EXECUTION COPY
 

 

 
 
LOAN AND SECURITY AGREEMENT
 
 
 
dated as of June 29, 2010
 
among
 

UNIFY CORPORATION,
as Borrower,
 

The Guarantors Party Hereto From Time to Time,
 

and
 

HERCULES TECHNOLOGY II, L.P.,
as Lender
 
 
 

 

 

 

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TABLE OF CONTENTS
 

Page SECTION 1.             DEFINITIONS AND RULES OF CONSTRUCTION 1
              1.1 Definitions 1   1.2 Rules of Construction 23 1.3 Accounting
and Other Terms 24 1.4 Uniform Commercial Code 24 SECTION 2.        THE LOANS 24
2.1 Revolving Loan 24 2.2 Term Loan 25 2.3 Maximum Interest 27 2.4 Late Fee;
Default Interest 27   2.5 Voluntary Prepayments 27 2.6 Mandatory Prepayments 28
2.7 Prepayment Charge 30 2.8 [Intentionally Omitted] 30 2.9 Unused Line Fee 30
2.10 Payments Generally 30 SECTION 3.          SPECIAL PROVISIONS RELATING TO
LIBOR AND TAXES; ETC 31 3.1 [Intentionally Omitted] 31   3.2   Special
Provisions Applicable to the LIBOR Rate 31 3.3 Payments Free of Taxes;
Obligation to Withhold; Payments on Account of Taxes 31   3.4   Evidence of Debt
34 SECTION 4.        SECURITY INTEREST 34   4.1   Grant of a Security Interest
34   4.2   Authorization to File Financing Statements 34   4.3   Other Actions
35 4.4 Relation to Other Security Documents 37 4.5 Power of Attorney 37

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TABLE OF CONTENTS
(continued)
 

Page SECTION 5.                CONDITIONS PRECEDENT TO LOANS 38              
5.1 Initial Advance 38 5.2 All Advances 41 5.3 No Default 41 SECTION 6.       
REPRESENTATIONS AND WARRANTIES 42 6.1 Organization, Qualification and Other
Information 42 6.2 Power; Authorization 42 6.3 No Contravention; Liens 42 6.4
Consents 42 6.5 Binding Effect 43 6.6 No Defaults; Material Adverse Effect 43  
6.7 Financial Statements 43 6.8 Ownership of Property; Liens; Indebtedness and
Investments 43 6.9 Collateral Documents 44 6.10   Absence of Litigation 44 6.11
Laws 45 6.12 Material Agreements and Other Contracts 45 6.13 Conduct of
Business; Compliance with Laws; Regulatory Permits 45 6.14 Transactions With
Affiliates 45 6.15 Information Correct and Current 45 6.16 Tax Matters 46 6.17
Solvency 46 6.18 Intellectual Property; Intellectual Property Rights; Etc 46
6.19 Financial Accounts 47 6.20 Capitalization and Subsidiaries 47 6.21 Employee
Loans 47 6.22 Environmental Laws 47 6.23 ERISA 47 6.24 Margin Stock 48

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TABLE OF CONTENTS
(continued)
 

Page               6.25        Regulated Entities 48   6.26 Internal Accounting
and Disclosure Controls 49 6.27 Employee Relations 49 6.28 Foreign Corrupt
Practices 49 6.29 Sarbanes-Oxley Act 49 6.30 Patriot Act 49 6.31 [Intentionally
Omitted] 50 6.32 Eligible Accounts 50 6.33 Acquisition Documents 50 6.34  
Customers 50 SECTION 7.        INSURANCE; INDEMNIFICATION 50 7.1 Coverage 50 7.2
Certificates 50 7.3 Indemnity 51 SECTION 8.        AFFIRMATIVE COVENANTS 51 8.1
Financial Reports 51 8.2 Notices 53 8.3 Corporate Existence and Maintenance of
Properties 55 8.4 Compliance with Laws; Conduct of Business; Regulatory Permits
55 8.5 Taxes 55 8.6 Books and Records 55 8.7 Use of Proceeds 55 8.8 Collateral
Protection Generally 55 8.9 Additional Intellectual Property 56 8.10 Additional
Collateral 56 8.11 Joinder 56 8.12 Inspection Rights; Audit Rights; Field Exams;
Appraisals; Etc. 57 8.13 Material Agreements 57 8.14 Lender Meetings 57

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TABLE OF CONTENTS
(continued)
 

Page               8.15        SBA Information 57 8.16 Compromise of Agreements
58 8.17 Further Assurances 58 8.18 Availability of Shares 58 8.19 Post-Closing
Covenants 58 8.20 Information Statement 59 SECTION 9.        NEGATIVE COVENANTS
59 9.1 Liens 59 9.2 Indebtedness; Prepayment of Indebtedness 59 9.3 Investments
60 9.4 Restricted Payments 60 9.5 Payment of Restricted Junior Payments 60   9.6
Transfers 60 9.7 Fundamental Changes 60 9.8 Acquisitions 60 9.9 No Negative
Pledges 60 9.10 Transactions with Affiliates 61   9.11 Accounting Changes 61
9.12 Modification of Organizational Documents and Material Agreements 61 9.13  
Organizational Changes; Locations of Collateral 61 9.14 Deposit Accounts and
Securities Accounts 61 9.15 Change in Nature of Business 61 9.16 [Intentionally
Omitted] 61 9.17 Non-circumvention 62 9.18 Financial Covenants 62 9.19
Modification of Seller Notes 62 9.20 Foreign Subsidiary Deposit Accounts 62 9.21
Stock Options 63 SECTION 10.        [INTENTIONALLY OMITTED] 63

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TABLE OF CONTENTS
(continued)
 

Page SECTION 11.               EVENTS OF DEFAULT 63               11.1
Non-payment 63 11.2 Specific Covenants; Other Defaults 63 11.3 Repudiation of
Guaranty and other Collateral Documents 63 11.4 Invalidity of Loan Documents 63
11.5 Liens 64 11.6 Representations and Warranties 64 11.7 Insolvency 64 11.8
Attachments; Judgments 64 11.9 Cross-Defaults 65 11.10 Material Agreements 65
11.11 Change in Control 65 11.12 Suspension of Business 65 11.13 [Intentionally
Omitted]; or 65 11.14 ERISA Event 65   11.15 Material Adverse Effect 65 11.16
Common Stock 65 11.17 Subordination of Seller Notes 65 SECTION 12.         
REMEDIES 65 12.1 General 65 12.2 Collection; Foreclosure 66 12.3 Standards for
Exercising Rights and Remedies 67 12.4 Marshalling of Assets 67 12.5 Cumulative
Remedies 67 SECTION 13.        GUARANTY 67 13.1 Guaranty 67 13.2 Waivers by
Guarantors 68 13.3 Benefit of Guaranty 68 13.4 Waiver of Subrogation, Etc. 68

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TABLE OF CONTENTS
(continued)
 

Page               13.5        Election of Remedies 68   13.6 Limitation 69 13.7
Contribution with Respect to Guaranty Obligations 69 13.8 Liability Cumulative
70 13.9 Stay of Acceleration 70 13.10 Benefit to Borrower 70 SECTION 14.       
MISCELLANEOUS 70 14.1 Severability 70 14.2 Notice 70 14.3 Entire Agreement;
Amendments and Waivers 71 14.4 No Strict Construction 71 14.5 No Waiver 71 14.6
Survival 71 14.7 Successors and Assigns 71 14.8 Governing Law 72 14.9 Consent to
Jurisdiction and Venue 72 14.10 Mutual Waiver of Jury Trial / Judicial Reference
72 14.11   Professional Fees 73 14.12 Confidentiality 73 14.13 Assignment of
Rights 74 14.14 Revival of Secured Obligations 74 14.15 Counterparts 75 14.16 No
Third Party Beneficiaries 75 14.17 Publicity 75

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Table of Addenda, Schedules and Exhibits
 

Addenda                 Addendum 1 SBIC Additional Requirements   Annex A
Consolidated Adjusted EBITDA Adjustments   Schedules   Schedule 1 Subsidiaries
Schedule 1A Existing Permitted Indebtedness Schedule 1B Existing Permitted
Investments Schedule 1C Existing Permitted Liens Schedule 1.1(a) Existing
Indebtedness Schedule 6.1 Organization, Qualification and Other Information
Schedule 6.3 No Contravention; Liens Schedule 6.10 Absence of Litigation
Schedule 6.12 Material Agreements Schedule 6.13 Conduct of Business; Compliance
with Laws; Regulatory Permits Schedule 6.14 Transactions with Affiliates
Schedule 6.16 Tax Matters Schedule 6.18(a) Intellectual Property Schedule
6.18(b) Intellectual Property Infringement Schedule 6.19 Financial Assets
(Deposit Accounts and Securities Accounts) Schedule 6.20 Capitalization;
Subsidiaries Schedule 6.22   Environmental Laws Schedule 6.23 ERISA Matters
Schedule 6.27 Employee Relations Schedule 6.34 Suppliers and Customers Schedule
8.19(b) Trademarks to be Transferred from Gupta Technologies, LLC Schedule 9.18
Financial Covenants   Exhibits   Exhibit A Advance Request and Attachment to
Advance Request Exhibit B-1 Revolving Note Exhibit B-2 Term Note Exhibit C
Compliance Certificate Exhibit D Joinder Agreement Exhibit E Borrowing Base
Certificate Exhibit F ACH Debit Authorization Agreement Exhibit G Securities
Pledge Agreement Exhibit H Form of Warrant

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LOAN AND SECURITY AGREEMENT
 
          THIS LOAN AND SECURITY AGREEMENT is made and dated as of June 29, 2010
and is entered into by and among (i) UNIFY CORPORATION, a Delaware corporation
(hereinafter referred to as “Borrower”), (ii) each other Person identified as a
“Guarantor” hereto from time to time, and (iii) HERCULES TECHNOLOGY II, L.P., a
Delaware limited partnership (“Lender”).
 
RECITALS
 
          A. Borrower has requested Lender make available to Borrower a
revolving facility in an aggregate principal amount of up to SIX MILLION DOLLARS
($6,000,000) (the “Maximum Revolving Loan Amount”);
 
          B. Borrower has requested Lender to make available to Borrower a term
loan in an aggregate principal amount equal to TWENTY-FOUR MILLION DOLLARS
($24,000,000) (the “Maximum Term Loan Amount”); and
 
          C. Lender is willing to make the Revolving Loan and the Term Loan (as
each such term is defined in Section 1.1 hereof) on the terms and conditions set
forth in this Agreement.
 
AGREEMENTS
 
          NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Borrower, each Guarantor and Lender
agree as follows:
 
SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION
 
          1.1 Definitions. Unless otherwise defined herein, the following
capitalized terms shall have the following meanings:
 
                    “Account Control Agreement(s)” means any agreement entered
into by and among Lender, Borrower and/or any Guarantor and a third party
depository bank, securities intermediary or other institution in which Borrower
or such Guarantor maintains a Deposit Account or Securities Account and which
grants Lender a perfected, first priority security interest in and Lien on the
subject account or accounts.
 
                    “Accounts” means any “accounts”, as such term is defined in
the UCC.
 
                    “ACH Authorization” means the ACH Debit Authorization
Agreement in substantially the form of Exhibit F.
 
                    “Acquisition” means any transaction or series of related
transactions for the purpose of or resulting, directly or indirectly, in (i) the
acquisition of all or substantially all of the assets of a Person, or of all or
substantially all of any business line, unit or division of a Person, (ii) the
acquisition of in excess of 50% of the Equity Interests of any Person, or
otherwise causing any Person to become a Subsidiary, or (iii) a merger or
consolidation or any other combination with another Person.
 
                    “Acquisition Agreement” means the Agreement and Plan of
Merger dated as of June 29, 2010, by and among Borrower, Merger Sub, the Target
and certain shareholders of the Target.
 

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                    “Acquisition Documents” means, collectively, (i) the
Acquisition Agreement, (ii) the Daegis Registration Rights Agreement, (iii) the
Seller Notes, and (iv) all other documents, agreements and instruments executed
and delivered in connection therewith.
 
                    “Advance(s)” means a Revolving Loan Advance and/or a Term
Loan Advance.
 
                    “Advance Date” means the funding date of any Advance.
 
                    “Advance Request” means a request for an Advance submitted
by Borrower to Lender in substantially the form of Exhibit A and in form and
substance satisfactory to Lender.
 
                    “Affiliate” means, with respect to any Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
 
                    “Agreement” means this Loan and Security Agreement, as
amended, amended and restated, modified, replaced, refinanced, supplemented or
otherwise in effect from time to time.
 
                    “Allocable Amount” has the meaning given to such term in
Section 13.7(b) hereof.
 
                    “Assignee” has the meaning given to it in Section 14.13
hereof.
 
                    “Board of Directors Fees” has the meaning given to such term
in the definition of “Restricted Junior Payments”.
 
                    “Borrower” has the meaning given to such term in the
Preamble to this Agreement.
 
                    “Borrowing Base” means, as of the date of determination, an
amount equal to:
 
          (i) 85% of the book value of Eligible Accounts at such time; minus
 
          (ii) Reserves imposed by Lender from time to time in Lender’s
Permitted Discretion.
 
                    “Borrowing Base Certificate” means a borrowing base
certificate substantially in the form of Exhibit E and in form and substance
satisfactory to Lender.
 
                    “Business Day” means a day in which the banking institutions
in the State of California are open for business.
 
                    “Change in Control” means an event or a series of events by
which:
 
                    (a) any “person” or “group” (as such terms are used in
Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, but excluding
any employee benefit plan of such person or its subsidiaries, and any person or
entity acting in its capacity as trustee, agent or other fiduciary or
administrator of any such plan) other than the existing equity owners of
Borrower as of the Closing Date becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934, except that a
person or group shall be deemed to have “beneficial ownership” of all securities
that such person or group has the right to acquire, whether such right is
exercisable immediately or only after the passage of time (such right, an
“option right”)), directly or indirectly, 25% or more of the Common Stock
entitled to vote for members of the board of directors or equivalent governing
body of Borrower on a fully-diluted basis (and taking into account all such
Common Stock that such “person” or “group” has the right to acquire pursuant to
any option right); or
 
2
 

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                    (b) during any period of 24 consecutive months, a majority
of the members of the board of directors or other equivalent governing body of
Borrower cease to be composed of individuals (i) who were members of that board
or equivalent governing body on the first day of such period, (ii) whose
election or nomination to that board or equivalent governing body was approved
by individuals referred to in clause (i) above constituting at the time of such
election or nomination at least a majority of that board or equivalent governing
body or (iii) whose election or nomination to that board or other equivalent
governing body was approved by individuals referred to in clauses (i) and (ii)
above constituting at the time of such election or nomination at least a
majority of that board or equivalent governing body (excluding, in the case of
both clause (ii) and clause (iii), any individual whose initial nomination for,
or assumption of office as, a member of that board or equivalent governing body
occurs as a result of an actual or threatened solicitation of proxies or
consents for the election or removal of one or more directors by any person or
group other than a solicitation for the election of one or more directors by or
on behalf of the board of directors); or
 
                    (c) any Person or two or more Persons acting in concert
shall have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation thereof, will result in its or
their acquisition of the power to exercise, directly or indirectly, a
controlling influence over the management or policies of Borrower, or control
over the Common Stock entitled to vote for members of the board of directors or
equivalent governing body of Borrower on a fully-diluted basis (and taking into
account all such Common Stock that such Person or Persons have the right to
acquire pursuant to any option right) representing 25% or more of the combined
voting power of such Common Stock; or
 
                    (d) Borrower shall cease, directly or indirectly, to own and
control legally and beneficially 100% of the Equity Interests in any Subsidiary
of Borrower, unless otherwise expressly permitted under Section 9.6 hereof;
provided, that, consolidation of Subsidiaries by merger or dissolution of
Subsidiaries from time to time permitted pursuant to Section 9.7 hereof, shall
not be deemed a Change in Control.
 
                    “Change in Law” means the occurrence, after the date of this
Agreement, of any of the following: (a) the adoption or taking effect of any
law, rule, regulation or treaty, (b) any change in any law, rule, regulation or
treaty or in the administration, interpretation or application thereof by any
Governmental Authority or (c) the making or issuance of any request, guideline
or directive (whether or not having the force of law) by any Governmental
Authority.
 
                    “Claims” has the meaning given to it in Section 14.10
hereof.
 
                    “Class” means each separate class of Loans comprising, as
the context may require, all of the outstanding Revolving Loans at such time or
the outstanding Term Loan at such time.
 
                    “Closing Date” means the date of this Agreement.
 
                    “Code” means the Internal Revenue Code of 1986, as amended.
 
                    “Collateral” means the property described in Section 4.1
hereof.
 
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                    “Collateral Access Agreements” means an agreement reasonably
satisfactory in form, scope and substance to Lender executed by (a) a bailee or
other Person in possession of Collateral, or (b) a landlord of Real Estate
leased by Borrower or any Guarantor, in each case, pursuant to which such
landlord, bailee or other Person (i) acknowledges the Lien granted to Lender on
the Collateral, (ii) releases or subordinates such Person’s Liens in the
Collateral held by such Person or located on such Real Estate, and (iii) (A) as
to any bailee or other Person, provides Lender with access to the Collateral
held by such bailee or other Person or located in or on such Real Estate, and
(B) as to any landlord, provides Lender with access to the Collateral located in
or on such Real Estate and a reasonable time to sell and remove of the
Collateral from such Real Estate.
 
                    “Collateral Assignment of Acquisition Documents” means, each
of the Collateral Assignment of Acquisition Documents in form and substance
satisfactory to the Lender, in each case delivered in connection with each
Permitted Acquisition.
 
                    “Collateral Documents” means, collectively, Section 4 of
this Agreement, the Securities Pledge Agreements, the Account Control
Agreements, the Intellectual Property Security Agreements, the Mortgages, the
Collateral Access Agreements, the Collateral Assignment of Acquisition
Documents, the UCC Financing Statements, and all other documents or instruments
executed and/or delivered pursuant to the terms hereof or thereof, or all other
documents or instruments which purport to grant a security interest in and Lien
on assets of a Person as security for the Secured Obligations.
 
                    “Common Equity Interest” means Equity Interests constituting
the common equity security or interest of a Person.
 
                    “Common Stock” means the authorized common stock of
Borrower.
 
                    “Compliance Certificate” means a compliance certificate in
the form of Exhibit C attached hereto and in form and substance (including
supporting details) satisfactory to Lender.
 
                    “Confidential Information” has the meaning given to it in
Section 14.12 hereof.
 
                    “Consolidated Adjusted EBITDA” means, as of any date of
determination, an amount equal to Consolidated Net Income of Borrower and its
Subsidiaries for the most recently completed applicable Measurement Period, plus
(a) the following to the extent deducted in calculating Consolidated Net Income
for such Measurement Period and without duplication: (i) Consolidated Interest
Expenses paid or accrued in such applicable Measurement Period, (ii) the
provision for Federal, state, local and foreign income taxes payable in such
applicable Measurement Period, (iii) depreciation and amortization expense, (iv)
non-cash stock option expenses calculated in accordance with GAAP, (v) other
non-recurring expenses reducing Consolidated Net Income which do not represent a
cash item in such period or any future period, (vi) non-cash charges for equity
based compensation, (vii) fees, legal fees and expenses incurred and paid in
connection with the preparation and negotiation of this Agreement and the other
Loan Documents and the consummation of the Initial Acquisition in an aggregate
amount not to exceed $1,500,000, (viii) all adjustments to EBITDA for periods
prior to the Closing Date for all Six Month Measurement Periods EBITDA and
Twelve Month Measurement Periods EBITDA calculations, including excess
compensation adjustments, restructuring adjustments and adjustment items
provided to Lender prior to the date of this Agreement; provided, that, the
aggregate adjustments for this subclause (ix) shall not exceed the amount set
forth on Annex A attached hereto, and (x) cash expenses actually paid in such
period for field exams and appraisals conducted by Borrower at Lender’s request
as herein provided; in each case, for Borrower and its Subsidiaries on a
consolidated basis for such applicable Measurement Period; and minus (b) the
following, to the extent included in calculating Consolidated Net Income: (i)
Federal, state, local and foreign income tax credits and (ii) all non-cash items
increasing Consolidated Net Income; in each case of or by Borrower and its
Subsidiaries for such applicable Measurement Period. For purposes of this
calculation and without duplication, with respect to any period of
determination, the consolidated adjusted EBITDA of a wholly-owned Subsidiary
acquired as a result of a Permitted Acquisition, which shall be calculated in a
manner consistent with the methodology set forth for Consolidated Adjusted
EBITDA herein, may be included in the calculation of Consolidated Adjusted
EBITDA as though such Permitted Acquisition was consummated on the first day of
the applicable Measurement Period (the “Acquired Entity EBITDA”). The Acquired
Entity EBITDA shall be calculated by reference to the audited financial results
of the acquired entity, if available for such applicable Measurement Period, or
if such audited financial results are not available for such Measurement Period,
any unaudited financial results or management-prepared results as are approved
by Lender in respect of such acquired entity.
 
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                    “Consolidated Debt Service Charges” means, for any
Measurement Period, the sum of (a) Consolidated Interest Expense paid in cash or
required to be paid in cash during such Measurement Period, plus (b) scheduled
principal payments paid in cash or required to be paid in cash (excluding
amortization of discounts on warrant and closing costs) on account of
Consolidated Funded Indebtedness (including, without limitation, on any of the
Loans hereunder) during such Measurement Period; in each case of or by Borrower
and its Subsidiaries for such applicable Measurement Period.
 
                    “Consolidated Excess Cash Flow” means, as of any date of
determination, an amount equal to (a) Consolidated Adjusted EBITDA for the most
recently completed Twelve Month Measurement Period, minus (b) the sum (without
duplication) of: (i) capital expenditures made in cash and not financed (other
than from the proceeds of the Revolving Loans) during such period, (ii)
Consolidated Interest Expense paid in cash during such period, (iii) the
aggregate amount of Federal, state, local and foreign income taxes paid in cash
during such period, (iv) scheduled repayments and/or voluntary or mandatory
prepayments of and the Term Loan made in cash during such period.
 
                    “Consolidated Fixed Charge Coverage Ratio” means, as of any
date of determination, the ratio of (a) Consolidated Adjusted EBITDA for the
most recently completed Twelve Month Measurement Period, minus the provision for
Federal, state, local and foreign income taxes payable for such Measurement
Period, minus cash capital expenditures made during such Measurement Period to
(b) Consolidated Debt Service Charges for such Measurement Period; in each case
of or by Borrower and its Subsidiaries for such Measurement Period.
 
                    “Consolidated Funded Indebtedness” means, as of any date of
determination, for Borrower and its Subsidiaries on a consolidated basis, the
sum (without duplication) of (a) the outstanding principal amount of all
obligations, whether current or long-term, for borrowed money (including Secured
Obligations hereunder) and all obligations evidenced by bonds, debentures,
notes, loan agreements or other similar instruments, (b) all purchase money
Indebtedness, (c) all direct obligations arising under letters of credit
(including standby and commercial), bankers’ acceptances, bank guaranties,
surety bonds and similar instruments, (d) all obligations in respect of the
deferred purchase price of property or services (other than trade accounts
payable in the ordinary course of business not past due for more than sixty (60)
days), (e) in respect of any capitalized lease of any Person, the capitalized
amount thereof that would appear on a balance sheet of such Person prepared as
of such date in accordance with GAAP, (f) all guarantees with respect to
outstanding Indebtedness of the types specified in clauses (a) through (e) above
of Persons other than Borrower or any Subsidiary, and (g) all Indebtedness of
the types referred to in clauses (a) through (f) above of any partnership or
joint venture (other than a joint venture that is itself a corporation or
limited liability company) in which Borrower or any Subsidiary is a general
partner or joint venturer, unless such Indebtedness is expressly made
non-recourse to Borrower or such Subsidiary, provided that Consolidated Funded
Indebtedness shall not include intercompany balances of the Loan Parties or
Interest Rate Hedging Agreements to the extent permitted hereunder, except to
the extent any amount under an Interest Rate Hedging Agreement is then due and
payable.
 
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                    “Consolidated Interest Expense” means, for any Measurement
Period, the sum of (a) all interest, premium payments, fees, charges and related
expenses (including amortization for discounts for warrants and loan closing
fees and related expenses) in connection with borrowed money (including
capitalized interest) or in connection with the deferred purchase price of
assets, in each case to the extent treated as interest in accordance with GAAP,
and (b) the portion of rent expense under capitalized leases that is treated as
interest in accordance with GAAP; in each case, of or by Borrower and its
Subsidiaries on a consolidated basis for the most recently completed Measurement
Period.
 
                    “Consolidated Net Income” means, as of any date of
determination, the net income (or loss) of Borrower and its Subsidiaries on a
consolidated basis for the most recently completed Measurement Period,
determined in accordance with GAAP, after excluding extraordinary gains and
extraordinary losses for that Measurement Period.
 
                    “Consolidated Total Leverage Ratio” means, as of any date of
determination, the ratio of (a) Consolidated Funded Indebtedness as of such date
to (b) Consolidated Adjusted EBITDA for the most recently completed Twelve Month
Measurement Period.
 
                    “Contingent Obligation” means, as applied to any Person, any
direct or indirect liability, contingent or otherwise, of that Person with
respect to (i) any indebtedness, lease, dividend, letter of credit or other
obligation of another Person, including any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit, corporate credit cards or merchant services issued for the account of
that Person; and (iii) all obligations arising under any interest rate, currency
or commodity swap agreement, interest rate cap agreement, interest rate collar
agreement, or other agreement or arrangement designated to protect a Person
against fluctuation in interest rates, currency exchange rates or commodity
prices; provided, however, that the term “Contingent Obligation” shall not
include endorsements for collection or deposit in the ordinary course of
business. The amount of any Contingent Obligation shall be deemed to be an
amount equal to the stated or determined amount of the primary obligation in
respect of which such Contingent Obligation is made or, if not stated or
determinable, the maximum reasonably anticipated liability in respect thereof as
determined by such Person in good faith; provided, however, that such amount
shall not in any event exceed the maximum amount of the obligations under the
guarantee or other support arrangement.
 
                    “Control” means the possession, directly or indirectly, of
the power to direct or cause the direction of the management or policies of a
Person, whether through the ability to exercise voting power, by contract or
otherwise. “Controlling” and “Controlled” have meanings correlative thereto.
 
                    “Copyright License” means any written agreement granting any
right to use any Copyright or Copyright registration, now owned or hereafter
acquired by Borrower or any Guarantor or in which Borrower or any Guarantor now
holds or hereafter acquires any interest.
 
                    “Copyrights” means all copyrights, whether registered or
unregistered, held pursuant to the laws of the United States, any State thereof,
or of any other country.
 
                    “Daegis Registration Rights Agreement” means the
Registration Rights Agreement dated as of June 29, 2010, made by Borrower in
favor of the holders of the Common Stock acquired pursuant to the Acquisition
Agreement.
 
                    “Debtor Relief Laws” means the Bankruptcy Code of the United
States, and all other liquidation, conservatorship, bankruptcy, assignment for
the benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief Laws of the United States or other
applicable jurisdictions from time to time in effect and affecting the rights of
creditors generally.
 
6
 

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                    “Default” means any event or condition that constitutes an
Event of Default or that, with the giving of any notice, the passage of time, or
both, would be an Event of Default.
 
                    “Default Rate” has the meaning given to it in Section 2.4(b)
hereof.
 
                    “Deposit Accounts” means any “deposit accounts,” as such
term is defined in the UCC, and includes any checking account, savings account,
or certificate of deposit.
 
                    “Domestic Subsidiary” means any Subsidiary organized or
formed, as applicable, under the laws of the United States of America, any State
thereof or the District of Columbia.
 
                    “Eligible Accounts” means Accounts arising in the ordinary
course of Borrower’s business. Lender reserves the right at any time and from
time to time after the Closing Date, to adjust any of the criteria set forth
below and to establish new criteria in its Permitted Discretion. Unless
otherwise agreed by Lender, Eligible Accounts shall not include the following:
 
               (a) Accounts that the account debtor has failed to pay in full
within 90 days of the original invoice date;
 
               (b) Accounts owing by an account debtor, including its
Affiliates, whose total obligations to Borrower exceed 15% of all Eligible
Accounts;
 
               (c) Accounts owing by an account debtor, including its
Affiliates, 25% of whose Accounts the account debtor has failed to pay within 90
days of original invoice date;
 
               (d) Accounts owing by an account debtor that does not have its
principal place of business in the United States or that is due in a currency
other than U.S. Dollars exceeding 40% of all Eligible Accounts;
 
               (e) Accounts owing by an account debtor that Borrower owes money,
goods and/or services or is otherwise obligated to, but only to the extent of
the potential amount owed;
 
               (f) other than maintenance agreements in the ordinary course of
business, Accounts arising out of deferred revenue;
 
               (g) Accounts owing by an Affiliate of Borrower;
 
               (h) Accounts that are the obligation of an account debtor that is
the United States government or a political subdivision thereof, unless Lender,
in its sole discretion, has agreed to the contrary in writing and Borrower, if
necessary or desirable, has complied with respect to such obligation with the
Federal Assignment of Claims Act of 1940 or any other law restricting assignment
thereof;
 
               (i) Accounts that arise with respect to goods that are delivered
on a bill-and-hold, cash-on-delivery basis or placed on consignment, guaranteed
sale or other terms by reason of which the payment by the account debtor is or
may be conditional;
 
7
 

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               (j) Accounts (i) upon which Borrower’s right to receive payment
is not absolute or is contingent upon the fulfillment of any condition
whatsoever or (ii) as to which Borrower is not able to bring suit or otherwise
enforce its remedies against the account debtor through judicial process;
 
               (k) Accounts not owned by Borrower free and clear of all Liens of
any other Person except the Liens in favor of Lender and other Permitted Senior
Eligible Account Liens;
 
               (l) Accounts not subject to a first priority, perfected Lien in
favor of Lender other than Permitted Senior Eligible Account Liens;
 
               (m) Accounts that do not arise from the sale of goods or the
performance of services by Borrower in the ordinary course of business; and
 
               (n) Accounts the collection of which Lender determines in its
Permitted Discretion to be doubtful.
 
                    “Employee Benefit Plan” means any “employee benefit plan” as
defined in Section 3(3) of ERISA which is or was sponsored, maintained or
contributed to by, or required to be contributed to by, any Loan Party or any of
its respective Subsidiaries or ERISA Affiliates.
 
                    “Environmental Laws” means all applicable Federal, state,
local or foreign laws relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata), including, without limitation,
laws relating to emissions, discharges, releases or threatened releases of
chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes
(collectively, “Hazardous Materials”) into the environment, the exposure of
humans thereto, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all regulatory authorizations, codes, decrees,
demands or demand letters, injunctions, judgments, licenses, notices of
violation or similar notice letters, orders, permits, plans or regulations
issued, entered, promulgated or approved thereunder.
 
                    “Equity Interests” means, with respect to any Person, all of
the shares of capital stock of (or other ownership or profit interests in) such
Person, all of the warrants, options or other rights for the purchase or
acquisition from such Person of shares of capital stock of (or other ownership
or profit interests in) such Person, all of the securities convertible into or
exchangeable for shares of capital stock of (or other ownership or profit
interests in) such Person or warrants, rights or options for the purchase or
acquisition from such Person of such shares (or such other interests), and all
of the other ownership or profit interests in such Person (including
partnership, member or trust interests therein), whether voting or nonvoting,
and whether or not such shares, warrants, options, rights or other interests are
outstanding on any date of determination.
 
                    “ERISA” means the Employee Retirement Income Security Act of
1974 and its regulations, as amended from time to time.
 
                    “ERISA Affiliate” means, as to Borrower or any Guarantor,
any trade or business (whether or not incorporated) that is a member of a group
which includes Borrower or such Guarantor and which is treated as a single
employer under Section 414 of the Code.
 
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                    “ERISA Event” means (a) a “reportable event” within the
meaning of Section 4043 of ERISA and the regulations issued thereunder with
respect to any Pension Plan; (b) the failure to meet the minimum funding
standards of Sections 412 and 430 of the Code with respect to any Pension Plan
(whether or not waived in accordance with Section 412(c) of the Code) or the
failure to make by its due date a required installment under Section 430(j) of
the Code with respect to any Pension Plan or the failure to make any required
contribution to a Multiemployer Plan; (c) the provision pursuant to Section
4041(a)(2) of ERISA by the administrator of any Pension Plan of a notice of
intent to terminate such plan in a distress termination described in Section
4041(c) of ERISA; (d) the withdrawal by any of the Loan Parties, any of their
respective Subsidiaries or any of their respective ERISA Affiliates from any
Pension Plan with two or more contributing sponsors or the termination of any
such Pension Plan resulting in liability to any of the Loan Parties, any of
their respective Subsidiaries or any of their respective ERISA Affiliates
pursuant to Section 4063 or 4064 of ERISA; (e) the institution by the PBGC of
proceedings to terminate any Pension Plan, or the occurrence of any event or
condition which might constitute grounds under ERISA for the termination of, or
the appointment of a trustee to administer, any Pension Plan; (f) the imposition
of liability on any of the Loan Parties, any of their respective Subsidiaries or
any of their respective ERISA Affiliates pursuant to Section 4062(e) or 4069 of
ERISA or by reason of the application of Section 4212(c) of ERISA; (g) the
withdrawal of any of the Loan Parties, any of their respective Subsidiaries or
any of their respective ERISA Affiliates in a complete or partial withdrawal
(within the meaning of Sections 4203 and 4205 of ERISA) from any Multiemployer
Plan if there is any potential liability therefor, or the receipt by any of the
Loan Parties, any of their respective Subsidiaries or any of their respective
ERISA Affiliates of notice from any Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA, or that
it intends to terminate or has terminated under Section 4041A or 4042 of ERISA;
(h) the occurrence of an act or omission which could give rise to the imposition
on any of the Loan Parties, any of their respective Subsidiaries or any of their
respective ERISA Affiliates of fines, penalties, taxes or related charges under
Sections 4975 through 4980E of the Code or under Section 409, Section 502(c),
(i) or (l), or Section 4071 of ERISA in respect of any Employee Benefit Plan;
(i) the assertion of a material claim (other than routine claims for benefits)
against any Employee Benefit Plan other than a Multiemployer Plan or the assets
thereof, or against any of the Loan Parties, any of their respective
Subsidiaries or any of their respective ERISA Affiliates in connection with any
Employee Benefit Plan; (j) receipt from the Internal Revenue Service of notice
of the failure of any Pension Plan (or any other Employee Benefit Plan intended
to be qualified under Section 401(a) of the Code) to qualify under Section
401(a) of the Code, or the failure of any trust forming part of any Pension Plan
to qualify for exemption from taxation under Section 501(a) of the Code unless
the failure is cured within any cure period specified in the notice; (k) the
failure to make any contribution to a Pension Plan or Multiemployer Plan which
could result in the imposition of a Lien pursuant to Section 401(a)(29) or
430(k) of the Code or pursuant to ERISA; (l) the imposition of a Lien pursuant
to Section 401(a)(29) or 430(k) of the Code or pursuant to ERISA with respect to
any Pension Plan; (m) the determination that any Pension Plan, or notice to any
Loan Party of any of its respective Subsidiaries or ERISA Affiliates that a
Multiemployer Plan, is considered an at-risk plan or a plan in endangered or
critical status within the meaning of Sections 430, 431 and 432 of the Code or
Sections 303, 304 or 305 of ERISA; or (o) any event or condition with respect to
an Employee Benefit Plan that could result in liability in excess of $200,000
during the term hereof, other than a liability to pay premiums or benefits when
due.
 
                    “Event of Default” has the meaning given to it in Section 11
hereof.
 
                    “Event of Loss” means, with respect to Borrower or any
Guarantor (a) any and all damage to, or loss or destruction of, or loss of title
to, all or any portion of the Collateral (i) in excess of $100,000 in the
aggregate for any fiscal year or (ii) that results, individually or in the
aggregate, in a Material Adverse Effect; or (b) any taking of any property of
Borrower or any Guarantor or any portion thereof, in or by condemnation or other
eminent domain proceedings pursuant to any law, general or special, or by reason
of the temporary requisition of the use of such assets or any portion thereof,
by any Governmental Authority, civil or military (i) in excess of $25,000 in the
aggregate for any fiscal year or (ii) that results, either individually or in
the aggregate, in a Material Adverse Effect.
 
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                    “Excluded Deposit Accounts” means (i) a Deposit Account for
which Lender is the depositary bank and is in automatic control or (ii) any
Deposit Accounts specially and exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of Borrower’s or
any Guarantor’s salaried employees.
 
                    “Excluded Taxes” means, with respect to Lender or any other
recipient of any payment to be made by or on account of any obligation of
Borrower hereunder, (a) taxes imposed on or measured by its overall net income
(however denominated), and franchise taxes imposed on it (in lieu of net income
taxes), by the jurisdiction (or any political subdivision thereof) under the
Laws of which such recipient is organized or in which its principal office is
located or, in the case of Lender, in which its Lending Office is located, (b)
any branch profits taxes imposed by the United States or any similar tax imposed
by any other jurisdiction in which Borrower is located with respect to income
described in subsection (a) above, (c) any backup withholding tax that is
required by the Code to be withheld from amounts payable to Lender that has
failed to comply with clause (A) of Section 3.3(e)(ii), and (d) in the case of a
Foreign Lender, any United States withholding tax that (i) is required to be
imposed on amounts payable to such Foreign Lender pursuant to the Laws in force
at the time such Foreign Lender becomes a party hereto (or designates a new
Lending Office) or (ii) is attributable to such Foreign Lender’s failure or
inability (other than as a result of a Change in Law) to comply with clause (B)
of Section 3.3(e)(ii), except to the extent that such Foreign Lender (or its
assignor, if any) was entitled, at the time of designation of a new Lending
Office (or assignment), to receive additional amounts from Borrower with respect
to such withholding tax pursuant to Section 3.3(a)(ii) or (iii).
 
                    “Existing Indebtedness” means the Indebtedness of Borrower
and each Guarantor existing on the Closing Date which is disclosed on Schedule
1.1(a).
 
                    “Extraordinary Receipts” means any cash received by Borrower
or any Guarantor outside the ordinary course of business (and not consisting of
proceeds described in Section 2.6(d), (e), (f), (g) or (h)), including, without
limitation, (a) foreign, United States Federal, state or local tax refunds, (b)
pension plan reversions, (c) judgments, proceeds of settlements or other
consideration of any kind in connection with any cause of action, and (d) any
purchase price adjustment or proceeds from indemnification claims received in
connection with any Acquisition, including, without limitation the Initial
Acquisition.
 
                    “Facility Charge” means two and one-quarter percent (2.25%)
of the Maximum Loan Amount.
 
                    “Fee Payment” has the meaning given to it in Section
8.20(d).
 
                    “Fee Payment Date” has the meaning given to it in Section
8.20(d).
 
                    “Financial Statements” has the meaning given to it in
Section 8.1 hereof.
 
                    “Foreign Accounts” has the meaning given to it in Section
9.20 hereof.
 
                    “Foreign Lender” means Lender that is organized under the
Laws of a jurisdiction other than that in which Borrower is resident for tax
purposes. For purposes of this definition, the United States, each State thereof
and the District of Columbia shall be deemed to constitute a single
jurisdiction.
 
                    “Foreign Subsidiary” means any Subsidiary that is not a
Domestic Subsidiary.
 
                    “GAAP” means generally accepted accounting principles in the
United States of America, as in effect from time to time.
 
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                    “Governmental Authority” means the government of the United
States of America, any other nation or any political subdivision of any of the
foregoing, whether state or local, and any agency, authority, commission,
instrumentality, regulatory body, court, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
 
                    “Guarantor” means, collectively, each Subsidiary of Borrower
and any other Person that has entered into a Guaranty pursuant to the terms
hereof.
 
                    “Guarantor Payment” has the meaning given to it in Section
13.7(a) hereof.
 
                    “Guaranty” means, collectively, Section 13 of this Agreement
and any other guaranty in a form, scope and substance reasonably acceptable to
Lender and entered into by a Person to guarantee the Secured Obligations.
 
                    “Hazardous Materials” has the meaning ascribed to such term
in the definition of “Environmental Laws.”
 
                    “Hedging Agreements” means any and all rate swap
transactions, basis swaps, credit derivative transactions, forward rate
transactions, commodity swaps, commodity options, forward commodity contracts,
equity or equity index swaps or options, bond or bond price or bond index swaps
or options or forward bond or forward bond price or forward bond index
transactions, interest rate options, forward foreign exchange transactions, cap
transactions, floor transactions, collar transactions, currency swap
transactions, cross-currency rate swap transactions, currency options, spot
contracts, or any other similar transactions or any combination of any of the
foregoing (including any options to enter into any of the foregoing), whether or
not any such transaction is governed by or subject to any master agreement.
 
                    “Indebtedness” means, as to any Person at a particular time,
without duplication, all of the following, whether or not included as
indebtedness or liabilities in accordance with GAAP: (a) all obligations of such
Person for borrowed money and all obligations of such Person evidenced by bonds,
debentures, notes, loan agreements or other similar instruments; (b) the maximum
amount of all direct or contingent obligations of such Person arising under
letters of credit (including standby and commercial), bankers’ acceptances, bank
guaranties, surety bonds and similar instruments; (c) net obligations of such
Person under any Hedging Agreements; (d) all obligations of such Person to pay
the deferred purchase price of property or services (other than trade accounts
payable in the ordinary course of business and not past due for more than 60
days after the date on which such trade account was created); (e) all capital
lease obligations; (f) all Contingent Obligations; (g) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make any payment in
respect of any Equity Interest in such Person or any other Person or any
warrant, right or option to acquire such Equity Interest, valued, in the case of
a redeemable preferred interest, at the greater of its voluntary or involuntary
liquidation preference plus accrued and unpaid dividends; (h) indebtedness
(excluding prepaid interest thereon) secured by a Lien on property owned or
being purchased by such Person (including indebtedness arising under conditional
sales or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and (i) all
Guarantees of such Person in respect of any of the foregoing.
 
                    “Initial Acquisition” means the Acquisition by Borrower of
Target pursuant to the terms of the Acquisition Documents.
 
                    “Insolvency Proceeding” is any proceeding by or against any
Person under any Debtor Relief Law, including assignments for the benefit of
creditors, compositions, extensions generally with its creditors, or proceedings
seeking reorganization, arrangement, or other relief.
 
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                    “Intellectual Property” means all of Borrower’s and any
Guarantor’s (i) Copyrights, Trademarks and Patents; (ii) Licenses; (iii) trade
secrets and inventions; (iv) mask works; (v) applications for any of the
foregoing; (vi) any reissues, extensions, or renewals of any of the foregoing;
and (vii) all goodwill associated with any of the foregoing; in each case,
together with Borrower’s or Guarantor’s rights to sue for past, present and
future infringement of Intellectual Property and the goodwill associated
therewith.
 
                    “Intellectual Property Rights” has the meaning ascribed to
such term in Section 6.18(b) hereof.
 
                    “Intellectual Property Security Agreements” means,
collectively, all copyright security agreements, trademark security agreements
and patent security agreements or any assignments with respect thereto entered
into by Borrower and/or any Guarantor in favor of Lender, or any other
documents, instrument or agreement which purports to grant a security interest
in and Lien on any Intellectual Property in favor of Lender.
 
                    “Interest Payment Date” means the first Business Day of each
calendar month and the Revolving Loan Maturity Date or Term Loan Maturity Date,
as applicable.
 
                    “Interest Period” means (a) initially, the period commencing
on the Advance Date with respect to such Loan and ending the first Business Day
of July 2010; and (b) thereafter, each period commencing on the first Business
Day of each January, April, July or October of any calendar year and ending on
the calendar day immediately prior to such Business Day.
 
                    “Interest Rate Hedging Agreements” means Hedging Agreement
constituting interest rate protection contracts entered in the ordinary course
of business of Borrower and not for speculative purposes.
 
                    “Inventory” means all “inventory” as defined in the UCC,
including all goods intended for sale, lease, display or demonstration; all work
in process; and all raw materials, and other materials and supplies of any kind
that are or could be used in connection with the manufacture, printing, packing,
shipping, advertising, sale, lease or furnishing of such goods, or otherwise
used or consumed in such Person’s business (but excluding equipment).
 
                    “Investment” means, as to any Person, any direct or indirect
acquisition or investment by such Person, whether by means of (a) the purchase
or other acquisition of Equity Interests of another Person, (b) a loan, advance
or capital contribution to, guarantee or assumption of debt of, or purchase or
other acquisition of any other debt or interest in, another Person, or (c) the
purchase or other acquisition (in one transaction or a series of transactions)
of assets of another Person that constitute a business unit or all or a
substantial part of the business of, such Person. For purposes of covenant
compliance, the amount of any Investment shall be the amount actually invested,
without adjustment for subsequent increases or decreases in the value of such
Investment.
 
                    “Joinder Agreements” means for each Subsidiary, a completed
and executed Joinder Agreement in substantially the form attached hereto as
Exhibit D.
 
                    “Key Customers” has the meaning ascribed to such term in
Section 6.34 hereof.
 
                    “Laws” means, collectively, all international, foreign,
Federal, state and local statutes, treaties, rules, guidelines, regulations,
ordinances, codes and administrative or judicial precedents or authorities,
including the interpretation or administration thereof by any Governmental
Authority charged with the enforcement, interpretation or administration
thereof, and all applicable administrative orders, directed duties, requests,
licenses, authorizations and permits of, and agreements with, any Governmental
Authority, in each case whether or not having the force of law.
 
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                    “Lender” has the meaning ascribed to such term in the
Preamble to this Agreement.
 
                    “Lender Expenses” are fees, expenses, costs and other
amounts incurred by Lender under the Loan Documents as set forth more fully in
Section 14.11 hereof.
 
                    “LIBOR Rate” means, as of the date of determination, the
rate per annum reported in The Wall Street Journal for deposits in Dollars two
Business Days prior to the beginning of the applicable Interest Period for such
Interest Period; provided, however, that, notwithstanding the foregoing, in no
event shall the LIBOR Rate be less than 2.00% per annum. In the event that such
rate does not appear in The Wall Street Journal, the LIBOR Rate shall be
determined by reference to such other comparable publicly available publication
or service for reporting or displaying eurodollar rates as may be selected by
Lender.
 
                    “LIBOR Rate Loan” means a Loan that bears interest at a rate
based on the LIBOR Rate.
 
                    “License” means any Copyright License, Patent License,
Trademark License or other license of rights or interests in Intellectual
Property.
 
                    “Lien” means any mortgage, deed of trust, pledge,
hypothecation, assignment for security, security interest, encumbrance, levy,
lien or charge of any kind, whether voluntarily incurred or arising by operation
of law or otherwise, against any property, any conditional sale or other title
retention agreement, any lease in the nature of a security interest and any
filing of any financing statement (other than a precautionary financing
statement with respect to a lease that is not in the nature of a security
interest) under the UCC or comparable law of any jurisdiction.
 
                    “Loan” means, collectively, the Advances made under this
Agreement.
 
                    “Loan Documents” means this Agreement, the Notes, the ACH
Authorization, the Collateral Documents, the Joinder Agreements, the Guaranty,
the Warrant, the Daegis Registration Rights Agreement, the Subordination
Agreements, any intercreditor agreements, any other subordination agreements and
any other documents executed in connection with the Secured Obligations or the
transactions contemplated hereby, as the same may from time to time be amended,
modified, supplemented or restated.
 
                    “Loan Party” means Borrower and each Domestic Subsidiary of
Borrower.
 
                    “Material Adverse Effect” means (a) a material adverse
change in, or material adverse effect upon, the operations, business,
properties, assets, liabilities (actual or contingent), or financial condition
of Borrower or any Guarantor; or (b) a material impairment in the ability of
Borrower or any Guarantor to perform the Secured Obligations in accordance with
the terms of the Loan Documents, or the ability of Lender to enforce any of its
rights or remedies with respect to the Secured Obligations; (c) a material
adverse effect upon the legality, validity, binding effect or enforceability
against Borrower or any Guarantor of any Loan Document to which it is a party;
or (d) a material adverse effect upon the Collateral or Lender’s Liens on the
Collateral or the priority of such Liens.
 
                    “Material Agreements” means, collectively, (i) the
Organization Documents of Borrower and each Guarantor, (ii) all agreements or
documents (other than the Loan Documents) evidencing Indebtedness of Borrower
and/or any Guarantor in excess of $200,000, (iii) the Acquisition Documents and
(iv) any other contract or other arrangement to which Borrower and/or any
Guarantor is a party (other than the Loan Documents) for which breach,
nonperformance, cancellation, termination or failure to renew would reasonably
be expected to have a Material Adverse Effect.
 
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                    “Maximum Loan Amount” means the sum of the Maximum Revolving
Loan Amount and the Maximum Term Loan Amount.
 
                    “Maximum Rate” shall have the meaning assigned to such term
in Section 2.3.
 
                    “Maximum Revolver Capacity” means, as of the date of
determination, the lesser of (i) the Maximum Revolving Loan Amount and (ii) the
Borrowing Base then in effect.
 
                    “Maximum Revolving Loan Amount” shall have the meaning
ascribed to such term in the Recitals to this Agreement.
 
                    “Maximum Term Loan Amount” shall have the meaning ascribed
to such term in the Recitals to this Agreement.
 
                    “Measurement Period” means, at any date of determination,
the most recently completed Twelve Month Measurement Period or Six Month
Measurement Period, of Borrower, as applicable.
 
                    “Merger Sub” means Unify Acquisition Corp., a California
corporation and wholly-owned subsidiary of Borrower.
 
                    “Mortgage” means any deed of trust, leasehold deed of trust,
mortgage, leasehold mortgage, deed to secure debt, leasehold deed to secure debt
or other document creating a Lien on Real Estate or any interest in Real Estate.
 
                    “Multiemployer Plan” means any Employee Benefit Plan which
is a “multiemployer plan” as defined in Section 3(37) or 4001(a)(3) of ERISA.
 
                    “New Guarantor” has the meaning ascribed to such term in
Section 8.11 hereof.
 
                    “Note(s)” means a Revolving Note and/or a Term Note.
 
                    “Organization Documents” means, (a) with respect to any
corporation, the certificate or articles of incorporation and the bylaws (or
equivalent or comparable constitutive documents with respect to any non-U.S.
jurisdiction); (b) with respect to any limited liability company, the
certificate or articles of formation or organization and operating agreement;
and (c) with respect to any partnership, joint venture, trust or other form of
business entity, the partnership, joint venture or other applicable agreement of
formation or organization and any agreement, instrument, filing or notice with
respect thereto filed in connection with its formation or organization with the
applicable Governmental Authority in the jurisdiction of its formation or
organization and, if applicable, any certificate or articles of formation or
organization of such entity.
 
                    “Other Taxes” means all present or future stamp or
documentary taxes or any other excise or property taxes, charges or similar
levies arising from any payment made hereunder or under any other Loan Document
or from the execution, delivery or enforcement of, or otherwise with respect to,
this Agreement or any other Loan Document.
 
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                    “Patent License” means any written agreement granting any
right with respect to any invention on which a Patent is in existence or a
Patent application is pending, in which agreement Borrower and/or any Guarantor
now holds or hereafter acquires any interest.
 
                    “Patents” means all letters patent of, or rights
corresponding thereto, in the United States or in any other country, all
registrations and recordings thereof, and all applications for letters patent
of, or rights corresponding thereto, in the United States or any other country.
 
                    “PBGC” means the Pension Benefit Guaranty Corporation or any
successor thereto.
 
                    “Pension Plan” means any Employee Benefit Plan, other than a
Multiemployer Plan, which is subject to Sections 412 and 430 of the Code or
Title IV or Section 302 of ERISA.
 
                    “Permitted Acquisitions” means the purchase or other
acquisition of all of the Equity Interests in a Person, or all or substantially
all of the assets of any Person, which Equity Interests or assets, as
applicable, upon the consummation of such purchase or other acquisition, will be
owned, directly or indirectly, by a Loan Party (including as a result of a
merger or consolidation); provided that, each of the following conditions have
been satisfied:
 
                    (i) the lines of business of the Person to be (or the assets
of which are to be) so purchased or otherwise acquired shall be substantially
the same lines of business as one or more of the principal businesses of the
Loan Parties in the ordinary course;
 
                    (ii) immediately before and immediately after giving pro
forma effect to any such purchase or other acquisition, no Default or Event of
Default shall have occurred and be continuing;
 
                    (iii) the target of such purchase or other acquisition has
positive EBITDA for the most recent four quarters prior to the acquisition date
for which financial statements are available;
 
                    (iv) Borrower shall have furnished to Lender (A) at least
ten (10) Business Days prior to the consummation of such purchase or other
acquisition, an executed term sheet and/or commitment letter (if any has been
executed) (setting forth in reasonable detail the terms and conditions of such
purchase or other acquisition) and, (B) at least five (5) Business Days prior to
the consummation of such purchase or other acquisition and at the request of
Lender, such other information and documents that Lender may reasonably request
(including, without limitation, any related management, non-compete, employment,
option or other material agreements), any schedules to such agreements,
documents or instruments and all drafts of other material ancillary agreements,
instruments and documents to be executed or delivered in connection therewith,
in all such cases, to the extent then available and then in the form then
available, (C) at least five (5) Business Days prior to the consummation of such
purchase or other acquisition, (1) pro forma financial statements of Borrower
and its Subsidiaries after giving effect to the consummation of such purchase or
other acquisition, and (2) a certificate of the chief financial officer of
Borrower demonstrating on a pro forma basis compliance with the financial
covenants set forth in Section 9.18 hereof after giving effect to the
consummation of such purchase or other acquisition and certifying that all of
the other requirements set forth in this definition have been satisfied or will
be satisfied on or prior to the consummation of such purchase or other
acquisition, and (D) by no later than the date of consummation of such purchase
or other acquisition, executed copies of the purchase and sale agreement and
such other agreements, instruments and other documents (including, without
limitation, the Loan Documents required by Section 8.10 and Section 8.11 and a
Collateral Assignment of Acquisition Documents under the acquisition documents)
as Lender reasonably shall request;
 
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                    (v) Borrower shall have delivered to Lender evidence
satisfactory to Lender that all Liens with respect to the assets or Equity
Interests to be acquired shall be free and clear of all Liens, other than
Permitted Liens (or concurrently with the acquisition thereof will be free and
clear of all Liens, other than Permitted Liens) and Lender will have a first
priority perfected security interest in and Lien on such assets or Equity
Interests to be acquired (subject only to Permitted Senior Liens);
 
                    (vi) such purchase or other acquisition shall not be hostile
and shall have been approved by the board of directors (or other similar body)
and/or the stockholders or other equityholders of the acquisition target;
 
                    (vii) the total cash and non-cash consideration (including
the fair market value of all Equity Interests issued or transferred to the
sellers thereof, all indemnities, earnouts and other contingent cash payment
obligations to, and the aggregate amounts paid or to be paid under non-compete,
consulting and other Affiliated agreements with, the sellers thereof and
reserves for liabilities with respect thereto, all write-downs of property and
reserves for liabilities with respect thereto and all assumptions of debt,
liabilities and other obligations in connection therewith) paid by or on behalf
of such Loan Party for any such purchase or other acquisition, when aggregated
with the total cash and noncash consideration paid by or on behalf of such Loan
Party in connection with all other Permitted Acquisitions shall not exceed
$1,000,000 in the aggregate in each fiscal year, and shall not exceed $5,000,000
in the aggregate during the term of this Agreement;
 
                    (viii) such purchase or other acquisition shall not include
or result in any contingent liabilities which would be reasonably expected to
have, either individually or in the aggregate, a Material Adverse Effect;
 
                    (ix) for any purchase or other acquisition of Equity
Interests of a Person, such Person shall be organized or formed, as applicable,
under the laws of the United States of America, any State thereof or the
District of Columbia; and
 
                    (x) any and all consents and approvals of any Governmental
Authority, landlord or other Person necessary for the consummation of such
purchase or acquisition shall have been received.
 
                    “Permitted Discretion” means a determination made in good
faith and in the exercise of reasonable (from the perspective of a secured
asset-based lender) business judgment.
 
                    “Permitted Indebtedness” means:
 
                    (i) Indebtedness of Borrower or any Guarantor in favor of
Lender arising under this Agreement or any other Loan Document;
 
                    (ii) Indebtedness existing on the Closing Date which is
disclosed in Schedule 1A;
 
                    (iii) Indebtedness of Borrower or any Guarantor in respect
of capital leases and purchase money obligations for equipment or other capital
assets within the limitations set forth in clause (iii) of the definition of
“Permitted Liens”, provided that the aggregate amount of all such Indebtedness
shall not exceed $500,000 in the aggregate in any fiscal year;
 
                    (iv) reimbursement obligations in connection with letters of
credit that are secured by cash or cash equivalents and issued on behalf of
Borrower or any Guarantor in an amount not to exceed $100,000 in the aggregate
at any time outstanding;
 
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                    (v) Indebtedness of Borrower or any Guarantor to trade
creditors incurred in the ordinary course of business that is not past due for
more than ninety (90) days;
 
                    (vi) Indebtedness of (A) a Loan Party owed to any other Loan
Party, (B) any Foreign Subsidiary owed to any Loan Party, and (C) any Loan Party
owed to any Foreign Subsidiary and existing on the Closing Date and set forth on
Schedule 1A, in each case, which Indebtedness shall (1) be pledged to Lender to
secure the Secured Obligations, (2) be on terms (including subordination terms)
acceptable to Lender, and (3) otherwise constitute a Permitted Investment;
 
                    (vii) Contingent Obligations of Borrower or any Guarantor in
respect of any Permitted Indebtedness;
 
                    (viii) Indebtedness of any Loan Party arising from the
honoring by a bank or other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary course of business,
provided that such Indebtedness (A) does not exceed $25,000 in the aggregate at
any time for Borrower and its Subsidiaries, taken as a whole, and (B) is
extinguished within five days of its incurrence;
 
                    (ix) Indebtedness of Borrower or any Guarantor owed to any
Person providing worker’s compensation, health, disability or other employee
benefits to Borrower or any Guarantor and constituting reimbursement or
indemnification obligations to such Person in the ordinary course of business of
Borrower and such Guarantor;
 
                    (x) Indebtedness of Borrower or any Guarantor in respect of
performance bonds, bid bonds, appeal bonds, surety bonds and similar
obligations, in each case, provided in the ordinary course of business of
Borrower and such Guarantor and not in connection with Indebtedness for borrowed
money;
 
                    (xi) Indebtedness incurred by Borrower or any Guarantor to
finance the payment of insurance premiums incurred in the ordinary course of
business;
 
                    (xii) Indebtedness incurred by Borrower on the Closing Date
in connection with the Initial Acquisition pursuant to the terms of the Seller
Notes;
 
                    (xiii) other unsecured Indebtedness of the Loan Parties in
an amount not to exceed $50,000 in the aggregate at any time outstanding; and
 
                    (xiv) extensions, refinancings and renewals of any items of
Permitted Indebtedness, provided that the principal amount is not increased or
the terms modified to impose materially more burdensome terms upon Borrower
and/or any Guarantor, as the case may be.
 
                    “Permitted Investment” means:
 
                    (i) Investments of Borrower or any Guarantor in any other
Person existing on the Closing Date which are disclosed in Schedule 1B;
 
                    (ii) (A) marketable direct obligations issued or
unconditionally guaranteed by the United States of America or any agency or any
State thereof maturing within one year from the date of acquisition thereof, (B)
commercial paper maturing no more than one year from the date of creation
thereof and currently having a rating of at least A-2 or P-2 from either
Standard & Poor’s Corporation or Moody’s Investors Service, (C) certificates of
deposit issued by any bank with assets of at least $500,000,000 maturing no more
than one year from the date of investment therein, and (D) money market accounts
(the foregoing clauses (A) through (D) herein above shall in each case, with
respect to any Foreign Subsidiary, be subject to the terms set forth in Section
9.20);
 
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                    (iii) repurchases of Equity Interests from former employees,
directors, or consultants of a Loan Party under the terms of applicable
repurchase agreements at the original issuance price of such securities in an
aggregate amount not to exceed $25,000 in any fiscal year, provided that no
Default or Event of Default has occurred, is continuing or would exist after
giving effect to the repurchases;
 
                    (iv) (A) Investments by a Loan Party in newly formed
Subsidiaries of a Loan Party organized under the laws of any political
subdivision of the United States of America, provided that the applicable Loan
Party has taken, and caused such newly formed Subsidiary to take, all actions
necessary to satisfy Section 8.10 and Section 8.11; (B) Investments in Foreign
Subsidiaries in the aggregate amount not to exceed $100,000; (C) Investment by a
Foreign Subsidiary in any Loan Party subject to terms acceptable to Lender; and
(D) Investments approved in advance in writing by Lender in its sole discretion;
 
                    (v) Investments that result in or that constitute a
Permitted Acquisition;
 
                    (vi) Investments consisting of loans not involving the net
transfer on a substantially contemporaneous basis of cash proceeds to employees,
officers or directors relating to the purchase of Equity Interests of Borrower
pursuant to employee equity purchase plans or other similar agreements approved
by Borrower’s board of directors (or equivalent governing body);
 
                    (vii) Investments consisting of advances to officers,
directors and employees of any Loan Party in an aggregate amount not to exceed
$25,000 at any time outstanding, for travel, entertainment, relocation and
analogous ordinary business purposes;
 
                    (viii) Investments (including debt obligations) received in
connection with the bankruptcy or reorganization of customers or suppliers and
in settlement of delinquent obligations of, and other disputes with, customers
or suppliers arising in the ordinary course of a Loan Party’s business;
 
                    (ix) Investments consisting of notes receivable of, or
prepaid royalties and other credit extensions, to customers and suppliers who
are not Affiliates, in the ordinary course of business, provided that this
clause (ix) shall not apply to Investments of a Loan Party in any Subsidiary of
such Loan Party;
 
                    (x) Investments by Borrower on the Closing Date to
consummate the Initial Acquisition; and
 
                    (xi) additional Investments by the Loan Parties that do not
exceed $100,000 in the aggregate at any time outstanding.
 
                    “Permitted Liens” means any and all of the following:
 
                    (i) Liens in favor of Lender pursuant to any Loan Document;
 
                    (ii) Liens existing on the Closing Date which are disclosed
in Schedule 1C;
 
                    (iii) Liens securing Indebtedness permitted in clause (iii)
of the definition of “Permitted Indebtedness”, provided that (A) such Liens do
not at any time encumber any property other than the property financed by such
Indebtedness and (B) the Indebtedness secured thereby does not exceed the cost
or fair market value, whichever is lower, of the property being acquired on the
date of acquisition;
 
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                    (iv) Liens on cash or cash equivalents securing obligations
permitted under clause (iv) of the definition of “Permitted Indebtedness”;
 
                    (v) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, provided,
that the Borrower or applicable Guarantor maintains adequate reserves therefor
in accordance with GAAP;
 
                    (vi) Liens securing claims or demands of materialmen,
artisans, mechanics, carriers, warehousemen, landlords and other like Persons
arising in the ordinary course of a Borrower’s or Guarantor’s business and
imposed without action of such parties, provided, that the payment thereof is
not yet required;
 
                    (vii) the following deposits, to the extent made in the
ordinary course of business: deposits under worker’s compensation, unemployment
insurance, social security and other similar laws, or to secure the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure indemnity, performance or other similar bonds for the performance
of bids, tenders or contracts (other than for the repayment of borrowed money)
or to secure statutory obligations (other than liens arising under ERISA or
environmental liens) or surety or appeal bonds, or to secure indemnity, and
performance or other similar bonds;
 
                    (viii) statutory and common law rights of set-off and other
similar rights solely as to deposits of cash and securities in favor of banks,
other depository institutions and brokerage firms to the extent securing usual
and customary fees and expenses for the maintenance of deposits or securities
accounts;
 
                    (ix) Liens in favor of customs and revenue authorities
arising as a matter of law to secure payment of custom duties that are promptly
paid on or before the date they become due;
 
                    (x) easements, zoning restrictions, rights-of-way and
similar encumbrances on real property imposed by law or arising in the ordinary
course of business so long as they do not materially impair the value or
marketability of the related property;
 
                    (xi) Liens arising from judgments, decrees or attachments in
circumstances which do not constitute an Event of Default hereunder;
 
                    (xii) leasehold interests in leases or subleases and
licenses granted in the ordinary course of business and not interfering in any
material respect with the business of the licensor;
 
                    (xiii) Liens on insurance proceeds securing the payment of
financed insurance premiums that are promptly paid on or before the date they
become due, provided that such Liens extend only to reimbursed insurance
premiums and not to any other property or assets; and
 
                    (xiv) Liens incurred in connection with the extension,
renewal or refinancing of the indebtedness to the extent permitted hereunder
secured by Liens of the type described in clauses (i) through (xii) above (other
than clause (iv), clause (viii) and clause (x) above), provided, that any
extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness
being extended, renewed or refinanced (as may have been reduced by any payment
thereon) does not increase (other than in respect of Indebtedness arising under
the Loan Documents in accordance with the terms thereof).
 
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                    “Permitted Senior Eligible Account Liens” means Liens
described in clauses (v), (vi) and (ix) of the definition of “Permitted Liens”.
 
                    “Permitted Senior Liens” means Liens described in clauses
(vi), (vii) and (viii) of the definition of “Permitted Liens”.
 
                    “Permitted Transfers” means (i) sales of Inventory in the
ordinary course of business, (ii) dispositions of worn-out, obsolete or surplus
equipment at fair market value in the ordinary course of business, (iii)
granting of Permitted Liens, (iv) entering into non-exclusive licenses and
sublicenses of Intellectual Property in the ordinary course of business, (v)
abandonment or cancellation of Intellectual Property that is not material or is
no longer used or useful in any material respect in the business of Borrower or
any Guarantor, (vi) Transfers of assets or Equity Interests from one Loan Party
to another Loan Party, or (vii) other Transfers of assets having a fair market
value of not more than $25,000 in the aggregate in any fiscal year.
 
                    “Person” means any individual, sole proprietorship,
partnership, joint venture, trust, unincorporated organization, association,
corporation, limited liability company, institution, other entity or government.
 
                    “Preferred Equity Interest” means, at any given time, any
equity security or interests issued by Borrower that has any rights, preferences
or privileges senior to the Common Stock.
 
                    “Prepayment Charge” means (i) three percent (3.00%) of the
aggregate principal amount of the Term Loan repaid on such date of
determination, if such prepayment is made in any of the first twelve (12) months
following the Closing Date; (ii) two percent (2.00%) of the aggregate principal
amount of the Term Loan repaid on such date of determination, if such prepayment
is made after twelve (12) months following the Closing Date but prior to
twenty-four (24) months following the Closing Date; (iii) one percent (1.00%) of
the aggregate principal amount of the Term Loan repaid on such date of
determination, if such prepayment is made after twenty four (24) months
following the Closing Date but prior to thirty-six (36) months following the
Closing Date; and (iv) zero percent (0.0%) thereafter.
 
                    “Proceeding” has the meaning assigned to such term in
Section 6.5 hereof.
 
                    “Real Estate” means all land, together with the buildings,
structures, parking areas, and other improvements thereon, now or hereafter
owned or leased by Borrower or any Guarantor, including all easements,
rights-of-way, and similar rights appurtenant thereto.
 
                    “Required Information Statement” has the meaning assigned to
such term in Section 8.20(a) hereof.
 
                    “Reserves” means reserves from time to time Lender
determines in Lender’s Permitted Discretion as being appropriate, including,
without limitation reserves that (i) ensure that the Borrower and Guarantors
maintain adequate liquidity for the operation of their business, (ii) cover any
deterioration in the amount or value of the Collateral and (iii) reflect
impediments to Lender’s ability to realize upon the Collateral, such reserves
described in clauses (i), (ii) and (iii) shall, in each case, be deemed to be a
reasonable exercise of Lender’s Permitted Discretion.
 
                    “Restricted Payments” means (a) any dividend or other
distribution (whether in cash, securities or other property) with respect to any
capital stock or other Equity Interest of any Person or any of its Subsidiaries,
(b) any payment (whether in cash, securities or other property), including any
sinking fund or similar deposit, on account of the purchase, redemption,
retirement, defeasance, acquisition, cancellation or termination of any such
capital stock or other Equity Interest, or on account of any return of capital
to any Person’s stockholders, partners or members (or the equivalent of any
thereof), or (c) any option, warrant or other right to acquire any such dividend
or other distribution or payment.
 
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                    “Restricted Junior Payments” means any payment (whether in
cash or other property or whether by setoff or otherwise) of (a) any fees,
allowance or other similar arrangement directly or indirectly paid or payable to
the members of the board of directors (or equivalent) of any Person in any such
Person’s capacity as a member of the board of directors (or equivalent) of such
Person (“Board of Directors Fees”), or (b) any payment of any Subordinated
Indebtedness, including any payments pursuant to the Seller Notes.
 
                    “Revolving Interest Rate” means for any day, the per annum
interest rate equal to the greater of (i) nine and one-quarter percent (9.25%)
and (ii) the LIBOR Rate, plus seven and one-quarter percent (7.25%).
 
                    “Revolving Loan” means a revolving loan made pursuant to the
terms of Section 2.1 hereof.
 
                    “Revolving Loan Advance” means any Revolving Loan funds
advanced under this Agreement.
 
                    “Revolving Loan Maturity Date” means June 29, 2015.
 
                    “Revolving Note” means a Promissory Note in substantially
the form of Exhibit B-1.
 
                    “SBA” shall have the meaning assigned to such term in
Section 8.14 hereof.
 
                    “SBIC” shall have the meaning assigned to such term in
Section 8.14 hereof.
 
                    “SBIC Act” shall have the meaning assigned to such term in
Section 8.14 hereof.
 
                    “SEC” means the United States Securities and Exchange
Commission.
 
                    “SEC Reports” means the periodic and current reports,
registration statements, proxy statements and other reports filed or required to
be filed by Borrower with the SEC pursuant to the Securities Act of 1933, as
amended, and/or the Securities Exchange Act of 1934, as amended, and any
amendments or supplements thereto filed with the SEC.
 
                    “Secured Obligations” means any and all obligations,
liabilities and indebtedness, including without limitation, principal, interest
(whether or not capitalized) and fees (including, but not limited to, interest
calculated at the Default Rate and post-petition interest in any case or
proceeding under any Debtor Relief Law regardless of whether such interest and
fees are allowed in such case or proceeding), Prepayment Charges and other fees,
costs (including, without limitation professional fees and expenses and fees and
expenses of attorneys of Lender), expenses, charges and other obligations under
the Loan Documents, of Borrower and/or any Guarantor, of any and every kind and
nature, howsoever created, arising or evidenced and howsoever owned, held or
acquired, whether now or hereafter existing, whether now due or to become due,
whether primary, secondary, direct, indirect, absolute, contingent or otherwise
(including, without limitation, obligations of performance), whether several,
joint or joint and several, and whether arising or existing under written or
oral agreement or by operation of law.
 
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                    “Securities Account” means any “securities account,” as such
term is defined in the UCC, and includes any account in which Investment
Property is maintained.
 
                    “Securities Pledge Agreement” means, collectively, (i) the
Securities Pledge Agreement executed as of the Closing Date and (ii) each other
Securities Pledge Agreement substantially in the form of Exhibit G hereto.
 
                    “Seller Notes” means the (a) Subordinated Indemnity Note in
the aggregate principal amount of $1,200,000, and (b) the Subordinated Purchase
Notes in the aggregate principal amount of $5,000,000, in each case, issued as
part of the consideration in the Initial Acquisition and in form and substance,
including any subordination terms contained therein, satisfactory to the Lender.
 
                    “Six Month Measurement Period” means, at any date of
determination, the most recently completed six consecutive calendar months of
Borrower.
 
                    “Solvent” means with respect to any Person as of any date of
determination, that, as of such date, (a) the value of the assets of such Person
(both at fair market value and present fair saleable value) is greater than the
total amount of liabilities (including contingent and unliquidated liabilities)
of such Person, (b) such Person is able to pay all liabilities of such Person as
such liabilities mature and (c) such Person does not have unreasonably small
capital. In computing the amount of contingent or unliquidated liabilities at
any time, such liabilities shall be computed at the amount that, in light of all
the facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
 
                    “Subordination Agreement” means any subordination agreement,
in form, scope and substance acceptable to Lender, in respect of any
Subordinated Indebtedness.
 
                    “Subordinated Indebtedness” means Indebtedness subordinated
to the Secured Obligations in amounts and on terms and conditions satisfactory
to Lender in its sole discretion, including, without limitation, the
Indebtedness incurred pursuant to the terms of the Seller Notes.
 
                    “Subsidiary” of a Person means a corporation, partnership,
joint venture, limited liability company or other business entity of which a
majority of the shares of securities or other interests having ordinary voting
power for the election of directors or other governing body (other than
securities or interests having such power only by reason of the happening of a
contingency) are at the time beneficially owned, or the management of which is
otherwise controlled, directly, or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise specified, all
references herein to a “Subsidiary” or to “Subsidiaries” shall refer to a
Subsidiary or Subsidiaries of Borrower. As of the Closing Date, Schedule 1
identifies all of Borrower’s Subsidiaries.
 
                    “Target” means Strategic Office Solutions, Inc., a
California corporation.
 
                    “Taxes” means all present or future taxes, levies, imposts,
duties, deductions, withholdings (including backup withholding), assessments,
fees or other charges imposed by any Governmental Authority, including any
interest, additions to tax or penalties applicable thereto.
 
                    “Term Loan” means the term loan funded pursuant to the terms
of Section 2.2 hereof.
 
                    “Term Loan Cash Interest Rate” means for any day, the per
annum interest rate equal to the greater of (i) ten and one-quarter percent
(10.25%) and (ii) the LIBOR Rate, plus eight and one-quarter percent (8.25%).
 
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                    “Term Loan Interest Rate” means, for any day, the sum of (A)
the Term Loan Cash Interest Rate and (B) the Term Loan PIK Interest Rate.
 
                    “Term Loan PIK Interest Rate” means, for any day, two
percent (2.00%).
 
                    “Term Loan Advance” means any Term Loan funds advanced under
this Agreement.
 
                    “Term Loan Maturity Date” means June 29, 2015.
 
                    “Term Note” means a Term Loan Note in substantially the form
of Exhibit B-2.
 
                    “Trademark License” means any written agreement granting any
right to use any Trademark or Trademark registration, now owned or hereafter
acquired by Borrower or any Guarantor or in which Borrower or any Guarantor now
holds or hereafter acquires any interest.
 
                    “Trademarks” means all trademarks (registered, common law or
otherwise) and any applications in connection therewith, including
registrations, recordings and applications in the United States Patent and
Trademark Office or in any similar office or agency of the United States, any
State thereof or any other country or any political subdivision thereof.
 
                    “Transaction” means, collectively, (i) the consummation of
the Initial Acquisition, (ii) the entering into by Borrower and each Guarantor
of the Loan Documents, (iii) the refinancing of the Existing Indebtedness and
the termination of all commitments with respect thereto, and (iv) the payment of
fees and expenses incurred in connection with the consummation of the foregoing.
 
                    “Transfer” means the sale, transfer, license, lease or other
disposition (including any sale and leaseback transaction) of any property by
any Person or of any Equity Interests of a Person held by any other Person (or
the granting of any option or other right to do any of the foregoing), including
any sale, assignment, transfer or other disposal, with or without recourse, of
any notes or accounts receivable or any rights and claims associated therewith
and any Equity Interests of a Person held by any other Person.
 
                    “Twelve Month Measurement Period” means, at any date of
determination, the most recently completed twelve consecutive calendar months of
Borrower.
 
                    “UCC” means the Uniform Commercial Code as the same is, from
time to time, in effect in the State of California, provided, that in the event
that, by reason of mandatory provisions of law, any or all of the attachment,
perfection or priority of, or remedies with respect to, Lender’s Lien on any
Collateral is governed by the Uniform Commercial Code as the same is, from time
to time, in effect in a jurisdiction other than the State of California, then
the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to
time, in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority or remedies and for purposes
of definitions related to such provisions.
 
                    “Warrant” means the warrant entered into in connection with
the Loan substantially in the form of Exhibit H with respect to the purchase by
the Lender of the Common Stock of Borrower.
 
                    “Wells Foreign Accounts” has the meaning given to it in
Section 9.20 hereof.
 
          1.2 Rules of Construction. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words “include”, “includes” and “including” shall
be deemed to be followed by the phrase “without limitation”. The word “will”
shall be construed to have the same meaning and effect as the word “shall”.
Unless the context requires otherwise, (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person’s successors and
assigns, (c) the words “herein”, “hereof” and “hereunder”, and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, and (d) all references in this Agreement or any
Annex or Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or
“Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex,
or Schedule in or to this Agreement.
 
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          1.3 Accounting and Other Terms. Unless otherwise expressly provided
herein, each accounting term used herein shall have the meaning given it under
GAAP applied on a basis consistent with those used in preparing the financial
statements delivered to Lender pursuant to Section 8.1. Notwithstanding any
other provision contained herein, all terms of an accounting or financial nature
used herein shall be construed, and all computations of amounts and ratios
referred to herein shall be made, without giving effect to any election under
Statement of Financial Accounting Standards 159 codified as FASB ASC 825 (or any
other Financial Accounting Standard having a similar result or effect) to value
any Indebtedness or other liabilities of Borrower and/or any Guarantor at “fair
value”, as defined therein.
 
          1.4 Uniform Commercial Code. Unless otherwise defined herein or in the
other Loan Documents, terms that are used herein or in the other Loan Documents
and defined in the UCC shall have the meanings given to them in the UCC.
 
SECTION 2. THE LOANS
 
               2.1 Revolving Loan.
 
          (a) Advances. Subject to the terms and conditions of this Agreement,
Borrower may request one or more Revolving Loan Advances on or before the
Revolving Loan Maturity Date in an aggregate principal amount up to the Maximum
Revolver Capacity at such time less the aggregate outstanding principal amount
of all Revolving Loan Advances (including the proposed Revolving Loan Advance to
be made), provided Borrower shall request only one (1) such Revolving Loan
Advance in any calendar month, and each Revolving Loan Advance shall be in a
minimum amount of $250,000 or if the amount available to be borrowed under the
Maximum Revolving Loan Amount is less than $250,000, then such lesser amount.
Revolving Loan Advances may be repaid and reborrowed at any time, without
premium or penalty. 
 
          (b) Advance Request. To obtain a Revolving Loan Advance, at least
three (3) Business Days prior to the requested Advance Date, Borrower shall
complete, sign and deliver an Advance Request and Borrowing Base Certificate.
Lender shall fund the Revolving Loan Advance in the manner requested by the
Advance Request provided that each of the conditions precedent to such Revolving
Advance is satisfied as of the requested Advance Date. 
 
          (c) Interest. The principal balance of the Revolving Loan shall bear
interest thereon at the Revolving Interest Rate, calculated based upon a year
consisting of 360 days and payable for the actual number of days elapsed. The
Revolving Interest Rate (i) shall initially be determined as of the initial
Revolving Loan Advance Date for the corresponding Revolving Loan Advance and
(ii) the Revolving Interest Rate determined by reference to the LIBOR Rate shall
thereafter be determined as of the commencement of each successive Interest
Period.
 
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          (d) Interest Payments; Maturity Date. Interest payments shall be due
in arrears on each Interest Payment Date applicable to such Revolving Loan. The
entire principal balance of the Revolving Loan and all accrued interest and fees
on or relating to the Revolving Loan shall be repaid in full on the Revolving
Loan Maturity Date.
 
               2.2 Term Loan.
 
          (a) Advances. Subject to the terms and conditions of this Agreement,
Lender will make the Term Loan Advances in an amount equal to the Maximum Term
Loan Amount on the Closing Date.
 
          (b) Advance Request. To obtain the Term Loan Advance, at least two (2)
Business Days prior to the Closing Date, Borrower shall complete, sign and
deliver an Advance Request to Lender. Lender shall fund the Term Loan Advance in
the manner requested by the Advance Request.
 
          (c) Interest. 
 
          (i) Term Loan. The outstanding principal balance of the Term Loan
shall bear interest thereon from the Closing Date at the Term Loan Interest Rate
based on a year consisting of 360 days, with interest computed daily based on
the actual number of days elapsed. 
 
          (ii) Interest Generally. The Term Loan Cash Interest Rate (i) shall
initially be determined as of the Advance Date for the Term Loan and (ii) the
Term Loan Cash Interest Rate determined by reference to the LIBOR Rate shall
thereafter be determined as of the commencement of each successive Interest
Period.
 
          (d) Payments. 
 
          (i) Interest. Interest payments shall be due in arrears on each
Interest Payment Date. Borrower will pay accrued interest on the Term Loan on
each Interest Payment Date, of which accrued interest calculated at the Term
Loan Cash Interest Rate shall be paid in cash on the applicable Interest Payment
Date and accrued interest calculated at the Term Loan PIK Interest Rate shall be
added to the outstanding principal amount of the Term Loan on the applicable
Interest Payment Date and such accrued interest shall thereafter be principal
under the Term Loan. 
 
          (ii) Amortization. Borrower shall repay the aggregate outstanding Term
Loan principal balance on the first Business Day of each calendar month,
commencing January 2011, as provided in the table set forth below:
 

Period Amount January 2011 $100,000 February 2011 in each such calendar month
March 2011   April 2011   May 2011

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June 2011 July 2011 August 2011 September 2011   October 2011 November 2011
December 2011 January 2012 $200,000 February 2012 in each such calendar month
March 2012 April 2012 May 2012 June 2012 July 2012 August 2012 September 2012
October 2012 November 2012 December 2012 January 2013 $300,000 February 2013 in
each such calendar month March 2013 April 2013 May 2013 June 2013 July 2013
August 2013 September 2013 October 2013 November 2013 December 2013 January 2014
$400,000 February 2014 in each such calendar month March 2014 April 2014 May
2014 June 2014 July 2014 August 2014 September 2014 October 2014 November 2014
December 2014 January 2015 $1,000,000 February 2015 in each such calendar month
March 2015 April 2015 May 2015 June 2015

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          (iii) Term Loan Maturity Date. The entire Term Loan principal balance
and all accrued but unpaid interest and fees on or relating to the Term Loan
shall be due and payable in cash on the Term Loan Maturity Date.
 
          2.3 Maximum Interest. Notwithstanding any provision in this Agreement
or any other Loan Document, it is the parties’ intent not to contract for,
charge or receive interest at a rate that is greater than the maximum rate
permissible by law that a court of competent jurisdiction shall deem applicable
hereto (which under the laws of the State of California shall be deemed to be
the laws relating to permissible rates of interest on commercial loans) (the
“Maximum Rate”). If a court of competent jurisdiction shall finally determine
that Borrower has actually paid to Lender an amount of interest in excess of the
amount that would have been payable if all of the Secured Obligations had at all
times borne interest at the Maximum Rate, then such excess interest actually
paid by Borrower shall be applied as follows: first, to the payment of Lender
Expenses then due and payable pursuant to any of the Loan Documents; second, to
the payment of accrued interest on the Term Loan; third, to the payment of
accrued interest on the Revolving Loan; fourth, to the payment of principal
outstanding on the Term Loan in inverse order of maturity; fifth, to the payment
of principal outstanding on the Revolving Loan; sixth, to any other Secured
Obligations; and seventh, after all Secured Obligations are repaid, the excess
(if any) shall be refunded to Borrower or as a court of competent jurisdiction
may direct; provided, however, the application of funds required pursuant to
this Section 2.3 shall be subject to Section 2.10.
 
          2.4 Late Fee; Default Interest.
 
          (a) Late Fee. In the event any payment is not paid on the scheduled
payment date, an amount equal to two percent (2.00%) of the past due amount
shall be payable on demand.
 
          (b) Default Interest. In addition to the Late Fee, upon the occurrence
and during the continuation of an Event of Default hereunder, the Secured
Obligations shall bear interest at the following rate(s) (such rate(s) the
“Default Rate”): (a) the outstanding principal amount of the Revolving Loan
shall bear interest at the Revolving Loan Interest Rate, plus two percent
(2.00%) per annum, such additional interest to be paid in cash, (b) the
outstanding principal amount of the Term Loan shall bear interest at the Term
Loan Interest Rate, plus two percent (2.00%) per annum, such additional interest
to be paid in cash, and (c) all other Secured Obligations shall bear interest at
the Term Loan Interest Rate, plus two percent (2.00%) per annum, such additional
interest to be paid in cash. Upon the occurrence and during the continuance of
an Event of Default and subject to Section 2.3, all accrued interest, including
accrued interest calculated at the Term Loan PIK Interest Rate, shall be payable
on demand in cash. In the event any interest is not paid when due hereunder,
delinquent interest shall be added to principal and shall bear interest on
interest, compounded at the rates set forth in Section 2.1(c), Section 2.2(c) or
Section 2.4, as applicable.
 
     2.5 Voluntary Prepayments. 
 
          (a) Revolving Loan. Borrower may prepay the Revolving Loan in whole or
in part from time to time without premium or penalty.
 
          (b) Term Loan. Borrower may prepay, at Borrower’s option upon at least
seven (7) Business Days prior written notice to Lender, in whole (or, in part
with the prior consent of Lender in its sole and absolute discretion), the Term
Loan, together with all Secured Obligations arising as a result of or relating
to the Term Loan, together with all accrued and unpaid interest thereon, plus
the Prepayment Charge on the amounts so prepaid, provided that any prepayment of
the Term Loan (i) shall be in a minimum amount of $500,000 with increments of
$250,000 in excess thereof (or, with the written consent of Lender, in Lender’s
sole discretion, in such other amounts and increments), or if the aggregate
principal amount of the Term Loan is less than such amounts, then the then
outstanding aggregate principal amount of the Term Loan; and (ii) shall be
applied pro rata to all scheduled principal installments thereof. If Borrower
prepays the outstanding aggregate amount of the Term Loan as herein provided, on
such date of repayment, Lender’s commitment to make Revolving Loans shall
terminate and all Secured Obligations shall be repaid in full in cash on such
date.
 
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          2.6 Mandatory Prepayments.
 
          (a) Maximum Revolver Capacity If, at any time, the aggregate
outstanding principal amount of all Revolving Loan Advances exceeds the Maximum
Revolver Capacity, Borrower shall immediately repay the Revolving Loans in the
amount of such excess to Lender. 
 
          (b) Maturity Date. Borrower shall repay the Revolving Loans and the
Term Loan as provided in Section 2.1(d) and Section 2.2(d)(iii). 
 
          (c) Amortization of Term Loan. Borrower shall repay the Term Loan as
provided in Section 2.2(d). 
 
          (d) Consolidated Excess Cash Flow. On or prior to the date which is
one hundred and twenty (120) days following the end of each fiscal year of
Borrower, commencing with the fiscal year ending April 30, 2011 and until such
time as the Consolidated Total Leverage Ratio as at such fiscal year end,
calculated based on a Twelve Month Measurement Period, is less than 1.0 to 1.0,
Borrower shall promptly prepay the principal amount of the Term Loan and accrued
and unpaid interest thereon in an amount equal to the lesser of (x) the
outstanding amount of the Term Loan and (y) fifty percent (50.00%) of the
Consolidated Excess Cash Flow. Such amounts shall be applied as set forth in
Section 2.6(j) and Section 2.10. No Prepayment Charge shall accrue as a result
of any mandatory prepayment of the Term Loan pursuant to this Section 2.6(d). 
 
          (e) Asset Sales. If Borrower or any Guarantor Transfers any of its
assets or properties (other than Permitted Transfers), which results in the
realization by such Person of net cash proceeds, then Borrower shall promptly
prepay the Loans in an amount equal to the lesser of (x) the outstanding amount
of the Loans and (y) 100% of such net cash proceeds upon receipt thereof by such
Person (but in any event within one (1) Business Day thereafter). Amounts
prepaid pursuant to this Section 2.6(e) shall be applied as provided in Section
2.6(j) and Section 2.10 below. 
 
          (f) Incurrence of Indebtedness. If Borrower or any Guarantor incurs or
issues any Indebtedness (other than Permitted Indebtedness), Borrower shall
promptly prepay the Loans in an amount equal to the lesser of (x) the
outstanding amount of the Loan and (y) 100% of all net cash proceeds received
therefrom by such Person (but in any event within one (1) Business Day
thereafter). Amounts prepaid pursuant to this Section 2.6(f) shall be applied as
provided in Section 2.6(j) and Section 2.10 below. 
 
          (g) Issuance of Equity. If Borrower or any Guarantor sells or issues
any of its Equity Interests (other than as expressly permitted pursuant to
Section 9.4(b) and Section 9.4(c)), Borrower may elect to apply up to fifty
percent (50%) of the net cash proceeds received therefrom to prepay the Term
Loan; provided, that, such prepayment is made within fifteen (15) days from the
issuance of such Equity Interests. No Prepayment Charge shall accrue as a result
of any prepayment of the Term Loan pursuant to this Section 2.6(g). Amounts
prepaid pursuant to this Section 2.6(g) shall be applied as provided in Section
2.6(j) and Section 2.10 below.
 
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          (h) Events of Loss If Borrower or any Guarantor receives net cash
proceeds from an Event of Loss (without giving effect to the qualifications set
forth in clause (A)(i) or (A)(ii) or clause (B)(i) or (B)(ii) thereof), Borrower
shall prepay the Loans in an amount equal to the lesser of (x) the outstanding
amount of the Loans and (y) 100% of the net cash proceeds received therefrom by
such Person (but in any event within one (1) Business Day thereafter). Amounts
prepaid pursuant to this Section 2.6(h) shall be applied as provided in Section
2.6(j) and Section 2.10 below.
 
          (i) Extraordinary Receipts; Insurance Proceeds.
 
          (x) (A) If Borrower or any Guarantor receives (1) any Extraordinary
Receipts equal to or in excess of $50,000 or (2) net cash proceeds equal to or
in excess of $50,000 in the aggregate from insurance proceeds, or (B) if Lender,
as loss payee, receives net cash proceeds equal to or in excess of $50,000 in
the aggregate from insurance proceeds, then Borrower shall promptly prepay the
Loans in an amount equal to 100% of such Extraordinary Receipts and/or insurance
proceeds received therefrom by such Person (but in any event within one (1)
Business Day thereafter). 
 
          (y) (A) If Borrower or any Guarantor receives (1) any Extraordinary
Receipts of less than $50,000 or (2) net cash proceeds less than $50,000 in the
aggregate from insurance proceeds, or (B) if Lender, as loss payee, receives net
cash proceeds of less than $50,000 in the aggregate from insurance proceeds,
then Borrower shall, at Borrower’s election and upon written notice thereof to
Lender, either (A) prepay the Loans in an amount equal to 100% of such
Extraordinary Receipts and/or insurance proceeds received therefrom by such
Person (but in any event within one (1) Business Day thereafter) or (B) so long
as no Default or Event of Default shall have occurred and be continuing,
reinvest all or any portion of such Extraordinary Receipts and/or net cash
proceeds in the purchase or replacement of operating assets so long as within
one hundred and twenty (120) days after the receipt of such Extraordinary
Receipts and/or net cash proceeds such purchase or reinvestment shall have been
consummated, provided that if such purchase or reinvestment shall not have been
so consummated, within one (1) Business Day following such one hundred and
twenty (120) day period, Borrower shall prepay the Loans in an amount equal to
100% of such Extraordinary Receipts and/or net cash proceeds received and not
subject to any reinvestment as herein provided. 
 
          (z) Amounts prepaid pursuant to this Section 2.6(i) shall be applied
as provided in Section 2.6(j) and Section 2.10 below.
 
          (j) Application of Mandatory Prepayments.
 
          (i) Consolidated Excess Cash Flow. Mandatory prepayments made pursuant
to Section 2.6(d) shall be applied as follows: first, to the payment of Lender
Expenses then due and payable pursuant to any of the Loan Documents; second, to
the payment of accrued interest on the Term Loan; third, to the payment of
principal outstanding on the Term Loan in inverse order of maturity; fourth, to
any other Secured Obligations arising in respect of the Term Loan; and fifth,
after all the Secured Obligations described in this Section 2.6(j)(i) are
repaid, the excess (if any) shall be refunded to Borrower or as a court of
competent jurisdiction may direct.
 
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          (ii) Mandatory Prepayments Generally. All mandatory prepayments made
pursuant to Section 2.6(e), Section 2.6(f), Section 2.6(g), Section 2.6(h)
and/or Section 2.6(i) shall be applied as follows: first, to the payment of
Lender Expenses then due and payable pursuant to any of the Loan Documents;
second, to the payment of accrued interest on the Term Loan; third, to the
payment of accrued interest on the Revolving Loan; fourth, to the payment of
principal outstanding on the Term Loan in inverse order of maturity; fifth, to
the payment of principal outstanding on the Revolving Loan (together with a
permanent commitment reduction thereunder in the amount of such payment); sixth,
to any other Secured Obligations; and seventh, after all Secured Obligations are
repaid, the excess (if any) shall be refunded to Borrower. 
 
          (iii) Mandatory prepayments made pursuant to this Section 2.6 shall
include all accrued and unpaid interest on the amount of the Secured
Obligations, as applicable, so prepaid.
 
          2.7 Prepayment Charge. Borrower agrees that the Prepayment Charge is a
reasonable calculation of Lender’s lost profits in view of the difficulties and
impracticality of determining actual damages resulting from an early repayment
of the Term Loan. In addition, Borrower agrees that such Prepayment Charge shall
be payable if any portion of the Term Loan is repaid (whether as a result of
acceleration, whether voluntarily or involuntarily mandatory repayments or
otherwise) but not on account of any prepayment arising under Sections 2.6(d) or
2.6(g) hereof. 
 
          2.8 [Intentionally Omitted]. 
 
          2.9 Unused Line Fee. Borrower shall pay to Lender for the period
commencing on the Closing Date and continuing through the Revolving Loan
Maturity Date in respect of the Revolving Loan, a commitment fee in an amount
equal to one-half of one percent per annum (0.50%), on the sum of the average
daily unused portion of the Revolving Loan facility. All commitment fees payable
pursuant to this Section shall be payable by Borrower in arrears on the first
Business Day of each fiscal quarter of Borrower, commencing the first Business
Day following the Closing Date continuing through the Revolving Loan Maturity
Date. 
 
          2.10 Payments Generally.
 
          (a) Application to LIBOR Rate Loans. Amounts to be applied to the
prepayment or repayment of principal of the Loans shall be applied first to
reduce the outstanding principal amount of the LIBOR Rate Loans of any Class. 
 
          (b) Payments Generally. Except as otherwise expressly provided herein,
all payments made by Borrower or any Guarantor shall be made in cash to Lender,
at Lender’s office in United States Dollars and in immediately available funds
not later than 2:00 p.m. (Pacific Time) on the date specified herein. All
payments received by Lender after 2:00 p.m. (Pacific Time) shall be deemed
received on the next succeeding Business Day and any applicable interest or fee
shall continue to accrue. If any payment to be made by Borrower or any Guarantor
shall come due on a day other than a Business Day, payment shall be made on the
next following Business Day, and such extension of time shall be reflected when
computing interest or fees, as the case may be.
 
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          (c) ACH Authorization. Lender will initiate debit entries to
Borrower’s account as authorized on the ACH Authorization on each payment date
of all periodic obligations payable to Lender under the Revolving Loan and the
Term Loan.
 
SECTION 3. SPECIAL PROVISIONS RELATING TO LIBOR AND TAXES; ETC.
 
          3.1 [Intentionally Omitted].
 
          3.2 Special Provisions Applicable to the LIBOR Rate.
 
          (a) Determinations Generally. The LIBOR Rate may be adjusted by Lender
on a prospective basis to take into account any additional or increased costs of
maintaining or obtaining any eurodollar or LIBOR deposits or increased costs due
to changes in applicable law occurring subsequent to the commencement of the
then applicable Interest Period, including without limitation changes in tax
laws and changes in the reserve requirements imposed by the Board of Governors
of the Federal Reserve System (or any successor), which additional or increased
costs would increase the cost of funding loans bearing interest at the LIBOR
Rate. In any such event, Lender shall give Borrower notice of such a
determination and adjustment and Borrower may, by notice to Lender require such
Lender to furnish to Borrower a statement setting forth the basis for adjusting
such LIBOR Rate and the method for determining the amount of such adjustment. In
the event that any change in market conditions or any law, regulation, treaty,
or directive, or any change therein or in the interpretation of application
thereof, shall at any time after the date hereof, in the reasonable opinion of
Lender, make it unlawful or impractical for Lender to fund or maintain a LIBOR
Loan or to continue such funding or maintaining, or to determine or charge
interest rates at the LIBOR Rate, Lender shall give notice of such changed
circumstances to Borrower and (i) in the case of any LIBOR Rate Loans that are
outstanding, interest for the next thirty (30) days shall accrue at the per
annum rate in effect on the date of such notice, and (ii) Borrower and Lender
shall negotiate in good faith the interest rate to be applicable after the
termination of such thirty (30) day period and if the parties cannot mutually
agree on an interest rate to be applicable thereafter, Borrower shall repay
(without prepayment penalty) the Secured Obligations in full in cash upon the
termination of such thirty (30) day period. 
 
          (b) No Requirement of Matched Funding. Anything to the contrary
contained herein notwithstanding, neither Lender, nor any participant, is
required actually to acquire eurodollar deposits to fund or otherwise match fund
any Secured Obligation as to which interest accrues at the LIBOR Rate. The
provisions of this Section 3.2(b) shall apply as if Lender or such participants
had match funded any Secured Obligation as to which interest is accruing at the
LIBOR Rate by acquiring eurodollar deposits for each Interest Period in the
amount of the LIBOR Rate Loans.
 
          3.3 Payments Free of Taxes; Obligation to Withhold; Payments on
Account of Taxes.
 
          (a) (i) Any and all payments by or on account of any obligation of
Borrower or any Guarantor hereunder or under any other Loan Document shall to
the extent permitted by applicable Laws be made free and clear of and without
reduction or withholding for any Taxes. If, however, applicable Laws require
Borrower, any Guarantor or Lender to withhold or deduct any Tax, such Tax shall
be withheld or deducted in accordance with such Laws as determined by Borrower
or Lender, as the case may be, upon the basis of the information and
documentation to be delivered pursuant to subsection (e) below.
 
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          (ii) If Borrower, any Guarantor or Lender shall be required by the
Code to withhold or deduct any Taxes, including both United States Federal
backup withholding and withholding taxes, from any payment, then (A) Lender
shall withhold or make such deductions as are determined by Lender to be
required based upon the information and documentation it has received pursuant
to subsection (e) below, (B) Lender shall timely pay the full amount withheld or
deducted to the relevant Governmental Authority in accordance with the Code, and
(C) to the extent that the withholding or deduction is made on account of Taxes
or Other Taxes, the sum payable by Borrower and/or any Guarantor, as the case
may be, shall be increased as necessary so that after any required withholding
or the making of all required deductions (including deductions applicable to
additional sums payable under this Section) Lender receives an amount equal to
the sum it would have received had no such withholding or deduction been made. 
 
          (b) Payment of Other Taxes by Borrower and Guarantor. Without limiting
the provisions of subsection (a) above, Borrower and each Guarantor shall timely
pay any Other Taxes to the relevant Governmental Authority in accordance with
applicable law. 
 
          (c) Tax Indemnifications. Without limiting the provisions of
subsection (a) or (b) above, Borrower and each Guarantor shall, and do hereby,
jointly and severally, indemnify Lender, and shall make payment in respect
thereof within 10 days after demand therefor, for the full amount of any Taxes
or Other Taxes (including Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section) withheld or deducted by
Borrower or Lender or paid by Lender (excluding taxes imposed on or measured by
the net income of Lender), and any penalties, interest and reasonable expenses
arising therefrom or with respect thereto, whether or not such Taxes or Other
Taxes were correctly or legally imposed or asserted by the relevant Governmental
Authority. A certificate as to the amount of any such payment or liability
delivered to Borrower by a Lender shall be conclusive absent manifest error. 
 
          (d) Evidence of Payments. Upon request by Borrower after any payment
of Taxes by Borrower, any Guarantor or Lender to a Governmental Authority as
provided in this Section 3.3, Borrower shall deliver to Lender or Lender shall
deliver to Borrower, as the case may be, the original or a certified copy of a
receipt issued by such Governmental Authority evidencing such payment, a copy of
any return required by Laws to report such payment or other evidence of such
payment reasonably satisfactory to Borrower or Lender, as the case may be.
 
          (e) Status of Lenders; Tax Documentation.
 
          (i) Lender shall deliver to Borrower, at the time or times prescribed
by applicable Laws or when reasonably requested by Borrower, such properly
completed and executed documentation prescribed by applicable Laws or by the
taxing authorities of any jurisdiction and such other reasonably requested
information as will permit Borrower to determine (A) whether or not payments
made hereunder or under any other Loan Document are subject to Taxes, (B) if
applicable, the required rate of withholding or deduction, and (C) Lender’s
entitlement to any available exemption from, or reduction of, applicable Taxes
in respect of all payments to be made to Lender by Borrower or any Guarantor, as
the case may be, pursuant to this Agreement or otherwise to establish such
Lender’s status for withholding tax purposes in the applicable jurisdiction. 
 
          (ii) Without limiting the generality of the foregoing, if Borrower is
resident for tax purposes in the United States,
 
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          (A) each Lender that is a “United States person” within the meaning of
Section 7701(a)(30) of the Code shall deliver to Borrower, upon request of
Borrower, executed originals of Internal Revenue Service Form W-9 or such other
documentation or information prescribed by applicable Laws or reasonably
requested by Borrower as will enable Borrower to determine whether or not such
Lender is subject to backup withholding or information reporting requirements;
and
 
          (B) each Foreign Lender that is entitled under the Code or any
applicable treaty to an exemption from or reduction of withholding tax with
respect to payments hereunder or under any other Loan Document shall deliver to
Borrower (in such number of copies as shall be requested by the recipient) on or
prior to the date on which such Foreign Lender becomes a Lender under this
Agreement (and from time to time thereafter upon the request of Borrower, but
only if such Foreign Lender is legally entitled to do so), whichever of the
following is applicable:
 
          (I) executed originals of Internal Revenue Service Form W-8BEN
claiming eligibility for benefits of an income tax treaty to which the United
States is a party, 
 
          (II) executed originals of Internal Revenue Service Form W-8ECI, 
 
          (III) executed originals of Internal Revenue Service Form W-8IMY and
all required supporting documentation, 
 
          (IV) in the case of a Foreign Lender claiming the benefits of the
exemption for portfolio interest under section 881(c) of the Code, (x) a
certificate to the effect that such Foreign Lender is not (A) a “bank” within
the meaning of section 881(c)(3)(A) of the Code, (B) a “10 percent shareholder”
of Borrower within the meaning of section 881(c)(3)(B) of the Code, or (C) a
“controlled foreign corporation” described in section 881(c)(3)(C) of the Code
and (y) executed originals of Internal Revenue Service Form W-8BEN, or 
 
          (V) executed originals of any other form prescribed by applicable Laws
as a basis for claiming exemption from or a reduction in United States Federal
withholding tax together with such supplementary documentation as may be
prescribed by applicable Laws to permit Borrower to determine the withholding or
deduction required to be made.
 
          (iii) Lender shall promptly (A) notify Borrower of any change in
circumstances which would modify or render invalid any claimed exemption or
reduction, and (B) take such steps as shall not be disadvantageous to it, in the
reasonable judgment of Lender, and as may be reasonably necessary (including the
re-designation of its Lending office) to avoid any requirement of applicable
Laws of any jurisdiction that Borrower make any withholding or deduction for
taxes from amounts payable to such Lender. 
 
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          (f) Treatment of Certain Refunds. If Lender determines, in its sole
discretion, that it has received a refund of any Taxes or Other Taxes as to
which it has been indemnified by Borrower or with respect to which Borrower has
paid additional amounts pursuant to this Section, it shall pay to Borrower an
amount equal to such refund (but only to the extent of indemnity payments made,
or additional amounts paid, by Borrower under this Section with respect to the
Taxes or Other Taxes giving rise to such refund), net of all out-of-pocket
expenses incurred by Lender and without interest (other than any interest paid
by the relevant Governmental Authority with respect to such refund), provided
that Borrower, upon the request of Lender, agrees to repay the amount paid over
to Borrower (plus any penalties, interest or other charges imposed by the
relevant Governmental Authority) to Lender in the event Lender is required to
repay such refund to such Governmental Authority. This subsection shall not be
construed to require Lender to make available its tax returns (or any other
information relating to its taxes that it deems confidential) to Borrower or any
other Person. 
 
          (g) Survival. This Section 3.3 shall survive the expiration or other
termination of this Agreement and the other Loan Documents.
 
          3.4 Evidence of Debt. The Advances made by Lender shall be evidenced
by one or more accounts or records maintained by Lender in the ordinary course
of business. The accounts or records maintained by Lender shall be conclusive
absent manifest error of the amount of the Advance made by Lender to Borrower
and the interest and payments thereon. Any failure to so record or any error in
doing so shall not, however, limit or otherwise affect the obligation of
Borrower hereunder to pay any amount owing with respect to the Secured
Obligations. Upon the request of Lender, Borrower shall execute and deliver to
Lender a Note, which shall evidence Lender’s Loans in addition to such accounts
or records. Lender may attach schedules to its Note and endorse thereon the
date, type (if applicable), amount and maturity of its Loans and payments with
respect thereto.
 
SECTION 4. SECURITY INTEREST
 
          4.1 Grant of a Security Interest. As security for the prompt, complete
and indefeasible payment when due (whether on the payment dates or otherwise) of
all the Secured Obligations, Borrower and each Guarantor grants to Lender a
security interest in all of Borrower’s or such Guarantor’s personal property now
owned or hereafter acquired or arising, and all proceeds and products thereof
(all of the same being hereinafter called the “Collateral”): all personal and
fixture property of every kind and nature including all goods (including
Inventory, equipment and any accessions thereto), instruments (including
promissory notes), documents (including, if applicable, electronic documents),
Accounts (including health-care-insurance receivables), chattel paper (whether
tangible or electronic), Deposit Accounts, Securities Accounts, cash, money,
letters of credit, letter-of-credit rights (whether or not the letter of credit
is evidenced by a writing), commercial tort claims, securities and all other
investment property (but excluding thirty-five percent (35%) of the voting
capital stock of any Foreign Subsidiary that constitutes a Permitted Investment
to the extent that such grant of a security interest would give rise to a
material adverse tax consequence to Borrower or any Guarantor), instruments
(including promissory notes), supporting obligations, any other contract rights
or rights to the payment of money, insurance claims and proceeds, Intellectual
Property and Licenses, and all general intangibles (including all payment
intangibles). 
 
          4.2 Authorization to File Financing Statements. Borrower and each
Guarantor hereby irrevocably authorizes Lender at any time and from time to time
to file in any filing office in any Uniform Commercial Code jurisdiction any
initial financing statements and amendments thereto that (a) indicate the
Collateral (i) as all assets of Borrower and/or such Guarantor or words of
similar effect, regardless of whether any particular asset comprised in the
Collateral falls within the scope of Section 11 of the UCC or, as applicable,
Article 9 of such jurisdiction, or (ii) as being of an equal or lesser scope or
with greater detail, and (b) provide any other information required by part 5 of
Section 11 of the UCC or, as applicable, Article 9 of such other jurisdiction
for the sufficiency or filing office acceptance of any financing statement or
amendment, including (i) whether Borrower or such Guarantor is an organization,
the type of organization and any organizational identification number issued to
Borrower or such Guarantor and, (ii) in the case of a financing statement filed
as a fixture filing or indicating Collateral as as-extracted collateral or
timber to be cut, a sufficient description of real property to which the
Collateral relates. Borrower and each Guarantor agrees to furnish any such
information to Lender promptly upon request. Borrower and each Guarantor also
ratifies its authorization for Lender to have filed in any Uniform Commercial
Code jurisdiction any like initial financing statements or amendments thereto if
filed prior to the date hereof.
 
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          4.3 Other Actions. Further to insure the attachment, perfection and
first priority (subject to Permitted Senior Liens) of, and the ability of Lender
to enforce Lender’s Liens, Borrower and each Guarantor agrees, in each case at
Borrower’s or such Guarantor’s expense, to take the following actions with
respect to the following Collateral and without limitation on Borrower’s or such
Guarantor’s other obligations contained in this Agreement: 
 
          (a) Promissory Notes and Tangible Chattel Paper. If Borrower or any
Guarantor shall, now or at any time hereafter, hold or acquire any promissory
notes or tangible chattel paper, Borrower or such Guarantor shall, at Lender’s
request, forthwith endorse, assign and deliver the same to Lender, accompanied
by such instruments of transfer or assignment duly executed in blank as Lender
may from time to time specify. 
 
          (b) Deposit Accounts. Other than with respect to amounts deposited
pursuant to Section 9.20, for each Deposit Account that Borrower or any
Guarantor, now or at any time hereafter, opens or maintains, Borrower or such
Guarantor shall, prior to or concurrently with the opening of such Deposit
Account, pursuant to an Account Control Agreement in form and substance
reasonably satisfactory to Lender, cause the depositary bank to agree to comply,
without further consent of Borrower or such Guarantor, at any time during the
continuance of an Event of Default with instructions from Lender to such
depositary bank directing the disposition of funds from time to time credited to
such deposit account. The provisions of this paragraph shall not apply to any
Excluded Deposit Accounts. 
 
          (c) Investment Property. If Borrower or any Guarantor shall, now or at
any time hereafter, hold or acquire any certificated securities constituting
Collateral, Borrower or such Guarantor shall forthwith endorse, assign and
deliver the same to Lender, accompanied by such instruments of transfer or
assignment duly executed in blank as Lender may from time to time specify (but
excluding thirty-five percent (35%) of the voting capital stock of any Foreign
Subsidiary that constitutes a Permitted Investment to the extent that such grant
of a security interest would give rise to a material adverse tax consequence to
Borrower or any Guarantor). If any securities constituting Collateral now or
hereafter acquired by Borrower or any Guarantor are uncertificated and are
issued to Borrower or its nominee, or such Guarantor or its nominee, directly by
the issuer thereof, Borrower or such Guarantor shall immediately notify Lender
thereof and, at Lender’s request and option, either (i) cause the issuer to
enter into an agreement under Section 8-106 of the UCC whereby the issuer agrees
with instructions originated by Lender without further consent by Borrower or
any Guarantor, or (ii) pursuant to an Account Control Agreement in form and
substance satisfactory to Lender, arrange for Lender to become the registered
owner of the securities. If any securities, whether certificated or
uncertificated, or other investment property now or hereafter acquired by
Borrower or any Guarantor that constitutes Collateral are held by Borrower or
its nominee, or any Guarantor or its nominee, through a securities intermediary
or commodity intermediary, Borrower or such Guarantor shall immediately notify
Lender thereof and, at Lender’s request and option, either (x) cause such
securities intermediary or (as the case may be) commodity intermediary to enter
into an Account Control Agreement, or (y) pursuant to an agreement in form and
substance satisfactory to Lender, in the case of financial assets or other
investment property held through a securities intermediary, arrange for Lender
to become the entitlement holder with respect to such investment property, with
Borrower or such Guarantor being permitted, only with the consent of Lender, to
exercise rights to withdraw or otherwise deal with such investment property. The
provisions of this paragraph shall not apply to any financial assets credited to
a securities account for which Lender is the securities intermediary.
 
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          (d) Collateral in the Possession of a Bailee. If any Collateral in
excess of $10,000 is, now or at any time hereafter, in the possession of a
bailee, Borrower or the applicable Guarantor shall promptly notify Lender
thereof and, at Lender’s request and option, shall promptly obtain a bailee
acknowledgment and access agreement in form and substance reasonably
satisfactory to Lender. 
 
          (e) Letter-of-credit Rights. If Borrower or any Guarantor is, now or
at any time hereafter, a beneficiary under a letter of credit with a notional
amount in excess of $100,000, Borrower or such Guarantor shall promptly notify
Lender thereof and, at the request and option of Lender, Borrower or such
Guarantor shall, pursuant to an agreement in form and substance reasonably
satisfactory to Lender, either (i) arrange for the issuer and any confirmer of
such letter of credit to consent to an assignment to Lender of the proceeds of
the letter of credit or (ii) arrange for Lender to become the transferee
beneficiary of the letter of credit. 
 
          (f) Commercial Tort Claims. If Borrower or any Guarantor shall, now or
at any time hereafter, hold or acquire a commercial tort claim in an amount
greater than $100,000, Borrower or such Guarantor shall promptly (but in any
event within two (2) Business Days thereof) notify Lender in a writing signed by
Borrower or such Guarantor of the particulars thereof and grant to Lender 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
reasonably satisfactory to Lender. 
 
          (g) Other Actions as to any and all Collateral. Borrower and each
Guarantor further agrees, upon the request of Lender and at Lender’s option, to
take any and all other actions as Lender may reasonably determine to be
necessary or useful for the attachment, perfection and first priority (subject
to Permitted Senior Liens) of, and the ability of Lender to enforce, Lender’s
Lien in any and all of the Collateral, including (i) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the UCC, to the extent, if any, that Borrower’s or any applicable
Guarantor’s signature thereon is required therefor, (ii) causing Lender’s name
to be noted as secured party on any certificate of title for a titled good if
such notation is a condition to attachment, perfection or priority of, or
ability of Lender to enforce, Lender’s security interest in such Collateral,
(iii) complying with any provision of any statute, regulation or treaty of the
United States as to any Collateral if compliance with such provision is a
condition to attachment, perfection or priority of, or ability of Lender to
enforce, Lender’s security interest in such Collateral, (iv) using commercially
reasonable efforts to obtain governmental and other third party waivers,
consents and approvals, in form and substance reasonably satisfactory to Lender,
including any consent of any licensor, lessor or other person obligated on
Collateral, (v) using commercially reasonable efforts to obtain obtaining
Collateral Access Agreements from mortgagees and landlords in form and substance
reasonably satisfactory to Lender, (vi) creating and perfecting Liens in favor
of Lender in any real property acquired after the Closing Date, and (vii) taking
all actions under any earlier versions of the UCC or under any other law, as
reasonably determined by Lender to be applicable in any relevant UCC or other
jurisdiction, including any foreign jurisdiction. In addition to the foregoing,
Borrower and each Guarantor shall concurrently with the delivery of a Compliance
Certificate in connection with the delivery of the Financial Statements
described in Section 8.1(b) (and at such other times as Lender may reasonably
request), (w) provide Lender with a report of all new material patentable,
copyrightable or trademarkable materials acquired or generated by Borrower or
any Guarantor during the prior period which Borrower or any Guarantor registered
with the United States Patent and Trademark Office or the Library of Congress,
as applicable, (x) cause all Patents and Trademarks, and cause all Copyrights
that are material to Borrower’s or any Guarantor’s business, in each case,
acquired or generated by Borrower or any Guarantor, that are not already the
subject of a registration with the appropriate filing office (or an application
therefor diligently prosecuted) to be registered with such appropriate filing
office in a manner sufficient to impart constructive notice of Borrower’s or
such Guarantor’s ownership thereof, (y) cause to be prepared, executed, and
delivered to Lender supplemental schedules to the applicable Loan Documents to
identify such Patents, Copyrights and Trademarks as being subject to the
security interests created thereunder, and (z) execute and deliver to Lender at
Lender’s request Intellectual Property Security Agreements with respect to such
Patents, Trademarks or Copyrights for filing with the appropriate filing office.
 
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          4.4 Relation to Other Security Documents. Concurrently herewith
Borrower and certain Subsidiaries are executing and delivering to Lender a
Securities Pledge Agreement, pursuant to which such Person is assigning to
Lender certain Collateral as set forth in such agreements. The provisions of
such agreements are supplemental to the provisions of this Agreement, and
nothing contained in such agreements shall derogate from any of the rights or
remedies of Lender. Neither the delivery of, nor anything contained in, such
agreements shall be deemed to prevent or postpone the time of attachment or
perfection of any security interest in such Collateral created hereby. 
 
          4.5 Power of Attorney. Borrower and each Guarantor hereby irrevocably
makes, constitutes, and appoints Lender (and any of Lender’s officers,
employees, professional advisors or agents designated by Lender) as Borrower’s
and each Guarantor’s true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Borrower and each Guarantor, or in
Lender’s own name, to: (a) if Borrower or any Guarantor refuses to, or fails
timely to execute and deliver any of the documents or take any of the actions
described in Section 4.2, sign the name of Borrower or such Guarantor on any of
the documents described in Section 4.2, (b) at any time that an Event of Default
has occurred and is continuing, generally to sell, transfer, pledge, make any
agreement with respect to or otherwise dispose of or deal with any of the
Collateral in such manner as is consistent with the Uniform Commercial Code or
any other relevant jurisdiction and as fully and completely as though Lender
were the absolute owner thereof for all purposes, and to do, at Borrower’s or
such Guarantor’s expense, at any time, or from time to time, all acts and things
which Lender deems necessary or useful to protect, preserve or realize upon the
Collateral and Lender’s security interest therein, in order to effect the intent
of this Agreement and the other Loan Documents, (c) at any time that an Event of
Default has occurred and is continuing, sign any Borrower’s or Guarantor’s name
on any invoice or bill of lading relating to the Collateral, drafts against
account debtors, or notices to account debtors, (d) at any time that an Event of
Default has occurred and is continuing, send requests for verification of
accounts, instruments, documents, chattel paper, supporting obligations, letters
of credit and proceeds of letters of credit, letter-of-credit rights, customer
lists, software, and business records related thereto, (e) at any time that an
Event of Default has occurred and is continuing, endorse Borrower and each
Guarantor’s name on any collection item that may come into Lender’s possession,
(f) at any time that an Event of Default has occurred and is continuing, make,
settle, and adjust all claims under Borrower’s and each Guarantor’s policies of
insurance and make all determinations and decisions with respect to such
policies of insurance, and (g) at any time that an Event of Default has occurred
and is continuing, settle and adjust disputes and claims respecting the
accounts, instruments, documents, chattel paper, supporting obligations, letters
of credit and proceeds of letters of credit, letter-of-credit rights, customer
lists, software, and business records related thereto, or general intangibles
directly with account debtors, for amounts and upon terms that Lender determines
to be reasonable, and Lender may cause to be executed and delivered any
documents and releases that Lender determines to be necessary. The appointment
of Lender as Borrower’s and each Guarantor’s attorney, and each and every one of
its rights and powers, being coupled with an interest, is irrevocable until all
of the Secured Obligations (other than inchoate indemnification obligations for
which no claim has then been made) have been fully and indefeasibly repaid in
cash and performed and Lender’s obligations to extend credit hereunder are
terminated.
 
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SECTION 5. CONDITIONS PRECEDENT TO LOANS
 
          The obligations of Lender to make the Loan hereunder are subject to
the satisfaction by the Borrower and each Guarantor of the following conditions:
 
          5.1 Initial Advance. On or prior to the Closing Date, Borrower and
each Guarantor shall have delivered to Lender the following documents (all in
form, scope and substance satisfactory to Lender):
 
          (a) Loan Documents. Duly executed copies of the following Loan
Documents (with originals to be delivered promptly following the Closing Date):
 
                              (i) this Agreement;
 
                              (ii) the Revolving Note;
 
                              (iii) the Term Loan Note;
 
                              (iv) the Securities Pledge Agreement;
 
                              (v) the Intellectual Property Security Agreements;
 
                              (vi) the Account Control Agreements with Wells
Fargo Bank, N.A.;
 
                              (vii) the ACH Authorization;
 
                              (viii) the Perfection Certificate;
 
                              (ix) the Daegis Registration Rights Agreement; and
 
                              (x) the Warrant.
 
          (b) Pledged Collateral. Delivery to Lender of all (i) certificates
representing the Pledged Collateral (as defined in the Securities Pledge
Agreement), accompanied by undated stock or membership transfer powers executed
in blank, and (ii) other possessory Collateral, together with all documents of
transfer with respect thereto.
 
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          (c) Legal Opinion. Duly executed copy of the legal opinion of the Loan
Parties’ counsel (with originals to be delivered promptly following the Closing
Date), which opinion shall be in form and substance satisfactory to Lender.
 
          (d) Secretary’s Certificate. Duly executed secretary’s certificate of
a duly authorized officer of Borrower and each Guarantor (with originals to be
delivered promptly following the Closing Date) attaching:
 
          (i) certified copies of the Organization Documents, as amended through
the Closing Date, of Borrower and each Guarantor;
 
          (ii) certified copy of resolutions of Borrower’s and each Guarantor’s
board of directors (or equivalent) evidencing approval of (A) the Loans and
other transactions evidenced by the Loan Documents; and (B) the Warrant and
transactions evidenced thereby;
 
          (iii) the title, name and specimen signature of each officer duly
authorized to sign the Loan Documents;
 
          (iv) a certificate of good standing for Borrower and each Guarantor
from its jurisdiction of organization; and
 
          (v) a certificate of good standing (foreign qualification) from all
other jurisdictions in which it does business and where the failure to be
qualified, either individually or in the aggregate, would have a Material
Adverse Effect.
 
          (e) Closing Date Officer’s Certificate. A certificate of Borrower’s
Chief Executive Officer or Chief Financial Officer of Borrower (i) either (x)
attaching copies of all consents, licenses and approvals required in connection
with the consummation by Borrower and each Guarantor and the execution, delivery
and performance by Borrower and each Guarantor and the validity against Borrower
and each Guarantor of the Loan Documents to which Borrower and/or the applicable
Guarantors are a party and such consents, licenses and approvals obtained shall
be in full force and effect or (y) stating that no such consents, licenses or
approvals are so required, (ii) certifying that no fact or condition exists that
would (or would, with the passage of time, the giving of notice, or both)
constitute an Event of Default and no event that has had or would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect has occurred and is continuing, (iii) all conditions precedent set forth
in Section 5 (with respect to any Advances on the Closing Date) have been
satisfied, (iv) certifying and attaching true, correct and complete copies of
the Acquisition Documents and all Subordinated Indebtedness documents, (v)
certifying that Consolidated Adjusted EBITDA as of the Closing Date, calculated
on a pro forma basis assuming the consummation of the Initial Acquisition and
determined for the Twelve Month Measurement Period ended April 30, 2010, equals
or exceeds $10,695,110 and attaching the calculation thereof, (vi) certifying
that Borrower and its Subsidiaries, taken as a whole, are Solvent after giving
effect to the Transactions and (vii) certifying that the Borrower and each
Guarantor is Solvent after giving effect to the Transactions.
 
          (f) UCC Search Results; Filings. The results of UCC and other lien
searches (and the equivalent thereof in all applicable foreign jurisdictions)
with respect to the Collateral, indicating no Liens other than Permitted Liens
or Liens that will be terminated on or prior to the consummation of the
Transaction. Evidence of the completion of or arrangements reasonably
satisfactory to Lender for all actions, recordings and filings of or with
respect to the Collateral Documents that Lender may reasonably deem necessary or
desirable in order to perfect the Liens created thereby.
 
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          (g) Repayment of Prior Obligations. Evidence satisfactory to Lender
that all obligations of the Target, Borrower and each Guarantor will be repaid
in full from the proceeds of the initial Loans and all Liens upon any of the
property of Borrower and/or any Guarantor (including, without limitation, the
assets to be acquired by Borrower pursuant to the terms of the Acquisition
Documents) shall be terminated immediately upon such payment and all commitments
to lend with respect to such obligations shall terminate, together with payoff
letters in form, scope and substance satisfactory to Lender.
 
          (h) Insurance Certificates. Certificates of insurance and endorsements
from an independent insurance broker, identifying insurers, types of insurance,
insurance limits, and policy terms, and otherwise describing the insurance
obtained in accordance with the provisions of Section 7.1 and Section 7.2, and
such other information as required pursuant to such Section 7.1 and Section 7.2.
 
          (i) SBA Documents. Completed and executed SBA Forms 480, 652 and 1031
(Parts A and B), together with a business plan showing Borrower’s financial
projections (including balance sheets and income and cash flows statements) for
the period described therein and a written statement (whether included in the
purchase agreement or pursuant to a separate statement) regarding its intended
use of proceeds from the sale of securities to Lender.
 
          (j) Exams. Commercial finance and collateral audit reports, an
accounts receivable agings report, an accounts payable aging report, appraisals
and such other information relating to the Collateral as Lender shall reasonably
request, in each case, accompanied by such supporting detail and documentation
as Lender shall reasonably request.
 
          (k) [Intentionally Omitted].
 
          (l) Capitalization. Evidence satisfactory to Lender of the
capitalization of Borrower and each Guarantor.
 
          (m) Initial Acquisition.
 
          (i) Evidence satisfactory to Lender that the Acquisition Documents are
in full force and effect and, concurrently with the closing of this Agreement,
the Initial Acquisition shall be consummated pursuant to the terms of the
Acquisition Documents.
 
          (ii) Certified copies of the each Seller Note and each Acquisition
Document.
 
          (iii) A duly executed copy of the legal opinion of Farella Braun +
Martel LLP, counsel for the Target, which opinion shall be in form and substance
satisfactory to the Lender, with respect to the Initial Acquisition and is
either (A) addressed to the Lender or (B) accompanied by a reliance letter from
such counsel addressed to the Lender that expressly states that the Lenders may
rely on such opinion.
 
          (iv) Evidence, in form and substance satisfactory to Lender, of the
filing of the certificate of merger with the Secretary of State of the Sate of
California with respect to the consummation of the merger.
 
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          (n) Payment of Fees. Payment of the Facility Charge, reimbursement of
Lender’s current expenses reimbursable pursuant to this Agreement and payment of
fees and expenses of Lender’s counsel, which amounts may be deducted from the
initial Advance.
 
          (o) Other Documents and Information. Such other documents and
information as Lender may reasonably request.
 
          5.2 All Advances. On each Advance Date:
 
          (a) Advance Request. Lender shall have received (i) an Advance Request
for the relevant Advance as required by Section 2.1(b) or Section 2.2(b), as
applicable, each duly executed by Borrower’s Chief Executive Officer or Chief
Financial Officer, and (ii) any other documents Lender may reasonably request.
 
          (b) Representations and Warranties. The representations and warranties
set forth in this Agreement and each other Loan Document shall be true and
correct on and as of the Advance Date with the same effect as though made on and
as of such date, except to the extent such representations and warranties
expressly relate to an earlier date in which case such representations and
warranties shall be true and correct as of such earlier date.
 
          (c) Compliance. Borrower and each Guarantor shall be in compliance
with all the terms and provisions set forth herein and in each other Loan
Document on its part to be observed or performed, and at the time of and
immediately after such Advance no Default or Event of Default shall have
occurred and be continuing.
 
          (d) Other. Each Advance Request shall be deemed to constitute a
representation and warranty by Borrower and each Guarantor on the relevant
Advance Date as to the matters specified in paragraphs (b) and (c) of this
Section 5.2 and as to the matters set forth in the Advance Request.
 
          5.3 No Default. As of the Closing Date and each Advance Date, (i) no
fact or condition exists that would (or would, with the passage of time, the
giving of notice, or both) constitute a Default or an Event of Default and (ii)
no event that has had or would reasonably be expected to have a Material Adverse
Effect has occurred and is continuing.
 
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SECTION 6. REPRESENTATIONS AND WARRANTIES
 
          Borrower and each Guarantor represent and warrant that:
 
          6.1 Organization, Qualification and Other Information. Borrower and
each Guarantor (a) is duly incorporated or formed, validly existing and in good
standing under the Laws of the jurisdiction of its incorporation or
organization, (b) is duly qualified in all jurisdictions in which the nature of
its business or location of its properties require such qualifications, except
where the failure to be so qualified could not reasonably be expected, either
individually or in the aggregate, to have a Material Adverse Effect, and (c) has
the power and authority to own their properties, carry on their business as now
being conducted, enter into the Loan Documents to which such Person is a party
and carry out the transactions contemplated hereby. Borrower’s and each
Guarantor’s present name, former names (if any), locations, place of formation,
tax identification number, organizational identification number and other
information are correctly set forth in Schedule 6.1, as may be updated by
Borrower in a written notice (including any Compliance Certificate) provided to
Lender after the Closing Date, provided that no such notice shall be deemed a
waiver of any Default or Event of Default arising as a result of such
disclosure).
 
          6.2 Power; Authorization. Borrower and each Guarantor has the
requisite power and authority to enter into and to perform its obligations under
this Agreement and the other Loan Documents to which the Borrower or such
Guarantor is a party. Borrower’s and each Guarantor’s execution, delivery and
performance of this Agreement and all other Loan Documents to which Borrower or
such Guarantor is a party and the consummation by Borrower or such Guarantor of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate (or equivalent) action of Borrower or such Guarantor.
The individual or individuals executing the Loan Documents are duly authorized
to do so.
 
          6.3 No Contravention; Liens. Borrower and each Guarantor’s execution,
delivery and performance of this Agreement and all other Loan Documents to which
Borrower or the applicable Guarantor is a party and the consummation by Borrower
or such Guarantor of the transactions contemplated hereby and thereby: (a) does
not violate any provisions of Borrower’s or such Guarantor’s Organization
Documents, or the terms of any capital stock or other Equity Interests of
Borrower or any Guarantor, (b) will not result in a violation of any Law, order,
injunction, judgment, decree or writ to which Borrower or such Guarantor is
subject, (c) except as described on Schedule 6.3, will not conflict with, or
constitute a breach or default (or an event which, with notice or lapse of time
or both, would become a breach or default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, any agreement,
indenture or instrument to which Borrower or any Guarantor is a party, and (d)
will not result in the creation or imposition of any Lien upon the Collateral,
other than Permitted Liens.
 
          6.4 Consents. Neither Borrower nor any Guarantor is required to obtain
any consent, authorization, approval, order, license, franchise, permit,
certificate or accreditation of, or make any filing or registration with, any
court, Governmental Authority or any regulatory or self-regulatory agency or
authority or any other Person (including, without limitation, any equityholder
of Borrower) in order for it to execute, deliver or perform any of its
obligations under or contemplated by the Loan Documents, in each case in
accordance with the terms hereof or thereof (other than (x) the resolutions and
consents of the stockholders and directors obtained prior to the Closing Date
and (y) the filings required by the Collateral Documents). All consents,
authorizations, approvals, orders, licenses, franchises, permits, certificates
or accreditations of, filings and registrations which Borrower and each such
Guarantor is required to obtain in connection with Borrower’s or such
Guarantor’s execution, delivery and performance of this Agreement and all other
Loan Documents to which Borrower or such Guarantor is a party and the
consummation by Borrower or such Guarantor of the transactions contemplated
hereby and thereby have been obtained or effected on or prior to the Closing
Date, other than any Current Report on Form 8-K required to be filed after the
Closing Date as a result of the execution of this Agreement. None of Borrower or
any Guarantor is aware of any facts or circumstances which might prevent
Borrower or any Guarantor from obtaining or effecting any of the registration,
application or filings pursuant to the preceding sentence.
 
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          6.5 Binding Effect. This Agreement and the other Loan Documents have
been duly executed and delivered by Borrower and each Guarantor party hereto and
thereto, and constitutes the legal, valid and binding obligations of Borrower
and each Guarantor party hereto and thereto, enforceable against Borrower and
each Guarantor in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
 
          6.6 No Defaults; Material Adverse Effect.
 
          (a) No Default. No Default or Event of Default exists or would result
from the incurring of any Secured Obligation by Borrower or any Guarantor or the
grant or perfection of Lender’s Lien on the Collateral or the consummation of
the Transactions.
 
          (b) Material Adverse Effect. Since January 31, 2010, no event that has
had or would reasonably be expected to have a Material Adverse Effect has
occurred and is continuing. Neither Borrower nor any Guarantor is aware of any
event likely to occur that is reasonably expected to result in a Material
Adverse Effect.
 
          6.7 Financial Statements. Each of the consolidated audited financial
statements of Borrower and its Subsidiaries dated April 30, 2009 and
consolidated unaudited financial statements of Borrower and its Subsidiaries
dated April 30, 2010 for the fiscal year then ended have been prepared in
accordance with GAAP, consistently applied, during the periods involved (except
(i) as may be otherwise indicated in such financial statements or the notes
thereto, or (ii) in the case of unaudited interim statements, to the extent they
may exclude footnotes or may be condensed or summary statements) and fairly
present in all material respects the consolidated financial position of Borrower
and its Subsidiaries as of the dates thereof and the results of its operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
 
          6.8 Ownership of Property; Liens; Indebtedness and Investments.
 
          (a) Ownership of Property. Borrower and each Guarantor has (i) good
and marketable title to (in the case of fee interests in real property), (ii)
valid leasehold interests in (in the case of leasehold interests in real or
personal property), (iii) valid licensed rights in (in the case of licensed
interests in Intellectual Property and all rights with respect thereto), and
(iv) good and marketable title to (in the case of all other personal property)
all of its real property and other properties and assets owned by it which are
material to the business of Borrower or such Guarantor, in each case free and
clear of all Liens other than Permitted Liens. Any real property and facilities
held under lease by Borrower or any Guarantor are held by it under valid,
subsisting and enforceable leases.
 
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          (b) Indebtedness. Except for Permitted Indebtedness, neither Borrower
nor any Guarantor has any outstanding Indebtedness. Schedule 1A sets forth a
complete and accurate list of all Indebtedness held by Borrower or any Guarantor
on the date hereof, showing as of the date hereof the amount, obligor or issuer
and maturity, if any, thereof.
 
          (c) Investments. Except for Permitted Investments, neither Borrower
nor any Guarantor has any outstanding Investments. Schedule 1B sets forth a
complete and accurate list of all Investments held by Borrower or any Guarantor
on the date hereof, showing as of the date hereof the amount, obligor or issuer
and maturity, if any, thereof.
 
          (d) Liens. Except for Permitted Liens, there are no Liens on any of
the properties of Borrower or any Guarantor. Schedule 1C sets forth a complete
and accurate list of all Liens on the properties or assets of Borrower or any
Guarantor on the date hereof, showing as of the date hereof the secured party of
record, described the collateral subject to such Liens, describing the
obligations and the outstanding amounts secured by such Liens and the maturity,
if any of such obligations.
 
          6.9 Collateral Documents. The Collateral Documents are effective to
create in favor of Lender, a legal, valid, binding, and (upon the filing of the
appropriate UCC financing statements and Intellectual Property Security
Agreements and the recording of the Mortgages, in each case in the appropriate
governmental filing office, possession by Lender of Collateral which is
perfected by possession only and “control” by Lender of Collateral which is
perfected by “control” only) enforceable perfected first priority security
interest and Lien (subject only to Permitted Senior Liens) in the Collateral
described therein as security for the obligations under the Loan Documents to
the extent that a legal, valid, binding, and enforceable security interest and
Lien in such Collateral may be created under applicable law including without
limitation, the Uniform Commercial Code as in effect in any applicable
jurisdiction and any other applicable Governmental Authority. Borrower and each
Guarantor has the power and authority to grant to Lender a first priority Lien
(subject only to Permitted Senior Liens) in the Collateral owned by Borrower or
such Guarantor as security for the Secured Obligations.
 
          6.10 Absence of Litigation. Except as set forth in Schedule 6.10,
there is no action, suit, proceeding, claim, dispute, inquiry or investigation
before or by any court, public board, government agency (including, without
limitation, the SEC, self-regulatory organization or other governmental body) or
any other Governmental Authority (in each case, a “Proceeding”) pending or, to
the best knowledge of Borrower and each Guarantor, threatened, at law, in
equity, in arbitration or before any Governmental Authority, against Borrower or
any Guarantor, or against Borrower’s or any Guarantor’s officers or directors or
properties which (i) purport to affect or pertain to this Agreement, the other
Loan Documents, or any of the transactions contemplated hereby or thereby, (ii)
would reasonably be expected to result, either individually or in the aggregate,
in a Material Adverse Effect, or (iii) if adversely determined, would reasonably
be expected to result, either individually or in the aggregate, in a Material
Adverse Effect.
 
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          6.11 Laws. Neither Borrower nor any Guarantor is in violation of any
Law, rule or regulation, or in default with respect to any judgment, writ,
injunction or decree of any Governmental Authority, where such violation or
default, either individually or in the aggregate, would reasonably be expected
to result in a Material Adverse Effect.
 
          6.12 Material Agreements and Other Contracts. The agreements filed as
exhibits to the Borrower’s SEC Reports and Schedule 6.12 (as either may be
updated by Borrower from time to time after the Closing Date in a written notice
to Lender, provided, that no such notice shall be deemed a waiver of any Default
or Event of Default arising as a result of such disclosure) contains a true,
correct and complete list of all the Material Agreements of Borrower or any
Guarantor, and all such Material Agreements are in full force and effect and no
defaults currently exist thereunder. Neither Borrower nor any Guarantor (i) is a
party to any contract, agreement or instrument, the violation of which, or
default under which, by the other party(ies) to such contract, agreement or
instrument, either individually or in the aggregate, would reasonably be
expected to result in a Material Adverse Effect, or (ii) is in violation of any
term of or in default under any contract, agreement or instrument relating to
any Indebtedness or any contract, agreement or instrument entered into in
connection therewith that, either individually or in the aggregate, would
reasonably be expected to result in a Material Adverse Effect.
 
          6.13 Conduct of Business; Compliance with Laws; Regulatory Permits.
Neither Borrower nor any Guarantor is in violation of any term of or in default
under its Organization Documents. Neither Borrower nor any Guarantor is in
violation of any judgment, decree or order or any statute, ordinance, rule or
regulation applicable to Borrower or any Guarantor. Except as set forth on
Schedule 6.13, Borrower and each Guarantor possesses all consents,
authorizations, approvals, orders, licenses, franchises, permits, certificates
and accreditations and all other appropriate regulatory authorities necessary to
conduct their respective businesses, and neither Borrower nor any Guarantor has
received any notice of proceedings relating to the revocation or modification of
any such consents, authorizations, approvals, orders, licenses, franchises,
permits, certificates, or accreditations.
 
          6.14 Transactions With Affiliates. Except (i) as set forth on Schedule
6.14 and (ii) for transactions permitted under Section 9.9, neither Borrower nor
any Guarantor or any of the officers, directors or employees of Borrower or any
Guarantor is presently a party to any transaction with Borrower or any Guarantor
(other than for ordinary course services as employees, officers or directors),
including any contract, agreement or other arrangement providing for the
furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from, any such
officer, director or employee or, to the knowledge of Borrower or any Guarantor,
any corporation, partnership, trust or other entity in which any such officer,
director, or employee has a substantial interest or is an officer, director,
trustee or partner.
 
          6.15 Information Correct and Current. No information, report, Advance
Request, Compliance Certificate, Borrowing Base Certificate, SEC Report,
financial statement, exhibit or schedule furnished, by or on behalf of Borrower
or any Guarantor to Lender in connection with any Loan Document or included
therein or delivered pursuant thereto contained, contains or will contain any
material misstatement of fact or omitted, omits or will omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances under which they were, are or will be made, not misleading at the
time such statement was made or deemed made. Additionally, any and all financial
or business projections provided by Borrower to Lender shall be (i) provided in
good faith and based on the most current data and information available to
Borrower, and (ii) the most current of such projections provided to Borrower’s
board of directors.
 
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          6.16 Tax Matters. Except as set forth on Schedule 6.16, Borrower and
each Guarantor (i) has made or filed all foreign, federal and state income and
all other material tax returns, reports and declarations required by any
jurisdiction to which it is subject, (ii) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, except those being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted, and (iii)
has set aside on its books adequate reserves in accordance with GAAP for the
payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. There are no unpaid taxes in any
material amount claimed to be delinquent by the taxing authority of any
jurisdiction (other than those (x) identified on Schedule 6.16 and (y) being
contested in good faith by appropriate proceedings promptly instituted and
diligently conducted and subject to adequate reserves taken by Borrower or such
Guarantor as shall be required in conformity with GAAP), and the officers of
Borrower and each Guarantor know of no basis for any such claim.
 
          6.17 Solvency. Before and after giving effect to (a) the Loans made on
or prior to the date of this representation and warranty is made or remade, (b)
the disbursement of the proceeds of such Loans by Borrower to its Subsidiaries,
and (c) the other Transactions, Borrower and its Subsidiaries taken as a whole
are Solvent and Borrower and each Guarantor is Solvent.
 
          6.18 Intellectual Property; Intellectual Property Rights; Etc.
 
          (a) Intellectual Property Owned. Schedule 6.18(a) (as may be updated
by Borrower in a written notice provided after the Closing Date to Lender,
provided that no such notice shall be deemed a waiver of any Default or Event of
Default arising as a result of such disclosure) is a true, correct and complete
list of each of Borrower’s and each Guarantor’s Patents, registered Trademarks,
registered Copyrights, and material agreements under which Borrower or such
Guarantor licenses Intellectual Property from third parties (other than
shrink-wrap software licenses), together with application or registration
numbers, as applicable, owned by Borrower or such Guarantor.
 
          (b) Intellectual Property Rights. Borrower and each Guarantor owns or
possesses adequate and valid rights to use all trademarks, trade names, service
marks, service mark registrations, service names, patents, patent rights,
copyrights, inventions, licenses, approvals, governmental authorizations, trade
secrets and other intellectual property rights (“Intellectual Property Rights”)
that are necessary to conduct its respective businesses as now conducted, and
such Intellectual Property Rights are free and clear of all liens, encumbrances
and defects other than Permitted Liens. Neither Borrower’s nor any Guarantor’s
Intellectual Property Rights have expired or terminated, or are expected to
expire or terminate within five (5) years from the Closing Date. Except as
described on Schedule 6.18(b), (i) neither Borrower nor any Guarantor has any
knowledge of any infringement, misappropriation, dilution or other violation by
Borrower or any Guarantor of Intellectual Property Rights of other Persons; (ii)
neither Borrower nor any Guarantor has any knowledge of any infringement,
misappropriation, dilution or other violation by any other Persons of the
Intellectual Property Rights of Borrower or any Guarantor; (iii) there is no
claim, action or proceeding pending or, to the knowledge of Borrower and each
Guarantor, threatened in writing, against Borrower or any Guarantor regarding
its Intellectual Property Rights or the Intellectual Property Rights of other
Persons; and (iv) neither Borrower nor any Guarantor is aware of any facts or
circumstances which might give rise to any of the foregoing infringements or
claims, actions or proceedings. Borrower and each Guarantor has taken and is
taking commercially reasonable security measures, consistent with industry
standards, to maintain and protect the secrecy, confidentiality and value of its
Intellectual Property Rights.
 
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          6.19 Financial Accounts. Schedule 6.19 (as may be updated by Borrower
in a written notice provided after the Closing Date to Lender, provided that no
such notice shall be deemed a waiver of any Default or Event of Default arising
as a result of such disclosure) is a true, correct and complete list of (a) all
banks and other financial institutions at which Borrower or any Guarantor
maintains Deposit Accounts and (b) all institutions at which Borrower or any
Guarantor maintains a Securities Account; in each case of clauses (a) and (b),
such exhibit correctly identifies the name, address and telephone number of each
depository bank or other financial institution, the name in which the account is
held, a description of the purpose of the account, and the complete account
number therefor.
 
          6.20 Capitalization and Subsidiaries. Schedule 6.20 (as may be updated
by Borrower in a written notice provided after the Closing Date to Lender,
provided that no such notice shall be deemed a waiver of any Default or Event of
Default arising as a result of such disclosure), sets forth the capitalization
of Borrower and each Guarantor and a true, correct and complete list of each
Guarantor and each other Person in which Borrower owns, directly or indirectly,
any Equity Interests.
 
          6.21 Employee Loans. Neither Borrower nor any Guarantor has any
outstanding loans to any employee, officer or director of Borrower or any
Guarantor nor has Borrower or any Guarantor guaranteed the payment of any loan
made to an employee, officer or director of Borrower or any Guarantor by a third
party, in each case, except to the extent expressly permitted under Section 9.3.
 
          6.22 Environmental Laws. Except as set forth on Schedule 6.22,
Borrower and each Guarantor (a)(i) is in compliance with any and all
Environmental Laws, (ii) has received all permits, licenses or other approvals
required of them under applicable Environmental Laws to conduct its respective
businesses, (iii) is in compliance with all terms and conditions of any such
permit, license or approval, and (iv) has no outstanding Liability under any
Environmental Laws and is not aware of any facts that would reasonably be
expected to result in liability under any Environmental Laws, in each of the
foregoing clauses of this Section 6.22(a), except to the extent, either
individually or in the aggregate, a Material Adverse Effect could not reasonably
be expected to occur, and (b) has provided Lender with copies of all
environmental reports, assessments and other documents in any way related to any
actual or potential liability under any Environmental Laws.
 
          6.23 ERISA.
 
          (a) Schedule 6.23(a) hereto contains a complete list as of the date
hereof of all of the Employee Benefit Plans.
 
          (b) Except as set forth on Schedule 6.23(b), no Loan Party or any of
its respective Subsidiaries or ERISA Affiliates (i) maintains or has maintained
any Pension Plan, (ii) is required, or has been required, to contribute to any
Multiemployer Plan or (iii) provides or has provided post-retirement medical or
insurance benefits with respect to employees or former employees (other than
benefits required under Section 601 of ERISA, Section 4980B of the Code or
applicable state law).
 
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          (c) Except as set forth on Schedule 6.23(c), each of the Employee
Benefit Plans has been maintained, administered and operated in all material
respects in accordance with all applicable laws, including ERISA and the Code,
and no Loan Party or any of its respective Subsidiaries or ERISA Affiliates has
received any notice or has any knowledge to the effect that it is not in full
compliance with any of the requirements of ERISA, the Code or applicable state
law with respect to any Employee Benefit Plan. No ERISA Event exists or has
occurred in the last five (5) years and the Loan Parties, their respective
Subsidiaries and their respective ERISA Affiliates are not aware of any fact,
event or circumstance that would reasonably be expected to constitute or result
in an ERISA Event. Each Employee Benefit Plan which is intended to qualify under
Section 401(a) of the Code has received a favorable determination letter (or
opinion letter in the case of a prototype Employee Benefit Plan) to the effect
that such Employee Benefit Plan is so qualified and there exists no reasonable
basis for the revocation of such determination or opinion letter.
 
          (d) No Loan Party or any of its respective Subsidiaries or ERISA
Affiliates has (i) any unpaid minimum required contributions under any Pension
Plan or Multiemployer Plan, whether or not waived, (ii) any liability under
Section 4201 or 4243 of ERISA for any withdrawal, or partial withdrawal, from
any Multiemployer Plan or (iii) any liability or knowledge of any facts or
circumstances which could result in any liability to the PBGC, the Internal
Revenue Service, the Department of Labor or any participant in connection with
any Employee Benefit Plan (other than routine claims for benefits under the
Employee Benefit Plan).
 
          (e) No actions, suits or claims with respect to the Employee Benefit
Plans are pending or to the knowledge of the Loan Parties, their respective
Subsidiaries and their respective ERISA Affiliates, threatened, and no Loan
Party or any of its Subsidiaries or ERISA Affiliates has any knowledge of any
facts which could give rise to or would reasonably be expected to give rise to
any actions, suits or claims with respect to the Employee Benefit Plans.
 
          (f) No (i) Loan Party or any of its respective Subsidiaries or ERISA
Affiliates, (ii) to the knowledge of each Loan Party and its respective
Subsidiaries and ERISA Affiliates, director, officer or employee of such Loan
Party and its respective Subsidiaries and ERISA Affiliates, or (iii) trustee,
administrator, “party in interest” (as defined in Section 3(14) of ERISA),
“disqualified person” (as defined in Section 4975 of the Code) or any other
“fiduciary” (as defined in Section 3(21) of ERISA) of an Employee Benefit Plan,
has any liability (including a tax, penalty or interest) for failure to comply
with ERISA or the Code for any action or failure to act in connection with the
administration or investment of any Employee Benefit Plan.
 
          (g) No Loan Party or any of its respective Subsidiaries or ERISA
Affiliates has any unpaid material liability, fine, penalty or tax with respect
to any Employee Benefit Plan for which any Loan Party or any of its respective
Subsidiaries or ERISA Affiliates would be liable.
 
          6.24 Margin Stock. Neither Borrower nor any Guarantor is engaged in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulation U of the Board of Governors of
the Federal Reserve System), and no part of the proceeds from any Loan will be
used to purchase or carry any margin stock or to extend credit to others for the
purpose of purchasing or carrying any margin stock, or for any purpose that
violates, or is inconsistent with, the provisions of Regulation T, U or X of the
Board of Governors of the Federal Reserve System.
 
          6.25 Regulated Entities. Neither Borrower nor any Guarantor is a
“registered investment company” or a company “controlled” by a “registered
investment company” or a “principal underwriter” of a “registered investment
company” as such terms are defined in the Investment Company Act of 1940, as
amended. Neither Borrower nor any Guarantor is subject to regulation under the
Federal Power Act, the Interstate Commerce Act, any state public utilities code
or any other Federal or state statute, rule or regulation limiting its ability
to incur Indebtedness, pledge its assets or perform its Secured Obligations
under the Loan Documents.
 
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          6.26 Internal Accounting and Disclosure Controls. Borrower and each
Guarantor maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (a) transactions are executed in accordance
with management’s general or specific authorizations, (b) transactions are
recorded as necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset and liability accountability, (c)
access to assets or incurrence of liabilities is permitted only in accordance
with management’s general or specific authorization, and (d) the recorded
accountability for assets and liabilities is compared with the existing assets
and liabilities at reasonable intervals and appropriate action is taken with
respect to any difference. During the twelve (12) months immediately prior to
the Closing Date, neither Borrower nor any Guarantor has received any notice or
correspondence from any accountant relating to any potential material weakness
in any part of the system of internal accounting controls of Borrower or any
Guarantor.
 
          6.27 Employee Relations. Except as set forth in Schedule 6.27, neither
Borrower nor any Guarantor is a party to any collective bargaining agreement or
employs any member of a union in such person’s capacity as a union member or to
perform union labor work. Borrower and each Guarantor believes that its
relations with its employees are good. As of the Closing Date, no executive
officer of Borrower or any Guarantor has notified Borrower or such Guarantor
that such officer intends to leave Borrower or such Guarantor or otherwise
terminate such officer’s employment with Borrower or such Guarantor. As of the
Closing Date, no executive officer of Borrower or any Guarantor, to the
knowledge of Borrower or any Guarantor, is, or is now expected to be, in
violation of any material term of any employment contract, confidentiality,
disclosure or proprietary information agreement, non-competition agreement, or
any other contract or agreement or any restrictive covenant. Borrower and each
Guarantor is in compliance with all federal, state, local and foreign laws and
regulations respecting labor, employment and employment practices and benefits,
terms and conditions of employment and wages and hours, except where failure to
be in compliance would not, either individually or in the aggregate, reasonably
be expected to result in a Material Adverse Effect.
 
          6.28 Foreign Corrupt Practices. Neither Borrower nor any Guarantor,
nor any director, officer, agent, employee or other Person acting on behalf of
Borrower or any Guarantor has, in the course of its actions for, or on behalf
of, Borrower or any Guarantor (a) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expenses relating to
political activity; (b) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (c)
violated or is in violation of any provision of the U.S. Foreign Corrupt
Practices Act of 1977, as amended; or (d) made any unlawful bribe, rebate,
payoff, influence payment, kickback or other unlawful payment to any foreign or
domestic government official or employee.
 
          6.29 Sarbanes-Oxley Act. Borrower is in material compliance with any
and all applicable requirements of the Sarbanes-Oxley Act of 2002 that are
applicable to Borrower as of the Closing Date, and any and all applicable rules
and regulations promulgated by the SEC thereunder that are applicable to
Borrower as of the Closing Date.
 
          6.30 Patriot Act. To the extent applicable, Borrower and each
Guarantor is in compliance, in all material respects, with (a) the Trading with
the Enemy Act, as amended, and each of the foreign assets control regulations of
the United States Treasury Department and any other enabling legislation or
executive order relating thereto, and (b) the Uniting and Strengthening America
by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act
(Title III of Pub. L. 107-56 (signed into law October 26, 2001)).
 
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          6.31 [Intentionally Omitted].
 
          6.32 Eligible Accounts. For any Eligible Account in any Borrowing Base
Certificate, all statements made and all unpaid balances appearing in all
invoices, instruments and other documents evidencing such Eligible Accounts are
and shall be true and correct (except for any good faith immaterial errors
promptly corrected when discovered) and all such invoices, instruments and other
documents, and all of Borrower’s books are genuine and in all respects what they
purport to be. All sales and other transactions underlying or giving rise to
each Eligible Account shall comply in all material respects with all applicable
Laws and governmental rules and regulations. Borrower has no knowledge of any
actual or imminent Insolvency Proceeding of any account debtor whose accounts
are an Eligible Account in any Borrowing Base Certificate. To the best of
Borrower’s knowledge, all signatures and endorsements on all documents,
instruments, and agreements relating to all Eligible Accounts are genuine, and
all such documents, instruments and agreements are legally enforceable in
accordance with their terms.
 
          6.33 Acquisition Documents. To the knowledge of Borrower and each
Guarantor, each of the representations and warranties contained in the
Acquisition Documents made by Persons other than Borrower and the Guarantors is
true and correct. The Initial Acquisition has been consummated in accordance
with the Acquisition Documents and applicable Law.
 
          6.34 Customers. Schedule 6.34 sets forth the top ten customers of
Borrower and its Subsidiaries (including the Target), determined by to the
dollar amount paid to Target by such customers for the fiscal year ended April
30, 2010 (such customers hereinafter referred to as the “Key Customers”).
 
SECTION 7. INSURANCE; INDEMNIFICATION
 
          7.1 Coverage. Borrower and each Guarantor shall cause to be carried
and maintained commercial general liability insurance, on an occurrence form,
against risks customarily insured against in Borrower’s or such Guarantor’s line
of business. Such risks shall include the risks of bodily injury, including
death, property damage, personal injury, advertising injury, and contractual
liability per the terms of the indemnification provisions found in Section 7.3.
Borrower and Guarantors must maintain a minimum of $2,000,000 of commercial
general liability insurance for each occurrence. Borrower and Guarantors have
and agree to maintain a minimum of $2,000,000 of directors and officers’
insurance for each occurrence and $5,000,000 in the aggregate. So long as Lender
has any commitment to make any Advances to Borrower or there are any Secured
Obligations outstanding, Borrower and each Guarantor shall also cause to be
carried and maintained insurance upon the Collateral, insuring against all risks
of physical loss or damage howsoever caused, in an amount not less than the full
replacement cost of the Collateral, provided that such insurance may be subject
to standard exceptions and deductibles. Borrower and Guarantors shall also carry
and maintain a fidelity insurance policy in an amount not less than $100,000.
 
          7.2 Certificates. Borrower shall deliver to Lender certificates of
insurance in form and substance reasonably satisfactory to Lender that evidence
Borrower and each Guarantor’s compliance with its insurance obligations in
Section 7.1 and the obligations contained in this Section 7.2. Borrower’s
insurance certificate shall state Lender is an additional insured for commercial
general liability, an additional insured and a lender’s loss payee for all risk
property damage insurance, subject to the insurer’s approval, a lender’s loss
payee for fidelity insurance, and a lender’s loss payee for property insurance
and additional insured for liability insurance for any future insurance that
Borrower or any Guarantor may acquire from such insurer. Borrower shall deliver
to Lender additional insured endorsements for liability and lender’s loss
payable endorsements for all risk property damage insurance and fidelity, each
in form and substance reasonably satisfactory to Lender. All certificates of
insurance will provide for a minimum of thirty (30) days advance written notice
to Lender of cancellation or any other change adverse to the Lender’s interests
and for ten (10) days in the case of nonpayment of premium. Any failure of
Lender to scrutinize such insurance certificates for compliance is not a waiver
of any of Lender’s rights, all of which are reserved.
 
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          7.3 Indemnity. Borrower and each Guarantor hereby agrees to and does
indemnify and hold Lender and its officers, directors, employees, agents,
in-house attorneys, representatives, professional advisors (including, without
limitation, attorneys) and shareholders harmless from and against any and all
claims, costs, expenses, damages and liabilities (including such claims, costs,
expenses, damages and liabilities based on liability in tort, including strict
liability in tort), including reasonable attorneys’ fees and disbursements and
other costs of investigation or defense (including those incurred upon any
appeal), that may be instituted or asserted against or incurred by Lender or any
such Person as the result of credit having been extended, suspended or
terminated under this Agreement and the other Loan Documents or the
administration of such credit, or in connection with or arising out of the
transactions contemplated hereunder and thereunder, or any actions or failures
to act in connection therewith, or arising out of the handling, disposition or
utilization of the Collateral, or Lender relying on any instruction of Borrower
or any Guarantor, or any other actions taken or not taken by Lender hereunder or
under any Loan Document, excluding in all cases claims resulting solely from
Lender’s gross negligence or willful misconduct as determined by a court of
competent jurisdiction in a final non-appealable order. Borrower and each
Guarantor agrees to pay, and to save Lender harmless from, any and all
liabilities with respect to, or resulting from any delay in paying, any and all
excise, sales or other similar taxes (excluding taxes imposed on or measured by
the net income of Lender) that may be payable or determined to be payable with
respect to any of the Collateral or this Agreement. This Section 7.3 shall
survive the expiration or other termination of this Agreement and the other Loan
Documents.
 
SECTION 8. AFFIRMATIVE COVENANTS
 
     Borrower and each Guarantor covenants and agrees as follows:
 
          8.1 Financial Reports. Borrower shall furnish to Lender the following
documents and financial statements as herein provided (the “Financial
Statements”):
 
          (a) Monthly Financial Statements. As soon as practicable (and in any
event within 30 days) after the end of each month, unaudited interim and
year-to-date financial statements of Borrower and its Subsidiaries as of the end
of such month (prepared on a consolidated and consolidating basis), including
balance sheet and related statements of income and cash flows accompanied by a
report detailing any material contingencies (including the commencement of any
material litigation by or against Borrower or any of its Subsidiaries) or any
other occurrence that would reasonably be expected, either individually or in
the aggregate, to have a Material Adverse Effect, all certified by Borrower’
Chief Executive Officer or Chief Financial Officer to the effect that they have
been prepared in accordance with GAAP, subject to normal year end adjustments
and absence of footnote disclosure;
 
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          (b) Quarterly Financial Statements. As soon as practicable (and in any
event within 45 days) after the end of each calendar quarter, unaudited interim
and year-to-date financial statements of Borrower and its Subsidiaries as of the
end of such calendar quarter (prepared on a consolidated and consolidating
basis), including balance sheet and related statements of income and cash flows
accompanied by a report detailing any contingencies (including the commencement
of any litigation by or against Borrower or any Guarantor) or any other
occurrence that would reasonably be expected, either individually or in the
aggregate, to have a Material Adverse Effect, certified by Borrower’ Chief
Executive Officer or Chief Financial Officer to the effect that they have been
prepared in accordance with GAAP, subject to normal year end adjustments and
absence of footnote disclosure;
 
          (c) Annual Financial Statements. As soon as practicable (and in any
event within one hundred twenty (120) days) after the end of each fiscal year,
unqualified audited financial statements of Borrower and its Subsidiaries as of
the end of such year (prepared on a consolidated and consolidating basis, if
applicable), including balance sheet and related statements of income and cash
flows, and setting forth in comparative form the corresponding figures for the
preceding fiscal year, certified by a firm of independent certified public
accountants selected by Borrower and reasonably acceptable to Lender, which
financial statements shall not be subject to any “going-concern” or like
qualification or exception or any qualification or exception as to scope of such
audit, and which shall be accompanied by any management report from such
accountants;
 
          (d) Compliance Certificate; Borrowing Base Certificate. So long as
Lender has any commitment to make any Advances to Borrower or any Secured
Obligations are outstanding, Borrower shall deliver to Lender (i) a Compliance
Certificate concurrently with the delivery of the Financial Statements described
in paragraphs (a), (b) and (c) of this Section 8.1, and (ii) as soon as
practicable (and in any event within ten (10) days after the end of each
calendar month), a Borrowing Base Certificate, determined as at the end of the
most recently completed calendar month or such other date as Lender may require,
and agings of accounts receivable and accounts payable, accompanied by
supporting detail and documentation as Lender shall have requested.
 
          (e) SEC Filings. Promptly after the sending or filing thereof, as the
case may be, copies of any proxy statements, financial statements or reports
that Borrower has made available to holders of its Equity Interests and copies
of any regular, periodic and special reports or registration statements that
Borrower files with the SEC or any Governmental Authority that may be
substituted therefor, or any national securities exchange; and
 
          (f) [Intentionally Omitted]
 
          (g) Projections. Promptly following the fiscal year end of Borrower
and in any event within thirty (30) days after the fiscal year end of Borrower,
(i) financial and business projections of Borrower and its Subsidiaries, as well
as budgets, operating plans and other financial information reasonably requested
by Lender and (ii) a schedule identifying (A) the top ten suppliers to Borrower,
determined by the dollar amount paid by Borrower and its Subsidiaries to such
suppliers for the Fiscal Year then ended, and (B) the top ten customers of
Borrower, determined by to the dollar amount paid to Borrower and its
Subsidiaries by such customers for the Fiscal Year then ended. In addition,
promptly following their approval by Borrower’s board of directors, financial
and business projections, budgets, operating plans and other financial
information reasonably requested by Lender.
 
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The executed Compliance Certificate may be sent via facsimile to Lender at (650)
473-9194 or via e-mail to sbhaumik@herculestech.com. All Financial Statements
required to be delivered pursuant to clauses (a), (b) and (c) shall be sent via
e-mail to financialstatements@herculestech.com with a copy to
kgrossman@herculestech.com, provided, that if e-mail is not available or sending
such Financial Statements via e-mail is not possible, they shall be sent via
facsimile to Lender at: (866) 468-8916, attention Chief Credit Officer.
 
          8.2 Notices. Borrower shall deliver to Lender, in form and detail
(including supporting information) reasonably satisfactory to Lender:
 
          (a) Default or Event of Default. Prompt (but in any event within two
(2) Business Days) notice of the occurrence of any Default or Event of Default.
 
          (b) Material Adverse Effect. Prompt notice of any matter that has
resulted or would reasonably be expected to result in a Material Adverse Effect.
 
          (c) Transfers. Prompt notice of any Transfer of any assets that would
give rise to a mandatory repayment of the Secured Obligations pursuant to
Section 2.6.
 
          (d) New Subsidiaries. Advance notice (at least ten (10) Business Days)
of each Subsidiary formed subsequent to the Closing Date.
 
          (e) Certain Collateral. Prompt (but in any event within five (5)
Business Days) notice of any promissory note, tangible chattel paper, letter of
credit or commercial tort claim held or acquired by Borrower or any Guarantor in
or relating to an amount greater than $100,000.
 
          (f) Schedules. Prompt notice if any information contained on Schedule
6.1, Schedule 6.12, Schedule 6.18, Schedule 6.19 or Schedule 6.20 shall become
incorrect or incomplete after the Closing Date and, shall promptly update such
information in a written notice (including in any Compliance Certificate) to
Lender, satisfactory to Lender and upon Lender’s receipt thereof, Lender may
update such Schedule to include such updated information, provided that no
update shall be deemed a waiver of any Default or Event of Default resulting
from matters disclosed therein.
 
          (g) Independent Public Account Reports. Promptly upon receipt thereof,
copies of any reports submitted by Borrower’s independent public accountants in
connection with each annual, interim or special audit or review of any type of
the financial statements or internal control systems of Borrower or any of its
Subsidiaries made by such accountants, including any comment letters submitted
by such accountants to management of Borrower or any of its Subsidiaries in
connection with their services.
 
          (h) Notice of Litigation. Promptly upon any officer of Borrower or any
Guarantor obtaining knowledge of (i) the institution of, or non frivolous threat
of, any adverse Proceeding not previously disclosed in writing by Borrower to
Lender, or (ii) any material development in any adverse Proceeding that, in the
case of either clause (i) or (ii) if adversely determined, could be reasonably
expected to have a Material Adverse Effect, or seeks to enjoin or otherwise
prevent the consummation of, or to recover any damages or obtain relief as a
result of, the transactions contemplated hereby, written notice thereof together
with such other information as may be reasonably available to Borrower to enable
Lender and its counsel to evaluate such matters.
 
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          (i) ERISA. (i) Promptly upon becoming aware of the occurrence of or
forthcoming occurrence of any ERISA Event, a written notice specifying the
nature thereof, the action(s) any Loan Party or any of its respective
Subsidiaries or ERISA Affiliates has taken, is taking or proposes to take with
respect thereto and, when known, any action taken or threatened by the Internal
Revenue Service, the Department of Labor or the PBGC with respect thereto; and
(ii) with reasonable promptness, copies of (1) at the request of Lender, each
Schedule B (Actuarial Information) to the annual report (Form 5500 Series) filed
by any of the Loan Parties, any of their respective Subsidiaries or any of their
respective ERISA Affiliates with the Internal Revenue Service with respect to
each Pension Plan; (2) all notices received by any of the Loan Parties, any of
their respective Subsidiaries or any of their respective ERISA Affiliates from a
Multiemployer Plan sponsor concerning an ERISA Event, but in no event later than
ten (10) days after the notice is received by such Loan Party or its respective
Subsidiary or ERISA Affiliate; (3) any annual notices or actuarial reports
relating to the Pension Plans or Multiemployer Plans received by any of the Loan
Parties, any of their respective Subsidiaries or any of their ERISA Affiliates
and (4) copies of such other documents or governmental reports or filings
relating to any Employee Benefit Plan as Lender shall reasonably request,
including, but not limited to, each annual and other report with respect to each
Pension Plan and Multiemployer Plan.
 
          (j) Insurance Report. Upon request of Lender, a report by Borrower’s
and each Guarantor’s insurance broker(s) in form and substance satisfactory to
Lender outlining all material insurance coverage maintained as of the date of
such report by Borrower and/or any Guarantor and all material insurance coverage
planned to be maintained by Borrower and/or any Guarantor in the immediately
succeeding fiscal year.
 
          (k) Environmental Reports and Audits. As soon as practicable following
receipt thereof, copies of all environmental audits and reports with respect to
environmental matters at any facility or property used by Borrower or any
Guarantor or which relate to any environmental liabilities of Borrower or any
Guarantor which, in any such case, individually or in the aggregate, would
reasonably be expected, either individually or in the aggregate, to result in a
Material Adverse Effect.
 
          (l) Corporate (Company) Information. Thirty (30) days’ prior written
notice of any change (i) in Borrower’s or any Guarantor’s legal name, (ii) in
Borrower’s or any Guarantor’s jurisdiction of incorporation or organization, or
(iii) in any Loan Parties’ Federal Taxpayer Identification Number or state
organizational identification number.
 
          (m) Tax Returns. Within ten (10) days following request by Lender,
copies of each federal income tax return filed by or on behalf of Borrower or
any Guarantor and requested by Lender.
 
          (n) Event of Loss. Promptly (and in any event within three (3)
Business Days) notice of (i) any claim with respect to any liability against
Borrower or any Guarantor that (A) is in excess of $100,000 and (B) would
reasonably be expected to result in a Material Adverse Effect or (ii) any event
which, with or without the passage of time, would reasonably be expected to
constitute an Event of Loss.
 
          (o) Eligibility of Accounts. Prompt notice of any event or
circumstance which to Borrower’s knowledge would cause Lender to consider any
then existing Account as no longer constituting an Eligible Account.
 
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          (p) Other Information. Promptly upon request of Lender, such other
information and data with respect to Borrower or any Guarantor as from time to
time may be reasonably requested.
 
          8.3 Corporate Existence and Maintenance of Properties. Borrower and
each Guarantor shall maintain and preserve (a) its existence and good standing
in the jurisdiction of its organization and (b) its qualification to do business
and good standing in each jurisdiction where the nature of its business makes
such qualification necessary (other than such jurisdictions in which the failure
to be so qualified or in good standing could not reasonably be expected to have,
either individually or in the aggregate, a Material Adverse Effect). Borrower
and each Guarantor shall maintain or cause to be maintained in good repair,
working order and condition, ordinary wear and tear excepted, all properties
used or useful in the business of Borrower or such Guarantor and from time to
time will make or cause to be made all appropriate repairs, renewals and
replacements thereof.
 
          8.4 Compliance with Laws; Conduct of Business; Regulatory Permits.
Borrower and each Guarantor shall comply with: (a) all material Laws wherever
its business is conducted, (b) the provisions of its Organization Documents, (c)
all material agreements and instruments by which it and any of its properties
may be bound and (d) all applicable decrees, orders and judgments, the
non-compliance of which could not reasonably be expected to result in an Event
of Default hereunder. Borrower and each Guarantor shall engage only in the line
of business engaged in on the Closing Date and businesses incidental thereto.
Borrower and each Guarantor shall maintain in full force and effect, valid and
binding, all material consents, authorizations, approvals, orders, licenses,
franchises, permits, certificates and accreditations and all other appropriate
regulatory authorities necessary to conduct their respective businesses.
 
          8.5 Taxes. Borrower and each Guarantor shall pay when due all Federal,
state and provincial taxes and all other material local taxes, fees or other
charges of any nature whatsoever (together with any related interest or
penalties) now or hereafter imposed or assessed against Borrower, any Guarantor
or the Collateral or upon Borrower’s or any Guarantor’s ownership, possession,
use, operation or disposition thereof or upon Borrower’s or any Guarantor’s
rents, receipts or earnings arising therefrom. Borrower and each Guarantor shall
file, on or before the due date therefor all personal property tax returns in
respect of the Collateral. Notwithstanding the foregoing, Borrower and any
Guarantor may contest, in good faith and by appropriate proceedings promptly
instituted and diligently conducted, taxes for which Borrower or such Guarantor
maintains adequate reserves therefor in accordance with GAAP.
 
          8.6 Books and Records. Borrower and each Guarantor shall maintain
proper books of records and account, in which full, true and correct entries in
conformity with GAAP consistently applied shall be made of all financial
transactions and matters involving the assets and business of such Person.
 
          8.7 Use of Proceeds. Borrower will use the proceeds (a) from the Term
Loan to (i) fund a portion of the purchase price of the Initial Acquisition,
(ii) refinance the Existing Indebtedness and (iii) to pay fees, expenses and
costs associated with the Transaction and (b) from the Revolving Loan for
general working capital purposes of the Loan Parties not in contravention of any
law or of any Loan Document.
 
          8.8 Collateral Protection Generally. Borrower and each Guarantor shall
give Lender prompt written notice of any legal process affecting the Collateral,
such other property and assets of Borrower or any Guarantor, or any Liens
thereon. Borrower and each Guarantor shall protect and defend such Person’s
title to its assets from and against all other Persons claiming any interest
adverse to Borrower or any Guarantor, and Borrower and each Guarantor shall at
all times to keep such Person’s property and assets free and clear from any
legal process or Liens whatsoever (except for Permitted Liens), and shall give
Lender prompt written notice of any legal process affecting such Person’s
assets.
 
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          8.9 Additional Intellectual Property. Concurrently with the delivery
of a Compliance Certificate in connection with the delivery of the financial
statements described in Section 8.1(b) (and at such other times as Lender may
reasonably request), Borrower shall (a) provide Lender with a report of all new
patentable, copyrightable or trademarkable materials acquired or generated by
Borrower or any Guarantor during the prior period which has been registered and
the filing office in which the registration has been made, and (b) cause to be
prepared, executed, and delivered to Lender supplemental schedules to the
applicable Loan Documents to identify such Intellectual Property as being
subject to the security interests created thereunder, and (c) execute and
deliver to Lender at Lender’s request security agreements with respect to such
Intellectual Property for filing with the appropriate filing office.
 
          8.10 Additional Collateral. With respect to any property (real or
personal or otherwise) acquired after the Closing Date by Borrower or any
Guarantor as to which Lender does not have a perfected Lien, Borrower or such
Guarantor shall promptly (a) execute and deliver to Lender, or its agent, such
amendments to the Collateral Documents or such other documents as Lender deems
necessary or advisable to grant to Lender a security interest in such property
and (b) take all other actions necessary or advisable in the discretion of
Lender to grant to Lender a perfected first priority security interest in such
property, including, without limitation, the filing of Mortgages and UCC
financing statements in such jurisdictions as may be required by the Collateral
Documents or by Law or as may be requested by Lender.
 
          8.11 Joinder. Borrower and each Guarantor shall provide Lender with at
least ten (10) days prior written notice of the formation or acquisition of any
Subsidiaries by Borrower or any Guarantor. For any Subsidiaries of Borrower or
any Guarantor formed or acquired after the Closing Date, Borrower and Guarantors
shall at their own expense, upon formation or acquisition of such Subsidiary,
cause each such Subsidiary to execute a Joinder Agreement obligating such
Subsidiary to any or all of the Loans Documents deemed necessary or appropriate
by Lender and cause the applicable Person that owns the Equity Interests of such
Subsidiary to pledge to Lender 100% of the Equity Interests owned by such
Borrower or Guarantor of each such Subsidiary formed or acquired after the
Closing Date and execute and deliver all documents or instruments required
thereunder or appropriate to perfect the security interest created thereby (but
excluding thirty-five percent (35%) of the voting capital stock of any Foreign
Subsidiary to the extent that such grant of a security interest would give rise
to a material adverse tax consequence to Borrower or any Guarantor). In the
event a Person becomes a Guarantor (a “New Guarantor”) pursuant to the Joinder
Agreement, upon such execution the New Guarantor shall be bound by all the terms
and conditions hereof and the other Loan Documents to the same extent as though
such New Guarantor had originally executed the Loan Documents. The addition of a
New Guarantor shall not in any manner affect the obligations of Borrower or any
Guarantor hereunder or thereunder. Borrower, each Guarantor and Lender hereto
acknowledges that the schedules and exhibits hereto or thereto may be amended or
modified in connection with the addition of any New Guarantor to reflect
information relating to such New Guarantor. Compliance with this Section 8.11
shall not excuse any violation any provision of this Agreement or any other Loan
Document.
 
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          8.12 Inspection Rights; Audit Rights; Field Exams; Appraisals; Etc.
 
          (a) Inspection Rights; Audit Rights. Borrower and each Guarantor shall
permit Lender or any agent or designee of Lender, including, without limitation,
its attorneys, accountants and professional advisors, to inspect the Collateral
and examine and make copies and abstracts of the books of account and records of
such Person at reasonable times and upon reasonable notice during normal
business hours (unless an Event of Default shall have occurred and be
continuing, in which event no notice shall be required and Lender shall have
access at any and all times during the continuance thereof). In addition, Lender
or such agent or designee of Lender shall have the right to meet with management
and officers of Borrower or such Guarantor to discuss such books of account and
records and significant business issues affecting Borrower or such Guarantor.
 
          (b) Field Exams. Borrower and each Guarantor shall permit Lender or
any agent or designee of Lender, including, without limitation, its attorneys,
accountants and professional advisors, to conduct field examinations of the
Collateral, at the sole cost of Borrower and Guarantors and at such reasonable
times and intervals as Lender may reasonably request (unless an Event of Default
shall have occurred and be continuing, in which event no notice shall be
required and Lender shall have access at any and all times during the
continuance thereof). Without limiting the foregoing, Borrower and each
Guarantor agrees that Lender may conduct such field exams at least once each
fiscal quarter of Borrower at Borrower and Guarantors’ expense. So long as no
Event of Default has occurred and is continuing, Borrower and Guarantor shall
not be required to reimburse amounts over $10,000 per quarter (or over $40,000
in the aggregate in any fiscal year) with respect to such field examinations.
 
          (c) Appraisals. Borrower and each Guarantor, at Lender’s request and
upon reasonable notice, and at Borrower’s and Guarantors’ sole cost and expense,
obtain an appraisal of the Collateral and the books of Borrower and its
Subsidiaries from an independent appraisal firm satisfactory to Lender (which
may be Affiliated with Lender). Without limiting the foregoing, Borrower and
each Guarantor agrees that Lender may conduct such appraisals at least once each
fiscal quarter of Borrower at the Borrower’s and Guarantors’ expense. So long as
no Event of Default has occurred and is continuing, Borrower and Guarantors
shall not be required to reimburse amounts over $10,000 per year with respect to
such appraisals.
 
          8.13 Material Agreements. Borrower and each Guarantor shall perform
and observe all the terms and provisions of each Material Agreement to be
performed or observed by such Person, maintain each such Material Agreement in
full force and effect, enforce each such Material Agreements in accordance with
its terms, take all such action to such end as may be from time to time
requested by Lender and, upon request of Lender, make to each other party to
each such Material Agreement such demands and requests for information and
reports or for action as Borrower or any Guarantor is entitled to make under
such Material Agreement, except, in any case, where the failure to do so, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.
 
          8.14 Lender Meetings. Borrower and each Guarantor, upon the request of
Lender, participate in a meeting with Lender twice during each fiscal year of
Borrower to be held at Borrower’s corporate offices (or at such other location
as may be agreed to by Borrower and Lender) at such time as may be agreed to by
Borrower and Lender.
 
          8.15 SBA Information. Lender has received a license from the U.S.
Small Business Administration (“SBA”) to extend loans as a small business
investment company (“SBIC”) pursuant to the Small Business Investment Act of
1958, as amended, and the associated regulations (collectively, the “SBIC Act”).
Portions of the loan to Borrower will be made under the SBA license and the SBIC
Act. Addendum 1 to this Agreement outlines various responsibilities of Lender
and Borrower associated with an SBA loan, and such Addendum 1 is hereby
incorporated in this Agreement.
 
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          8.16 Compromise of Agreements. With respect to Accounts with a
combined value in excess of ten percent (10%) of Borrower’s or any Guarantors’
Accounts then outstanding, neither Borrower nor any Guarantor shall (a) grant
any material extension of the time of payment thereof, (b) to any material
extent, compromise, compound or settle the same for less than the full amount
thereof, (c) release, wholly or partly, any Person liable for the payment
thereof, or (d) allow any credit or discount whatsoever thereon other than trade
discounts granted by such Person in the ordinary course of business of such
Person.
 
          8.17 Further Assurances. Borrower and each Guarantor shall promptly
upon request by Lender, (a) correct any material defect or error that may be
discovered in any Loan Document or in the execution, acknowledgment, filing or
recordation thereof, and (b) do, execute, acknowledge, deliver, record,
re-record, file, re-file, register and re-register any and all such further
acts, deeds, certificates, assurances and other instruments as Lender may
reasonably require from time to time in order to (i) carry out more effectively
the purposes of the Loan Documents, (ii) to the fullest extent permitted by
applicable law, subject Borrower’s or any Guarantor’s properties, assets, rights
or interests to the Liens now or hereafter intended to be covered by any of the
Collateral Documents, (iii) perfect and maintain the validity, effectiveness and
priority of any of the Collateral Documents and any of the Liens intended to be
created thereunder and (iv) assure, convey, grant, assign, transfer, preserve,
protect and confirm more effectively unto Lender the rights granted or now or
hereafter intended to be granted to Lender under any Loan Document or under any
other instrument executed in connection with any Loan Document to which Borrower
or any Guarantor is or is to be a party.
 
          8.18 Availability of Shares. Borrower shall at all times have a
minimum of 718,860 authorized and unreserved shares of Common Stock (after
accounting for all outstanding shares, all options, warrants, convertible
securities and other purchase rights, and all option plans) to satisfy
conversion and exercise rights under the Warrant.
 
          8.19 Post-Closing Covenants.
 
          (a) Collateral Access Agreements. On or before the thirtieth (30th)
day following request therefor, Borrower shall deliver to Lender, Collateral
Access Agreements with respect to each location of a Loan Party as Lender may
reasonably request.
 
          (b) Transfer of Certain Trademarks of Gupta Technologies, LLC. On or
before the thirtieth (30th) day following the Closing Date, Borrower shall
deliver to Lender (i) evidence of the proper assignment and transfer from Gupta
Technologies, LLC to Borrower of the Trademarks listed on Schedule 8.19(b)
attached hereto, and (ii) supplemental schedules to the applicable Loan
Documents to identify those Trademarks as being subject to the security
interests created thereunder.
 
          (c) Closing of Certain Deposit Accounts. On or before the sixtieth
(60th) day following the Closing Date, Borrower shall deliver to Lender evidence
in form and substance satisfactory to Lender of the closing of the following
Deposit Accounts of AXS-One Inc.: Silicon Valley Bank account numbers:
4860462615 RR ZGQ; 3300650708; 3300459813; 3300459828; 3300649870; and Bank of
Montreal account number 1032464.
 
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          (d) Dissolution of Gupta Technologies GmbH. On or before the one
hundred and eightieth (180th) day following the Closing Date, Borrower shall
deliver to Lender, evidence in form and substance satisfactory to Lender, of the
dissolution of Gupta Technologies GmbH.
 
          (a) Account Control Agreements. On or before the thirtieth (30th) day
following the Closing Date, Borrower shall deliver fully executed copies of the
Account Control Agreements by and among Lender, the applicable Guarantors and
Bank of America, N.A., and such agreements shall be in form and substance
satisfactory to Lender.
 
          8.20 Information Statement.
 
          (a) On or before July 31, 2010, Borrower shall have filed with the
SEC, an information statement (the “Required Information Statement”), in
accordance with Regulation 14C under the Securities Exchange Act of 1934, as
amended, with respect to the action by written consent of Borrower’s
stockholders approving the issuance of Common Stock issuable upon exercise of
the Warrant.
 
          (b) Borrower shall promptly provide to Lender copies of all
correspondence from and to the SEC staff regarding the Required Information
Statement.
 
          (c) Upon SEC staff clearance of the Required Information Statement,
Borrower shall promptly (but in no event later than ten (10) Business Days
thereafter), deliver the Required Information Statement to the stockholders of
Borrower.
 
          (d) Borrower shall pay to Lender on the Fee Payment Date (as
hereinafter defined) a cash fee in the amount of $1,000,000 (the “Fee Payment”),
unless the Warrant is deemed exercisable and is in full force and effect in
accordance with its terms prior to the Fee Payment Date. Fee Payment Date shall
mean the earlier of (x) at Lender’s election, an Event of Default hereunder, (y)
acceleration of the Loans hereunder in accordance with Section 12.1, or (z)
demand at any time after the date that is one-hundred and twenty (120) days
following the Closing Date. If the Fee Payment is made, the Warrant shall be
returned to Borrower for cancellation without any additional consideration from
Borrower.
 
SECTION 9. NEGATIVE COVENANTS
 
     Borrower and each Guarantor covenants and agrees as follows:
 
          9.1 Liens. Neither Borrower nor any Guarantor shall, directly or
indirectly, allow or suffer to exist any Liens, other than Permitted Liens.
 
          9.2 Indebtedness; Prepayment of Indebtedness.
 
          (a) Indebtedness. Neither Borrower nor any Guarantor shall create,
incur, assume, guarantee, suffer to exist or be or remain liable with respect to
any Indebtedness, or engage in any sale-leaseback, synthetic lease or similar
transaction, other than Permitted Indebtedness.
 
          (b) Prepayment of Indebtedness. Neither Borrower nor any Guarantor
shall prepay any Indebtedness or take any actions which impose on such Person an
obligation to prepay any Indebtedness, or make any payment in violation of any
subordination terms of any Indebtedness, except for (i) the conversion of
Indebtedness into equity securities and the payment of cash in lieu of
fractional shares in connection with such conversion and (ii) so long as no
Default or Event of Default then exists or would arise as a result thereof, for
the prepayment of Permitted Indebtedness described under clauses (i), (iii)
(iv), (v), (vi)(A) and (iv)(B) of the definition of “Permitted Indebtedness”.
 
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          9.3 Investments. Neither Borrower nor any Guarantor shall directly or
indirectly acquire or own, or make any Investment in or to any Person, other
than Permitted Investments.
 
          9.4 Restricted Payments. Neither Borrower nor any Guarantor shall (a)
make any Restricted Payments, or (b) repurchase or redeem any Equity Interest,
in each case other than: (w) repurchases of Equity Interests pursuant to clause
(iii) of the definition of Permitted Investments, (x) each Subsidiary of
Borrower may make Restricted Payments to Borrower or any other Loan Party,
ratably according to their respective holdings of the type of Equity Interest in
respect of which such Restricted Payment is being made, (y) Borrower and each
Guarantor may declare and make dividend payments or other distributions payable
solely in the Equity Interest or other common Equity Interests of such Person,
and (z) issuance of the Warrant.
 
          9.5 Payment of Restricted Junior Payments. Neither Borrower nor any
Guarantor shall, voluntarily or involuntarily, make any Restricted Junior
Payment to any Person, other than the Board of Directors Fees, provided that
such Board of Directors Fees shall not exceed $350,000 in the aggregate in any
fiscal year of Borrower.
 
          9.6 Transfers. Neither Borrower nor any Guarantor shall, voluntarily
or involuntarily make any Transfer in any portion of such Person’s assets and
properties, other than Permitted Transfers.
 
          9.7 Fundamental Changes. Neither Borrower nor any Guarantor shall,
merge or consolidate with or into another Person, provided that upon not less
than five (5) Business Days prior written notice to Lender (or such shorter
period as Lender may agree in writing) any Subsidiary of Borrower may merge or
consolidate with and into any other Subsidiary of Borrower so long as (i) if
Borrower is a party to such merger of consolidation, Borrower shall be the
continuing or surviving entity and (ii) if any other Loan Party is a party to
such merger or consolidation, such other Loan Party shall be the continuing or
surviving entity. Neither Borrower nor any Guarantor (other than Gupta
Technologies GmbH) shall dissolve or liquidate without the prior written consent
of Lender.
 
          9.8 Acquisitions. Neither Borrower nor any Guarantor shall be a party
to any Acquisition, other than a Permitted Acquisition.
 
          9.9 No Negative Pledges. Neither Borrower nor any Guarantor shall: (i)
enter into or permit to exist any arrangement or agreement (excluding this
Agreement and the other Loan Documents) which directly or indirectly prohibits
such Person from creating, assuming or incurring any Lien upon its properties,
revenues or assets whether now owned or hereafter acquired, or (ii) enter into
any agreement, contract or arrangement (excluding this Agreement and the other
Loan Documents) restricting the ability of such Person to pay or make dividends
or distributions in cash or kind to Borrower or any Guarantor, to make loans,
advances or other payments of whatsoever nature to Borrower or any Guarantor, or
to make transfers or distributions of all of any part of its assets to Borrower
or any Guarantor; in each case other than (x) restrictions on specific assets
which assets are the subject of purchase money security interests to the extent
included as a Permitted Lien, and (y) customary anti-assignment provisions
contained in leases and licensing agreements entered into by Borrower or such
Guarantor in the ordinary course of business.
 
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          9.10 Transactions with Affiliates. Neither Borrower nor any Guarantor
shall, directly or indirectly, enter into or permit to exist any transaction
(including the purchase, sale, lease or exchange of any property or the
rendering of any service) with Borrower or any Guarantor, whether or not in the
ordinary course of business, other than on terms that are fair and reasonable
and comparable to the terms which would be obtainable by such Borrower or
Guarantor at the time in a comparable arm’s length transaction with a Person
other than an Affiliate and are fully disclosed in writing to Lender prior to
the consummation thereof. 
 
          9.11 Accounting Changes. Neither Borrower nor any Guarantor shall,
make any change in each of their respective (a) accounting policies or reporting
practices (unless required by the SEC or by changes in GAAP) or (b) fiscal years
or fiscal quarters. The fiscal year of Borrower shall end on April 30.
 
          9.12 Modification of Organizational Documents and Material Agreements.
Neither Borrower nor any Guarantor shall consent to any amendment, supplement,
waiver or other modification of, its Organization Document or any Material
Agreements, unless, in either such case, amendment, supplement, waiver or other
modification is of an immaterial or ministerial nature. 
 
          9.13 Organizational Changes; Locations of Collateral. Neither Borrower
nor any Guarantor shall change its legal name or jurisdiction of formation
without thirty (30) days’ prior written notice to Lender. Neither Borrower nor
any Guarantor shall change its legal form without the prior written consent of
Lender, in its sole discretion. Neither Borrower nor any Guarantor shall
relocate its chief executive office or its principal place of business unless:
(i) it has provided at least thirty (30) days’ prior written notice to Lender;
and (ii) with respect to each Loan Party, such relocation shall be within the
continental United States. Borrower and each Guarantor agree not to effect or
permit any change referred to in the preceding three sentences hereof unless all
filings have been made under the UCC or otherwise and all other actions that are
required in order for Lender to continue at all times following such change to
have a valid, legal and perfected security interest in all the Collateral as
contemplated in the Collateral Documents and other Loan Documents. Neither
Borrower nor any Guarantor shall, relocate any item of Collateral (other than
(x) sales of Inventory in the ordinary course of business, (y) relocations of
equipment having an aggregate value of up to $25,000 in any fiscal year, and (z)
relocations of Collateral from a location described on Schedule 6.1 to another
location described on Schedule 6.1) unless (A) it has provided prompt prior
written notice to Lender, (B) with respect to each Loan Party, such relocation
is within the continental United States and, (C) if such relocation is to a
third party bailee, it has delivered a Collateral Access Agreement. 
 
          9.14 Deposit Accounts and Securities Accounts. Other than as set forth
in Section 9.20, neither Borrower nor any Guarantor shall maintain any Deposit
Accounts or Securities Accounts, except with respect to which Lender has an
Account Control Agreement, other than any Excluded Deposit Accounts. 
 
          9.15 Change in Nature of Business. Neither Borrower nor any Guarantor
shall engage in any material line of business substantially different from those
lines of business conducted by Borrower or such Guarantor on the date hereof or
any business substantially related or incidental thereto. 
 
          9.16 [Intentionally Omitted].
 
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          9.17 Non-circumvention. Neither Borrower nor any Guarantor shall by
amendment of its Organization Documents, or through any reorganization, transfer
of assets, consolidation, merger, scheme of arrangement, dissolution, issue or
sale of securities, or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Agreement or the other
Loan Documents, and will at all times in good faith carry out all of the
provisions of this Agreement and the other Loan Documents and take all action as
may be required to protect the rights of Lender. 
 
          9.18 Financial Covenants.
 
          (a) Minimum Consolidated Adjusted EBITDA. Neither Borrower nor any
Guarantor shall permit the minimum Consolidated Adjusted EBITDA, determined on a
Six Month Measurement Period basis, at any time during any of the periods
described in the table attached hereto as Schedule 9.18 to be less than the
amount set forth opposite such period on such Schedule 9.18; 
 
          (b) Consolidated Total Leverage Ratio. Neither Borrower nor any
Guarantor shall permit the Consolidated Total Leverage Ratio as at the end of
the periods described in the table attached hereto as Schedule 9.18 to be
greater than the ratio set forth below opposite such period on such Schedule
9.18; 
 
          (c) Consolidated Fixed Charge Coverage Ratio. Neither Borrower nor any
Guarantor shall permit the Consolidated Fixed Charge Coverage Ratio as at the
end of the periods described in the table attached hereto as Schedule 9.18 to be
less than the ratio set forth opposite such period on such Schedule 9.18;
 
provided, however, that on or before the fifteenth (15th) day following the
Closing Date, Schedule 9.18 shall be amended and restated in its entirety to
reflect modifications to the Financial Covenants set forth in clause (a) herein
above and such amended and restated Schedule 9.18 shall be accepted by Lender in
writing and shall be in form and substance satisfactory to Borrower and Lender;
provided, further, that Borrower and Lender agree to negotiate in good faith
with respect to such amendment of the financial covenants set forth in this
Section 9.18 to preserve the original intent hereof and until so amended and
agreed, such financial covenants shall continue to be computed as set forth on
Schedule 9.18 hereto .
 
          9.19 Modification of Seller Notes. Borrower shall not amend, restate,
supplement or otherwise modify the provisions of any Seller Note without the
Lender’s prior written consent.
 
          9.20 Foreign Subsidiary Deposit Accounts. Neither Borrower nor any
Guarantor shall transfer funds to any Deposit Account or maintain funds in any
Deposit Account, if the depository bank is not organized under the laws of the
United States of America, any State thereof or the District of Columbia with
such Deposit Account domiciled in the United States of America, any State
thereof or the District of Columbia (such account, a “Foreign Account”) except
with respect to limited funds which are reasonably required to finance the
ongoing operational expenses of Foreign Subsidiaries in the ordinary course of
business and provided that the aggregate amount of such funds shall at no time
be greater than (a) $500,000 in the aggregate as to all such Foreign
Subsidiaries (other than the Foreign Accounts of Borrower maintained with Wells
Fargo Bank, N.A. domiciled in the Cayman Islands (account numbers 7776001716,
7770005473 and 7770005465) (collectively, the “Wells Foreign Accounts”), and (b)
$1,000,000 in the aggregate as to all Wells Foreign Accounts; provided that the
Wells Foreign Accounts shall, notwithstanding anything contained herein to the
contrary, be subject to an Account Control Agreement. Furthermore, any Foreign
Accounts shall be prohibited from entering into “overdraft”. For the purposes of
this Section 9.20, “overdraft” shall mean an aggregate negative balance in such
Foreign Account taking into account all other deposit and saving accounts with
such bank. 
 
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          9.21 Stock Options. Borrower shall not issue options or other rights
(including restricted stock, “phantom stock” or securities convertible or
exchangeable for shares of capital stock) under its 2001 Stock Option Plan, 2002
Director Restricted Stock Plan or any incentive equity plan approved by the
Borrower's stockholders after the Closing Date for the purchase or acquisition
from the Borrower of more than 550,000 shares of its Common Stock or other
Equity Interests (net of any forfeitures and cancellations), as such number of
shares may be increased or decreased to reflect stock splits, reverse stock
splits or stock dividends, in any twelve (12) month period, with such first
twelve (12) month period to commence on the Closing Date.
 
SECTION 10. [INTENTIONALLY OMITTED].
 
SECTION 11. EVENTS OF DEFAULT
 
          The occurrence of any one or more of the following events shall be an
Event of Default:
 
          11.1 Non-payment. Borrower or any Guarantor fails to pay any amount
due under this Agreement, the Notes or any of the other Loan Documents on the
due date; or 
 
          11.2 Specific Covenants; Other Defaults. Borrower or any Guarantor
breaches or defaults in the performance of any covenant or Secured Obligation
under this Agreement, the Notes, or any of the other Loan Documents, (a) with
respect to a default under any of Section 7, Sections 8.1 (other than Section
8.1(o)), 8.3, 8.4, 8.5, 8.6, 8.7, 8.12, 8.19, failure to pay the Fee Payment
when due under Section 8.20(d), or Section 9, upon the occurrence of such
default; or (b) with respect to any other default under any covenant (other than
Section 8.1(o) and Sections 8.20(a) through 8.20(c)), under this Agreement or
any other Loan Document (other than as set forth in this Section 11) such
default continues for more than ten (10) days after the earlier of the date on
which (i) Lender has given notice of such default to Borrower and (ii) Borrower
or any Guarantor has knowledge of such default; or 
 
          11.3 Repudiation of Guaranty and other Collateral Documents. Any
Guarantor shall purport to revoke, terminate or otherwise not be bound by the
Guaranty as to any future Advances, Loans or any other Secured Obligations. The
repudiation by Borrower or any Guarantor of any of its obligations under any
Collateral Document, or any Collateral Document or any term thereof shall cease
to be, or is asserted by Borrower or any Guarantor not to be, a legal, valid and
binding obligation of Borrower or any Guarantor enforceable in accordance with
its terms; or 
 
          11.4 Invalidity of Loan Documents. Any provision of any Loan Document
shall at any time and for any reason cease to be in full force and effect or is
declared to be null and void, or the validity or enforceability thereof shall be
contested by Borrower or any Guarantor, or the validity or enforceability
thereof shall be contested by any other Person in writing or in any judicial
proceeding, or a proceeding shall be commenced by Borrower, any Guarantor or by
any Governmental Authority having jurisdiction over Borrower or any Guarantor,
seeking to establish the invalidity or unenforceability thereof, or Borrower or
any Guarantor denies that it has any or further liability or obligation under
any provision of any Loan Document, or purports to revoke, terminate or rescind
any provision of any Loan Document; or
 
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          11.5 Liens. Any Lien against any material portion of the Collateral
intended to be created by any Collateral Document shall at any time for whatever
reason cease to be a perfected, first priority Lien (subject only to Permitted
Senior Liens to the extent the Loan Documents expressly permit such Liens to
have priority), or shall be invalidated, subordinated or otherwise cease to be
in full force and effect; or any security interest purported to be created by
any Collateral Document shall cease to be, or shall be asserted by Borrower or
any Guarantor not to be, a valid grant of a security interest in all or any
portion of the Collateral (except as expressly otherwise provided under and in
accordance with the terms of such Loan Document); or 
 
          11.6 Representations and Warranties. Any representation, warranty,
certification or statement of fact made or deemed made by or on behalf of
Borrower or any Guarantor herein, in any other Loan Document, or in any document
delivered in connection herewith or therewith shall be incorrect or misleading
in any material respect when made or deemed made; or 
 
          11.7 Insolvency. Borrower or any Guarantor (A) (i) shall make an
assignment for the benefit of creditors; or (ii) shall be unable to pay its
debts as they become due, or be unable to pay or perform under the Loan
Documents, or shall become insolvent; or (iii) shall file a voluntary petition
in bankruptcy; or (iv) shall file any petition, answer, or document seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation pertinent to such circumstances; or (v) shall seek or consent to or
acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower
or such Guarantor or of all or any substantial part (i.e., 33-1/3% or more) of
the assets or property of Borrower or such Guarantor; or (vi) shall cease
operations of its business as its business has normally been conducted, or
terminate substantially all of its employees, or becomes insolvent; or (vii)
Borrower or such Guarantor or its directors or majority shareholders (or
equivalent position) shall take any action initiating any of the foregoing
actions described in clauses (A)(i) through (A)(vi); or (B) either (i) thirty
(30) days shall have expired after the commencement of an involuntary action
against Borrower or any Guarantor seeking reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, without such action being
dismissed or all orders or proceedings thereunder affecting the operations or
the business of Borrower or such Guarantor being stayed; or (ii) a stay of any
such order or proceedings shall thereafter be set aside and the action setting
it aside shall not be timely appealed; or (iii) Borrower or such Guarantor shall
file any answer admitting or not contesting the material allegations of a
petition filed against Borrower or such Guarantor in any such proceedings; or
(iv) the court in which such proceedings are pending shall enter a decree or
order granting the relief sought in any such proceedings; or (v) thirty (30)
days shall have expired after the appointment, without the consent or
acquiescence of Borrower or such Guarantor, of any trustee, receiver or
liquidator of Borrower or such Guarantor or of all or any substantial part of
the properties of Borrower or such Guarantor without such appointment being
vacated; or 
 
          11.8 Attachments; Judgments. Any portion of Borrower’s or any
Guarantor’s assets is attached or seized, or a levy is filed against any such
assets, or a judgment or judgments is/are entered for the payment of money,
individually or in the aggregate, of at least $200,000, or Borrower or any
Guarantor is enjoined or in any way prevented by court order from conducting any
part of its business; or
 
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          11.9 Cross-Defaults. The occurrence of any default under any agreement
or obligation of Borrower or any Guarantor involving any Indebtedness in excess
of $200,000. The material breach by Borrower or any Guarantor of any agreement
or agreements (in each case, other than the Loan Documents) to which it is a
party that involves the payment to or by Borrower or such Guarantor,
individually or in the aggregate, of more than $200,000 (whether by setoff or
otherwise) in any six (6) month period; or 
 
          11.10 Material Agreements. Any default or event of default (monetary
or otherwise) which would reasonably be expected to have a Material Adverse
Effect shall occur with respect to any Material Agreement; or
 
          11.11 Change in Control. A Change in Control occurs without the prior
written consent of the Lender; or 
 
          11.12 Suspension of Business. Borrower or any Guarantor liquidates,
dissolves, terminates or suspends its business operations or otherwise fails to
operate its business in the ordinary course except as otherwise expressly
provided in this Agreement; or 
 
          11.13 [Intentionally Omitted]; or 
 
          11.14 ERISA Event. (a) There occurs one or more ERISA Events which
individually or in the aggregate result(s) in or would reasonably be expected to
result in liability of Borrower and/or any Guarantor in excess of $200,000
during the term hereof; or (b) the present value of all benefit liabilities
under all Pension Plans (determined on a plan termination basis using the
assumptions prescribed by the PBGC for purposes of Section 4044 of ERISA)
exceeds, in the aggregate, as of the last valuation date, the fair market value
of the assets of such Pension Plans allocable to such benefits under Title IV of
ERISA, by an amount in excess of $200,000; or 
 
          11.15 Material Adverse Effect. A circumstance has occurred that would
reasonably be expected to have a Material Adverse Effect; or 
 
          11.16 Common Stock. The Common Stock shall not be listed or traded on
any national securities exchange, or shall cease to be actively quoted on the
OTC Bulletin Board, for any period in excess of thirty (30) consecutive days;
or 
 
          11.17 Subordination of Seller Notes. Any subordination provision, in
whole or in part, of any Seller Note shall at any time and for any reason cease
to be in full force and effect or is declared to be null and void, or the
validity or enforceability thereof shall be contested by any party thereto, or
the validity or enforceability thereof shall be contested by any other Person in
writing or in any judicial proceeding.
 
SECTION 12. REMEDIES 
 
          12.1 General. Upon and during the continuance of any one or more
Events of Default: (i) Lender may, at its option, terminate its commitment to
make any Advance; (ii) Lender may, at its option, accelerate and demand payment
of all or any part of the Secured Obligations, together with a Prepayment Charge
and declare them to be immediately due and payable (provided, that upon the
occurrence of an Event of Default of the type described in Section 11.7,
Lender’s commitment to make any Advance shall automatically terminate and the
Loans and all of the Secured Obligations shall automatically be accelerated and
made due and payable, in each case without any further notice or act); (iii)
Lender may, at its option, notify any account debtor of Borrower or any
Guarantor to make payment directly to Lender, compromise the amount of any such
account on Borrower’s or such Guarantor’s behalf and endorse Lender’s name
without recourse on any such payment for deposit directly to Lender’s account;
and (iv) Lender may, at its option, exercise all rights and remedies with
respect to the Collateral under the Loan Documents or otherwise available to it
under the UCC and other applicable law, including the right to release, hold,
sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or
any part of the Collateral and the right to occupy, utilize, process and
commingle the Collateral. All Lender’s rights and remedies shall be cumulative
and not exclusive.
 
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          12.2 Collection; Foreclosure. Upon the occurrence and during the
continuance of any Event of Default, Lender may, at any time or from time to
time, apply, collect, liquidate, sell in one or more sales, lease or otherwise
dispose of, any or all of the Collateral, in its then condition or following any
commercially reasonable preparation or processing, in such order as Lender may
elect. Lender may require Borrower and/or any Guarantor to assemble the
Collateral and make it available to Lender at a place designated by Lender. Any
such sale may be made either at public or private sale at its place of business
or elsewhere. Unless the Collateral is perishable or threatens to decline
speedily in value or is of a type customarily sold on a recognized market,
Lender shall give to Borrower or Guarantor, as applicable, at least ten days
prior written notice of the time and place of any public sale of Collateral or
of the time after which any private or other intended disposition is to be made.
Borrower and each Guarantor agrees that such ten days’ notice is reasonable
notice. In addition, Borrower and each Guarantor waives any and all rights that
it may have to a judicial hearing in advance of the enforcement of any of
Lender’s rights and remedies hereunder, including its right following an Event
of Default to take immediate possession of the Collateral and to exercise its
rights and remedies with respect thereto. The proceeds of any sale, disposition
or other realization upon all or any part of the Collateral shall be applied by
Lender in the following order of priorities:
 
First, to Lender in an amount sufficient to pay in full Lender’s costs and
professionals’ and advisors’ fees and expenses as described in Section 14.11;
 
Second, to Lender in an amount equal to the then unpaid amount of the Secured
Obligations (including principal, interest, and the Default Rate interest), in
such order and priority as Lender may choose in its sole discretion; and
 
Finally, after the full, final, and indefeasible payment in cash of all of the
Secured Obligations, to any creditor holding a junior Lien on the Collateral, or
to Borrower or its representatives or as a court of competent jurisdiction may
direct.
 
Lender shall be deemed to have acted reasonably in the custody, preservation and
disposition of any of the Collateral if it complies with the obligations of a
secured party under the UCC. 
 
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          12.3 Standards for Exercising Rights and Remedies. To the extent that
applicable law imposes duties on Lender to exercise remedies in a commercially
reasonable manner, Borrower and each Guarantor acknowledges and agrees that it
is not commercially unreasonable for Lender (a) to fail to incur expenses
reasonably deemed significant by Lender to prepare Collateral for disposition or
otherwise to fail to complete raw material or work in process into finished
goods or other finished products for disposition, (b) to fail to obtain third
party consents for access to Collateral to be disposed of, or to obtain or, if
not required by other law, to fail to obtain governmental or third party
consents for the collection or disposition of Collateral to be collected or
disposed of, (c) to fail to exercise collection remedies against account debtors
or other persons obligated on Collateral or to fail to remove Liens on or any
adverse claims against Collateral, (d) to exercise collection remedies against
account debtors and other persons obligated on Collateral directly or through
the use of collection agencies and other collection specialists, (e) to
advertise dispositions of Collateral through publications or media of general
circulation, whether or not the Collateral is of a specialized nature, (f) to
contact other persons, whether or not in the same business as Borrower or
Guarantors, for expressions of interest in acquiring all or any portion of the
Collateral, (g) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the collateral is of a specialized
nature, (h) to dispose of Collateral by utilizing Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (i) to dispose of assets in wholesale rather than retail markets, (j) to
disclaim disposition warranties, (k) to purchase insurance or credit
enhancements to insure Lender against risks of loss, collection or disposition
of Collateral or to provide to Lender a guaranteed return from the collection or
disposition of Collateral, or (l) to the extent deemed appropriate by Lender, to
obtain the services of brokers, investment bankers, consultants and other
professionals to assist Lender in the collection or disposition of any of the
Collateral. Borrower and each Guarantor acknowledges that the purpose of this
Section 12.3 is to provide non-exhaustive indications of what actions or
omissions by Lender would fulfill Lender duties under the Uniform Commercial
Code or any other relevant jurisdiction in Lender’s exercise of remedies against
the Collateral and that other actions or omissions by Lender shall not be deemed
to fail to fulfill such duties solely on account of not being indicated in this
Section 12.3. Without limitation upon the foregoing, nothing contained in this
Section 12.3 shall be construed to grant any rights to Borrower or any Guarantor
or to impose any duties on Lender that would not have been granted or imposed by
this Agreement or by applicable law in the absence of this Section 12.3.
 
          12.4 Marshalling of Assets. Lender shall be under no obligation to
marshal any of present or future collateral security (including, without
limitation, the Collateral) for, or other assurances of payment of, the Secured
Obligations or any of them or to resort to such collateral security or other
assurances of payment in any particular order. Borrower and each Guarantor
hereby agrees that Borrower or such Guarantor will not invoke any law relating
to the marshaling of collateral which might cause delay in or impede the
enforcement of Lender’s rights and remedies under this Agreement or any of the
other Loan Documents, or under any other instrument creating or evidencing any
of the Secured Obligations or under which any of the Secured Obligations is
outstanding or by which any of the Secured Obligations is secured or payment
thereof is otherwise assured and, Borrower and each Guarantor hereby irrevocably
waives the benefits of all such laws. 
 
          12.5 Cumulative Remedies. The rights, powers and remedies of Lender
hereunder shall be in addition to all rights, powers and remedies given by
statute or rule of law and are cumulative. The exercise of any one or more of
the rights, powers and remedies provided herein shall not be construed as a
waiver of or election of remedies with respect to any other rights, powers and
remedies of Lender.
 
SECTION 13. GUARANTY
 
          13.1 Guaranty. Each Guarantor, jointly and severally, hereby
absolutely and unconditionally guarantees to Lender and its successors and
assigns the full and prompt payment (whether at stated maturity, by acceleration
or otherwise) and performance of, all Secured Obligations. Each Guarantor agrees
that its guaranty obligation hereunder is a continuing guaranty of payment and
performance and not of collection, that its obligations under this Section 13
shall not be discharged until payment and performance, in full, of the
obligations under the Loan Documents has occurred and all commitments (if any)
to lend hereunder have been terminated, and that its obligations under this
Section 13 shall be absolute and unconditional, irrespective of, and unaffected
by:
 
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          (a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Agreement, any other Loan Document or
any other agreement, document or instrument to which Borrower or any Guarantor
is or may become a party; 
 
          (b) the absence of any action to enforce this Agreement (including
this Section 13) or any other Loan Document or the waiver or consent by Lender
with respect to any of the provisions thereof; 
 
          (c) the insolvency of Borrower or any Guarantor; or
 
          (d) any other action or circumstances that might otherwise constitute
a legal or equitable discharge or defense of a surety or guarantor.
 
          Each Guarantor shall be regarded, and shall be in the same position,
as principal debtor with respect to the obligations guaranteed hereunder.
 
          13.2 Waivers by Guarantors. Each Guarantor expressly waives all rights
it may have now or in the future under any statute, or at common law, or at law
or in equity, or otherwise, to compel Lender to marshal assets or to proceed in
respect of the obligations guaranteed hereunder against Borrower or any other
Guarantor, any other party or against any security for the payment and
performance of the obligations under the Loan Documents before proceeding
against, or as a condition to proceeding against, such Guarantor. It is agreed
among each Guarantor that the foregoing waivers are of the essence of the
transaction contemplated by this Agreement and the other Loan Documents and
that, but for the provisions of this Section 13 and such waivers, Lender would
decline to enter into this Agreement. 
 
          13.3 Benefit of Guaranty. Each Guarantor agrees that the provisions of
this Section 13 are for the benefit of Lender and its successors, transferees,
endorsees and assigns, and nothing herein contained shall impair, as between
Borrower or any Guarantor and Lender, the obligations of Borrower or such
Guarantor under the Loan Documents. 
 
          13.4 Waiver of Subrogation, Etc. Notwithstanding anything to the
contrary in this Agreement or in any other Loan Document, and except as set
forth in Section 13.7, each Guarantor hereby expressly and irrevocably waives
any and all rights at law or in equity to subrogation, reimbursement,
exoneration, contribution, indemnification or set off and any and all defenses
available to a surety, guarantor or accommodation co-obligor. Each Guarantor
acknowledges and agrees that this waiver is intended to benefit Lender and shall
not limit or otherwise affect such Guarantor’s liability hereunder or the
enforceability of this Section 13, and that Lender and its successors and
assigns are intended third party beneficiaries of the waivers and agreements set
forth in this Section 13.4.
 
          13.5 Election of Remedies. If Lender may, under applicable law,
proceed to realize their benefits under any of the Loan Documents, Lender may,
at its sole option, determine which of its remedies or rights it may pursue
without affecting any of its rights and remedies under this Section 13. If, in
the exercise of any of its rights and remedies, of Lender shall forfeit any of
its rights or remedies, including its right to enter a deficiency judgment
against Borrower or any Guarantor or any other Person, whether because of any
applicable laws pertaining to “election of remedies” or the like, Borrower and
each Guarantor hereby consents to such action by Lender and waives any claim
based upon such action, even if such action by Lender shall result in a full or
partial loss of any rights of subrogation that Borrower or any Guarantor might
otherwise have had but for such action by Lender. Any election of remedies that
results in the denial or impairment of the right of Lender to seek a deficiency
judgment against Borrower or any Guarantor shall not impair Borrower or any
other Guarantor’s obligation to pay the full amount of the obligations under the
Loan Documents.
 
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          13.6 Limitation. Notwithstanding any provision herein contained to the
contrary, each Guarantor’s liability under this Section 13 (which liability is
in any event in addition to amounts for which Borrower is primarily liable under
the Loan Documents) shall be limited to an amount not to exceed as of any date
of determination the greater of:
 
          (a) the net amount of all amounts advanced to such Guarantor under
this Agreement or otherwise transferred to, or for the benefit of, such
Guarantor (including any interest and fees and other charges); and 
 
          (b) the amount that could be claimed by Lender from such Guarantor
under this Section 13 without rendering such claim voidable or avoidable under
Section 548 of Chapter 11 of the Bankruptcy Code or under any applicable state
Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance Act or similar
statute or common law after taking into account, among other things, such
Guarantor’s right of contribution and indemnification from Borrower or each
other Guarantor under Section 13.7.
 
          13.7 Contribution with Respect to Guaranty Obligations.
 
          (a) To the extent that any Guarantor shall make a payment under this
Section 13 of all or any of the obligations under the Loan Documents (other than
financial accommodations made to that Guarantor for which it is primarily
liable) (a “Guarantor Payment”) that, taking into account all other Guarantor
Payments then previously or concurrently made by any other Guarantor, exceeds
the amount that such Guarantor would otherwise have paid if each Guarantor had
paid the aggregate obligations under the Loan Documents satisfied by such
Guarantor Payment in the same proportion that such Guarantor’s “Allocable
Amount” (as defined below) (as determined immediately prior to such Guarantor
Payment) bore to the aggregate Allocable Amounts of each Guarantor as determined
immediately prior to the making of such Guarantor Payment, then, following
indefeasible payment in full in cash of the obligations under the Loan Documents
and termination of the Loan Documents (including all commitments (if any) to
lend hereunder), such Guarantor shall be entitled to receive contribution and
indemnification payments from, and be reimbursed by, each other Guarantor for
the amount of such excess, pro rata based upon their respective Allocable
Amounts in effect immediately prior to such Guarantor Payment. 
 
          (b) As of any date of determination, the “Allocable Amount” of any
Guarantor shall be equal to the maximum amount of the claim that could then be
recovered from such Guarantor under this Section 13 without rendering such claim
voidable or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or
under any applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent
Conveyance Act or similar statute or common law. 
 
          (c) This Section 13.7 is intended only to define the relative rights
of Guarantor and nothing set forth in this Section 13.7 is intended to or shall
impair the obligations of Borrower and Guarantors, jointly and severally, to pay
any amounts as and when the same shall become due and payable in accordance with
the terms of this Agreement, including Section 13.1. Nothing contained in this
Section 13.7 shall limit the liability of Borrower or any Guarantor to pay the
financial accommodations made directly or indirectly to Borrower or such
Guarantor and accrued interest, fees and expenses with respect thereto for which
Borrower or such Guarantor shall be primarily liable.
 
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          (d) The parties hereto acknowledge that the rights of contribution and
indemnification hereunder shall constitute assets of the Guarantor to which such
contribution and indemnification is owing. 
 
          (e) The rights of the indemnifying Guarantor against other Guarantor
under this Section 13.7 shall be exercisable upon the full and indefeasible
payment of the Secured Obligations under the Loan Documents and the termination
of the Loan Documents.
 
          13.8 Liability Cumulative. The liability of each Guarantor under this
Section 13 is in addition to and shall be cumulative with all liabilities of
Borrower and each other Guarantor to Lender under this Agreement and the other
Loan Documents to which Borrower or such Guarantor is a party or in respect of
any obligations under the Loan Documents or obligation of the Borrower or any
other Guarantor, without any limitation as to amount, unless the instrument or
agreement evidencing or creating such other liability specifically provides to
the contrary. 
 
          13.9 Stay of Acceleration. If acceleration of the time for payment of
any amount payable by Borrower and/or any Guarantor under this Agreement is
stayed upon the insolvency, bankruptcy or reorganization of Borrower or any
Guarantor, all such amounts otherwise subject to acceleration under the terms of
this Agreement shall nonetheless be payable jointly and severally by Borrower
and Guarantors hereunder forthwith on demand by Lender. 
 
          13.10 Benefit to Borrower. Borrower and each Guarantor is engaged in
related businesses and integrated to such an extent that the financial strength
and flexibility of each such Person has a direct impact on the success of each
other Person. Borrower and each Guarantor will derive substantial direct and
indirect benefit from the extension of credit made hereunder.
 
SECTION 14. MISCELLANEOUS
 
          14.1 Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under such law, such provision shall be ineffective only to the extent
and duration of such prohibition or invalidity, without invalidating the
remainder of such provision or the remaining provisions of this Agreement. 
 
          14.2 Notice. Except as otherwise provided herein, any notice, demand,
request, consent, approval, declaration, service of process or other
communication (including the delivery of Financial Statements) that is required,
contemplated, or permitted under the Loan Documents or with respect to the
subject matter hereof shall be in writing, and shall be deemed to have been
validly served, given, delivered, and received upon the earlier of: (i) the day
of transmission by facsimile or hand delivery or delivery by an overnight
express service or overnight mail delivery service; or (ii) the third calendar
day after deposit in the United States mails, with proper first class postage
prepaid, in each case addressed to the party to be notified as follows:
 
          (a) If to Lender:
 

 

                        
HERCULES TECHNOLOGY II, L.P.
Legal Department
Attention: Chief Legal Officer and Kevin L. Grossman, Managing Director
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
Facsimile: 650-473-9194
Telephone: 650-289-3068

 
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          (b) If to Borrower or any Guarantor:
 

                        
UNIFY CORPORATION
 
Attention: Chief Financial Officer
1420 Rocky Ridge Drive, Suite 380
Roseville, CA 95661-2875
Facsimile: 916-218-4377
Telephone: 916-218-4700

 
          or to such other address as each party may designate for itself by
like notice.
 
          14.3 Entire Agreement; Amendments and Waivers. This Agreement, the
Notes, and the other Loan Documents constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter hereof and
thereof, and supersede and replace in their entirety any prior proposals, term
sheets, letters, negotiations or other documents or agreements, whether written
or oral, with respect to the subject matter hereof or thereof (including
Lender’s proposal letter dated June 2, 2010). None of the terms of this
Agreement or any of the other Loan Documents may be amended, modified or waived
except by a written instrument executed by each of the parties to such Loan
Document. 
 
          14.4 No Strict Construction. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any provisions of this Agreement. 
 
          14.5 No Waiver. The powers conferred upon Lender by this Agreement are
solely to protect its rights hereunder and under the other Loan Documents and
its interest in the Collateral and shall not impose any duty upon Lender to
exercise any such powers. No omission or delay by Lender at any time to enforce
any right or remedy reserved to it, or to require performance of any of the
terms, covenants or provisions hereof by Borrower or any Guarantor at any time
designated, shall be a waiver of any such right or remedy to which Lender is
entitled, nor shall it in any way affect the right of Lender to enforce such
provisions thereafter. 
 
          14.6 Survival. All agreements, representations and warranties
contained in this Agreement, the Notes and the other Loan Documents or in any
document delivered pursuant hereto or thereto shall be for the benefit of Lender
and shall survive the execution and delivery of this Agreement and the
expiration or other termination of this Agreement. 
 
          14.7 Successors and Assigns. The provisions of this Agreement and the
other Loan Documents shall inure to the benefit of and be binding on Borrower
and each Guarantor and their respective permitted assigns (if any). Neither
Borrower nor any Guarantor shall assign its obligations under this Agreement,
the Notes or any of the other Loan Documents without Lender’s express prior
written consent, and any such attempted assignment shall be void and of no
effect. Lender may assign, transfer, or endorse its rights hereunder and under
the other Loan Documents without prior notice to Borrower or any Guarantor, and
all of such rights shall inure to the benefit of Lender’s successors and
assigns.
 
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          14.8 Governing Law. This Agreement, the Notes and the other Loan
Documents have been negotiated and delivered to Lender in the State of
California, and shall have been accepted by Lender in the State of California.
Payment to Lender by Borrower or any Guarantor of the Secured Obligations is due
in the State of California. This Agreement, the Notes and the other Loan
Documents shall be governed by, and construed and enforced in accordance with,
the laws of the State of California, excluding conflict of laws principles that
would cause the application of laws of any other jurisdiction. 
 
          14.9 Consent to Jurisdiction and Venue. All judicial proceedings (to
the extent that the reference requirement of Section 14.10 is not applicable)
arising in or under or related to this Agreement, the Notes or any of the other
Loan Documents may be brought in any state or federal court located in the State
of California. By execution and delivery of this Agreement, each party hereto
generally and unconditionally: (a) consents to nonexclusive personal
jurisdiction in Santa Clara County, State of California; (b) waives any
objection as to jurisdiction or venue in Santa Clara County, State of
California; (c) agrees not to assert any defense based on lack of jurisdiction
or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement, the Notes or the
other Loan Documents. Service of process on any party hereto in any action
arising out of or relating to this Agreement shall be effective if given in
accordance with the requirements for notice set forth in Section 14.2, and shall
be deemed effective and received as set forth in Section 14.2. Nothing herein
shall affect the right to serve process in any other manner permitted by law or
shall limit the right of either party to bring proceedings in the courts of any
other jurisdiction. 
 
          14.10 Mutual Waiver of Jury Trial / Judicial Reference.
 
          (a) Because disputes arising in connection with complex financial
transactions are most quickly and economically resolved by an experienced and
expert person and the parties wish applicable state and federal laws to apply
(rather than arbitration rules), the parties desire that their disputes be
resolved by a judge applying such applicable laws. BORROWER, EACH GUARANTOR AND
LENDER SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE
OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER
CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER OR ANY GUARANTOR AGAINST
LENDER OR ITS ASSIGNEE OR BY LENDER OR ITS ASSIGNEE AGAINST BORROWER OR ANY
GUARANTOR. This waiver extends to all such Claims, including Claims that involve
Persons other than Borrower or any Guarantor and Lender; Claims that arise out
of or are in any way connected to the relationship between Borrower or any
Guarantor and Lender; and any Claims for damages, breach of contract, tort,
specific performance, or any equitable or legal relief of any kind, arising out
of this Agreement or any other Loan Document.
 
          (b) If the waiver of jury trial set forth in Section 14.10(a) is
ineffective or unenforceable, the parties agree that all Claims shall be
resolved by reference to a private judge sitting without a jury, pursuant to
Code of Civil Procedure Section 638, before a mutually acceptable referee or, if
the parties cannot agree, a referee selected by the Presiding Judge of the Santa
Clara County, California. Such proceeding shall be conducted in Santa Clara
County, California, with California rules of evidence and discovery applicable
to such proceeding.
 
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          (c) In the event Claims are to be resolved by judicial reference,
either party may seek from a court identified in Section 14.9, any prejudgment
order, writ or other relief and have such prejudgment order, writ or other
relief enforced to the fullest extent permitted by law notwithstanding that all
Claims are otherwise subject to resolution by judicial reference.
 
          14.11 Professional Fees. Borrower and each Guarantor promises to pay
Lender on demand for costs and expenses, reasonable legal expenses and
attorneys’ fees (whether for internal or outside counsel), incurred by Lender in
connection with: (i) documentation and consummation of the transactions
contemplated hereunder and any other transactions between Borrower or any
Guarantor and Lender, including, without limitation, UCC and other public record
searches and filings, overnight courier or other express or messenger delivery,
appraisal costs, surveys, title insurance and environmental audit or review
(including due diligence review) costs; (ii) collection, protection or
enforcement of any rights in or to the Collateral; (iii) collection of any
Secured Obligations; (iv) administration and enforcement of Lender’s rights
under this Agreement or any other Loan Document (including, without limitation,
any costs and expenses of any third party provider, appraiser, consultant or
other specialist engaged by Lender for such purposes); (v) costs associated with
any refinancings or restructurings of the transactions contemplated by this
Agreement and the other Loan Documents, whether in the nature of a “work-out” in
any insolvency or bankruptcy proceeding or otherwise, and whether or not
consummated; (vi) all out-of-pocket costs and expenses of Lender and its
assignee(s) (including, without limitation, attorneys’ fees) in connection with
the assignment, transfers or syndication of the Notes in an aggregate amount not
to exceed $10,000; and (vii) from and against all liability for any intangibles,
documentary, stamp or other similar taxes, fees and excises, if any, including
any interest and penalties, and any finder’s or brokerage fees, commissions and
expenses (other than any fees, commissions or expenses of finders or brokers
engaged by Lender), that may be payable in connection with the transactions
contemplated by this Agreement and the other Loan Documents. Without limiting
the foregoing, if (a) any Note or other Loan Document is placed in the hands of
an attorney for collection or enforcement or is collected or enforced through
any legal proceeding or Lender otherwise takes action to collect amounts due
under such Note or such Loan Document or to enforce the provisions of such Note
or such Loan Document or (b) there occurs any bankruptcy, reorganization,
receivership of Borrower or any Guarantor or other proceedings affecting
creditors’ rights and involving a claim under such Note or such Loan Document,
then Borrower and Guarantors shall pay the costs incurred by Lender for such
collection, enforcement or action or in connection with such bankruptcy,
reorganization, receivership or other proceeding, including, but not limited to,
attorneys’ fees and disbursements (including such fees and disbursements related
to seeking relief from any stay, automatic or otherwise, in effect under any
Debtor Relief Law). This Section 14.11 shall survive the expiration or other
termination of this Agreement and the other Loan Documents. 
 
          14.12 Confidentiality. Lender acknowledges that certain items of
Collateral and information provided to Lender by Borrower and Guarantors are
confidential and proprietary information of Borrower or such Guarantor, if and
to the extent such information either (x) is marked as confidential by Borrower
or such Guarantor at the time of disclosure, or (y) should reasonably be
understood to be confidential (the “Confidential Information”). Accordingly,
Lender agrees that any Confidential Information it may obtain in the course of
acquiring, administering, or perfecting Lender’s security interest in the
Collateral shall not be disclosed to any other person or entity in any manner
whatsoever, in whole or in part, without the prior written consent of Borrower
or such Guarantor, except that Lender may disclose any such information: (a) to
its own directors, officers, employees, accountants, counsel and other
professional advisors and to its Affiliates if Lender in its sole discretion
determines that any such party should have access to such information in
connection with such party’s responsibilities in connection with the Loan or
this Agreement and, provided that such recipient of such Confidential
Information either (i) agrees to be bound by the confidentiality provisions of
this paragraph or (ii) is otherwise subject to confidentiality restrictions that
reasonably protect against the disclosure of Confidential Information; (b) if
such information is generally available to the public; (c) if required or
appropriate in any report, statement or testimony submitted to any governmental
authority having or claiming to have jurisdiction over Lender; (d) if required
or appropriate in response to any summons or subpoena or in connection with any
litigation, to the extent permitted or deemed advisable by Lender’s counsel; (e)
to comply with any legal requirement or law applicable to Lender; (f) to the
extent reasonably necessary in connection with the exercise of any right or
remedy under any Loan Document, including Lender’s sale, lease, or other
disposition of Collateral after default; (g) to any participant or assignee of
Lender or any prospective participant or assignee; provided, that such
participant or assignee or prospective participant or assignee agrees in writing
to be bound by this Section prior to disclosure; or (h) otherwise with the prior
consent of Borrower; provided, that any disclosure made in violation of this
Agreement shall not affect the obligations of Borrower, any Guarantor or any of
their Affiliates or any guarantor under this Agreement or the other Loan
Documents. Lender acknowledges that it is aware, and that it will advise its
directors, officers, employees, accountants, counsel and other professional
advisors who receive information from the Loan Parties hereunder, that the
United States securities laws prohibit any person who has received material,
non-public information concerning the Borrower from purchasing or selling
securities of the Borrower or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.
 
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          14.13 Assignment of Rights. Borrower acknowledges and understands that
Lender may sell and assign all or part of its interest hereunder and under the
Note(s) and Loan Documents to any person or entity (an “Assignee”). After such
assignment the term “Lender” as used in the Loan Documents shall mean and
include such Assignee, and such Assignee shall be vested with all rights, powers
and remedies of Lender hereunder with respect to the interest so assigned; but
with respect to any such interest not so transferred, Lender shall retain all
rights, powers and remedies hereby given. No such assignment by Lender shall
relieve Borrower or any Guarantor of any of its obligations hereunder. Lender
agrees that, upon receipt of Borrower’s written request, in the event of any
transfer by it of the Note(s), it will endorse thereon a notation as to the
portion of the principal of the Note(s), which shall have been paid at the time
of such transfer and as to the date to which interest shall have been last paid
thereon. Lender further acknowledges (a) Lender is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D under the Securities Act of
1933, is familiar with the business and affairs of Borrower and knowledgeable
and experienced in financial and business matters such that Lender is capable of
evaluating the merits and risks of an investment in the Notes; (b) that the
Notes are being acquired for Lender’s account, for investment purposes only, and
not with any view toward the resale or distribution thereof, or with any present
intention of selling, assigning or distributing all or any portion of the Notes;
and (c) that the Notes may not be sold or transferred unless subsequently
registered with the SEC or an exemption from registration is available. 
 
          14.14 Revival of Secured Obligations. This Agreement and the Loan
Documents shall remain in full force and effect and continue to be effective if
any petition is filed by or against Borrower or any Guarantor for liquidation or
reorganization, if Borrower or any Guarantor becomes insolvent or makes an
assignment for the benefit of creditors, if a receiver or trustee is appointed
for all or any significant part of Borrower’s or any Guarantor’s assets, or if
any payment or transfer of Collateral is recovered from Lender. The Loan
Documents and the Secured Obligations and Collateral security shall continue to
be effective, or shall be revived or reinstated, as the case may be, if at any
time payment and performance of the Secured Obligations or any transfer of
Collateral to Lender, or any part thereof is rescinded, avoided or avoidable,
reduced in amount, or must otherwise be restored or returned by, or is recovered
from, Lender or by any obligee of the Secured Obligations, whether as a
“voidable preference,” “fraudulent conveyance,” or otherwise, all as though such
payment, performance, or transfer of Collateral had not been made. In the event
that any payment, or any part thereof, is rescinded, reduced, avoided,
avoidable, restored, returned, or recovered, the Loan Documents and the Secured
Obligations shall be deemed, without any further action or documentation, to
have been revived and reinstated except to the extent of the full, final, and
indefeasible payment to Lender in cash.
 
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          14.15 Counterparts. This Agreement and any amendments, waivers,
consents or supplements hereto may be executed in any number of counterparts,
and by different parties hereto in separate counterparts, each of which when so
delivered shall be deemed an original, but all of which counterparts shall
constitute but one and the same instrument. Delivery of an executed counterpart
of a signature page of this Agreement by facsimile or other electronic imaging
means shall be effective as delivery of a manually executed counterpart of this
Agreement. 
 
          14.16 No Third Party Beneficiaries. No provisions of the Loan
Documents are intended, nor will be interpreted, to provide or create any
third-party beneficiary rights or any other rights of any kind in any person
other than Lender and Borrower unless specifically provided otherwise herein,
and, except as otherwise so provided, all provisions of the Loan Documents will
be personal and solely between Lender, Borrower and the Guarantors.
 
          14.17 Publicity. On or after the Closing Date, Lender may use
Borrower’s and/or Guarantor’s name and logo, and include a brief description of
the relationship between Borrower and/or Guarantors and Lender, in Lender’s
marketing materials, provided that prior to such use, the Borrower will have an
opportunity to review and approve such materials, such approval not to be
unreasonably withheld and if Borrower does not respond within twenty-four hours
of Lender’s request thereof, Lender’s use of Borrower’s name and logo shall be
deemed approved by Borrower.
 
[Remainder of Page Intentionally Left Blank]
 
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     IN WITNESS WHEREOF, Borrower, the Guarantors and Lender have duly executed
and delivered this Loan and Security Agreement as of the day and year first
above written.
 

Borrower:   UNIFY CORPORATION   Signature: /s/ Todd E. Wille Print Name:   Todd
E. Wille Title: President and CEO  
    Guarantors:   UNIFY INTERNATIONAL (US) CORPORATION     Signature:       /s/
Todd E. Wille Print Name: Todd E. Wille Title: President  
  AXS-ONE INC.   Signature: /s/ Todd E. Wille Print Name: Todd E. Wille Title:
President  
  UNIFY ACQUISITION CORP.   Signature: /s/ Todd E. Wille Print Name: Todd E.
Wille Title: President

Signature Pages to Loan and Security Agreement
 

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CIPHERSOFT INC.   Signature: /s/ Todd E. Wille Print Name:   Todd E. Wille
Title: President  
  REALEASE, LLC     Signature:       /s/ Todd E. Wille Print Name: Todd E. Wille
Title: President  
  GUPTA TECHNOLOGIES, GMBH   Signature: /s/ Todd E. Wille Print Name: Todd E.
Wille Title: President  
  UNIFY CORPORATION FRANCE S.A.   Signature: /s/ Todd E. Wille Print Name: Todd
E. Wille Title: President

 
Signature Pages to Loan and Security Agreement
 

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STRATEGIC OFFICE SOLUTIONS, INC.   Signature: /s/ Todd E. Wille Print Name:  
Todd E. Wille Title: President  
  GUPTA TECHNOLOGIES, GMBH     Signature:       /s/ Steven D. Bonham Print Name:
Steven D. Bonham Title: Chief Financial Officer

Signature Pages to Loan and Security Agreement
 

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Accepted in Palo Alto, California:
 

Lender:   HERCULES TECHNOLOGY II, L.P., a Delaware limited partnership     By:
Hercules Technology SBIC Management, LLC, its General Partner   By: Hercules
Technology Growth Capital, Inc., its Manager     By: /s/ R. Nicholas Martitsch
Name:   R. Nicholas Martitsch Its: Associate General Counsel

Signature Pages to Loan and Security Agreement
 

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ADDENDUM 1 TO LOAN AND SECURITY AGREEMENT
 
          (a) Borrower’s Business. For purposes of this Addendum 1, Borrower
shall be deemed to include its “affiliates” as defined in Title 13 Code of
Federal Regulations Section 121.103. Borrower represents and warrants to Lender
(as of the Closing Date and for a period of one year thereafter) and covenants
to Lender as follows:
 

                        1.       Size Status. Borrower does not have tangible
net worth in excess of $18 million or average net income after Federal income
taxes (excluding any carry-over losses) for the preceding two completed fiscal
years in excess of $6 million;   2. No Relender. Borrower’s primary business
activity does not involve, directly or indirectly, providing funds to others,
purchasing debt obligations, factoring, or long-term leasing of equipment with
no provision for maintenance or repair;   3. No Passive Business. Borrower is
engaged in a regular and continuous business operation (excluding the mere
receipt of payments such as dividends, rents, lease payments, or royalties).
Borrower’s employees are carrying on the majority of day to day operations.
Borrower will not pass through substantially all of the proceeds of the Loan to
another entity;   4. No Real Estate Business. Borrower is not classified under
Major Group 65 (Real Estate) or Industry No. 1531 (Operative Builders) of the
SIC Manual. The proceeds of the Loan will not be used to acquire or refinance
real property unless Borrower (x) is acquiring an existing property and will use
at least 51 percent of the usable square footage for its business purposes; (y)
is building or renovating a building and will use at least 67 percent of the
usable square footage for its business purposes; or (z) occupies the subject
property and uses at least 67 percent of the usable square footage for its
business purposes.   5. No Project Finance. Borrower’s assets are not intended
to be reduced or consumed, generally without replacement, as the life of its
business progresses, and the nature of Borrower’s business does not require that
a stream of cash payments be made to the business’s financing sources, on a
basis associated with the continuing sale of assets (e.g., real estate
development projects and oil and gas wells). The primary purpose of the Loan is
not to fund production of a single item or defined limited number of items,
generally over a defined production period, where such production will
constitute the majority of the activities of Borrower (e.g., motion pictures and
electric generating plants).   6. No Farm Land Purchases. Borrower will not use
the proceeds of the Loan to acquire farm land which is or is intended to be used
for agricultural or forestry purposes, such as the production of food, fiber, or
wood, or is so taxed or zoned.   7. No Foreign Investment. The proceeds of the
Loan will not be used substantially for a foreign operation. At the time of the
Loan, Borrower will not have more than 49 percent of its employees or tangible
assets located outside the United States. The representation in this subsection
(7) is made only as of the date hereof and shall not continue for one year as
contemplated in the first sentence of this Section 1.  

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          (b) Small Business Administration Documentation. Lender acknowledges
that Borrower completed, executed and delivered to Lender SBA Forms 480, 652 and
1031 (Parts A and B) together with a business plan showing Borrower’s financial
projections (including balance sheets and income and cash flows statements) for
the period described therein and a written statement (whether included in the
purchase agreement or pursuant to a separate statement) from Lender regarding
its intended use of proceeds from the sale of securities to Lender (the “Use of
Proceeds Statement”). Borrower represents and warrants to Lender that the
information regarding Borrower and its affiliates set forth in the SBA Form 480,
Form 652 and Form 1031 and the Use of Proceeds Statement delivered as of the
Closing Date is accurate and complete. 
 
          (c) Inspection. The following covenants contained in this Section (c)
are intended to supplement and not to restrict the related provisions of the
Loan Documents. Subject to the preceding sentence, Borrower will permit, for so
long as Lender holds any debt or equity securities of Borrower, Lender or its
representative, at Lender’ expense, and examiners of the SBA to visit and
inspect the properties and assets of Borrower, to examine its books of account
and records, and to discuss Borrower’s affairs, finances and accounts with
Borrower’s officers, senior management and accountants, all at such reasonable
times as may be requested by Lender or the SBA. 
 
          (d) Annual Assessment. Promptly after the end of each calendar year
(but in any event prior to February 28 of each year) and at such other times as
may be reasonably requested by Lender, Borrower will deliver to Lender a written
assessment of the economic impact of Lender’ investment in Borrower, specifying
the full-time equivalent jobs created or retained in connection with the
investment, the impact of the investment on the businesses of Borrower in terms
of expanded revenue and taxes, other economic benefits resulting from the
investment (such as technology development or commercialization, minority
business development, or expansion of exports) and such other information as may
be required regarding Borrower in connection with the filing of Lender’s SBA
Form 468. Lender will assist Borrower with preparing such assessment. In
addition to any other rights granted hereunder, Borrower will grant Lender and
the SBA access to Borrower’s books and records for the purpose of verifying the
use of such proceeds. Borrower also will furnish or cause to be furnished to
Lender such other information regarding the business, affairs and condition of
Borrower as Lender may from time to time reasonably request.
 
          (e) Use of Proceeds. Borrower will use the proceeds from the Loan only
for funding the Acquisition and general working capital purposes. Borrower will
deliver to Lender from time to time promptly following Lender’s request, a
written report, certified as correct by Borrower’s Chief Financial Officer,
verifying the purposes and amounts for which proceeds from the Loan have been
disbursed. Borrower will supply to Lender such additional information and
documents as Lender reasonably requests with respect to its use of proceeds and
will permit Lender and the SBA to have access to any and all Borrower records
and information and personnel as Lender deems necessary to verify how such
proceeds have been or are being used, and to assure that the proceeds have been
used for the purposes specified in Section 8.7.
 

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          (f) Activities and Proceeds. Neither Borrower nor any of its
affiliates (if any) will engage in any activities or use directly or indirectly
the proceeds from the Loan for any purpose for which a small business investment
company is prohibited from providing funds by the SBIC Act, including 13 C.F.R.
§107.720. Without obtaining the prior written approval of Lender, Borrower will
not change within 1 year of the date hereof, Borrower’s current business
activity to a business activity which a licensee under the SBIC Act is
prohibited from providing funds by the SBIC Act. 
 
          (g) Redemption Provisions. Notwithstanding any provision to the
contrary contained in the Certificate of Incorporation of Borrower, as amended
from time to time (the “Charter”), if, pursuant to the redemption provisions
contained in the Charter, Lender is entitled to a redemption of its Warrant,
such redemption (in the case of Lender) will be at a price equal to the
redemption price set forth in the Charter (the “Existing Redemption Price”). If,
however, Lender delivers written notice to Borrower that the then current
regulations promulgated under the SBIC Act prohibit payment of the Existing
Redemption Price in the case of an SBIC (or, if applied, the Existing Redemption
Price would cause the Preferred Equity Interest to lose its classification as an
“equity security” and Lender has determined that such classification is
unadvisable), the amount Lender will be entitled to receive shall be the greater
of (i) fair market value of the securities being redeemed taking into account
the rights and preferences of such securities plus any costs and expenses of
Lender incurred in making or maintaining the Warrant, and (ii) the Existing
Redemption Price where the amount of accrued but unpaid dividends payable to
Lender is limited to Borrower’s earnings plus any costs and expenses of Lender
incurred in making or maintaining the Warrant; provided, however, the amount
calculated in subsections (i) or (ii) above shall not exceed the Existing
Redemption Price. 
 
          (h) Cost of Money. Notwithstanding any provision to the contrary
contained in the Loan Documents, all interest and fees charged pursuant to the
Loan Documents shall comply with the provisions of 13 C.F.R. § 107.855,
including, without limitation, that such amounts shall not exceed the Cost of
Money ceiling (as defined hereafter). The current Cost of Money ceiling for this
Loan is 14.5 percent.
 
          (i) Compliance and Resolution. Borrower agrees that a failure to
comply with Borrower’s obligations under this Addendum, or any other set of
facts or circumstances where it has been asserted by any governmental regulatory
agency (or Lender believes that there is a substantial risk of such assertion)
that Lender and its affiliates are not entitled to hold, or exercise any
significant right with respect to, any securities issued to Lender by Borrower,
will constitute a breach of the obligations of Borrower under the financing
agreements between Borrower and Lender. In the event of (i) a failure to comply
with Borrower’s obligations under this Addendum; or (ii) an assertion by any
governmental regulatory agency (or Lender believes that there is a substantial
risk of such assertion) of a failure to comply with Borrower’s obligations under
this Addendum, then (i) Lender and Borrower will meet and resolve any such issue
in good faith to the satisfaction of Borrower, Lender, and any governmental
regulatory agency, and (ii) upon request of Lender, Borrower will cooperate and
assist with any assignment of the financing agreements from Hercules Technology
II, L.P. to Hercules Technology Growth Capital, Inc.
 

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SECURED REVOLVING PROMISSORY NOTE
 

$6,000,000 June [___], 2015

     FOR VALUE RECEIVED, Unify Corporation, a Delaware corporation, for itself
and each of its Subsidiaries (the “Borrower”) hereby promises to pay to the
order of Hercules Technology II, L.P., a Delaware limited partnership or the
holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto,
CA 94301 or such other place of payment as the holder of this Secured Revolving
Promissory Note (this “Promissory Note”) may specify from time to time in
writing, in lawful money of the United States of America, the principal amount
of Six Million Dollars ($6,000,000) or such other principal amount as Lender has
advanced to Borrower, together with interest thereon, all as provided in the
Loan Agreement referred to below
 
     This Promissory Note is the Note referred to in, and is executed and
delivered in connection with, that certain Loan and Security Agreement dated as
of June [___], 2010 among Borrower, the Guarantors party thereto from time to
time, and Lender (as the same may from time to time be amended, modified or
supplemented in accordance with its terms, the “Loan Agreement”), and is
entitled to the benefit and security of the Loan Agreement and the other Loan
Documents (as defined in the Loan Agreement), to which reference is made for a
statement of all of the terms and conditions thereof. All payments shall be made
in accordance with the Loan Agreement. All terms defined in the Loan Agreement
shall have the same definitions when used herein, unless otherwise defined
herein. An Event of Default under the Loan Agreement shall constitute a default
under this Promissory Note.
 
     Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest under the UCC or any applicable law. Borrower
agrees to make all payments under this Promissory Note without setoff,
recoupment or deduction and regardless of any counterclaim or defense. This
Promissory Note has been negotiated and delivered to Lender and is payable in
the State of California. This Promissory Note shall be governed by and construed
and enforced in accordance with, the laws of the State of California, excluding
any conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
 

UNIFY CORPORATION

   
By: Title:

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SECURED TERM PROMISSORY NOTE
 

$24,000,000 June [___], 2010

     FOR VALUE RECEIVED, Unify Corporation, a Delaware corporation, for itself
and each of its Subsidiaries (the “Borrower”) hereby promises to pay to the
order of Hercules Technology II, L.P., a Delaware limited partnership or the
holder of this Note (the “Lender”) at 400 Hamilton Avenue, Suite 310, Palo Alto,
CA 94301 or such other place of payment as the holder of this Secured Term
Promissory Note (this “Promissory Note”) may specify from time to time in
writing, in lawful money of the United States of America, the principal amount
of Twenty-Four Million Dollars ($24,000,000) or such other principal amount as
Lender has advanced to Borrower, together with interest thereon, all as provided
in the Loan Agreement referred to below.
 
     This Promissory Note is the Note referred to in, and is executed and
delivered in connection with, that certain Loan and Security Agreement dated as
of June [___], 2010 among Borrower, the Guarantors party thereto from time to
time, and Lender (as the same may from time to time be amended, modified or
supplemented in accordance with its terms, the “Loan Agreement”), and is
entitled to the benefit and security of the Loan Agreement and the other Loan
Documents (as defined in the Loan Agreement), to which reference is made for a
statement of all of the terms and conditions thereof. All payments shall be made
in accordance with the Loan Agreement. All terms defined in the Loan Agreement
shall have the same definitions when used herein, unless otherwise defined
herein. An Event of Default under the Loan Agreement shall constitute a default
under this Promissory Note.
 
     Borrower waives presentment and demand for payment, notice of dishonor,
protest and notice of protest under the UCC or any applicable law. Borrower
agrees to make all payments under this Promissory Note without setoff,
recoupment or deduction and regardless of any counterclaim or defense. This
Promissory Note has been negotiated and delivered to Lender and is payable in
the State of California. This Promissory Note shall be governed by and construed
and enforced in accordance with, the laws of the State of California, excluding
any conflicts of law rules or principles that would cause the application of the
laws of any other jurisdiction.
 

UNIFY CORPORATION

   
By: Title:

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Schedules and Exhibits Omitted
 

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