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EXHIBIT 10.1

BUSINESS LOAN AGREEMENT

|              |  |           |            |          |  |          |            |           |  |         |           |         |  |          |      |  |  |  |  |  |  |  |     |  |  |  |  | 
|------------- |  | --------- | ---------- | -------- |  | -------- | ---------- | --------- |  | ------- | --------- | ------- |  | -------- | ---- |  |  |  |  |  |  |  | --- |  |  |  |  | 
|Principal     |  | Loan Date |            | Maturity |  | Loan No. |            | Call/Coll |  | Account |           | Officer |  | Initials
|              |  |           |            |          |  |          |            |           |  |         |           |         |  |         
|$5,000,000.00 |  |           | 07-18-2003 |          |  |          | 07-18-2004 |           |  |         | 373376964 |         |  |          | 2000 |  |  |  |  |  |  |  | 024 | 

|          |  |                        |  |         |  |                    
|--------- |  | ---------------------- |  | ------- |  | -------------------
|Borrower: |  | Niku Corporation       |  | Lender: |  | Mid-Peninsula Bank 
|          |  | 305 Main Street        |  |         |  | Palo Alto Office   
|          |  | Redwood City, CA 94063 |  |         |  | 420 Cowper Street  
|          |  |                        |  |         |  | Palo Alto, CA 94301

THIS BUSINESS LOAN AGREEMENT dated July 18, 2003, is made and executed between
Niku Corporation (Borrower) and Mid-Peninsula Bank (Lender) on the
following terms and conditions. Borrower has received prior commercial loans
from Lender or has applied to Lender for a commercial loan or loans or other
financial accommodations, including those which may be described on any exhibit
or schedule attached to this Agreement (Loan). Borrower understands and
agrees that: (A) in granting, renewing, or extending any Loan hereunder, Lender
is relying upon Borrowers representations, warranties, and agreements as set
forth in this Agreement; (B) the granting, renewing, or extending of any Loan
by Lender at all times shall be subject to Lenders sole judgment and
discretion; and (C) all such Loans shall be and remain subject to the terms and
conditions of this Agreement.

TERM. This Agreement shall be effective as of July 18, 2003, and shall continue
in full force and effect until such time as all of Borrowers Loans in favor of
Lender have been paid in full, including principal, interest, costs, expenses,
attorneys fees, and other fees and charges, or until such time as the parties
may agree in writing to terminate this Agreement.

CONDITIONS PRECEDENT TO EACH ADVANCE.Lenders obligation to make the initial
Advance and each subsequent Advance under this Agreement shall be subject to
the fulfillment to Lenders satisfaction of all of the conditions set forth in
this Agreement and in the Related Documents.



| |  | Loan Documents.Borrower shall provide to Lender the following documents
for the Loan: (1) the Note; 121 Security Agreements granting to Lender
security interests in the Collateral; 131 financing statements and all
other documents perfecting Lenders Security Interests; (4) evidence of
insurance as required below; (5) together with all such Related Documents
as Lender may require for the Loan; all in form and substance satisfactory
to Lender and Lenders counsel.
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| |  | Borrowers Authorization.Borrower shall have provided in form and
substance satisfactory to Lender properly certified resolutions, duly
authorizing the execution and delivery of this Agreement, the Note and the
Related Documents, In addition, Borrower shall have provided such other
resolutions, authorizations, documents and instruments as Lender or its
counsel, may require.                                                                                          
|
| |  | Payment of Fees and Expenses.Borrower shall have paid to Lender all fees,
charges, and other expenses which are then due and payable as specified in
this Agreement or any Related Document.                                                                                                                                                                                                                                                                                      
|
| |  | Representations and Warranties.The representations and warranties set
forth in this Agreement, in the Related Documents, and in any document or
certificate delivered to Lender under this Agreement are true and correct.                                                                                                                                                                                                                                                        
|
| |  | No Event of Default.There shall not exist at the time of any Advance a
condition which would constitute an Event of Default under this Agreement
or under any Related Document.                                                                                                                                                                                                                                                                                                   





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REPRESENTATIONS AND WARRANTIES.Borrower represents and warrants to Lender, as
of the date of this Agreement, as of the date of each disbursement of loan
proceeds, as of the date of any renewal, extension or modification of any Loan,
and at all times any Indebtedness exists:



| |  | Organization.Borrower is a corporation for profit which is, and at all
times shall be, duly organized, validly existing, and in good standing
under and by virtue of the laws of the State of Delaware. Borrower is duly
authorized to transact business in all other states in which Borrower is
doing business, having obtained all necessary filings, governmental
licenses and approvals for each state in which Borrower is doing business,
Specifically, Borrower is, and at all times shall be, duly qualified as a
foreign corporation in all states in which the failure to so qualify would
have a material adverse effect on its business or financial condition.
Borrower has the full power and authority to own its properties and to
transact the business in which it is presently engaged or presently
proposes to engage. Borrower maintains an office at 305 Main Street,
Redwood City, CA 94063. Unless Borrower has designated otherwise in
writing, the principal office is the office at which Borrower keeps its
books and records including its records concerning the Collateral. Borrower
will notify Lender prior to any change in the location of Borrowers state
of organization or any change in Borrowers name, Borrower shall do all
things necessary to preserve and to keep in full force and effect its
existence, rights and privileges, and shall comply with all regulations,
rules, ordinances, statutes, orders and decrees of any governmental or
quasi-governmental authority or court applicable to Borrower and Borrowers
business activities.
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| |  | Assumed Business Names.Borrower has filed or recorded all documents or
filings required by law relating to all assumed business names used by
Borrower. Excluding the name of Borrower, the following is a complete list
of all assumed business names under which Borrower does business: None.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Authorization.Borrowers execution, delivery, and performance of this
Agreement and all the Related Documents have been duly authorized by all
necessary action by Borrower and do not conflict with, result in a
violation of, or constitute a default under (1) any provision of Borrowers
articles of incorporation or organization, or bylaws, or any agreement or
other instrument binding upon Borrower or (2) any law, governmental
regulation, court decree, or order applicable to Borrower or to Borrowers
properties,                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Financial Information.Each of Borrowers financial statements supplied to
Lender truly and completely disclosed Borrowers financial condition in
accordance with GAAP.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Legal Effect. This Agreement constitutes, and any instrument or agreement
Borrower is required to give under this Agreement when delivered will
constitute legal, valid, and binding obligations of Borrower enforceable
against Borrower in accordance with their respective terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Properties.Except as contemplated by this Agreement or as previously
disclosed in Borrowers financial statements or in writing to Lender and as
accepted by Lender, and except for property tax liens for taxes not
presently due and payable, Borrower owns and has good title to all of
Borrowers properties (other than properties leased or licensed in the
ordinary course of business) free and clear of all Security Interests, and
has not executed any security documents or financing statements relating to
such properties (other than for properties leased or licensed in the
ordinary course of business). All of Borrowers properties are titled in
Borrowers legal name, and Borrower has not used or filed a financing
statement under any other name for at least the last five (5) years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Hazardous Substances.Except as disclosed to and acknowledged by Lender in
writing, Borrower represents and warrants that: (1) During the period of
Borrowers ownership of Borrowers Collateral, there has been no use,
generation, manufacture, storage, treatment, disposal, release or
threatened release of any Hazardous Substance by any person on, under,
about or from any of the Collateral. (2) Borrower has no knowledge of, or
reason to believe that there has been (a) any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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| |  | breach or violation of any Environmental Laws; (b) any use, generation,
manufacture, storage, treatment, disposal, release or threatened release of
any Hazardous Substance on, under, about or from the Collateral by any
prior owners or occupants of any of the Collateral; or (c) any actual or
threatened litigation or claims of any kind by any person relating to such
matters. (3) Neither Borrower nor any tenant, contractor, agent or other
authorized user of any of the Collateral shall use, generate, manufacture,
store, treat, dispose of or release any Hazardous Substance on, under,
about or from any of the Collateral; and any such activity shall be
conducted in compliance with all applicable federal, state, and local laws,
regulations, and ordinances, including without limitation all Environmental
Laws. Borrower authorizes Lender and its agents to enter upon the
Collateral to make such inspections and tests as Lender may deem
appropriate to determine compliance of the Collateral with this section of
the Agreement. Any inspections or tests made by Lender shall be at
Borrowers expense and for Lenders purposes only and shall not be
construed to create any responsibility or liability on the part of Lender
to Borrower or to any other person. The representations and warranties
contained herein are based on Borrowers due diligence in investigating the
Collateral for hazardous waste and Hazardous Substances. Borrower hereby
(1) releases and waives any future claims against Lender for indemnity or
contribution in the event Borrower becomes liable for cleanup or other
costs under any such laws, and (2) agrees to indemnify and hold harmless
Lender against any and all claims, losses, liabilities, damages, penalties,
and expenses which Lender may directly or indirectly sustain or suffer
resulting from a breach of this section of the Agreement or as a
consequence of any use, generation, manufacture, storage, disposal, release
or threatened release of a hazardous waste or substance on the Collateral.
The provisions of this section of the Agreement, including the obligation
to indemnify, shall survive the payment of the Indebtedness and the
termination, expiration or satisfaction of this Agreement and shall not be
affected by Lenders acquisition of any interest in any of the Collateral,
whether by foreclosure or otherwise.
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| |  | Litigation and Claims.No litigation, claim, investigation, administrative
proceeding or similar action (including those for unpaid taxes) against
Borrower is pending or threatened, and no other event has occurred which
may materially adversely affect Borrowers financial condition or
properties, other than litigation, claims, or other events, if any, that
have been disclosed to and acknowledged by Lender in writing pursuant to
the notice provisions of this Agreement or in Borrowers public filings
with the Securities and Exchange Commission.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Taxes.To the best of Borrowers knowledge, all of Borrowers tax returns
and reports that are or were required to be filed, have been filed, and all
taxes, assessments and other governmental charges have been paid in full,
except those presently being or to be contested by Borrower in good faith
in the ordinary course of business and for which adequate reserves have
been provided.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
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| |  | Lien Priority.Unless otherwise previously disclosed to Lender in writing
and except for Permitted Liens, Borrower has not entered into or granted
any Security Agreements, or permitted the filing or attachment of any
Security Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrowers Loan and Note, that would be
prior or that may in any way be superior to Lenders Security Interests and
rights in and to such Collateral.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Binding Effect. ThisAgreement, the Note, all Security Agreements (if any),
and all Related Documents are binding upon the signers thereof, as well as
upon their successors, representatives and assigns, and are legally
enforceable in accordance with their respective terms.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

AFFIRMATIVE COVENANTS.Borrower covenants and agrees with Lender that, so long
as this Agreement remains in effect, Borrower will:



| |  | Notices of Claims and Litigation.Promptly inform Lender in writing of all
existing and all threatened litigation, claims, investigations,
administrative proceedings or similar actions affecting Borrower which
could materially affect the financial condition of Borrower.
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| |  | Financial Records.Maintain its books and records in accordance with GAAP,
applied on a consistent basis, and permit Lender to examine and audit
Borrowers books and records at all reasonable times.
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| |  | Financial Statements.Furnish Lender with the following:                                                                                                                                              



| |  |  | Interim Statements.As soon as available, but in no event later than 15
days after the end of each month, Borrowers balance sheet and profit
and loss statement for the period ended, prepared by Borrower.                                                                          
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| |  |  | Tax Returns.As soon as available, but in no event later than
one-hundred-twenty (120) days after the applicable filing date (unless
extended in accordance with applicable law) for the tax reporting period
ended, Federal and other governmental tax returns, prepared by Borrower.
|
| |  |  | Additional Requirements.As soon as available, but in no event later
than 15 days of filing, Borrowers 10-Q report and 10K Annual Form.                                                                                                                                              

All financial reports required to be provided under this Agreement shall be
prepared in accordance with GAAP, applied on a consistent basis, and certified
by Borrower as being true and correct.

Additional Information.Furnish such additional information and statements, as
Lender may request from time to time.

Financial Covenants and Ratios.Borrower agrees to comply with the following
covenants and ratios:



| |  |  | (1) Minimum Cash Requirement:Borrower agrees that the ratio of the
aggregate amount of its cash, cash equivalents and marketable
securities will be equal to or at least 1.25 times the outstanding
principal line balance at each month end.                                           
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| |  |  | (2) Liquidity Requirement:Borrower agrees to maintain minimum quarter
end cash balance of not less than $10 million at the end of each of
Borrowers fiscal quarters.                                                                                                                   
|
| |  |  | (3) Minimum Income:Annual GAAP profitability of at least $1
(excluding adjustments for restructuring charges for vacated
facilities and excluding stock based compensation shares) for the
period from 5/1/03 to 4/30/04.                                                               
|
| |  |  | Except as provided above, all computations made to determine
compliance with the requirements contained in this paragraph shall be
made in accordance with generally accepted accounting principles,
applied on a consistent basis, and certified by Borrower as being true
and correct.

Insurance.Maintain fire and other risk insurance, public liability insurance,
and such other insurance as Lender may require with respect to Borrowers
properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver
to Lender from time to time the policies or certificates of insurance in form
satisfactory to Lender, including stipulations that coverages will not be
cancelled or diminished without at least ten (10) days prior written notice to
Lender.

Insurance Reports.Furnish to Lender, upon request of Lender, reports on each
existing insurance policy showing such information as Lender may reasonably
request, including without limitation the following: (1) the name of the
insurer; (2) the risks insured; (3) the amount of the policy; (4) the
properties insured; (5) the then current property values on the basis of which
insurance has been obtained, and the manner of determining those values; and
(6) the expiration date of the policy.

Other Agreements.Comply with all terms and conditions of each agreement, the
breach or default of which would be reasonably likely to have a material
adverse effect on Borrowers financial condition, operations or assets, whether
now or hereafter existing, between Borrower and any other party and notify

Lender immediately in writing of any default in connection with any such
agreement, except where the

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failure to so comply with any such agreement would not reasonably be likely to
have a material adverse effect on Borrowers financial condition, operations or
assets or where the failure to so comply with any such agreement will not
result in a material default thereunder or where the agreement in question is a
real estate lease which the Borrower is in negotiations to terminate.

Loan Proceeds.Use all Loan proceeds solely for Borrowers business operations,
unless specifically consented to the contrary by Lender in writing.

Loan Proceeds. Use all Loan proceeds solely for Borrowers business
operations, unless specifically consented to the contrary by Lender in writing.

Taxes, Charges and Liens.Pay and discharge when due all of its indebtedness
and obligations, including without limitation all assessments, taxes,
governmental charges, levies and liens, of every kind and nature, imposed upon
Borrower or its properties, income, or profits, prior to the date on which
penalties would attach, and all lawful claims that, if unpaid, might become a
lien or charge upon any of Borrowers properties, income, or profits, except
for any such obligations, taxes, or claims that are being contested in good
faith.

Performance.Perform and comply, in a timely manner, with all terms,
conditions, and provisions set forth in this Agreement, in the Related
Documents, and in all other instruments and agreements between Borrower and
Lender. Borrower shall notify Lender immediately in writing of any default in
connection with any agreement, except in the case of any default which would
not reasonably be likely to have a material adverse effect on Borrowers
financial condition, operations or assets.

Operations.Maintain executive and management personnel with substantially the
same qualifications and experience as the present executive and management
personnel; provide written notice to Lender of any change in executive and
management personnel; conduct its business affairs in a reasonable and prudent
manner, except where the failure to so conduct its business affairs would not
reasonably be likely to have a material adverse effect on Borrowers financial
condition, operations or assets.

Environmental Studies.Promptly conduct and complete, at Borrowers expense,
all such investigations, studies, samplings and testings as may be requested by
Lender or any governmental authority relative to any substance, or any waste or
by-product of any substance defined as toxic or a hazardous substance under
applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.

Compliance with Governmental Requirements.Comply with all laws, ordinances,
and regulations, now or hereafter in effect, of all governmental authorities
applicable to the conduct of Borrowers properties, businesses and operations,
and to the use or occupancy of the Collateral, including without limitation,
the Americans With Disabilities Act, except where noncompliance would not
reasonably be likely to have a material adverse effect on Borrowers financial
condition, operations or assets. Borrower may contest in good faith any such
law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in
writing prior to doing so and so long as, in Lenders sole opinion, Lenders
interests in the Collateral are not jeopardized. Lender may require Borrower to
post adequate security or a surety bond, reasonably satisfactory to Lender, to
protect Lenders interest.

Inspection.Permit employees or agents of Lender at any reasonable time to
inspect any and all Collateral for the Loan or Loans and Borrowers other
properties and to examine or audit Borrowers books, accounts, and records and
to make copies and memoranda of Borrowers books, accounts, and records. If
Borrower now or at any time hereafter maintains any records (including without
limitation computer generated records and computer software programs for the
generation of such records) in the possession of a third party, Borrower, upon
request of Lender, shall notify such party to permit Lender free access to such
records at all reasonable times and to provide Lender with copies of any
records it may request, all at Borrowers expense.

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Compliance Certificates. Unless waived in writing by Lender, provide Lender at
least annually, with a certificate executed by Borrowers chief financial
officer, or other officer or person acceptable to Lender, certifying that the
representations and warranties set forth in this Agreement are true and correct
as of the date of the certificate, except for those representations and
warranties which specifically refer to an earlier date which shall only be
required to be true in all material respects as of such earlier date, and
further certifying that, as of the date of the certificate, no Event of Default
exists under this Agreement.

Environmental Compliance and Reports.Borrower shall comply in all respects
with any and all Environmental Laws; not cause or permit to exist, as a result
of an intentional or unintentional action or omission on Borrowers part or on
the part of any third party, on property owned and/or occupied by Borrower, any
environmental activity where damage may result to the environment, unless such
environmental activity is pursuant to and in compliance with the conditions of
a permit issued by the appropriate federal, state or local governmental
authorities; shall furnish to Lender promptly and in any event within thirty
(30) days after receipt thereof a copy of any notice, summons, lien, citation,
directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission
on Borrowers part in connection with any environmental activity whether or not
there is damage to the environment and/or other natural resources.

Additional Assurances.Make, execute and deliver to Lender such promissory
notes, mortgages, deeds of trust, security agreements, assignments, financing
statements, instruments, documents and other agreements as Lender or its
attorneys may reasonably request to evidence and secure the Loans and to
perfect all Security Interests.

RECOVERY OF ADDITIONAL COSTS.If the imposition of or any change in any law,
rule, regulation or guideline, or the interpretation or application of any
thereof by any court or administrative or governmental authority (including any
request or policy not having the force of law) shall impose, modify or make
applicable any taxes (except federal, state or local income or franchise taxes
imposed on Lender), reserve requirements, capital adequacy requirements or
other obligations which would (A) increase the cost to Lender for extending or
maintaining the credit facilities to which this Agreement relates, (B) reduce
the amounts payable to Lender under this Agreement or the Related Documents, or
(C) reduce the rate of return on Lenders capital as a consequence of Lenders
obligations with respect to the credit facilities to which this Agreement
relates, then Borrower agrees to pay Lender such additional amounts as will
compensate Lender therefore, within five (5) days after Lenders written demand
for such payment, which demand shall be accompanied by an explanation of such
imposition or charge and a calculation in reasonable detail of the additional
amounts payable by Borrower, which explanation and calculations shall be
conclusive in the absence of manifest error.

LENDERS EXPENDITURES.If any action or proceeding is commenced that would
materially affect Lenders interest in the Collateral or if Borrower fails to
comply with any provision of this Agreement or any Related Documents, including
but not limited to Borrowers failure to discharge or pay when due any amounts
Borrower is required to discharge or pay under this Agreement or any Related
Documents, Lender on Borrowers behalf may (but shall not be obligated to) take
any action that Lender deems appropriate, including but not limited to
discharging or paying all taxes, liens, security interests, encumbrances and
other claims, at any time levied or placed on any Collateral and paying all
costs for insuring, maintaining and preserving any Collateral. All such
expenditures incurred or paid by Lender for such purposes will then bear
interest at the rate charged under the Note from the date incurred or paid by
Lender to the date of repayment by Borrower. All such expenses will become a
part of the Indebtedness and, at Lenders option, will (A) be payable on
demand; (B) be added to the balance of the Note and be apportioned among and be
payable with any installment payments to become due during either (1) the term
of any applicable insurance policy; or (2) the remaining term of the Note; or
(C) be treated as a balloon payment which will be due and payable at the Notes
maturity.

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NEGATIVE COVENANTS.Borrower covenants and agrees with Lender that while this
Agreement is in effect, Borrower shall not, without the prior written consent
of Lender:

Indebtedness and Liens.(1) Except for trade debt incurred in the normal course
of business, Permitted Indebtedness and indebtedness to Lender contemplated by
this Agreement, create, incur or assume indebtedness for borrowed money,
including capital leases, (2) sell, transfer, mortgage, assign, pledge, lease,
grant a security interest in, or encumber any of Borrowers assets (except as
allowed as Permitted Liens and except for sales, leases, or licenses of any
intellectual property rights embodied in products of Borrower and its
Subsidiaries and dispositions of office fixtures and equipment consistent with
the ordinary course of Borrowers business), or (3) sell with recourse any of
Borrowers accounts, except to Lender.

Continuity of Operations. (1) Engage in any business activities substantially
different than those in which Borrower is presently engaged, (2) cease
operations, liquidate, merge, transfer, acquire or consolidate with any other
entity, change its name, dissolve or transfer or sell Collateral out of the
ordinary course of business, or (3) pay any dividends on Borrowers stock
(other than dividends payable in its stock).

Loans, Acquisitions and Guaranties.Except for Permitted Investments, (1) Loan,
invest in or advance money or assets, (2) purchase, create or acquire any
interest in any other enterprise or entity, or (3) incur any obligation as
surety or guarantor other than in the ordinary course of business.

CESSATION OF ADVANCES.If Lender has made any commitment to make any Loan to
Borrower, whether under this Agreement or under any other agreement, Lender
shall have no obligation to make Loan Advances or to disburse Loan proceeds if:
(A) Borrower is in default under the terms of this Agreement or any of the
Related Documents or any other agreement that Borrower has with Lender; (B)
Borrower becomes insolvent, files a petition in bankruptcy or similar
proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse
change in Borrowers financial condition or in the value of any Collateral
securing any Loan.

DEFAULT.Each of the following shall constitute an Event of Default under this
Agreement:

Payment Default.Borrower fails to make any payment when due under the Loan.

Other Defaults.Borrower fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Borrower and such failure continues for ten (10) consecutive days after the
date of written notice form Lender identifying such failure.

Default in Favor of Third Parties.Borrower defaults under any loan, extension
of credit, security agreement, purchase or sales agreement, or any other
agreement, in favor of any other creditor or person that may materially affect
any of Borrowers property or Borrowers ability to repay the Loans or
perform their respective obligations under this Agreement or any of the Related
Documents.

False Statements.Any warranty, representation or statement made or furnished
to Lender by Borrower or on Borrowers behalf under this Agreement or the
Related Documents is false or misleading in any material respect, either now or
at the time made or furnished or becomes false or misleading at any time
thereafter.

Insolvency.The dissolution or termination of Borrowers existence as a going
business, the insolvency of Borrower, the appointment of a receiver for any
part of Borrowers property, any assignment for the benefit of creditors, any
type of creditor workout, or the commencement of any proceeding under any
bankruptcy or insolvency laws by or against Borrower.

7



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Defective Collateralization.This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Creditor or Forfeiture Proceedings.Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Borrower or by any governmental agency against
any collateral securing the Loan. This includes a garnishment of any of
Borrowers accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Borrower
as to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Borrower gives Lender written notice
of the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Change in Ownership.Any change in ownership of fifty-one percent (51%) or more
of the common stock of Borrower.

Adverse Change.A material adverse change occurs in Borrowers financial
condition.

Right to Cure.If any default, other than a default on Indebtedness, is curable
and if Borrower or Grantor, as the case may be, has not been given a notice of
a similar default within the preceding twelve (12) months, it may be cured and
no Event of Default will have occurred) if Borrower or Grantor, as the case may
be, after receiving written notice from Lender demanding cure of such default:
(1) cure the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiate steps which Lender deems in
Lenders sole discretion to be sufficient to cure the default and thereafter
continue and complete all reasonable and necessary steps sufficient to produce
compliance as soon as reasonably practical.

EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, except
where otherwise provided in this Agreement or the Related Documents, all
commitments and obligations of Lender under this Agreement or the Related
Documents or any other agreement immediately will terminate (including any
obligation to make further Loan Advances or disbursements), and, at Lenders
option, all Indebtedness immediately will become due and payable, all without
notice of any kind to Borrower, except that in the case of an Event of Default
of the type described in the Insolvency subsection above, such acceleration
shall be automatic and not optional. In addition, Lender shall have all the
rights and remedies provided in the Related Documents or available at law, in
equity, or otherwise. Except as may be prohibited by applicable law, all of
Lenders rights and remedies shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Borrower shall not affect Lenders
right to declare a default and to exercise its rights and remedies.

ACCOUNTS RECEIVABLE AGINGS. Borrower agrees to furnish Lender with, as soon as
available, but in no event later than fifteen (15) days after the end of each
fiscal quarter, Borrowers detailed accounts receivable aging for the period
ended.

DEPOSIT RELATIONSHIP.Borrower agrees that until such time as Borrower is no
longer subject to the terms of any credit agreement(s) with Lender, the primary
deposit account(s) maintained by Borrower will be placed with Lender, or a bank
affiliated with Lender.

OUT OF DEBT PROVISION.Borrower agrees to maintain the principal balance on the
Note at a zero balance for a period of at least fifteen (15) consecutive days
commencing with the date of the Promissory Note and continuing through the
maturity date of the Promissory Note.

MISCELLANEOUS PROVISIONS.The following miscellaneous provisions are a part of
this Agreement:

8



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Amendments.This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.

Attorneys Fees; Expenses.Borrower agrees to pay upon demand all of Lenders
costs and expenses, including Lenders attorneys fees and Lenders legal
expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall
pay the costs and expenses of such enforcement. Costs and expenses include
Lenders attorneys fees and legal expenses whether or not there is a lawsuit,
including attorneys fees and legal expenses for bankruptcy proceedings
(including efforts to modify or vacate any automatic stay or injunction),
appeals, and any anticipated post-judgment collection services. Borrower also
shall pay all court costs and such additional fees as may be directed by the
court.

Caption Headings.Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

Consent to Loan Participation.Borrower agrees and consents to Lenders sale or
transfer, whether now or later, of one or more participation interests in the
Loan to one or more purchasers, whether related or unrelated to Lender. Lender
may provide, without any limitation whatsoever, to any one or more purchasers,
or potential purchasers, any information or knowledge Lender may have about
Borrower or about any other matter relating to the Loan, and Borrower hereby
waives any rights to privacy Borrower may have with respect to such matters.
Borrower additionally waives any and all notices of sale of participation
interests, as well as all notices of any repurchase of such participation
interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the
Loan and will have all the rights granted under the participation agreement or
agreements governing the sale of such participation interests. Borrower further
waives all rights of offset or counterclaim that it may have now or later
against Lender or against any purchaser of such a participation interest and
unconditionally agrees that either Lender or such purchaser may enforce
Borrowers obligation under the Loan irrespective of the failure or insolvency
of any holder of any interest in the Loan. Borrower further agrees that the
purchaser of any such participation interests may enforce its interests
irrespective of any personal claims or defenses that Borrower may have against
Lender.

Governing Law.This Agreement will be governed by, construed and enforced in
accordance with federal law and the laws of the State of California. This
Agreement has been accepted by Lender in the State of California.

Choice of Venue.If there is a lawsuit, Borrower agrees upon Lenders request
to submit to the jurisdiction of the courts of Santa Clara County, State of
California.

No Waiver by Lender.Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a provision
of this Agreement shall not prejudice or constitute a waiver of Lenders right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Borrower shall constitute a waiver of any of
Lenders rights or of any of Borrowers obligations as to any future
transactions. Whenever the consent of Lender is required under this Agreement,
the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.

Notices.Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by

9



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law), when deposited with a nationally recognized overnight courier, or, if
mailed, when deposited in the United States mail, as first class, certified or
registered mail postage prepaid, directed to the addresses shown near the
beginning of this Agreement. Any party may change its address for notices under
this Agreement by giving formal written notice to the other parties, specifying
that the purpose of the notice is to change the partys address. For notice
purposes, Borrower agrees to keep Lender informed at all times of Borrowers
current address. Unless otherwise provided or required by law, if there is more
than one Borrower, any notice given by Lender to any Borrower is deemed to be
notice given to all Borrowers.

Severability.If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending
provision shall be considered modified so that it becomes legal, valid and
enforceable. If the offending provision cannot be so modified, it shall be
considered deleted from this Agreement. Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other
provision of this Agreement.

Subsidiaries of Borrower.To the extent the context of any provisions of this
Agreement makes it appropriate, including without limitation any
representation, warranty or covenant, the word Borrower as used in this
Agreement shall include all of Borrowers subsidiaries. Notwithstanding the
foregoing however, under no circumstances shall this Agreement be construed to
require Lender to make any Loan or other financial accommodation to any of
Borrowers subsidiaries.

Successors and Assigns.All covenants and agreements contained by or on behalf
of Borrower shall bind Borrowers successors and assigns and shall inure to the
benefit of Lender and its successors and assigns. Borrower shall not, however,
have the right to assign Borrowers rights under this Agreement or any interest
therein, without the prior written consent of Lender.

Survival of Representations and Warranties.Borrower understands and agrees
that in extending Loan Advances, Lender is relying on all representations,
warranties, and covenants made by Borrower in this Agreement or in any
certificate or other instrument delivered by Borrower to Lender under this
Agreement or the Related Documents. Borrower further agrees that regardless of
any investigation made by Lender, all such representations, warranties and
covenants will survive the extension of Loan Advances and delivery to Lender of
the Related Documents shall be continuing in nature, shall be deemed made and
re-dated by Borrower at the time each Loan Advance is made, and shall remain in
full force and effect until such time as Borrowers Indebtedness shall be paid
in full, or until this Agreement shall be terminated in the manner provided
above, whichever is the last to occur.

Time is of the Essence.Time is of the essence in the performance of this
Agreement.

Waive Jury.All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party. (Initial Here____________)

DEFINITIONS.The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money
of the United States of America. Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code.
Accounting words and terms not otherwise defined in this Agreement shall have
the meanings assigned to them in accordance with generally accepted accounting
principles as in effect on the date of this Agreement:

10



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Advance.The word Advance means a disbursement of Loan funds made, or to be
made, to Borrower or on Borrowers behalf on a line of credit or multiple
advance basis under the terms and conditions of this Agreement.

Agreement.The word Agreement means this Business Loan Agreement, as this
Business Loan Agreement may be amended or modified from time to time, together
with all exhibits and schedules attached to this Business Loan Agreement from
time to time.

Borrower.The word Borrower means Niku Corporation.

Collateral.The word Collateral means (I) the Collateral, as such term is
defined in the Security Agreement and, (ii) as applicable, any other Collateral
(Other Collateral) from time to time pledged as collateral for the Loan.

Environmental Laws.The words Environmental Laws mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1 980,
as amended, 42 U.S.C. Section 9601, et seq. (CERCLA), the Superfund
Amendments and Reauthorization Act of 1986, Pub. L. No. 99-499 (SARA), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or federal laws, rules,
or regulations adopted pursuant thereto.

Event of Default.The words Event of Default mean any of the events of
default set forth in this Agreement in the default section of this Agreement.

GAAP.The word GAAP means generally accepted accounting principles.

Grantor.The word Grantor means each and all of the persons or entities
granting a Security Interest in any Collateral for the Loan, including without
limitation all Borrowers granting such a Security Interest.

Hazardous Substances.The words Hazardous Substances mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human
health or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words Hazardous
Substances are used in their very broadest sense and include without
limitation any and all hazardous or toxic substances, materials or waste as
defined by or listed under the Environmental Laws. The term Hazardous
Substances also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

Indebtedness.The word Indebtedness means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Borrower is responsible
under this Agreement or under any of the Related Documents.

Lender.The word Lender means Mid-Peninsula Bank, its successors and assigns.

Loan.The word Loan means any and all loans and financial accommodations from
Lender to Borrower made pursuant to this Agreement whether now or hereafter
existing, and however evidenced, including without limitation those loans and
financial accommodations described herein or described on any exhibit or
schedule attached to this Agreement from time to time.

Note.The word Note means the Note executed by Niku Corporation in the
principal amount of $5,000,000.00 dated July 18, 2003, together with all
renewals of, extensions of, modifications of, re-financings of, consolidations
of, and substitutions for the note or credit agreement.

Permitted Acquisitions.The words Permitted Acquisitions mean an acquisition
(whether pursuant to an acquisition of stock, assets or otherwise) by Borrower
of any entity or the assets of any entity which

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meets all of the following conditions: (i) the purchase price paid by Borrower
pursuant to such acquisition consists solely of securities of Borrower; (ii)
such entity is primarily engaged in a similar line of business as Borrower as
of the date of this Agreement; (iii) more than 80 percent of the assets
acquired or owned by the entity being acquired are located in the United States
and such entity (in the case of a stock acquisition) is organized under the
laws of the United States or a state thereof; (iv) immediately before and after
giving effect to such acquisition, no Event of Default shall have occurred and
be continuing or would result therefrom; (v) Borrower shall have delivered to
Lender a pro forma financial statement for the period of four full fiscal
quarters immediately preceding such acquisition (prepared in good faith and in
a manner and using such methodology which is consistent with the most recent
financial statements delivered to Lender) giving pro forma effect to the
consummation of such acquisition and evidencing compliance with the financial
covenants and ratios set forth above and incompliance with the financial ratios
contained in any Related Documents; and (vi) Lender shall have received a true
and complete copy of each purchase agreement, and all other material documents
and instruments delivered in connection with the consummation of any Permitted
Acquisition (the delivery of which would not violate any confidentiality
obligations).

Permitted Indebtedness.The words Permitted Indebtedness means:



| | (a) |  | unsecured indebtedness (i) occurred in the ordinary course of
Borrower or its Subsidiaries (including open accounts extended by
suppliers on normal trade terms in connection with purchases of goods
and services which are not overdue for a period of more than 90 days
or, if overdue for more than 90 days, as to which a dispute exists and
adequate reserves in conformity with GAAP have been established on the
books of Borrower or such Subsidiary) and (ii) in respect of any
performance, surety or appeal bonds provided in the ordinary course of
business, which bonds are issued in accordance with an agreement
approved by Lender;
| | --- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | indebtedness of any Subsidiary owing to Borrower or any other
Subsidiary, which is not forgiven or otherwise discharged for any
consideration other than payment in full or in part in cash;                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | (c) |  | indebtedness of Borrower and its Subsidiaries in respect of
purchase money indebtedness for property and equipment purchased in the
ordinary course of business consistent any capital budget; and                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| | (d) |  | indebtedness of Borrower its Subsidiaries in respect of capitalized
leases for equipment not in exceed of the initial purchase price of
such equipment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| | (e) |  | Any other indebtedness not exceeding $500,000 in the aggregate                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

Permitted Investments. The words Permitted Investments mean:



| | (a) |  | loans to officers and other key employees of Borrower and its
Subsidiaries which (i) are made as book entries and in which no cash is
actually advanced and which are made to permit the purchase of
securities of Borrower and are secured by such securities and (ii) are
made in cash in amounts not exceeding two hundred fifty thousands
dollars ($250,000) in any one transaction and not exceeding (in the
aggregate) on million dollars ($1,000,000) for all such transactions
outstanding at any time;                                                                                 
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (b) |  | (i) investments of cash balances in cash equivalents and short term
investments, consistent with any investment guidelines and practices in
effect on the date of this Agreement or as may from time to time be
approved by Lender in writing and (ii) repurchases of common stock (1)
pursuant to any agreements with employees providing for such repurchase
at the time of execution thereof at a purchase price not exceeding the
lesser of the fair market value of such stock or the purchase price for
same actually paid by the employee and (2) pursuant to Borrowers share
repurchase

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| |     |  | program in effect on the date of this Agreement or in accordance with
such other program as may from time to time be approved by Lender in
writing;                                                                                                         
| | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | (c) |  | without duplication, investments to the extent permitted as
Permitted Indebtedness;                                                                                                                                                                         
|
| | (d) |  | investments by way of contributions of capital or purchases of
equity by Borrower in any Subsidiary that has guaranteed the
Indebtedness, which guaranty shall be in a form and content prepared by
and acceptable to Lender;                               
|
| | (e) |  | investments constituting (i) accounts receivable arising, (ii)
trade debt granted, or (iii) deposits made in connection with the
purchase price )or license or other similar fee) of goods or services,
in each case in the ordinary course of business; and
|
| | (f) |  | Investments by way of Permitted Acquisitions in companies that have
guaranteed the Indebtedness, which guaranty shall be in a form and
content prepared by and acceptable to Lender.                                                                        

Permitted Liens.The words Permitted Liens mean (1) liens and security
interests securing Indebtedness owed by Borrower to Lender; (2) liens for
taxes, assessments, or similar charges either not yet due or being contested in
good faith; (3) liens of material men, mechanics, warehousemen, or carriers, or
other like liens arising in the ordinary course of business and securing
obligations which are not yet delinquent; (4) purchase money liens or purchase
money security interests upon or in any property acquired or held by Borrower
in the ordinary course of business to secure indebtedness outstanding on the
date of this Agreement or permitted to be incurred under the paragraph of this
Agreement titled Indebtedness and Liens; (5) liens and security interests
which, as of the date of this Agreement, have been disclosed to and approved by
the Lender in writing; and (6) those liens and security interests which in the
aggregate constitute an immaterial and insignificant monetary amount with
respect to the net value of Borrowers assets; (7) liens of lessors in respect
of equipment and other operating and capital leases of property leased in the
ordinary course of business; (8) liens and security interests which, as of the
date of this Agreement, have been disclosed to and approved by the Lender in
writing; (9) those liens and security interests which in the aggregate
constitute an immaterial and insignificant monetary amount with respect to the
net value of Borrowers assets and (10) judgment liens (x) in an aggregate
amount not exceeding at any time $500,000 that have been outstanding less than
45 days, or (y) are covered by adequate insurance, or (z) the execution of
which has been stayed.

Related Documents.The words Related Documents mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Loan.

Security Agreement.The words Security Agreement mean (i) the Commercial
Security Agreement dated as of the date hereof and, (ii) in respect of any
Other Collateral that may from time to time be pledged as collateral for the
Loan, any agreements, promises, covenants, arrangements, understandings or
other agreements, whether created by law, contract, or otherwise, evidencing,
governing, representing, or creating a Security Interest in such Other
Collateral.

Security Interest.The words Security Interest mean, without limitation, any
and all types of collateral security, present and future, whether in the form
of a lien, charge, encumbrance, mortgage, deed of trust, security deed,
assignment, pledge, crop pledge, chattel mortgage, collateral chattel mortgage,
chattel trust, factors lien, equipment trust, conditional sale, trust receipt,
lien or title retention contract, lease or consignment intended as a security
device, or any other security or lien interest whatsoever whether created by
law, contract, or otherwise.

Subsidiary.Subsidiary means any corporation, limited liability company,
limited partnership or other similar entity which is either eligible to be
consolidated with Borrower in accordance with GAAP on the

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financial statements of Borrower or in which Borrower either directly or
indirectly holds 50% or more of the outstanding capital stock, membership
interests, partnership interest, or any other indicia of ownership.

BORROWER ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS BUSINESS LOAN
AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS BUSINESS LOAN AGREEMENT IS
DATED JULY 18, 2003.

BORROWER:

NIKU CORPORATION

|                                                                |  |                        | 
|--------------------------------------------------------------- |  | ---------------------- | 
|By:                                                             |  | /s/ Michael Shahbazian | 
|                                                                |  |                        | 
|Michael Shahbazian, Chief Financial Officer of Niku Corporation

LENDER:

MID-PENINSULA BANK

|                                         |  |                    | 
|---------------------------------------- |  | ------------------ | 
|By:                                      |  | /s/ Michelle Titus | 
|                                         |  |                    | 
|V. Michelle Titus, Senior Vice President

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COMMERCIAL SECURITY AGREEMENT

|              |  |           |            |          |  |          |            |           |  |         |           |         |  |          |      |  |  |  |  |  |  |  |     |  |  |  |  | 
|------------- |  | --------- | ---------- | -------- |  | -------- | ---------- | --------- |  | ------- | --------- | ------- |  | -------- | ---- |  |  |  |  |  |  |  | --- |  |  |  |  | 
|Principal     |  | Loan Date |            | Maturity |  | Loan No. |            | Call/Coll |  | Account |           | Officer |  | Initials
|              |  |           |            |          |  |          |            |           |  |         |           |         |  |         
|$5,000,000.00 |  |           | 07-18-2003 |          |  |          | 07-18-2004 |           |  |         | 373376964 |         |  |          | 2000 |  |  |  |  |  |  |  | 024 | 

|         |  |                                                         |  |         |  |                                                                          
|-------- |  | ------------------------------------------------------- |  | ------- |  | -------------------------------------------------------------------------
|Grantor: |  | Niku Corporation
305 Main Street
Redwood City, CA 94063 |  | Lender: |  | Mid-Peninsula Bank
Palo Alto Office
420 Cowper Street
Palo Alto, CA 94301

THIS COMMERCIAL SECURITY AGREEMENTdated July 18, 2003, is made and executed
between Niku Corporation Grantor) and Mid-Peninsula Bank (Lender).

GRANT OF SECURITY INTEREST.For valuable consideration, Grantor grants to
Lender a security interest in the Collateral to secure the Indebtedness and
agrees that Lender shall hove the rights stated in This Agreement with respect
to the Collateral, in addition to all other rights which Lender may have by
law.

COLLATERAL DESCRIPTION.COLLATERAL. The word Collateral means the
following described property of Grantor, whether now owned or hereafter
acquired, whether now existing or hereafter arising, and wherever located:

ALL INVENTORY, CHATTEL PAPER, ACCOUNTS, EQUIPMENT, GENERAL INTANGIBLES,
MONEY OR DEPOSIT ACCOUNTS (INCLUDING, WITHOUT LIMITATION, DEPOSIT ACCOUNT
NUMBERS 373376901, 3733376905, 373376906, 373376908 MAINTAINED BY GRANTOR WITH
LENDER), ANY OTHER ASSETS OF GRANTOR IN WHICH LENDER RECEIVES A SECURITY
INTEREST, OR WHICH HEREAFTER COME INTO THE POSSESSION, CUSTODY OR CONTROL OF
LENDER, AND ALL PROCEEDS THEREOF

In addition, the word Collateral includes all the following, whether now
owned or hereafter acquired, whether now existing or hereafter arising, and
wherever located:

(a)     All attachments, accessions, accessories, tools, parts, supplies,
increases, and additions to and all replacements of and substitutions for any
property described above.

(b)     All products and produce or any of the property described in this
Collateral section.

(c)     All accounts, general intangibles, instruments, rents, monies,
payments, and all other rights, arising out of a sale, lease, or other
disposition of any of the property described in this Collateral section.

(d)     All proceeds (including insurance proceeds) from the sale,
destruction, loss, or other disposition of any of the property described in
this Collateral section (the Proceeds).

(e)     All records and data relating to any of the property described in this
Collateral section, whether in the form of a writing, photograph, microfilm,
microfiche, or electronic media, together with all of Grantors right, title,
and interest in and to all computer software required to utilize, create,
maintain, and process any such records or data on electronic media.

Despite any other provision of this Agreement, Lender is not granted, and will
not have, a non-purchase money security interest in household goods, to the
extent such a security interest would be prohibited by applicable law. In
addition, if because of the type of any Property, Lender is required to give a
notice of





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the right to cancel under Truth in Lending for the Indebtedness, then Lender
will not have a security interest in such Collateral unless and until such a
notice is given.

CROSS-COLLATERALIZATION.In addition to the Note, this Agreement secures all
obligations, debts and liabilities, plus interest thereon of Grantor to Lender,
or any one or more of them, as well as all claims by Lender against Grantor or
any one or more of them, whether now existing or hereafter arising, whether
related or unrelated to the purpose of the Note, whether voluntary or
otherwise, whether due or not due, direct or indirect, determined or
undetermined, absolute or contingent, liquidated or unliquidated whether
Grantor may be liable individually or jointly with others whether obligated as
guarantor, surety, accommodation party or otherwise, and whether recovery upon
such amounts may be or hereafter may become barred by any statute of
limitations, and whether the obligation to repay such amounts may be or
hereafter may become otherwise unenforceable. (Initial
Here )

GRANTORS REPRESENTATIONS AND WARRANTIES WIT RESPECT TO THE COLLATERAL.With
respect to the Collateral, Grantor represents and promises to Lender that:

Perfection of Security Interest.Grantor agrees to execute financing statements
and to take whatever other actions are requested by Lender to perfect and
continue Lenders security interest in the Collateral. Upon request of Lender,
Grantor will deliver to Lender any and all of the documents evidencing or
constituting the Collateral, and Grantor will note Lenders interest upon any
and all chattel paper if not delivered to Lender for possession by Lender. This
is a continuing Security Agreement and will continue in effect even though all
or any part of the Indebtedness is paid in full and even though for a period of
time Grantor may not be indebted to Lender.

Notices to Lender.Grantor will promptly notify Lender in writing at Lenders
address shown above (or such other addresses as Lender may designate from time
to time) prior to any (1) change in Grantors name; (2) change in Grantors
assumed business name(s); (3) change in the management of the Corporation
Grantor; (4) change in the authorized signer(s): (5) change in Grantors
principal office address; (6) change in Grantors state of organization: (7)
conversion of Grantor to a new or different type of business entity; or (8)
change in any other aspect of Grantor that directly or indirectly relates to
any agreements between Grantor and Lender. No change in Grantors name or state
of organization will take effect until after Lender has received notice

No Violation.The execution and delivery of this Agreement will not violate any
law or agreement governing Grantor or to which Grantor is a party, and its
certificate or articles of incorporation and bylaws do not prohibit any term or
condition of this Agreement.

Enforceability of Collateral.To the extent the Collateral consists of
accounts, chattel paper, or general intangibles, as defined by the Uniform
Commercial Code, the Collateral is enforceable in accordance with its terms, is
genuine, and fully complies with all applicable laws and regulations concerning
form, content and manner of preparation and execution, and all persons
appearing to be obligated on the Collateral have authority and capacity to
contract and are in fact obligated as they appear to be on the Collateral. At
the time any Account becomes subject to a security interest in favor of Lender,
the Account shall be a good and valid account representing an undisputed, bona
fide indebtedness incurred by the account debtor, for merchandise held subject
to delivery instructions or previously shipped or delivered pursuant to a
contract of sale, or for services previously performed by Grantor with or for
the account debtor. So long as this Agreement remains in effect, Grantor shall
not, without Lenders prior written consent, compromise, settle, adjust, or
extend payment under or with regard to any such Accounts. There shall be no
setoffs or counterclaims against any of the Collateral, and no agreement shall
have been made under which any deductions or discounts may be claimed
concerning the Collateral except those disclosed to Lender in writing.

Location of the Collateral.Except in the ordinary course of Grantors
business, Grantor agrees to keep the Collateral (or to the extent the
Collateral consists of intangible property such as accounts or general

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intangibles, the records concerning the Collateral) at Grantors address shown
above or at such other locations as are acceptable to Lender. Upon Lenders
request, Grantor will deliver to Lender in form satisfactory to Lender a
schedule of real properties and Collateral locations relating to Grantors
operations, including without limitation the following: (1) all real property
Grantor owns or is purchasing; (2) all real property Grantor is renting or
leasing; (3) all storage facilities Grantor owns, rents, leases, or uses; and
(4) all other properties where Collateral is or may be located.

Removal of the Collateral.Except in the ordinary course of Grantors business,
including the sales of inventory, Grantor shall not remove the Collateral from
its existing location without Lenders prior written consent. To the extent
that the Collateral consists of vehicles, or other titled property, Grantor
shall not take or permit any action which would require application for
certificates of title for the vehicles outside the State of California, without
Lenders prior written consent. Grantor shall, whenever requested, advise
Lender of the exact location of the Collateral.

Transactions Involving Collateral.Except for inventory sold or accounts
collected in the ordinary course of Grantors business, or as otherwise
provided for in this Agreement, Grantor shall not sell, offer to sell, or
otherwise transfer or dispose of the Collateral. While Grantor is not in
default under this Agreement, Grantor may sell inventory, but only in the
ordinary course of its business and only to buyers who qualify as a buyer in
the ordinary course of business. A sale in the ordinary course of Grantors
business does not include a transfer in partial or total satisfaction of a debt
or any bulk sale. Grantor shall not pledge, mortgage, encumber or otherwise
permit the Collateral to be subject to any lien, security interest,
encumbrance, or charge, other than the security interest provided for in this
Agreement, without the prior written consent of Lender. This includes security
interests even if junior in right to the security interests granted under this
Agreement. Unless waived by Lender, all proceeds from any disposition of the
Collateral (for whatever reason) shall be held in trust for Lender and shall
not be commingled with any other funds; provided however, this requirement
shall not constitute consent by Lender to any sale or other disposition. Upon
receipt, Grantor shall immediately deliver any such proceeds to Lender.

Title.Grantor represents and warrants to Lender that Grantor holds good and
marketable title to the Collateral, free and clear of all liens and
encumbrances except for the lien of this Agreement. No financing statement
covering any of the Collateral is on file in any public office other than those
which reflect the security interest created by this Agreement or to which
Lender has specifically consented. Grantor shall defend Lenders rights in the
Collateral against the claims and demands of all other persons.

Repairs and Maintenance.Grantor agrees to keep and maintain, and to cause
others to keep and maintain, the Collateral in good order, repair and condition
at all times while this Agreement remains in effect. Grantor further agrees to
pay when due all claims for work done on, or services rendered or material
furnished in connection with the Collateral so that no lien or encumbrance may
ever attach to or be filed against the Collateral.

Inspection of Collateral.Lender and Lenders designated representatives and
agents shall have the right at all reasonable times to examine and inspect the
Collateral wherever located.

Taxes, Assessments and Liens.Grantor will pay when due all taxes, assessments
and liens upon the Collateral, its use or operation, upon this Agreement, upon
any promissory note or notes evidencing the Indebtedness, or upon any of the
other Related Documents. Grantor may withhold any such payment or may elect to
contest any lien if Grantor is in good faith conducting an appropriate
proceeding to contest the obligation to pay and so long as Lenders interest in
the Collateral is not jeopardized in Lenders sole opinion. If the Collateral
is subjected to a lien which is not discharged within fifteen (15) days,
Grantor shall deposit with Lender cash, a sufficient corporate surety bond or
other security satisfactory to Lender in an amount adequate to provide for the
discharge of the lien plus any interest, costs, reasonable attorneys fees or
other charges that could accrue as a result of foreclosure or sale of the
Collateral. In any contest Grantor shall defend itself and Lender and shall
satisfy any final adverse judgment before

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enforcement against the Collateral. Grantor shall name Lender as an additional
obligee under any surety bond furnished in the contest proceedings.

Compliance with Governmental Requirements.Grantor shall comply promptly with
all laws, ordinances, rules and regulations of all governmental authorities,
now or hereafter in effect, applicable to the ownership, production,
disposition, or use of the Collateral, including all laws or regulations
relating to the undue erosion of highly-erodible land or relating to the
conversion of wetlands for the production of an agricultural product or
commodity. Grantor may contest in good faith any such law, ordinance or
regulation and withhold compliance during any proceeding, including appropriate
appeals, so long as Lenders interest in the Collateral, in Lenders opinion,
is not jeopardized.

Hazardous Substances.Grantor represents and warrants that the Collateral never
has been, and never will be so long as this Agreement remains a lien on the
Collateral, used in violation of any Environmental Laws or for the generation,
manufacture, storage, transportation, treatment, disposal, release or
threatened release of any Hazardous Substance. The representations and
warranties contained herein are based on Grantors due diligence in
investigating the Collateral for Hazardous Substances. Grantor hereby Ill
releases and waives any future claims against Lender for indemnity or
contribution in the event Grantor becomes liable for cleanup or other costs
under any Environmental Laws, and (21 agrees to indemnify and hold harmless
Lender against any and all claims and losses resulting from a breach of this
provision of this Agreement. This obligation to indemnify shall survive the
payment of the Indebtedness and the satisfaction of this Agreement.

Maintenance of Casualty Insurance.Grantor shall procure and maintain all risks
insurance, including without limitation fire, theft and liability coverage
together with such other insurance as Lender may require with respect to the
Collateral, in form, amounts, coverages and basis reasonably acceptable to
Lender and issued by a company or companies reasonably acceptable to Lender.
Grantor, upon request of Lender, will deliver to Lender from time to time the
policies or certificates of insurance in form satisfactory to Lender, including
stipulations that coverages will not be cancelled or diminished without at
least ten (10) days prior written notice to Lender and not including any
disclaimer of the insurers liability for failure to give such a notice. If
Grantor at any time fails to obtain or maintain any insurance as required under
this Agreement, Lender may (but shall not be obligated to) obtain such
insurance as Lender deems appropriate, including if Lender so chooses single
interest insurance, which will cover only Lenders interest in the Collateral.

Application of Insurance Proceeds.Grantor shall promptly notify Lender of any
loss or damage to the Collateral. Lender may make proof of loss if Grantor
fails to do so within fifteen (15) days of the casualty. All proceeds of any
insurance on the Collateral, including accrued proceeds thereon, shall be held
by Lender as part of the Collateral. If Lender consents to repair or
replacement of the damaged or destroyed Collateral, Lender shall, upon
satisfactory proof of expenditure, pay or reimburse Grantor from the proceeds
for the reasonable cost of repair or restoration. If Lender does not consent to
repair or replacement of the Collateral, Lender shall retain a sufficient
amount of the proceeds to pay all of the Indebtedness, and shall pay the
balance to Grantor. Any proceeds which have not been disbursed within six 16)
months after their receipt and which Grantor has not committed to the repair or
restoration of the Collateral shall be used to prepay the Indebtedness.

Insurance Reports.Grantor, upon request of Lender, shall furnish to Lender
reports on each existing policy of insurance showing such information as Lender
may reasonably request including the following: (1) the name of the insurer;
(2) the risks insured; (3) the amount of the policy; (4) the property insured;
(5) the then current value on the basis of which insurance has been obtained
and the manner of determining that value; and (6) the expiration date of the
policy.

Financing Statements.Grantor authorizes Lender to file a UCC-1 financing
statement, or alternatively, a copy of this Agreement to perfect Lenders
security interest. At Lenders request, Grantor additionally agrees to sign all
other documents that are necessary to perfect, protect, and continue Lenders
security

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interest in the Property. Grantor will pay all filing fees, title transfer
fees, and other fees and costs involved unless prohibited by law or unless
Lender is required by law to pay such fees and costs. Grantor irrevocably
appoints Lender to execute financing statements and documents of title in
Grantors name and to execute all documents necessary to transfer title if
there is a default. Lender may file a copy of this Agreement as a financing
statement, If Grantor changes Grantors name or address, or the name or address
of any person granting a security interest under this Agreement changes,
Grantor will promptly notify the Lender of such change.

GRANTORS RIGHT TO POSSESSION AND TO COLLECT ACCOUNTS.Until default and except
as otherwise provided below with respect to accounts, Grantor may have
possession of the tangible personal property and beneficial use of all the
Collateral and may use it in any lawful manner not inconsistent with this
Agreement or the Related Documents, provided that Grantors right to possession
and beneficial use shall not apply to any Collateral where possession of the
Collateral by Lender is required by law to perfect Lenders security interest
in such Collateral. Until otherwise notified by Lender, Grantor may collect any
of the Collateral consisting of accounts. If Lender at any time has possession
of any Collateral, whether before or after an Event of Default, Lender shall be
deemed to have exercised reasonable care in the custody and preservation of the
Collateral if Lender takes such action for that purpose as Grantor shall
request or as Lender, in Lenders sole discretion, shall deem appropriate under
the circumstances, but failure to honor any request by Grantor shall not of
itself be deemed to be a failure to exercise reasonable care. Lender shall not
be required to take any steps necessary to preserve any rights in the
Collateral against prior parties, nor to protect, preserve or maintain any
security interest given to secure the Indebtedness.

LENDERS EXPENDITURES.If not discharged or paid when due, Lender on Grantors
behalf may (but shall not be obligated to) take any action that Lender deems
appropriate, including but not limited to discharging or paying all taxes,
liens, security interests, encumbrances and other claims, at any time levied or
placed on the Collateral and paying all costs for insuring, maintaining and
preserving the Collateral. All such expenditures incurred or paid by Lender for
such purposes will then bear interest at the rate charged under the Note from
the date incurred or paid by Lender to the date of repayment by Grantor. All
such expenses will become a part of the Indebtedness and, at Lenders option,
will (A) be payable on demand; (B) be added to the balance of the Note and be
apportioned among and be payable with any installment payments to become due
during either (1) the term of any applicable insurance policy; or (2) the
remaining term of the Note; or (C) be treated as a balloon payment which will
be due and payable at the Notes maturity. The Agreement also will secure
payment of these amounts. Such right shall be in addition to all other rights
and remedies to which Lender may be entitled upon Default.

DEFAULT.Each of the following shall constitute an Event of Default under this
Agreement:

Payment Default.Grantor fails to make any payment when due under the
Indebtedness.

Other Defaults.Grantor fails to comply with or to perform any other term,
obligation, covenant or condition contained in this Agreement or in any of the
Related Documents or to comply with or to perform any term, obligation,
covenant or condition contained in any other agreement between Lender and
Grantor and such failure continues for ten (10) consecutive days after the date
of written notice from Lender identifying such failure.

Default in Favor of Third Parties.Should Borrower or any Grantor default under
any loan, extension of credit, security agreement, purchase or sales agreement,
or any other agreement, in favor of any other creditor or person that may
materially affect any of Grantors property or Grantors or any Grantors
ability to repay the Indebtedness or perform their respective obligations under
this Agreement or any of the Related Documents.

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False Statements.Any warranty, representation or statement made or furnished
to Lender by Grantor or on Grantors behalf under this Agreement or the Related
Documents is false or misleading in any material respect, either now or at the
time made or furnished or becomes false or misleading at any time thereafter.

Defective Collateralization.This Agreement or any of the Related Documents
ceases to be in full force and effect (including failure of any collateral
document to create a valid and perfected security interest or lien) at any time
and for any reason.

Insolvency.The dissolution or termination of Grantors existence as a going
business, the insolvency of Grantor, the appointment of a receiver for any part
of Grantors property, any assignment for the benefit of creditors, any type of
creditor workout, or the commencement of any proceeding under any bankruptcy or
insolvency laws by or against Grantor.

Creditor or Forfeiture Proceedings.Commencement of foreclosure or forfeiture
proceedings, whether by judicial proceeding, self-help, repossession or any
other method, by any creditor of Grantor or by any governmental agency against
any collateral securing the Indebtedness. This includes a garnishment of any of
Grantors accounts, including deposit accounts, with Lender. However, this
Event of Default shall not apply if there is a good faith dispute by Grantor as
to the validity or reasonableness of the claim which is the basis of the
creditor or forfeiture proceeding and if Grantor gives Lender written notice of
the creditor or forfeiture proceeding and deposits with Lender monies or a
surety bond for the creditor or forfeiture proceeding, in an amount determined
by Lender, in its sole discretion, as being an adequate reserve or bond for the
dispute.

Adverse Change.A material adverse change occurs in Grantors financial
condition.

Cure Provisions.If any default, other than a default in payment is curable and
if Grantor has not been given a notice of a breach of the same provision of
this Agreement within the preceding twelve (12) months, it may be cured (and no
event of default will have occurred) if Grantor, after receiving written notice
from Lender demanding cure of such default: (1) cures the default within
fifteen (15) days; or (2) if the cure requires more than fifteen (15) days,
immediately initiates steps which Lender deems in Lenders sole discretion to
be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as
reasonably practical.

RIGHTS AND REMEDIES ON DEFAULT.If an Event of Default occurs under this
Agreement, at any time thereafter, Lender shall have all the rights of a
secured party under the California Uniform Commercial Code. In addition and
without limitation, Lender may exercise any one or more of the following rights
and remedies:

Accelerate Indebtedness.Lender may declare the entire Indebtedness, including
any prepayment penalty which Grantor would be required to pay, immediately due
and payable, without notice of any kind to Grantor.

Assemble Collateral.Lender may require Grantor to deliver to Lender all or any
portion of the Collateral and any and all certificates of title and other
documents relating to the Collateral. Lender may require Grantor to assemble
the Collateral and make it available to Lender at a place to be designated by
Lender. Lender also shall have full power to enter upon the property of Grantor
to take possession of and remove the Collateral. If the Collateral contains
other goods not covered by this Agreement at the time of repossession, Grantor
agrees Lender may take such other goods, provided that Lender makes reasonable
efforts to return them to Grantor after repossession.

Sell the Collateral.Lender shall have full power to sell, lease, transfer, or
otherwise deal with the Collateral or proceeds thereof in Lenders own name or
that of Grantor. Lender may sell the Collateral at public auction or private
sale. Unless the Collateral threatens to decline speedily in value or is of a
type customarily sold on a recognized market, Lender will give Grantor, and
other persons as required by law, reasonable notice of the time and place of
any public sale, or the time after which any private sale or any

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other disposition of the Collateral is to be made. However, no notice need be
provided to any person who, after Event of Default occurs, enters into and
authenticates an agreement waiving that persons right to notification of sale.
The requirements of reasonable notice shall be met if such notice is given at
least ten (10) days before the time of the sale or disposition. All expenses
relating to the disposition of the Collateral, including without limitation the
expenses of retaking, holding, insuring, preparing for sale and selling the
Collateral, shall become a part of the Indebtedness secured by this Agreement
and shall be payable on demand, with interest at the Note rate from date of
expenditure until repaid.

Appoint Receiver.Lender shall have the right to have a receiver appointed to
take possession of all or any part of the Collateral, with the power to protect
and preserve the Collateral, to operate the Collateral preceding foreclosure or
sale, and to collect the Rents from the Collateral and apply the proceeds, over
and above the cost of the receivership, against the Indebtedness. The receiver
may serve without bond if permitted by law. Lenders right to the appointment
of a receiver shall exist whether or not the apparent value of the Collateral
exceeds the Indebtedness by a substantial amount. Employment by Lender shall
not disqualify a person from serving as a receiver.

Collect Revenues, Apply Accounts.Lender, either itself or through a receiver,
may collect the payments, rents, income, and revenues from the Collateral.
Lender may at any time in Lenders discretion transfer any Collateral into
Lenders own name or that of Lenders nominee and receive the payments, rents,
income, and revenues therefrom and hold the same as security for the
Indebtedness or apply it to payment of the Indebtedness in such order of
preference as Lender may determine. Insofar as the Collateral consists of
accounts, general intangibles, insurance policies, instruments, chattel paper,
chooses in action, or similar property, Lender may demand, collect, receipt
for, settle, compromise, adjust, sue for, foreclose, or realize on the
Collateral as Lender may determine, whether or not Indebtedness or Collateral
is then due. For these purposes, Lender may, on behalf of and in the name of
Grantor, receive, open and dispose of mail addressed to Grantor; change any
address to which mail and payments are to be sent; and endorse notes, checks,
drafts, money orders, documents of title, instruments and items pertaining to
payment, shipment, or storage of any Collateral. To facilitate collection,
Lender may notify account debtors and obligors on any Collateral to make
payments directly to Lender.

Obtain Deficiency.If Lender chooses to sell any or all of the Collateral,
Lender may obtain a judgment against Grantor for any deficiency remaining on
the Indebtedness due to Lender after application of all amounts received from
the exercise of the rights provided in this Agreement. Grantor shall be liable
for a deficiency even if the transaction described in this subsection is a sale
of accounts or chattel paper.

Other Rights and Remedies.Lender shall have all the rights and remedies of a
secured creditor under the provisions of the Uniform Commercial Code, as may be
amended from time to time. In addition, Lender shall have and may exercise any
or all other rights and remedies it may have available at law, in equity, or
otherwise.

Election of Remedies.Except as may be prohibited by applicable law, all of
Lenders rights and remedies, whether evidenced by this Agreement, the Related
Documents, or by any other writing, shall be cumulative and may be exercised
singularly or concurrently. Election by Lender to pursue any remedy shall not
exclude pursuit of any other remedy, and an election to make expenditures or to
take action to perform an obligation of Grantor under this Agreement, after
Grantors failure to perform, shall not affect Lenders right to declare a
default and exercise its remedies.

MISCELLANEOUS PROVISIONS.The following miscellaneous provisions are a part of
this Agreement:

Amendments. This Agreement, together with any Related Documents, constitutes
the entire understanding and agreement of the parties as to the matters set
forth in this Agreement. No alteration of or amendment to this Agreement shall
be effective unless given in writing and signed by the party or parties sought
to be charged or bound by the alteration or amendment.

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Attorneys Fees; Expenses.Grantor agrees to pay upon demand all of Lenders
costs and expenses, including Lenders reasonable attorneys fees and Lenders
legal expenses, incurred in connection with the enforcement of this Agreement.
Lender may hire or pay someone else to help enforce this Agreement, and Grantor
shall pay the costs and expenses of such enforcement. Costs and expenses
include Lenders reasonable attorneys fees and legal expenses whether or not
there is a lawsuit, including reasonable attorneys fees and legal expenses for
bankruptcy proceedings (including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Lender may also recover from Grantor all court, alternative dispute
resolution or other collection costs (including, without limitation, fees and
charges of collection agencies) actually incurred by Lender.

Caption Headings.Caption headings in this Agreement are for convenience
purposes only and are not to be used to interpret or define the provisions of
this Agreement.

Governing Law.This Agreement will be governed by, construed and enforced in
accordance with federal law and the laws of the State of California. However,
in the event that the enforceability or validity of any provision of this
Agreement is challenged or questioned, such provision shall be governed by
whichever applicable state or federal law would uphold or would enforce such
challenged or questioned provision. The loan transaction which is evidenced by
the Note and this Agreement has been applied for, considered, approved and
made, and all necessary loan documents have been accepted by Lender in the
State of California.

Choice of Venue.If there is a lawsuit, Grantor agrees upon Lenders request to
submit to the jurisdiction of the courts of Santa Clara County, State of
California.

No Waiver by Lender.Lender shall not be deemed to have waived any rights under
this Agreement unless such waiver is given in writing and signed by Lender. No
delay or omission on the part of Lender in exercising any right shall operate
as a waiver of such right or any other right. A waiver by Lender of a provision
of this Agreement shall not prejudice or constitute a waiver of Lenders right
otherwise to demand strict compliance with that provision or any other
provision of this Agreement. No prior waiver by Lender, nor any course of
dealing between Lender and Grantor, shall constitute a waiver of any of
Lenders rights or of any of Grantors obligations as to any future
transactions. Whenever the consent of Lender is required under this Agreement,
the granting of such consent by Lender in any instance shall not constitute
continuing consent to subsequent instances where such consent is required and
in all cases such consent may be granted or withheld in the sole discretion of
Lender.

Notices.Any notice required to be given under this Agreement shall be given in
writing, and shall be effective when actually delivered, when actually received
by telefacsimile (unless otherwise required by law), when deposited with a
nationally recognized overnight courier, or, if mailed, when deposited in the
United States mail, as first class, certified or registered mail postage
prepaid, directed to the addresses shown near the beginning of this Agreement.
Any party may change its address for notices under this Agreement by giving
formal written notice to the other parties, specifying that the purpose of the
notice is to change the partys address. For notice purposes, Grantor agrees to
keep Lender informed at all times of Grantors current address. Unless
otherwise provided or required by law, if there is more than one Grantor, any
notice given by Lender to any Grantor is deemed to be notice given to all
Grantors.

Power of Attorney.Grantor hereby appoints Lender as Grantors irrevocable
attorney-in-fact for the purpose of executing any documents necessary to
perfect, amend, or to continue the security interest granted in this Agreement
or to demand termination of filings of other secured parties. Lender may at any
time, and without further authorization from Grantor, file a carbon,
photographic or other reproduction of any financing statement or of this
Agreement for use as a financing statement. Grantor will reimburse Lender for
all expenses for the perfection and the continuation of the perfection of
Lenders security interest in the Collateral.

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Severability.If a court of competent jurisdiction finds any provision of this
Agreement to be illegal, invalid, or unenforceable as to any circumstance, that
finding shall not make the offending provision illegal, invalid, or
unenforceable as to any other circumstance. If feasible, the offending
provision shall be considered modified so that it becomes legal, valid and
enforceable. If the offending provision cannot be so modified, it shall be
considered deleted from this Agreement. Unless otherwise required by law, the
illegality, invalidity, or unenforceability of any provision of this Agreement
shall not affect the legality, validity or enforceability of any other
provision of this Agreement.

Successors and Assigns.Subject to any limitations stated in this Agreement on
transfer of Grantors interest, this Agreement shall be binding upon and inure
to the benefit of the parties, their successors and assigns. If ownership of
the Collateral becomes vested in a person other than Grantor, Lender, without
notice to Grantor, may deal with Grantors successors with reference to this
Agreement and the Indebtedness by way of forbearance or extension without
releasing Grantor from the obligations of this Agreement or liability under the
Indebtedness.

Survival of Representations and Warranties. All representations, warranties,
and agreements made by Grantor in this Agreement shall survive the execution
and delivery of this Agreement, shall be continuing in nature, and shall remain
in full force and effect until such time as Grantors Indebtedness shall be
paid in full.

Time is of the Essence.Time is of the essence in the performance of this
Agreement.

Waive Jury.All parties to this Agreement hereby waive the right to any jury
trial in any action, proceeding, or counterclaim brought by any party against
any other party. (Initial Here
)

DEFINITIONS. The following capitalized words and terms shall have the following
meanings when used in this Agreement. Unless specifically stated to the
contrary, all references to dollar amounts shall mean amounts in lawful money
of the United States of America. Words and terms used in the singular shall
include the plural, and the plural shall include the singular, as the context
may require. Words and terms not otherwise defined in this Agreement shall have
the meanings attributed to such terms in the Uniform Commercial Code:

Account.The word Account means a trade account, account receivable, other
receivable, or other right to payment for goods sold or services rendered owing
to Grantor (or to a third party grantor acceptable to Lender).

Agreement.The word Agreement means this Commercial Security Agreement, as
this Commercial Security Agreement may be amended or modified from time to
time, together with all exhibits and schedules attached to this Commercial
Security Agreement from time to time.

Borrower. The word Borrower means Niku Corporation, and all other persons and
entities signing the Note in whatever capacity.

Collateral.The word Collateral means all of Grantors right, title and
interest in and to all the Collateral as described in the Collateral
Description section of this Agreement.

Default.The word Default means the Default set forth in this Agreement in
the section titled Default.

Environmental Laws.The words Environmental Laws mean any and all state,
federal and local statutes, regulations and ordinances relating to the
protection of human health or the environment, including without limitation the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended, 42 U.S.C. Section 9601, et seq. (CERCLA), the Superfund
Amendments and Reauthorization Act of 1 986, Pub. L. No. 99-499 (SARA), the
Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq., the
Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq.,
Chapters 6.5 through 7.7 of Division 20 of the California Health and Safety
Code, Section 25100, et seq., or other applicable state or federal laws, rules,
or regulations adopted pursuant thereto.

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Event of Default.The words Event of Default mean any of the events of
default set forth in this Agreement in the default section of this Agreement.

Grantor.The word Grantor means Niku Corporation.

Hazardous Substances.The words Hazardous Substances mean materials that,
because of their quantity, concentration or physical, chemical or infectious
characteristics, may cause or pose a present or potential hazard to human
health or the environment when improperly used, treated, stored, disposed of,
generated, manufactured, transported or otherwise handled. The words Hazardous
Substances are used in their very broadest sense and include without
limitation any and all hazardous or toxic substances, materials or waste as
defined by or listed under the Environmental Laws. The term Hazardous
Substances also includes, without limitation, petroleum and petroleum
by-products or any fraction thereof and asbestos.

Indebtedness.The word Indebtedness means the indebtedness evidenced by the
Note or Related Documents, including all principal and interest together with
all other indebtedness and costs and expenses for which Grantor is responsible
under this Agreement or under any of the Related Documents.

Lender.The word Lender means Mid-Peninsula Bank, its successors and assigns.

Note.The word Note means the Note executed by Niku Corporation in the
principal amount of $5,000,000.00 dated July 18, 2003, together with all
renewals of, extensions of, modifications of, re-financings of, consolidations
of, and substitutions for the note or credit agreement.

Property.The word Property means all of Grantors right, title and interest
in and to all the Property as described in the Collateral Description section
of this Agreement.

Related Documents.The words Related Documents mean all promissory notes,
credit agreements, loan agreements, environmental agreements, guaranties,
security agreements, mortgages, deeds of trust, security deeds, collateral
mortgages, and all other instruments, agreements and documents, whether now or
hereafter existing, executed in connection with the Indebtedness.

GRANTOR HAS READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS COMMERCIAL SECURITY
AGREEMENT AND AGREES TO ITS TERMS. THIS AGREEMENT IS DATED JULY 18, 2003.

THIS AGREEMENT IS GIVEN UNDER SEAL AND IT IS INTENDED THAT THIS AGREEMENT IS
AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT ACCORDING TO
LAW.

GRANTOR:

NIKU CORPORATION

|                                                                |  |                        | 
|--------------------------------------------------------------- |  | ---------------------- | 
|By:                                                             |  | /s/ Michael Shahbazian | 
|                                                                |  |                        | 
|Michael Shahbazian, Chief Financial Officer of Niku Corporation

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PROMISSORY NOTE

|              |  |           |            |          |  |          |            |           |  |         |           |         |  |          |      |  |  |  |  |  |  |  |     |  |  |  |  | 
|------------- |  | --------- | ---------- | -------- |  | -------- | ---------- | --------- |  | ------- | --------- | ------- |  | -------- | ---- |  |  |  |  |  |  |  | --- |  |  |  |  | 
|Principal     |  | Loan Date |            | Maturity |  | Loan No. |            | Call/Coll |  | Account |           | Officer |  | Initials
|              |  |           |            |          |  |          |            |           |  |         |           |         |  |         
|$5,000,000.00 |  |           | 07-18-2003 |          |  |          | 07-18-2004 |           |  |         | 373376964 |         |  |          | 2000 |  |  |  |  |  |  |  | 024 | 

|          |  |                        |  |         |  |                    
|--------- |  | ---------------------- |  | ------- |  | -------------------
|Borrower: |  | Niku Corporation       |  | Lender: |  | Mid-Peninsula Bank 
|          |  | 305 Main Street        |  |         |  | Palo Alto Office   
|          |  | Redwood City, CA 94063 |  |         |  | 420 Cowper Street  
|          |  |                        |  |         |  | Palo Alto, CA 94301

|                                |  |                     |  |                            
|------------------------------- |  | ------------------- |  | ---------------------------
|Principal Amount: $5,000,000.00 |  | Initial Rate: 4.50% |  | Date of Note: July 18, 2003

PROMISE TO PAY.Niku Corporation (Borrower) promises to pay to Mid-Peninsula Bank (Lender), or order, in lawful money of the United States of America the principal amount of Five Million & 00/100 Dollars ($5,000,000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.

PAYMENT.Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on July 18, 2004. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning July 18, 2003, with all subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable law, payments will be applied first to accrued unpaid interest, then to principal, and any remaining amount to any unpaid collection costs and late charges. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lenders address shown above or at such other place as Lender may designate in writing.

VARIABLE INTEREST RATE.The
interest rate on this Note is subject to change from time to time
based on changes in an independent index which is the Prime Rate as
published in the Wall Street Journal (Western Edition) (the
Index). The Index is not necessarily the lowest
rate charged by Lender on its loans. If the Index becomes
unavailable during the term of this loan, Lender may designate
a substitute index after notice to Borrower. Lender will tell
Borrower the current Index rate upon Borrowers request.
The interest rate change will not occur more often than each
day. Borrower understands that Lender may make loans based on
other rates as well. The Index currently is 4.00%. The interest
rate to be applied to the unpaid principal balance of this Note
will be at a rate of 0.500 percentage points over the Index,
resulting in an initial rate of 4.50%. NOTICE: Under no circumstances
will the interest rate on this Note be more than the maximum rate allowed by applicable law.

PREPAYMENT; MINIMUM INTEREST CHARGE.In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest charge of $250.00. Other than Borrowers obligation to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrowers obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked paid in full, without recourse, or similar language. If Borrower sends such a





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payment, Lender may accept it without losing any of Lenders rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes payment in full of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Mid-Peninsula Bank, Palo Alto Office, 420 Cowper Street, Palo Alto, CA 94301.

LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 5.000% of the unpaid portion of the regularly scheduled payment.

INTEREST AFTER DEFAULT.Upon Borrowers failure to pay all amounts declared due pursuant to this section, including failure to pay upon final maturity, Lender, at its option, may, if permitted under applicable law, increase the variable interest rate on this Note to 5.500 percentage points over the Index.

DEFAULT.Each of the following
shall constitute an event of default (Event of Default) under this Note:

Payment Default.Borrower fails to make any payment when due under this Note.

Other Defaults.Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower and such failure continues for ten (10) consecutive days after the date of written notice from Lender identifying such failure.

Default in Favor of Third Parties.Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrowers property or Borrowers ability to repay this Note or perform Borrowers obligations under this Note or any of the related documents.

False Statements.Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrowers behalf under this Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Insolvency.The dissolution or termination of Borrowers existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrowers property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower,

Creditor or Forfeiture Proceedings.Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrowers accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Change In Ownership.Any change in ownership of Fifty-one percent (51%) or more of the common stock of Borrower.

Adverse Change.A material adverse change occurs in Borrowers financial condition, or Lender believes the prospect of payment or performance of this Note is impaired.

Cure Provisions.If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it

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may be cured (and no event of default will have occurred) if
Borrower, after receiving written notice from Lender demanding cure of such default:
(1) cures the default within fifteen (15) days; or (2) if the cure requires more
than fifteen (15) days, immediately initiates steps which Lender deems in Lenders sole
discretion to be sufficient to cure the default and thereafter continues and completes all
reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

LENDERS RIGHTS.Upon default, Lender may declare the
entire unpaid principal balance on this Note and all accrued unpaid interest immediately due, and
then Borrower will pay that amount.

ATTORNEYS FEES; EXPENSES.Lender may hire or pay
someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that
amount. This includes, subject to any limits under applicable law, Lenders attorneys
fees and Lenders legal expenses, whether or not there is a lawsuit, including
attorneys fees, expenses for bankruptcy proceedings (including efforts to modify or vacate
any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in
addition to all other sums provided by law,

JURY WAIVER.Lender and Borrower hereby waive the right
to any jury trial in any action, proceeding, or counterclaim brought by either Lender or
Borrower against the other. (Initial Here
)

GOVERNING LAW.This Note will be governed by, construed
and enforced in accordance with federal law and the laws of the State of California. This Note
has been accepted by Lender in the State of California.

CHOICE OF VENUE.If there is a lawsuit, Borrower agrees
upon Lenders request to submit to the jurisdiction of the courts of Santa Clara County,
State of California.

COLLATERAL.Borrower acknowledges this Note is secured by
the Collateral as described in those certain Collateral Assignments; Patent, Copyright and
Trademark Mortgage; and Security Agreement dated September 9, 2002 and Security Agreement
dated July 18, 2003.

LINE OF CREDIT.This Note evidences a revolving line of
credit. Advances under this Note may be requested either orally or in writing by Borrower or as
provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed
in writing. All communications, instructions, or directions by telephone or otherwise to Lender
are to be directed to Lenders office shown above. The following persons currently are
authorized to request advances and authorize payments under the line of credit until Lender
receives from Borrower, at Lenders address shown above, written notice of revocation of
their authority: Michael Shahbazian, Chief Financial Officer of Niku Corporation; Joshua
Pickus; and Naomi Estep. Borrower agrees to be liable for all sums either: (A) advanced
in accordance with the instructions of an authorized person or (B) credited to any of
Borrowers accounts with Lender. The unpaid principal balance owing on this Note at any
time may be evidenced by endorsements on this Note or by Lenders internal records,
including daily computer print-outs. Lender will have no obligation to advance funds under this
Note if: (A) Borrower is in default under the terms of this Note or any agreement that
Borrower or any guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (B) Borrower ceases doing business or is insolvent; (C) Borrower
has applied funds provided pursuant to this Note for purposes other than those authorized by
Lender.

BUSINESS LOAN AGREEMENT.In addition to the terms and
conditions contained in the Note, it is also subject to the terms and conditions contained in
that certain Business Loan Agreement (Agreement) dated July 18, 2003, executed
by Borrower in favor of Lender.

SUCCESSOR INTERESTS. The terms of this Note shall be binding
upon Borrower, and upon Borrowers heirs, personal representatives, successors and assigns,
and shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS.Lender may delay or forgo enforcing any
of its rights or remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to

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the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lenders security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several.

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO THE TERMS OF THE NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

NIKU CORPORATION

|                                                                    |  |  | 
|------------------------------------------------------------------- |  |  | 
|/s/ Michael Shahbazian                                              | 
|                                                                    | 
|By: Michael Shahbazian, Chief Financial Officer of Niku Corporation

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