by which it is bound resulting in a
right by a third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount in excess of Five Hundred Thousand
Dollars ($500,000); or which could have a Material Adverse Effect;”

 

22. Section 8.8 of the Agreement hereby is amended and restated in its entirety
to read as follows:

 

“8.8 Judgments. If a judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least Five Hundred Thousand
Dollars ($500,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment); or”

 

23. Exhibit C to the Agreement hereby is replaced in its entirety with Exhibit C
attached hereto.

 

24. Exhibit D to the Agreement hereby is replaced in its entirety with Exhibit D
attached hereto.

 

25. All references in the Loan Documents to Bank’s address at 9920 S. La Cienega
Blvd., Suite 1401, Inglewood, CA 90301, shall mean and refer to 2321 Rosecrans
Ave., Suite 5000, El Segundo, CA 90245.

 

26. Section 12 of the Agreement as in effect prior to the date of this Amendment
hereby is renumbered to read “Section 13,” and references to Section 12
throughout the Agreement as in effect prior to the

 

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date of this Amendment shall mean and refer to “Section 13.” New Section 12
hereby is added to the Agreement to read as follows:

 

“12. JUDICIAL REFERENCE.

 

The parties prefer that any dispute between them be resolved in litigation
subject to a Jury Trial Waiver as set forth in Section 11 of this Agreement, but
the availability of that process is in doubt because of the opinion of the
California Court of Appeal in Grafton Partners LP v. Superior Court, 9
Cal.Rptr.3d 511. This Reference Provision will be applicable until the
California Supreme Court completes its review of that case, and will continue to
be applicable if either that court or a California Court of Appeal publishes a
decision holding that a pre-dispute Jury Trial Waiver provision similar to that
contained in the Loan Documents is invalid or unenforceable. Delay in requesting
appointment of a referee pending review of any such decision, or participation
in litigation pending review, will not be deemed a waiver of this Reference
Provision.

 

12.1 Mechanics.

 

(a) Other than (i) nonjudicial foreclosure of security interests in real or
personal property, (ii) the appointment of a receiver or (iii) the exercise of
other provisional remedies (any of which may be initiated pursuant to applicable
law), any controversy, dispute or claim (each, a “Claim”) between the parties
arising out of or relating to this Agreement or any other document, instrument
or agreement between the Bank and the undersigned (collectively in this Section,
the “Loan Documents”), will be resolved by a reference proceeding in California
in accordance with the provisions of Section 638 et seq. of the California Code
of Civil Procedure (“CCP”), or their successor sections, which shall constitute
the exclusive remedy for the resolution of any Claim, including whether the
Claim is subject to the reference proceeding. Except as otherwise provided in
the Loan Documents, venue for the reference proceeding will be in the Superior
Court or Federal District Court in the County or District where venue is
otherwise appropriate under applicable law (the “Court”).

 

(b) The referee shall be a retired Judge or Justice selected by mutual written
agreement of the parties. If the parties do not agree, the referee shall be
selected by the Presiding Judge of the Court (or his or her representative). A
request for appointment of a referee may be heard on an ex parte or expedited
basis, and the parties agree that irreparable harm would result if ex parte
relief is not granted. The referee shall be appointed to sit with all the powers
provided by law. Each party shall have one peremptory challenge pursuant to CCP
§170.6. Pending appointment of the referee, the Court has power to issue
temporary or provisional remedies.

 

(c) The parties agree that time is of the essence in conducting the reference
proceedings. Accordingly, the referee shall be requested to (a) set the matter
for a status and trial-setting conference within fifteen (15) days after the
date of selection of the referee, (b) if practicable, try all issues of law or
fact within ninety (90) days after the date of the conference and (c) report a
statement of decision within twenty (20) days after the matter has been
submitted for decision. Any decision rendered by the referee will be final,
binding and conclusive, and judgment shall be entered pursuant to CCP §644.

 

(d) The referee will have power to expand or limit the amount and duration of
discovery. The referee may set or extend discovery deadlines or cutoffs for good
cause, including a party’s failure to provide requested discovery for any reason
whatsoever. Unless otherwise ordered, no party shall be entitled to “priority”
in conducting discovery, depositions may be taken by either party upon seven (7)
days written notice, and all other discovery shall be responded to within
fifteen (15) days after service. All disputes relating to discovery which cannot
be resolved by the parties shall be submitted to the referee whose decision
shall be final and binding.

 

12.2 Procedures. Except as expressly set forth in this Agreement, the referee
shall determine the manner in which the reference proceeding is conducted
including the time and place of hearings, the order of presentation of evidence,
and all other questions that arise with respect to the course of the reference
proceeding. All proceedings and hearings conducted before the referee, except
for trial,

 

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shall be conducted without a court reporter, except that when any party so
requests, a court reporter will be used at any hearing conducted before the
referee, and the referee will be provided a courtesy copy of the transcript. The
party making such a request shall have the obligation to arrange for and pay the
court reporter. Subject to the referee’s power to award costs to the prevailing
party, the parties will equally share the cost of the referee and the court
reporter at trial.

 

12.3 Application of Law. The referee shall be required to determine all issues
in accordance with existing case law and the statutory laws of the State of
California. The rules of evidence applicable to proceedings at law in the State
of California will be applicable to the reference proceeding. The referee shall
be empowered to enter equitable as well as legal relief, provide all temporary
or provisional remedies, enter equitable orders that will be binding on the
parties and rule on any motion which would be authorized in a trial, including
without limitation motions for summary judgment or summary adjudication . The
referee shall issue a decision at the close of the reference proceeding which
disposes of all claims of the parties that are the subject of the reference. The
referee’s decision shall be entered by the Court as a judgment or an order in
the same manner as if the action had been tried by the Court. The parties
reserve the right to appeal from the final judgment or order or from any
appealable decision or order entered by the referee. The parties reserve the
right to findings of fact, conclusions of laws, a written statement of decision,
and the right to move for a new trial or a different judgment, which new trial,
if granted, is also to be a reference proceeding under this provision.

 

12.4 Repeal. If the enabling legislation which provides for appointment of a
referee is repealed (and no successor statute is enacted), any dispute between
the parties that would otherwise be determined by reference procedure will be
resolved and determined by arbitration. The arbitration will be conducted by a
retired judge or Justice, in accordance with the California Arbitration Act
§1280 through §1294.2 of the CCP as amended from time to time. The limitations
with respect to discovery set forth above shall apply to any such arbitration
proceeding.

 

12.5 THE PARTIES RECOGNIZE AND AGREE THAT ALL DISPUTES RESOLVED UNDER THIS
REFERENCE PROVISION WILL BE DECIDED BY A REFEREE AND NOT BY A JURY, AND THAT
THEY ARE IN EFFECT WAIVING THEIR RIGHT TO TRIAL BY JURY IN AGREEING TO THIS
REFERENCE PROVISION. AFTER CONSULTING (OR HAVING HAD THE OPPORTUNITY TO CONSULT)
WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY AND VOLUNTARILY AND FOR
THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE PROVISION WILL APPLY TO ANY
DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS RELATED TO THIS AGREEMENT OR THE
LOAN DOCUMENTS.”

 

27. No course of dealing on the part of Bank or its officers, nor any failure or
delay in the exercise of any right by Bank, shall operate as a waiver thereof,
and any single or partial exercise of any such right shall not preclude any
later exercise of any such right. Bank’s failure at any time to require strict
performance by a Borrower of any provision shall not affect any right of Bank
thereafter to demand strict compliance and performance. Any suspension or waiver
of a right must be in writing signed by an officer of Bank.

 

28. Unless otherwise defined, all initially capitalized terms in this Amendment
shall be as defined in the Agreement. The Agreement, as amended hereby, shall be
and remain in full force and effect in accordance with its respective terms and
hereby is ratified and confirmed in all respects. Except as expressly set forth
herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of, or as an amendment of, any right, power, or remedy of
Bank under the Agreement, as in effect prior to the date hereof.

 

29. Borrower represents and warrants that, except as set forth in the attached
Schedule of Exceptions, the Representations and Warranties contained in the
Agreement are true and correct as of the date of this Amendment; and that no
Event of Default has occurred and is continuing.

 

30. As a condition to the effectiveness of this Amendment, Bank shall have
received, in form and substance satisfactory to Bank, the following:

 

(a) this Amendment, duly executed by Borrower;

 

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(b) a Certificate of the Secretary of Borrower with respect to incumbency and
resolutions authorizing the execution and delivery of this Amendment;

 

(c) a Commitment Fee in the amount of $35,000, which may be debited from any of
Borrower’s accounts;

 

(d) all reasonable Bank Expenses incurred through the date of this Amendment,
which may be debited from any of Borrower’s accounts; and

 

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

 

31. This Amendment may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one
instrument.

 

IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first
date above written.

 

TIPPINGPOINT TECHNOLOGIES, INC.

By:

 

/s/ ADAM CHIBIB

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Title:

 

Chief Financial Officer

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COMERICA BANK, successor by merger to

COMERICA BANK-CALIFORNIA

By:

 

/s/ PAUL GERLING

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Title:

 

Vice President

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