Exhibit 10.1


    
      

    

     

    Exhibit
      10.1

     

     

    


     

    AMENDED
      AND RESTATED LOAN AND SECURITY AGREEMENT

     

    THIS
      AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
      (this
“Agreement”)
      dated
      as of January 3, 2007, and effective as of December 29, 2006 (the "Effective
      Date")
      between SILICON
      VALLEY BANK,
      a
      California corporation and with a loan production office located at 100
      Matsonford Road, Building 5, Suite 555, Radnor, Pennsylvania 19087
      (“Bank”),
      and
VOXWARE,
      INC.,
      a
      Delaware corporation (“Borrower”),
      provides the terms on which Bank shall lend to Borrower and Borrower shall
      repay
      Bank. This Agreement amends and restates in its entirety a certain Loan and
      Security Agreement dated as of May 24, 2006, between Borrower and Bank. The
      parties agree as follows:

     

    1        
      ACCOUNTING
      AND OTHER TERMS

     

    Accounting
      terms not defined in this Agreement shall be construed following GAAP.
      Calculations and determinations must be made following GAAP. Capitalized terms
      not otherwise defined in this Agreement shall have the meanings set forth in
      Section 13. All other terms contained in this Agreement, unless otherwise
      indicated, shall have the meaning provided by the Code to the extent such terms
      are defined therein.

     

    2        
      LOAN
      AND TERMS OF PAYMENT

     

    2.1   
       Promise
      to Pay.
      Borrower hereby unconditionally promises to pay Bank the outstanding principal
      amount of all Credit Extensions and accrued and unpaid interest thereon as
      and
      when due in accordance with this Agreement.

     

    2.1.1 
      Revolving
      Advances.

     

    (a)    Availability.
      Subject
      to the terms and conditions of this Agreement and to the deduction of Reserves,
      Bank will make Advances to Borrower up to the Availability Amount. Amounts
      borrowed under the Revolving Line may be repaid and, prior to the Revolving
      Line
      Maturity Date, reborrowed, subject to the applicable terms and conditions
      precedent herein.

     

    (b)    Termination;
      Repayment.
      The
      Revolving Line terminates on the Revolving Line Maturity Date, when the
      principal amount of all Advances, the unpaid interest thereon, and all other
      Obligations relating to the Revolving Line shall be immediately due and
      payable.

     

    2.1.2  Letters
      of Credit Sublimit.

     

    (a)    As
      part
      of the Revolving Line and subject to the deduction of Reserves, Bank shall
      issue
      or have issued Letters of Credit for Borrower’s account. The face amount of
      outstanding Letters of Credit (including drawn but unreimbursed Letters of
      Credit and any Letter of Credit Reserve) may not exceed One Million
      Dollars ($1,000,000.00),
      inclusive of Credit Extensions relating to Sections 2.1.3 and 2.1.4. Such
      aggregate amounts utilized hereunder shall at all times reduce the amount
      otherwise available for Advances under the Revolving Line. If, on the Revolving
      Maturity Date, there are any outstanding Letters of Credit, then on such date
      Borrower shall provide to Bank cash collateral in an amount equal to 105% of
      the
      face amount of all such Letters of Credit plus all interest, fees, and costs
      due
      or to become due in connection therewith (as estimated by Bank in its good
      faith
      business judgment), to secure all of the Obligations relating to said Letters
      of
      Credit. All Letters of Credit shall be in form and substance acceptable to
      Bank
      in its sole discretion and shall be subject to the terms and conditions of
      Bank’s standard Application and Letter of Credit Agreement (the “Letter
      of Credit Application”).
      Borrower agrees to execute any further documentation in connection with the
      Letters of Credit as Bank may reasonably request. Borrower
      further agrees to be bound by the regulations and interpretations of the issuer
      of any Letters of Credit guarantied by Bank and opened for Borrower’s account or
      by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
      account, and Borrower understands and agrees that Bank shall not be liable
      for
      any error, negligence, or mistake, whether of omission or commission, in
      following Borrower’s instructions or those contained in the Letters of Credit or
      any modifications, amendments, or supplements thereto.

     

    (b)    The
      obligation of Borrower to immediately reimburse Bank for drawings made under
      Letters of Credit shall be absolute, unconditional, and irrevocable, and shall
      be performed strictly in accordance with the terms of this Agreement, such
      Letters of Credit, and the Letter of Credit Application. 

     

    


    
      
        
          
          

        

        
           

          
            

          

        

        
          
          

        

      

    

    


    (c)    Borrower
      may request that Bank issue a Letter of Credit payable in a Foreign Currency.
      If
      a demand for payment is made under any such Letter of Credit, Bank shall treat
      such demand as an Advance to Borrower of the equivalent of the amount thereof
      (plus fees and charges in connection therewith such as wire, cable, SWIFT or
      similar charges) in Dollars at the then-prevailing rate of exchange in San
      Francisco, California, for sales of the Foreign Currency for transfer to the
      country issuing such Foreign Currency.

     

    (d)    To
      guard
      against fluctuations in currency exchange rates, upon the issuance of any Letter
      of Credit payable in a Foreign Currency, Bank shall create a reserve (the
“Letter
      of Credit Reserve”)
      under
      the Revolving Line in an amount equal to ten percent (10%) of the face amount
      of
      such Letter of Credit. The amount of the Letter of Credit Reserve may be
      adjusted by Bank from time to time to account for fluctuations in the exchange
      rate. The availability of funds under the Revolving Line shall be reduced by
      the
      amount of such Letter of Credit Reserve for as long as such Letter of Credit
      remains outstanding.

     

    2.1.3 
      Foreign
      Exchange Sublimit.
      As part
      of the Revolving Line and subject to the deduction of Reserves, Borrower
      may enter into foreign exchange contracts with Bank under which Borrower commits
      to purchase from or sell to Bank a specific amount of Foreign Currency (each,
      a
“FX
      Forward Contract”)
      on a specified date (the “Settlement
      Date”).
      FX Forward Contracts shall have a Settlement Date of at least one (1) FX
      Business Day after the contract date and shall be subject to a reserve of ten
      percent (10%) of each outstanding FX Forward Contract in a maximum aggregate
      amount equal to One Million Dollars ($1,000,000.00) (the “FX
      Reserve”),
      inclusive of Credit Extensions relating to Sections 2.1.2 and 2.1.4. The
      aggregate amount of FX Forward Contracts at any one time may not exceed ten
      (10)
      times the amount of the FX Reserve. 

     

    2.1.4 
      Cash
      Management Services Sublimit.
      Borrower may use up to One Million Dollars ($1,000,000.00) (the “Cash
      Management Services Sublimit”),
      inclusive of Credit Extensions relating to Sections 2.1.2 and 2.1.3 of the
      Revolving Line for Bank’s cash management services which may include merchant
      services, direct deposit of payroll, business credit card, and check cashing
      services identified in Bank’s various cash management services agreements
      (collectively, the “Cash
      Management Services”).
      Any
      amounts Bank pays on behalf of Borrower or any amounts that are not paid by
      Borrower for any Cash Management Services will be treated as Advances under
      the
      Revolving Line and will accrue interest at the interest rate applicable to
      Advances.

     

    2.1.5 
      Term
      Loan.

     

    (a)    Availability.
      Bank
      shall make one (1) term loan available to Borrower in an amount up to the Term
      Loan on or before March 31, 2007, subject to the satisfaction of the terms
      and
      conditions of this Agreement.

     

    (b)    Interest
      Payments.
      Commencing on the first Payment Date of the month following the month in which
      the Funding Date occurs (or commencing on the Funding Date if the Funding Date
      is the first calendar day of the month), Borrower shall make monthly payments
      of
      interest at the rate set forth in Section 2.3(a)(ii).

     

    (c)    Repayment.
      Commencing on April 1, 2007, and continuing on the Payment Date of each month
      thereafter, Borrower shall repay the Term Loan in (i) thirty-six (36) equal
      installments of principal, plus (ii) monthly payments of accrued
      interest (the
      “Term
      Loan Payment”).
      Borrower’s final Term Loan Payment, due on the Term Loan Maturity Date, shall
      include all outstanding principal and accrued and unpaid interest under the
      Term
      Loan. 

     

    2.2    
      Overadvances.
      If at
      any time or for any reason the total of all outstanding Advances and all other
      monetary Obligations exceeds the Availability Amount (an “Overadvance”),
      Borrower shall immediately pay the amount of the excess to Bank, without notice
      or demand. Without limiting Borrower’s obligation to repay to Bank the amount of
      any Overadvance, Borrower agrees to pay Bank interest on the outstanding amount
      of any Overadvance, on demand, at the Default Rate.

     

    


    
      
        
          
          

        

        
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    2.3    
      Payment
      of Interest on the Credit Extensions. 

     

    (a)    Interest
      Rate.
      

     

    (i)    Advances.
      Subject
      to Section 2.3(b), the principal amount outstanding under the Revolving Line
      shall accrue interest at a floating per annum rate equal to the one and
      three-quarters of one percentage points (1.75%) above the Prime Rate (which
      shall be reduced to one-half of one percentage point (.50%) above the Prime
      Rate, beginning on the first Payment Date following the occurrence of the
      Profitability Event), which interest shall be payable monthly in accordance
      with
      Section 2.3(f) below.

     

    (ii)    Term
      Loan.
      Subject
      to Section 2.3(b), the principal amount outstanding under the Term Loan shall
      accrue interest at a floating per annum rate equal to two and one-quarter of
      one
      percentage points (2.25%) above the Prime Rate, which interest shall be payable
      monthly in accordance with Section 2.3(f) below. 

     

    (b)    Default
      Rate.
      Immediately upon the occurrence and during the continuance of an Event of
      Default, Obligations shall bear interest at a rate per annum which is five
      percentage points above the rate effective immediately before the Event of
      Default (the “Default
      Rate”).
      Payment
      or acceptance of the increased interest rate provided in this
      Section 2.3(b) is not a permitted alternative to timely payment and shall
      not constitute a waiver of any Event of Default or otherwise prejudice or limit
      any rights or remedies of Bank. 

     

    (c)    Adjustment
      to Interest Rate.
      Changes
      to the interest rate of any Credit Extension based on changes to the Prime
      Rate
      shall be effective on the effective date of any change to the Prime Rate and
      to
      the extent of any such change. 

     

    (d)    360-Day
      Year.
      Interest shall be computed on the basis of a 360-day year for the actual number
      of days elapsed.

     

    (e)    Debit
      of Accounts.
      Bank
      may debit any of Borrower’s deposit accounts, including the Designated Deposit
      Account, for principal and interest payments or any other amounts Borrower
      owes
      Bank when due. These debits shall not constitute a set-off.

     

    (f)    Payments;
      Interest Computation; Float Charge.
      Interest is payable monthly on the last calendar day of each month. In computing
      interest on the Obligations, all Payments received after 12:00 noon Eastern
      time
      on any day shall be deemed received on the next Business Day. When a payment
      is
      due on a day that is not a Business Day, the payment is due the next Business
      Day and additional fees or interest, as applicable, shall continue to accrue.
      In
      addition, Bank shall be entitled to charge Borrower a “float” charge in an
      amount equal to three (3) Business Days interest, at the interest rate
      applicable to the Advances, on all Payments received by Bank. The float charge
      for each month shall be payable on the last day of the month. Bank shall not,
      however, be required to credit Borrower's account for the amount of any item
      of
      payment which is unsatisfactory to Bank in its good faith business judgment,
      and
      Bank may charge Borrower's Designated Deposit Account for the amount of any
      item
      of payment which is returned to Bank unpaid.

     

    2.4     
      Fees.
      Borrower shall pay to Bank: 

     

    (a)    Revolving
      Line Commitment Fee.
      A fully
      earned, non-refundable commitment fee of Seven Thousand Five Hundred Dollars
      ($7,500.00) is due on the Effective Date.

     

    (b)    Unused
      Revolving Line Facility Fee.
      A fee
      (the “Unused
      Revolving Line Facility Fee”),
      payable monthly, in arrears, on the last day of each month, in an amount equal
      to one-quarter of one percent (0.25%) per annum of the average unused portion
      of
      the Revolving Line, as determined by Bank. Borrower shall not be entitled to
      any
      credit, rebate or repayment of any Unused Revolving Line Facility Fee previously
      earned by Bank pursuant to this Section notwithstanding any termination of
      the
      within Agreement or the suspension or termination of Bank’s obligation to make
      loans and advances hereunder; and

     

    (c)    Bank
      Expenses.
      All
      Bank Expenses (including reasonable attorneys’ fees and expenses, plus expenses,
      for documentation and negotiation of this Agreement) incurred through and after
      the Effective Date, when due.

     

    


    
      
        
          
          

        

        
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      3         CONDITIONS
      OF LOANS

     

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

     

    (a)    Duly
      executed original signatures to the Loan Documents to which it is a
      party;

     

    (b)    Duly
      executed original signatures to the Control Agreement[s];

     

    (c)    Borrower
      shall have delivered its Operating Documents and a good standing certificate
      of
      Borrower certified by the Secretary of State of the State of Delaware as of
      a
      date no earlier than thirty (30) days prior to the Effective Date;
      

     

    (d)    Duly
      executed original signatures to the completed Borrowing Resolutions for
      Borrower;

     

    (e)    Bank
      shall have received certified copies, dated as of a recent date, of financing
      statement searches, as Bank shall request, accompanied by written evidence
      (including any UCC termination statements) that the Liens indicated in any
      such
      financing statements either constitute Permitted Liens or have been or, in
      connection with the initial Credit Extension, will be terminated or
      released;

     

    (f)    Borrower
      shall have delivered a legal opinion of Borrower’s counsel dated as of the
      Effective Date together with the duly executed original signatures
      thereto;

     

    (g)    Duly
      executed original signatures to the guaranty and security agreement (together
      with the completed Borrowing Resolution) for Guarantor;

     

    (h)    Borrower
      shall have delivered evidence satisfactory to Bank that the insurance policies
      required by Section 6.5 hereof are in full force and effect, together with
      appropriate evidence showing loss payable and/or additional insured clauses
      or
      endorsements in favor of Bank; and

     

    (i)    Borrower
      shall have paid the fees and Bank Expenses then due as specified in Section
      2.4
      hereof.

     

    3.2    
      Conditions
      Precedent to all Credit Extensions.
      Bank’s
      obligations to make each Credit Extension, including the initial Credit
      Extension, is subject to the following:

     

    (a)    timely
      receipt of an executed Transaction Report; 

     

    (b)    the
      representations and warranties in Section 5 shall be true in all material
      respects on the date of the Transaction Report and on the Funding Date of each
      Credit Extension; provided, however, that such materiality qualifier shall
      not
      be applicable to any representations and warranties that already are qualified
      or modified by materiality in the text thereof; and provided, further
that
      those representations and warranties expressly referring to a specific date
      shall be true, accurate and complete in all material respects as of such
      date,
      and no
      Default or Event of Default shall have occurred and be continuing or result
      from
      the Credit Extension. Each Credit Extension is Borrower’s representation and
      warranty on that date that the representations and warranties in Section 5
      remain true in all material respects; provided, however, that such materiality
      qualifier shall not be applicable to any representations and warranties that
      already are qualified or modified by materiality in the text thereof; and
      provided, further that
      those representations and warranties expressly referring to a specific date
      shall be true, accurate and complete in all material respects as of such
      date;
      and

     

    (c)    in
      Bank’s
      sole discretion, there has not been any material impairment in the general
      affairs, management, results of operation, financial condition or the prospect
      of repayment of the Obligations, or there has not been any material adverse
      deviation by Borrower from the most recent business plan of Borrower presented
      to and accepted by Bank.

     

     

    


    
      
        
          
          

        

        
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    3.3     
      Covenant
      to Deliver.
      

     

    Borrower
      agrees to deliver to Bank each item required to be delivered to Bank under
      this
      Agreement as a condition to any Credit Extension. Borrower expressly agrees
      that
      the extension of a Credit Extension prior to the receipt by Bank of any such
      item shall not constitute a waiver by Bank of Borrower’s obligation to deliver
      such item, and any such extension in the absence of a required item shall be
      in
      Bank’s sole discretion.

     

    3.4     
      Procedures
      for Borrowing. Subject
      to the prior satisfaction of all other applicable conditions to the making
      of an
      Advance set forth in this Agreement, to obtain an Advance (other than Advances
      under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank (which notice shall
      be irrevocable) by electronic mail, facsimile, or telephone by 12:00 noon
      Eastern time on the Funding Date of the Advance. Together with any such
      electronic or facsimile notification, Borrower must promptly deliver to Bank
      by
      electronic mail or facsimile a completed Transaction Report executed by a
      Responsible Officer or his or her designee. Bank may rely on any telephone
      notice given by a person whom Bank believes is a Responsible Officer or
      designee. Bank shall credit Advances to the Designated Deposit Account. Bank
      may
      make Advances under this Agreement based on instructions from a Responsible
      Officer or his or her designee or without instructions if the Advances are
      necessary to meet Obligations which have become due.

     

    4        
      CREATION
      OF SECURITY INTEREST 

     

    4.1     
      Grant
      of Security Interest.
      Borrower hereby grants Bank, to secure the payment and performance in full
      of
      all of the Obligations, a continuing security interest in, and pledges to Bank,
      the Collateral, wherever located, whether now owned or hereafter acquired or
      arising, and all proceeds and products thereof. Borrower represents, warrants,
      and covenants that the security interest granted herein is and shall at all
      times continue to be a first priority perfected security interest in the
      Collateral (subject only to Permitted Liens that may have superior priority
      to
      Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort
      claim, Borrower shall promptly notify Bank in a writing signed by Borrower
      of
      the general details thereof and grant to Bank in such writing a security
      interest therein and in the proceeds thereof, all upon the terms of this
      Agreement, with such writing to be in form and substance reasonably satisfactory
      to Bank.

     

    If
      this
      Agreement is terminated, Bank’s Lien in the Collateral shall continue until the
      Obligations (other than inchoate indemnity obligations) are repaid in full
      in
      cash. Upon payment in full in cash of the Obligations and
      at
      such time as Bank’s obligation to make Credit Extensions has terminated, Bank
      shall, at Borrower’s sole cost and expense, release its Liens in the Collateral
      and all rights therein shall revert to Borrower.

     

    4.2     
      Authorization
      to File Financing Statements.
      Borrower hereby authorizes Bank to file financing statements, without notice
      to
      Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
      interest or rights hereunder, including a notice that any disposition of the
      Collateral, by either Borrower or any other Person, shall be deemed to violate
      the rights of Bank under the Code. 

     

    5        
      REPRESENTATIONS
      AND WARRANTIES

     

    Borrower
      represents and warrants as follows: 

     

    5.1    
      Due
      Organization and Authorization.
      Borrower and each of its Subsidiaries are duly existing and in good standing,
      as
      Registered Organizations in their respective jurisdictions of formation and
      are
      qualified and licensed to do business and are in good standing in any
      jurisdiction in which the conduct of their business or their ownership of
      property requires that they be qualified except where the failure to do so
      could
      not reasonably be expected to have a material adverse effect on Borrower’s
      business. In connection with this Agreement, Borrower delivered to Bank a
      completed certificate signed
      by
      Borrower dated as of May 24, 2006 (the “Perfection Certificate”). Borrower
      represents and warrants to Bank that (a) Borrower’s exact legal name is that
      indicated on the Perfection Certificate and on the signature page hereof;
      (b) Borrower is an organization of the type and is organized in the
      jurisdiction set forth in the Perfection Certificate; (c) the Perfection
      Certificate accurately sets forth Borrower’s organizational identification
      number or accurately states that Borrower has none; (d) the Perfection
      Certificate accurately sets forth Borrower’s place of business, or, if more than
      one, its chief executive office as well as Borrower’s mailing address (if
      different than its chief executive office); (e) Borrower (and each of its
      predecessors) has not, in the past five (5) years, changed its jurisdiction
      of
      formation, organizational structure or type, or any organizational number
      assigned by its jurisdiction; and (f) all other information set forth on the
      Perfection Certificate pertaining to Borrower and each of its Subsidiaries
      is
      accurate and complete. If Borrower is

     

    


    
      
        
          
          

        

        
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    not
      now a
      Registered Organization but later becomes one, Borrower shall promptly notify
      Bank of such occurrence and provide Bank with Borrower’s organizational
      identification number.

     

    The
      execution, delivery and performance of the Loan Documents have been duly
      authorized, and do not conflict with Borrower’s organizational documents, nor
      constitute an event of default under any material agreement by which Borrower
      is
      bound. Borrower is not in default under any agreement to which it is a party
      or
      by which it is bound in which the default could reasonably be expected to have
      a
      material adverse effect on Borrower’s business.

     

    5.2    
      Collateral.
      Borrower has good title to, has rights in, and the power to transfer each item
      of the Collateral upon which it purports to grant a Lien hereunder, free and
      clear of any and all Liens except Permitted Liens. Borrower has no deposit
      accounts other than the deposit accounts with Bank, the deposit accounts, if
      any, described in the Perfection Certificate delivered to Bank in connection
      herewith. The Accounts are bona fide, existing obligations of the Account
      Debtors.

     

    The
      Collateral is not in the possession of any third party bailee (such as a
      warehouse) except as otherwise provided in the Perfection Certificate. None
      of
      the components of the Collateral shall be maintained at locations other than
      as
      provided in the Perfection Certificate. In the event that Borrower, after the
      date hereof, intends to store or otherwise deliver any portion of the Collateral
      to a bailee, then Borrower will first receive the written consent of Bank and
      such bailee must execute and deliver a bailee agreement in form and substance
      satisfactory to Bank in its sole discretion. 

     

    All
      Inventory is in all material respects of good and marketable quality, free
      from
      material defects.

     

     Borrower
      is the sole owner of its intellectual property, except for non-exclusive
      licenses granted to its customers in the ordinary course of business. Each
      patent is valid and enforceable, and no part of the intellectual property has
      been judged invalid or unenforceable, in whole or in part, and to the best
      of
      Borrower’s knowledge, no claim has been made that any part of the intellectual
      property violates the rights of any third party except to the extent such claim
      could not reasonably be expected to have a material adverse effect on Borrower’s
      business. Except as noted on the Perfection Certificate, Borrower is not a
      party
      to, nor is bound by, any material license or other agreement with respect to
      which Borrower is the licensee that prohibits or otherwise restricts Borrower
      from granting a security interest in Borrower’s interest in such license or
      agreement or any other property. Borrower shall provide written notice to Bank
      within ten (10) days of entering or becoming bound by any such license or
      agreement which is reasonably likely to have a material impact on Borrower’s
      business or financial condition (other than over-the-counter software that
      is
      commercially available to the public). Borrower shall take such steps as Bank
      requests to obtain the consent of, or waiver by, any person whose consent or
      waiver is necessary for all such licenses or contract rights to be deemed
“Collateral” and for Bank to have a security interest in it that might otherwise
      be restricted or prohibited by law or by the terms of any such license or
      agreement (such consent or authorization may include a licensor’s agreement to a
      contingent assignment of the license to Bank if Bank determines that is
      necessary in its good faith judgment), whether now existing or entered into
      in
      the future. 

     

    5.3     
      Accounts
      Receivable.
      

     

    (a)    For
      each
      Account with respect to which Advances are requested, on the date each
 Advance
      is requested and made, such Account shall meet the Minimum Eligibility
      Requirements set forth in Section  13
      below.

     

    (b)    All
      statements made and all unpaid balances appearing in all invoices, instruments
      and other documents evidencing the Accounts are and shall be true and correct
      and all such invoices, instruments and other documents, and all of Borrower’s
      Books are genuine and in all respects what they purport to be. All sales and
      other transactions underlying or giving rise to each Account shall comply in
      all
      material respects with all applicable laws and governmental rules and
      regulations. Borrower has no knowledge of any actual or imminent Insolvency
      Proceeding of any Account Debtor whose accounts are an Eligible Account in
      any
      Borrowing Base Certificate. To the best of Borrower’s knowledge, all signatures
      and endorsements on all documents, instruments, and agreements relating to
      all
      Accounts are genuine, and all such documents, instruments and agreements are
      legally enforceable in accordance with their terms. 

     

    5.4     Litigation.
      There
      are no actions or proceedings pending or, to the knowledge of the Responsible
       Officers,
      threatened in writing by or against Borrower or any of its Subsidiaries
      involving more than Fifty  Thousand
      Dollars ($50,000.00).

     

    


    
      
        
          
          

        

        
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    5.5    
      No
      Material Deviation in Financial Statements.
      All
      consolidated financial statements for Borrower and any of its Subsidiaries
      delivered to Bank fairly present in all material respects Borrower’s
      consolidated financial condition and Borrower’s consolidated results of
      operations. There has not been any material deterioration in Borrower’s
      consolidated financial condition since the date of the most recent financial
      statements submitted to Bank.

     

    5.6    
      Solvency.
      The
      fair salable value of Borrower’s assets (including goodwill minus disposition
      costs) exceeds the fair value of its liabilities; Borrower is not left with
      unreasonably small capital after the transactions in this Agreement; and
      Borrower is able to pay its debts (including trade debts) as they
      mature.

     

    5.7    
      Regulatory
      Compliance.
      Borrower is not an “investment company” or a company “controlled” by an
“investment company” under the Investment Company Act. Borrower is not engaged
      as one of its important activities in extending credit for margin stock (under
      Regulations T and U of the Federal Reserve Board of Governors). Borrower has
      complied in all material respects with the Federal Fair Labor Standards Act.
      Borrower has not violated any laws, ordinances or rules, the violation of which
      could reasonably be expected to have a material adverse effect on its business.
      None of Borrower’s or any of its Subsidiaries’ properties or assets has been
      used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by
      previous Persons, in disposing, producing, storing, treating, or transporting
      any hazardous substance other than legally. Borrower and each of its
      Subsidiaries have obtained all consents, approvals and authorizations of, made
      all declarations or filings with, and given all notices to, all government
      authorities that are necessary to continue its business as currently
      conducted.

     

    5.8    
      Subsidiaries;
      Investments.
      Borrower does not own any stock, partnership interest or other equity securities
      except for Permitted Investments.

     

    5.9    
      Tax
      Returns and Payments; Pension Contributions.
      Borrower has timely filed all required tax returns and reports, and Borrower
      and
      its Subsidiaries, if any, have timely paid all foreign, federal, state and
      local
      taxes, assessments, deposits and contributions owed by Borrower. Borrower may
      defer payment of any contested taxes, provided that Borrower (a) in good faith
      contests its obligation to pay the taxes by appropriate proceedings promptly
      and
      diligently instituted and conducted, (b) notifies Bank in writing of the
      commencement of, and any material development in, the proceedings, (c) posts
      bonds or takes any other steps required to prevent the governmental authority
      levying such contested taxes from obtaining a Lien upon any of the Collateral
      that is other than a “Permitted Lien”. Borrower is unaware of any claims or
      adjustments proposed for any of Borrower's prior tax years which could result
      in
      additional taxes becoming due and payable by Borrower. Borrower has paid all
      amounts necessary to fund all present pension, profit sharing and deferred
      compensation plans in accordance with their terms, and Borrower has not
      withdrawn from participation in, and has not permitted partial or complete
      termination of, or permitted the occurrence of any other event with respect
      to,
      any such plan which could reasonably be expected to result in any liability
      of
      Borrower, including any liability to the Pension Benefit Guaranty Corporation
      or
      its successors or any other governmental agency.

     

    5.10   
      Use
      of Proceeds.
      Borrower shall use the proceeds of the Credit Extensions solely as working
      capital and to fund its general business requirements and not for personal,
      family, household or agricultural purposes.

     

    5.11   
      Full
      Disclosure.
      No
      written representation, warranty or other statement of Borrower in any
      certificate or written statement given to Bank, as of the date such
      representations, warranties, or other statements were made, taken together
      with
      all such written certificates and written statements given to Bank, contains
      any
      untrue statement of a material fact or omits to state a material fact necessary
      to make the statements contained in the certificates or statements not
      misleading (it being recognized by Bank that the projections and forecasts
      provided by Borrower in good faith and based upon reasonable assumptions are
      not
      viewed as facts and that actual results during the period or periods covered
      by
      such projections and forecasts may differ from the projected or forecasted
      results).

     

    6        
      AFFIRMATIVE
      COVENANTS

     

    Borrower
      shall do all of the following:

     

    6.1    
      Government
      Compliance.
      Maintain its and all its Subsidiaries’ legal existence and good standing in
      their respective jurisdictions of formation and maintain qualification in each
      jurisdiction in which the failure to so qualify would reasonably be expected
      to
      have a material adverse effect on Borrower’s business or operations. Borrower
      shall comply, and have each Subsidiary comply, with all laws, ordinances and
      regulations to which it is subject, the noncompliance with which could have
      a
      material adverse effect on Borrower’s business.

     

    


    
      
        
          
          

        

        
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    6.2    
      Financial
      Statements, Reports, Certificates.

     

    (a)    Borrower
      shall provide Bank with the following: 

     

    (i)    
weekly,
      and upon each request for a Credit Extension, a Transaction Report;


     

    (ii)           
      within
      fifteen (15) days after the end of each month, (A) monthly accounts receivable
      agings, aged by invoice date, and (b) monthly accounts payable agings, aged
      by
      invoice date, and outstanding or held check registers, if any;

     

    (iii)          
      as
      soon as available, and in any event within thirty (30) days after the end of
      each month, monthly unaudited financial statements;

     

    (iv)         
      within
      thirty (30) days after the end of each month a monthly Compliance Certificate
      signed by a Responsible Officer, certifying that as of the end of such month,
      Borrower was in full compliance with all of the terms and conditions of this
      Agreement, and setting forth calculations showing compliance with the financial
      covenants set forth in this Agreement and such other information as Bank shall
      reasonably request, including, without limitation, a statement that at the
      end
      of such month there were no held checks; 

     

    (v)         
      within
      thirty (30) days prior to the end of each fiscal year of Borrower, (A) annual
      operating budgets (including income statements, balance sheets and cash flow
      statements, by month) for the upcoming fiscal year of Borrower, and (B)
annual
      financial projections for the following fiscal year (on a quarterly basis)
      as
      approved by Borrower’s board of directors, together with any related business
      forecasts used in the preparation of such annual financial
      projections;
      and 

     

    (vi)         as
      soon as available, and in any event within one hundred twenty (120) days
      following the end of Borrower's fiscal year, annual financial statements
      certified by, and with an unqualified opinion of, independent certified public
      accountants acceptable to Bank.

     

    (vii)       
      within
      five (5) days after filing, all reports on Form 10-K, 10-Q and 8-K filed with
      the Securities and Exchange Commission or a link thereto on Borrower’s or
      another website on the Internet.

     

    Notwithstanding
      the foregoing, during any period in which Borrower maintains unrestricted and
      unencumbered cash at Bank, plus the Availability Amount, in an amount greater
      than $2,500,000, or when there are no Credit Extensions outstanding or requested
      under the Revolving Line, Borrower shall only be required to provide the Bank
      with reports pursuant to clause (a)(i) above on a monthly basis.

     

    6.3     
      Accounts
      Receivable.

     

    (a)    Schedules
      and Documents Relating to Accounts.
      Borrower
      shall deliver to Bank transaction reports and schedules of collections, as
      provided in Section 6.2, on Bank’s standard forms; provided, however, that
      Borrower’s failure to execute and deliver the same shall not affect or limit
      Bank’s Lien and other rights in all of Borrower’s Accounts, nor shall Bank’s
      failure to advance or lend against a specific Account affect or limit Bank’s
      Lien and other rights therein. If requested by Bank, Borrower shall furnish
      Bank
      with copies (or, at Bank’s request, originals) of all contracts, orders,
      invoices, and other similar documents, and all shipping instructions, delivery
      receipts, bills of lading, and other evidence of delivery, for any goods the
      sale or disposition of which gave rise to such Accounts. In addition, Borrower
      shall deliver to Bank, on its request, the originals of all instruments, chattel
      paper, security agreements, guarantees and other documents and property
      evidencing or securing any Accounts, in the same form as received, with all
      necessary indorsements, and copies of all credit memos.

     

    (b)    Disputes.
      Borrower shall promptly notify Bank of all disputes or claims relating to
      Accounts. Borrower may forgive (completely or partially), compromise, or settle
      any Account for less than payment in full, or agree to do any of the foregoing
      so long as (i) Borrower does so in good faith, in a commercially reasonable
      manner, in the ordinary course of business, in arm’s-length transactions, and
      reports the same to Bank in the regular reports provided to Bank; (ii) no
      Default or Event of Default has occurred and is continuing; and (iii) after
      taking into account all such discounts, settlements and forgiveness, the total
      outstanding Advances will not exceed the Availability
      Amount.
      

     

    (c)    Collection
      of Accounts.
      Borrower shall have the right to collect all Accounts, unless and until a
      Default or an Event of Default has occurred and is continuing. Whether or not
      an
      Event of Default has occurred and is continuing, Borrower shall hold all
      Payments on, and proceeds of, Accounts in trust for Bank, and Borrower shall immediately deliver all such payments
      and proceeds to Bank
      in their original form, duly endorsed, to be applied to the Obligations pursuant
      to the terms of Section 9.4 hereof. Accounts shall be deposited by Borrower
      into
      a lockbox account, or such other “blocked account” as Bank may specify, pursuant
      to a blocked account agreement in such form as Bank may specify in its good
      faith business judgment.

    


    
      
        
          
          

        

        
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    (d)    Returns.
      Provided no Event of Default has occurred and is continuing, if any Account
      Debtor returns any Inventory to Borrower, Borrower shall promptly
      (i) determine the reason for such return, (ii) issue a credit
      memorandum to the Account Debtor in the appropriate amount, and
      (iii) provide a copy of such credit memorandum to Bank, upon request from
      Bank. In the event any attempted return occurs after the occurrence and during
      the continuance of any Event of Default, Borrower shall hold the returned
      Inventory in trust for Bank, and immediately notify Bank of the return of
      the Inventory. 

     

    (e)    Verification.
      Bank
      may, from time to time, verify directly with the respective Account Debtors
      the
      validity, amount and other matters relating to the Accounts, either in the
      name
      of Borrower or Bank or such other name as Bank may choose. 

     

    (f)    No
      Liability.
      Bank
      shall not be responsible or liable for any shortage or discrepancy in, damage
      to, or loss or destruction of, any goods, the sale or other disposition of
      which
      gives rise to an Account, or for any error, act, omission, or delay of any
      kind
      occurring in the settlement, failure to settle, collection or failure to collect
      any Account, or for settling any Account in good faith for less than the full
      amount thereof, nor shall Bank be deemed to be responsible for any of Borrower’s
      obligations under any contract or agreement giving rise to an Account. Nothing
      herein shall, however, relieve Bank from liability for its own gross negligence
      or willful misconduct.

     

    6.4     Remittance
      of Proceeds.
      Except
      as otherwise provided in Section 6.3(c), deliver, in kind, all proceeds arising
      from the disposition of any Collateral to Bank in the original form in which
      received by Borrower not later than the following Business Day after receipt
      by
      Borrower, to be applied to the Obligations pursuant to the terms of Section
      9.4
      hereof; provided that, if no Default or Event of Default has occurred and is
      continuing, Borrower shall not be obligated to remit to Bank the proceeds of
      the
      sale of worn out or obsolete Equipment disposed of by Borrower in good faith
      in
      an arm’s length transaction for an aggregate purchase price of $25,000 or less
      (for all such transactions in any fiscal year). Borrower agrees that it will
      not
      commingle proceeds of Collateral with any of Borrower’s other funds or property,
      but will hold such proceeds separate and apart from such other funds and
      property and in an express trust for Bank. Nothing in this Section limits the
      restrictions on disposition of Collateral set forth elsewhere in this
      Agreement.

     

    6.5    
      Taxes;
      Pensions.
      Make,
      and cause each of its Subsidiaries to make, timely payment of all foreign,
      federal, state, and local taxes or assessments (other than taxes and assessments
      which Borrower is contesting pursuant to the terms of Section 5.9 hereof) and
      shall deliver to Bank, on demand, appropriate certificates attesting to such
      payments, and pay
      all amounts necessary to fund all present pension, profit sharing and deferred
      compensation plans in accordance with their terms.

     

    6.6    
      Access
      to Collateral; Books and Records.
      At reasonable times, on one (1) Business Day’s notice (provided no notice is
      required if an Event of Default has occurred and is continuing), Bank, or its
      agents, shall have the right to inspect the Collateral and the right to audit
      and copy Borrower’s Books. The foregoing inspections and audits shall be at
      Borrower’s expense, and the charge therefor shall be $750 per person per day (or
      such higher amount as shall represent Bank’s then-current standard charge for
      the same), plus reasonable out-of-pocket expenses. In the event Borrower and
      Bank schedule an audit more than ten (10) days in advance, and Borrower cancels
      or seeks to reschedules the audit with less than ten (10) days written notice
      to
      Bank, then (without limiting any of Bank’s rights or remedies), Borrower shall
      pay Bank a fee of $1,000 plus any out-of-pocket expenses incurred by Bank to
      compensate Bank for the anticipated costs and expenses of the cancellation
      or
      rescheduling.

     

    6.7    
      Insurance.
      Keep
      its business and the Collateral insured for risks and in amounts standard for
      companies in Borrower’s industry and location and as Bank may reasonably
      request. Insurance
      policies shall be in a form, with companies, and in amounts that are
      satisfactory to Bank. All property policies shall have a lender’s loss payable
      endorsement showing Bank as lender loss payee and waive subrogation against
      Bank, and all liability policies shall show, or have endorsements showing,
      Bank
      as an additional insured. All policies (or the loss payable and additional
      insured endorsements) shall provide that the insurer must give Bank at least
      thirty (30) days notice before canceling, amending, or declining to renew its
      policy. At Bank’s request, Borrower shall deliver certified copies of policies
      and evidence of all premium payments. Proceeds payable under any policy shall,
      at Bank’s

     

    


    
      
        
          
          

        

        
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    option,
      be payable to Bank on account of the Obligations. Notwithstanding the foregoing,
      (a) so long as no Event of Default has occurred and is continuing, Borrower
      shall have the option of applying the proceeds of any casualty policy up to
      $50,000, in the aggregate, toward the replacement or repair of destroyed or
      damaged property; provided that any such replaced or repaired property (i)
      shall
      be of equal or like value as the replaced or repaired Collateral and
      (ii) shall be deemed Collateral in which Bank has been granted a first
      priority security interest, and (b) after the occurrence and during the
      continuance of an Event of Default, all proceeds payable under such casualty
      policy shall, at the option of Bank, be payable to Bank on account of the
      Obligations. If Borrower fails to obtain insurance as required under this
      Section 6.7 or to pay any amount or furnish any required proof of payment
      to third persons and Bank, Bank may make all or part of such payment or obtain
      such insurance policies required in this Section 6.7, and take any action under
      the policies Bank deems prudent.

     

    6.8    
      Operating
      Accounts.

     

    (a)    Maintain
      its and its Subsidiaries’ depository,
      operating, and securities accounts with Bank and Bank’s affiliates, with the
      exception of accounts maintained with: (i) PNC Bank and Barclays Bank, provided
      that the maximum aggregate balance of such accounts does not exceed Seventy-Five
      Thousand Dollars ($75,000.00) at any time, and (ii) Royal Bank of Scotland,
      provided that the maximum balance of such account does not exceed the lesser
      of:
      (a) Five Hundred Thousand Dollars ($500,000.00), or (b) ten percent (10%) of
      the
      dollar value of the Borrower's unrestricted consolidated cash (the "RBS Maximum
      Amount") (collectively, the "Permitted Accounts"). In addition, the Borrower
      shall, within seven (7) business days following any event in which the
      balance of the Royal Bank of Scotland exceeds the RBS Maximum Amount, transfer
      such excess cash to an account of Borrower maintained with Bank and/or Bank's
      affiliates. Any Guarantor shall maintain all depository, operating and
      securities accounts with Bank, or SVB Securities.

     

    (b)    With
      the
      exception of the Permitted Accounts, provide Bank five (5) days prior written
      notice before establishing any Collateral Account at or with any bank or
      financial institution other than Bank or its Affiliates. In addition, with
      the
      exception of the Permitted Accounts for each Collateral Account that Borrower
      or
      Guarantor at any time maintains, Borrower shall cause the applicable bank or
      financial institution (other than Bank) at or with which any Collateral Account
      is maintained to execute and deliver a Control Agreement or other appropriate
      instrument with respect to such Collateral Account to perfect Bank’s Lien in
      such Collateral Account in accordance with the terms hereunder. The provisions
      of the previous sentence shall not apply to deposit accounts exclusively used
      for payroll, payroll taxes and other employee wage and benefit payments to
      or
      for the benefit of Borrower’s employees and identified to Bank by Borrower as
      such.

     

    6.9    
      Financial
      Covenants.

     

    Borrower
      shall maintain, as of the last day of each month, unless otherwise
      noted:

     

    (a)    Minimum
      Cash Balance.
      As of
      the Effective Date, and at all times thereafter, Borrower shall maintain: (i)
      Two Million Five Hundred Thousand Dollars ($2,500,000.00) in unrestricted and
      unencumbered cash in accounts with the Bank or a Bank subsidiary, plus (ii)
      the
      aggregate of the Availability Amount, plus, prior to the occurrence of an Event
      of Default, Five Hundred Thousand Dollars ($500,000.00), which shall be tested
      as of the last day of each month.

     

    (b)    Minimum
      Quarterly Net Loss/Net Income.
      Borrower’s quarterly: (i) net losses shall not exceed: (A) Six Hundred Thousand
      Dollars ($600,000.00) for the quarter ending March 31, 2007; (B) One Million
      Dollars ($1,000,000.00) for the quarter ending June 30, 2007; and (C) Five
      Hundred Thousand Dollars ($500,000.00) for the quarter ending September 30,
      2007, and (ii) net income shall be at least One Dollar ($1.00) for the
      Borrower’s quarter ending December 31, 2007 and as of the last day of each
      quarter thereafter. 

     

    6.10  
      Litigation
      Cooperation.
      From
      the date hereof and continuing through the termination of this Agreement,
      make
      available to Bank, without expense to Bank, Borrower and its officers, employees
      and agents and Borrower's books and records, to the extent that Bank may deem
      them reasonably necessary to prosecute or defend any third-party suit or
      proceeding instituted by or against Bank with respect to any Collateral or
      relating to Borrower.

     

    6.11  
      Lock
      Box Agreement. Within
      thirty (30) days after a request from Borrower for an Advance and at
      all
      times thereafter, Borrower
      shall direct each account debtor (and each depository institution where proceeds
      of

     

    accounts
      receivable are on deposit) to make payments with respect to all receivables
      to
      one or more lockbox accounts established with the Bank (“Lockbox”) or to wire
      transfer payments to a cash collateral account that Bank controls, as and when
      directed by the Bank from time to time, at its option and at the sole and
      exclusive discretion of the Bank 

     

    


    
      
        
          
          

        

        
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    6.12  
      Protection
      and Registration of Intellectual Property Rights.
      Borrower shall: (a) protect, defend and maintain the validity and enforceability
      of its intellectual property; (b) promptly advise Bank in writing of material
      infringements of its intellectual property; and (c) not allow any intellectual
      property material to Borrower’s business to be abandoned, forfeited or dedicated
      to the public without Bank’s written consent. If Borrower decides to register
      any copyrights or mask works in the United States Copyright Office, Borrower
      shall: (x) provide Bank with at least fifteen (15) days prior written notice
      of
      its intent to register such copyrights or mask works together with a copy of
      the
      application it intends to file with the United States Copyright Office
      (excluding exhibits thereto); (y) execute an intellectual property security
      agreement or such other documents as Bank may reasonably request to maintain
      the
      perfection and priority of Bank’s security interest in the copyrights or mask
      works intended to be registered with the United States Copyright Office; and
      (z)
      record such intellectual property security agreement with the United States
      Copyright Office contemporaneously with filing the copyright or mask work
      application(s) with the United States Copyright Office. Borrower shall promptly
      provide to Bank a copy of the application(s) filed with the United States
      Copyright Office together with evidence of the recording of the intellectual
      property security agreement necessary for Bank to maintain the perfection and
      priority of its security interest in such copyrights or mask works. Borrower
      shall provide written notice to Bank of any application filed by Borrower in
      the
      United States Patent and Trademark Office for a patent or to register a
      trademark or service mark within 30 days after any such filing.

     

    6.13  
      Further
      Assurances.
      Borrower shall execute any further instruments and take further action as Bank
      reasonably requests to perfect or continue Bank’s Lien in the Collateral or to
      effect the purposes of this Agreement.

     

    6.12  
      Ratification
      of Intellectual Property Security Agreement.
      Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms
      and conditions of the IP Agreement, and acknowledges, confirms and agrees that
      “Loan Agreement” as defined therein includes this Agreement. The IP Agreement
      contains an accurate and complete listing of all Intellectual Property
      Collateral as defined in said IP Agreement, shall remain in full force and
      effect, and secures the Obligations.

     

    7       
      NEGATIVE
      COVENANTS

     

    Borrower
      shall not do any of the following without Bank’s prior written
      consent:

     

    7.1    
      Dispositions.
      Convey,
      sell, lease, transfer or otherwise dispose of (collectively, “Transfer”),
      or
      permit any of its Subsidiaries to Transfer, all or any part of its business
      or
      property, except for Transfers (a) of Inventory in the ordinary course of
      business; (b) of worn-out or obsolete Equipment; (c) in connection with
      Permitted Liens and Permitted Investments; and (d) of non-exclusive licenses
      and
      similar arrangements for the use of the property of Borrower or its Subsidiary
      in the ordinary course of business. Borrower shall not enter into an agreement
      with any Person other than Bank which restricts the subsequent granting of
      a
      security interest in the Intellectual Property.

     

    7.2    
      Changes
      in Business, Management, Ownership, or Business Locations.
      (a) Engage in or permit any of its Subsidiaries to engage in any business
      other than the businesses currently engaged in by Borrower and such Subsidiary,
      as applicable, or reasonably related thereto; (b) liquidate or dissolve; or
      (c) (i) have a material change in management or
      (ii)
enter
      into any transaction or series of related transactions in which the stockholders
      of Borrower immediately prior to the first such transaction own less than 50%
      of
      the voting stock of Borrower immediately after giving effect to such transaction
      or related series of such transactions
      (other
      than by the sale of Borrower’s equity securities in a public offering or to
      venture capital investors so long as Borrower identifies to Bank the venture
      capital investors prior to the closing of the transaction). Borrower shall
      not,
      without at least thirty (30) days prior written notice to Bank: (1) add any
      new offices or business locations, including warehouses (unless such new offices
      or business locations contain less than Ten Thousand Dollars ($10,000) in
      Borrower’s assets or property), (2) change its jurisdiction of organization,
      (3) change its organizational structure or type, (4) change its legal name,
      or (5) change any organizational number (if any) assigned by its
      jurisdiction of organization.

     

    


    
      
        
          
          

        

        
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    7.3    
      Mergers
      or Acquisitions.
      Merge
      or consolidate, or permit any of its Subsidiaries to merge or consolidate,
      with
      any other Person, or acquire, or permit any of its Subsidiaries to acquire,
      all
      or substantially all of the capital stock or property of another Person. A
      Subsidiary may merge or consolidate into another Subsidiary or into
      Borrower.

     

    7.4    
      Indebtedness.
      Create,
      incur, assume, or be liable for any Indebtedness, or permit any Subsidiary
      to do
      so, other than Permitted Indebtedness.

     

    7.5    
      Encumbrance.
      Create,
      incur, or allow any Lien on any of its property, or assign or convey any right
      to receive income, including the sale of any Accounts, or permit any of its
      Subsidiaries to do so, except for Permitted Liens, or permit any Collateral
      not
      to be subject to the first priority security interest granted herein,
or
      enter into any agreement, document, instrument or other arrangement (except
      with
      or in favor of Bank) with any Person which directly or indirectly prohibits
      or
      has the effect of prohibiting Borrower or any Subsidiary from assigning,
      mortgaging, pledging, granting a security interest in or upon, or encumbering
      any of Borrower’s or any Subsidiary’s intellectual property, except as is
      otherwise permitted in Section 7.1 hereof and the definition of “Permitted Lien”
herein.
      The
      Collateral may also be subject to Permitted Liens.

     

    7.6    
      Maintenance
      of Collateral Accounts.
      Maintain any Collateral Account except pursuant to the terms of Section 6.8.(b)
      hereof.

     

    7.7    
      Distributions;
      Investments.
      (a)
      Directly or indirectly make any Investment other than Permitted Investments,
      or
      permit any of its Subsidiaries to do so; or (b) pay any dividends or make any
      distribution or payment or redeem, retire or purchase any capital
      stock.
      

     

    7.8    
      Transactions
      with Affiliates.
      Directly or indirectly enter into or permit to exist any material transaction
      with any Affiliate of Borrower, except for: (i) those transactions contemplated
      by the guarantee of the Guarantor, and (ii) transactions that are in the
      ordinary course of Borrower’s business, upon fair and reasonable terms that are
      no less favorable to Borrower than would be obtained in an arm’s length
      transaction with a non-affiliated Person.

     

    7.9    
      Subordinated
      Debt.
      (a)
      Make or permit any payment on any Subordinated Debt, except under the terms
      of
      the subordination, intercreditor, or other similar agreement to which such
      Subordinated Debt is subject, or (b) amend any provision in any document
      relating to the Subordinated Debt which would increase the amount thereof or
      adversely affect the subordination thereof to Obligations owed to
      Bank.

     

    7.10  
      Compliance.
      Become
      an “investment company” or a company controlled by an “investment company”,
      under the Investment Company Act of 1940 or undertake as one of its important
      activities extending credit to purchase or carry margin stock (as defined in
      Regulation U of the Board of Governors of the Federal Reserve System), or use
      the proceeds of any Credit Extension for that purpose; fail to meet the minimum
      funding requirements of ERISA, permit a Reportable Event or Prohibited
      Transaction, as defined in ERISA, to occur; fail to comply with the Federal
      Fair
      Labor Standards Act or violate any other law or regulation, if the violation
      could reasonably be expected to have a material adverse effect on Borrower’s
      business, or permit any of its Subsidiaries to do so; withdraw
      or permit any Subsidiary to withdraw from participation in, permit partial
      or
      complete termination of, or permit the occurrence of any other event with
      respect to, any present pension, profit sharing and deferred compensation plan
      which could reasonably be expected to result in any liability of Borrower,
      including any liability to the Pension Benefit Guaranty Corporation or its
      successors or any other governmental agency.

     

    8       
      EVENTS
      OF DEFAULT

     

    Any
      one
      of the following shall constitute an event of default (an “Event
      of Default”)
      under
      this Agreement:

     

    8.1    
      Payment
      Default.
      Borrower fails to make any payment of principal or interest on any Credit
      Extension on its due date, or pay any other Obligations within three (3)
      Business Days after such Obligations are due and payable. During the cure
      period, the failure to cure the payment default is not an Event of Default
      (but
      no Credit Extension will be made during the cure period);

     

    


    
      
        
          
          

        

        
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    8.2    
      Covenant
      Default.
      

     

    (a)    Borrower
      fails or neglects to perform any obligation in Sections 6.2, 6.3, 6.4, 6.6,
      6.8,
      6.9, 6.11, or violates any covenant in Section 7; or

     

    (b)    Borrower
      fails or neglects to perform, keep, or observe any other term, provision,
      condition, covenant or agreement contained in this Agreement, any Loan
      Documents, and as to any default (other than those specified in this Section
      8)
      under such other term, provision, condition, covenant or agreement that can
      be
      cured, has failed to cure the default within ten (10) days after the occurrence
      thereof; provided, however, that if the default cannot by its nature be cured
      within the ten (10) day period or cannot after diligent attempts by Borrower
      be
      cured within such ten (10) day period, and such default is likely to be cured
      within a reasonable time, then Borrower shall have an additional period (which
      shall not in any case exceed thirty (30) days) to attempt to cure such default,
      and within such reasonable time period the failure to cure the default shall
      not
      be deemed an Event of Default (but no Credit Extensions shall be made during
      such cure period). Grace periods provided under this section shall not apply,
      among other things, to financial covenants or any other covenants set forth
      in
      subsection (a) above;

     

    8.3    
      Material
      Adverse Change.
      A
      Material Adverse Change occurs;

     

    8.4    
      Attachment.
      (a) Any
      material portion of Borrower’s assets is attached, seized, levied on, or comes
      into possession of a trustee or receiver and the attachment, seizure or levy
      is
      not removed in ten (10) days; (b) the service of process seeking to attach,
      by trustee or similar process, any funds of Borrower, or of any entity under
      control of Borrower (including a Subsidiary) on deposit with the Bank or Bank's
      Affiliate; (c) Borrower is enjoined, restrained, or prevented by court order
      from conducting a material part of its business; (d) a judgment or other claim
      in excess of One Hundred Thousand Dollars ($100,000.00) becomes a Lien on any
      of
      Borrower’s assets; or (e) a notice of lien, levy, or assessment is filed against
      any of Borrower’s assets by any government agency and not paid within ten (10)
      days after Borrower receives notice. These are not Events of Default if stayed
      or if a bond is posted pending contest by Borrower (but no Credit Extensions
      shall be made during the cure period);

     

    8.5    
      Insolvency
      (a)
      Borrower is unable to pay its debts (including trade debts) as they become
      due
      or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding;
      or
      (c) an Insolvency Proceeding is begun against Borrower and not dismissed or
      stayed within forty-five (45) days (but no Credit Extensions shall be made
      while
      of any of the conditions described in clause (a) exist and/or until any
      Insolvency Proceeding is dismissed);

     

    8.6    
      Other
      Agreements.
      There
      is a default in any agreement to which Borrower or any Guarantor is a party
      with
      a third party or parties resulting in a right by such third party or parties,
      whether or not exercised, to accelerate the maturity of any Indebtedness in
      an
      amount in excess of One Hundred Thousand Dollars ($100,000) or that could have
      a
      material adverse effect on Borrower’s or any Guarantor’s business; 

     

    8.7    
      Judgments.
      A
      judgment or judgments for the payment of money in an amount, individually or
      in
      the aggregate, of at least Two Hundred Thousand Dollars ($200,000) (not covered
      by independent third-party insurance) shall be rendered against Borrower and
      shall remain unsatisfied and unstayed for a period of ten (10) days after the
      entry thereof (provided that no Credit Extensions will be made prior to the
      satisfaction or stay of such judgment);

     

    8.8    
      Misrepresentations.
      Borrower or any Person acting for Borrower makes any representation, warranty,
      or other statement now or later in this Agreement, any Loan Document or in
      any
      writing delivered to Bank or to induce Bank to enter this Agreement or any
      Loan
      Document, and such representation, warranty, or other statement is incorrect
      in
      any material respect when made;

     

    8.9    
      Subordinated
      Debt.
      A
      default or breach occurs under any agreement between Borrower and any creditor
      of Borrower that signed a subordination, intercreditor, or other similar
      agreement with Bank, or any creditor that has signed such an agreement with
      Bank
      breaches any terms of such agreement; or

     

    8.10  
      Guaranty.
      (a) Any
      guaranty of any Obligations terminates or ceases for any reason to be in full
      force and effect; (b) any Guarantor does not perform any obligation or covenant
      under any guaranty of the Obligations; (c) any circumstance described in
      Sections 8.3, 8.4, 8.5, 8.7, or 8.8 occurs with respect to any Guarantor;
      (d) the liquidation, winding up, or termination of existence of any
      Guarantor; or (e) a material adverse change in the general affairs,
      management, results of operation, condition (financial or otherwise) or the
      prospect of repayment of the Obligations occurs with respect to any
      Guarantor.

     

    


    
      
        
          
          

        

        
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    8.11  
      Cross-Default.
      An
      Event of Default occurs and remains continuing under the Existing Loan and
      Security Agreement.

     

    9       
      BANK’S
      RIGHTS AND REMEDIES

     

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

     

    (a)    declare
      all Obligations immediately due and payable (but if an Event of Default
      described in Section 8.5 occurs all Obligations are immediately due and payable
      without any action by Bank);

     

    (b)    stop
      advancing money or extending credit for Borrower’s benefit under this Agreement
      or under any other agreement between Borrower and Bank;

     

    (c)    demand
      that Borrower (i) deposits cash with Bank in an amount equal to the aggregate
      amount of any Letters of Credit remaining undrawn, as collateral security for
      the repayment of any future drawings under such Letters of Credit, and Borrower
      shall forthwith deposit and pay such amounts, and (ii) pay in advance all Letter
      of Credit fees scheduled to be paid or payable over the remaining term of any
      Letters of Credit;

     

    (d)    terminate
      any FX Contracts;

     

    (e)    settle
      or
      adjust disputes and claims directly with Account Debtors for amounts on terms
      and in any order that Bank considers advisable, notify any Person owing Borrower
      money of Bank’s security interest in such funds, and verify the amount of such
      account; 

     

    (f)    make
      any
      payments and do any acts it considers necessary or reasonable to protect the
      Collateral and/or its security interest in the Collateral. Borrower shall
      assemble the Collateral if Bank requests and make it available as Bank
      designates. Bank may enter premises where the Collateral is located, take and
      maintain possession of any part of the Collateral, and pay, purchase, contest,
      or compromise any Lien which appears to be prior or superior to its security
      interest and pay all expenses incurred. Borrower grants Bank a license to enter
      and occupy any of its premises, without charge, to exercise any of Bank’s rights
      or remedies;

     

    (g)    apply
      to
      the Obligations any (i) balances and deposits of Borrower it holds, or (ii)
      any
      amount held by Bank owing to or for the credit or the account of
      Borrower;

     

    (h)    ship,
      reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise
      for sale, and sell the Collateral. Bank is hereby granted a non-exclusive,
      royalty-free license or other right to use, without charge, Borrower’s labels,
      patents, copyrights, mask works, rights of use of any name, trade secrets,
      trade
      names, trademarks, service marks, and advertising matter, or any similar
      property as it pertains to the Collateral, in completing production of,
      advertising for sale, and selling any Collateral and, in connection with Bank’s
      exercise of its rights under this Section, Borrower’s rights under all licenses
      and all franchise agreements inure to Bank’s benefit;

     

    (i)    place
      a
“hold” on any account maintained with Bank and/or deliver a notice of exclusive
      control, any entitlement order, or other directions or instructions pursuant
      to
      any Control Agreement or similar agreements providing control of any
      Collateral;

     

    (j)    demand
      and receive possession of Borrower’s Books; and

     

    (k)    exercise
      all rights and remedies available to Bank under the Loan Documents or at law
      or
      equity, including all remedies provided under the Code (including disposal
      of
      the Collateral pursuant to the terms thereof).

     

    


    
      
        
          
          

        

        
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    9.2    
      Power
      of Attorney.
      Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact,
      exercisable upon the occurrence and during the continuance of an Event of
      Default, to: (a) endorse Borrower’s name on any checks or other forms of payment
      or security; (b) sign Borrower’s name on any invoice or bill of lading for any
      Account or drafts against Account Debtors; (c) settle and adjust disputes and
      claims about the Accounts directly with Account Debtors, for amounts and on
      terms Bank determines reasonable; (d) make, settle, and adjust all claims under
      Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge,
      encumbrance, security interest, and adverse claim in or to the Collateral,
      or
      any judgment based thereon, or otherwise take any action to terminate or
      discharge the same; and (f) transfer the Collateral into the name of Bank or
      a
      third party as the Code permits. Borrower hereby appoints Bank as its lawful
      attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
      or continue the perfection of Bank’s security interest in the Collateral
      regardless of whether an Event of Default has occurred until all Obligations
      have been satisfied in full and Bank is under no further obligation to make
      Credit Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney
      in fact, and all of Bank’s rights and powers, coupled with an interest, are
      irrevocable until all Obligations have been fully repaid and performed and
      Bank’s obligation to provide Credit Extensions terminates.

     

    9.3    
      Protective
      Payments.
      If
      Borrower fails to obtain the insurance called for by Section 6.5 or fails to
      pay
      any premium thereon or fails to pay any other amount which Borrower is obligated
      to pay under this Agreement or any other Loan Document, Bank may obtain such
      insurance or make such payment, and all amounts so paid by Bank are Bank
      Expenses and immediately due and payable, bearing interest at the then highest
      applicable rate, and secured by the Collateral. Bank will make reasonable
      efforts to provide Borrower with notice of Bank obtaining such insurance at
      the
      time it is obtained or within a reasonable time thereafter. No payments by
      Bank
      are deemed an agreement to make similar payments in the future or Bank’s waiver
      of any Event of Default.

     

    9.4    
      Application
      of Payments and Proceeds.
      If an Event of Default has occurred and is continuing, Bank may apply any funds
      in its possession, whether from Borrower account balances, payments, proceeds
      realized as the result of any collection of Accounts or other disposition of
      the
      Collateral, or otherwise, to the Obligations in such order as Bank shall
      determine in its sole discretion. Any surplus shall be paid to Borrower or
      other
      Persons legally entitled thereto; Borrower shall remain liable to Bank for
      any
      deficiency. If Bank, in its good faith business judgment, directly or indirectly
      enters into a deferred payment or other credit transaction with any purchaser
      at
      any sale of Collateral, Bank shall have the option, exercisable at any time,
      of
      either reducing the Obligations by the principal amount of the purchase price
      or
      deferring the reduction of the Obligations until the actual receipt by Bank
      of
      cash therefor.

     

    9.5    
      Bank’s
      Liability for Collateral.
      So long
      as Bank complies with reasonable banking practices regarding the safekeeping
      of
      the Collateral in the possession or under the control of Bank, Bank shall not
      be
      liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss
      or damage to the Collateral; (c) any diminution in the value of the Collateral;
      or (d) any act or default of any carrier, warehouseman, bailee, or other Person.
      Borrower bears all risk of loss, damage or destruction of the
      Collateral.

     

    9.6    
      No
      Waiver; Remedies Cumulative.
      Bank’s
      failure, at any time or times, to require strict performance by Borrower of
      any
      provision of this Agreement or any other Loan Document shall not waive, affect,
      or diminish any right of Bank thereafter to demand strict performance and
      compliance herewith or therewith. No waiver hereunder shall be effective unless
      signed by Bank and then is only effective for the specific instance and purpose
      for which it is given. Bank’s rights and remedies under this Agreement and the
      other Loan Documents are cumulative. Bank has all rights and remedies provided
      under the Code, by law, or in equity. Bank’s exercise of one right or remedy is
      not an election, and Bank’s waiver of any Event of Default is not a continuing
      waiver. Bank’s delay in exercising any remedy is not a waiver, election, or
      acquiescence. 

     

    9.7    
      Demand
      Waiver.
      Borrower waives demand, notice of default or dishonor, notice of payment and
      nonpayment, notice of any default, nonpayment at maturity, release, compromise,
      settlement, extension, or renewal of accounts, documents, instruments, chattel
      paper, and guarantees held by Bank on which Borrower is liable.

     

    10      
      NOTICES

     

    All
      notices, consents, requests, approvals, demands, or other communication
      (collectively, “Communication”),
      other
      than Advance requests made pursuant to Section 3.4, by any party to this
      Agreement or any other Loan Document must be in writing and be delivered or
      sent
      by facsimile at the addresses or facsimile numbers listed below. Bank or
      Borrower may change its notice address by giving the other party written notice
      thereof. Each such Communication shall be deemed to have been validly served,
      given, or delivered: (a) upon the

     

    


    
      
        
          
          

        

        
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    earlier
      of actual receipt and three (3) Business Days after deposit in the U.S. mail,
      registered or certified mail, return receipt requested, with proper postage
      prepaid; (b) upon transmission, when sent by facsimile transmission (with such
      facsimile promptly confirmed by delivery of a copy by personal delivery or
      United States mail as otherwise provided in this Section 10); (c) one (1)
      Business Day after deposit with a reputable overnight courier with all charges
      prepaid; or (d) when delivered, if hand-delivered by messenger, all of which
      shall be addressed to the party to be notified and sent to the address or
      facsimile number indicated below. Advance requests made pursuant to Section
      3.4
      must be in writing and may be in the form of electronic mail, delivered to
      Bank
      by Borrower at the e-mail address of Bank provided below and shall be deemed
      to
      have been validly served, given, or delivered when sent (with such electronic
      mail promptly confirmed by delivery of a copy by personal delivery or United
      States mail as otherwise provided in this Section 10). Bank or Borrower may
      change its address, facsimile number, or electronic mail address by giving
      the
      other party written notice thereof in accordance with the terms of this
      Section 10.

     

    
      	
              If
                to Borrower:

            	
              Voxware,
                Inc. 

            
	 	
              168
                Franklin Corner Road

            
	 	
              Lawrenceville,
                New Jersey 08648

            
	 	
              Attn:
                Chief Executive Officer

            
	 	
              Fax:
                609 514 4103

            
	 	
              Email: 
                pcommons@voxware.com

            
	 	 
	
              If
                to Bank:

            	
              Silicon
                Valley Bank 

            
	 	
              100
                Matsonford Road, Building 5, Suite 555 

            
	 	
              Radnor,
                Pennsylvania 19087

            
	 	
              Attn:
                Mr. Bill Howell

            
	 	
              Fax:
                (610) 971-2063

            
	 	
              Email:
                BHowell@svbank.com

            
	
               

            	 
	
              with
                a copy to:

            	
              Riemer
                & Braunstein LLP

            
	
               

            	
              Three
                Center Plaza

            
	 	
              Boston,
                Massachusetts 02108

            
	 	
              Attn:
                David A. Ephraim, Esquire

            
	 	
              Fax:
                (617) 880-3456

            
	 	
              Email:
                DEphraim@riemerlaw.com

            


    

    


     

    11      
      CHOICE
      OF LAW, VENUE AND JURY TRIAL WAIVER AND JUDICIAL
      REFERENCE

     

    Massachusetts
      law governs the Loan Documents without regard to principles of conflicts of
      law.
      Borrower and Bank each submit to the exclusive jurisdiction of the State and
      Federal courts in Massachusetts; provided, however, that nothing in this
      Agreement shall be deemed to operate to preclude Bank from bringing suit or
      taking other legal action in any other jurisdiction to realize on the Collateral
      or any other security for the Obligations, or to enforce a judgment or other
      court order in favor of Bank. Borrower expressly submits and consents in advance
      to such jurisdiction in any action or suit commenced in any such court, and
      Borrower hereby waives any objection that it may have based upon lack of
      personal jurisdiction, improper venue, or forum non conveniens and hereby
      consents to the granting of such legal or equitable relief as is deemed
      appropriate by such court. Borrower hereby waives personal service of the
      summons, complaints, and other process issued in such action or suit and agrees
      that service of such summons, complaints, and other process may be made by
      registered or certified mail addressed to Borrower at the address set forth
      in
      Section 10 of this Agreement and that service so made shall be deemed completed
      upon the earlier to occur of Borrower’s actual receipt thereof or three (3) days
      after deposit in the U.S. mails, proper postage prepaid.
      NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL
      SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
      OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS
      NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
      ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS PROPERTY.

     

    


    
      
        
          
          

        

        
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    TO
      THE EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR
      RIGHT
      TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON
      THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING
      CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL
      INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS
      REVIEWED THIS WAIVER WITH ITS COUNSEL.

     

    12     
      GENERAL
      PROVISIONS

     

    12.1    Successors
      and Assigns.
      This
      Agreement binds and is for the benefit of the successors and permitted assigns
      of each party. Borrower may not assign this Agreement or any rights or
      obligations under it without Bank’s prior written consent (which may be granted
      or withheld in Bank’s discretion). Bank has the right, without the consent of or
      notice to Borrower, to sell, transfer, negotiate, or grant participation in
      all
      or any part of, or any interest in, Bank’s obligations, rights, and benefits
      under this Agreement and the other Loan Documents.

     

    12.2  
      Indemnification.
      Borrower agrees to indemnify, defend and hold Bank and its directors, officers,
      employees, agents, attorneys, or any other Person affiliated with or
      representing Bank harmless against: (a) all obligations, demands, claims,
      and liabilities (collectively, “Claims”) asserted by any other party in
      connection with the transactions contemplated by the Loan Documents; and (b)
      all
      losses or Bank Expenses incurred, or paid by Bank from, following, or arising
      from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses directly caused by Bank’s
      gross negligence or willful misconduct.

     

    12.3  
      Limitation
      of Actions. Any
      claim or cause of action by Borrower against Bank, its directors, officers,
      employees, agents, accountants, attorneys, or any other Person affiliated with
      or representing Bank based upon, arising from, or relating to this Loan
      Agreement or any other Loan Document, or any other transaction contemplated
      hereby or thereby or relating hereto or thereto, or any other matter, cause
      or
      thing whatsoever, occurred, done, omitted or suffered to be done by Bank, its
      directors, officers, employees, agents, accountants or attorneys, shall be
      barred unless asserted by Borrower by the commencement of an action or
      proceeding in a court of competent jurisdiction by (a) the filing of a complaint
      within one year from the earlier of (i) the date any of Borrower’s officer or
      directors had knowledge of the first act, the occurrence or omission upon which
      such claim or cause of action, or any part thereof, is based, or (ii) the date
      this Agreement is terminated, and (b) the service of a summons and complaint
      on
      an officer of Bank, or on any other person authorized to accept service on
      behalf of Bank, within thirty (30) days thereafter. Borrower agrees that such
      one-year period is a reasonable and sufficient time for Borrower to investigate
      and act upon any such claim or cause of action. The one-year period provided
      herein shall not be waived, tolled, or extended except by the written consent
      of
      Bank in its sole discretion. This provision shall survive any termination of
      this Loan Agreement or any other Loan Document.

     

    12.4    Time
      of Essence.
      Time is
      of the essence for the performance of all Obligations in this
      Agreement.

     

    12.5    Severability
      of Provisions.
      Each
      provision of this Agreement is severable from every other provision in
      determining the enforceability of any provision.

     

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

     

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

     

    12.8  
      Survival.
      All
      covenants, representations and warranties made in this Agreement continue in
      full force until this Agreement has terminated pursuant to its terms and all
      Obligations (other than inchoate indemnity obligations and any other obligations
      which, by their terms, are to survive the termination of this Agreement) have
      been satisfied. The obligation of Borrower in Section 12.2 to indemnify Bank
      shall survive until the statute of limitations with respect to such claim or
      cause of action shall have run.

     

    


    
      
        
          
          

        

        
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    12.9  
      Confidentiality.
      In
      handling any confidential information, Bank shall exercise the same degree
      of
      care that it exercises for its own proprietary information, but disclosure
      of
      information may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to
      prospective transferees or purchasers of any interest in the Credit Extensions
      (provided, however, Bank shall use commercially reasonable efforts to obtain
      such prospective transferee’s or purchaser’s agreement to the terms of this
      provision); (c) as required by law, regulation, subpoena, or other order;
      (d) to Bank’s regulators or as otherwise required in connection with Bank’s
      examination or audit; and (e) as Bank considers appropriate in exercising
      remedies under this Agreement. Confidential information does not include
      information that either: (i) is in the public domain or in Bank’s possession
      when disclosed to Bank, or becomes part of the public domain after disclosure
      to
      Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know
      that
      the third party is prohibited from disclosing the information.

     

    12.10  
      Right
      of Set Off.
      Borrower hereby grants to Bank, a lien, security interest and right of set
      off
      as security for all Obligations to Bank, whether now existing or hereafter
      arising upon and against all deposits, credits, collateral and property, now
      or
      hereafter in the possession, custody, safekeeping or control of Bank or any
      entity under the control of Bank (including a Bank subsidiary) or in transit
      to
      any of them. At any time after the occurrence and during the continuance of
      an
      Event of Default, without demand or notice, Bank may set off the same or any
      part thereof and apply the same to any liability or obligation of Borrower
      even
      though unmatured and regardless of the adequacy of any other collateral securing
      the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS
      OR
      REMEDIES WITH RESPECT TO ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS,
      PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS
      OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY
      WAIVED.

     

    13     
      DEFINITIONS

     

    13.1  
      Definitions.
      As used
      in this Agreement, the following terms have the following meanings:

     

    “Account”
is
      any
      “account” as defined in the Code with such additions to such term as may
      hereafter be made, and includes, without limitation, all accounts receivable
      and
      other sums owing to Borrower.

     

    “Account
      Debtor”
      is any “account debtor” as defined in the Code with such additions to such term
      as may hereafter be made.

     

    “Advance”
or
      “Advances”
means
      an advance (or advances) under the Revolving Line.

     

    "Adjusted
      Quick Ratio"
      means a
      ratio of Quick Assets to Quick Liabilities.

     

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

     

    “Agreement”
is
      defined in the preamble hereof.

     

    “Availability
      Amount”
is
      (a)
      the lesser of (i) the Revolving Line or (ii) the Borrowing Base minus
      (b) the amount of all outstanding Letters of Credit (including drawn but
      unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit
      Reserves, minus (c) the FX Reserve, and minus (d) the outstanding principal
      balance of any Advances (including any amounts used for Cash Management
      Services).

     

    “Bank”
is
      defined in the preamble hereof.

     

    “Bank
      Expenses”
are
      all
      audit fees and expenses, costs, and expenses (including reasonable attorneys’
fees and expenses) for preparing, negotiating, administering, defending and
      enforcing the Loan Documents (including, without limitation, those incurred
      in
      connection with appeals or Insolvency Proceedings) or otherwise incurred with
      respect to Borrower.

     

    "Board"
      means
      Borrower's Board of Directors.

     

     

    


    
      
        
          
          

        

        
          -18-

          
            

          

        

        
          
          

        

      

    

     

    
      “Borrower”
is
        defined in the preamble hereof.

    

    


    “Borrower’s
      Books”
are
      all
      Borrower’s books and records including ledgers, federal and state tax returns,
      records regarding Borrower’s assets or liabilities, the Collateral, business
      operations or financial condition, and all computer programs or storage or
      any
      equipment containing such information.

     

    “Borrowing
      Base”
is
      seventy-five percent (75.0%) of
      Eligible Accounts, as determined by Bank from Borrower’s most recent Borrowing
      Base Certificate (provided however, if Borrower is unable, at any time, to
      either: (i) maintain an Adjusted Quick Ratio of at least 1.50 to 1.0, or (ii)
      (a) maintain an Adjusted Quick Ratio of at least 1.15 to 1.0, and (b) at all
      times maintain unrestricted and unencumbered cash, in accounts with the Bank
      in
      amount of at least Two Million Dollars ($2,000,000.00), then the Borrowing
      Base
      will be seventy-five percent (75.0%) of
      Eligible Accounts, net of any offsets related to each specific Account Debtor,
      including, without limitation, Deferred Revenue), minus if Borrower's Adjusted
      Quick Ratio is less than 1.25 to 1.0, at any time, the outstanding Obligations
      under the Term Loan; provided, however, that Bank may decrease the foregoing
      percentages in its good faith business judgment, based on events, conditions,
      contingencies, or risks which, as determined by Bank, may adversely affect
      Collateral.

     

    “Borrowing
      Base Certificate”
is
      that
      certain certificate included within each Transaction Report.

     

    “Borrowing
      Resolutions”
are,
      with respect to any Person, those resolutions adopted by such Person’s Board of
      Directors or other appropriate body and delivered by such Person to Bank
      approving the Loan Documents to which such Person is a party and the
      transactions contemplated thereby, together with a certificate executed by
      its
      secretary on behalf of such Person certifying that (a) such Person has the
      authority to execute, deliver, and perform its obligations under each of the
      Loan Documents to which it is a party, (b) that attached as Exhibit A to
      such certificate is a true, correct, and complete copy of the resolutions then
      in full force and effect authorizing and ratifying the execution, delivery,
      and
      performance by such Person of the Loan Documents to which it is a party, (c)
      the
      name(s) of the Person(s) authorized to execute the Loan Documents on behalf
      of
      such Person, together with a sample of the true signature(s) of such Person(s),
      and (d) that Bank may conclusively rely on such certificate unless and
      until such Person shall have delivered to Bank a further certificate canceling
      or amending such prior certificate.

     

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

     

    “Cash
      Equivalents” means
      (a) marketable
      direct obligations issued or unconditionally guaranteed by the United States
      or
      any agency or any State thereof having maturities of not more than one (1)
      year
      from the date of acquisition; (b) commercial paper maturing no more than
      one (1) year after its creation and having the highest rating from either
      Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc., and (c)
      Bank’s certificates of deposit issued maturing no more than one (1) year after
      issue.

     

    “Cash
      Management Services” is
      defined in Section 2.1.4.

     

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

     

    “Code”
is
      the
      Uniform Commercial Code, as the same may, from time to time, be enacted and
      in
      effect in the Commonwealth of Massachusetts; provided, that, to the extent
      that
      the Code is used to define any term herein or in any Loan Document and such
      term
      is defined differently in different Articles or Divisions of the Code, the
      definition of such term contained in Article or Division 9 shall govern;
      provided further, that in the event that, by reason of mandatory provisions
      of
      law, any or all of the attachment, perfection, or priority of, or remedies
      with
      respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial
      Code in effect in a jurisdiction other than the Commonwealth of Massachusetts,
      the term “Code”
shall
      mean the Uniform Commercial Code as enacted and in effect in such other
      jurisdiction solely for purposes on the provisions thereof relating to such
      attachment, perfection, priority, or remedies and for purposes of definitions
      relating to such provisions.

    


    “Collateral”
is
      any
      and all properties, rights and assets of Borrower described on Exhibit
      A.

     

    “Collateral
      Account”
is
      any
      Deposit Account, Securities Account, or Commodity Account.

     

    “Commodity
      Account”
      is
      any “commodity account” as defined in the Code with such additions to such term
      as may hereafter be made.

     

     

    


    
      
        
          
          

        

        
          -19-

          
            

          

        

        
          
          

        

      

    

     

    
      “Communication”
        is defined in Section 10.

       

    

    “Compliance
      Certificate”
is
      that
      certain certificate in the form attached hereto as Exhibit
      D.

     

    “Contingent
      Obligation”
is,
      for
      any Person, any direct or indirect liability, contingent or not, of that Person
      for (a) any indebtedness, lease, dividend, letter of credit or other obligation
      of another such as an obligation directly or indirectly guaranteed, endorsed,
      co-made, discounted or sold with recourse by that Person, or for which that
      Person is directly or indirectly liable; (b) any obligations for undrawn letters
      of credit for the account of that Person; and (c) all obligations from any
      interest rate, currency or commodity swap agreement, interest rate cap or collar
      agreement, or other agreement or arrangement designated to protect a Person
      against fluctuation in interest rates, currency exchange rates or commodity
      prices; but “Contingent Obligation” does not include endorsements in the
      ordinary course of business. The amount of a Contingent Obligation is the stated
      or determined amount of the primary obligation for which the Contingent
      Obligation is made or, if not determinable, the maximum reasonably anticipated
      liability for it determined by the Person in good faith; but the amount may
      not
      exceed the maximum of the obligations under any guarantee or other support
      arrangement.

     

    “Control
      Agreement”
is
      any
      control agreement entered into among the depository institution at which
      Borrower maintains a Deposit Account or the securities intermediary or commodity
      intermediary at which Borrower maintains a Securities Account or a Commodity
      Account, Borrower, and Bank pursuant to which Bank obtains control (within
      the
      meaning of the Code) over such Deposit Account, Securities Account, or Commodity
      Account.

     

    “Credit
      Extension”
is
      any
      Advance, Letter of Credit, Term Loan, FX Forward Contract, amount utilized
      for
      Cash Management Services, or any other extension of credit by Bank for
      Borrower’s benefit.

     

    “Current
      Liabilities”
are
      all
      obligations and liabilities of Borrower to Bank, plus, without duplication,
      the
      aggregate amount of Borrower’s Total Liabilities that mature within one (1)
      year.

     

    “Default”
      means any event which with notice or passage of time or both, would constitute
      an Event of Default.

     

    “Default
      Rate”
is
      defined in Section 2.3(b).

     

    “Deferred
      Revenue”
is
      all
      amounts received or invoiced in advance of performance under contracts and
      not
      yet recognized as revenue.

     

    “Deposit
      Account”
      is any “deposit account” as defined in the Code with such additions to such term
      as may hereafter be made.

     

    “Designated
      Deposit Account”
      is Borrower’s deposit account, account number 3300055128 maintained with
      Bank.

     

    “Dollars,” “dollars”
      and “$”
      each mean lawful money of the United States.

     

    “Effective
      Date”
is
      defined in the preamble of this Agreement.

     

    “Eligible
      Accounts”
are
      Accounts which arise in the ordinary course of Borrower’s business that meet all
      Borrower’s representations and warranties in Section 5.3. Bank reserves the
      right, at any time and from time to time after the Effective Date, to adjust
      any
      of the criteria set forth below and to establish new criteria in its good faith
      business judgment. Without limiting the fact that the determination of which
      Accounts are eligible for borrowing is a matter of Bank’s good faith judgment,
      the following (“Minimum Eligibility Requirements”) are the minimum requirements
      for an Account to be an Eligible Account. Unless Bank agrees otherwise in
      writing, Eligible Accounts shall not include:

     

    (a)    Accounts
      for which the Account Debtor has not been invoiced;

     

    (b)    Accounts
      that the Account Debtor has not paid within ninety (90) days of invoice
      date;

     

    


    
      
        
          
          

        

        
          -20-

          
            

          

        

        
          
          

        

      

    

     

     

    
      (c)    Accounts
        owing
        from an Account Debtor, fifty percent (50%) or more of whose Accounts have
        not
        been paid within ninety (90) days of invoice date;

       

      (d)    Credit
        balances over ninety (90) days from invoice date;


    

     

    (e)    Accounts
      owing from an Account Debtor, including Affiliates, whose total obligations
      to
      Borrower exceed fifty percent (50.0%) of all Accounts, for the amounts that
      exceed that percentage, unless Bank approves in writing;

     

    (f)    
Accounts
      owing from an Account Debtor which does not have its principal place of business
      in the United States, except for Eligible Foreign Accounts;

     

    (g)    Accounts
      owing from an Account Debtor which is a federal, state or local government
      entity or any department, agency, or instrumentality thereof except for Accounts
      of the United States or state or local government if Borrower has assigned
      its
      payment rights to Bank and the assignment has been acknowledged under the
      Federal Assignment of Claims Act of 1940, as amended or corresponding state
      or
      local laws or regulations;

     

    (h)    Accounts
      owing from an Account Debtor to the extent that Borrower is indebted or
      obligated in any manner to the Account Debtor (as creditor, lessor, supplier
      or
      otherwise - sometimes called “contra” accounts, accounts payable, customer
      deposits or credit accounts), with the exception of customary credits,
      adjustments and/or discounts given to an Account Debtor by Borrower in the
      ordinary course of its business;

     

    (i)    Accounts
      for demonstration or promotional equipment, or in which goods are consigned,
      or
      sold on a “sale guaranteed”, “sale or return”, “sale on approval”, “bill and
      hold”, or other terms if Account Debtor’s payment may be
      conditional;

     

    (j)    
Accounts
      for which the Account Debtor is Borrower’s Affiliate, officer, employee, or
      agent;

     

    (k)    Accounts
      in which the Account Debtor disputes liability or makes any claim (but only
      up
      to the disputed or claimed amount), or if the Account Debtor is subject to
      an
      Insolvency Proceeding, or becomes insolvent, or goes out of
      business;

     

    (l)    
Accounts
      owing from an Account Debtor with respect to which Borrower has received
      deferred revenue (but only to the extent of such deferred revenue);

     

    (m)   Accounts
      for which Bank in its good faith business judgment determines collection to
      be
      doubtful; and

     

    (n)    other
      Accounts Bank deems ineligible in the exercise of its good faith business
      judgment.

     

    “Eligible
      Foreign Accounts”
are
      Accounts for which the Account Debtor does not have its principal place of
      business in the United States but are otherwise Eligible Accounts, and
      that
      Bank approves in writing in its sole and absolute discretion, on a case by
      case
      basis. Eligible Foreign Accounts shall include Waitrose, Somerfield, Argos,
      and
      Intermarche.

     

    “Equipment”
is
      all
      “equipment” as defined in the Code with such additions to such term as may
      hereafter be made, and includes without limitation all machinery, fixtures,
      goods, vehicles (including motor vehicles and trailers), and any interest in
      any
      of the foregoing.

     

    “ERISA”
is
      the
      Employment Retirement Income Security Act of 1974, and its
      regulations.

     

    “Event
      of Default”
      is defined in Section 8.

     

    "Existing
      Loan Agreement"
      means that certain Loan and Security Agreement dated as of December 29, 2003,
      as
      amended and in effect, by and between the Borrower and the Bank.

     

    “Foreign
      Currency”
      means
      lawful money of a country other than the United States.

     

     

    


    
      
        
          
          

        

        
          -21-

          
            

          

        

        
          
          

        

      

    

     

     

    
      “Funding
        Date”
is
        any
        date on which a Credit Extension is made to or on account of Borrower which
        shall be a Business Day.

       

      “FX
        Business Day”
        is
        any day
        when (a) Bank’s Foreign Exchange Department is conducting its normal business
        and (b) the Foreign Currency being purchased or sold by Borrower is available
        to
        Bank from the entity from which Bank shall buy or sell such Foreign
        Currency.


    

     

    “FX
      Forward Contract” is
      defined in Section 2.1.3.

     

    “FX
      Reserve” is
      defined in Section 2.1.3.

     

    “GAAP”
is
      generally accepted accounting principles set forth in the opinions and
      pronouncements of the Accounting Principles Board of the American Institute
      of
      Certified Public Accountants and statements and pronouncements of the Financial
      Accounting Standards Board or in such other statements by such other Person
      as
      may be approved by a significant segment of the accounting profession, which
      are
      applicable to the circumstances as of the date of determination.

     

    “General
      Intangibles”
is
      all
      “general intangibles” as defined in the Code in effect on the date hereof with
      such additions to such term as may hereafter be made, and includes without
      limitation, all copyright
      rights, copyright applications, copyright registrations and like protections
      in
      each work of authorship and derivative work, whether published or unpublished,
      any patents, trademarks, service marks and, to the extent permitted under
      applicable law, any applications therefor, whether registered or not, any trade
      secret rights, including any rights to unpatented inventions,
      payment intangibles, royalties, contract rights, goodwill, franchise agreements,
      purchase orders, customer lists, route lists, telephone numbers, domain names,
      claims, income and other tax refunds, security and other deposits, options
      to
      purchase or sell real or personal property, rights in all litigation presently
      or hereafter pending (whether in contract, tort or otherwise), insurance
      policies (including without limitation key man, property damage, and business
      interruption insurance), payments of insurance and rights to payment of any
      kind.

     

    “Guarantor” is
      any
      present or future guarantor of the Obligations, including Verbex Acquisition
      Corporation.

     

    “Indebtedness”
is
      (a)
      indebtedness for borrowed money or the deferred price of property or services,
      such as reimbursement and other obligations for surety bonds and letters of
      credit, (b) obligations evidenced by notes, bonds, debentures or similar
      instruments, (c) capital lease obligations, and (d) Contingent
      Obligations.

     

    “Insolvency
      Proceeding”
is
      any
      proceeding by or against any Person under the United States Bankruptcy Code,
      or
      any other bankruptcy or insolvency law, including assignments for the benefit
      of
      creditors, compositions, extensions generally with its creditors, or proceedings
      seeking reorganization, arrangement, or other relief.

     

    “Inventory”
is
      all
      “inventory” as defined in the Code in effect on the date hereof with such
      additions to such term as may hereafter be made, and includes without limitation
      all merchandise, raw materials, parts, supplies, packing and shipping materials,
      work in process and finished products, including without limitation such
      inventory as is temporarily out of Borrower’s custody or possession or in
      transit and including any returned goods and any documents of title representing
      any of the above.

     

    “Investment”
is
      any
      beneficial ownership interest in any Person (including stock, partnership
      interest or other securities), and any loan, advance or capital contribution
      to
      any Person.

     

    "IP
      Agreement"
      is that
      certain Intellectual Property Security Agreement dated as of December 29, 2003,
      by and between the Borrower and the Bank.

     

    “Letter
      of Credit”
      means a
      standby letter of credit issued by Bank or another institution based upon an
      application, guarantee, indemnity or similar agreement on the part of Bank
      as
      set forth in Section 2.1.2.

     

    “Letter
      of Credit Application”
is
      defined in Section 2.1.2(a).

     

    “Letter
      of Credit Reserve”
has
      the
      meaning set forth in Section 2.1.2(d).

    


    
      
        
          
          

        

        
          -22-

          
            

          

        

        
          
          

        

      

    

     

    
       

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

       

      “Loan
        Documents”
are,
        collectively, this Agreement, the Perfection Certificate, any note, or notes
        or
        guaranties executed by Borrower or any Guarantor, and any other present or
        future agreement between Borrower any Guarantor and/or for the benefit of
        Bank
        in connection with this Agreement, all as amended, restated, or otherwise
        modified.

       

      "LockBox"
        is
        defined in Section 6.9.


    

     

    “Material
      Adverse Change”
      is (a) a
      material impairment in the perfection or priority of Bank’s Lien in the
      Collateral or in the value of such Collateral; (b) a material adverse change
      in
      the business, operations, or condition (financial or otherwise) of Borrower;
      (c)
      a material impairment of the prospect of repayment of any portion of the
      Obligations; or (d)
      Bank
      determines, based upon information available to it and in its reasonable
      judgment, that there is a reasonable likelihood that Borrower shall fail to
      comply with one or more of the financial covenants in Section 6 during the
      next
      succeeding financial reporting period.

     

    "Minimum
      Eligibility Requirements"
      is
      defined in the defined term "Eligible Accounts".

     

    “Obligations”
are
      Borrower’s obligation to pay when due any debts, principal, interest, Bank
      Expenses and other amounts Borrower owes Bank now or later, whether under this
      Agreement, the Existing Loan Agreement, the Loan Documents, or otherwise,
      including, without limitation, all obligations relating to letters of credit,
      cash management services, and foreign exchange contracts, if any, and including
      interest accruing after Insolvency Proceedings begin and debts, liabilities,
      or
      obligations of Borrower assigned to Bank, and the performance of Borrower’s
      duties under the Loan Documents.

     

    “Operating
      Documents”
      are, for
      any Person, such Person’s formation documents, as certified with the Secretary
      of State of such Person’s state of formation on a date that is no earlier than
      30 days prior to the Effective Date, and its bylaws in current form, each of
      the
      foregoing with all current amendments or modifications thereto.

     

    “Payment” means
      all
      checks, wire transfers and other items of payment received by Bank (including
      proceeds of Accounts and payment of all the Obligations in full) for credit
      to
      Borrower’s outstanding Credit Extensions or, if the balance of the Credit
      Extensions has been reduced to zero, for credit to its Deposit
      Accounts.

     

    “Payment
      Date”
is
      the
      first day of each calendar month.

     

    “Perfection
      Certificate”
is
      defined in Section 5.1.

     

    "Permitted
      Accounts"
      is
      defined in Section 6.6(a).

     

    “Permitted
      Indebtedness”
      is:

     

    (a)    Borrower’s
      Indebtedness to Bank under this Agreement and the other Loan
      Documents;

     

    (b)    Indebtedness
      existing on the Effective Date and shown on the Perfection
      Certificate;

     

    (c)    Subordinated
      Debt;

     

    (d)    unsecured
      Indebtedness to trade
      creditors incurred
      in
      the ordinary course of business; 

     

    (e)    Indebtedness
      secured by Permitted Liens; and

     

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

     

    


    
      
        
          
          

        

        
          -23-

          
            

          

        

        
          
          

        

      

    

    


    “Permitted
      Investments”
      are:

     

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

     

    (b)    Cash
      Equivalents.

     

    “Permitted
      Liens”
      are:

     

    (a)    Liens
      existing on the Effective Date and shown on the Perfection Certificate or
      arising under this Agreement and the other Loan Documents;

     

    (b)    Liens
      for
      taxes, fees, assessments or other government charges or levies, either not
      delinquent or being contested in good faith and for which Borrower maintains
      adequate reserves on its Books, if
      they
      have no priority over any of Bank’s Liens;

     

    (c)    purchase
      money Liens and capital leases (i) on Equipment acquired or held by Borrower
      incurred for financing the acquisition of the Equipment securing no more than
      Five Hundred Thousand Dollars ($500,000.00) in the aggregate amount outstanding,
      or (ii) existing on Equipment when acquired, if
      the Lien
      is confined to the property and improvements and the proceeds of the Equipment;
      

     

    (d)    Liens
      incurred in the extension, renewal or refinancing of the indebtedness secured
      by
      Liens described in (a) through (c), but
      any
      extension, renewal or replacement Lien must be limited to the property
      encumbered by the existing Lien and the principal amount of the indebtedness
      may
      not increase;

     

    (e)    carrier's,
      warehousemen's, mechanics', materialmen's, repairmen's, landlord's liens or
      other like Liens arising in the ordinary course of business which are not
      overdue for a period of more than thirty (30) days or which are being contested
      in good faith by appropriate proceedings and for which appropriate reserves
      have
      been made therefor;

     

    (f)    pledges
      or deposits in connection with workers' compensation, unemployment insurance
      and
      other social security legislation and deposits securing liability to insurance
      carriers under insurance or self-insurance arrangements; and

     

    (g)    deposits
      to secure the performance of tenders, bids or leases, trade contracts (other
      than for borrowed money), statutory obligations, surety, customs, stay and
      appeal bonds, performance and return of money bonds, government contracts and
      other obligations of a like nature in an amount not to exceed Fifty Thousand
      Dollars ($50,000.00), in the aggregate.

     

    “Person”
is
      any
      individual, sole proprietorship, partnership, limited liability company, joint
      venture, company, trust, unincorporated organization, association, corporation,
      institution, public benefit corporation, firm, joint stock company, estate,
      entity or government agency.

     

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

     

    "Profitability
      Event" is
      the
      confirmation by the Bank that Borrower has maintained, after the Effective
      Date,
      a net profit of at least One Dollar ($1.00), for two (2) consecutive fiscal
      quarters.

     

    “Quick
      Assets”
is,
      on
      any date, Borrower’s, unrestricted cash, plus net billed accounts
      receivable.

     

    "Quick
      Liabilities"
      are
      Current Liabilities, less (i) the current portion of Subordinated Debt and
      Deferred Revenue, and less (ii) accrued bonuses due to employees.

     

    “Registered
      Organization”
is
      any
      “registered organization” as defined in the Code with such additions to such
      term as may hereafter be made.

     

    “Reserves”
      means,
      as of any date of determination, such amounts as Bank may from time to time
      establish and revise in good faith reducing the amount of Advances, Letters
      of
      Credit and other financial accommodations which would otherwise be available
      to
      Borrower under the lending formulas: (a) to reflect events, conditions,
      contingencies or risks which, as determined by Bank in good faith, do or may
      affect (i) the Collateral or any other

     

    


    
      
        
          
          

        

        
          -24-

          
            

          

        

        
          
          

        

      

    

     

    property
      which is security for the Obligations or its value (including without limitation
      any increase in delinquencies of Accounts), (ii) the assets or business of
      Borrower or any guarantor, or (iii) the security interests and other rights
      of
      Bank in the Collateral (including the enforceability, perfection and priority
      thereof); or (b) to reflect Bank’s good faith belief that any collateral report
      or financial information furnished by or on behalf of Borrower or any guarantor
      to Bank is or may have been incomplete, inaccurate or misleading in any material
      respect; or (c) in respect of any state of facts which Bank determines in good
      faith constitutes an Event of Default or may, with notice or passage of time
      or
      both, constitute an Event of Default.

     

    “Responsible
      Officer”
is
      any
      of the Borrower's: (i) Chief Financial Officer, who is currently Paul Commons,
      (ii) President, who is currently Scott Yetter, and (iii) Controller, who is
      currently Ken Riley. 

     

    “Revolving
      Line”
is
      an
      Advance or Advances in an aggregate amount of up to One Million Five Hundred
      Thousand Dollars ($1,500,000.00) outstanding at any time.

     

    “Revolving
      Line Maturity Date” is
      December ___, 2007 (364 days from the Effective Date).

     

    “Securities
      Account”
      is
      any “securities account” as defined in the Code with such additions to such term
      as may hereafter be made.

     

    “Subordinated
      Debt”
is
      indebtedness incurred by Borrower subordinated to all of Borrower’s now or
      hereafter indebtedness to Bank (pursuant to a subordination, intercreditor,
      or
      other similar agreement in form and substance satisfactory to Bank entered
      into
      between Bank and the other creditor), on terms acceptable to Bank.

     

    “Subsidiary”
means,
      with respect to any Person, any Person of which more than 50% of the voting
      stock or other equity interests is owned or controlled, directly or indirectly,
      by such Person or one or more Affiliates of such Person.

     

    “Term
      Loan”
      is a
      loan made by Bank pursuant to the terms of Section 2.1.5 hereof.

     

    “Term
      Loan” is
      an
      aggregate amount equal to One Million Five Hundred Thousand Dollars
      ($1,500,000.00) outstanding at any time.

     

    “Term
      Loan Maturity Date”
is
      March 1, 2010.

     

    “Term
      Loan Payment”
is
      defined in Section 2.1.5(b).

     

    “Total
      Liabilities”
is
      on
      any day, obligations that should, under GAAP, be classified as liabilities
      on
      Borrower’s consolidated balance sheet, including all Indebtedness, and current
      portion of Subordinated Debt permitted by Bank to be paid by Borrower, but
      excluding all other Subordinated Debt.

     

    “Transfer”
is
      defined in Section 7.1. 

     

    “Transaction
      Report”
      is that
      certain form attached hereto as Exhibit
      B.

     

    “Unused
      Revolving Line Facility Fee”
is
      defined in Section 2.4(b).

     

    


     

    


     

     Signature
      page follows.

     

    


    
      
        
          
          

        

        
          -25-

          
            

          

        

        
          
          

        

      

    

    


    IN
      WITNESS WHEREOF,
      the
      parties hereto have caused this Agreement to be executed as a sealed instrument
      under the laws of the Commonwealth of Massachusetts as of the Effective
      Date.

     

    BORROWER:

     

    VOXWARE,
      INC.

     

    By    
      /s/
      Paul
      Commons                                               
    

     

    Name:    
      Paul
      Commons                                              
    

     

    Title:    
      Vice President and Chief Financial Officer    


     

    BANK:

     

    SILICON
      VALLEY BANK

     

    By    
      /s/ Richard
      White                                                      


    Name:    
      Richard
      White                                                     


     

    Title:    
      Relationship
      Manager                                         


     

    


     

    


    
      
        
          [Signature
            page to Loan and Security Agreement]

          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      A

    


    


    The
      Collateral consists of all of Borrower’s right, title and interest in and to the
      following personal property:

     

    All
      goods, Accounts (including health-care receivables), Equipment, Inventory,
      contract rights or rights to payment of money, leases, license agreements,
      franchise agreements, General Intangibles, commercial tort claims, documents,
      instruments (including any promissory notes), chattel paper (whether tangible
      or
      electronic), cash, deposit accounts, certificates of deposit, fixtures, letters
      of credit rights (whether or not the letter of credit is evidenced by a
      writing), securities, and all other investment property, supporting obligations,
      and financial assets, whether now owned or hereafter acquired, wherever located;
      and

     

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

     

     

     

     

     

     

     

     

     

    
 

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      B

    Transaction
      Report

    [EXCEL
      spreadsheet to be provided separately from lending officer.]

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    


    EXHIBIT
      C

    


    COMPLIANCE
      CERTIFICATE

     

    
      	
              TO:

            	
              SILICON
                VALLEY BANK

            	
              Date:
                _______________________________

            
	
              FROM:
                

            	
              VOXWARE,
                INC.

            	 


    

    


    The
      undersigned authorized officer of Voxware, Inc. (“Borrower”) certifies that
      under the terms and conditions of the Loan and Security Agreement between
      Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for
      the period ending _______________ with all required covenants except as noted
      below, (2) there are no Events of Default, (3) all representations and
      warranties in the Agreement are true and correct in all material respects on
      this date except as noted below; provided, however, that such materiality
      qualifier shall not be applicable to any representations and warranties that
      already are qualified or modified by materiality in the text thereof; and
      provided, further that
      those representations and warranties expressly referring to a specific date
      shall be true, accurate and complete in all material respects as of such
      date,
      (4)
      Borrower, and each of its Subsidiaries, has timely filed all required tax
      returns and reports, and Borrower
      has timely paid all foreign, federal, state and local taxes, assessments,
      deposits and contributions owed by Borrower
      except
      as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
      and (5) no Liens have been levied or claims made against Borrower or any of
      its
      Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
      has not previously provided written notification to Bank. Attached are the
      required documents supporting the certification. The undersigned certifies
      that
      these are prepared in accordance with generally GAAP consistently applied from
      one period to the next except as explained in an accompanying letter or
      footnotes. The undersigned acknowledges that no borrowings may be requested
      at
      any time or date of determination that Borrower is not in compliance with any
      of
      the terms of the Agreement, and that compliance is determined not just at the
      date this certificate is delivered. Capitalized terms used but not otherwise
      defined herein shall have the meanings given them in the Agreement.

     

    
      	
              Please
                indicate compliance status by circling Yes/No under “Complies”
                column.

            
	 
	
              Reporting
                Covenant

            	
              Required

            	
              Complies

            
	 	 	 
	
              Monthly
                financial statements with 

              Compliance
                Certificate

            	
              Monthly
                within 30 days

            	
              Yes
                No

            
	
              Annual
                financial statement (CPA Audited) + CC

            	
              FYE
                within 120 days

            	
              Yes
                No

            
	
              10-Q,
                10-K and 8-K

            	
              Within
                5 days after filing with SEC

            	
              Yes
                No

            
	
              Borrowing
                Base Certificate A/R Agings

            	
              Monthly
                within 30 days

            	
              Yes
                No

            
	
              Audit

            	
              Annually
                and within 45 days of Effective 

              Date

            	
              Yes
                No 

            
	
              Board
                approved projections Annually Yes No

            
	
              The
                following Intellectual Property was registered after the Effective
                Date
                (if no registrations, state “None”)

              ____________________________________________________________________________

            


    

    


    
      	
              Financial
                Covenant

            	
              Required

            	
              Actual

            	
              Complies

            
	
              Minimum
                Cash Balances

            	
              $2,500,000.00

            	
              $

            	
              Yes
                No

            
	
              Minimum
                Quarterly Net Loss/Net Income

            	
              $______
                *

            	
              $

            	
              Yes
                No

            


    

    


    


    
      	
              Adjusted
                Quick Ratio**

            	 	
              Actual

            
	
              Minimum
                Adjusted Quick Ratio

            	 	 


    

     

    *
      As set
      forth in Section 6.7(b) of the Agreement

    


    **
      Note,
      this is not a financial covenant.

    


    
      
        
          
          

        

        
          -29-

          
            

          

        

        
          
          

        

      

    

    


    The
      following financial covenant analyses and information set forth in Schedule
      1
      attached hereto are true and accurate as of the date of this
      Certificate.

    


    The
      following are the exceptions with respect to the certification above: (If no
      exceptions exist, state “No exceptions to note.”)

    


     

      
        

      

    

    
      

      

    

     

    
      	
              Voxware,
                Inc.

               

               

              By: 
                ______________________________________  

              Name:   
                Paul
                Commons                                                       
                

              Title:
                 
                Vice President and
                CFO                                          
                

            	
              BANK
                USE ONLY

               

              Received
                by: _____________________

              authorized
                signer

              Date:
                 _________________________

               

              Verified:
                ________________________

              authorized
                signer

              Date:
                 _________________________

               

              Compliance
                Status:       Yes    
                No

            


    

    


    


     

     

     

     

     

     

     

     

     

    
 

    


    
      
        
          
          

        

        
          -30-

          
            

          

        

        
          
          

        

      

    

    


    Schedule
      1 to Compliance Certificate

    


    Financial
      Covenants of Borrower

    


    


    Dated: ____________________

    


    In
      the
      event of a conflict between this Schedule and the Loan Agreement, the terms
      of
      the Loan Agreement shall control.

    


    
      	I.	
              TANGIBLE
                NET WORTH

            


    

     

    

      
        	
                A.

              	
                Aggregate
                  value of total assets of Borrower and 

              	 	
                $

              	
                _______

              	 
	
                B.

              	
                Aggregate
                  value of goodwill of Borrower 

              	 	
                $

              	
                _______

              	 
	
                C.

              	
                Aggregate
                  value of intangible assets of Borrower 

              	 	
                $

              	
                _______

              	 
	
                D.

              	
                Aggregate
                  value of any reserves not already deducted from assets

              	 	
                $

              	
                _______

              	 
	
                E.

              	
                Aggregate
                  value of obligations owing to Borrower from officers or other
                  directors

              	 	
                $

              	
                _______

              	 
	
                F.

              	
                Aggregate
                  value of liabilities of Borrower (including all Indebtedness)

                and
                  current portion of Subordinated Debt permitted by Bank to be paid
                  by
                  Borrower (but no other Subordinated Debt)

              	
                 

                 

              	
                $

              	
                _______

              	 
	
                G.

              	
                Value
                  of Subordinated Debt

              	 	
                $

              	
                _______

              	 
	
                H.

              	
                Tangible
                  Net Worth (line A minus line B minus line C minus line D minus
                  line E
                  minus line F, plus line G)

              	
                 

              	
                $

              	
                _______

              	 


      

    

    


    


    


    Is
      line H
      equal to or greater than $_____________?

    


    
      	
              _____  No,
                not in compliance

            	
              _____  Yes,
                in compliance

            
	 	 


    

    


    


    


    
      	II.	
              ADJUSTED
                QUICK RATIO

            


    

     

    

      
        	
                A.

              	
                Aggregate
                  value of the unrestricted cash of Borrower 

              	 	
                $

              	
                _______

              	 
	
                B.

              	
                Aggregate
                  value of the net billed accounts receivable of Borrower 

              	 	
                $

              	
                _______

              	 
	
                C.

              	
                Quick
                  Assets (the sum of lines A and B)

              	
                 

              	
                $

              	
                _______

              	 
	
                D.

              	
                Aggregate
                  value of Obligations to Bank

              	 	
                $

              	
                _______

              	 
	
                E.

              	
                Aggregate
                  value of liabilities of Borrower (including all Indebtedness)


                that
                  matures within one (1) year and current portion of Subordinated
                  Debt
                  permitted by Bank to be paid by Borrower

              	 	
                
                

                
                

                $

              	
                
                

                
                

                _______

              	 
	
                F

              	
                Aggregate
                  value of (i) the current portion of Subordinated Debt and Deferred
                  Revenue
                  and (ii) accrued bonuses due to employees

              	 	 	 	 
	
                G.

              	
                Quick
                  Liabilities (the sum of lines D, E minus F)

              	
                 

              	
                $

              	
                _______

              	 
	
                G.

              	
                Adjusted
                  Quick Ratio (line C divided by line G)

              	
                 

              	 	
                _______

              	 


      

    

    


    Is
      line G
      equal to or greater than 1.25:1:00?