Exhibit 10.1

CREDIT AGREEMENT

Dated as of July 5, 2013

among

SABA SOFTWARE, INC., as Borrower

the Subsidiary Guarantors party hereto

and VECTOR TRADING (CAYMAN), LP, as Lender

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TABLE OF CONTENTS

 

     Page  

ARTICLE I.    DEFINED TERMS

     1   

Section 1.01    DEFINITIONS

     1   

Section 1.02    INTERPRETATION

     16   

ARTICLE II.    CREDIT TERMS

     17   

Section 2.01    LOAN; PAYMENTS

     17   

Section 2.02    INTENTIONALLY OMITTED

     19   

Section 2.03    INTEREST

     19   

Section 2.04    COLLATERAL

     19   

Section 2.05    GUARANTIES

     19   

ARTICLE III.    REPRESENTATIONS AND WARRANTIES

     19   

Section 3.01    LEGAL STATUS

     19   

Section 3.02    AUTHORIZATION AND VALIDITY

     20   

Section 3.03    NO VIOLATION; CONSENTS

     20   

Section 3.04    LITIGATION

     20   

Section 3.05    CORRECTNESS OF FINANCIAL STATEMENTS

     20   

Section 3.06    INCOME TAX RETURNS

     21   

Section 3.07    NO SUBORDINATION

     21   

Section 3.08    PERMITS, FRANCHISES

     21   

Section 3.09    ERISA

     21   

Section 3.10    OTHER OBLIGATIONS

     21   

Section 3.11    ENVIRONMENTAL MATTERS

     21   

Section 3.12    SUBSIDIARIES

     22   

Section 3.13    TRUTH, ACCURACY OF INFORMATION

     22   

Section 3.14    COMPLIANCE WITH LAWS

     22   

Section 3.15    GOVERNMENTAL REGULATION; OFAC

     22   

Section 3.16    MUTUAL BENEFIT

     23   

Section 3.17    SOLVENCY

     23   

ARTICLE IV.    CONDITIONS

     23   

Section 4.01    CONDITIONS PRECEDENT TO FUNDING

     23   

ARTICLE V.    AFFIRMATIVE COVENANTS

     25   

Section 5.01    PUNCTUAL PAYMENTS

     25   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

Section 5.02    ACCOUNTING RECORDS

     25   

Section 5.03    FINANCIAL STATEMENTS

     25   

Section 5.04    COMPLIANCE

     27   

Section 5.05    INSURANCE

     27   

Section 5.06    FACILITIES

     28   

Section 5.07    TAXES AND OTHER LIABILITIES

     28   

Section 5.08    LITIGATION

     28   

Section 5.09    FINANCIAL COVENANT

     28   

Section 5.10    NOTICE TO LENDER

     28   

Section 5.11    SECURITY; JOINDER AGREEMENT; FOREIGN SUBSIDIARIES

     29   

Section 5.12    DEPOSIT ACCOUNTS; CASH MANAGEMENT SERVICES

     29   

Section 5.13    FURTHER ASSURANCES

     29   

ARTICLE VI.    NEGATIVE COVENANTS

     30   

Section 6.01    USE OF FUNDS

     30   

Section 6.02    INTENTIONALLY OMITTED

     30   

Section 6.03    OTHER INDEBTEDNESS

     30   

Section 6.04    MERGER, CONSOLIDATION, TRANSFER OF ASSETS

     31   

Section 6.05    GUARANTIES

     31   

Section 6.06    LOANS, ADVANCES, INVESTMENTS

     31   

Section 6.07    DIVIDENDS, DISTRIBUTIONS

     32   

Section 6.08    PLEDGE OF ASSETS

     32   

Section 6.09    PREPAYMENTS

     32   

Section 6.10    AMENDMENTS

     32   

ARTICLE VII.    EVENTS OF DEFAULT

     32   

Section 7.01    EVENTS OF DEFAULT

     33   

Section 7.02    REMEDIES

     34   

ARTICLE IX.    MISCELLANEOUS

     34   

Section 8.01    NO WAIVER

     34   

Section 8.02    NOTICES

     35   

Section 8.03    COSTS AND EXPENSES; INDEMNIFICATION

     35   

 

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TABLE OF CONTENTS

(continued)

 

     Page  

Section 8.04    SUCCESSORS, ASSIGNMENT

     37   

Section 8.05    RIGHT OF SETOFF

     38   

Section 8.06    GUARANTY

     38   

Section 8.07    ENTIRE AGREEMENT; AMENDMENT

     45   

Section 8.08    NO THIRD PARTY BENEFICIARIES

     45   

Section 8.09    TIME

     45   

Section 8.10    SEVERABILITY OF PROVISIONS

     45   

Section 8.11    COUNTERPARTS

     45   

Section 8.12    GOVERNING LAW

     45   

Section 8.13    ARBITRATION

     45   

Section 8.14    CAPITAL REQUIREMENTS

     47   

Section 8.15    PATRIOT ACT

     48   

Section 8.16    INTEGRATION

     48   

Section 8.17    CONFIDENTIALITY

     48   

Section 8.18    ACKNOWLEDGMENTS

     49   

 

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CREDIT AGREEMENT

THIS CREDIT AGREEMENT (this “Agreement”) is entered into as of July 5, 2013 (the
“Closing Date”) by and among SABA SOFTWARE, INC., a Delaware corporation
(“Borrower”), each of the Domestic Subsidiaries of Borrower party hereto as
Subsidiary Guarantors, and VECTOR TRADING (CAYMAN), LP, an exempted limited
partnership organized under the laws of the Cayman Islands (together with its
registered successors and assigns, “Lender”).

RECITALS

WHEREAS, Borrower desires that Lender make the Loan (as hereinafter defined)
subject to and in accordance with the terms of this Agreement and the other Loan
Documents (as hereinafter defined); and

WHEREAS, Lender is willing to make the Loan to Borrower, subject to and in
accordance with the terms of this Agreement and the other Loan Documents.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby
covenant, agree, represent and warrant as follows:

ARTICLE I. DEFINED TERMS

Section 1.01 DEFINITIONS. As used in this Agreement and unless otherwise
expressly indicated, or unless the context clearly requires otherwise, the
following terms shall have the following meanings:

“AAA” means the American Arbitration Association.

“Acquired Business” means the entity or assets acquired by Borrower in an
Acquisition, whether before or after the date of this Agreement.

“Acquisition” means any transaction or series of related transactions for the
purpose of or resulting, directly or indirectly, in (a) the acquisition of all
or substantially all of the assets of a Person, or of any business or division
of a Person, (b) the acquisition of in excess of fifty percent (50%) of the
capital stock, partnership interests, membership interests or equity of any
Person, or (c) a merger or consolidation or any other combination with another
Person provided that Borrower is the surviving entity.

“Advances” has the meaning given such term in the First Lien Credit Agreement.

“Agreement” means this Credit Agreement, as amended, restated, modified or
supplemented from time to time.

“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.

“Asset Sale” means any transaction, or series of related transactions, pursuant
to which Borrower or any Material Subsidiary sells, assigns, transfers, conveys,
leases or subleases, licenses or otherwise disposes of any property or assets
(whether now owned or hereafter acquired), in each case, whether or not the
consideration therefor consists of cash, securities or other assets owned by the
acquiring person; provided, that, the term “Asset Sale” shall not include, any
transaction otherwise permitted under Section 6.04, Section 6.06 or
Section 6.07.

 

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“Availability” has the meaning given such term in the First Lien Credit
Agreement.

“Authorized Person” means any one of the individuals identified on Schedule 2.

“Bankruptcy Code” means the federal Bankruptcy Reform Act of 1978 (11 U.S.C.
Sections 101 et seq.), as amended, modified or recodified from time to time.

“Bankruptcy Laws” means, collectively: (a) the Bankruptcy Code; and (b) 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.

“Borrower” has the meaning set forth in the introductory paragraph to this
Agreement.

“Business Day” means any day except a Saturday or Sunday or any other day on
which banks in California are authorized or required by law to close, except
that, if a determination of a Business Day shall relate to LIBOR, the term
“Business Day” also shall exclude any day on which banks are closed for dealings
in Dollar deposits in the London interbank market.

“Capital Expenditures” shall mean any amount incurred by Borrower or any
Material Subsidiary in respect of capital items, including without limitation
any Capital Lease, which in accordance with GAAP would not be included in
Borrower’s annual consolidated financial statements as an operating expense and
is not reasonably expected by Borrower to be a regularly recurring operating
expense, but excluding any capitalized software development costs and expenses.

“Capital Lease” means any lease of Property which in accordance with GAAP would
be required to be capitalized on the balance sheet of the lessee.

“Cash Acquisition Consideration” means cash consideration payable in respect of
a proposed Permitted Acquisition, other than the proceeds of (a) equity
contributions made to Borrower by holders of its Equity Interests for the
purpose of funding, in whole or in part, such proposed Acquisition, and (b) Debt
permitted pursuant to Section 6.03(e) or Section 6.03 (g).

“Cash and Cash Equivalents” means cash and Cash Equivalents, treated under GAAP
in a manner consistently applied.

“Cash Equivalents” means, as to any Person: (a) securities issued or directly
and fully guaranteed or insured by the United States or any agency or
instrumentality thereof (but only so long as the full faith and credit of the
United States is pledged in support thereof) having maturities of not more than
twelve months from the date of acquisition; (b) securities issued by any state
of the United States or any political subdivision of any such state or any
public instrumentality thereof having maturities of not more than ninety days
from the date of acquisition and having one of the two highest ratings from
either S&P or Moody’s; (c) domestic and Eurodollar certificates of deposit, time
or demand deposits or bankers’ acceptances maturing within six months after the
date of acquisition issued or guaranteed by or placed with, and money market
deposit accounts issued or offered by any commercial bank organized under the
laws of the United States or any state thereof or the District of Columbia
having combined capital and surplus of not less than $250,000,000;
(d) repurchase obligations with a term of not more than thirty days for
underlying securities of the types described in clause (a) and (b) of this
definition entered into with

 

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any bank meeting the qualifications specified in clause (c) of this definition;
(e) commercial paper issued by the parent corporation of any commercial bank
(provided that the parent corporation and the bank are both incorporated in the
United States) having capital and surplus in excess of $250,000,000 and
commercial paper issued by any Person incorporated in the United States, which
commercial paper is rated at least A-1 or the equivalent thereof by S&P or at
least P-1 or the equivalent thereof by Moody’s, and in each case maturing not
more than ninety days after the date of acquisition by such Person; and
(f) investments in money market funds substantially all the assets of which are
comprised of securities of the types described in clauses (a) through (e) of
this definition.

“Change of Control” means an event or series of events by which any “person” or
“group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act,
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) becomes the “beneficial owner” (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group
shall be deemed to have “beneficial ownership” of all Equity Interests 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, of twenty percent (20.00%) or more of the Equity
Interests of Borrower 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 Equity Interests that such person or group has the right to
acquire pursuant to any option right).

“Closing Date” has the meaning set forth in the preamble hereto.

“Collateral” has the meaning set forth in Section 2.04 hereof.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et
seq.), as amended from time to time, and any successor statute.

“Compliance Certificate” means a certificate substantially in the form of
Exhibit A hereto.

“Connection Income Taxes” means Taxes, imposed as a result of a present or
former connection between Lender and the jurisdiction imposing such Tax, which
Taxes are imposed on or measured by net income or that are franchise Taxes or
branch profits Taxes.

“Confidentiality Agreement” has the meaning set forth in Section 8.17 hereof.

“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. The
terms “Controlling” and “Controlled” have meanings correlative thereto. Without
limiting the generality of the foregoing, a Person shall be deemed to be
Controlled by another Person if such Person possesses, directly or indirectly,
the power to vote fifteen percent (15.00%) or more of the Equity Interests
having ordinary voting power for the election of directors, managing general
partners or the equivalent.

“Copyrights” means any and all copyright rights, copyright applications,
copyright registrations and like protections in each work or authorship and
derivative work thereof, whether published or unpublished and whether or not the
same also constitutes a trade secret, now or hereafter existing, created,
acquired or held.

“Credit Amount Certificate” means a certificate in the form of Exhibit C.

 

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“Credit Amount Excess” has the meaning given such term in the First Lien Credit
Agreement.

“Debt” of any Person means at any date, without duplication, (a) all obligations
of such Person for borrowed money, (b) all obligations of such Person evidenced
by this Agreement, debentures, notes or other similar instruments and all
reimbursement or other obligations in respect of letters of credit, bankers
acceptances, or other financial products, (c) all obligations of such Person
under any and all rate swap transactions, credit derivative transactions, bond
or bond price or bond index swaps, options, interest rate options, cap
transactions, floor transactions, collar transactions, or any other similar
transactions (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
and under any and all transactions of any kind, and the related confirmations,
including Hedge Agreements and those subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swaps
and Derivatives Association, Inc. or any other master agreement including any
such obligations or liabilities under any such master agreement (in each case,
together with any related schedules), (d) all obligations of such Person to pay
the deferred purchase price of property or services (whether contingent or
otherwise), except trade accounts payable arising in the ordinary course of
business, (e) all obligations of such Person as lessee under Capital Leases,
(f) all Debt of others secured by a Lien on any asset of such Person, whether or
not such Debt is assumed by such Person, (g) any Disqualified Equity Interests,
and (h) all guarantees by such Person of Debt of other Persons.

“Debt Issuance” means any issuance or sale of any Debt by Borrower or any
Subsidiary other than as permitted under Section 6.03 or Section 6.06.

“Default” means a condition, event or act which with the giving of notice or the
passage of time or both would constitute an Event of Default.

“Direct Competitor” means any of the Persons listed on Schedule 5 (provided that
such Schedule (a) may be updated by Borrower from time to time to include any
Person that becomes a parent or a subsidiary or affiliate of a Person listed
thereon as a result of a merger or acquisition (other than an investment bank, a
commercial bank, a finance company, a fund or other similar entity which merely
has an economic interest in any such Person), and (b) may be updated to include
any other Person that is engaged in an Eligible Line of Business so long as such
Person is approved in writing by Lender (which approval shall not be
unreasonably withheld or delayed)).

“Disqualified Equity Interests” shall mean any Equity Interest that, by its
terms (or by the terms of any security or other Equity Interests into which it
is convertible or for which it is exchangeable), or upon the happening of any
event or condition (a) matures or is mandatorily redeemable (other than solely
for Qualified Equity Interests), pursuant to a sinking fund obligation or
otherwise (except as a result of a change of control or asset sale so long as
any rights of the holders thereof upon the occurrence of a change of control or
asset sale event shall be subject to the prior repayment in full of the Loan and
all other obligations that are accrued and/or payable in accordance with the
Loan Documents), (b) is redeemable at the option of the holder thereof (other
than solely for Equity Interests that are not otherwise Disqualified Equity
Interests), in whole or in part, (c) provides for the scheduled payments of
dividends in cash, or (d) is or becomes convertible into or exchangeable for
Debt or any other Equity Interests that would constitute Disqualified Equity
Interests, in each case, prior to the date that is 180 days after the Maturity
Date.

“Domestic Subsidiary” means any Subsidiary that is not a Foreign Subsidiary.

“EBITDA” means, with respect to any fiscal period:

 

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Borrower’s consolidated net earnings (or loss),

minus the sum of

(a) without duplication, the sum of the following amounts of Borrower for such
period to the extent included in determining consolidated net earnings (or loss)
for such period:

(i) any extraordinary, unusual, or non-recurring gains,

(ii) interest income,

(iii) any software development costs to the extent capitalized during such
period,

(iv) exchange, translation or performance gains relating to any hedging
transactions or foreign currency fluctuations, and

(v) income arising by reason of the application of FAS 141R in connection with
any Permitted Acquisition;

and

(b) without duplication, the sum of the following amounts of Borrower for such
period to the extent included in determining consolidated net earnings (or loss)
for such period:

(i) any extraordinary, unusual, or non-recurring losses,

(ii) interest expense,

(iii) tax expense based on income, profits or capital, including federal,
foreign, state, franchise and similar taxes (and for the avoidance of doubt,
specifically excluding any sales taxes or any other taxes held in trust for a
Governmental Authority),

(iv) depreciation and amortization for such period,

(v) (A) with respect to any Permitted Acquisitions after the Closing Date:
(1) purchase accounting adjustments, including, without limitation, a dollar for
dollar adjustment for that portion of revenue that would have been recorded in
the relevant period had the balance of deferred revenue (unearned income)
recorded on the closing balance sheet and before application of purchase
accounting not been adjusted downward to fair value to be recorded on the
opening balance sheet in accordance with GAAP purchase accounting rules; and
(2) non-cash adjustments in accordance with GAAP purchase accounting rules under
FASB Statement No. 141 and EITF Issue No. 01-3, in the event that such an
adjustment is required by Borrower’s independent auditors, in each case, as
determined in accordance with GAAP,

(vi) fees, costs, charges and expenses incurred in connection with any Permitted
Acquisition to the extent permitted to be incurred under the Agreement that are
required by the application of FAS 141R to be and are expensed by Borrower and
its Subsidiaries,

(vii) non-cash compensation expense (including deferred non-cash compensation
expense), or other non-cash expenses or charges, arising from the sale or
issuance of stock, the granting of stock options, and the granting of stock
appreciation rights and similar arrangements (including any repricing,
amendment, modification, substitution, or change of any such stock, stock
option, stock appreciation rights, or similar arrangements) minus the amount of
any such expenses or charges when paid in cash to the extent not deducted in the
computation of net earnings (or loss),

 

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(viii) one time restructuring charges,

(ix) non-cash exchange, translation, or performance losses relating to any
hedging transactions or foreign currency fluctuations,

(x) non-cash losses on sales of fixed assets or write-downs of fixed or
intangible assets, and

(xi) fees, costs, and charges incurred prior to August 31, 2013 in connection
with the Restatement-Related Events in an aggregate amount not to exceed
$4,000,000 for the three months ended May 31, 2013 and $8,000,000 for the six
months ended August 31, 2013,

in each case, determined on a consolidated basis (x) for all periods prior to
the Restatement Completion, generally consistent with the Saba Prerestatement
Standards, (y) for all periods on or after the Restatement Completion, in
accordance with GAAP and (z) with respect to any calculation of EBITDA on and
after the Restatement Completion:

(A) minus any non-cash (i) increases to revenue, (ii) decreases to any component
of cost of goods sold and (iii) any other decreases to non-tax expenses,
included, in each case, in the calculation of Borrower’s consolidated net
earnings on or after the Restatement Completion in accordance with GAAP that
would otherwise not be included if such were calculated in a manner consistent
with the Saba Prerestatement Standards; and

(B) plus any non-cash (i) decreases to revenue, (ii) increases to any component
of cost of goods sold and (iii) any other increases to non-tax expenses
included, in each case, in the calculation of Borrower’s consolidated net
earnings on or after the Restatement Completion in accordance with GAAP that
would otherwise not be included if such were calculated in a manner consistent
with the Saba Prerestatement Standards.

Examples of the calculations of the amounts described in clauses (A) and
(B) above are set forth on Exhibit E attached hereto, and going forward such
amounts shall be calculated in a manner consistent with such examples.

In addition, for the purposes of calculating EBITDA for any period of 4
consecutive fiscal quarters (each, a “Reference Period”), if at any time during
such Reference Period (and after the Closing Date), Borrower shall have made a
Permitted Acquisition, EBITDA for such Reference Period shall be calculated
after giving pro forma effect thereto (including pro forma adjustments arising
out of events which are directly attributable to such Permitted Acquisition, are
factually supportable, and are expected to have a continuing impact, in each
case determined on a basis consistent with Article 11 of Regulation S-X
promulgated under the Securities Act and as interpreted by the staff of the SEC
or in such other manner acceptable to Lender) as if any such Permitted
Acquisition or adjustment occurred on the first day of such Reference Period.

“Eligible Line of Business” means any business engaged primarily in the sale of
people management, collaboration, analytics, publishing or related software and
services.

 

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“Equity Interest” means, with respect to a Person, all of the shares, options,
warrants, interests, participations, or other equivalents (regardless of how
designated) of or in such Person, whether voting or nonvoting, including capital
stock (or other ownership or profit interests or units), preferred stock, or any
other “equity security” (as such term is defined in Rule 3a11-1 of the General
Rules and Regulations promulgated by the Securities Exchange Commission under
the Exchange Act).

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended or
recodified from time to time.

“Event of Default” has the meaning set forth in Section 7.01 hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended or
recodified from time to time.

“FATCA” means Sections 1471 through 1474 of the IRC, as of the date of this
Agreement (or any amended or successor version that is substantively comparable
and not materially more onerous to comply with) and any current or future
regulations or official interpretations thereof.

“Financial Covenant Liquidity Amount” means (a) as of any date of determination
prior to occurrence of the Financial Statement Event, $8,500,000, and (b) as of
any date of determination subsequent to occurrence of the Financial Statement
Event, $4,250,000.

“Financial Statement Event” means, as of any date of determination, that all of
the following clauses are satisfied: (a) the Restatement Completion has occurred
and no Event of Default has occurred and is continuing, (b) Borrower has filed
with the United States Securities and Exchange Commission its Annual Reports on
Form 10-K for Borrower’s fiscal years ended May 31, 2012 and ended May 31, 2013
(each with the requisite financial statements contained therein, which shall be
audited by Borrower’s independent certified public accountant (which independent
certified public accountant shall be of recognized national standing) and
certified by such independent certified public accountant (i) to have been
prepared in accordance with GAAP, and (ii) without any qualifications (including
any (A) “going concern” or like qualification or exception, (B) qualification or
exception as to the scope of such audit, or (C) qualification which relates to
the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause any noncompliance with the provisions of
Section 5.09 of the Credit Agreement)), and (c) Borrower has delivered to Lender
consolidating financial statements of Borrower, prepared by Borrower (to include
balance sheets, profit and loss statements, statements of cash flows, and
reconciliations of net worth) for each such fiscal year and a duly completed
Compliance Certificate executed by a senior financial officer of Borrower for
each such fiscal year.

“First Lien Credit Agreement” means that certain Amended and Restated Credit
Agreement, dated as of June 27, 2011 by and among Borrower, Subsidiary
Guarantors and First Lien Lender, as amended, restated, supplemented or
otherwise modified from time to time.

“First Lien Lender” means Wells Fargo Bank, National Association.

“First Lien Loan Documents” means the First Lien Credit Agreement, the First
Lien Security Agreement, the Intercreditor Agreement and each contract,
instrument and other document required under the First Lien Credit Agreement or
at any time hereafter delivered to First Lien Lender in connection therewith.

“First Lien Security Agreements” means (a) the Second Amended and Restated
Security Agreement, dated as of the date hereof, executed by Borrower in favor
of First Lien Lender, as amended, restated, supplemented or otherwise modified
from time to time; (b) the Amended and Restated Third

 

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Party Security Agreement, dated as of the date hereof, executed by each
Subsidiary Guarantor in favor of First Lien Lender, as amended, restated,
supplemented or otherwise modified from time to time; and (c) any similar
security document executed pursuant to the terms of the First Lien Credit
Agreement or in connection therewith (including any intellectual property
security agreement).

“Foreign Subsidiary” means any Subsidiary organized under the laws of a country
(or political subdivision thereof) other than the United States (or political
subdivision thereof).

“Funding Date” means the date on which the conditions set forth in Section 4.01
are satisfied or waived in accordance with the terms hereof.

“GAAP” means generally accepted accounting principles in the United States set
forth in the opinions and pronouncements of the Accounting Principles Board and
the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or such other
principles or standards as may be approved by a significant segment of the
accounting profession in the United States, that are in effect and applicable to
the circumstances and/or Persons to which such generally accepted accounting
principles relate as of the date of determination, consistently applied and used
consistently with the prior practices of such Persons (which Persons include
Borrower each Subsidiary Guarantor for all purposes of this Agreement).

“Governmental Authority” means the government of the United States or any other
nation, or of any political subdivision thereof, whether state or local, and any
agency, authority, 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 (including any
supra-national bodies such as the European Union or the European Central Bank).

“Guaranteed Obligations” has the meaning set forth in Section 8.06(a) hereof.

“Hedge Agreement” means a “swap agreement” as that term is defined in
Section 101(53B)(A) of the Bankruptcy Code.

“Hostile Acquisition” means the acquisition of the Equity Interests of a Person
through a tender offer or similar solicitation of the owners of such Equity
Interests which has not been approved (prior to such acquisition) by resolutions
of the board of directors of such Person or by similar action if such Person is
not a corporation, or as to which such approval has been withdrawn.

“Increased Cost Taxes” has the meaning set forth in Section 8.03(c) hereof.

“Indemnified Party” has the meaning set forth in Section 8.03(b) hereof.

“Insolvency Proceeding” means any proceeding commenced by or against any Person
under any provision of any Bankruptcy Law, assignments for the benefit of
creditors, formal or informal moratoria, compositions, extensions generally with
creditors, or proceedings seeking reorganization, arrangement, or other similar
relief.

“Intellectual Property” means all of Borrower’s and its Subsidiaries’ right,
title, and interest in and to the following: (a) Copyrights, Trademarks and
Patents; (b) any and all trade secrets, and any and all intellectual property
rights in computer software and computer software products now or hereafter
existing, created, acquired or held; (c) any and all design rights which may be
available to Borrower now or hereafter existing, created, acquired or held;
(d) any and all claims for damages by way of past, present and future
infringement of any of the rights included above, with the right, but not the
obligation, to sue

 

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for and collect such damages for said use or infringement of the intellectual
property rights identified above; (e) all licenses or other rights to use any of
the Copyrights, Patents or Trademarks, and all license fees and royalties
arising from such use to the extent permitted by such license or rights; (f) all
amendments, renewals and extensions of any of the Copyrights, Trademarks or
Patents; and (g) all proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty payable in
respect of any of the foregoing.

“Intercreditor Agreement” means that certain Intercreditor Agreement, dated as
of the date hereof, by and between Lender and First Lien Lender, as amended,
restated, supplemented or otherwise modified from time to time.

“Interest Expense” means, for any period, the aggregate of the interest expense
of Borrower for such period, determined on a consolidated basis in accordance
with GAAP.

“IRC” shall mean the Internal Revenue Code of 1986, as amended, as it may be
further amended from time to time, and any successor statutes thereto, and
applicable U.S. Department of Treasury regulations issued pursuant thereto in
temporary or final form.

“Joinder Agreement” means an agreement entered into by a Domestic Subsidiary of
Borrower following the date hereof to join in the guaranty set forth in
Section 8.06, in substantially the form of Exhibit B hereto or any other form
approved by Lender.

“Lender” has the meaning set forth in the introductory paragraph to this
Agreement.

“LIBOR” has the meaning set forth in the Promissory Note.

“Lien” means any mortgage, lien, security interest, pledge, charge or
encumbrance of any kind in respect of any property, including the interests of a
vendor or lessor under any conditional sale, Capital Lease or other title
retention arrangement.

“Loan” shall mean the loan in the amount of $25,000,000 made by Lender to
Borrower pursuant to this Agreement.

“Loan Documents” means this Agreement, the Second Lien Security Agreements, the
Intercreditor Agreement, the Promissory Note, and each contract, instrument and
other document required under this Agreement or at any time hereafter delivered
to Lender in connection herewith or therewith.

“Loan Parties” means Borrower and each Subsidiary Guarantor, and each a “Loan
Party”.

“Make-Whole Premium Amount” means, with respect to any amount of the Loan
prepaid in accordance with clause (a) of Section 2.01(g), the interest otherwise
payable on 103% of such prepaid amount, calculated from the date of prepayment
until the second anniversary of the Funding Date, as discounted for such period
to the date of prepayment at the Treasury Rate then in effect as of the date of
such prepayment plus 25 basis points.

“Marketable Securities” means (a) investments in direct obligations of the
United States or instrumentality thereof whose obligations constitute full faith
and credit obligations of the United States or of any agency of the United
States, (b) investments in commercial paper rated at least P-1 by Moody’s or at
least A-1 by S&P, (c) investments in certificates of deposit, Eurodollar
deposits or bankers’ acceptances issued by any United States domestic commercial
bank having capital and surplus of not less than $100,000,000 or any branch of a
foreign bank licensed by a state or the federal government of the

 

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United States and having capital and surplus in such branch of not less than
$100,000,000, (d) investments in corporate debt securities which are rated in
one of the three highest long-term rating categories (without regard to
gradations within a rating category) or in the highest short-term rating
category by Moody’s or S&P (without regard to gradations within such rating
category), (e) repurchase agreements secured by obligations described in
clause (a) of this definition, (f) equity securities conforming to Borrower’s
Investment Policies which are listed on a national securities exchange
registered under Section 6 of the United States Securities and Exchange Act of
1934, as amended, or quoted on the National Association of Securities Dealers’
automated interdealer quotation national market system, (g) investments in
mutual funds (including, without limitation, money market funds and index funds)
registered under the United States Investment Company Act of 1940, as amended,
provided that the portfolio of any such mutual fund is limited to obligations
described in clauses (a) through (f) of this definition, or (h) any other
investments approved in writing by Lender.

“Material Adverse Effect” means any of the following: (a) a material adverse
change in, or material adverse effect upon, the business, condition (financial
or otherwise), operations, performance or properties of either: (i) Borrower; or
(ii) Borrower and its Subsidiaries, taken as a whole; (b) a material impairment
of the ability of either Borrower or Borrower and the Subsidiary Guarantors,
taken as a whole, to perform their respective obligations under the Loan
Documents; or (c) a material adverse effect upon: (i) the legality, validity,
binding effect or enforceability of any Loan Document to which Borrower or any
Subsidiary Guarantor is a party; or (ii) the rights and remedies of Lender under
or in respect of any Loan Document.

“Material Domestic Subsidiary” means any Domestic Subsidiary of Borrower that
(a) owns at least two and one-half percent (2.50%) of the consolidated tangible
assets (net of intercompany balances) of Borrower and its Subsidiaries,
(b) generates at least two and one-half percent (2.50%) of the consolidated
revenues of Borrower and its Subsidiaries, (c) is irrevocably designated by
Borrower in writing to be a “Material Domestic Subsidiary” for purposes of this
Agreement or (d) is the owner of equity interests of any Material Domestic
Subsidiary or Material Foreign Subsidiary; provided that if the total amount of
all Domestic Subsidiaries of Borrower that are not otherwise Material Domestic
Subsidiaries pursuant to either (a), (b), (c) or (d) above, in the aggregate,
either (x) own at least seven and one-half percent (7.50%) of the consolidated
tangible assets (net of intercompany balances) of Borrower and its Subsidiaries
or (y) generate at least seven and one-half percent (7.50%) of the consolidated
revenues of Borrower and its Subsidiaries, then each such Domestic Subsidiary
shall be deemed to be a Material Domestic Subsidiary for all purposes under this
Agreement and Borrower shall cause such other Domestic Subsidiaries to execute a
Joinder Agreement and become a Subsidiary Guarantor hereunder unless and until
Borrower causes a sufficient number of Domestic Subsidiaries to be designated
“Material Domestic Subsidiaries” pursuant to (c) above, such that, following
such designation, the remaining Domestic Subsidiaries that are not Material
Domestic Subsidiaries pursuant to (a), (b), (c) or (d) above do not meet the
thresholds set forth in (x) or (y) hereof.

“Material Foreign Subsidiary” means any Foreign Subsidiary of Borrower that
(a) owns at least five percent (5.00%) of the consolidated tangible assets (net
of intercompany balances) of Borrower and its Subsidiaries, (b) generates at
least five percent (5.00%) of the consolidated revenues of Borrower and its
Subsidiaries or (c) is irrevocably designated by Borrower in writing to be a
“Material Foreign Subsidiary” for purposes of this Agreement; provided that if
the total amount of all Foreign Subsidiaries of Borrower that are not otherwise
Material Foreign Subsidiaries pursuant to either (a), (b) or (c) above, in the
aggregate, either (x) own at least fifteen percent (15.00%) of the consolidated
tangible assets (net of intercompany balances) of Borrower and its Subsidiaries
or (y) generate at least fifteen percent (15.00%) of the consolidated revenues
of Borrower and its Subsidiaries, then each such Foreign Subsidiary shall be
deemed to be a Material Foreign Subsidiary for all purposes under this Agreement
and Borrower shall pledge or cause to be pledged 65% of the voting stock,
ownership interest or other equity interest in all

 

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such other Foreign Subsidiaries unless and until Borrower causes a sufficient
number of Foreign Subsidiaries to be designated “Material Foreign Subsidiaries”
pursuant to (c) above, such that, following such designation, the remaining
Foreign Subsidiaries that are not Material Foreign Subsidiaries pursuant to (a),
(b) or (c) above do not meet the thresholds set forth in (x) or (y) hereof.

“Material Subsidiary” means any Material Foreign Subsidiary or any Material
Domestic Subsidiary.

“Maturity Date” means July 5, 2018.

“Minimum Fixed Charge Coverage Ratio” shall mean, for any period, the ratio of:

(a) the difference of (x) EBITDA for such period minus (y) the sum of
(i) Capital Expenditures made during such period and (ii) cash state and federal
income taxes paid or required to be paid by Borrower during such period, to

(b) the sum of the aggregate amount of interest due and payable by Borrower
during such period in accordance with this Agreement and any other Debt
permitted under Section 6.03.

“Moody’s” means Moody’s Investors Service, Inc., and its successors and assigns.

“NASDAQ Listing Event” means, as of any date of determination, that all of the
following clauses are satisfied: (a) the Financial Statement Event has occurred
and Borrower has otherwise made all required filings with the United States
Securities and Exchange Commission required under the Securities Exchange Act of
1934, as amended, and the rules and regulations thereunder as of such date of
determination and has regained compliance with applicable federal securities
laws, (b) no Event of Default has occurred and is continuing, and (c) the shares
of Borrower are re-listed on The NASDAQ Global Select Stock Market.

“Net Cash Proceeds” means with respect to any Asset Sale or Debt Issuance, the
cash proceeds received (directly or indirectly) from time to time (whether as
initial consideration or through the payment or disposition of deferred
consideration) by or on behalf of Borrower or any of its Subsidiaries in respect
of such Asset Sale or Debt Issuance, after deducting therefrom only:

(a) in the case of any Asset Sale, (i) the reasonable and customary expenses
incurred by a Borrower directly related to such Asset Sale, (ii) reasonable and
customary brokerage costs, fees, or commissions incurred by Borrower directly
related to such Asset Sale; (iii) the amounts paid from such proceeds at the
time of the Asset Sale in respect of any indebtedness (other than the
indebtedness of Borrower under this Agreement and the other Loan Documents)
secured by any Permitted Liens on the asset that is the subject of such Asset
Sale that has priority over the Lien of Lender on such asset in accordance with
applicable law, (iv) taxes paid (directly or indirectly) to any taxing
authorities by Borrower, as the case may be, in connection with, or directly
attributable to, such Asset Sale at the time thereof or not later than the end
of the tax year immediately following the year during which the Asset Sale
occurs, and

(b) in the case of any Debt Issuance, (i) reasonable and customary expenses
directly related to such Debt Issuance, and (ii) reasonable and customary
underwriting or brokerage costs, fees and commissions directly related to such
Debt Issuance.

 

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“Net Leverage Ratio” shall mean, as of any date, the ratio of:

(a) the total outstanding Debt of Borrower less Cash and Cash Equivalents as of
such date, as stated on Borrower’s most recent quarterly financial statements
delivered to Lender, to

(b) EBITDA for the trailing twelve (12) months immediately prior to such date,
as stated on Borrower’s most recent quarterly financial statements delivered to
Lender.

“Non-Excluded Taxes” means any Taxes other than: (i) Taxes imposed on or
measured by net income (however denominated), branch profits Taxes or franchise
Taxes, in each case, (a) as a result of Lender being organized under the laws
of, or having its principal office or applicable lending office located in, the
jurisdiction imposing such Tax (or any political subdivision of a taxing
authority thereof or therein) or (b) as a result of a present or former
connection between Lender and the relevant jurisdiction imposing such Tax, but
excluding any such connection which arises from Lender having executed,
delivered, become a party to, performed its obligations under, received payment
under, received or perfected a security interest under, engaged in any other
transaction pursuant to or enforced any Loan Document, or sold or assigned an
interest in any Loan or Loan Document; (ii) any Taxes imposed as a result of
failure to comply with Section 8.03(c)(ii) or Section 8.03(c)(iii); and
(iii) any U.S. federal withholding tax imposed by a law in effect at the time
Lender becomes a party hereto (or designates a new lending office), with respect
to any interest payment made by or on account of any obligation of Borrower to
Lender, except to the extent that Lender (or its assignor, if any) was entitled,
at the time of the assignment (or designation of a new lending office), to
receive additional amounts with respect to such withholding Tax pursuant to
Section 8.03(c)(i).

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the
Treasury.

“OID” has the meaning set forth in Section 2.01(b) hereof.

“Organizational 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) of
such Person; (b) with respect to any limited liability company, the certificate
or articles of formation or organization and operating agreement of such Person;
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 of such Person and any agreement, instrument, filing
or notice with respect thereto filed in connection with such Person’s 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 Person.

“Other Taxes” means all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes that arise from any payment made
under, from the execution, delivery, performance, enforcement or registration
of, from the receipt or perfection of a security interest under, or otherwise
with respect to, any Loan Document.

“Participant Register” has the meaning set forth in Section 8.04(b) hereof.

“Patents” means all patents, patent applications and like protections including
without limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

“Permitted Acquisition” means any Acquisition by Borrower or any Subsidiary
Guarantor with respect to which all of the following conditions shall have been
satisfied: (a) the Acquired Business is in an Eligible Line of Business; (b) the
Acquisition shall not be a Hostile Acquisition; (c) Borrower shall have notified
Lender not less than fifteen (15) days prior to any such Acquisition and
furnished to Lender

 

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at such time (i) reasonable details as to such Acquisition (including sources
and uses of funds therefor) and covenant compliance calculations reasonably
satisfactory to Lender demonstrating satisfaction of the condition described in
clause (e) below, (ii) the financial statements of the Acquired Business for the
twelve (12) month period most recently ended prior to the date of the
Acquisition, and (iii) copies of the acquisition agreement and other material
documents relative to such Acquisition; (d) after giving effect to the
Acquisition, no Default or Event of Default shall have occurred and be
continuing; (e) Borrower has provided Lender with written confirmation,
supported by reasonably detailed calculations, that on a pro forma basis
(including pro forma adjustments arising out of events which are directly
attributable to such proposed Acquisition, are factually supportable, and are
expected to have a continuing impact, in each case, determined as if the
combination had been accomplished at the beginning of the relevant period; such
eliminations and inclusions determined on a basis consistent with Article 11 of
Regulation S-X promulgated under the Securities Act and as interpreted by the
staff of the SEC) created by adding the historical combined financial statements
of Borrower (including the combined financial statements of any other Person or
assets that were the subject of a prior Permitted Acquisition during the
relevant period) to the historical consolidated financial statements of the
Person to be acquired (or the historical financial statements related to the
assets to be acquired) pursuant to the proposed Acquisition, Borrower and its
Subsidiaries are projected to be in compliance with the financial covenant in
Section 5.09 for each of the fiscal quarters ended during the one year period
following the proposed date of consummation of such proposed Acquisition;
(f) after giving effect to the Acquisition and any Advances used to finance the
consideration for the Acquisition, no Credit Amount Excess shall exist;
(g) Borrower and its Domestic Subsidiaries shall have Availability plus
Qualified Cash in an amount equal to or greater than $8,500,000 immediately
after giving effect to the consummation of the Acquisition; (h) Borrower or such
Subsidiary Guarantor shall have complied with Section 5.11 and Section 5.13 with
respect to the assets or Equity Interests that are the subject of the
Acquisition; and (i) the Acquisition shall have been approved by Borrower’s
board of directors and (if legally required) owners, and all necessary legal and
regulatory approvals with respect to the Acquisition shall have been obtained.

“Permitted Liens” means (a) Liens granted pursuant to the Loan Documents,
(b) Liens granted pursuant to the First Lien Security Agreements, (c) Liens
listed on Schedule 1 hereto, (d) Liens for taxes, fees, assessments or other
governmental charges or levies, either not delinquent or being contested in good
faith by appropriate proceedings and with respect to which adequate reserves or
other appropriate provisions are maintained by Borrower or any Subsidiary,
(e) Liens of materialmen, mechanics, warehousemen, carriers or employees or
other similar Liens arising by operation of law and securing obligations either
not delinquent or being contested in good faith by appropriate proceedings and
which do not in the aggregate materially impair the use or value of the
Collateral or risk the loss or forfeiture thereof, (f) Liens on deposit accounts
or securities accounts (and the contents thereof), in favor of the financial
institution at which such account is located, arising pursuant to such financial
institution’s standard terms and conditions governing such account, but only to
the extent that such Liens secure obligations for fees, charges or
indemnification obligations related to such account and specifically not to the
extent that such Liens secure obligations for borrowed money, (g) Liens
consisting of deposits or pledges to secure the performance of bids, trade
contracts, leases, public or statutory obligations, or other obligations of like
nature incurred in the ordinary course of business, other than any such Liens
which secure obligations for borrowed money, (h) purchase money Liens or the
interests of lessors under Capital Leases to the extent that such Liens or
interests secure Debt permitted pursuant to Section 6.03 and so long as (i) such
Lien attaches only to the asset purchased or acquired and the proceeds thereof,
and (ii) such Lien only secures the Debt that was incurred to acquire the asset
purchased or acquired, (i) non-exclusive licenses of Intellectual Property
granted in the ordinary course of business, (j) Liens arising from judgments,
decrees or attachments not constituting an Event of Default, (k) restrictions
and other minor encumbrances on real property which do not individually or in
the aggregate materially impair the use or value of such property or risk the
loss or forfeiture thereof and (l) customary rights of any lessor, lessee or
sublessee with respect to leased property arising under any lease entered into
in the ordinary course of business.

 

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“Person” means an individual, partnership, corporation, limited liability
company, association, trust, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof.

“Plan” means an employee pension benefit plan (as defined in ERISA).

“Principal Amount” shall mean Twenty Five Million Dollars ($25,000,000) or so
much thereof as may be outstanding under this Agreement.

“Promissory Note” has the meaning set forth in Section 2.01(a) hereof.

“Qualified Cash” has the meaning given such term in the First Lien Credit
Agreement.

“Recurring Revenues” means, with respect to any period, all recurring
subscription revenues, consisting of maintenance revenues and
software-as-a-service and hosting revenues attributable to software licensed by
Borrower or any of its Subsidiaries which recurring subscription revenues are
earned during such period, calculated on a basis consistent with the financial
statements delivered to Lender prior to the Closing Date.

“Register” has the meaning set forth in Section 8.04(b) hereof.

“Restatement Completion” means that Borrower has restated its annual financial
results for fiscal years 2010, 2011, and 2012, which restated financials are
audited by Borrower’s independent certified public accountant (which independent
certified public accountant shall be of recognized national standing) and
certified by such independent certified public accountant (a) to have been
prepared in accordance with GAAP, and (b) without any qualifications (including
any (i) “going concern” or like qualification or exception, (ii) qualification
or exception as to the scope of such audit, or (iii) qualification which relates
to the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause any noncompliance with the provisions of
Section 5.09 hereof), and has delivered such restated financials to Lender.

“Restatement Projections” has the meaning set forth in Section 5.03(g) hereof.

“Restatement-Related Event” means (a) any event partially or wholly contributing
to (i) the need to conduct the Restatement Completion or (ii) the de-listing of
the shares of Borrower on The NASDAQ Global Select Stock Market and/or (b) the
Restatement Completion, the de-listing of the shares of Borrower on The NASDAQ
Global Select Stock Market, the failure of Borrower to make filings with the
Securities and Exchange Commission prior to the Restatement Completion, and the
SEC Investigation.

“Rules” has the meaning set forth in Section 8.13(b) hereof.

“Saba Prerestatement Standards” means accounting principles generally consistent
with those used by Borrower for financial information and revenue accounting
during periods prior to the Restatement Completion when Borrower filed quarterly
and annual reports with the United States Securities and Exchange Commission.

 

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“Sanctioned Entity” means (a) a country or a government of a country, (b) an
agency of the government of a country, (c) an organization directly or
indirectly controlled by a country or its government, (d) a Person resident in
or determined to be resident in a country, in each case, that is subject to a
country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated
Nationals maintained by OFAC.

“SEC Investigation” means the investigation by the staff of the San Francisco
office of the United States Securities and Exchange Commission pending on and
prior to May 31, 2013, which, Borrower believes, focuses on Borrower financial
accounting, reporting and controls related to Restatement-Related Events.

“Second Lien Security Agreements” means (a) the Second Lien Security Agreement,
dated as of the date hereof (the “Second Lien Borrower Security Agreement”),
executed by Borrower in favor of Lender, as amended, restated, supplemented or
otherwise modified from time to time; (b) the Second Lien Third Party Security
Agreement, dated as of the date hereof (the “Second Lien Third Party Security
Agreement”), executed by each Subsidiary Guarantor in favor of Lender, as
amended, restated, supplemented or otherwise modified from time to time; and
(c) any similar document executed thereafter pursuant to the terms hereof or
otherwise in connection herewith after the Closing Date (including any
intellectual property security agreement).

“Solvent” means, with respect to any Person as of any date of determination,
that (a) at fair valuations, the sum of such Person’s debts is less than all of
such Person’s assets, (b) such Person is not engaged or about to engage in a
business or transaction for which the remaining assets of such Person are
unreasonably small in relation to the business or transaction or for which the
property remaining with such Person is an unreasonably small capital, and
(c) such Person has not incurred and does not intend to incur, or reasonably
believe that it will incur, debts beyond its ability to pay such debts as they
become due (whether at maturity or otherwise).

“S&P” means Standard & Poor’s Ratings Services, a division of The McGraw-Hill
Companies, Inc., and its successors and assigns.

“Subordinated Debt” means all indebtedness which (a) is designated by Borrower
in writing as “Subordinated Debt” and approved in writing by Lender, in Lender’s
sole and absolute discretion, as subordinated to Borrower’s obligations to
Lender under this Agreement and (b) is subject to subordination agreement(s) in
form and substance satisfactory to Lender in Lender’s sole and absolute
discretion.

“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.

“Subsidiary Guarantor” has the meaning set forth in Section 8.06 hereof.

“Subsidiary Guarantor Subordinated Debt” has the meaning set forth in
Section 8.06(i) hereof.

 

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“Subsidiary Guarantor Subordinated Debt Payments” has the meaning set forth in
Section 8.06(i) hereof.

“Swap Obligation” means, with respect to Borrower or any Subsidiary Guarantor,
any obligation to pay or perform under any agreement, contract or transaction
that constitutes a “swap” within the meaning of section 1a(47) of the Commodity
Exchange Act.

“Taxes” means any and all present or future taxes, levies, imposts, duties,
charges, fees, deductions or withholdings imposed, levied, collected, withheld
or assessed by an taxing authority in any jurisdiction, including any interest,
additions to tax or penalties applicable thereto.

“Trademarks” means any trademark and servicemark rights, whether registered or
not, applications to register and registrations of the same and like
protections, and the entire goodwill of the business of Borrower or its
Subsidiaries connected with and symbolized by such trademarks.

“Treasury Rate” means, as of the applicable prepayment date, the per annum rate
of interest (based on a year of 360 days) equal to the U.S. Treasury note yield
to maturity for a term most nearly equal to the period from such prepayment date
to the second anniversary of the Funding Date, as reported in the Federal
Reserve Statistical Release H.15-Selected Interest Rates under the heading “U.S.
Government Securities/Treasury Constant Maturities” (in the event Release H.15
is no longer published, Lender shall select a comparable publication to
determine the U.S. Treasury note yield to maturity).

“UCP 600” means the rules of the Uniform Customs and Practice for Documentary
Credits, as most recently published by the International Chamber of Commerce and
in effect as of July 1, 2007 (or such later version thereof as may be in effect
at the time of issuance).

“United States” and “U.S.” mean the United States of America.

“U.S. Person” means any Person that is a “United States person” as defined in
Section 7701(a)(30) of the IRC.

Section 1.02 INTERPRETATION.

(a) For all purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires, (i) terms used in this Agreement
include, as appropriate, all genders and the plural as well as the singular;
(ii) references to this Agreement include any and all Exhibits and Schedules
hereto; (iii) references to words such as “herein,” “hereof’ and the like shall
refer to this Agreement as a whole and not to any particular part or Section
herein; (iv) the terms “includes” and “including” are not limiting, and the term
“or” has the inclusive meaning represented by the phrase “and/or”; (v) any
defined term which relates to a document referenced in this Agreement shall
include within its definition any amendments, modifications, renewals,
restatements, extensions, supplements or substitutions in effect through the
date of this Agreement but shall not include within its definition any renewals,
restatements, extensions, supplements or substitutions after the date of this
Agreement; (vi) references to any statute or regulation are to be construed as
including all statutory and regulatory provisions consolidating, amending,
replacing, supplementing or interpreting the statute or regulation; and
(vii) any defined term which relates to a Person shall include within its
definition the successors and permitted assigns of such Person.

(b) All accounting terms not specifically defined herein shall be construed in
accordance with GAAP; provided, that if Borrower notifies Lender that Borrower
requests an amendment to any provision hereof to eliminate the effect of any
changes in accounting principles required by the

 

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promulgation of any rule, regulation, pronouncement or opinion by the Financial
Accounting Standards Board of the American Institute of Certified Public
Accountants (or successor thereto or any agency with similar functions)
occurring after the Closing Date or in the application thereof on the operation
of such provision (or if Lender notifies Borrower that Lender requests an
amendment to any provision hereof for such purpose), regardless of whether any
such notice is given before or after such change or in the application thereof,
then Lender and Borrower agree that they will negotiate in good faith amendments
to the provisions of this Agreement that are directly affected by such change
with the intent of having the respective positions of Lender and Borrower after
such change conform as nearly as possible to their respective positions as of
the date of this Agreement and, until any such amendments have been agreed upon,
the provisions in this Agreement shall be calculated as if no such change had
occurred. When used herein, the term “financial statements” shall include the
notes and schedules thereto. Whenever the term “Borrower” is used in respect of
a financial covenant or a related definition, it shall be understood to mean
Borrower and its Subsidiaries on a consolidated basis, unless the context
clearly requires otherwise. Notwithstanding anything to the contrary contained
herein, all financial statements delivered hereunder shall be prepared, and all
financial covenants contained herein shall be calculated, without giving effect
to any election under the Statement of Financial Accounting Standards No. 159
(or any similar accounting principle) permitting a Person to value its financial
liabilities or indebtedness at the fair value thereof.

ARTICLE II. CREDIT TERMS

Section 2.01 LOAN; PAYMENTS.

(a) Loan. Subject to and upon the terms and conditions set forth herein, Lender
hereby agrees to make and Borrower hereby agrees to accept the Loan on the
Funding Date. Borrower may request and receive only one borrowing hereunder in
respect of the Loan and any amount borrowed and repaid hereunder in respect of
the Loan may not be reborrowed. Borrower’s obligation to repay the Loan shall be
evidenced by the promissory note dated as of the Funding Date substantially in
the form of Exhibit D (the “Promissory Note”), all terms of which are
incorporated herein by this reference.

(b) OID. Borrower agrees that the aggregate amount of the Loan to be advanced by
Lender on the Funding Date shall be $24,500,000; provided, however, that the
aggregate principal amount of the Loan to be paid on the Maturity Date or on any
prepayment date of the Loan pursuant to the Loan Documents shall equal
$25,000,000. The $500,000 discount shall be treated as original issue discount
(“OID”) under the IRC, and Borrower agrees that it shall file all tax and
information returns and other reports consistently with the foregoing. Borrower
shall cooperate with Lender to determine the yield to maturity for the Loan and
shall timely provide to Lender (and promptly respond to requests for) all
relevant information that is reasonably available to Borrower to enable Lender
to timely comply with their respective tax reporting obligations in respect of
the Loan.

(c) Borrowing Procedures.

(i) The Loan shall be made by an irrevocable written request by an Authorized
Person delivered to Lender. Such notice must be received by Lender no later than
10:00 a.m. (California time) on the Business Day that is the requested Funding
Date specifying (A) the amount of such borrowing, and (B) the requested Funding
Date, which shall be a Business Day. At Lender’s election, in lieu of delivering
the above-described written request, any Authorized Person may give Lender
telephonic notice of such request by the required time. In such circumstances,
Borrower agrees that any such telephonic notice will be confirmed in writing
within 24 hours of the giving of such telephonic notice, but the failure to
provide such written confirmation shall not affect the validity of the request.

 

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(ii) If Lender has received a timely request for a borrowing in accordance with
the provisions hereof, and subject to the satisfaction of the applicable terms
and conditions set forth herein, Lender shall make the proceeds of the borrowing
available to Borrower on the Funding Date by transferring available funds equal
to such proceeds to Borrower.

(d) Payments Generally. Except as otherwise expressly provided herein, all
payments by Borrower shall be made to Lender and shall be made in immediately
available funds, no later than 11:00 a.m. (California time) on the date
specified herein. Any payment received by Lender later than 11:00 a.m.
(California time) shall be deemed to have been received on the following
Business Day and any applicable interest or fee shall continue to accrue until
such following Business Day. The receipt of any payment item by Lender shall not
be considered a payment on account unless such payment item is a wire transfer
of immediately available federal funds or unless and until such payment item is
honored when presented for payment. Should any payment item not be honored when
presented for payment, then Borrower shall be deemed not to have made such
payment and interest shall be calculated accordingly.

(e) Mandatory Prepayments.

(i) If Borrower or any Material Subsidiary at any time or from time to time
makes or agrees in writing to make an Asset Sale, then (A) Borrower shall
promptly notify Lender of such proposed Asset Sale (including the amount of the
estimated Net Cash Proceeds to be received in respect thereof) and (B) in
connection with any mandatory prepayment under the First Lien Credit Agreement
relating to such Asset Sale, the Net Cash Proceeds of such Asset Sale shall have
been applied as provided in Section 2.01(e)(ii) of the First Lien Credit
Agreement; provided, that (X) so long as all Debt under the First Lien Loan
Documents has been paid in full and all commitments thereunder have been
terminated, then (Y) within two (2) Business Days after such Asset Sale,
Borrower shall, absolutely and unconditionally without notice or demand, prepay
the outstanding Principal Amount of the Loan in an amount equal to fifty percent
(50%) of such Net Cash Proceeds in connection therewith in accordance with
Section 2.01(g) and Section 2.01(h). For the avoidance of doubt, if the Net Cash
Proceeds of such Asset Sale have not been applied as provided in
Section 2.01(e)(ii) of the First Lien Credit Agreement, due to a waiver in
writing by First Lien Lender thereof, then Borrower shall prepay the outstanding
Principal Amount of the Loan as set forth in clause (B)(Y) of this
Section 2.01(e)(i) without any further requirement that such Net Cash Proceeds
be first applied to prepayment of any Debt under the First Lien Loan Documents.

(ii) Within two (2) Business Days after any Debt Issuance by Borrower or any
Material Subsidiary, then in connection with any mandatory prepayment under the
First Lien Credit Agreement relating to such Debt Issuance, the Net Cash
Proceeds of such Debt Issuance shall have been applied as provided in
Section 2.01(e)(iii) of the First Lien Credit Agreement; provided, that (A) so
long as all Debt under the First Lien Loan Documents has been paid in full and
all commitments thereunder have been terminated, then (B) Borrower shall,
absolutely and unconditionally without notice or demand, prepay the outstanding
Principal Amount of the Loan in an amount equal to one hundred (100%) percent of
the Net Cash Proceeds in connection with such Debt Issuance in accordance with
Section 2.01(g) and Section 2.01(h). For the avoidance of doubt, if the Net Cash
Proceeds of such Debt Issuance have not been applied as provided in
Section 2.01(e)(iii) of the First Lien Credit Agreement, due to a waiver in
writing by First Lien Lender thereof, then Borrower shall prepay the outstanding
Principal Amount of the Loan as set forth in clause (B) of this
Section 2.01(e)(ii) without any further requirement that such Net Cash Proceeds
be first applied to prepayment of any Debt under the First Lien Loan Documents.

(f) Optional Prepayments. Borrower may, at any time upon not less than 30
calendar days’ and not more than 60 calendar days’ prior written notice to
Lender, prepay in whole or in part the outstanding Principal Amount of the Loan
in accordance with Section 2.01(g) and Section 2.01(h).

 

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(g) Prepayment Premiums. If Borrower makes any prepayment of the Loan in
accordance with Section 2.01(e) or Section 2.01(f), Lender shall be paid a
prepayment premium on the date of such prepayment, in addition to the amount of
the Loan prepaid, as follows: (a) if such prepayment is made on or prior to the
second anniversary of the Funding Date, the Make-Whole Premium Amount; (b) if
such prepayment is made after the second anniversary and on or prior to the
third anniversary of the Funding Date, 3% of the aggregate amount of the Loan so
prepaid; and (c) if such prepayment is made after the third anniversary and on
or prior to the fourth anniversary of the Funding Date, 1% of the aggregate
amount of the Loan so prepaid.

(h) Accrued Interest of Prepayments. In addition to the applicable prepayment
premium pursuant to Section 2.01(g), any prepayment made pursuant to
Section 2.01(e) or Section 2.01(f) shall be accompanied by accrued interest on
the amount of the Loan being prepaid to the date of prepayment applicable
thereto.

Section 2.02 INTENTIONALLY OMITTED.

Section 2.03 INTEREST.

(a) Interest. The outstanding principal amount of the Loan shall bear interest
in the manner and at the rate of interest set forth in the Promissory Note.

(b) Computation and Payment. Interest shall be computed on the basis of a
360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Promissory Note.

Section 2.04 COLLATERAL.

As security for all indebtedness and other obligations of Borrower to Lender
under this Agreement and the other Loan Documents, including all indebtedness of
Borrower to Lender under the Loan, Borrower and each Subsidiary Guarantor shall,
pursuant to the Second Lien Security Agreements grant to Lender security
interests of second priority (subject to Permitted Liens) in their respective
interests in all of the “Collateral” under and as defined in the Second Lien
Security Agreements, as applicable.

Section 2.05 GUARANTIES. The payment and performance of all indebtedness and
other obligations of Borrower to Lender under this Agreement, the Promissory
Note, and the other Loan Documents shall be guaranteed jointly and severally by
each of the Subsidiary Guarantors, as evidenced by and subject to the terms of
this Agreement and each Joinder Agreement.

ARTICLE III. REPRESENTATIONS AND WARRANTIES

Borrower and each Subsidiary Guarantor makes the following representations and
warranties to Lender, which representations and warranties shall survive the
execution of this Agreement, shall continue in full force and effect until the
full and final payment, and satisfaction and discharge, of all obligations of
Borrower and each Subsidiary Guarantor to Lender subject to this Agreement, and
which shall be true, correct, and complete, in all material respects (except
that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text
thereof), as of the Closing Date.

Section 3.01 LEGAL STATUS. Each of Borrower and each Subsidiary Guarantor is a
corporation, partnership or limited liability company duly organized and
existing and in good standing under the laws of the jurisdiction of its
incorporation, organization or formation, and is qualified or licensed to do
business (and is in good standing as a foreign corporation, partnership or
limited liability company, if applicable) in all jurisdictions in which the
failure to so qualify or to be so licensed could have a Material Adverse Effect
on Borrower or such Subsidiary Guarantor.

 

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Section 3.02 AUTHORIZATION AND VALIDITY. This Agreement and each Loan Document
have been duly authorized, and upon their execution and delivery in accordance
with the provisions hereof and thereof will constitute legal, valid and binding
agreements and obligations of Borrower and each Subsidiary Guarantor party
thereto, or the party which executes the same, enforceable in accordance with
their respective terms, except as such enforceability may be limited by general
principles of equity or the effect of laws relating to or affecting the rights
of creditors generally.

Section 3.03 NO VIOLATION; CONSENTS.

(a) The execution, delivery and performance by Borrower and each Subsidiary
Guarantor of each of the Loan Documents to which it is a party do not violate
any provision of any law or regulation or any order, judgment, or decree of any
court or other Governmental Authority binding on Borrower or its Subsidiaries,
or contravene any provision of such Person’s Organizational Documents, or result
in any breach of or default under any material contract, obligation, indenture
or other instrument to which Borrower or any of its Subsidiaries is a party or
by which Borrower or any of its Subsidiaries may be bound.

(b) The execution, delivery, and performance by Borrower and each Subsidiary
Guarantor of each of the Loan Documents to which it is a party and the
consummation of the transactions contemplated by the Loan Documents do not and
will not require any registration with, consent, or approval of, or notice to,
or other action with or by, any Governmental Authority, other than
registrations, consents, approvals, notices, or other actions that have been
obtained and that are still in force and effect and except for filings and
recordings with respect to the Collateral to be made, or otherwise delivered to
Lender for filing or recordation, as of the Closing Date.

Section 3.04 LITIGATION. There are no actions, claims, investigations, suits, or
proceedings pending or, to the best of Borrower’s and each Subsidiary
Guarantor’s knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any Governmental Authority, arbitrator, court or
administrative agency which reasonably could be expected to have a Material
Adverse Effect, other than the SEC Investigation. Schedule 3.04 sets forth a
complete and accurate description of each of the actions, claims,
investigations, suits, or proceedings with asserted liabilities in excess of, or
that could reasonably be expected to result in liabilities in excess of,
$1,500,000 that, as of the Closing Date, is pending or, to the best knowledge of
Borrower and each Subsidiary Guarantor threatened, against Borrower or one of
its Subsidiaries.

Section 3.05 CORRECTNESS OF FINANCIAL STATEMENTS. All historical financial
statements relating to Borrower and its Subsidiaries that have been delivered by
Borrower to Lender since May 17, 2011 have been prepared in accordance with
(a) for all periods prior to the Restatement Completion, the Saba Prerestatement
Standards, and (b) for all periods on or after the Restatement Completion, GAAP
(except, in each case, in the case of unaudited financial statements, for the
lack of footnotes and being subject to year-end audit adjustments) and present
fairly in all material respects, Borrower and its Subsidiaries’ consolidated
financial condition as of the date thereof and results of operations for the
period then ended. Since August 31, 2010, no event, circumstance, or change has
occurred that has or could reasonably be expected to result in a Material
Adverse Effect with respect to Borrower and its Subsidiaries (other than the
need to conduct the Restatement Completion, the Restatement Completion, the
de-listing of the shares of Borrower on The NASDAQ Global Select Stock Market,
the failure of Borrower to make filings with the Securities and Exchange
Commission prior to the Restatement Completion, and the SEC Investigation).

 

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Section 3.06 INCOME TAX RETURNS. Neither Borrower nor any Subsidiary Guarantor
has any knowledge of any pending assessments or adjustments of its or its
Subsidiaries’ income tax payable with respect to any year.

Section 3.07 NO SUBORDINATION. Other than the Intercreditor Agreement, there is
no agreement, indenture, contract or instrument to which Borrower or any
Subsidiary Guarantor is a party or by which Borrower or any Subsidiary Guarantor
may be bound that requires the subordination in right of payment of any of
Borrower’s or any Subsidiary Guarantor’s obligations subject to this Agreement
to any other obligation of Borrower or any Subsidiary Guarantor.

Section 3.08 PERMITS, FRANCHISES. Borrower and each of its Subsidiaries
possesses, and will hereafter possess, all permits, consents, approvals,
franchises and licenses reasonably required for the conduct of such Person’s
business and rights to all trademarks, trade names, patents, and fictitious
names, if any, necessary to enable it to conduct the business in which it is now
engaged in compliance with applicable law.

Section 3.09 ERISA. Borrower and each of its Subsidiaries are in compliance in
all material respects with all applicable provisions of ERISA; Borrower and each
of its Subsidiaries have not violated any provision of any Plan maintained or
contributed to by Borrower or such Subsidiary; no Reportable Event (as defined
in ERISA) has occurred and is continuing with respect to any Plan initiated by
Borrower or any of its Subsidiaries; Borrower and each of its Subsidiaries has
met its minimum funding requirements under ERISA with respect to each Plan; and
each Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents and under GAAP.

Section 3.10 OTHER OBLIGATIONS. Set forth on Schedule 3.10 is a true and
complete list of all Debt of Borrower and each of its Subsidiaries outstanding
immediately prior to the Closing Date that is to remain outstanding immediately
after giving effect to the closing hereunder on the Closing Date and such
Schedule accurately sets forth the aggregate principal amount of such Debt as of
the Closing Date. Neither Borrower nor any of its Subsidiaries is (a) in default
on any obligation for borrowed money or any purchase money obligation in the
principal amount of Five Hundred Thousand Dollars ($500,000) or more (either
individually or in the aggregate considering all similar obligations then in
default) or (b) in default on any other material lease, commitment, contract,
instrument or obligation, which default could reasonably be expected to have a
Material Adverse Effect.

Section 3.11 ENVIRONMENTAL MATTERS. Except as set forth on Schedule 3.11 hereto,
each of Borrower and each of its Subsidiaries is in compliance in all material
respects with all applicable federal or state environmental, hazardous waste,
health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect such Person’s operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, and the Federal Toxic Substances Control Act, as any of the same may be
amended, modified or supplemented from time to time. None of the operations of
Borrower or any of its Subsidiaries is the subject of any federal or state
investigation evaluating whether any remedial action involving a material
expenditure is needed to respond to a release of any toxic or hazardous waste or
substance into the environment. None of Borrower or any of its Subsidiaries has
any material contingent liability in connection with any release of any toxic or
hazardous waste or substance into the environment.

 

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Section 3.12 SUBSIDIARIES. None of Borrower or any Subsidiary Guarantor owns any
Equity Interest in any Person other than the Subsidiaries set forth on
Schedule 3.12 (as such Schedule may be updated from time to time to reflect
changes resulting from transactions permitted under this Agreement) hereto. As
of the Closing Date, Schedule 3.12 sets forth a true and complete list of the
Material Domestic Subsidiaries and the Material Foreign Subsidiaries.

Section 3.13 TRUTH, ACCURACY OF INFORMATION. To the best of Borrower’s and each
Subsidiary Guarantor’s knowledge, no statement of financial or other information
furnished by Borrower or any Subsidiary Guarantor to Lender in connection with
this Agreement contains any untrue statement of material fact or omits a
material fact necessary to make the statement not misleading in light of all of
the circumstances existing on the date the statement was made, including such
circumstances or other factual information previously furnished by Borrower or
any Subsidiary Guarantor to Lender (in each case, except to the extent that such
untruth or omission is related to any statement made prior to the Restatement
Completion in connection with delivery of financial statements that are being
restated in connection with the Restatement Completion); provided, however, that
projections contained therein are not to be viewed as factual and that actual
results during the periods covered thereby may differ from the results set forth
in such projections by a material amount. All projections that are part of such
information are based upon good faith estimates and stated assumptions believed
to be reasonable and fair as of the date made in light of conditions and facts
then known and, as of such date, reflect good faith, reasonable and fair
estimates of the information projected for the periods set forth therein (in
each case, except for projections delivered prior to the Restatement Completion
that are impacted by any Restatement-Related Event).

Section 3.14 COMPLIANCE WITH LAWS. Neither Borrower nor any of its Subsidiaries
(a) is in violation of any applicable laws, rules, regulations, executive
orders, or codes that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect, or (b) is subject to or in
default with respect to any final judgments, writs, injunctions, decrees, rules
or regulations of any court or any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, that, individually or in the aggregate, could reasonably be
expected to result in a Material Adverse Effect (except in connection with
Borrower’s failure to timely file with the United States Securities and Exchange
Commission its Quarterly Reports on Form 10-Q for the fiscal quarters ended
February 29, 2012, August 31, 2012, November 30, 2012, and February 28, 2013 and
its Annual Reports on Form 10-K for the fiscal years ended May 31, 2012 and
May 31, 2013). Without limiting the generality of the foregoing, to the extent
applicable, Borrower and each Subsidiary Guarantor is in compliance, in all
material respects, with the (i) Trading with the Enemy Act, as amended, and each
of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling
legislation or executive order relating thereto, and (ii) Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept and
Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the
proceeds of the Loan made hereunder will be used by Borrower or any of its
Affiliates, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended.

Section 3.15 GOVERNMENTAL REGULATION; OFAC. Neither Borrower nor any of its
Subsidiaries is subject to regulation under the Federal Power Act or the
Investment Company Act of 1940 or under any other federal or state statute or
regulation which may limit its ability to incur Debt or which may otherwise
render all or any portion of the indebtedness and obligations arising under the
Loan Documents to which it is a party unenforceable. Neither Borrower nor any of
its Subsidiaries is a “registered investment company” or a company “controlled”
by a “registered investment company” or a

 

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“principal underwriter” of a “registered investment company” as such terms are
defined in the Investment Company Act of 1940. Neither Borrower nor any of its
Subsidiaries is in violation of any of the country or list based economic and
trade sanctions administered and enforced by OFAC. Neither Borrower nor any of
its Subsidiaries (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its
assets located in Sanctioned Entities, or (c) derives revenues from investments
in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds
of the Loan made hereunder will be used to fund any operations in, finance any
investments or activities in, or make any payments to, a Sanctioned Person or a
Sanctioned Entity.

Section 3.16 MUTUAL BENEFIT. The funds that have been and are to be borrowed
from Lender by Borrower have been and are to be contemporaneously paid to or
used for the benefit of each Subsidiary Guarantor. It is the position, intent
and expectation of the parties that each of Borrower and each Subsidiary
Guarantor has derived and will continue to derive significant, substantial and
direct benefits from the accommodations that have been made by Lender under the
Loan Documents and that each of Borrower and each Subsidiary Guarantor has
received at least “reasonably equivalent value” (as such phrase is used in
Section 548 of the Bankruptcy Code) and more than sufficient consideration to
support the indebtedness, obligations, liens and security interests created
under the Loan Documents and all repayments or other transfers made or to be
made to Lender. To the extent, if any, that funds are transferred by any of
Borrower or any Subsidiary Guarantor to Borrower or any other Subsidiary
Guarantor, as the case may be, which such recipient intends to be used to repay
Lender, it is the position, intent and expectation of the parties that: (a) such
funds shall in fact be used to contemporaneously repay Lender; (b) to the
maximum extent permitted by law, these transfers constitute contemporaneous
exchanges for value given to the transferor and, therefore, shall qualify for
the protection and benefits of Section 547(c) of the Bankruptcy Code; and (c) in
any event, Lender, as the immediate transferee of such funds, shall take them in
“good faith” and without “knowledge of the voidability of the transfer” as
between Borrower and such Subsidiary Guarantor or as between Subsidiary
Guarantors, as the case may be, if any, as those phrases are used in
Section 550(b) of the Bankruptcy Code. To the extent that any payment or
collateral proceeds received by Lender hereunder is subsequently avoided or
otherwise required to be paid over to any other person or entity, then the
obligation or indebtedness which had been paid, reduced or satisfied by such
payment or receipt of collateral proceeds shall be reinstated and continued in
full force and effect as of the date such initial payment, reduction or
satisfaction occurred.

Section 3.17 SOLVENCY. Borrower and each Subsidiary Guarantor is Solvent. None
of Borrower or any Subsidiary Guarantor will be rendered not Solvent by the
execution or delivery of this Agreement or of any of the other Loan Documents or
by the transactions contemplated hereunder or thereunder. No transfer of
property is being made by any Loan Party and no obligation is being incurred by
any Loan Party in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder, delay, or
defraud either present or future creditors of such Loan Party.

ARTICLE IV. CONDITIONS

Section 4.01 CONDITIONS PRECEDENT TO FUNDING. The obligation of Lender to make
the Loan contemplated by this Agreement is subject to the fulfillment to
Lender’s satisfaction of all of the following conditions:

(a) Documentation. Lender shall have received, in form and substance
satisfactory to Lender, each of the following, duly executed and delivered:

(i) This Agreement, the Second Lien Borrower Security Agreement (as defined in
the definition of “Second Lien Security Agreements”), the Second Lien Third
Party Security Agreement (as defined in the definition of “Second Lien Security
Agreements”), the Intercreditor Agreement and the Promissory Note.

 

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(ii) Corporate resolutions and incumbency certificates from or on behalf of
Borrower and each Subsidiary Guarantor certified as of the date hereof by the
Secretary or Assistant Secretary of Borrower or such Subsidiary Guarantor, as
applicable.

(iii) A true and correct copy of Borrower’s and each Subsidiary Guarantor’s
Organizational Documents, certified as of a recent date by the Secretary of
State of such Person’s jurisdiction of incorporation, organization or formation,
as applicable, and certified as of the date hereof to be a true and correct copy
thereof by a Secretary or Assistant Secretary of Borrower or such Subsidiary
Guarantor, as applicable.

(iv) A good standing and/or tax good standing certificate for Borrower and each
Subsidiary Guarantor from each such Person’s jurisdiction of organization and
each other jurisdiction reasonably requested by Lender as of a recent date, and,
if requested by Lender, a bring-down certificate by facsimile dated on or about
the Closing Date.

(v) All security agreements, pledge agreements, guaranties, UCC-1 financing
statements, UCC amendments and other documentation from Borrower, each
Subsidiary Guarantor and each other Person required by Lender for the creation,
perfection and preservation of the personal property security interests
described in Section 2.04 hereof, including, without limitation, if requested by
Lender, (x) unless already provided to the First Lien Lender, the original stock
certificates of each corporate Subsidiary Guarantor and any original membership
interest certificates of each limited liability company Subsidiary Guarantor (if
certificated) and any other original documents evidencing any other equity
interest of a Subsidiary Guarantor (to the extent that a Lien on such equity can
be perfected by possession of such documents), and (y) current UCC searches
covering Borrower and each Subsidiary Guarantor from such jurisdictions as
Lender shall require.

(vi) A legal opinion from counsel to Borrower in form and substance satisfactory
to Lender.

(vii) Such other documents as Lender may require under any other Section of this
Agreement.

(b) Searches. Lender shall have completed (i) Patriot Act searches, OFAC/PEP
searches and customary individual background checks for Borrower and each
Subsidiary Guarantor, and (ii) OFAC/PEP searches and customary individual
background searches for Borrower’s and each Subsidiary Guarantor’s senior
management and key principals, the results of which shall be satisfactory to
Lender.

(c) Financial Condition. There shall have been no Material Adverse Effect since
February 28, 2013.

(d) Insurance. Borrower shall have delivered to Lender evidence of insurance
coverage on all Borrower’s and each Subsidiary Guarantor’s property, in form,
substance, amounts, covering risks and issued by companies satisfactory to
Lender, and where required by Lender, with loss payable and additional insured
endorsements in favor of Lender.

(e) Fees and Expenses. Borrower shall have paid all fees and invoiced costs and
expenses then due pursuant to the terms of this Agreement.

 

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(f) Compliance. The representations and warranties contained herein and in each
of the other Loan Documents shall be true, correct, and complete, in all
material respects (except that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof), as of the Funding Date, and no
Default or Event of Default shall have occurred and be continuing or shall
result from the Loan.

(g) Documentation. Lender shall have received all additional documents which may
be required in connection with the Loan as requested by Lender.

ARTICLE V. AFFIRMATIVE COVENANTS

Borrower and each Subsidiary Guarantor covenant that any liabilities (whether
direct or contingent, liquidated or unliquidated) of Borrower or any Subsidiary
Guarantor to Lender under any of the Loan Documents remain outstanding, and
until payment in full of all indebtedness and obligations of Borrower and each
Subsidiary Guarantor subject hereto, Borrower and each Subsidiary Guarantor
shall, unless Lender otherwise consents in writing:

Section 5.01 PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or
other liabilities due under any of the Loan Documents at the times and place and
in the manner specified therein, and immediately upon demand by Lender, the
amount by which the outstanding principal balance of any credit subject hereto
at any time exceeds any limitation on borrowings applicable thereto.

Section 5.02 ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with (a) for all periods prior to the Restatement Completion, the
Saba Prerestatement Standards, and (b) for all periods on or after the
Restatement Completion, GAAP, and permit any representative of Lender, at any
reasonable time, to inspect, audit and examine such books and records, to make
copies of the same, and to inspect the properties of Borrower and the Subsidiary
Guarantors (in each case, during normal business hours and upon reasonable
advance notice (it being understood and agreed that 24 hours advance notice is
reasonable)); provided, that so long as no Event of Default shall have occurred
and be continuing, Borrower shall not be obligated to reimburse Lender for more
than 1 financial examination during any calendar year or more than 1
business/recurring revenue valuation during any calendar year.

Section 5.03 FINANCIAL STATEMENTS. Provide to Lender all of the following, in
form and detail satisfactory to Lender:

(a) promptly after the sending or filing thereof, but in no event later than one
hundred twenty (120) days after the end of each fiscal year of Borrower
beginning with the fiscal year ending May 31, 2013 (provided that, for the
fiscal year ending May 31, 2013, such 120 day period shall not apply and instead
the applicable deadline shall be the 90th (ninetieth) day following the
Restatement Completion), copies of each Form 10-K report (including the
financial statements contained therein, which shall be audited by Borrower’s
independent certified public accountant (which independent certified public
accountant shall be of recognized national standing) and certified by such
independent certified public accountant (i) to have been prepared in accordance
with GAAP and (ii) without any qualifications (including any (A) “going concern”
or like qualification or exception, (B) qualification or exception as to the
scope of such audit, or (C) qualification which relates to the treatment or
classification of any item and which, as a condition to the removal of such
qualification, would require an adjustment to such item, the effect of which
would be to cause any noncompliance with the provisions of Section 5.09)), filed
by Borrower with the United States Securities and Exchange Commission or any
successor agency and, concurrently therewith, consolidating financial statements
of Borrower, prepared by Borrower (to include balance sheets, profit and loss
statements, statements of cash flows, and reconciliations of net worth),
together with a duly completed Compliance Certificate executed by a senior
financial officer of Borrower;

 

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(b) promptly after the sending or filing thereof, but in no event later than
forty-five (45) days after and as of the end of each fiscal quarter of Borrower,
(i) beginning with the first fiscal quarter ending after the 90th (ninetieth)
day following the Restatement Completion, copies of each Form 10-Q report filed
by Borrower with the United States Securities and Exchange Commission, and
(ii) the consolidated and consolidating financial statements of Borrower,
prepared by Borrower, to include balance sheets, income statements, statements
of retained earnings and statements of cash flows and a duly completed
Compliance Certificate executed by a senior financial officer of Borrower;

(c) no later than forty-five (45) days after and as of the end of each fiscal
quarter of Borrower, a report, in form satisfactory to Lender, detailing the
terms and conditions of any earn-out or holdback obligations incurred in
connection with any Acquisitions consummated during such fiscal quarter (other
than any Acquisitions consummated prior to the Closing Date);

(d) promptly after the same are available, copies of each annual report, proxy
or financial statement or other report or communication sent to the holders of
Equity Interests of Borrower generally, and copies of all annual, regular,
periodic and special reports and registration statements, if any, that Borrower
may file or be required to file with the United States Securities and Exchange
Commission or any successor agency under Section 13 or Section 15(d) of the
Exchange Act, and, in each case, not otherwise required to be delivered to
Lender pursuant hereto;

(e) monthly (not later than the 20th day of each month), (i) an unaudited
consolidated income statement and balance sheet covering Borrower’s and its
Subsidiaries’ operations during such period, (ii) a Credit Amount Certificate,
including Recurring Revenue detail for the trailing twelve month period, and
(iii) a detailed report regarding Borrowers’ and its Domestic Subsidiaries’ Cash
and Cash Equivalents, including an indication of which amounts constitute
Qualified Cash;

(f) semi-annually (not later than the date that unaudited financial statements
are required to be delivered for the second fiscal quarter and the last fiscal
quarter of each fiscal year), a report separately detailing Borrower’s retention
statistics for recurring maintenance and software-as-a-service and hosting
contracts;

(g) (i) annually (not later than the earlier of (A) 10 days after Borrower’s
board of directors approves Borrower’s business plan for a fiscal year, or
(B) 60 days after the end of the fiscal year), copies of Borrower’s business
plan, in the form provided to Borrower’s board of directors, and with underlying
assumptions which are reasonable under the circumstances, for the forthcoming
fiscal year, quarter by quarter, certified by the senior financial officer of
Borrower as being such officer’s good faith estimate of the financial
performance of Borrower during the period covered thereby, and (ii) within 10
Business Days of the Restatement Completion, an updated business plan, in form
provided to Borrower’s board of directors and otherwise reasonably satisfactory
to Lender, and with underlying assumptions which are reasonable under the
circumstances, through the fiscal quarter ended August 31, 2015, on a fiscal
quarter by fiscal quarter basis, certified by the senior financial officer of
Borrower as being such officer’s good faith estimate of the financial
performance of Borrower during the periods covered thereby (the “Restatement
Projections”);

(h) if, as of any date of determination, Availability plus Qualified Cash of
Borrower and its Domestic Subsidiaries is less than $15,000,000, no later than
forty-five (45) days after the end of the fiscal quarter in which such date of
determination occurs and within forty-five (45) days after the end of each
fiscal quarter of Borrower thereafter, (i) a summary aging of Borrower’s and its
Subsidiaries’ accounts receivable, (ii) a summary aging, by vendor, of
Borrower’s and its Subsidiaries’ accounts payable, and any book overdraft,
(iii) a reconciliation of the prior quarter’s deferred revenue balance between
Borrower’s and its Subsidiaries’ balance sheet and Borrower’s and its
Subsidiaries’ general ledger, and (iv) a report detailing Borrower’s and its
Subsidiaries’ accrued, but unpaid taxes;

 

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(i) (a) a copy of its Annual Report on Form 10-K for Borrower’s fiscal year
ended May 31, 2012 filed by Borrower with the United States Securities and
Exchange Commission (with the requisite financial statements contained therein,
which shall be audited by Borrower’s independent certified public accountant
(which independent certified public accountant shall be of recognized national
standing) and certified by such independent certified public accountant (i) to
have been prepared in accordance with GAAP, and (ii) without any qualifications
(including any (A) “going concern” or like qualification or exception,
(B) qualification or exception as to the scope of such audit, or
(C) qualification which relates to the treatment or classification of any item
and which, as a condition to the removal of such qualification, would require an
adjustment to such item, the effect of which would be to cause any noncompliance
with the provisions of Section 5.09)), (b) consolidating financial statements of
Borrower, prepared by Borrower (to include balance sheets, profit and loss
statements, statements of cash flows, and reconciliations of net worth) for
Borrower’s fiscal year ended May 31, 2012, and (c) a duly completed Compliance
Certificate executed by a senior financial officer of Borrower for Borrower’s
fiscal year ended May 31, 2012, in each case on or before February 28, 2014; and

(j) from time to time such other information as Lender may reasonably request;

provided that if any such material is electronically filed by Borrower or any of
its Subsidiaries with the United States Securities and Exchange Commission and
is publicly available through the internet or other electronic means, Borrower
will notify Lender promptly following such filing and upon the request of
Lender, furnish a copy of such materials to Lender. Delivery of notice to Lender
that such material has been electronically filed and is publicly available shall
satisfy the delivery requirements with regard to such report or information.

Section 5.04 COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises reasonably necessary
for the conduct of its business; comply with the provisions of all documents
pursuant to which Borrower or such Subsidiary Guarantor is organized and/or
which govern Borrower’s or such Subsidiary Guarantor’s continued existence; and
comply, and cause each of its Material Subsidiaries to comply, with the
requirements of all laws, rules, regulations and orders of any Governmental
Authority applicable to Borrower or any of its Material Subsidiaries and/or
reasonably necessary for the conduct of such Person’s business.

Section 5.05 INSURANCE. At Borrower’s expense, (a) maintain insurance respecting
each of Borrower’s and its Subsidiaries’ assets wherever located and covering
liabilities, losses or damages as are customarily are insured against by other
Persons engaged in same or similar businesses and similarly situated and
located. All such policies of insurance shall be with financially sound and
reputable insurance companies acceptable to Lender and in such amounts as is
carried generally in accordance with sound business practice by companies in
similar businesses similarly situated and located and, in any event, in amount,
adequacy, and scope reasonably satisfactory to Lender. All property insurance
policies covering the Collateral are to be made payable to Lender, as its
interests may appear, in case of loss, pursuant to a standard loss payable
endorsement with a standard non contributory “lender” or “secured party” clause
and are to contain such other provisions as Lender may reasonably require to
fully protect Lender’s interest in the Collateral and to any payments to be made
under such policies. All certificates of property and general liability
insurance are to be delivered to Lender, with the loss payable (but only in
respect of Collateral) and additional insured endorsements in favor of Lender
and shall provide for not less than 30 days (10 days in the case of non-payment)
prior written notice to Lender of the exercise of any right of cancellation. If
Borrower or its Subsidiaries fail to maintain such insurance, Lender may arrange
for such insurance, but at Borrower’s expense and without any responsibility on
Lender’s part for

 

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obtaining the insurance, the solvency of the insurance companies, the adequacy
of the coverage, or the collection of claims. Upon the occurrence and during the
continuance of an Event of Default, Lender shall have the sole right to file
claims under any property and general liability insurance policies in respect of
the Collateral, to receive, receipt and give acquittance for any payments that
may be payable thereunder, and to execute any and all endorsements, receipts,
releases, assignments, reassignments or other documents that may be necessary to
effect the collection, compromise or settlement of any claims under any such
insurance policies.

Section 5.06 FACILITIES. Keep, and cause its Subsidiaries to keep, all
properties useful, necessary or reasonably required in the conduct of Borrower’s
and its Subsidiaries’ business in good repair and condition, and from time to
time make necessary repairs, renewals and replacements thereto so that such
properties shall be fully and efficiently preserved and maintained.

Section 5.07 TAXES AND OTHER LIABILITIES. Pay and discharge, and cause each of
its Subsidiaries to pay and discharge, when due any and all indebtedness,
obligations, assessments and taxes, both real or personal, including without
limitation federal and state income taxes and state and local property taxes and
assessments, except (a) such as Borrower or its Subsidiary (as applicable) may
in good faith contest or as to which a bona fide dispute may arise, and (b) for
which Borrower or its Subsidiary (as applicable) has made provision, to Lender’s
satisfaction, for eventual payment thereof in the event Borrower or such
Subsidiary is obligated to make such payment.

Section 5.08 LITIGATION. Promptly give notice in writing to Lender of (a) any
litigation pending or, to Borrower’s knowledge, threatened against Borrower or
any of its Subsidiaries with a claim in excess of One Million Five Hundred
Thousand Dollars ($1,500,000.00), (b) any litigation pending or, to Borrower’s
knowledge, threatened in writing against Borrower or any of its Subsidiaries,
that is related to the Restatement Completion or the NASDAQ Listing Event, or
(c) any investigation or proceeding by any Governmental Authority that is
related to the Restatement Completion or the NASDAQ Listing Event.

Section 5.09 FINANCIAL COVENANTS.

(a) Borrower shall have EBITDA of at least the required amount set forth on
Schedule 5.09(a) for the period applicable thereto.

(b) Borrower shall maintain Availability plus Qualified Cash of an amount
greater than or equal to the applicable Financial Covenant Liquidity Amount at
all times.

(c) Borrower shall have total outstanding Debt less Cash and Cash Equivalents of
no more than the amount set forth on Schedule 5.09(c) on the dates therein
listed.

(d) Borrower shall have, on the last day of each fiscal quarter set forth on
Schedule 5.09(d), a Minimum Fixed Charge Coverage Ratio of no less than the
ratio set forth on Schedule 5.09(d) for such fiscal quarter.

(e) Borrower shall have, on the last day of each fiscal quarter set forth on
Schedule 5.09(e), a Net Leverage Ratio of no higher than the ratio set forth on
Schedule 5.09(e) for such fiscal quarter.

Section 5.10 NOTICE TO LENDER. Promptly (but in no event more than five (5) days
after the occurrence of each such event or matter) give written notice to Lender
in reasonable detail of: (a) the occurrence of any Default or Event of Default;
(b) any change in the name or the organizational structure of Borrower or any
Subsidiary Guarantor; (c) the occurrence and nature of any Reportable Event or

 

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Prohibited Transaction, each as defined in ERISA, or any funding deficiency with
respect to any Plan; or (d) any termination or cancellation of any insurance
policy which Borrower or any Subsidiary is required to maintain, or any loss
through liability or property damage, or through fire, theft or any other cause
affecting Borrower’s or any Subsidiary’s property in excess of an aggregate of
Two Hundred Fifty Thousand Dollars ($250,000.00).

Section 5.11 SECURITY; JOINDER AGREEMENT; FOREIGN SUBSIDIARIES. At all times
maintain in favor of Lender perfected security interests in all assets in which,
under the provisions of this Agreement and the other Loan Documents, Lender has
obtained or is to obtain a security interest, of such priority as is designated
herein; take such actions (including, without limitation, the filing of
financing statements and fixture filings or providing authorization for Lender
to file same) as Lender deems necessary and appropriate to protect Lender’s
security interests; and provide to Lender such assurances as Lender may require
as to Borrower’s and each Subsidiary Guarantor’s compliance herewith. Borrower
shall at all times cause each Material Domestic Subsidiary to be a Subsidiary
Guarantor hereunder and Borrower shall cause each Person that becomes a Material
Domestic Subsidiary after the Closing Date to execute and deliver a Joinder
Agreement, security agreement, pledge agreement, control agreement and/or any
and all other agreements, documents or opinions reasonably requested by Lender
to cause such Person to be a Subsidiary Guarantor under this Agreement and to
perfect or maintain the perfected security interest of Lender in the assets of
such Material Domestic Subsidiary as required hereunder or the other Loan
Documents within ten (10) Business Days after such Person becomes a Material
Domestic Subsidiary. Borrower shall execute such agreements, documents or
instruments, or take such other actions, as Lender reasonably deems necessary in
order to effectuate the pledge to Lender of security interests in Borrower’s
ownership interest in all Domestic Subsidiaries and Material Foreign
Subsidiaries (such pledge, with respect to any Material Foreign Subsidiary,
exclusive of shares of voting stock of such Material Foreign Subsidiary that
represent more than 65% of the voting stock of such Material Foreign Subsidiary)
and after the Closing Date, Borrower shall and shall cause each Subsidiary that
owns a Domestic Subsidiary or a Material Foreign Subsidiary from time to time
(including any Material Foreign Subsidiary of a Domestic Subsidiary) after the
Closing Date, to execute, or cause to be executed, such agreements, documents or
instruments, or take such other actions, as Lender reasonably deems necessary in
order to effectuate the pledge to Lender of security interests in Borrower’s
and/or Borrower’s Subsidiaries’ ownership interest in such Domestic Subsidiary
or Material Foreign Subsidiary (such pledge, with respect to any Material
Foreign Subsidiary, exclusive of shares of voting stock of such Material Foreign
Subsidiary that represent more than 65% of the voting stock of such Material
Foreign Subsidiary). In addition, Borrower and each Subsidiary Guarantor shall,
upon request of Lender, deliver to Lender as additional collateral for their
obligations hereunder all original stock certificates of such Subsidiary
Guarantor and all original membership interest certificates of each limited
liability company Subsidiary Guarantor (if certificated) to the extent that the
pledge thereof is required hereunder.

Section 5.12 DEPOSIT ACCOUNTS; CASH MANAGEMENT SERVICES. Borrower shall and
shall cause the Subsidiary Guarantors to maintain substantially all of their
deposit accounts and cash management services with First Lien Lender or one of
its Affiliates.

Section 5.13 FURTHER ASSURANCES.

(a) From time to time hereafter, Borrower and each Subsidiary Guarantor will
execute and deliver such additional instruments, certificates or documents, and
will take all such actions as Lender may reasonably request for the purposes of
implementing or effectuating the provisions of this Agreement and the Loan
Documents or for the purpose of more fully perfecting or renewing the rights of
Lender with respect to the rights, properties or assets subject to such
documents (or with respect to any additions thereto or replacements or proceeds
thereof or with respect to any other property or assets hereafter acquired by
Borrower which may be deemed to be a part thereof). Upon the exercise by Lender
of any

 

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power, right, privilege or remedy pursuant to this Agreement or the Loan
Documents which requires any consent, approval, registration, qualification or
authorization of any Governmental Authority or instrumentality, Borrower will
execute and deliver all necessary applications, certifications, instruments and
other documents and papers that Lender may be required to obtain for such
governmental consent, approval, registration, qualification or authorization.

(b) Borrower shall, upon the request of Lender, from time to time, execute and
deliver and, if necessary, file, register and record such further financing
statements, amendments, continuation statements and other documents and
instruments and take such further action as may be reasonably necessary to
effect the provisions of this Agreement, and the other Loan Documents. Borrower
shall pay or cause to be paid all filing, registration and recording fees
incident to such filing, registration and recording, and all expenses incident
to the preparation, execution and acknowledgment of such instruments of further
assurance, and all federal or state fees and other similar fees, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Agreement, the Loan Documents and such
instruments of further assurance.

ARTICLE VI. NEGATIVE COVENANTS

Borrower and each Subsidiary Guarantor further covenant that so long as any
liabilities (whether direct or contingent, liquidated or unliquidated) of
Borrower or any Subsidiary Guarantor to Lender under any of the Loan Documents
remain outstanding, and until payment in full of all indebtedness and
obligations of Borrower subject hereto, Borrower and each Subsidiary Guarantor
will not without Lender’s prior written consent:

Section 6.01 USE OF FUNDS.

(a) Use any of the proceeds of the Loan extended hereunder except, consistent
with the terms and conditions hereof, for repayment of the amounts owing under
the First Lien Credit Agreement, for general corporate and working capital
purposes, and to pay costs and expenses incurred in connection with the closing
of the Loan.

(b) Use any part of the proceeds of the Loan made to Borrower to purchase or
carry any margin stock (within the meaning of Regulation U of the Board of
Governors of the United States Federal Reserve) or to extend credit to others
for the purpose of purchasing or carrying any such margin stock, in each case,
in contravention of said Regulation U, or for any purpose that violates the
provisions of Regulation T, U or X of the Board of Governors of the United
States Federal Reserve).

Section 6.02 [INTENTIONALLY OMITTED]

Section 6.03 OTHER INDEBTEDNESS. Create, incur, assume or permit to exist, or
permit any of its Subsidiaries to create, incur, assume or permit to exist, any
Debt (including any indebtedness or liabilities resulting from borrowings, loans
or advances), whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except (a) the liabilities of Borrower or any
Subsidiary Guarantor owing to Lender, (b) any other liabilities of Borrower or
any Subsidiary Guarantor existing as of the date hereof and disclosed on
Schedule 3.10 hereto, (c) Capital Leases in an aggregate amount not to exceed
Four Million Six Hundred Thousand Dollars ($4,600,000.00), (d) intercompany
loans owing to Borrower or any of its Material Subsidiaries permitted pursuant
to Section 6.06, (e) Subordinated Debt, (f) Debt secured by Permitted Liens,
(g) unsecured earn-outs or customary holdbacks that are incurred concurrently
with the consummation of a Permitted Acquisition solely for the purpose of
consummating such Permitted Acquisition so long as (i) at the time of such
incurrence, no Event of Default has occurred and is continuing or would result
therefrom, and (ii) such unsecured Debt is not incurred for working

 

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capital purposes, (h) Debt permitted pursuant to Section 6.05 or Section 6.06
and (i) the liabilities of Borrower or any Subsidiary Guarantor to the First
Lien Lender pursuant to the First Lien Credit Agreement and the other “Loan
Documents” (as defined in the First Lien Credit Agreement).

Section 6.04 MERGER, CONSOLIDATION, TRANSFER OF ASSETS.

(a) Merge into or consolidate with any other entity, or permit any of its
Subsidiaries to merge into or consolidate with any other entity, except (i) in
connection with a Permitted Acquisition permitted hereunder or (ii) in the case
of any merger or consolidation of any Subsidiary of Borrower into or with any
other Subsidiary of Borrower (so long as, if such merger or consolidation
involves a Subsidiary Guarantor, such Subsidiary Guarantor remains the surviving
entity in any such merger or consolidation) or with or into Borrower (so long as
Borrower remains the surviving entity in any such merger or consolidation);
make, or permit any of its Subsidiaries to make, any substantial change in the
nature of Borrower’s or any Subsidiary Guarantor’s business as conducted as of
the date hereof; acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the assets of any other entity, except in connection with a
Permitted Acquisition.

(b) Sell, lease, assign, transfer or otherwise dispose of, or permit any of its
Subsidiaries to sell, lease, assign, transfer or otherwise dispose of, (i) any
Intellectual Property that is necessary or material to the conduct of its
business other than the licensing, on a non-exclusive basis, of Intellectual
Property in the ordinary course of business, or (ii) any of its other assets,
except, in the case of this clause (ii), (A) in the ordinary course of its
business, (B) in connection with the liquidation of any Subsidiary that is not a
Material Subsidiary, (C) in connection with the liquidation of any Subsidiary
Guarantor so long as such assets are transferred to Borrower or any Subsidiary
Guarantor, (D) in connection with the liquidation of any Material Foreign
Subsidiary so long as such assets are transferred to Borrower, any Subsidiary
Guarantor, or any Material Foreign Subsidiary, (E) in transactions expressly
permitted under Section 6.04(a), Section 6.06, Section 6.07, or Section 6.08, or
(F) in a single transaction in an amount not to exceed One Million One Hundred
and Fifty Thousand Dollars ($1,150,000.00) and, together with all other
dispositions of assets under this Section 6.04(b)(ii)(F), in an aggregate amount
not to exceed Five Million Seven Hundred and Fifty Thousand Dollars
($5,750,000.00).

Section 6.05 GUARANTIES. Guarantee or become liable in any way as surety,
endorser (other than as endorser of negotiable instruments for deposit or
collection in the ordinary course of business), accommodation endorser or
otherwise for, pledge or hypothecate any assets of Borrower or any of its
Subsidiaries as security for, or permit any of its Subsidiaries to do any of the
foregoing for, any liabilities or obligations of any other person or entity,
except any of the foregoing (a) in favor of Lender, (b) in favor First Lien
Lender, (c) by Borrower with respect to obligations of any of its Subsidiaries
permitted both hereunder and under the First Lien Credit Agreement, in each case
in the ordinary course of business, or (d) in an aggregate amount not to exceed
One Million One Hundred and Fifty Thousand Dollars ($1,150,000.00).

Section 6.06 LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or
investments in any person or entity, except (a) any of the foregoing existing as
of, and disclosed to Lender in writing prior to, the date hereof, (b) Permitted
Acquisitions in an aggregate amount of Cash Acquisition Consideration not to
exceed Forty Six Million Dollars ($46,000,000.00) during the term of this
Agreement, (c) any of the foregoing among Borrower and the Subsidiary
Guarantors, (d) any of the foregoing among any of Borrower’s Foreign
Subsidiaries, (e) so long as no Event of Default has occurred and is continuing
or would result therefrom and Availability plus Qualified Cash is in excess of
Eight Million Five Hundred Thousand Dollars ($8,500,000.00) both before and
after giving effect thereto, intercompany loans or advances from Borrower or any
Subsidiary Guarantor to any Subsidiary of Borrower, (f) any of the foregoing
consisting of deposit accounts, Cash Equivalents or Marketable

 

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Securities or otherwise made in accordance with Borrower’s investment policy as
of the date hereof, (g) advances to employees in the ordinary course of business
in an aggregate outstanding amount not to exceed One Million One Hundred and
Fifty Thousand Dollars ($1,150,000.00) at any one time and (h) any of the
foregoing not described in the preceding clauses (a) through (g), in an amount
not to exceed Two Hundred Eighty Seven Thousand and Five Hundred Dollars
($287,500.00) in any fiscal year.

Section 6.07 DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution, or permit any of its Subsidiaries to declare or pay any dividend,
either in cash or any other property on Borrower’s or any of its Subsidiaries’
Equity Interests now or hereafter outstanding, nor redeem, retire, repurchase or
otherwise acquire any shares of any class of Borrower’s or any of its
Subsidiary’s Equity Interests now or hereafter outstanding; provided however,
that Borrower may so long as no Event of Default has occurred and is continuing
or would result therefrom, (a) repurchase Borrower’s Equity Interests in an
aggregate amount not to exceed (i) Nine Hundred Thousand Dollars ($900,000.00)
during any period of twelve (12) consecutive months and (ii) Two Million Nine
Hundred Thousand Dollars ($2,900,000.00) in the aggregate for so long as
Borrower has any Indebtedness outstanding under the Loan Documents and (b) pay
dividends made solely in Borrower’s common Equity Interests; and provided
further that, Borrower or any Subsidiary Guarantor may purchase common stock or
common stock options from its present or former officers or employees upon the
death, disability or termination of employment of such officer or employee in an
aggregate amount not to exceed $2,500,000.00 during any period of twelve
(12) consecutive months.

Section 6.08 PLEDGE OF ASSETS. (a)Mortgage, pledge, grant or permit to exist a
security interest in, or lien upon all or any portion of Borrower’s or any
Subsidiary Guarantor’s assets, now owned or hereafter acquired (including any
Collateral), or permit any of its Subsidiaries to mortgage, pledge, grant or
permit to exist a security interest in, or lien upon, all or any portion of such
Subsidiary’s Intellectual Property, now owned or hereafter acquired, in each
case, except Permitted Liens, or (b) enter into any agreement, document,
instrument or other arrangement, or permit any of its Subsidiaries to enter into
any agreement, document, instrument or other arrangement, (except with or in
favor of Lender) with any Person which agreement, document, instrument or other
arrangement directly or indirectly prohibits or has the effect of prohibiting
Borrower or any of its Subsidiaries from assigning, mortgaging, pledging or
granting a security interest in, upon or encumbering any of Borrower’s or any of
its Subsidiaries’ Intellectual Property.

Section 6.09 PREPAYMENTS. (a) Optionally prepay, redeem, defease, purchase, or
otherwise acquire any Debt of Borrower or any Subsidiary Guarantor, other than
(i) the obligations and indebtedness incurred under the Loan Documents in
accordance with this Agreement, (ii) the obligations and indebtedness incurred
under the First Lien Credit Agreement in accordance therewith and
(iii) intercompany loans permitted under this Agreement, or (b) make any payment
on account of Debt that has been contractually subordinated in right of payment
to the obligations and indebtedness incurred under the Loan Documents if such
payment is not permitted at such time under the applicable subordination terms
and conditions.

Section 6.10 AMENDMENTS. Directly or indirectly, amend, modify, or change any of
the terms or provisions, or permit any of its Subsidiaries to directly or
indirectly, amend, modify, or change any of the terms or provisions, of (a) any
agreement, instrument, document, indenture, or other writing evidencing or
concerning Debt other than (i) the Loan Documents in accordance with the terms
thereof, or (ii) Debt permitted pursuant to Section 6.03(c) or Section 6.03(d),
or (b) the Organizational Documents of Borrower or any of its Subsidiaries, in
each case, if the effect thereof, either individually or in the aggregate, could
reasonably be expected to be materially adverse to the interests of Lender.

 

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ARTICLE VII. EVENTS OF DEFAULT

Section 7.01 EVENTS OF DEFAULT. The occurrence of any of the following shall
constitute an “Event of Default” under this Agreement:

(a) Borrower or any Subsidiary Guarantor shall fail to pay (i) when due any
principal or interest, payable under any of the Loan Documents or (ii) within
five (5) Business Days after when due any other amounts payable under the Loan
Documents (other than as set forth in Section 7.01(a)(i)).

(b) Any financial statement or certificate furnished to Lender in connection
with, or any representation or warranty made by Borrower, any Material
Subsidiary or any other party under this Agreement or any other Loan Document
shall prove to be incorrect, false or misleading in any material respect when
furnished or made (other than due to any financial statement furnished to Lender
prior to the Restatement Completion being prepared in accordance with Saba
Prerestatement Standards).

(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained in Section 5.03(i), Section 5.05 or
Section 5.09 or ARTICLE VI.

(d) Any default in the performance of or compliance with any obligation,
agreement or other provision contained in Section 5.03, and such default
continues for a period of five (5) Business Days after the earlier of (i) the
date on which such failure shall first become known to any officer of Borrower,
or (ii) the date on which written notice thereof is given to Borrower by Lender.

(e) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those otherwise specifically described as an “Event of Default” in
this Section 7.01), and such default continues for a period of twenty (20) days
after the earlier of (i) the date on which such failure shall first become known
to any officer of Borrower, or (ii) the date on which written notice thereof is
given to Borrower by Lender.

(f) Any default in the payment or performance of any obligation, or any defined
event of default, under the terms of any material contract, instrument or
document (other than any of the Loan Documents or the First Lien Loan Documents)
between Borrower or any Material Subsidiary and Lender, or pursuant to which
Borrower or any of its Material Subsidiaries has incurred any Debt in excess of
Two Hundred Eighty Seven Thousand and Five Hundred Dollars ($287,500.00) to any
person or entity.

(g) Borrower or any of its Material Subsidiaries shall become insolvent, or
shall suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property, or shall generally
fail to pay its debts as they become due, or shall make a general assignment for
the benefit of creditors; Borrower or any of its Material Subsidiaries shall
file an Insolvency Proceeding; Borrower or any of its Material Subsidiaries
shall file an answer admitting the jurisdiction of the court and the material
allegations of any involuntary Insolvency Proceeding; any petition commencing an
involuntary Insolvency Proceeding against Borrower or any of its Material
Subsidiaries is not timely controverted by Borrower or such Material Subsidiary;
any petition commencing an involuntary Insolvency Proceeding against Borrower or
any of its Material Subsidiaries is not dismissed within 60 calendar days of the
date of the filing thereof; or Borrower or any of its Material Subsidiaries
shall be adjudicated a bankrupt, or an order for relief shall be entered against
Borrower or any of its Material Subsidiaries by any court of competent
jurisdiction in any involuntary Insolvency Proceeding.

(h) One or more judgments, orders, or awards for the payment of money (including
any judgments or orders to pay fines, penalties, or other amounts in connection
with the SEC Investigation) involving an aggregate amount of One Million One
Hundred and Fifty Thousand Dollars ($1,150,000.00), or more (except to the
extent fully covered (other than to the extent of customary deductibles) by
insurance pursuant to which the insurer has not denied coverage) is entered or
filed against Borrower or

 

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any of its Material Subsidiaries, or with respect to any of their respective
assets, and either (i) there is a period of 30 consecutive days at any time
after the entry of any such judgment, order, or award during which (1) the same
is not discharged, satisfied, vacated, or bonded pending appeal, or (2) a stay
of enforcement thereof is not in effect, or (ii) enforcement proceedings are
commenced upon such judgment, order, or award.

(i) An event or circumstance that has had a Material Adverse Effect occurs
(other than the need to conduct the Restatement Completion, the Restatement
Completion, the de-listing of the shares of Borrower on The NASDAQ Global Select
Stock Market, the failure of Borrower to make filings with the Securities and
Exchange Commission prior to the Restatement Completion, and the SEC
Investigation).

(j) Except as not prohibited under Article VI, the dissolution or liquidation of
Borrower or any of its Material Subsidiaries; or Borrower or any of its Material
Subsidiaries, or any of its directors, stockholders or members, shall take
action seeking to effect the dissolution or liquidation of Borrower or any of
its Material Subsidiaries.

(k) A Change of Control occurs.

(l) A Reportable Event as defined in ERISA has occurred and is continuing with
respect to any Plan initiated by Borrower or any of its Subsidiaries or Borrower
or any of its Subsidiaries (i) fails to comply in any material respect with any
applicable provisions of ERISA, (ii) violates any provision of any Plan it
maintains or to which it contributes, (iii) fails to meet its minimum funding
requirements under ERISA with respect to each Plan, or (iv) is unable to fulfill
its benefit obligations as they come due in accordance with the Plan documents
and under GAAP.

(m) This Agreement or any of the other Loan Documents ceases to be in full force
and effect (including, without limitation, the failure of any collateral
document to create a valid and perfected security interest or lien) other than
due to the act or omission of Lender.

(n) (i) The occurrence and continuation of an “Event of Default” under (and as
defined in) Section 7.01(a) of the First Lien Credit Agreement or (ii) the
acceleration, by the First Lien Lender following the occurrence of an “Event of
Default” under (and as defined in) the First Lien Credit Agreement, of the
obligations under the First Lien Credit Agreement.

Section 7.02 REMEDIES. Upon the occurrence and during the continuance of any
Event of Default: (a) all indebtedness of Borrower under each of the Loan
Documents, any term thereof to the contrary notwithstanding, shall at Lender’s
option and without notice become immediately due and payable without
presentment, demand, protest or notice of dishonor, all of which are hereby
expressly waived by Borrower; and (b) Lender shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including without limitation the right to foreclose upon any or all security for
any credit subject hereto and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Lender may be exercised at any time by Lender and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.

ARTICLE VIII. MISCELLANEOUS

Section 8.01 NO WAIVER. No delay, failure or discontinuance of Lender in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Lender of any breach of or default under any of the Loan Documents must
be in writing and shall be effective only to the extent set forth in such
writing.

 

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Section 8.02 NOTICES. All notices, requests and demands which any party is
required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:

 

BORROWER:

  

SABA SOFTWARE, INC.

2400 BRIDGE PARKWAY

REDWOOD SHORES, CA 94065

ATTN: MARK ROBINSON

FACSIMILE: (650) 581-2545

SUBSIDIARY

GUARANTORS:

  

C/O SABA SOFTWARE, INC.

2400 BRIDGE PARKWAY

REDWOOD SHORES, CA 94065

ATTN: MARK ROBINSON

FACSIMILE: (650) 581-2545

LENDER:

  

VECTOR TRADING (CAYMAN), LP

1 MARKET PLAZA

STEUART TOWER, FLOOR 23

SAN FRANCISCO, CA 94105

ATTN: YUNHEE YOO

FACSIMILE: (415) 293-5100

or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy or
electronic email, upon receipt.

Section 8.03 COSTS AND EXPENSES; INDEMNIFICATION.

(a) Borrower shall pay to Lender immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys’
fees (to include outside counsel fees and all allocated costs of Lender’s
in-house counsel), expended or incurred by Lender in connection with (a) the
negotiation and preparation of this Agreement and the other Loan Documents,
Lender’s continued administration hereof and thereof, and the preparation of any
amendments and waivers hereto and thereto, (b) the enforcement of Lender’s
rights and/or the collection of any amounts which become due to Lender under any
of the Loan Documents, and (c) the reasonable actual charges paid or incurred by
Lender if it elects to employ the services of one or more third persons to
perform financial exams or analyses of Borrower’s and its Subsidiaries’
business/recurring revenue valuation; provided, that so long as no Event of
Default shall have occurred and be continuing, Borrower shall not be obligated
to reimburse Lender for more than 1 financial examination during any calendar
year or more than 1 business/recurring revenue valuation during any calendar
year, and (d) the prosecution or defense of any action in any way related to any
of the Loan Documents, including without limitation, any action for

 

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declaratory relief, whether incurred at the trial or appellate level, in an
arbitration proceeding or otherwise, and including any of the foregoing incurred
in connection with any Insolvency Proceeding (including without limitation, any
adversary proceeding, contested matter or motion brought by Lender or any other
person) relating to Borrower, any Subsidiary Guarantor or any other person or
entity.

(b) Borrower and each Subsidiary Guarantor jointly and severally agrees to
indemnify and hold harmless Lender, its officers, directors, employees and
agents (each an “Indemnified Party”) from and against any and all claims,
damages, losses, liabilities, costs or expenses whatsoever (including reasonable
attorneys fees) which an Indemnified Party may incur or be subject to as a
result of any claim against an Indemnified Party by any Person other than
Borrower or any Subsidiary (except to the extent that such claim by Borrower or
any Subsidiary against any Indemnified Party is unsuccessful) by reason of or in
connection with the execution and delivery of and consummation and performance
of the transactions contemplated by this Agreement or any of the other Loan
Documents; provided, however, that Borrower and each Subsidiary Guarantor shall
not be required to indemnify an Indemnified Party for any claims, damages,
losses, liabilities, costs or expenses to the extent, but only to the extent,
any of the foregoing are caused by the willful misconduct or gross negligence of
such Indemnified Party as finally determined by a court of competent
jurisdiction. Nothing in this Section 8.03 is intended to limit the obligations
of Borrower or any Subsidiary Guarantor to pay its obligations under this
Agreement or the other Loan Documents.

(c) TAXES.

(i) All payments required to be made by or on account of any obligation of
Borrower or any Subsidiary Guarantor under any Loan Document shall be made to
Lender free and clear of, and without deduction for, any and all present and
future Taxes. If Borrower or any Subsidiary Guarantor shall be required by law
to deduct any Taxes from or in respect of any such payment, (A) if such Taxes
are Non-Excluded Taxes, the sum payable by Borrower and each Subsidiary
Guarantor shall be increased as much as shall be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 8.03(c)) Lender receives an amount equal to the sum
it would have received had no such deductions been made, (B) Borrower or such
Subsidiary Guarantor, as applicable, shall make such deductions, and
(C) Borrower or such Subsidiary Guarantor shall pay the full amount deducted to
the relevant taxing or other authority in accordance with applicable law. As
soon as practicable but no later than thirty (30) days after the date of any
payment of Taxes, Borrower or such Subsidiary Guarantor, as applicable, shall
furnish to Lender the original or a certified copy of a receipt evidencing
payment thereof. Borrower and each Subsidiary Guarantor shall indemnify and,
within ten (10) days of demand therefor, pay Lender for the full amount of any
Other Taxes and any Non-Excluded Taxes (including any Taxes imposed by any
jurisdiction on amounts payable under this Section 8.03(c)) paid by Lender and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto, whether or not such Taxes were correctly or legally
asserted. A certificate as to the amount of such payment or liability delivered
to Borrower by Lender shall be conclusive absent manifest error. Borrower and
each Subsidiary Guarantor shall timely pay to the relevant Governmental
Authority in accordance with applicable law any Other Taxes. In addition, if any
change in law shall subject Lender to any Taxes, excluding Connection Income
Taxes and Taxes described in clauses (ii) and (iii) of the definition of
Non-Excluded Taxes (“Increased Cost Taxes”) on its loans, loan principal, or
other obligations, or its deposits, reserves, other liabilities, or capital
attributable thereto, and the result of the foregoing shall be to increase the
cost to Lender of making, continuing or maintaining such Loan or other
obligation, or to reduce the amount of any sum received or receivable by Lender
hereunder, then upon the request of Lender, Borrower and each Subsidiary
Guarantor shall indemnify and, within ten (10) days pay to Lender such
additional amount or amounts as will compensate Lender for such additional costs
incurred or reduction suffered. A certificate of Lender setting forth the
amounts necessary to compensate Lender for any such Increased Cost Taxes and
delivered to Borrower shall be conclusive absent manifest error.

 

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(ii) If Lender is not a U.S. Person, Lender shall deliver to the Borrower on or
prior to the date on which Lender becomes Lender under this Agreement, and from
time to time thereafter as reasonably requested by Borrower, a duly signed
completed copy of whichever of the following is applicable: IRS Form W-8BEN, IRS
Form W-8ECI, or IRS Form W-8IMY. In the case that Lender is not a U.S. Person
that is claiming the benefits of the exemption for portfolio interest pursuant
to Section 881(c) of the IRC, Lender shall to the extent it is legally entitled
to do so also deliver to Borrower a certificate to the effect that Lender is not
a “bank” within the meaning of IRC Section 881(c)(3)(A), a “10 percent
shareholder” of the Borrower within the meaning of IRC Section 881(c)(3)(B), or
a “controlled foreign corporation” described in IRC Section 881(c)(3)(C).
Thereafter, upon request from time to time by Borrower, Lender shall, to the
extent it is legally entitled to do so, deliver to Borrower such other duly
completed and signed copies of one of such IRS W-8 forms (or such successor
forms as shall be adopted from time to time by the relevant United States taxing
authorities), and such supplementary documentation as may then be prescribed
under then current United States laws and regulations, as a basis for claiming
exemption from, or reduction of, United States withholding taxes in respect of
payments to be made to Lender pursuant to this Agreement; provided, however,
that delivery of such documentation shall not be required if in Lender’s
reasonable judgment the completion, execution or submission would subject Lender
to any material unreimbursed cost or expense or would materially prejudice the
legal or commercial position of Lender. Lender agrees that it shall promptly
notify the Borrower if any form or certification previously delivered becomes
inaccurate if such inaccuracy would modify or render invalid any previously
claimed exemption or reduction.

(iii) If a payment made to Lender under this Agreement or any other Loan
Document would be subject to U.S. federal withholding Tax imposed by FATCA if
Lender were to fail to comply with the applicable reporting requirements of
FATCA (including those contained in Section 1471(b) or 1472(b) of the IRC, as
applicable), Lender shall deliver to the Borrower at the time or times
prescribed by law and at such time or times reasonably requested by the Borrower
such documentation prescribed by applicable law (including as prescribed by
Section 1471(b)(3)(C)(i) of the IRC) and such additional documentation
reasonably requested by the Borrower as may be necessary for the Borrower to
comply with its obligations under FATCA and to determine that Lender has
complied with Lender’s obligations under FATCA or to determine the amount to
deduct and withhold from such payment.

The provisions of this Section 8.03 shall survive any assignment of rights by,
or the replacement of Lender, the termination of this Agreement and the payment
in full, satisfaction or discharge of all the obligations of Borrower and each
Subsidiary Guarantor hereunder or any other Loan Document.

Section 8.04 SUCCESSORS, ASSIGNMENT.

(a) This Agreement shall be binding upon and inure to the benefit of the heirs,
executors, administrators, legal representatives, successors and assigns of the
parties; provided however, that neither Borrower nor any Subsidiary Guarantor
may assign or transfer its interests or rights hereunder without Lender’s prior
written consent and any such prohibited assignment shall be absolutely void.
Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender’s rights and
benefits under each of the Loan Documents to any Affiliate of Lender or any bona
fide financial institution engaged in the business of extending credit;
provided, however, that (i) so long as no Default or Event of Default has
occurred and is continuing at the time of such assignment, such assignee shall
be reasonably acceptable to Borrower and (ii) such assignee shall not be a
Direct Competitor. In connection therewith, Lender may disclose all documents
and information which Lender now has or may hereafter acquire relating to any
credit subject hereto, Borrower or its business, any Subsidiary Guarantor or its
business, any guarantor hereunder or the business of such guarantor, or any
collateral required hereunder.

 

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(b) Borrower shall maintain a register, in accordance with Section 5f.103-1(c)
of the United States Treasury Regulations, at its principal office in Redwood
Shores, California for the recordation of the names and addresses of Lender and
its assignees, and the principal amounts (and stated interest) of the Loan owing
to, each such Person pursuant to the terms hereof from time to time (the
“Register”). Borrower shall promptly record on the Register each assignment of
all or part of the Loan by Lender (or any assignee) pursuant to Section 8.04(a).
Borrower and Lender hereby agree that the Loan and the other obligations
evidenced by the Loan Documents are intended to be “registered obligations”
within the meaning of IRC Sections 871(h) and 881(c), and this Section 8.04 and
the other provisions of the Loan Documents shall be interpreted consistently
therewith. The Register shall be available for inspection by Lender (and its
assignees), at any reasonable time and from time to time upon reasonable prior
notice. With respect to any participation sold by Lender or an assignee, Lender
or such assignee shall, acting solely for this purpose as a non-fiduciary agent
of Borrower, maintain a register on which it enters the name and address of each
participant and the principal amounts (and stated interest) of each
participant’s interest in the Loan or other obligations under the Loan Documents
(the “Participant Register”); provided that no such Person shall have any
obligation to disclose all or any portion of the Participant Register (including
the identity of any participant or any information relating to a participant’s
interest in the Loan or other obligations under the Loan Documents) to any
Person except to the extent that such disclosure is necessary to establish that
the Loan or other obligation is in registered form under Section 5f.103-1(c) of
the United States Treasury Regulations. The entries in the Participant Register
shall be conclusive absent manifest error, and Lender or such assignee shall
treat each Person whose name is recorded in the Participant Register as the
owner of such participation for all purposes of this Agreement notwithstanding
any notice to the contrary. Borrower agrees that each participant shall be
entitled to the benefits of Section 8.03 (subject to the requirements and
limitations therein, including the requirements under Section 8.03(c)(ii) (it
being understood that the documentation required under Section 8.03(c)(ii) shall
be delivered to the participating Lender)) to the same extent as if it were
Lender and had acquired its interest by assignment pursuant to this
Section 8.04; provided that such participant shall not be entitled to receive
any greater payment under Section 8.03 with respect to any participation than
its participating Lender would have been entitled to receive, except to the
extent such entitlement to receive a greater payment results from a change in
law that occurs after the participant acquired the applicable participation

Section 8.05 RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, Lender is hereby authorized at any time and from time to time, to
the fullest extent permitted by applicable law, to set off and apply any and all
deposits (general or special, time or demand, provisional or final, in whatever
currency) at any time held and other obligations (in whatever currency) at any
time owing by Lender to or for the credit or the account of Borrower or any
Subsidiary Guarantor against any and all of the obligations to Lender,
irrespective of whether or not Lender shall have made any demand under this
Agreement or any other Loan Document and although such obligations of Borrower
or such Subsidiary Guarantor may be contingent or unmatured or are owed to a
branch or office of Lender different from the branch or office holding such
deposit or obligated on such obligations. The rights of Lender under this
Section 8.05 are in addition to other rights and remedies (including other
rights of setoff) that Lender may have. Lender agrees to notify Borrower or such
Subsidiary Guarantor promptly after any such setoff and application; provided
that the failure to give such notice shall not affect the validity of such
setoff and application.

 

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Section 8.06 GUARANTY.

(a) Each Material Domestic Subsidiary of Borrower party hereto and each Material
Domestic Subsidiary that becomes a guarantor of the Guaranteed Obligations
pursuant to a Joinder Agreement (each, a “Subsidiary Guarantor”) unconditionally
and irrevocably guarantees to Lender the full and prompt payment when due
(whether at stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise) and performance of (i) the obligations of Borrower under
this Agreement, (ii) the obligations of Borrower under the other Loan Documents
and (iii) all other obligations of Borrower to Lender, including, without
limitation, all other advances, debts, obligations and liabilities of Borrower
to Lender, heretofore, now or hereafter made, incurred or created, in each case,
whether voluntary or involuntary and however arising, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether Borrower shall be liable individually or jointly with others, or
whether recovery upon which may be or hereafter becomes unenforceable (the
“Guaranteed Obligations”). The Guaranteed Obligations include interest that, but
for any Insolvency Proceeding, would have accrued on such Guaranteed
Obligations, whether or not a claim is allowed against Borrower for such
interest in any such Insolvency Proceeding.

(i) Notwithstanding any term or provision of this Agreement or any other Loan
Document to the contrary, the maximum aggregate amount for which any Subsidiary
Guarantor shall be liable under the Loan Documents shall not exceed the maximum
amount for which such Subsidiary Guarantor can be liable without rendering this
Agreement or any other Loan Document, as it relates to such Subsidiary
Guarantor, subject to avoidance under applicable requirements of law relating to
fraudulent conveyance or fraudulent transfer, including the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act and Section 548 of title 11
of the United States Code or any applicable provisions of comparable
Requirements of Law (collectively, “Fraudulent Transfer Laws”). Any analysis of
the provisions of this Agreement or any other Loan Document for purposes of
Fraudulent Transfer Laws shall take into account the right of contribution
established in this Section 8.06 and, for purposes of such analysis, give effect
to any discharge of intercompany debt as a result of any payment made by any
Subsidiary Guarantor under any Loan Document.

(ii) To the extent that any Subsidiary Guarantor shall be required under any
Loan Document to pay any portion of any indebtedness under any Loan Document
exceeding the greater of (x) the amount of the economic benefit actually
received by such Subsidiary Guarantor from the loans and other obligations under
the Loan Documents and (y) the amount such Subsidiary Guarantor would otherwise
have paid if such Subsidiary Guarantor had paid the aggregate amount of the
indebtedness and other liabilities under the Loan Documents (excluding the
amount thereof repaid by the Borrower) in the same proportion as such Subsidiary
Guarantor’s net worth on the date enforcement is sought hereunder bears to the
aggregate net worth of all the Subsidiary Guarantors on such date, then such
Subsidiary Guarantor shall be reimbursed by such other Subsidiary Guarantors for
the amount of such excess, pro rata, based on the respective net worth of such
other Subsidiary Guarantors on such date.

(b) Each Subsidiary Guarantor acknowledges and agrees that: (i) the Guaranteed
Obligations are separate and distinct from any debt arising under or in
connection with any other document, including under any provision of this
Agreement other than this Section 8.06, executed at any time by such Subsidiary
Guarantor in favor of Lender; and (ii) such Subsidiary Guarantor shall pay and
perform all of the Guaranteed Obligations as required under this Section 8.06,
and Lender may enforce any and all of its respective rights and remedies
hereunder, without regard to any other document, including any provision of this
Agreement other than this Section 8.06, at any time executed by such Subsidiary
Guarantor in favor of Lender, irrespective of whether any such other document,
or any provision thereof or hereof, shall for any reason become unenforceable or
any of the debt thereunder shall have been discharged, whether by performance,
avoidance or otherwise. Each Subsidiary Guarantor acknowledges that, in
providing benefits to Borrower, Lender is relying upon the enforceability of
this Section 8.06 and the Guaranteed Obligations as separate and distinct debt
of such Subsidiary Guarantor, and each Subsidiary Guarantor agrees that Lender
would be denied the full benefit of its bargain if at any time this Section 8.06
or the Guaranteed Obligations were treated any differently. The fact that the
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this Agreement rather than in a separate guaranty document is for the
convenience of Borrower and Subsidiary Guarantors and shall in no way impair or
adversely affect the rights or benefits of Lender under this Section 8.06. Each
Subsidiary Guarantor agrees to execute and deliver a separate document,
immediately upon request at any time of Lender, evidencing such Subsidiary
Guarantor’s obligations under this Section 8.06. Upon the occurrence of any
Event of Default, a separate action or actions may be brought against any
Subsidiary Guarantor, whether or not Borrower, any other Subsidiary Guarantor or
any other Person is joined therein or a separate action or actions are brought
against Borrower, any such other Subsidiary Guarantor or any such other Person.

(c) To the extent that any court of competent jurisdiction shall impose by final
judgment under applicable law (including the California Uniform Fraudulent
Transfer Act and Sections 544 and 548 of the Bankruptcy Code) any limitations on
the amount of any Subsidiary Guarantor’s liability with respect to the
Guaranteed Obligations that Lender can enforce under this Section 8.06, Lender
by its acceptance hereof accepts such limitation on the amount of such
Subsidiary Guarantor’s liability hereunder to the extent needed to make this
Section 8.06 fully enforceable and nonavoidable.

(d) The liability of any Subsidiary Guarantor under this Section 8.06 shall be
irrevocable, absolute, independent and unconditional, and shall not be affected
by any circumstance that might constitute a discharge of a surety or guarantor
other than the indefeasible payment and performance in full of all Guaranteed
Obligations. In furtherance of the foregoing and without limiting the generality
thereof, each Subsidiary Guarantor agrees as follows:

(i) such Subsidiary Guarantor’s liability hereunder shall be the immediate,
direct, and primary obligation of such Subsidiary Guarantor and shall not be
contingent upon Lender’s exercise or enforcement of any remedy it may have
against Borrower or any other Person, or against any collateral or other
security for any Guaranteed Obligations;

(ii) this Guaranty is a guaranty of payment when due and not merely of
collectibility;

(iii) Lender may enforce this Section 8.06 upon the occurrence of an Event of
Default notwithstanding the existence of any dispute among Lender, on the one
hand, and Borrower or any other Person, on the other hand, with respect to the
existence of such Event of Default;

(iv) such Subsidiary Guarantor’s payment of a portion, but not all, of the
Guaranteed Obligations shall in no way limit, affect, modify or abridge such
Subsidiary Guarantor’s liability for any portion of the Guaranteed Obligations
remaining unsatisfied; and

(v) such Subsidiary Guarantor’s liability with respect to the Guaranteed
Obligations shall remain in full force and effect without regard to, and shall
not be impaired or affected by, nor shall such Subsidiary Guarantor be
exonerated or discharged by, any of the following events:

1) any Insolvency Proceeding;

2) any limitation, discharge, or cessation of the liability of Borrower or any
other Person for any Guaranteed Obligations due to any statute, regulation or
rule of law, or any invalidity or unenforceability in whole or in part of any of
the Guaranteed Obligations or the Loan Documents;

3) any merger, acquisition, consolidation or change in structure of Borrower or
any other guarantor or Person, or any sale, lease, transfer or other disposition
of any or all of the assets or shares of Borrower or any other Person;

 

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4) any assignment or other transfer, in whole or in part, of Lender’s interests
in and rights under this Agreement (including this Section 8.06) or the other
Loan Documents;

5) any claim, defense, counterclaim or setoff, other than that of prior
performance, that Borrower, such Subsidiary Guarantor, any other guarantor or
any other Person may have or assert, including any defense of incapacity or lack
of corporate or other authority to execute any of the Loan Documents;

6) Lender’s amendment, modification, renewal, extension, cancellation or
surrender of any Loan Document or any Guaranteed Obligations;

7) Lender’s exercise or non-exercise of any power, right or remedy with respect
to any Guaranteed Obligations or any collateral therefor;

8) Lender’s vote, claim, distribution, election, acceptance, action or inaction
in any proceeding under any Bankruptcy Law; or

9) any other guaranty, whether by such Subsidiary Guarantor or any other Person,
of all or any part of the Guaranteed Obligations or any other indebtedness,
obligations or liabilities of Borrower to Lender.

(e) Each Subsidiary Guarantor hereby unconditionally consents and agrees that,
without notice to or further assent from such Subsidiary Guarantor:

(i) the principal amount of the Guaranteed Obligations may be increased or
decreased and additional indebtedness or obligations of Borrower under the Loan
Documents may be incurred and the time, manner, place or terms of any payment
under any Loan Document may be extended or changed, by one or more amendments,
modifications, renewals or extensions of any Loan Document or otherwise;

(ii) the time for Borrower’s (or any other Person’s) performance of or
compliance with any term, covenant or agreement on its part to be performed or
observed under any Loan Document may be extended, or such performance or
compliance waived, or failure in or departure from such performance or
compliance consented to, all in such manner and upon such terms as Lender (as
applicable under the relevant Loan Documents) may deem proper;

(iii) Lender may request and accept other guaranties and may take and hold
security as collateral for the Guaranteed Obligations, and may, from time to
time, in whole or in part, exchange, sell, surrender, release, subordinate,
modify, waive, rescind, compromise or extend such other guaranties or security
and may permit or consent to any such action or the result of any such action,
and may apply such security and direct the order or manner of sale thereof; and

(iv) Lender may exercise, or waive or otherwise refrain from exercising, any
other right, remedy, power or privilege even if the exercise thereof affects or
eliminates any right of subrogation or any other right of such Subsidiary
Guarantor against Borrower.

(f) Each Subsidiary Guarantor waives and agrees not to assert:

(i) any right to require Lender to proceed against Borrower, any other guarantor
or any other Person, or to pursue any other right, remedy, power or privilege of
Lender whatsoever;

 

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(ii) the defense of the statute of limitations in any action hereunder or for
the collection or performance of the Guaranteed Obligations;

(iii) any defense arising by reason of any lack of corporate or other authority
or any other defense of Borrower, such Subsidiary Guarantor or any other Person;

(iv) any defense based upon Lender’s errors or omissions in the administration
of the Guaranteed Obligations;

(v) any rights to set-offs and counterclaims;

(vi) without limiting the generality of the foregoing, to the fullest extent
permitted by law, any defenses or benefits that may be derived from or afforded
by applicable law limiting the liability of or exonerating guarantors or
sureties, or that may conflict with the terms of this Section 8.06, including
any and all benefits that otherwise might be available to such Subsidiary
Guarantor under any of California Civil Code Sections 1432, 2809, 2810, 2815,
2819, 2839, 2845, 2848, 2849, 2850, 2899 and 3433 and California Code of Civil
Procedure Sections 580a, 580b, 580d and 726; and

(vii) any and all notice of the acceptance of this guaranty, and any and all
notice of the creation, renewal, modification, extension or accrual of the
Guaranteed Obligations, or the reliance by Lender upon this guaranty, or the
exercise of any right, power or privilege hereunder. The Guaranteed Obligations
shall conclusively be deemed to have been created, contracted, incurred and
permitted to exist in reliance upon this guaranty. Each Subsidiary Guarantor
waives promptness, diligence, presentment, protest, demand for payment, notice
of default, dishonor or nonpayment and all other notices to or upon Borrower,
each Subsidiary Guarantor or any other Person with respect to the Guaranteed
Obligations.

(g) No Subsidiary Guarantor shall have any right to require Lender to obtain or
disclose any information with respect to: the financial condition or character
of Borrower or the ability of Borrower to pay and perform the Guaranteed
Obligations; the Guaranteed Obligations; any collateral or other security for
any or all of the Guaranteed Obligations; the existence or nonexistence of any
other guarantees of all or any part of the Guaranteed Obligations; any action or
inaction on the part of Lender or any other Person; or any other matter, fact or
occurrence whatsoever. Each Subsidiary Guarantor hereby acknowledges that it has
undertaken its own independent investigation of the financial condition of
Borrower and all other matters pertaining to this guaranty and further
acknowledges that it is not relying in any manner upon any representation or
statement of Lender with respect thereto.

(h) Until the Guaranteed Obligations shall be satisfied in full, each Subsidiary
Guarantor shall not have, and shall not directly or indirectly exercise: (i) any
rights that it may acquire by way of subrogation under this Section 8.06, by any
payment hereunder or otherwise; (ii) any rights of contribution,
indemnification, reimbursement or similar suretyship claims arising out of this
Section 8.06; or (iii) any other right that it might otherwise have or acquire
(in any way whatsoever) that could entitle it at any time to share or
participate in any right, remedy or security of Lender as against any Borrower
or other guarantors or any other Person, whether in connection with this
Section 8.06, any of the other Loan Documents or otherwise. If any amount shall
be paid to any Subsidiary Guarantor on account of the foregoing rights at any
time when all the Guaranteed Obligations shall not have been paid in full, such
amount shall be held in trust for the benefit of Lender and shall forthwith be
paid to Lender to be credited and applied to the Guaranteed Obligations, whether
matured or unmatured, in accordance with the terms of the Loan Documents.

 

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(i) All payments on account of all indebtedness, liabilities and other
obligations of Borrower to any Subsidiary Guarantor or to any other Subordinated
Guarantor, whether now existing or hereafter arising, and whether due or to
become due, absolute or contingent, liquidated or unliquidated, determined or
undetermined (the “Subsidiary Guarantor Subordinated Debt”) shall be subject,
subordinate and junior in right of payment and exercise of remedies, to the
extent and in the manner set forth herein, to the prior payment in full in cash
or cash equivalents of the Guaranteed Obligations. As long as any of the
Guaranteed Obligations (other than unasserted contingent indemnification
obligations) shall remain outstanding and unpaid, each Subsidiary Guarantor
shall not accept or receive any payment or distribution by or on behalf of
Borrower or any other Subsidiary Guarantor, directly or indirectly, or assets of
Borrower or any other Subsidiary Guarantor, of any kind or character, whether in
cash, property or securities, including on account of the purchase, redemption
or other acquisition of Subsidiary Guarantor Subordinated Debt, as a result of
any collection, sale or other disposition of collateral, or by setoff, exchange
or in any other manner, for or on account of the Subsidiary Guarantor
Subordinated Debt (“Subsidiary Guarantor Subordinated Debt Payments”) in each
case, except to the extent not prohibited under ARTICLE VI.

If any Subsidiary Guarantor Subordinated Debt Payments shall be received in
contravention of this Section 8.06, such Subsidiary Guarantor Subordinated Debt
Payments shall be held in trust for the benefit of Lender and shall be paid over
or delivered to Lender for application to the payment in full in cash or cash
equivalents of all Guaranteed Obligations remaining unpaid to the extent
necessary to give effect to this Section 8.06 after giving effect to any
concurrent payments or distributions to Lender in respect of the Guaranteed
Obligations.

If, while any Subsidiary Guarantor Subordinated Debt is outstanding, any
proceeding under any Bankruptcy Law is commenced by or against Borrower or its
property, Lender, is hereby irrevocably authorized and empowered (in its own the
name or in the name of any Subsidiary Guarantor or otherwise), but shall have no
obligation, to demand, sue for, collect and receive every payment or
distribution in respect of all Subsidiary Guarantor Subordinated Debt and give
acquittances therefor and to file claims and proofs of claim and take such other
action (including voting the Subsidiary Guarantor Subordinated Debt) as it may
deem necessary or advisable for the exercise or enforcement of any its the
rights or interests; and each Subsidiary Guarantor shall promptly take such
action as Lender may reasonably request: (A) to collect the Subsidiary Guarantor
Subordinated Debt for the account of Lender and to file appropriate claims or
proofs of claim in respect of the Subsidiary Guarantor Subordinated Debt; (B) to
execute and deliver to Lender such powers of attorney, assignments and other
instruments as it may request to enable it to enforce any and all claims with
respect to the Subsidiary Guarantor Subordinated Debt; and (C) to collect and
receive any and all Subsidiary Guarantor Subordinated Debt Payments.

(j) This guaranty is a continuing guaranty and agreement of subordination and
shall continue in effect and be binding upon each Subsidiary Guarantor until
payment and performance in full of the Guaranteed Obligations, including
Guaranteed Obligations which may exist continuously or which may arise from time
to time under successive transactions, and each Subsidiary Guarantor expressly
acknowledges that this guaranty shall remain in full force and effect
notwithstanding that there may be periods in which no Guaranteed Obligations
exist. This guaranty shall continue in effect and be binding upon each
Subsidiary Guarantor until actual receipt by Lender of written notice from such
Subsidiary Guarantor of its intention to discontinue this guaranty as to future
transactions (which notice shall not be effective until noon on the day that is
five Business Days following such receipt); provided that no revocation or
termination of this guaranty shall affect in any way any rights of Lender
hereunder with respect to any Guaranteed Obligations arising or outstanding on
the date of receipt of such notice, including any subsequent continuation,
extension, or renewal thereof, or change in the terms or conditions thereof, or
any Guaranteed Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Lender in existence as of
the date of such revocation (collectively, “Existing Guaranteed Obligations”),
and the sole effect of such notice shall be to exclude from this Guaranty
Guaranteed Obligations thereafter arising which are unconnected to any Existing
Guaranteed Obligations.

 

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(k) This guaranty shall continue to be effective or shall be reinstated and
revived, as the case may be, if, for any reason, any payment of the Guaranteed
Obligations by or on behalf of Borrower (or receipt of any proceeds of
collateral) shall be rescinded, invalidated, declared to be fraudulent or
preferential, set aside, voided or otherwise required to be repaid to Borrower,
its estate, trustee, receiver or any other Person (including under any
Bankruptcy Law), or must otherwise be restored by Lender, whether as a result of
proceedings under any Bankruptcy Law or otherwise. All losses, damages, costs
and expenses that Lender may suffer or incur as a result of any voided or
otherwise set aside payments shall be specifically covered by the indemnity in
favor of Lender contained in Section 8.03.

(l) The extensions of credit provided to or for the benefit of Borrower
hereunder by Lender have been and are to be contemporaneously used for the
benefit of Borrower and each Subsidiary Guarantor. It is the position, intent
and expectation of the parties that Borrower and each Subsidiary Guarantor have
derived and will derive significant and substantial benefits from the extensions
of credit to be made available by Lender under the Loan Documents. Each
Subsidiary Guarantor has received at least “reasonably equivalent value” (as
such phrase is used in Section 548 of the Bankruptcy Code, in Section 3439.04 of
the California Uniform Fraudulent Transfer Act and in comparable provisions of
other applicable law) and more than sufficient consideration to support its
obligations hereunder in respect of the Guaranteed Obligations. Immediately
prior to and after and giving effect to the incurrence of each Subsidiary
Guarantor’s obligations under this Guaranty, such Subsidiary Guarantor will be
solvent.

(m) EACH SUBSIDIARY GUARANTOR ACKNOWLEDGES THAT IT EITHER HAS OBTAINED THE
ADVICE OF LEGAL COUNSEL OR HAS HAD THE OPPORTUNITY TO OBTAIN SUCH ADVICE IN
CONNECTION WITH THE TERMS AND PROVISIONS OF THIS Section 8.06. EACH SUBSIDIARY
GUARANTOR ACKNOWLEDGES AND AGREES THAT EACH OF THE WAIVERS AND CONSENTS SET
FORTH HEREIN IS MADE WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE AND CONSEQUENCES,
THAT ALL SUCH WAIVERS AND CONSENTS HEREIN ARE EXPLICIT AND KNOWING AND THAT EACH
SUBSIDIARY GUARANTOR EXPECTS SUCH WAIVERS AND CONSENTS TO BE FULLY ENFORCEABLE.

 

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Section 8.07 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other Loan
Documents constitute the entire agreement between Borrower, each Subsidiary
Guarantor and Lender with respect to each credit subject hereto and supersede
all prior negotiations, communications, discussions and correspondence
concerning the subject matter hereof. This Agreement may be amended or modified
only in writing signed by Borrower and Lender.

Section 8.08 NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered
into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with, this Agreement or any other of the Loan Documents
to which it is not a party.

Section 8.09 TIME. Time is of the essence of each and every provision of this
Agreement and each other of the Loan Documents.

Section 8.10 SEVERABILITY OF PROVISIONS. If any provision of this Agreement
shall be prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity without
invalidating the remainder of such provision or any remaining provisions of this
Agreement.

Section 8.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be an
original, and all of which when taken together shall constitute one and the same
Agreement. Delivery of an executed counterpart of a signature page of this
Agreement by telecopy and/or electronic mail shall be effective as delivery of a
manually executed counterpart of this Agreement.

Section 8.12 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of laws that would result in the application of the law
of any other jurisdiction.

Section 8.13 ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit
to binding arbitration all claims, disputes and controversies between or among
them (and their respective employees, officers, directors, attorneys, and other
agents), whether in tort, contract or otherwise in any way arising out of or
relating to (i) any credit subject hereto, or any of the Loan Documents, and
their negotiation, execution, collateralization, administration, repayment,
modification, extension, substitution, formation, inducement, enforcement,
default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location
in California selected by the AAA; (ii) be governed by the Federal Arbitration
Act (Title 9 of the United States Code), notwithstanding any conflicting choice
of law provision in any of the documents between the parties; and (iii) be
conducted by the AAA, or such other administrator as the parties shall mutually
agree upon, in accordance with the AAA’s commercial dispute resolution
procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive
of claimed interest, arbitration fees and costs in which case the arbitration
shall be conducted in accordance with the AAA’s optional procedures for large,
complex commercial disputes (the commercial dispute resolution procedures or the
optional procedures for large, complex commercial disputes to be referred to
herein, as applicable, as the “Rules”). If there is any inconsistency between
the terms hereof and the Rules, the terms and procedures set forth herein shall
control. Any party who fails or refuses to submit to arbitration following a
demand by any other party shall bear all costs and expenses incurred by such
other party in compelling arbitration of any dispute. Nothing contained herein
shall be deemed to be a waiver by any party that is a bank of the protections
afforded to it under 12 U.S.C. §91 or any similar applicable state law.

 

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(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The
arbitration requirement does not limit the right of any party to (i) foreclose
against real or personal property collateral; (ii) exercise self-help remedies
relating to collateral or proceeds of collateral such as setoff or repossession;
or (iii) obtain provisional or ancillary remedies such as replevin, injunctive
relief, attachment or the appointment of a receiver, before during or after the
pendency of any arbitration proceeding. This exclusion does not constitute a
waiver of the right or obligation of any party to submit any dispute to
arbitration or reference hereunder, including those arising from the exercise of
the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which
the amount in controversy is $5,000,000.00 or less will be decided by a single
arbitrator selected according to the Rules, and who shall not render an award of
greater than $5,000,000.00. Any dispute in which the amount in controversy
exceeds $5,000,000.00 shall be decided by majority vote of a panel of three
arbitrators; provided however, that all three arbitrators must actively
participate in all hearings and deliberations. The arbitrator will be a neutral
attorney licensed in the State of California or a neutral retired judge of the
state or federal judiciary of California, in either case with a minimum of
ten years experience in the substantive law applicable to the subject matter of
the dispute to be arbitrated. The arbitrator will determine whether or not an
issue is arbitratable and will give effect to the statutes of limitation in
determining any claim. In any arbitration proceeding the arbitrator will decide
(by documents only or with a hearing at the arbitrator’s discretion) any
pre-hearing motions which are similar to motions to dismiss for failure to state
a claim or motions for summary adjudication. The arbitrator shall resolve all
disputes in accordance with the substantive law of California and may grant any
remedy or relief that a court of such state could order or grant within the
scope hereof and such ancillary relief as is necessary to make effective any
award. The arbitrator shall also have the power to award recovery of all costs
and fees, to impose sanctions and to take such other action as the arbitrator
deems necessary to the same extent a judge could pursuant to the Federal Rules
of Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Judgment upon the award rendered by the arbitrator may be entered in any
court having jurisdiction. The institution and maintenance of an action for
judicial relief or pursuit of a provisional or ancillary remedy shall not
constitute a waiver of the right of any party, including the plaintiff, to
submit the controversy or claim to arbitration if any other party contests such
action for judicial relief.

(e) Discovery. In any arbitration proceeding, discovery will be permitted in
accordance with the Rules. All discovery shall be expressly limited to matters
directly relevant to the dispute being arbitrated and must be completed no later
than 20 days before the hearing date. Any requests for an extension of the
discovery periods, or any discovery disputes, will be subject to final
determination by the arbitrator upon a showing that the request for discovery is
essential for the party’s presentation and that no alternative means for
obtaining information is available.

(f) Class Proceedings and Consolidations. No party hereto shall be entitled to
join or consolidate disputes by or against others in any arbitration, except
parties who have executed any Loan Document, or to include in any arbitration
any dispute as a representative or member of a class, or to act in any
arbitration in the interest of the general public or in a private attorney
general capacity.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs
and expenses of the arbitration proceeding.

 

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(h) Real Property Collateral: Judicial Reference. Notwithstanding anything
herein to the contrary, no dispute shall be submitted to arbitration if the
dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such dispute is not submitted to arbitration, the dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with such Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA’s selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators
and the parties shall take all action required to conclude any arbitration
proceeding within 180 days of the filing of the dispute with the AAA. No
arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business or by applicable law or
regulation. If more than one agreement for arbitration by or between the parties
potentially applies to a dispute, the arbitration provision most directly
related to the Loan Documents or the subject matter of the dispute shall
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.

(j) Small Claims Court. Notwithstanding anything herein to the contrary, each
party retains the right to pursue in Small Claims Court any dispute within that
court’s jurisdiction. Further, this arbitration provision shall apply only to
disputes in which either party seeks to recover an amount of money (excluding
attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small
Claims Court.

Section 8.14 CAPITAL REQUIREMENTS.

(a) If, after the date hereof, Lender determines that (i) the adoption of or
change in any law, rule, regulation or guideline regarding capital or reserve
requirements for banks or bank holding companies, or any change in the
interpretation, implementation, or application thereof by any Governmental
Authority charged with the administration thereof, or (ii) compliance by Lender
or its parent bank holding company with any guideline, request or directive of
any such entity regarding capital adequacy (whether or not having the force of
law), has the effect of reducing the return on Lender’s or such holding
company’s capital as a consequence of Lender’s commitments hereunder to a level
below that which Lender or such holding company could have achieved but for such
adoption, change, or compliance (taking into consideration Lender’s or such
holding company’s then existing policies with respect to capital adequacy and
assuming the full utilization of such entity’s capital) by any amount deemed by
Lender to be material, then Lender may notify Borrower thereof. Following
receipt of such notice, Borrower agrees to pay Lender on demand the amount of
such reduction of return of capital as and when such reduction is determined,
payable within 30 days after presentation by Lender of a statement in the amount
and setting forth in reasonable detail Lender’s calculation thereof and the
assumptions upon which such calculation was based. In determining such amount,
Lender may use any reasonable averaging and attribution methods. Borrower shall
only be liable pursuant to this Section 8.14 for any amounts (A) incurred no
more than 120 days prior to the date on which the demand for payment of such
amount is first made to Borrower (provided that if an event or circumstance
giving rise to such amount is retroactive, then the 120-day period referred to
above shall be extended to include the period of retroactive effect thereof),
and (B) to the extent that Lender has required other similarly situated
borrowers or obligors to pay comparable amounts in respect of such increased
costs or reduced returns. If

 

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claiming reimbursement or compensation under this Section 8.14, Lender shall
deliver to Borrower a notice of its intent to make such claim. Each such notice
shall be delivered within 120 days of the date the officer of Lender charged
with the credit responsibility for Borrower and the Loan Documents first becomes
aware of the specific facts on which such claim is to be based and shall include
a certificate setting forth in reasonable detail the amount payable to Lender
under this Section 8.14. Notwithstanding any other provision in this Agreement
or any other Loan Document, Lender shall not be entitled to any reimbursement or
compensation pursuant to this Section 8.14 for any period of time prior to such
notice if Lender shall have not given notice within 120 days of the date the
officer of Lender charged with the credit responsibility for Borrower first
becomes aware of the specific facts on which such claim is to be based. The
determination by Lender of any amount due pursuant to this Section 8.14, as set
forth in a certificate setting forth the calculation thereof in reasonable
detail, shall, in the absence of manifest or demonstrable error, be final and
conclusive and binding on all of the parties hereto.

(b) If Lender requests additional or increased costs referred to in clause
(a) above relative to changed circumstances, then Lender shall use reasonable
efforts to promptly designate a different one of its lending offices or to
assign its rights and obligations hereunder to another of its offices or
branches, if (i) in the reasonable judgment of Lender, such designation or
assignment would eliminate or reduce amounts payable pursuant to clause
(a) above and (ii) in the reasonable judgment of Lender, such designation or
assignment would not subject it to any material unreimbursed cost or expense and
would not otherwise be materially disadvantageous to it. Borrower agrees to pay
all reasonable out-of-pocket costs and expenses incurred by Lender in connection
with any such designation or assignment.

(c) Notwithstanding anything herein to the contrary, the issuance of any rules,
regulations or directions under the Dodd-Frank Wall Street Reform and Consumer
Protection Act and all requests, rules, guidelines or directives thereunder or
issued in connection therewith after the date of this Agreement shall be deemed
to be a change in law, rule, regulation or guideline for purposes of this
Section 8.14 and the protection of this Section 8.14 shall be available to
Lender regardless of any possible contention of the invalidity or
inapplicability of the law, rule, regulation, guideline or other change or
condition which shall have occurred or been imposed, so long as it shall be
customary for lenders or issuing banks affected thereby to comply therewith.

Section 8.15 PATRIOT ACT. Lender hereby notifies Borrower that pursuant to the
requirements of the Patriot Act, it is required to obtain, verify and record
information that identifies Borrower, which information includes the name and
address of Borrower and other information that will allow Lender to identify
Borrower in accordance with the Patriot Act. In addition, if Lender is required
by law or regulation or internal policies to do so, it shall have the right to
periodically conduct (a) Patriot Act searches, OFAC/PEP searches, and customary
individual background checks for Borrower and the Subsidiary Guarantors and
(b) OFAC/PEP searches and customary individual background checks for Borrower’s
and the Subsidiary Guarantors’ senior management and key principals, and
Borrower agrees to cooperate in respect of the conduct of such searches and
further agrees that the reasonable costs and charges for such searches shall be
for the account of Borrower.

Section 8.16 INTEGRATION. This Agreement, together with the other Loan
Documents, reflects the entire understanding of the parties with respect to the
transactions contemplated hereby and shall not be contradicted or qualified by
any other agreement, oral or written, before the date hereof.

Section 8.17 CONFIDENTIALITY. Lender and each of the Loan Parties agrees that
the Confidentiality Agreement, dated as of May 9, 2013 (the “Confidentiality
Agreement”), between Borrower and Vector Capital Corporation, a Delaware
corporation, shall apply as between Lender and each of the Loan Parties as if
Lender were “Vector” or “Receiving Party” thereunder, each of the Loan Parties
was “the Company” or “Disclosing Party” thereunder, and all actions of such
parties relating to

 

-48-

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this Agreement or any of the other Loan Documents were, collectively, the
“Potential Transaction” thereunder. The Confidentiality Agreement shall so apply
until the date that is one year after the repayment in full of the Loan and all
other obligations of the Loan Parties under the Loan Documents.

Section 8.18 ACKNOWLEDGMENTS. Each of the Loan Parties acknowledges that:

(a) it has such knowledge and experience in financial and business matters and
is capable of evaluating the merits and risks of the entering into the
transactions contemplated by this Agreement and the other Loan Documents and
making an informed decision with respect thereto; and

(b) it has been advised by counsel in the negotiation, execution and delivery of
this Agreement and the other Loan Documents.

[Signature page follows]

 

-49-

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the day and year first written above.

BORROWER:

 

SABA SOFTWARE, INC., a Delaware corporation By:   /s/ Peter E. Williams III  
Name:   Peter E. Williams III   Title:   Executive Vice President

 

SUBSIDIARY GUARANTORS: HAL ACQUISITION SUB INC., a Delaware corporation By:  
/s/ Peter E. Williams III   Name:   Peter E. Williams III   Title:   President

 

HUMANCONCEPTS, LLC, a California limited liability company By:   /s/ Peter E.
Williams III   Name:   Peter E. Williams III   Title:   President

Signature Page to Credit Agreement

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LENDER:

VECTOR TRADING (CAYMAN), LP,

an exempted limited partnership organized under the laws of the Cayman Islands

  By:    VCP CREDIT, L.L.C., its general partner   By:   /s/ David Baylor    
Name:   David Baylor     Title:   Chief Operating Officer

Signature Page to Credit Agreement

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EXHIBIT A TO

CREDIT AGREEMENT

[FORM OF] COMPLIANCE CERTIFICATE

VECTOR TRADING (CAYMAN), LP

1 MARKET PLAZA

STEUART TOWER, FLOOR 23

SAN FRANCISCO, CA 94105

ATTN: YUNHEE YOO

FACSIMILE: (415) 293-5100

This Compliance Certificate is furnished pursuant to that certain Credit
Agreement, dated as of July 5, 2013 (as amended, restated, supplemented, or
otherwise modified from time to time, the “Credit Agreement”) among SABA
SOFTWARE, INC., a Delaware corporation (“Borrower”), each of the Domestic
Subsidiaries of Borrower party thereto as Subsidiary Guarantors (each a
“Subsidiary Guarantor” and collectively the “Subsidiary Guarantors”), and VECTOR
TRADING (CAYMAN), LP, an exempted limited partnership organized under the laws
of the Cayman Islands (together with its registered successors and assigns,
“Lender”). Unless otherwise defined herein, the terms used in this Compliance
Certificate have the meanings ascribed thereto in the Credit Agreement.

The undersigned hereby certifies that:

1. I am the duly elected [chief executive] [chief financial] officer of
Borrower;

2. I have reviewed the terms of the Credit Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the transactions
and conditions of Borrower and its Subsidiaries during the [fiscal quarter]
[fiscal year] covered by the attached financial statements;

3. The examinations described in paragraph 2 did not disclose, and we have no
knowledge of, the existence of any condition or the occurrence of any event
which constitutes a Default or an Event of Default, during or at the end of the
[fiscal quarter] [fiscal year] covered by the attached financial statements or
as of the date of this Compliance Certificate, except as set forth below;

4. The financial statements required by Section 5.03 of the Credit Agreement and
being furnished to you concurrently with this Compliance Certificate present
fairly, in all material respects, the financial condition of Borrower, as of the
date and for the [fiscal quarter] [fiscal year] covered thereby; and

5. Schedule I hereto sets forth financial data and computations evidencing
Borrower’s compliance with certain covenants of the Credit Agreement, including
Section 5.09, Section 6.03, Section 6.04, Section 6.05, Section 6.06 and
Section 6.07 thereof, all of which data and computations are, to the best of my
knowledge, true, complete and correct and have been made in accordance with the
relevant Sections of the Credit Agreement.

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Described below are the exceptions, if any, to paragraph 3 by listing, in
detail, the nature of the condition or event, the period during which it has
existed and the action which Borrowers have taken, are taking, or proposes to
take with respect to each such condition or event:

 

       

The foregoing certifications, together with the computations set forth in
Schedule I hereto and the financial statements delivered with this Compliance
Certificate in support hereof, are made and delivered this              day of
                     201  .

 

SABA SOFTWARE, INC.,

a Delaware corporation

By:       Name:       Title:   [Chief Executive] [Chief Financial] Officer

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EXHIBIT B TO

CREDIT AGREEMENT

[FORM OF] JOINDER AGREEMENT

This JOINDER AGREEMENT (this “Agreement”), dated as of [            ,      201_
is made by [            ] (the “Specified Subsidiary”) and the other parties
listed on the signature pages hereof in favor of VECTOR TRADING (CAYMAN), LP, an
exempted limited partnership organized under the laws of the Cayman Islands
(together with its registered successors and assigns, “Lender”), pursuant to
that certain Credit Agreement, dated as of July 5, 2013 (as amended, restated,
supplemented, or otherwise modified from time to time, the “Credit Agreement”),
by and among Saba Software, Inc., a Delaware corporation (“Borrower”), each
Material Domestic Subsidiary of Borrower party thereto as a Subsidiary Guarantor
and Lender. Each capitalized term used, but not otherwise defined herein, has
the meaning ascribed thereto in the Credit Agreement.

WHEREAS, under the terms and conditions of the Credit Agreement, each Material
Domestic Subsidiary, including without limitation, the Specified Subsidiary, is
required to execute and deliver to Lender this Agreement;

NOW, THEREFORE, in consideration of the foregoing and for other valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the undersigned hereby agree as follows with Lender:

1. The Specified Subsidiary hereby acknowledges, agrees and confirms that, by
its execution and delivery of this Agreement, the Specified Subsidiary: (a) will
be deemed to be a party to the Credit Agreement and a “Subsidiary Guarantor” and
a “Material Domestic Subsidiary” for all purposes of the Credit Agreement and
the other Loan Documents; (b) shall have all of the obligations of a Subsidiary
Guarantor and a Material Domestic Subsidiary under the Credit Agreement and the
other Loan Documents; (c) ratifies, as of the date hereof, and agrees to be
bound by, all of the terms, provisions and conditions applicable to the
Subsidiary Guarantors under the Credit Agreement and the other Loan Documents,
including, without limitation, Section 8.06 thereof; and (d) waives acceptance
by Lender of this Agreement, the guaranty by the Specified Subsidiary under
Section 8.06 of the Credit Agreement, and the other agreements and obligations
of the Specified Subsidiary under the Loan Documents. Without limiting the
generality of the foregoing, the Specified Subsidiary, jointly and severally,
together with all other Subsidiary Guarantors, hereby unconditionally and
irrevocably guarantees to Lender, and its respective successors, endorsees,
transferees and assigns, the full and prompt payment when due (whether at stated
maturity, by required prepayment, declaration, acceleration, demand or
otherwise) and performance of (i) the obligations of Borrower under the Credit
Agreement, (ii) the obligations of Borrower under the other Loan Documents, and
(iii) all other obligations of Borrower to Lender, including, without
limitation, all other advances, debts, obligations and liabilities of Borrower
to Lender, heretofore, now or hereafter made, incurred or created, in each case,
whether voluntary or involuntary and however arising, whether due or not due,
absolute or contingent, liquidated or unliquidated, determined or undetermined,
and whether Borrower shall be liable individually or jointly with others, or
whether recovery upon which may be or hereafter becomes unenforceable. The
Specified Subsidiary hereby further notifies Lender that: (A) it has received
and reviewed all of the Loan Documents; and (B) the notice information for the
Specified Subsidiary for all purposes under the Loan Documents shall be

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c/o SABA SOFTWARE, INC.

2400 Bridge Parkway

Redwood Shores, CA 94065

Attn: Mark Robinson

Facsimile: (650) 581-2545

2. Each party hereto other than the Specified Subsidiary hereby acknowledges the
foregoing, consents (without implying the need for any such consent) thereto,
and represents, warrants and confirms to Lender that, both before and after
giving effect to this Agreement: (a) no Default or Event of Default has occurred
and is continuing; and (b) all of the Loan Documents to which such party is a
party remain in full force and effect as an enforceable obligation of such
party, except as limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws of general applicability affecting the enforceability of
creditor rights and to general principles of equity.

3. Each party hereto hereby represents and warrants that (a) it is duly
organized and existing and it has full power and authority to take, and has
taken, all action necessary to execute and deliver this Agreement and any other
documents required or permitted to be executed or delivered by it in connection
with this Agreement, and to fulfill its obligations hereunder and under the Loan
Documents; (b) no notices to, or consents, authorizations or approvals of, any
Person are required (other than any already given or obtained) for its due
execution and delivery by such Person of, and performance by such Person of its
obligations under, this Agreement and the other Loan Documents; and (c) this
Agreement has been duly executed and delivered by it and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with the
terms hereof, except as limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforceability
of creditor rights and to general principles of equity.

4. Each party hereto hereby agrees to execute and deliver such other
instruments, and take such other action, as Lender may reasonably request in
connection with the transactions contemplated by this Agreement, including the
delivery of any notices or other documents or instruments to Lender that may be
required under the Loan Documents.

5. This Agreement may be executed in any number of counterparts and all of such
counterparts taken together shall be deemed to constitute one and the same
agreement. Each of the parties hereto understands and agrees that this document
may be delivered by any party thereto either in the form of an executed original
or an executed original sent by facsimile transmission to be followed promptly
by delivery of a hard copy original, and that receipt by Lender of a facsimile
transmitted document purportedly bearing the signature of the parties hereto
shall bind such person with the same force and effect as the delivery of a hard
copy original. Any failure by Lender to receive the hard copy executed original
of such document shall not diminish the binding effect of receipt of the
facsimile transmitted executed original of such document of the party whose hard
copy page was not received by Lender.

6. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAWS THAT WOULD RESULT IN THE APPLICATION OF ANY OTHER
JURISDICTION.

[Signatures on Following Page]

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IN WITNESS WHEREOF, each of the parties set forth below (including the Specified
Subsidiary) has caused this Agreement to be executed and delivered by one of its
duly authorized officers as of the day and year first written above.

 

SPECIFIED SUBSIDIARY: [                    ] By:    

Name:     Title:    

 

BORROWER:

SABA SOFTWARE, INC.,

a Delaware corporation

By:    

Name:     Title:    

 

SUBSIDIARY GUARANTORS: [                    ] By:    

Name:     Title:    

 

Acknowledged and Accepted:

VECTOR TRADING (CAYMAN), LP,

an exempted limited partnership organized

under the laws of the Cayman Islands

 

By: VCP CREDIT, L.L.C., its general partner   By:    

  Title:    

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EXHIBIT D TO

CREDIT AGREEMENT

[FORM OF] PROMISSORY NOTE

 

$25,000,000.00    Palo Alto, California    July 5, 2013

FOR VALUE RECEIVED, the undersigned SABA SOFTWARE, INC., a Delaware corporation
(“Borrower”) promises to pay to VECTOR TRADING (CAYMAN), LP, an exempted limited
partnership organized under the laws of the Cayman Islands (together with its
registered successors and assigns, “Lender”), in lawful money of the United
States of America and in immediately available funds, the principal sum of
Twenty Five Million Dollars ($25,000,000.00), or so much thereof as may be
outstanding, with interest thereon, at the rates specified herein and on the
dates specified in the Credit Agreement.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each
definition, any other term defined in this Promissory Note shall have the
meaning set forth at the place defined, and any capitalized terms used herein
without definition shall have the meaning set forth in that certain Credit
Agreement, dated as of July 5, 2013 (as amended, restated, supplemented or
otherwise modified from time to time, the “Credit Agreement”), among Borrower,
the Subsidiary Guarantors party thereto from time to time, and Lender:

(a) “Applicable Margin” means, as of any date of determination 9.5 percentage
points per annum; provided that upon the occurrence of a NASDAQ Listing Event
and for so long as a NASDAQ Listing Event continues, “Applicable Margin” shall
mean, as of any date of determination 8.5 percentage points per annum.

(b) “Business Day” means any day except a Saturday, Sunday or any other day on
which commercial banks in California are authorized or required by law to close.

(c) “LIBOR” means, for any day, the rate of interest equal to the Daily Three
Month LIBOR Rate then in effect for delivery for a three (3) month period.

INTEREST:

(d) Interest. Except as otherwise set forth in this Promissory Note, the
outstanding principal balance of this Promissory Note shall bear interest
(computed on the basis of a 360-day year, actual days elapsed) at LIBOR as in
effect as of the date hereof plus (i) the Applicable Margin and (ii) 2.0
percentage points, unless and until Borrower’s EBITDA for the trailing twelve
(12) months as stated on any of Borrower’s quarterly financial statements
delivered to Lender is greater than $15,000,000.

(e) Payment of Interest. Interest accrued on this Promissory Note shall be
payable quarterly in arrears on the first Business Day of each of January,
April, July and October using a three hundred sixty (360) day year composed of
twelve (12) months of thirty (30) days each, except that the interest due and
payable for a period less than a full month shall be calculated by multiplying
the actual number of days elapsed in such period by a daily rate based on said
three hundred sixty (360) day year. Interest shall accrue from, and including,
the first (1st) day of the prior calendar month and ending on the last day of
the prior calendar month; in each case without adjustment for any Business Day
convention; provided that the first accrual period shall commence on the date
hereof.

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(f) Default Interest. From and after the Maturity Date of this Promissory Note,
or such earlier date as all principal owing hereunder becomes due and payable by
acceleration or otherwise, or at Lender’s option upon the occurrence, and during
the continuance of an Event of Default, the outstanding principal balance of
this Promissory Note shall bear interest at an increased rate per annum
(computed on the basis of a 360-day year, actual days elapsed) equal to two
percent (2%) above LIBOR as in effect as of the date hereof plus (i) the
Applicable Margin and (ii) 2.0 percentage points, unless and until Borrower’s
EBITDA for the trailing twelve (12) months as stated on any of Borrower’s
quarterly financial statements delivered to Lender is greater than $15,000,000;
provided, however, that if none of the remedies set forth in Section 7.02 have
been exercised, such rate shall be equal to: (A) in the ninety days following
the first one hundred eighty days in which such Event of Default exists and
continues, three percent (3%) above LIBOR as in effect as of the date hereof
plus (I) the Applicable Margin and (II) 2.0 percentage points, unless and until
Borrower’s EBITDA for the trailing twelve (12) months as stated on any of
Borrower’s quarterly financial statements delivered to Lender is greater than
$15,000,000; and (B) for each day after the first two hundred seventy days in
which such Event of Default exists and continues, four percent (4%) above LIBOR
as in effect as of the date hereof plus (X) the Applicable Margin and (Y) 2.0
percentage points, unless and until Borrower’s EBITDA for the trailing twelve
(12) months as stated on any of Borrower’s quarterly financial statements
delivered to Lender is greater than $15,000,000.

REPAYMENT:

(g) Repayment. Borrower may from time to time during the term of this Promissory
Note, partially or wholly repay this Promissory Note, subject to all of the
limitations, terms and conditions of this Promissory Note, the Credit Agreement,
and of any document executed in connection with or governing this Promissory
Note. The unpaid principal balance of this Promissory Note at any time shall be
the total amounts advanced hereunder by the holder hereof less the amount of
principal payments made hereon by or for Borrower, which balance may be endorsed
hereon from time to time by the holder. The outstanding principal balance of
this Promissory Note shall be due and payable in full on July 5, 2018.

EVENTS OF DEFAULT:

(h) This Promissory Note is made pursuant to and is subject to the terms and
conditions of the Credit Agreement. Any default in the payment or performance of
any obligation under this Promissory Note, or any defined event of default under
the Credit Agreement, shall constitute an “Event of Default” under this
Promissory Note.

MISCELLANEOUS:

(i) Remedies. Upon the occurrence and during the continuance of any Event of
Default, the holder of this Promissory Note, at the holder’s option, may declare
all sums of principal and interest outstanding hereunder to be immediately due
and payable without presentment, demand, notice of nonperformance, notice of
protest, protest or notice of dishonor, all of which are expressly waived by
Borrower, and the obligation, if any, of the holder to extend any further credit
hereunder shall immediately cease and terminate. Borrower shall pay to the
holder immediately upon demand the full amount of all payments, advances,
charges, costs and expenses, including reasonable attorneys’ fees (to include
outside counsel fees and all allocated costs of the holder’s in-house counsel),
expended or incurred by the holder in connection with the enforcement of the
holder’s rights and/or the collection of any amounts which become due to the
holder under this Promissory Note, and the prosecution or defense

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of any action in any way related to this Promissory Note, including without
limitation, any action for declaratory relief, whether incurred at the trial or
appellate level, in an arbitration proceeding or otherwise, and including any of
the foregoing incurred in connection with any bankruptcy proceeding (including
without limitation, any adversary proceeding, contested matter or motion brought
by Lender or any other person) relating to Borrower or any other person or
entity.

(j) Intercreditor Agreement. Anything herein to the contrary notwithstanding,
the liens and security interests securing the obligations evidenced by this
Promissory Note, the exercise of any right or remedy with respect thereto, and
certain of the rights of the holder hereof are subject to the provisions of the
Intercreditor Agreement. In the event of any conflict between the terms of the
Intercreditor Agreement and this Promissory Note, the terms of the Intercreditor
Agreement shall govern and control.

(k) Registered Obligation. The Borrower shall promptly record in the Register
pursuant to Section 8.04(b) any assignment of this Promissory Note.
Notwithstanding anything else in this Promissory Note and the Credit Agreement
to the contrary, the right to the principal of, and interest on, the Loan shall
be transferred only if the transfer is recorded in the Register or if the
transfer is otherwise made in a manner consistent with the “registered
obligation” requirements as set forth in Section 8.04(b). This Promissory Note
may not at any time be endorsed to bearer.

(l) ORIGINAL ISSUE DISCOUNT. THIS PROMISSORY NOTE IS ISSUED WITH OID. A HOLDER
OF THIS PROMISSORY NOTE MAY CONTACT THE CHIEF FINANCIAL OFFICER, AT THE OFFICES
OF THE BORROWER, AT 2400 BRIDGE PARKWAY, REDWOOD SHORES, CA 94065 FOR
INFORMATION CONCERNING THE ISSUE PRICE, AMOUNT OF OID AND YIELD TO MATURITY OF
THIS PROMISSORY NOTE.

(m) Governing Law. This Promissory Note shall be governed by and construed in
accordance with the laws of the State of California, without regard to
principles of conflicts of laws that would result in the application of the law
of any other jurisdiction.

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the
date first written above.

 

SABA SOFTWARE, INC. By:    

Name:     Title: