Exhibit 10.1


 


LOAN AND
SECURITY AGREEMENT


 


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


 


1              ACCOUNTING AND OTHER TERMS


 


Accounting
terms not defined in this Agreement shall be construed following GAAP.  Except as otherwise specified, calculations
and determinations must be made following GAAP. 
The term “financial statements” includes the notes and schedules
attached thereto.  The terms “including”
and “includes” always mean “including (or includes) without limitation,” in
this or any Loan Document.  Capitalized
terms in this Agreement shall have the meanings set forth in Article 13.  All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code, to 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 unpaid principal amount of all Credit Extensions and interest on
the unpaid principal amount of the Credit Extensions as and when due in
accordance with this Agreement.


 


2.1.1       Revolving Advances.


 


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


 


(b)           Borrowing Procedure.  To obtain an Advance,
Borrower must notify Bank (which notice shall be irrevocable) by facsimile or
telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to
be made.  If such notification is by
telephone, Borrower must promptly confirm the notification by delivering to
Bank a completed Payment/Advance Form.  Bank
shall credit Advances to Borrower’s 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.  Bank may rely on any
telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee. Borrower shall indemnify Bank for any loss
Bank suffers due to such reliance.


 


(c)           Interest Rate.   The principal amounts
outstanding under the Revolving Line shall accrue interest at a per annum rate
equal to the aggregate of the Prime Rate and one half of one percent (0.5%), which
interest shall be payable monthly.


 


(d)           Termination; Repayment.  The Revolving Line
terminates on the 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)           Bank shall issue or have
issued Letters of Credit for Borrower’s account not exceeding Revolving Line
Availability.  The face amount of
outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve) may not exceed Revolving Line
Availability.  Borrower’s Letter of
Credit reimbursement obligation shall be secured by cash on terms acceptable to
Bank on and after (i) the Maturity Date, or (ii) the termination of
the Revolving Line by Borrower, or (iii) the occurrence of an Event of
Default hereunder.  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 (“Letter of Credit Application”).  Borrower agrees to execute any further
documentation in connection with the Letters of Credit as Bank may reasonably
request.


 


(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 and such Letters of Credit, and the
Letter of Credit Application.  Borrower
shall indemnify, defend, protect, and hold Bank harmless from any loss, cost,
expense or liability, including, without limitation, reasonable attorneys’
fees, arising out of or in connection with any Letters of Credit, other than
losses, costs, expenses or liabilities arising out of or relating to Bank’s
gross negligence or willful misconduct.


 


(c)           Borrower may request that
Bank issue a Letter of Credit payable in a currency other than United States
Dollars.  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 United
States currency at the then prevailing rate of exchange in San Francisco,
California, for sales of that other currency for transfer to the country of
which it is the currency.


 


(d)           Upon the issuance of any Letter
of Credit payable in a currency other than United States Dollars, Bank shall
create a reserve under the Revolving Line for protection against fluctuations
in currency exchange rates, in an amount equal to ten percent (10%) of the face
amount of such Letter of Credit (the “Letter of Credit Reserve”).  The amount of the Letter of Credit Reserve
may be amended 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 the Letter of Credit
Reserve for as long as such Letter of Credit remains outstanding.


 


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


 


2.1.4       Cash Management Services Sublimit.  Borrower may request and utilize the Bank’s cash
management services (the “Cash Management Services”), which may include
merchant services, direct deposit of payroll, business credit card, and check
cashing services identified in the various cash management services agreements
related to such Cash Management Services. 
The maximum amount of Obligations relating to Cash Management Services
shall not exceed Revolving Line Availability (the “Cash Management Services
Sublimit”).  The aggregate amounts
utilized under the Cash Management Services Sublimit shall at all times reduce
the amount otherwise available for Credit Extensions under the Revolving
Line.  Any amounts Bank pays on behalf of
Borrower or any amounts that are not paid by Borrower to Bank 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       Undisbursed Credit Extensions.  Bank’s obligation to lend the undisbursed
portion of the Obligations shall terminate if, in Bank’s sole discretion, there
has been a Material Adverse Change, or there has been any material adverse deviation
by Borrower from the most recent business plan of Borrower presented to and
accepted by Bank prior to the execution of this Agreement.


 


2.2          Interest Rate. 


 


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


 


(b)           Adjustment to Interest
Rate. The applicable interest rate hereunder shall
increase or decrease when the Prime Rate changes. 


 


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(c)           360-Day Year.  Interest is computed on the
basis of a three hundred sixty (360) day year for the actual number of days
elapsed.


 


(d)           Debit of Accounts.  Bank may debit any of
Borrower’s deposit or operating accounts, including Account Number XXXXXXXXXX,
for principal and interest payments when due, or any other amounts Borrower
owes Bank, when due. Bank shall promptly notify Borrower after it debits
Borrower’s accounts.  These debits shall
not constitute a set off.


 


(e)           Payments.  Interest is payable monthly
on the first calendar day of each month. 
Payments received after 12:00 noon Eastern time are considered received
at the opening of business 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.


 


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


 


2.3          Fees.  Borrower shall pay to Bank:


 


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


 


(b)           Unused Revolving Line
Facility Fee. 
In addition to the foregoing, as compensation for Bank’s maintenance of
sufficient funds available for such purpose, Bank shall have earned a fee (the “Unused
Revolving Line Facility Fee”), which fee shall be paid quarterly, in arrears,
on a calendar year basis, in an amount equal to one quarter of one percent (0.25%)
per annum of the average unused portion of the Revolving Line, as reasonably 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
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) incurred through and after
the Closing Date, when due.


 


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, the following:


 


(a)           this Agreement;


 


(b)           a certificate of the
Secretary of Borrower with respect to articles, bylaws, incumbency and
resolutions authorizing the execution and delivery of this Agreement, the Loan
Documents, and all transactions related thereto;


 


(c)           Perfection Certificate by
Borrower;


 


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


 


(e)           Guaranty by the Guarantor;


 


(f)            Subordination Agreement
from Guarantor;


 


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(g)           consent of Senior Lender; 


 


(h)           landlord’s waiver; 


 


(i)            Securities Account Control
Agreement;


 


(j)            insurance certificate;


 


(k)           payment of the fees and
Bank Expenses;


 


(l)            Certificate of Foreign
Qualification (if applicable); 


 


(m)          Certificate of Good
Standing/Legal Existence; and


 


(n)           such other documents, and
completion of such other matters, as Bank may reasonably deem necessary or
appropriate.


 


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 any
Payment/Advance Form; and


 


(b)           the representations and
warranties in Article 5 shall be true in all material respects on the date
of the Payment/Advance Form and on the effective date of each Credit
Extension and no 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 Article 5 remain true in all material respects; provided,
however, that those representations and warranties expressly referring to
another date shall be true, in all material respects, only as of such date.


 


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 and the performance
of each of Borrower’s duties under the Loan Documents, a continuing security
interest in, and pledges and assigns to Bank, the Collateral, wherever located,
whether now owned or hereafter acquired or arising, and all proceeds and
products thereof.  Subject to Section 5.2,
Borrower warrants and represents that the security interest granted herein
shall be a first priority security interest in the Collateral.


 


Except
as noted on the Perfection Certificate, Borrower is not a party to, nor is bound
by, any material license (other than over the counter software that is
commercially available to the public) or other material 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.  Borrower shall take such
steps as Bank reasonably requests to obtain the consent of, authorization by 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, whether now existing or
entered into in the future.


 


If
Borrower shall, at any time, become aware that it has acquired a material commercial
tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower
which provides a brief summary of the 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.


 


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4.2          Termination by Borrower.


 


Borrower may
terminate this Agreement by sending written notice to Bank and paying in full
all Obligations.  If this Agreement is
terminated, Bank’s lien and security interest in the Collateral shall continue
until Borrower fully satisfies the Obligations.


 


4.3          Authorization to File Financing Statements.  Borrower hereby authorizes
Bank to file UCC financing statements, without notice to Borrower, with all
appropriate jurisdictions in order 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 to Bank as follows: 


 


5.1          Due Organization and Authorization.  Borrower, and each Subsidiary, is duly
existing and in good standing in its state of formation and qualified and
licensed to do business in, and in good standing in, any state in which the
conduct of its business or its ownership of property requires that it be
qualified except where the failure to do so could not reasonably be expected to
cause a Material Adverse Change.  In
connection with this Agreement, Borrower delivered to Bank a perfection certificate
signed by Borrower (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; and (b) Borrower is an
organization of the type, and is organized in the jurisdiction, set forth in
the Perfection Certificate; and (c) the Perfection Certificate accurately
sets forth Borrower’s organizational identification number or accurately states
that Borrower has none; and (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, and (e) all
other information set forth on the Perfection Certificate pertaining to Borrower
is accurate and complete.  If Borrower
does not now have an organizational identification number, but later obtains
one, Borrower shall forthwith notify Bank of such 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 shall they constitute
an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under
any agreement to which or by which it is bound in which the default could
reasonably be expected to cause a Material Adverse Change.


 


5.2          Collateral.  Borrower has good title to the Collateral,
free of Liens except Permitted Liens. 
Borrower has no deposit account, other than the deposit accounts with Bank
and deposit accounts described in the Perfection Certificate. The Accounts are
bona fide, existing obligations, and the service or property has been performed
or delivered to the account debtor or its agent for immediate shipment to and
unconditional acceptance by the account debtor. The Collateral is not in the
possession of any third party bailee (such as a warehouse).  Except as hereafter disclosed to Bank in
writing by Borrower, 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 acknowledge in writing that the bailee is holding
such Collateral for the benefit of Bank. All Inventory is in all material
respects of good and marketable quality, free from material defects.


 


5.3          Litigation.  Except as shown in the Perfection
Certificate, there are no actions or proceedings pending or, to the knowledge
of Borrower’s Responsible Officers or legal counsel, threatened by or against
Borrower or any Subsidiary in which an adverse decision would reasonably be
expected to cause a Material Adverse Change.


 


5.4          No Material Deterioration in Financial Statements.  All consolidated financial
statements for Borrower and any Subsidiary delivered to Bank fairly present in
all material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations as of and for the periods set forth therein.  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.


 


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5.5          Solvency.  The fair salable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of 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.


 


5.6          Regulatory Compliance.  Borrower is not an “investment company” or a
company “controlled” by an “investment company” under the Investment Company
Act of 1940.  Borrower is not engaged as
one of its important activities in extending credit for margin stock (under
Regulations X, 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
cause a Material Adverse Change.  To
Borrower’s knowledge, none of Borrower’s or any Subsidiary’s properties or
assets has been used by Borrower or any Subsidiary or by previous Persons, in
disposing, producing, storing, treating, or transporting any hazardous
substance other than legally, except where failure to do so would not
reasonably be expected to cause a Material Adverse Change. Borrower and each
Subsidiary has timely filed all required material tax returns and paid, or made
adequate provision to pay, all material taxes, except those being contested in
good faith with adequate reserves under GAAP. 
Borrower and each Subsidiary has 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 except where the failure to obtain or make such consents, declarations,
notices or filings would not reasonably be expected to cause a Material Adverse
Change.


 


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


 


5.8          Full Disclosure.  No written representation, warranty or other
statement of Borrower in any certificate or written statement given to Bank
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.  Borrower shall maintain its, and all
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, noncompliance with which
could have a material adverse effect on Borrower’s business or operations or
would reasonably be expected to cause a Material Adverse Change.


 


6.2          Financial Statements, Reports, Certificates.


 


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


 


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


 


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


 


6.3          Inventory; Returns.  Borrower shall keep all Inventory in good and
marketable condition, free from material defects. Borrower must promptly notify
Bank of all returns, recoveries, disputes and claims that involve more than
Fifty Thousand Dollars ($50,000.00).


 


6.4          Taxes.  Borrower shall make, and cause each
Subsidiary to make, timely payment of all material federal, state, and local
taxes or assessments (other than taxes and assessments which Borrower is
contesting in good faith, with adequate reserves maintained in accordance with
GAAP) and will deliver to Bank, on demand, appropriate certificates attesting
to such payments.


 


6.5          Insurance.  Borrower shall keep its business and the
Collateral insured for risks and in amounts, and as Bank may reasonably
request.  Insurance policies shall be in
a form, with companies, and in amounts that are satisfactory to Bank in its
reasonable discretion. All property policies shall have a lender’s loss payable
endorsement showing Bank as an additional loss payee and all liability policies
shall show Bank as an additional insured and all policies shall provide that
the insurer must give Bank at least twenty (20) days notice before canceling
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 option, be payable
to Bank on account of the Obligations. Notwithstanding the foregoing, 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 $200,000.00, in
the aggregate, toward the replacement or repair of destroyed or damaged
property; provided that (i) any such replaced or repaired property (a) shall
be of equal or like value as the replaced or repaired Collateral and (b) shall
be deemed Collateral in which Bank has been granted a first priority security
interest and (ii) after the occurrence and during the continuation 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 Section 6.5 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 Section 6.5, and
take any action under the policies Bank reasonably deems prudent.


 


6.6          Accounts. 


 


(a)           In order to permit Bank to
monitor Borrower’s financial performance and condition, Borrower shall maintain
Borrower’s primary depository, operating and securities accounts with Bank or
SVB Securities, and a majority of Borrower’s cash or securities in excess of
that amount used for Borrower’s operations shall be maintained at Bank or SVB
Securities. 


 


(b)           Borrower shall identify to
Bank, in writing, any bank or securities account opened by Borrower with any
institution other than Bank.  In
addition, for each such domestic account that Borrower at any time opens or
maintains, Borrower shall, at Bank’s request and option, pursuant to an
agreement in form and substance acceptable to Bank, cause the depository bank
or securities intermediary to agree that such account is the collateral of
Bank, and enter into a “control agreement” pursuant to the terms hereunder.
Notwithstanding the foregoing, provided that no Event of Default has occurred
or is continuing, Borrower may maintain up to a maximum of $100,000.00, in the
aggregate at any time, at institutions other than Bank without entering into a
control agreement. 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.


 


6.7          Financial Covenants.


 


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


 


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


 


(b)           Guarantor Liquidity.  Beginning with the quarter
ending September 30, 2005, the Guarantor shall maintain, at all times to
be tested as of the last day of each quarter, Unencumbered Capital, in an
amount equal to or greater than three (3) times the aggregate outstanding
Obligations; provided, however, that if, at any time, Unencumbered Capital is
less than three (3) times the aggregate outstanding Obligations, Guarantor
shall, as soon as possible but in no event later than thirty (30) days
thereafter, either (i) deposit and maintain with Bank, at all times
thereafter, cash in such amounts as Bank determines will secure the full amount
of the outstanding Obligations, or (ii) provide Bank with an irrevocable
letter of credit, on terms and conditions reasonably acceptable to Bank in its
sole discretion, from a financial institution reasonably acceptable to Bank in
its sole discretion, and in such amount as Bank determines will secure the full
amount of the outstanding Obligations.   


 


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


 


7              NEGATIVE COVENANTS


 


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


 


7.1          Dispositions.  Convey, sell, lease, transfer, assign or
otherwise dispose of (collectively a “Transfer”), or permit any of its
Subsidiaries to Transfer, all or any part of its business or property, including
the Intellectual Property, except for Transfers of (a) Inventory in the
ordinary course of business; (b) non-exclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; or (c) worn-out or obsolete Equipment.  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, Ownership, Management or Business Locations.  Engage in or permit any of
its Subsidiaries to engage in any business other than the businesses currently
engaged in by Borrower or reasonably related thereto, or have a material change
in its ownership such that greater than fifty percent (50%) of Borrower’s
voting stock as of the Closing Date is transferred (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 investment), or management.  Borrower shall not, without prior written
notice to Bank: (a) relocate its chief executive office, or (b) change
its jurisdiction of organization, or (c) change its organizational
structure or type, or (d) change its legal name, or (e) change any
organizational number (if any) assigned by its jurisdiction of organization.


 


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, except where (a) such
transactions do not in the aggregate exceed $500,000.00 (including the
assumption of any indebtedness), (b) no Event of Default has occurred and
is continuing or would exist after giving effect to the transactions, and (c) Borrower
is the surviving legal entity. 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, including the Intellectual 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.  The Collateral may also be subject to
Permitted Liens.


 


7.6          Distributions; Investments.  (a) Directly or indirectly acquire or
own any Person, or make any Investment in any Person, 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, except for


 


8





















 


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


 


7.7          Transactions with Affiliates.  Directly or indirectly enter into or permit
to exist any material transaction with any Affiliate of Borrower, except for
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.


 


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


 


7.9          Compliance.  (a) 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, or use the proceeds of any Credit Extension for
that purpose; (b) fail to meet the minimum funding requirements of ERISA, or
permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to
occur; or (c) fail to comply in any material respect with the Federal Fair
Labor Standards Act or violate any other law or regulation, if the violation
would reasonably be expected to cause a Material Adverse Change, or permit any
of its Subsidiaries to do so.


 


8              EVENTS OF DEFAULT


 


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


 


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


 


8.2          Covenant Default.  (a)  Borrower fails or neglects to
perform any obligation in Section 6.2, 6.6, 6.7, or 6.8 or violates any
covenant in Article 7;  or (b) 
Borrower fails or neglects to perform, keep, or observe any other material
term, provision, condition, covenant or agreement contained in this Agreement,
any of the Loan Documents, or in any present or future agreement between
Borrower and Bank and as to any default under such other material 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 have cured such default
shall not be deemed an Event of Default (provided that 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 that are required to be
satisfied, completed or tested by a date certain.


 


8.3          Material Adverse Change.  A Material Adverse Change occurs.


 


8.4          Attachment.  (a) Any material portion of Borrower’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 upon Borrower seeking to attach, by trustee or
similar process, any funds of Borrower on deposit with Bank, or any entity
under control of Bank (including a subsidiary); (c) Borrower is enjoined,
restrained, or prevented by court order from conducting a material part of its
business; (d) a judgment or other claim becomes a Lien on a material
portion 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


 


9





















 


begun
against Borrower and not dismissed or stayed within thirty (30) days (but no
Credit Extensions shall be made before any Insolvency Proceeding is dismissed).


 


8.6          Other Agreements.  If there is a default in any agreement to
which Borrower 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 ($100,000.00) or that would result in a Material Adverse Change. 


 


8.7          Judgments.  If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000.00) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of ten (10) days (provided that no
Credit Extensions will be made prior to the satisfaction or stay of such
judgment).


 


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


 


8.9          Subordinated Debt. A default or
breach occurs under any agreement between Borrower and any creditor of Borrower
that signed a subordination agreement with Bank, or any creditor that has
signed a subordination agreement with Bank breaches any terms of the
subordination agreement.


 


8.10        Guaranty.  (a) Any guaranty of any Obligations
terminates or ceases for any reason to be in full force; or (b) any
Guarantor does not perform any obligation or covenant under any guaranty of the
Obligations; or (c) any material misrepresentation or material misstatement
exists now or later in any warranty or representation in any guaranty of the
Obligations or in any certificate delivered to Bank in connection with the
guaranty; or (d) any circumstance described in Articles 7 or 8 occurs to
any Guarantor, or (e) the liquidation, winding up, termination of
existence, or insolvency of any Guarantor.


 


9              BANK’S RIGHTS AND REMEDIES


 


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


 


(a)           Declare all 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) deposit
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)           Settle or adjust disputes
and claims directly with account debtors for amounts, on terms and in any order
that Bank considers advisable and notify any Person owing Borrower money of Bank’s
security interest in such funds and verify and/or collect the amounts owed by
such account debtors.  After the
occurrence of an Event of Default, any amounts received by Borrower shall be
held in trust by Borrower for Bank, and, if requested by Bank, Borrower shall
immediately deliver such receipts to Bank in the form received from the account
debtor, with proper endorsements for deposit; 



 


(e)           Make any payments and do
any acts it considers necessary or reasonable to protect 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


 


10





















 


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;


 


(f)            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;


 


(g)           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; 


 


(h)           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; and


 


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


 


9.2          Power of Attorney.  Borrower hereby irrevocably appoints Bank as
its lawful attorney-in-fact, to be effective 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; and (e) 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 any security interest 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          Bank Expenses.  Any amounts paid by Bank as provided herein shall
constitute Bank Expenses and are immediately due and payable, and shall bear
interest at the then applicable rate hereunder and be secured by the
Collateral.  No payments by Bank shall be
deemed an agreement to make similar payments in the future or Bank’s waiver of
any Event of Default.


 


9.4          Bank’s Liability for Collateral.  So long as Bank complies with reasonable
banking practices regarding the safekeeping of Collateral and Section 9-207
of the Code, 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.


 


9.5          Remedies Cumulative.  Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements 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 is not a waiver, election, or acquiescence. No waiver
hereunder shall be effective unless signed by Bank and then is only effective
for the specific instance and purpose for which it was given.


 


9.6          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 or
demands by any party to this Agreement or any related agreement must be in
writing and be personally delivered or sent by an overnight delivery service,
by certified mail, postage prepaid, return receipt


 


11





















 


requested, or by facsimile at the addresses
listed below.  Either Bank or Borrower
may change its notice address by giving the other party written notice.


 


	
   

  	
  If to
  Borrower:

  	
  CLEARSTORY
  SYSTEMS, INC.

  
	
   

  	
   

  	
  One
  Research Drive, Suite 200B

  
	
   

  	
   

  	
  Westborough,
  Massachusetts 01581

  
	
   

  	
   

  	
  Attn:
  Mr. Stephen Read

  
	
   

  	
   

  	
  FAX:
  (508) 366-0431

  
	
   

  	
   

  	
   

  
	
   

  	
  If to
  Bank:

  	
  Silicon
  Valley Bank

  
	
   

  	
   

  	
  One
  Newton Executive Park, Suite 200

  
	
   

  	
   

  	
  2221
  Washington Street

  
	
   

  	
   

  	
  Newton,
  Massachusetts 02462

  
	
   

  	
   

  	
  Attn:
  Ms. Irina Case

  
	
   

  	
   

  	
  Fax:
  (617) 969-5973

  
	
   

  	
   

  	
   

  
	
   

  	
  with
  a copy to:

  	
  Riemer &
  Braunstein LLP

  
	
   

  	
   

  	
  Three
  Center Plaza

  
	
   

  	
   

  	
  Boston,
  Massachusetts 02108

  
	
   

  	
   

  	
  Attn:
  David A. Ephraim, Esquire

  
	
   

  	
   

  	
  FAX:
  (617) 880-3456

  



 


11           CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER


 


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.  NOTWITHSTANDING THE FOREGOING, BANK SHALL 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.


 


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, assign, negotiate, or grant participation in all or any part
of, or any interest in, Bank’s obligations, rights and benefits under this
Agreement, the Loan Documents or any related agreement.


 


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


 


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


 


12





















 


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.


 


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


 


12.5        Severability of Provision.  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 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.


 


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 in connection with their business with
Borrower; (b) to prospective transferees or purchasers of any interest in
the Credit Extensions (provided, however, Bank shall use commercially
reasonable efforts in obtaining 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) as 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.


 


13           DEFINITIONS


 


13.1        Definitions.  In this Agreement:


 


“Accounts” are all existing and later
arising accounts, contract rights, and other obligations owed Borrower in connection
with its sale or lease of goods (including licensing software and other
technology) or provision of services, all credit insurance, guaranties, other
security and all merchandise returned or reclaimed by Borrower and Borrower’s
Books relating to any of the foregoing, as such definition may be amended from
time to time according to the Code.


 


“Advance” or “Advances” is a loan advance (or advances) under the Revolving
Line.


 


“Affiliate” 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.


 


13





















 


 “Bank
Expenses” are all audit fees and expenses and reasonable costs or
expenses (including reasonable attorneys’ fees and expenses) for preparing,
negotiating, defending and enforcing the Loan Documents (including appeals or
Insolvency Proceedings).


 


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


 


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


 


“Callable Capital” is the remaining amount
of capital, excluding capital attributable to Defaulting Partners, which
Guarantor would be able to obtain from the General Partner and the Limited
Partners, without condition, upon proper issuance of capital call notices in
accordance with the Partnership Agreement.


 


“Cash Management Services” is defined in Section 2.1.4.


 


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


 


“Closing Date” is the date of this
Agreement.


 


“Code” is the Uniform Commercial Code as
adopted in Massachusetts, as amended and as may be amended and in effect from
time to time.


 


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


 


 “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.


 


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


 


“Credit Extension” is each Advance, Letter
of Credit, FX Forward Contract, or any other extension of credit by Bank for
Borrower’s benefit.


 


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


 


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


 


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


 


14





















 


“Event of Default” is defined in Article 8.


 


“FX Forward Contract” is defined in Section 2.1.3.


 


“FX Reserve” is defined in Section 2.1.3.


 


“GAAP” is generally accepted accounting
principles in the United States.


 


“General Partner” means the general partner
of the Guarantor.


 


“Guarantor” is any present or future
guarantor of the Obligations, including, without limitation, SCP Private Equity
Partners II, L.P.


 


“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.


 


“Intellectual Property” is any Copyrights, Copyright rights, Copyright
applications, Copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, now owned or
later acquired; any Patents, Trademarks, service marks and applications
therefor; any trade secret rights, including any rights to unpatented
inventions, now owned or hereafter acquired.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Limited Partners” means the limited
partners set forth in the Partnership Agreement, as the same may be amended
from time to time.


 


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


 


“Mask Works” are all mask works or similar
rights available for the protection of semiconductor chips, now owned or later
acquired.


 


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


 


15





















 


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


 


“Maturity Date” is August 23, 2007.


 


“Obligations” are all liabilities,
obligations, covenants, agreements, debts, principal, interest, Bank Expenses
and other amounts Borrower owes Bank now or later, including 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.


 


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


 


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


 


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


 


“Perfection Certificate” is defined in Section 5.1.


 


“Permitted Indebtedness” is:


 


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


 


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


 


(c)           Subordinated Debt;


 


(d)           Indebtedness secured by Permitted Liens;


 


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


 


“Permitted Investments” are:


 


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


 


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


 


16





















 


“Permitted Liens” are:


 


(a)           Liens existing on the Closing Date and shown on the Perfection
Certificate or arising under this Agreement or 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 security interests;


 


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


 


(d)           Liens of materialmen, mechanics, warehousemen, carriers or other
similar Liens accruing after the date hereof and in the ordinary course of
Borrower’s business or by operation of law or regulation and securing
obligations not yet due;


 


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


 


(f)            Liens incurred in the extension, renewal or refinancing of the
indebtedness secured by Liens described in (a) through (e), 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; and


 


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


 


“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.


 


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


 


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


 


“Responsible Officer” is each of the Chief
Executive Officer, President, Chief Financial Officer and Controller of
Borrower.


 


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


 


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


 


“Senior Lender” is Benefactor Funding Corp.


 


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


 


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


 


17





















 


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


 


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


 


“Unused Revolving Line Facility Fee” is
defined in Section 2.3(b).


 


[The remainder of this page is intentionally left
blank]


 


18





















 


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
date first above written.


 


	
  BORROWER:

  
	
   

  
	
  CLEARSTORY SYSTEMS, INC.

  
	
   

  
	
  By:

  	
  /S/ Stephen A. Read

  	
   

  
	
  Name:

  	
  Stephen A. Read

  	
   

  
	
  Title: 

  	
  VP, CFO

  	
   

  
	
   

  
	
  BANK:

  
	
   

  
	
  SILICON VALLEY BANK

  
	
   

  
	
  By:

  	
  /S/ Irina Case

  	
   

  
	
  Name:

  	
    Irina Case

  	
   

  
	
  Title: 

  	
  SVP

  	
   

  
										



 


S-1





















 


EXHIBIT A


 


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


 


All goods,
equipment, inventory, contract rights or rights to payment of money, license
agreements, franchise agreements, general intangibles (including payment intangibles),
accounts (including health-care receivables), documents, instruments (including
any promissory notes), chattel paper (whether tangible or electronic), cash,
deposit accounts, fixtures, letters of credit rights (whether or not the letter
of credit is evidenced by a writing), commercial tort claims, 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.


 


The Collateral
does not include: any copyright rights, copyright applications, copyright
registrations mask works, and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; any trade
secret rights, including any rights to unpatented inventions, now owned or
hereafter acquired.  Notwithstanding the
foregoing, the Collateral shall include all accounts, license and royalty fees
and other revenues, proceeds, or income arising out of or relating to any of
the foregoing.


 


A-2





















 


EXHIBIT B


Loan
Payment/Advance Request Form


DEADLINE
FOR SAME DAY PROCESSING IS 3:00 E.S.T.


 


	
  Fax To: (617) 969-5965

  	
  Date:

  	
   

  	
   

  



 


	
  LOAN PAYMENT:

  	
   

  
	
  CLEARSTORY SYSTEMS, INC.

  
	
   

  	
   

  
	
  From Account #

  	
   

  	
   

  	
  To Account #

  	
   

  	
   

  
	
   

  	
  (Deposit Account #)

  	
   

  	
  (Loan Account #)

  
	
   

  	
   

  
	
  Principal $

  	
   

  	
   

  	
  and/or Interest $

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
  Phone Number:

  	
   

  	
   

  
														



 


LOAN ADVANCE:


 


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


 


	
  From Account #

  	
   

  	
   

  	
  To Account #

  	
   

  	
   

  
	
   

  	
  (Loan Account #)

  	
   

  	
   

  	
  (Deposit Account
  #)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Amount of Advance $

  	
   

  	
   

  	
   

  	
   

  	
   

  
								



 


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


 


	
  Authorized Signature:

  	
   

  	
   

  	
  Phone Number:

  	
   

  	
   

  



 


	
  OUTGOING WIRE REQUEST

  	
   

  
	
  Complete
  only if all or a portion of funds from the loan
  advance above are to be wired.

  
	
  Deadline for same day
  processing is 3:00 pm, E.S.T.

  
	
   

  	
   

  
	
  Beneficiary Name:

  	
   

  	
   

  	
  Amount of Wire:

  	
   

  	
   

  
	
   

  	
   

  
	
  Beneficiary Bank:

  	
   

  	
   

  	
  Account Number:

  	
   

  	
   

  
	
   

  	
   

  
	
  City and State:

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  Beneficiary Bank Transit (ABA) #:

  	
   

  	
   

  	
  Beneficiary Bank Code (Swift, Sort, Chip, etc.):

  	
   

  	
   

  
	
   

  	
   

  	
  (For International Wire Only)

  
	
   

  	
   

  
	
  Intermediary Bank:

  	
   

  	
   

  	
  Transit (ABA) #:

  	
   

  	
   

  
	
   

  	
   

  
	
  For Further Credit to:

  	
   

  	
   

  
	
   

  	
   

  
	
  Special Instruction:

  	
   

  	
   

  
	
   

  	
   

  
																				



 


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


 


	
  Authorized Signature:

  	
   

  	
   

  	
  2nd Signature (If Required):

  	
   

  	
   

  
	
  Print Name/Title:

  	
   

  	
   

  	
  Print Name/Title:

  	
   

  	
   

  
	
  Telephone #

  	
   

  	
   

  	
  Telephone #

  	
   

  	
   

  
										



 


B-1





















 


EXHIBIT C


COMPLIANCE
CERTIFICATE


 


TO:         SILICON VALLEY BANK


FROM:   CLEARSTORY SYSTEMS, INC.


 


The
undersigned authorized officer of CLEARSTORY SYSTEMS, INC. certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower
and Bank (the “Agreement”), (i) Borrower is in complete compliance for the
period ending                         
with all required covenants except as noted below and (ii) there are no
Events of Default, and all representations and warranties in the Agreement are
true and correct in all material respects on this date; provided however, that
those representations and warranties expressly referring to another date shall
be true and correct in all material respects only as of such date.  Attached are the required documents
supporting the certification.  The
Officer certifies that these are prepared in accordance with Generally Accepted
Accounting Principles (GAAP) consistently applied from one period to the next
except as explained in an accompanying letter or footnotes.  The Officer 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.


 


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


 


	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Interim
  financial statements for Borrower

  with A/R Agings (by invoice date)

  	
   

  	
  Monthly within 30 days

  	
   

  	
  YesNo

  
	
  Annual
  financial statements (CPA Audited) for
 Borrower

  	
   

  	
  FYE within 120 days

  	
   

  	
  YesNo

  
	
  Annual Balance Sheet and Income Statement

  	
   

  	
  Within 30 days of Board approval

  	
   

  	
  YesNo

  
	
  10 Q, 10 K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  YesNo

  
	
  Compliance Certificate

  	
   

  	
  Quarterly within 30 days

  	
   

  	
  YesNo

  



 


	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain at
  all times (tested quarterly):

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum net
  revenue (Borrower)

  	
   

  	
  *

  	
   

  	
  :1.0

  	
   

  	
  YesNo

  
	
  Minimum Callable
  Capital (Guarantor)

  	
   

  	
  3x
  outstanding Obligations

  	
   

  	
  :1.0

  	
   

  	
  YesNo

  



 










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

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


	
   

  	
   

  	
  BANK USE ONLY

  
	
  Comments Regarding Exceptions: See Attached.

  	
   

  	
  Received by:

  	
   

  	
   

  
	
  Sincerely,

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  SIGNATURE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  TITLE

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
   

  
	
  DATE

  	
   

  	
  Compliance Status:

  	
  Yes

  	
  No

  
													



 


C-1