**Exhibit 10.1**

 

**LOAN ANDSECURITY AGREEMENT**

 

This LOAN ANDSECURITY AGREEMENT (this “Agreement”) dated as of August 25, 2005, between**SILICON VALLEY BANK**, a Californiachartered bank, with its principal place of business at 3003 Tasman Drive,Santa Clara, California 95054 and with a loan production office located at OneNewton Executive Park, Suite 200, 2221 Washington Street, Newton,Massachusetts 02462 (“Bank”) and **CLEARSTORYSYSTEMS, INC.**, a Delaware corporation (“Borrower”), provides theterms on which Bank shall extend credit to Borrower and Borrower shall repayBank. The parties agree as follows:

 

**1****              ACCOUNTING AND OTHER TERMS**

 

Accountingterms not defined in this Agreement shall be construed following GAAP.  Except as otherwise specified, calculationsand determinations must be made following GAAP. The term “financial statements” includes the notes and schedulesattached thereto.  The terms “including”and “includes” always mean “including (or includes) without limitation,” inthis or any Loan Document.  Capitalizedterms in this Agreement shall have the meanings set forth in Article 13.  All other terms contained in this Agreement,unless otherwise indicated, shall have the meaning provided by the Code, to theextent such terms are defined therein.

 

**2****              LOAN AND TERMS OF PAYMENT**

 

## **2.1****          Promise to Pay**.  Borrower hereby unconditionally promises topay Bank the unpaid principal amount of all Credit Extensions and interest onthe unpaid principal amount of the Credit Extensions as and when due inaccordance with this Agreement.

 

### **2.1.1****       Revolving Advances**.

 

#### (a)           Revolving LineAvailability. Bank shall make Advances not exceeding the following (“Revolving LineAvailability”): (i) the Revolving Line, minus (ii) the aggregate outstandingbalance of all outstanding Letters of Credit (including drawn but unreimbursedLetters of Credit), plus an amount equal to any Letter of Credit Reserves,minus (iii) the FX Reserve, and minus (iv) the aggregate outstandingAdvances hereunder.  Amounts borrowedunder this Section may be repaid and reborrowed during the term of thisAgreement.

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#### (b)           Borrowing Procedure.  To obtain an Advance,Borrower must notify Bank (which notice shall be irrevocable) by facsimile ortelephone by 3:00 p.m. Eastern time on the Business Day the Advance is tobe made.  If such notification is bytelephone, Borrower must promptly confirm the notification by delivering toBank a completed Payment/Advance Form.  Bankshall credit Advances to Borrower’s deposit account.  Bank may make Advances under this Agreementbased on instructions from a Responsible Officer or his or her designee orwithout instructions if the Advances are necessary to meet Obligations whichhave become due.  Bank may rely on anytelephone notice given by a person whom Bank reasonably believes is aResponsible Officer or designee. Borrower shall indemnify Bank for any lossBank suffers due to such reliance.

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#### (c)           Interest Rate.   The principal amountsoutstanding under the Revolving Line shall accrue interest at a per annum rateequal to the aggregate of the Prime Rate and one half of one percent (0.5%), whichinterest shall be payable monthly.

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#### (d)           Termination; Repayment.  The Revolving Lineterminates on the Maturity Date, when the principal amount of all Advances, theunpaid interest thereon, and all other Obligations relating to the RevolvingLine shall be immediately due and payable.

 

### **2.1.2****       Letters of Credit Sublimit**.

 

#### (a)           Bank shall issue or haveissued Letters of Credit for Borrower’s account not exceeding Revolving LineAvailability.  The face amount ofoutstanding Letters of Credit (including drawn but unreimbursed Letters ofCredit and any Letter of Credit Reserve) may not exceed Revolving LineAvailability.  Borrower’s Letter ofCredit reimbursement obligation shall be secured by cash on terms acceptable toBank on and after (i) the Maturity Date, or (ii) the termination ofthe Revolving Line by Borrower, or (iii) the occurrence of an Event ofDefault hereunder.  All Letters of Creditshall be in form and substance acceptable to Bank in its sole discretion, and

 

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#### shallbe subject to the terms and conditions of Bank’s standard Application andLetter of Credit Agreement (“Letter of Credit Application”).  Borrower agrees to execute any furtherdocumentation in connection with the Letters of Credit as Bank may reasonablyrequest.

 

#### (b)           The obligation of Borrowerto immediately reimburse Bank for drawings made under Letters of Credit shallbe absolute, unconditional and irrevocable, and shall be performed strictly inaccordance with the terms of this Agreement and such Letters of Credit, and theLetter of Credit Application.  Borrowershall indemnify, defend, protect, and hold Bank harmless from any loss, cost,expense or liability, including, without limitation, reasonable attorneys’fees, arising out of or in connection with any Letters of Credit, other thanlosses, costs, expenses or liabilities arising out of or relating to Bank’sgross negligence or willful misconduct.

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#### (c)           Borrower may request thatBank issue a Letter of Credit payable in a currency other than United StatesDollars.  If a demand for payment is madeunder any such Letter of Credit, Bank shall treat such demand as an Advance toBorrower of the equivalent of the amount thereof (plus fees and charges inconnection therewith such as wire, cable, SWIFT or similar charges) in UnitedStates currency at the then prevailing rate of exchange in San Francisco,California, for sales of that other currency for transfer to the country ofwhich it is the currency.

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#### (d)           Upon the issuance of any Letterof Credit payable in a currency other than United States Dollars, Bank shallcreate a reserve under the Revolving Line for protection against fluctuationsin currency exchange rates, in an amount equal to ten percent (10%) of the faceamount of such Letter of Credit (the “Letter of Credit Reserve”).  The amount of the Letter of Credit Reservemay be amended by Bank from time to time to account for fluctuations in theexchange rate.  The availability of fundsunder the Revolving Line shall be reduced by the amount of the Letter of CreditReserve for as long as such Letter of Credit remains outstanding.

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### **2.1.3****       Foreign Exchange Sublimit**. Borrowermay enter into foreign exchange forward contracts with Bank under whichBorrower commits to purchase from or sell to Bank a set amount of foreigncurrency more than one (1) Business Day after the contract date (the “FXForward Contract”). Bank shall subtract 10% of each outstanding FX ForwardContract (the “FX Reserve”) from the foreign exchange sublimit, which sublimitis a maximum of Revolving Line Availability. The total FX Forward Contracts at any one time may not exceed ten (10) timesthe amount of the FX Reserve.  Bank mayterminate the FX Forward Contracts if an Event of Default occurs.** **TheObligations of Borrower relating to this Section may not exceed RevolvingLine Availability.

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### **2.1.4****       Cash Management Services Sublimit**.  Borrower may request and utilize the Bank’s cashmanagement services (the “Cash Management Services”), which may includemerchant services, direct deposit of payroll, business credit card, and checkcashing services identified in the various cash management services agreementsrelated to such Cash Management Services. The maximum amount of Obligations relating to Cash Management Servicesshall not exceed Revolving Line Availability (the “Cash Management ServicesSublimit”).  The aggregate amountsutilized under the Cash Management Services Sublimit shall at all times reducethe amount otherwise available for Credit Extensions under the RevolvingLine.  Any amounts Bank pays on behalf ofBorrower or any amounts that are not paid by Borrower to Bank for any CashManagement Services will be treated as Advances under the Revolving Line andwill accrue interest at the interest rate applicable to Advances.

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### **2.1.5****       Undisbursed Credit Extensions**.  Bank’s obligation to lend the undisbursedportion of the Obligations shall terminate if, in Bank’s sole discretion, therehas been a Material Adverse Change, or there has been any material adverse deviationby Borrower from the most recent business plan of Borrower presented to andaccepted by Bank prior to the execution of this Agreement.

 

## **2.2****          Interest Rate.**

 

#### (a)           Default Rate. After an Event of Default, Obligations shall bear interest at fivepercent (4.0%) above the rate effective immediately before the Event ofDefault.  

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#### (b)           Adjustment to InterestRate. The applicable interest rate hereunder shallincrease or decrease when the Prime Rate changes. 

 

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#### (c)           360-Day Year.  Interest is computed on thebasis of a three hundred sixty (360) day year for the actual number of dayselapsed.

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#### (d)           Debit of Accounts.  Bank may debit any ofBorrower’s deposit or operating accounts, including Account Number XXXXXXXXXX,for principal and interest payments when due, or any other amounts Borrowerowes Bank, when due. Bank shall promptly notify Borrower after it debitsBorrower’s accounts.  These debits shallnot constitute a set off.

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#### (e)           Payments.  Interest is payable monthlyon the first calendar day of each month. Payments received after 12:00 noon Eastern time are considered receivedat the opening of business on the next Business Day.  When a payment is due on a day that is not aBusiness Day, the payment is due the next Business Day and additional fees orinterest, as applicable, shall continue to accrue.

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#### (f)            Prepayment.  Borrower has the option, atany time upon thirty (30) days’ prior written notice to Bank, to terminate thisAgreement by paying to Bank, in cash, the Obligations in full, without premiumor penalty. If Borrower has sent a notice of termination pursuant to theprovisions of this Section, then Bank’s obligations to extend credit hereundershall terminate and Borrower shall be obligated to repay the Obligations infull, without premium or penalty, on the date set forth as the date oftermination of this Agreement in such notice (unless due earlier pursuant tothis Agreement).  

 

## **2.3****          Fees**.  Borrower shall pay to Bank:

 

#### (a)           Commitment Fee.  A fully earned, non-refundablecommitment fee of $15,000.00 due and payable on the Closing Date; and

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#### (b)           Unused Revolving LineFacility Fee. In addition to the foregoing, as compensation for Bank’s maintenance ofsufficient funds available for such purpose, Bank shall have earned a fee (the “UnusedRevolving Line Facility Fee”), which fee shall be paid quarterly, in arrears,on a calendar year basis, in an amount equal to one quarter of one percent (0.25%)per annum of the average unused portion of the Revolving Line, as reasonably determinedby Bank. Borrower shall not be entitled to any credit, rebate or repayment ofany Unused Revolving Line Facility Fee previously earned by Bank pursuant tothis Section notwithstanding any termination of the within Agreement, orsuspension or termination of Bank’s obligation to make loans and advanceshereunder; and

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#### (c)           Bank Expenses.  All Bank Expenses(including reasonable attorneys’ fees and expenses) incurred through and afterthe Closing Date, when due.

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**3****              CONDITIONS OF LOANS**

 

## **3.1****          Conditions Precedent to Initial Credit Extension**.  Bank’s obligation to makethe initial Credit Extension is subject to the condition precedent that Bankshall have received, in form and substance satisfactory to Bank, such documents,and completion of such other matters, as Bank may reasonably deem necessary orappropriate, including, without limitation, the following:

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#### (a)           this Agreement;

 

#### (b)           a certificate of theSecretary of Borrower with respect to articles, bylaws, incumbency andresolutions authorizing the execution and delivery of this Agreement, the LoanDocuments, and all transactions related thereto;

 

#### (c)           Perfection Certificate byBorrower;

 

#### (d)           a legal opinion of Borrower’sand Guarantor’s counsel (authority and enforceability);

 

#### (e)           Guaranty by the Guarantor;

 

#### (f)            Subordination Agreementfrom Guarantor;

 

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#### (g)           consent of Senior Lender; 

 

#### (h)           landlord’s waiver; 

 

#### (i)            Securities Account ControlAgreement;

 

#### (j)            insurance certificate;

 

#### (k)           payment of the fees andBank Expenses;

 

#### (l)            Certificate of ForeignQualification (if applicable); 

 

#### (m)          Certificate of GoodStanding/Legal Existence; and

 

#### (n)           such other documents, andcompletion of such other matters, as Bank may reasonably deem necessary orappropriate.

 

## **3.2****          Conditions Precedent to all Credit Extensions**.  Bank’s obligations to makeeach Credit Extension, including the initial Credit Extension, is subject tothe following:

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#### (a)           timely receipt of anyPayment/Advance Form; and

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#### (b)           the representations andwarranties in Article 5 shall be true in all material respects on the dateof the Payment/Advance Form and on the effective date of each CreditExtension and no Event of Default shall have occurred and be continuing, orresult from the Credit Extension. Each Credit Extension is Borrower’srepresentation and warranty on that date that the representations andwarranties in Article 5 remain true in all material respects; provided,however, that those representations and warranties expressly referring toanother date shall be true, in all material respects, only as of such date.

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**4****              CREATION OF SECURITY INTEREST**

 

## **4.1****          Grant of Security Interest**.  Borrower hereby grants Bank, to secure thepayment and performance in full of all of the Obligations and the performanceof each of Borrower’s duties under the Loan Documents, a continuing securityinterest in, and pledges and assigns to Bank, the Collateral, wherever located,whether now owned or hereafter acquired or arising, and all proceeds andproducts thereof.  Subject to Section 5.2,Borrower warrants and represents that the security interest granted hereinshall be a first priority security interest in the Collateral.

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Exceptas noted on the Perfection Certificate, Borrower is not a party to, nor is boundby, any material license (other than over the counter software that iscommercially available to the public) or other material agreement with respectto which Borrower is the licensee that prohibits or otherwise restrictsBorrower from granting a security interest in Borrower’s interest in suchlicense or agreement or any other property. Borrower shall provide written notice to Bank within ten (10) daysof entering or becoming bound by, any such license or agreement which isreasonably likely to have a material impact on Borrower’s business or financialcondition.  Borrower shall take suchsteps as Bank reasonably requests to obtain the consent of, authorization by orwaiver by, any person whose consent or waiver is necessary for all suchlicenses or contract rights to be deemed “Collateral” and for Bank to have asecurity interest in it that might otherwise be restricted or prohibited by lawor by the terms of any such license or agreement, whether now existing orentered into in the future.

 

IfBorrower shall, at any time, become aware that it has acquired a material commercialtort claim, Borrower shall promptly notify Bank in a writing signed by Borrowerwhich provides a brief summary of the details thereof and grant to Bank in suchwriting a security interest therein and in the proceeds thereof, all upon theterms of this Agreement, with such writing to be in form and substance reasonablysatisfactory to Bank.

 

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## **4.2****          Termination by Borrower**.

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Borrower mayterminate this Agreement by sending written notice to Bank and paying in fullall Obligations.  If this Agreement isterminated, Bank’s lien and security interest in the Collateral shall continueuntil Borrower fully satisfies the Obligations.

 

## **4.3****          Authorization to File Financing Statements**.  Borrower hereby authorizesBank to file UCC financing statements, without notice to Borrower, with allappropriate jurisdictions in order to perfect or protect Bank’s interest orrights hereunder, including a notice that any disposition of the Collateral, byeither Borrower or any other Person, shall be deemed to violate the rights of Bankunder the Code. 

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**5****              REPRESENTATIONS AND WARRANTIES**

 

Borrowerrepresents and warrants to Bank as follows: 

 

## **5.1****          Due Organization and Authorization**.  Borrower, and each Subsidiary, is dulyexisting and in good standing in its state of formation and qualified andlicensed to do business in, and in good standing in, any state in which theconduct of its business or its ownership of property requires that it bequalified except where the failure to do so could not reasonably be expected tocause a Material Adverse Change.  Inconnection with this Agreement, Borrower delivered to Bank a perfection certificatesigned by Borrower (the “Perfection Certificate”).  Borrower represents and warrants to Bankthat: (a) Borrower’s exact legal name is that indicated on the PerfectionCertificate and on the signature page hereof; and (b) Borrower is anorganization of the type, and is organized in the jurisdiction, set forth inthe Perfection Certificate; and (c) the Perfection Certificate accuratelysets forth Borrower’s organizational identification number or accurately statesthat Borrower has none; and (d) the Perfection Certificate accurately setsforth Borrower’s place of business, or, if more than one, its chief executiveoffice as well as Borrower’s mailing address if different, and (e) allother information set forth on the Perfection Certificate pertaining to Borroweris accurate and complete.  If Borrowerdoes not now have an organizational identification number, but later obtainsone, Borrower shall forthwith notify Bank of such organizational identificationnumber.

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The execution,delivery and performance of the Loan Documents have been duly authorized, anddo not conflict with Borrower’s organizational documents, nor shall they constitutean event of default under any material agreement by which Borrower isbound.  Borrower is not in default underany agreement to which or by which it is bound in which the default couldreasonably be expected to cause a Material Adverse Change.

 

## **5.2****          Collateral**.  Borrower has good title to the Collateral,free of Liens except Permitted Liens. Borrower has no deposit account, other than the deposit accounts with Bankand deposit accounts described in the Perfection Certificate. The Accounts arebona fide, existing obligations, and the service or property has been performedor delivered to the account debtor or its agent for immediate shipment to andunconditional acceptance by the account debtor. The Collateral is not in thepossession of any third party bailee (such as a warehouse).  Except as hereafter disclosed to Bank inwriting by Borrower, none of the components of the Collateral shall bemaintained at locations other than as provided in the PerfectionCertificate.  In the event that Borrower,after the date hereof, intends to store or otherwise deliver any portion of theCollateral to a bailee, then Borrower will first receive the written consent ofBank and such bailee must acknowledge in writing that the bailee is holdingsuch Collateral for the benefit of Bank. All Inventory is in all materialrespects of good and marketable quality, free from material defects.

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## **5.3****          Litigation**.  Except as shown in the PerfectionCertificate, there are no actions or proceedings pending or, to the knowledgeof Borrower’s Responsible Officers or legal counsel, threatened by or againstBorrower or any Subsidiary in which an adverse decision would reasonably beexpected to cause a Material Adverse Change.

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## **5.4****          No Material Deterioration in Financial Statements**.  All consolidated financialstatements for Borrower and any Subsidiary delivered to Bank fairly present inall material respects Borrower’s consolidated financial condition and Borrower’sconsolidated results of operations as of and for the periods set forth therein.  There has not been any material deteriorationin Borrower’s consolidated financial condition since the date of the mostrecent financial statements submitted to Bank.

 

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## **5.5****          Solvency**.  The fair salable value of Borrower’s assets(including goodwill minus disposition costs) exceeds the fair value of itsliabilities; Borrower is not left with unreasonably small capital after thetransactions in this Agreement; and Borrower is able to pay its debts(including trade debts) as they mature.

 

## **5.6****          Regulatory Compliance**.  Borrower is not an “investment company” or acompany “controlled” by an “investment company” under the Investment CompanyAct of 1940.  Borrower is not engaged asone of its important activities in extending credit for margin stock (underRegulations X, T and U of the Federal Reserve Board of Governors).  Borrower has complied in all materialrespects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws,ordinances or rules, the violation of which could reasonably be expected tocause a Material Adverse Change.  ToBorrower’s knowledge, none of Borrower’s or any Subsidiary’s properties orassets has been used by Borrower or any Subsidiary or by previous Persons, indisposing, producing, storing, treating, or transporting any hazardoussubstance other than legally, except where failure to do so would notreasonably be expected to cause a Material Adverse Change. Borrower and eachSubsidiary has timely filed all required material tax returns and paid, or madeadequate provision to pay, all material taxes, except those being contested ingood faith with adequate reserves under GAAP. Borrower and each Subsidiary has obtained all consents, approvals andauthorizations of, made all declarations or filings with, and given all noticesto, all government authorities that are necessary to continue its business ascurrently conducted except where the failure to obtain or make such consents, declarations,notices or filings would not reasonably be expected to cause a Material AdverseChange.

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## **5.7****          Subsidiaries; Investments**.  Borrower does not own any stock, partnershipinterest or other equity securities except for Permitted Investments.

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## **5.8****          Full Disclosure**.  No written representation, warranty or otherstatement of Borrower in any certificate or written statement given to Banktaken together with all such written certificates and written statements givento Bank contains any untrue statement of a material fact or omits to state amaterial fact necessary to make the statements contained in the certificates orstatements not misleading (it being recognized by Bank that the projections andforecasts provided by Borrower in good faith and based upon reasonableassumptions are not viewed as facts and that actual results during the periodor periods covered by such projections and forecasts may differ from theprojected or forecasted results).

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**6****              AFFIRMATIVE COVENANTS**

 

Borrower shalldo all of the following:

 

## **6.1****          Government Compliance**.  Borrower shall maintain its, and allSubsidiaries’, legal existence and good standing in their respective jurisdictionsof formation and maintain qualification in each jurisdiction in which thefailure to so qualify would reasonably be expected to have a material adverseeffect on Borrower’s business or operations. Borrower shall comply, and have each Subsidiary comply, with all laws,ordinances and regulations to which it is subject, noncompliance with whichcould have a material adverse effect on Borrower’s business or operations orwould reasonably be expected to cause a Material Adverse Change.

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## **6.2****          Financial Statements, Reports, Certificates**.

 

#### (a)           Borrower shall deliver toBank: (i) as soon as available, but no later than thirty (30) days afterthe last day of each month, a company prepared consolidated balance sheet andincome statement covering Borrower’s consolidated operations during the periodcertified by a Responsible Officer and in a form acceptable to Bank, togetherwith aged listings of accounts receivable (by invoice date); (ii) as soonas available, but no later than one hundred twenty (120) days after the lastday of Borrower’s fiscal year, audited consolidated financial statements ofBorrower prepared under GAAP, consistently applied, together with anunqualified opinion on the financial statements from an independent certifiedpublic accounting firm reasonably acceptable to Bank; (iii) as soon asavailable, but no later than thirty (30) days after approval of same byBorrower’s Board of Directors, Borrower’s annual balance sheet and incomestatement projections; (iv) within five (5) days of filing, Borrowershall provide Bank copies of, or electronic notice of links to, all statements,reports and notices made available to Borrower’s security holders or to anyholders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8-Kfiled with the Securities and Exchange Commission; (v) a prompt report ofany legal actions pending or threatened against

 

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#### Borroweror any Subsidiary that could result in damages or costs to Borrower or anySubsidiary of One Hundred Thousand Dollars ($100,000.00) or more; and (vi) otherfinancial information reasonably requested by Bank.

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#### (b)           Within thirty (30) daysafter the last day of each quarter, Borrower shall deliver to Bank, aCompliance Certificate signed by a Responsible Officer in the form of **Exhibit C**.

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## **6.3****          Inventory; Returns**.  Borrower shall keep all Inventory in good andmarketable condition, free from material defects. Borrower must promptly notifyBank of all returns, recoveries, disputes and claims that involve more thanFifty Thousand Dollars ($50,000.00).

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## **6.4****          Taxes**.  Borrower shall make, and cause eachSubsidiary to make, timely payment of all material federal, state, and localtaxes or assessments (other than taxes and assessments which Borrower iscontesting in good faith, with adequate reserves maintained in accordance withGAAP) and will deliver to Bank, on demand, appropriate certificates attestingto such payments.

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## **6.5****          Insurance**.  Borrower shall keep its business and theCollateral insured for risks and in amounts, and as Bank may reasonablyrequest.  Insurance policies shall be ina form, with companies, and in amounts that are satisfactory to Bank in itsreasonable discretion. All property policies shall have a lender’s loss payableendorsement showing Bank as an additional loss payee and all liability policiesshall show Bank as an additional insured and all policies shall provide thatthe insurer must give Bank at least twenty (20) days notice before cancelingits policy.  At Bank’s request, Borrowershall deliver certified copies of policies and evidence of all premiumpayments. Proceeds payable under any policy shall, at Bank’s option, be payableto Bank on account of the Obligations. Notwithstanding the foregoing, so longas no Event of Default has occurred and is continuing, Borrower shall have theoption of applying the proceeds of any casualty policy up to $200,000.00, inthe aggregate, toward the replacement or repair of destroyed or damagedproperty; provided that (i) any such replaced or repaired property (a) shallbe of equal or like value as the replaced or repaired Collateral and (b) shallbe deemed Collateral in which Bank has been granted a first priority securityinterest and (ii) after the occurrence and during the continuation of anEvent of Default all proceeds payable under such casualty policy shall, at theoption of Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance asrequired under Section 6.5 or to pay any amount or furnish any requiredproof of payment to third persons and Bank, Bank may make all or part of suchpayment or obtain such insurance policies required in Section 6.5, andtake any action under the policies Bank reasonably deems prudent.

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## **6.6****          Accounts**. 

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#### (a)           In order to permit Bank tomonitor Borrower’s financial performance and condition, Borrower shall maintainBorrower’s primary depository, operating and securities accounts with Bank orSVB Securities, and a majority of Borrower’s cash or securities in excess ofthat amount used for Borrower’s operations shall be maintained at Bank or SVBSecurities. 

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#### (b)           Borrower shall identify toBank, in writing, any bank or securities account opened by Borrower with anyinstitution other than Bank.  Inaddition, for each such domestic account that Borrower at any time opens ormaintains, Borrower shall, at Bank’s request and option, pursuant to anagreement in form and substance acceptable to Bank, cause the depository bankor securities intermediary to agree that such account is the collateral ofBank, and enter into a “control agreement” pursuant to the terms hereunder.Notwithstanding the foregoing, provided that no Event of Default has occurredor is continuing, Borrower may maintain up to a maximum of $100,000.00, in theaggregate at any time, at institutions other than Bank without entering into acontrol agreement. The provisions of the previous sentence shall not apply todeposit accounts exclusively used for payroll, payroll taxes and other employeewage and benefit payments to or for the benefit of Borrower’s employees.

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## **6.7****          Financial Covenants**.

 

(a)           Borrower Net Revenue. Borrower shall maintain at all times, to be tested as of the lastday of each quarter for the prior six (6) month period, minimum aggregatenet revenue of at least: (i) $4,100,000.00 for the six (6) monthperiod ending September 30, 2005, (ii) $X,XXX,000.00 for the six (6) monthperiod ending December 31, 2005, (iii) $X,XXX,000.00 for the six (6) monthperiod ending March 31, 2006, and (iv) the greater of (A) $X,XXX,000.00,or (B) 80% of the projections set forth in the plan approved by Borrower’sBoard or

 

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Directors, for the six (6) monthperiod ending June 30, 2006, and for the six (6) month period ending asof the last day of each quarter thereafter.  

 

(b)           Guarantor Liquidity.  Beginning with the quarterending September 30, 2005, the Guarantor shall maintain, at all times tobe tested as of the last day of each quarter, Unencumbered Capital, in anamount equal to or greater than three (3) times the aggregate outstandingObligations; provided, however, that if, at any time, Unencumbered Capital isless than three (3) times the aggregate outstanding Obligations, Guarantorshall, as soon as possible but in no event later than thirty (30) daysthereafter, either (i) deposit and maintain with Bank, at all timesthereafter, cash in such amounts as Bank determines will secure the full amountof the outstanding Obligations, or (ii) provide Bank with an irrevocableletter of credit, on terms and conditions reasonably acceptable to Bank in itssole discretion, from a financial institution reasonably acceptable to Bank inits sole discretion, and in such amount as Bank determines will secure the fullamount of the outstanding Obligations.   

 

## **6.8****          Further Assurances**.  Borrower shall execute any furtherinstruments and take further action as Bank reasonably requests to perfect orcontinue Bank’s security interest in the Collateral or to effect the purposesof this Agreement.

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**7****              NEGATIVE COVENANTS**

 

Borrower shallnot do any of the following without Bank’s prior written consent which shallnot be unreasonably withheld:

 

## **7.1****          Dispositions**.  Convey, sell, lease, transfer, assign orotherwise dispose of (collectively a “Transfer”), or permit any of itsSubsidiaries to Transfer, all or any part of its business or property, includingthe Intellectual Property, except for Transfers of (a) Inventory in theordinary course of business; (b) non-exclusive licenses and similararrangements for the use of the property of Borrower or its Subsidiaries in theordinary course of business; or (c) worn-out or obsolete Equipment.  Borrower shall not enter into an agreementwith any Person other than Bank which restricts the subsequent granting of asecurity interest in the Intellectual Property.

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## **7.2****          Changes in Business, Ownership, Management or Business Locations**.  Engage in or permit any ofits Subsidiaries to engage in any business other than the businesses currentlyengaged in by Borrower or reasonably related thereto, or have a material changein its ownership such that greater than fifty percent (50%) of Borrower’svoting stock as of the Closing Date is transferred (other than by the sale ofBorrower’s equity securities in a public offering or to venture capitalinvestors so long as Borrower identifies to Bank the venture capital investorsprior to the closing of the investment), or management.  Borrower shall not, without prior writtennotice to Bank: (a) relocate its chief executive office, or (b) changeits jurisdiction of organization, or (c) change its organizationalstructure or type, or (d) change its legal name, or (e) change anyorganizational number (if any) assigned by its jurisdiction of organization.

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## **7.3****          Mergers or Acquisitions**.  Merge or consolidate, or permit any of itsSubsidiaries to merge or consolidate, with any other Person, or acquire, orpermit any of its Subsidiaries to acquire, all or substantially all of thecapital stock or property of another Person, except where (a) suchtransactions do not in the aggregate exceed $500,000.00 (including theassumption of any indebtedness), (b) no Event of Default has occurred andis continuing or would exist after giving effect to the transactions, and (c) Borroweris the surviving legal entity. A Subsidiary may merge or consolidate intoanother Subsidiary or into Borrower.

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## **7.4****          Indebtedness**.  Create, incur, assume, or be liable for anyIndebtedness, or permit any Subsidiary to do so, other than PermittedIndebtedness.

##  

## **7.5****          Encumbrance**.  Create, incur, or allow any Lien on any ofits property, including the Intellectual Property, or assign or convey anyright to receive income, including the sale of any Accounts, or permit any ofits Subsidiaries to do so, except for Permitted Liens, or permit any Collateralnot to be subject to the first priority security interest granted herein.  The Collateral may also be subject toPermitted Liens.

 

## **7.6****          Distributions; Investments**.  (a) Directly or indirectly acquire orown any Person, or make any Investment in any Person, other than PermittedInvestments, or permit any of its Subsidiaries to do so; or (b) pay anydividends or make any distribution or payment or redeem, retire or purchase anycapital stock, except for

 

8

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## repurchasesof stock from former employees or directors of Borrower under the terms ofapplicable repurchase agreements in an aggregate amount not to exceed$50,000.00 in the aggregate in any fiscal year, provided that no Event ofDefault has occurred, is continuing or would exist after giving effect to the repurchases.

##  

## **7.7****          Transactions with Affiliates**.  Directly or indirectly enter into or permitto exist any material transaction with any Affiliate of Borrower, except fortransactions that are in the ordinary course of Borrower’s business, upon fairand reasonable terms that are no less favorable to Borrower than would beobtained in an arm’s length transaction with a non-affiliated Person.

##  

## **7.8****          Subordinated Debt**.  Make or permit any payment on anySubordinated Debt, except under the terms of the Subordinated Debt, or amendany provision in any document relating to the Subordinated Debt

##  

## **7.9****          Compliance**.  (a) Become an “investment company” or acompany controlled by an “investment company”, under the Investment Company Actof 1940 or undertake as one of its important activities extending credit topurchase or carry margin stock, or use the proceeds of any Credit Extension forthat purpose; (b) fail to meet the minimum funding requirements of ERISA, orpermit a Reportable Event or Prohibited Transaction, as defined in ERISA, tooccur; or (c) fail to comply in any material respect with the Federal FairLabor Standards Act or violate any other law or regulation, if the violationwould reasonably be expected to cause a Material Adverse Change, or permit anyof its Subsidiaries to do so.

##  

**8****              EVENTS OF DEFAULT**

 

Any one of thefollowing shall constitute an event of default hereunder (an “Event of Default”):

 

## **8.1****          Payment Default**.  Borrower fails to pay any of the Obligationswithin three (3) days after their due date. During such three (3) dayperiod the failure to cure the default shall not constitute an Event of Default(but no Credit Extension shall be made during such cure period).

##  

## **8.2****          Covenant Default**.  (a)  Borrower fails or neglects toperform any obligation in Section 6.2, 6.6, 6.7, or 6.8 or violates anycovenant in Article 7;  or (b) Borrower fails or neglects to perform, keep, or observe any other materialterm, provision, condition, covenant or agreement contained in this Agreement,any of the Loan Documents, or in any present or future agreement betweenBorrower and Bank and as to any default under such other material term,provision, condition, covenant or agreement that can be cured, has failed tocure the default within ten (10) days after the occurrence thereof;provided, however, that if the default cannot by its nature be cured within theten (10) day period or cannot after diligent attempts by Borrower be curedwithin such ten (10) day period, and such default is likely to be curedwithin a reasonable time, then Borrower shall have an additional period (whichshall not in any case exceed thirty (30) days) to attempt to cure such default,and within such reasonable time period the failure to have cured such defaultshall not be deemed an Event of Default (provided that no Credit Extensions shallbe made during such cure period).  Graceperiods provided under this Section shall not apply, among other things,to financial covenants or any other covenants that are required to besatisfied, completed or tested by a date certain.

##  

## **8.3****          Material Adverse Change**.  A Material Adverse Change occurs.

 

## **8.4****          Attachment**.  (a) Any material portion of Borrower’sassets is attached, seized, levied on, or comes into possession of a trustee orreceiver and the attachment, seizure or levy is not removed in ten (10) days;(b) the service of process upon Borrower seeking to attach, by trustee orsimilar process, any funds of Borrower on deposit with Bank, or any entityunder control of Bank (including a subsidiary); (c) Borrower is enjoined,restrained, or prevented by court order from conducting a material part of itsbusiness; (d) a judgment or other claim becomes a Lien on a materialportion of Borrower’s assets; or (e) a notice of lien, levy, or assessmentis filed against any of Borrower’s assets by any government agency and not paidwithin ten (10) days after Borrower receives notice.  These are not Events of Default if stayed orif a bond is posted pending contest by Borrower (but no Credit Extensions shallbe made during the cure period).

##  

## **8.5****          Insolvency**.  (a) Borrower is unable to pay its debts(including trade debts) as they become due or otherwise becomes insolvent; (b) Borrowerbegins an Insolvency Proceeding; or (c) an Insolvency Proceeding is

 

9

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## begunagainst Borrower and not dismissed or stayed within thirty (30) days (but noCredit Extensions shall be made before any Insolvency Proceeding is dismissed).

##  

## **8.6****          Other Agreements**.  If there is a default in any agreement towhich Borrower is a party with a third party or parties resulting in a right bysuch third party or parties, whether or not exercised, to accelerate thematurity of any Indebtedness in an amount in excess of One Hundred ThousandDollars ($100,000.00) or that would result in a Material Adverse Change. 

##  

## **8.7****          Judgments**.  If a judgment or judgments for the payment ofmoney in an amount, individually or in the aggregate, of at least One Hundred ThousandDollars ($100,000.00) shall be rendered against Borrower and shall remainunsatisfied and unstayed for a period of ten (10) days (provided that noCredit Extensions will be made prior to the satisfaction or stay of suchjudgment).

##  

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

##  

## **8.9****          Subordinated Debt**. A default orbreach occurs under any agreement between Borrower and any creditor of Borrowerthat signed a subordination agreement with Bank, or any creditor that hassigned a subordination agreement with Bank breaches any terms of thesubordination agreement.

##  

## **8.10****        Guaranty**.  (a) Any guaranty of any Obligationsterminates or ceases for any reason to be in full force; or (b) anyGuarantor does not perform any obligation or covenant under any guaranty of theObligations; or (c) any material misrepresentation or material misstatementexists now or later in any warranty or representation in any guaranty of theObligations or in any certificate delivered to Bank in connection with theguaranty; or (d) any circumstance described in Articles 7 or 8 occurs toany Guarantor, or (e) the liquidation, winding up, termination ofexistence, or insolvency of any Guarantor.

##  

**9****              BANK’S RIGHTS AND REMEDIES**

 

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

##  

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

####  

#### (b)           Stop advancing money orextending credit for Borrower’s benefit under this Agreement or under any otheragreement between Borrower and Bank;

####  

#### (c)           Demand that Borrower: (i) depositcash with Bank in an amount equal to the aggregate amount of any Letters ofCredit remaining undrawn, as collateral security for the repayment of anyfuture drawings under such Letters of Credit, and Borrower shall forthwithdeposit and pay such amounts, and (ii) pay in advance all Letter of Creditfees scheduled to be paid or payable over the remaining term of any Letters ofCredit;

####  

#### (d)           Settle or adjust disputesand claims directly with account debtors for amounts, on terms and in any orderthat Bank considers advisable and notify any Person owing Borrower money of Bank’ssecurity interest in such funds and verify and/or collect the amounts owed bysuch account debtors.  After theoccurrence of an Event of Default, any amounts received by Borrower shall beheld in trust by Borrower for Bank, and, if requested by Bank, Borrower shallimmediately deliver such receipts to Bank in the form received from the accountdebtor, with proper endorsements for deposit; 

####  

#### (e)           Make any payments and doany acts it considers necessary or reasonable to protect its security interestin the Collateral.  Borrower shallassemble the Collateral if Bank requests and make it available as Bankdesignates.  Bank may enter premiseswhere the Collateral is located, take and maintain possession of any part ofthe Collateral, and pay, purchase, contest, or compromise any Lien whichappears to be prior or superior to its

 

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#### securityinterest and pay all expenses incurred. Borrower grants Bank a license to enterand occupy any of its premises, without charge, to exercise any of Bank’srights or remedies;

####  

#### (f)            Apply to the Obligationsany (i) balances and deposits of Borrower it holds, or (ii) anyamount held by Bank owing to or for the credit or the account of Borrower;

####  

#### (g)           Ship, reclaim, recover,store, finish, maintain, repair, prepare for sale, advertise for sale, and sellthe Collateral. Bank is hereby granted a non-exclusive, royalty-free license orother right to use, without charge, Borrower’s labels, Patents, Copyrights,Mask Works, rights of use of any name, trade secrets, trade names, Trademarks,service marks, and advertising matter, or any similar property as it pertainsto the Collateral, in completing production of, advertising for sale, andselling any Collateral and, in connection with Bank’s exercise of its rightsunder this Section, Borrower’s rights under all licenses and all franchiseagreements inure to Bank’s benefit; 

####  

#### (h)           Deliver a notice ofexclusive control, any entitlement order, or other directions or instructionspursuant to any control agreement or similar agreements providing control ofany Collateral; and

####  

#### (i)            Exercise all rights andremedies and dispose of the Collateral according to the Code.

####  

## **9.2****          Power of Attorney**.  Borrower hereby irrevocably appoints Bank asits lawful attorney-in-fact, to be effective upon the occurrence and during thecontinuance of an Event of Default, to:  (a) endorseBorrower’s name on any checks or other forms of payment or security; (b) signBorrower’s name on any invoice or bill of lading for any Account or draftsagainst account debtors; (c) settle and adjust disputes and claims aboutthe Accounts directly with account debtors, for amounts and on terms Bankdetermines reasonable; (d) make, settle, and adjust all claims underBorrower’s insurance policies; and (e) transfer the Collateral into thename of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawfulattorney-in-fact to sign Borrower’s name on any documents necessary to perfector continue the perfection of any security interest regardless of whether anEvent of Default has occurred until all Obligations have been satisfied in fulland Bank is under no further obligation to make Credit Extensionshereunder.  Bank’s foregoing appointmentas Borrower’s attorney in fact, and all of Bank’s rights and powers, coupledwith an interest, are irrevocable until all Obligations have been fully repaidand performed and Bank’s obligation to provide Credit Extensions terminates.

##  

## **9.3****          Bank Expenses**.  Any amounts paid by Bank as provided herein shallconstitute Bank Expenses and are immediately due and payable, and shall bearinterest at the then applicable rate hereunder and be secured by theCollateral.  No payments by Bank shall bedeemed an agreement to make similar payments in the future or Bank’s waiver ofany Event of Default.

##  

## **9.4****          Bank’s Liability for Collateral**.  So long as Bank complies with reasonablebanking practices regarding the safekeeping of Collateral and Section 9-207of the Code, Bank shall not be liable or responsible for: (a) thesafekeeping of the Collateral; (b) any loss or damage to the Collateral; (c) anydiminution in the value of the Collateral; or (d) any act or default ofany carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage ordestruction of the Collateral.

##  

## **9.5****          Remedies Cumulative**.  Bank’s rights and remedies under thisAgreement, the Loan Documents, and all other agreements are cumulative.  Bank has all rights and remedies providedunder the Code, by law, or in equity. Bank’s exercise of one right or remedy isnot an election, and Bank’s waiver of any Event of Default is not a continuingwaiver. Bank’s delay is not a waiver, election, or acquiescence. No waiverhereunder shall be effective unless signed by Bank and then is only effectivefor the specific instance and purpose for which it was given.

##  

## **9.6****          Demand Waiver**.  Borrower waives demand, notice of default ordishonor, notice of payment and nonpayment, notice of any default, nonpaymentat maturity, release, compromise, settlement, extension, or renewal ofaccounts, documents, instruments, chattel paper, and guarantees held by Bank onwhich Borrower is liable.

##  

**10****           NOTICES**

 

All notices ordemands by any party to this Agreement or any related agreement must be inwriting and be personally delivered or sent by an overnight delivery service,by certified mail, postage prepaid, return receipt

 

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requested, or by facsimile at the addresseslisted below.  Either Bank or Borrowermay change its notice address by giving the other party written notice.

 
|       | If to  Borrower: | CLEARSTORY  SYSTEMS, INC.                  |
|------------|------------------|--------------------------------------------|
|       |             | One  Research Drive, Suite 200B       |
|       |             | Westborough,  Massachusetts 01581          |
|       |             | Attn:  Mr. Stephen Read               |
|       |             | FAX:  (508) 366-0431                       |
|       |             |                                       |
|       | If to  Bank:     | Silicon  Valley Bank                       |
|       |             | One  Newton Executive Park, Suite 200 |
|       |             | 2221  Washington Street                    |
|       |             | Newton,  Massachusetts 02462               |
|       |             | Attn:  Ms. Irina Case                 |
|       |             | Fax:  (617) 969-5973                       |
| ** ** | ** **       | ** **                                 |
|       | with  a copy to: | Riemer &  Braunstein LLP          |
|       |             | Three  Center Plaza                        |
|       |             | Boston,  Massachusetts 02108               |
|       |             | Attn:  David A. Ephraim, Esquire           |
|       |             | FAX:  (617) 880-3456                       |

 

**11****           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER**

 

Massachusettslaw governs the Loan Documents without regard to principles of conflicts oflaw.  Borrower and Bank each submit tothe exclusive jurisdiction of the State and Federal courts in Massachusetts.  NOTWITHSTANDING THE FOREGOING, BANK SHALL HAVETHE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS PROPERTY INTHE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR APPROPRIATEIN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S RIGHTSAGAINST BORROWER OR ITS PROPERTY.

 

**BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM ORCAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTSOR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY ANDALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TOENTER INTO THIS AGREEMENT.  EACH PARTYHAS REVIEWED THIS WAIVER WITH ITS COUNSEL**.

 

**12****           GENERAL PROVISIONS**

 

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

##  

## **12.2****        Indemnification**.  Borrower hereby indemnifies, defends andholds Bank and its directors, officers, employees and agents harmlessagainst:  (a) all obligations,demands, claims, and liabilities asserted by any other party or Person inconnection with the transactions contemplated by the Loan Documents; and (b) alllosses or Bank Expenses incurred, or paid by Bank from, arising from transactionsbetween Bank and Borrower (including reasonable attorneys’ fees and expenses),except for losses caused by Bank’s gross negligence or willful misconduct.

##  

## **12.3****        Right of Set Off**.   Borrower hereby grants to Bank, a lien,security interest and right of set off as security for all Obligations to Bank,whether now existing or hereafter arising upon and against all deposits,credits,

 

12

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## collateraland property, now or hereafter in the possession, custody, safekeeping orcontrol of Bank or any entity under the control of Bank (including a Bank subsidiary)or in transit to any of them.  At anytime after the occurrence and during the continuance of an Event of Default,without demand or notice, Bank may set off the same or any part thereof andapply the same to any liability or obligation of Borrower even though unmaturedand regardless of the adequacy of any other collateral securing theObligations.  ANY AND ALL RIGHTS TOREQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO ANY OTHERCOLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OFSETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER AREHEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.

##  

## **12.4****        Time of Essence**.  Time is of the essence for the performance ofall Obligations in this Agreement.

##  

## **12.5****        Severability of Provision**.  Each provision of this Agreement is severablefrom every other provision in determining the enforceability of any provision.

##  

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

##  

## **12.7****        Counterparts**.  This Agreement may be executed in any numberof counterparts and by different parties on separate counterparts, each ofwhich, when executed and delivered, are an original, and all taken together,constitute one Agreement.

##  

## **12.8****        Survival**.  All covenants, representations and warrantiesmade in this Agreement continue in full force until this Agreement hasterminated pursuant to its terms, and all Obligations have been satisfied..  The obligation of Borrower in Section 12.2to indemnify Bank shall survive until the statute of limitations with respectto such claim or cause of action shall have run.

##  

## **12.9****        Confidentiality**.  In handling any confidential information,Bank shall exercise the same degree of care that it exercises for its ownproprietary information, but disclosure of information may be made: (a) toBank’s Subsidiaries or Affiliates in connection with their business withBorrower; (b) to prospective transferees or purchasers of any interest inthe Credit Extensions (provided, however, Bank shall use commerciallyreasonable efforts in obtaining such prospective transferee’s or purchaser’sagreement to the terms of this provision); (c) as required by law,regulation, subpoena, or other order, (d) as required in connection withBank’s examination or audit; and (e) as Bank considers appropriate inexercising remedies under this Agreement. Confidential information does not include information that either: (i) isin the public domain or in Bank’s possession when disclosed to Bank, or becomespart of the public domain after disclosure to Bank; or (ii) is disclosedto Bank by a third party, if Bank does not know that the third party isprohibited from disclosing the information.

##  

**13****           DEFINITIONS**

 

## **13.1****        Definitions**.  In this Agreement:

##  

“**Accounts**” are all existing and laterarising accounts, contract rights, and other obligations owed Borrower in connectionwith its sale or lease of goods (including licensing software and othertechnology) or provision of services, all credit insurance, guaranties, othersecurity and all merchandise returned or reclaimed by Borrower and Borrower’sBooks relating to any of the foregoing, as such definition may be amended fromtime to time according to the Code.

 

“**Advance**” or “**Advances**” is a loan advance (or advances) under the RevolvingLine.

 

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

 

13

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 “**BankExpenses**” are all audit fees and expenses and reasonable costs orexpenses (including reasonable attorneys’ fees and expenses) for preparing,negotiating, defending and enforcing the Loan Documents (including appeals orInsolvency Proceedings).

 

“**Borrower’s Books**” are all Borrower’s booksand records including ledgers, records regarding Borrower’s assets orliabilities, the Collateral, business operations or financial condition and allcomputer programs or storage or any equipment containing the information.

 

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

 

“**Callable Capital**” is the remaining amountof capital, excluding capital attributable to Defaulting Partners, whichGuarantor would be able to obtain from the General Partner and the LimitedPartners, without condition, upon proper issuance of capital call notices inaccordance with the Partnership Agreement.

 

“**Cash Management Services**” is defined in Section 2.1.4.

** **

“**Cash Management Services Sublimit**” isdefined in Section 2.1.4.

** **

“**Closing Date**” is the date of thisAgreement.

 

“**Code**” is the Uniform Commercial Code asadopted in Massachusetts, as amended and as may be amended and in effect fromtime to time.

 

 “**Collateral**”is any and all properties, rights and assets of Borrower granted by Borrower toBank or arising under the Code, now, or in the future, in which Borrowerobtains an interest, or the power to transfer rights, in the property describedon **Exhibit A**.

 

 “**ContingentObligation**” is, for any Person, any direct or indirect liability,contingent or not, of that Person for (a) any indebtedness, lease,dividend, letter of credit or other obligation of another such as an obligationdirectly or indirectly guaranteed, endorsed, co-made, discounted or sold withrecourse by that Person, or for which that Person is directly or indirectlyliable; (b) any obligations for undrawn letters of credit for the accountof that Person; and (c) all obligations from any interest rate, currencyor commodity swap agreement, interest rate cap or collar agreement, or otheragreement or arrangement designated to protect a Person against fluctuation ininterest rates, currency exchange rates or commodity prices;  but “Contingent Obligation” does not includeendorsements in the ordinary course of business.  The amount of a Contingent Obligation is thestated or determined amount of the primary obligation for which the ContingentObligation is made or, if not determinable, the maximum reasonably anticipatedliability for it determined by the Person in good faith; but the amount may notexceed the maximum of the obligations under any guarantee or other supportarrangement.

 

“**Copyrights**” are all copyright rights,applications or registrations and like protections in each work or authorshipor derivative work, whether published or not (whether or not it is a tradesecret) now or later existing, created, acquired or held.

 

“**Credit Extension**” is each Advance, Letterof Credit, FX Forward Contract, or any other extension of credit by Bank forBorrower’s benefit.

 

“**Defaulting Partner**” is the General Partneror any Limited Partner who has previously failed to comply with any portion ofa capital call made by the Guarantor or the General Partner (for any fund underGeneral Partner’s management) unless: (i) such failure has been cured, or (ii) theGuarantor has substituted the Defaulting Partner with another partner, inaccordance with the Partnership Agreement, who is in compliance with all of theterms of the Partnership Agreement.

 

“**Equipment**” is all present and futuremachinery, equipment, tenant improvements, furniture, fixtures, vehicles,tools, parts and attachments in which Borrower has any interest.

 

“**ERISA**” is the Employee Retirement IncomeSecurity Act of 1974, and its regulations.

 

14

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“**Event of Default**” is defined in Article 8.

 

“**FX Forward Contract**” is defined in Section 2.1.3.

** **

“**FX Reserve**” is defined in Section 2.1.3.

** **

“**GAAP**” is generally accepted accountingprinciples in the United States.

 

“**General Partner**” means the general partnerof the Guarantor.

 

“**Guarantor**” is any present or futureguarantor of the Obligations, including, without limitation, SCP Private EquityPartners II, L.P.

** **

“**Indebtedness**” is (a) indebtedness forborrowed money or the deferred price of property or services, such asreimbursement and other obligations for surety bonds and letters of credit, (b) obligationsevidenced by notes, bonds, debentures or similar instruments, (c) capitallease obligations and (d) Contingent Obligations.

 

“**Insolvency Proceeding**” is any proceeding byor against any Person under the United States Bankruptcy Code, or any otherbankruptcy or insolvency law, including assignments for the benefit ofcreditors, compositions, extensions generally with its creditors, orproceedings seeking reorganization, arrangement, or other relief.

 

“**Intellectual Property**”****is any Copyrights, Copyright rights, Copyrightapplications, Copyright registrations and like protections in each work ofauthorship and derivative work, whether published or unpublished, now owned orlater acquired; any Patents, Trademarks, service marks and applicationstherefor; any trade secret rights, including any rights to unpatentedinventions, now owned or hereafter acquired.

** **

“**Inventory**” is present and future inventoryin which Borrower has any interest, including merchandise, raw materials,parts, supplies, packing and shipping materials, work in process and finishedproducts intended for sale or lease or to be furnished under a contract ofservice, of every kind and description now or later owned by or in the custodyor possession, actual or constructive, of Borrower, including inventorytemporarily out of its custody or possession or in transit and includingreturns on any accounts or other proceeds (including insurance proceeds) fromthe sale or disposition of any of the foregoing and any documents of title.

 

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

 

“**Letter of Credit**” means a letter of creditor similar undertaking issued by Bank pursuant to Section 2.1.2.

** **

“**Letter of Credit Application**” is defined inSection 2.1.2.

** **

“**Letter of Credit Reserve**” is defined in Section 2.1.2.

** **

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

 

“**Limited Partners**” means the limitedpartners set forth in the Partnership Agreement, as the same may be amendedfrom time to time.

 

“**Loan Documents**” are, collectively, thisAgreement, any guaranties executed by any Guarantor, and any other present orfuture agreement between Borrower and/or for the benefit of Bank in connectionwith this Agreement, all as amended, extended or restated.

 

“**Mask Works**” are all mask works or similarrights available for the protection of semiconductor chips, now owned or lateracquired.

 

“**Material Adverse Change**”****is: (a) a material impairment in theperfection or priority of Bank’s security interest in the Collateral or in thevalue of such Collateral; (b) a material adverse change in the business,operations,

 

15

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or financial condition of Borrower; (c) amaterial impairment of the prospect of repayment of any portion of theObligations; or (d) the determination by Bank, based upon informationavailable to it and in its reasonable judgment, that there is a substantial likelihoodthat Borrower or Guarantor shall fail to comply with one or more of thefinancial covenants in Article 6 during the next succeeding financialreporting period.

 

“**Maturity Date**”****is August 23, 2007.

 

“**Obligations**” are all liabilities,obligations, covenants, agreements, debts, principal, interest, Bank Expensesand other amounts Borrower owes Bank now or later, including letters of credit,cash management services, and foreign exchange contracts, if any, and includinginterest accruing after Insolvency Proceedings begin and debts, liabilities, orobligations of Borrower assigned to Bank.

 

“**Partnership Agreement**” is that certainLimited Partnership Agreement dated as of June 15, 2000, as amended, byand among the Limited Partners and the General Partner.

 

 “**Patents**”are patents, patent applications and like protections, including improvements,divisions, continuations, renewals, reissues, extensions and continuations-in-partof the same.

 

“**Payment/Advance Form**”****is in the form of **Exhibit B**.

 

“**Perfection Certificate**”****is defined in Section 5.1.

** **

“**Permitted Indebtedness**” is:

 

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

 

(b)           Indebtedness existing on the Closing Date and shown on thePerfection Certificate;

 

(c)           Subordinated Debt;

 

(d)           Indebtedness secured by Permitted Liens;

 

(e)           Other Indebtedness not otherwise permitted by Section 7.4 notexceeding $250,000.00 in the aggregate outstanding at any time; and

 

(f)            Extensions, refinancings, modifications, amendments and restatementsof any items of Permitted Indebtedness (a) through (e) above,provided that the principal amount thereof is not increased or the termsthereof are not modified to impose more burdensome terms upon Borrower or itsSubsidiary, as the case may be.

 

“**Permitted Investments**” are:

 

(a)           Investments shown on the Perfection Certificate and existing on theClosing Date; and

 

(b) (i)  marketable direct obligationsissued or unconditionally guaranteed by the United States or its agency or anystate maturing within 1 year from its acquisition, (ii) commercial papermaturing no more than 1 year after its creation and having the highest ratingfrom either Standard & Poor’s Corporation or Moody’s Investors Service, Inc.,(iii) Bank’s certificates of deposit issued maturing no more than 1 yearafter issue, and (iv) any other investments administered through Bank.

 

16

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“**Permitted Liens**” are:

 

(a)           Liens existing on the Closing Date and shown on the PerfectionCertificate or arising under this Agreement or other Loan Documents;

 

(b)           Liens for taxes, fees, assessments or other government charges orlevies, either not delinquent or being contested in good faith and for whichBorrower maintains adequate reserves on its Books, if they have nopriority over any of Bank’s security interests;

 

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

 

(d)           Liens of materialmen, mechanics, warehousemen, carriers or othersimilar Liens accruing after the date hereof and in the ordinary course ofBorrower’s business or by operation of law or regulation and securingobligations not yet due;

 

(e)           Liens to secure payment of workers’ compensation, employmentinsurance, or social security obligations of Borrower;

 

(f)            Liens incurred in the extension, renewal or refinancing of theindebtedness secured by Liens described in (a) through (e), but anyextension, renewal or replacement Lien must be limited to the propertyencumbered by the existing Lien and the principal amount of the indebtednessmay not increase; and

 

(e)           Liens in favor of other financial institutions arising in connectionwith Borrower’s deposit accounts held at such institutions, provided that Bankhas a perfected security interest in the amounts held in such deposit accounts.

 

“**Person**” is any individual, soleproprietorship, partnership, limited liability company, joint venture, company,trust, unincorporated organization, association, corporation, institution,public benefit corporation, firm, joint stock company, estate, entity orgovernment agency.

 

“**Portfolio Company Obligations**” are theaggregate amount of Guarantor’s obligations from time to time under guaranteesissued by Guarantor with respect to the obligations of its portfolio companies(whether or not demand for payment has been made thereunder).

 

“**Prime Rate**” is Bank’s most recentlyannounced “prime rate,” even if it is not Bank’s lowest rate.

 

“**Responsible Officer**” is each of the ChiefExecutive Officer, President, Chief Financial Officer and Controller ofBorrower.

 

“**Revolving Line**” is an Advance or Advancesof up to $1,500,000.00.

** **

“**Revolving Line Availability**” is defined in Section 2.1.1(a).

 

“**Senior Lender**” is Benefactor Funding Corp.

 

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

 

“**Subsidiary**” is any Person, or any otherbusiness entity of which more than 50% of the voting stock or other equityinterests is owned or controlled, directly or indirectly, by the Person or oneor more Affiliates of the Person.

 

17

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“**Trademarks**”****are trademark and service mark rights, registered or not,applications to register and registrations and like protections, and the entiregoodwill of the business of Borrower connected with the trademarks.

 

“**Unencumbered Capital**” is Callable Capitalminus the aggregate amount of outstanding Portfolio Company Obligations.

 

“**Unused Revolving Line Facility Fee**” isdefined in Section 2.3(b).

 

*[The remainder of this page is intentionally leftblank]*

 

18

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IN WITNESSWHEREOF, the parties hereto have caused this Agreement to be executed as asealed instrument under the laws of the Commonwealth of Massachusetts as of thedate first above written.

 
| BORROWER:                |
|--------------------------|
|                     |
| CLEARSTORY SYSTEMS, INC. |
|                     |
| By:                      | /S/ Stephen A. Read |   |
| Name:                    | Stephen A. Read |   |
| Title:                   | VP, CFO |   |
|                     |
| BANK:                    |
|                     |
| SILICON VALLEY BANK      |
|                     |
| By:                      | /S/ Irina Case |   |
| Name:                    |   Irina Case |   |
| Title:                   | SVP |   |
|                          |  |  |  |  |  |  |  |  |  |

 

S-1

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**EXHIBIT A**

 

The Collateralconsists of all right, title and interest of Borrower in and to the following:

 

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

 

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

 

The Collateraldoes not include: any copyright rights, copyright applications, copyrightregistrations mask works, and like protections in each work of authorship andderivative work, whether published or unpublished, now owned or later acquired;any patents, trademarks, service marks and applications therefor; any tradesecret rights, including any rights to unpatented inventions, now owned orhereafter acquired.  Notwithstanding theforegoing, the Collateral shall include all accounts, license and royalty feesand other revenues, proceeds, or income arising out of or relating to any ofthe foregoing.

 

A-2

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**EXHIBIT B**

**LoanPayment/Advance Request Form**

**DEADLINEFOR SAME DAY PROCESSING IS 3:00 E.S.T.**

 
| Fax To: (617) 969-5965 | Date: |   |   |
|------------------------|-------|--------|--------|

 
| **LOAN PAYMENT:**         |                |
|---------------------------|---------------------|
| CLEARSTORY SYSTEMS, INC.  |
| ** **                | ** **          |
| From Account #            | ** **          | ** ** | To Account # | ** ** | ** ** |
| ** **                | (Deposit Account #) | ** ** | (Loan Account #) |
| ** **                | ** **          |
| Principal $               | ** **          | ** ** | and/or Interest $ | ** ** | ** ** |
| ** **                | ** **          |
| ** **                | ** **          |
| **Authorized Signature:** | ** **          | ** ** | Phone Number: | ** ** | ** ** |
|                           |                     |  |  |  |  |  |  |  |  |  |  |  |  |

 

**LOAN ADVANCE:**

 

Complete *Outgoing Wire Request*section below if all or a portion of the funds from this loan advance arefor an outgoing wire.

 
| From Account #      |             |   | To Account # |                 |   |
|---------------------|------------------|--------|--------------|----------------------|--------|
|                | (Loan Account #) |   |         | (Deposit Account  #) |   |
|                |             |   |         |                 |   |
| Amount of Advance $ |             |   |         |                 |   |
|                     |                  |        |              |                      |        |  |  |

 

All Borrower’s representation and warranties in the Loan and SecurityAgreement are true, correct and complete in all material respects on the dateof the telephone transfer request for an advance, but those representations andwarranties expressly referring to another date shall be true, correct andcomplete in all material respects as of such date:

 
| **Authorized Signature:** |   |   | Phone Number: |   |   |
|---------------------------|--------|--------|---------------|--------|--------|

 
| **OUTGOING WIRE REQUEST**                                                                       |       |
|-------------------------------------------------------------------------------------------------|------------|
| **Complete  only if all or a portion of funds from the *loan  advance* above are to be wired.** |
| Deadline for same day  processing is 3:00 pm, E.S.T.                                            |
| ** **                                                                                      | ** ** |
| Beneficiary Name:                                                                               | ** ** | ** ** | Amount of Wire: | ** ** | ** ** |
| ** **                                                                                      | ** ** |
| Beneficiary Bank:                                                                               | ** ** | ** ** | Account Number: | ** ** | ** ** |
| ** **                                                                                      | ** ** |
| City and State:                                                                                 | ** ** | ** ** | ** ** |
| ** **                                                                                      | ** ** |
| Beneficiary Bank Transit (ABA) #:                                                               | ** ** | ** ** | Beneficiary Bank Code (Swift, Sort, Chip, etc.): | ** ** | ** ** |
| ** **                                                                                      | ** ** | **(For International Wire Only)** |
| ** **                                                                                      | ** ** |
| Intermediary Bank:                                                                              | ** ** | ** ** | Transit (ABA) #: | ** ** | ** ** |
| ** **                                                                                      | ** ** |
| For Further Credit to:                                                                          | ** ** | ** ** |
| ** **                                                                                      | ** ** |
| Special Instruction:                                                                            | ** ** | ** ** |
| ** **                                                                                      | ** ** |
|                                                                                                 |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

*By signing below, I (we)acknowledge and agree that my (our) funds transfer request shall be processedin accordance with and subject to the terms and conditions set forth in theagreements(s) covering funds transfer service(s), which agreements(s) werepreviously received and executed by me (us).*

 
| Authorized Signature: | ** ** | ** ** | 2nd Signature (If Required): | ** ** | ** ** |
|-----------------------|------------|------------|------------------------------|------------|------------|
| Print Name/Title:     | ** ** | ** ** | Print Name/Title:            | ** ** | ** ** |
| Telephone #           | ** ** | ** ** | Telephone #                  | ** ** | ** ** |
|                       |            |            |                              |            |            |  |  |  |  |

 

B-1

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**EXHIBIT C**

**COMPLIANCECERTIFICATE**

 

TO:         SILICON VALLEY BANK

FROM:   CLEARSTORY SYSTEMS, INC.

** **

Theundersigned authorized officer of CLEARSTORY SYSTEMS, INC. certifies that underthe terms and conditions of the Loan and Security Agreement between Borrowerand Bank (the “Agreement”), (i) Borrower is in complete compliance for theperiod ending                         with all required covenants except as noted below and (ii) there are noEvents of Default, and all representations and warranties in the Agreement aretrue and correct in all material respects on this date; provided however, thatthose representations and warranties expressly referring to another date shallbe true and correct in all material respects only as of such date.  Attached are the required documentssupporting the certification.  TheOfficer certifies that these are prepared in accordance with Generally AcceptedAccounting Principles (GAAP) consistently applied from one period to the nextexcept as explained in an accompanying letter or footnotes.  The Officer acknowledges that no borrowingsmay be requested at any time or date of determination that Borrower is not incompliance with any of the terms of the Agreement, and that compliance isdetermined not just at the date this certificate is delivered.

 

**Please indicate compliancestatus by circling Yes/No under “Complies” column.**

 
| **Reporting Covenant**                                                        | ** ** | **Required**                        | ** ** | **Complies** |
|-------------------------------------------------------------------------------|------------|-------------------------------------|------------|--------------|
|                                                                          |       |                                |       |         |
| Interim  financial statements for Borrower  with A/R Agings (by invoice date) |       | Monthly within 30 days              |       | YesNo        |
| Annual  financial statements (CPA Audited) for Borrower                  |       | FYE within 120 days                 |       | YesNo        |
| Annual Balance Sheet and Income Statement                                     |       | Within 30 days of Board approval    |       | YesNo        |
| 10 Q, 10 K and 8-K                                                            |       | Within 5 days after filing with SEC |       | YesNo        |
| Compliance Certificate                                                        |       | Quarterly within 30 days            |       | YesNo        |

 
| **Financial Covenant**                     | ** ** | **Required**                | ** ** | **Actual** | ** ** | **Complies** |
|--------------------------------------------|------------|-----------------------------|------------|------------|------------|--------------|
|                                       |       |                        | ** ** | ** ** | ** ** | ** **   |
| Maintain at  all times (tested quarterly): |       |                        |       |       |       |         |
| Minimum net  revenue (Borrower)            |       | *                           |       | :1.0       |       | YesNo        |
| Minimum Callable  Capital (Guarantor)      |       | 3x  outstanding Obligations |       | :1.0       |       | YesNo        |

 

----

| *as set  forth in Section 6.7(a) of the Loan and Security Agreement |   |   |   |   |   |   |
|-------------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|

 
|                                             |       | **BANK USE ONLY**  |
|--------------------------------------------------|------------|--------------------|
| **Comments Regarding Exceptions:** See Attached. |       | Received by:       |   |   |
| Sincerely,                                       |       |               | AUTHORIZED SIGNER |
|                                             |       |               | Date: |   |   |
| SIGNATURE                                        |       |               |
|                                             |       |               | Verified: |   |   |
| TITLE                                            |       |               | AUTHORIZED SIGNER |
|                                             |       |               |   |
| DATE                                             | ** ** | Compliance Status: | Yes | No |
|                                                  |            |                    |  |  |  |  |  |  |  |  |  |  |

 

C-1

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