exv10w18



 





Exhibit 10.18




LOAN AND SECURITY AGREEMENT




     THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of the Effective Date among
SILICON VALLEY BANK, a California corporation (“Bank”), GOLD HILL VENTURE LENDING 03, LP (“Gold
Hill”) (Bank and Gold Hill each individually a “Lender” and collectively the “Lenders”), Bank in
its capacity as agent (the “Agent”) and DEMANDTEC, INC., a Delaware corporation (“Borrower”),
provides the terms on which Lenders shall lend to Borrower and Borrower shall repay Lenders. 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 Lenders the outstanding
principal amount of all Credit Extensions and accrued and unpaid interest and any fees thereon as
and when due in accordance with this Agreement.



     2.1.1 Growth Capital Loan Facility.



               (a) Availability. Subject to the terms and conditions of this Agreement, Lenders
agree, severally and not jointly, to lend to Borrower from time to time prior to the Growth Capital
Commitment Termination Date, advances (each a “Growth Capital Advance” and collectively the “Growth
Capital Advances”) in an aggregate amount not to exceed the Growth Capital Loan Commitment
according to each Lender’s pro rata share of the Growth Capital Loan Commitment (based upon the
respective Growth Capital Commitment Percentage of each Lender). When repaid, the Growth Capital
Advances may not be re-borrowed. Lenders’ obligation to lend hereunder shall terminate on the
earlier of (i) the occurrence and continuance of an Event of Default, or (ii) the Growth Capital
Commitment Termination Date. For purposes of this Section, the minimum amount of each Growth
Capital Advance is One Million Dollars ($1,000,000).



               (b) Repayment. For each Growth Capital Advance, Borrower shall make monthly payments
of interest only commencing on the first day of the month following the month in which the Growth
Capital Funding Date occurs with respect to such Growth Capital Advance and continuing thereafter
on the first day of each successive calendar month (each a “Growth Capital Interest Only Payment
Date”) during the Growth Capital Interest Only Period. Commencing on the Growth Capital
Amortization Date, Borrower shall make thirty-six (36) equal monthly payments of principal and
interest which would fully amortize the outstanding Growth Capital Advances as of the Growth
Capital Amortization Date over the Growth Capital Repayment Period (individually, the “Growth
Capital Scheduled Payment”, and collectively, “Growth Capital Scheduled Payments”) and on the first
day of each successive month and continuing thereafter during the Growth Capital Repayment Period
on the first day of each successive calendar month (each a “Growth Capital Scheduled Payment
Date”). All unpaid principal and accrued interest is due and payable in full on the Growth Capital
Maturity Date with respect to such Growth Capital Advance. A Growth Capital Advance may only be
prepaid in accordance with Sections 2.1.1(d) and 2.1.1(e). Each Growth Capital Interest
Only Payment Date and each Growth Capital Scheduled Payment Date are sometimes referred to as a
“Growth Capital Payment Date.”



               (c) Final Payment. On the Growth Capital Maturity Date with respect to each Growth
Capital Advance, Borrower shall pay, in addition to the unpaid principal and accrued interest and
all other amounts due on such date with respect to such Growth Capital Advance, an amount equal to
the Growth Capital Final Payment.



               (d) Mandatory Prepayment Upon an Acceleration. If the Growth Capital Advances are
accelerated following the occurrence of an Event of Default or otherwise, Borrower shall
immediately pay to Lenders an amount equal to the sum of: (i) all outstanding principal plus
accrued interest, (ii) the Growth Capital Final Payment, plus (iii) all other sums, if any, that
shall have become due and payable, including interest at the Default Rate with respect to any past
due amounts.



 









 





               (e) Permitted Prepayment of Loans. Borrower shall have the option to prepay all or
any portion (but in any event at least $1,000,000), of each Growth Capital Advance advanced by
Lenders under this Agreement, provided Borrower (i) provides written notice to Agent of its
election to prepay such Growth Capital Advance at least ten (10) days prior to such prepayment, and
(ii) pays, on the date of such prepayment (A) the outstanding principal being prepaid plus all
accrued interest then due on such Growth Capital Advance, (B) a ratable portion of the Growth
Capital Final Payment for such Growth Capital Advance (based upon the amount being pre-paid), plus
(C) all other sums, if any, that shall have become due and payable, including interest at the
Default Rate with respect to any past due amounts.



     2.2      Payment of Interest on the Credit Extensions.



               (a) Interest Rate.



                    (i) Growth Capital Advance. Subject to Section 2.2(b), the principal amount
outstanding under each Growth Capital Advance shall accrue interest, which interest shall be
payable monthly, at the per annum rate equal to the greater of (i) nine and one-half percent
(9.50%) and (ii) the sum of (a) one hundred twenty five (125) basis points or 1.25%, plus the Prime
Rate as determined by Agent on the applicable Growth Capital Funding Date.



               (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 2.2(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 Agent or Lenders.



               (c) Adjustment to Interest Rate. Interest on each Growth Capital Advance shall be
fixed on the Growth Capital Funding Date with respect to such Growth Capital Advance. Prior to the
date of such Growth Capital Advance, 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. Agent may debit any of Borrower’s deposit accounts , including
the Designated Deposit Account, for: (i) the payments of principal and interest when due and the
Growth Capital Final Payment when due and owing by Borrower to Lenders under this Agreement and the
Loan Documents, or (ii) any other amounts due and owing when specifically approved in advance by
Borrower. These debits shall not constitute a set-off.



               (f) Payments. Unless otherwise provided, interest is payable monthly on the first
(1st) calendar day of each month. Payments of principal and/or interest received after
12:00 p.m. Pacific 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.



     2.3      Fees. Borrower shall pay to Agent:



               (a) Loan Fee. The parties hereto acknowledge that Agent has received prior to the
date hereof a fully earned, non-refundable loan fee of $25,000 (to be shared between Bank and the
Gold Hill pursuant to their respective Growth Capital Commitment Percentages).



               (b) Agent Expenses; Lenders Expenses. All Agent Expenses and Lenders Expenses
(including reasonable attorneys’ fees and expenses for the documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due. Agent agrees to provide
Borrower with prompt notice if Agent Expenses and Lenders Expenses through and as of the Effective
Date are anticipated to exceed $10,000.



     3      CONDITIONS OF LOANS



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



               (a) Borrower shall have delivered duly executed original signatures to the Loan Documents to
which it is a party;



               (b) Borrower shall have delivered a duly executed original signature to each of the Warrant to
be issued to Bank and the Warrant to be issued to Gold Hill;



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



               (d) Borrower shall have delivered duly executed original signatures to the completed Borrowing
Resolutions for Borrower;



               (e) Agent shall have received certified copies, dated as of a recent date, of financing
statement searches, as Agent 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 the Perfection Certificate executed by Borrower;



               (g) Borrower shall have delivered the IP Agreement executed by Borrower;



               (h) Borrower shall have delivered the VC/OC Management Letter Agreement in favor of Gold Hill;



               (i) Borrower shall have delivered a copy of its Amended and Restated Investors’ Rights
Agreement and any amendments thereto;



               (j) Borrower shall have delivered evidence satisfactory to Agent 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 Agent
or Lenders; and



               (k) Borrower shall have paid the fees, Agent Expenses and Lenders Expenses then due as
specified in Section 2.3 hereof.



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



               (a) except as otherwise provided in Section 3.4(a), timely receipt of an executed
Payment/Advance Form;



               (b) the representations and warranties in Section 5 shall be true in all material
respects on the date of the Payment/Advance Form and on the Growth Capital 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



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               (c) in Lenders’ 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 Agent prior to the Effective Date of this
Agreement.



     3.3 Covenant to Deliver.



     Borrower agrees to deliver to Agent each item required to be delivered to Agent 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 Agent of any such item shall not constitute a waiver by
Agent or Lenders of Borrower’s obligation to deliver such item, and any such extension in the
absence of a required item shall be in Lenders’ sole discretion.



     3.4      Procedures for Borrowing.



               (a) Growth Capital Advances. To obtain a Growth Capital Advance, Borrower must notify
Agent by facsimile or telephone by 12:00 p.m. Pacific Time two (2) Business Days prior to the date
the Growth Capital Advance is to be made. If such notification is by telephone, Borrower must
promptly confirm the notification by delivering to Agent a completed Payment/Advance Form in the
form attached as Exhibit B. On the Growth Capital Funding Date, each Lender shall credit
and/or transfer (as applicable) to Borrower’s deposit account, an amount equal to its Growth
Capital Commitment Percentage multiplied by the amount of the Growth Capital Advance. Each Lender
may make Growth Capital Advances under this Agreement based on instructions from a Responsible
Officer or his or her designee or without instructions if the Growth Capital Advances are necessary
to meet Obligations which have become due. Each Lender may rely on any telephone notice given by a
person whom such Lender believes is a Responsible Officer or designee. Borrower shall indemnify
each Lender for any loss Lender suffers due to such reliance.



     4 CREATION OF SECURITY INTEREST



     4.1 Grant of Security Interest. Borrower hereby grants Agent, for the ratable benefit of
Lenders, and to each Lender, to secure the payment and performance in full of all of the
Obligations, a continuing security interest in, and pledges to Agent, 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 are permitted to have superior priority to Agent’s Lien under
this Agreement). If Borrower shall acquire a commercial tort claim, Borrower shall promptly notify
Agent in a writing signed by Borrower of the general details thereof and grant to Agent and Lenders
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 Agent.



     If this Agreement is terminated, Agent’s and Lenders’ 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 Lenders’ obligation to make Credit
Extensions has terminated, Agent shall, at Borrower’s sole cost and expense, release Agent’s and
Lenders’ Liens in the Collateral.



     4.2 Authorization to File Financing Statements. Borrower hereby authorizes Agent to file
financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or
protect Agent’s and Lenders’ 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
Agent and Lenders under the Code.



     5 REPRESENTATIONS AND WARRANTIES



               Borrower represents and warrants to Agent and Lenders as follows:



     5.1      Due Organization and Authorization. Borrower and each of its Subsidiaries are duly
existing and in good standing 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 has delivered to Agent a



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completed certificate signed
by Borrower, entitled “Perfection Certificate.” Borrower represents and warrants to Agent and
Lenders that as of the Effective Date, each Growth Capital Funding Date and as of the delivery date
of any Compliance Certificate, except as disclosed to Agent in any Compliance Certificate: (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 not now a Registered Organization but later becomes one, Borrower shall promptly notify
Agent of such occurrence and provide Agent 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. As of the Effective Date, each Growth Capital
Funding Date and as of the delivery date of any Compliance Certificate, except as disclosed to
Agent in any Compliance Certificate, 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 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 Agent
in connection herewith, or of which Borrower has given Agent notice and taken such actions as are
necessary to give Agent a perfected security interest therein.



     The Collateral is not in the possession of any third party bailee (such as a warehouse) except
as otherwise provided in the Perfection Certificate or as disclosed to Agent in any Compliance
Certificate. None of the components of the Collateral shall be maintained at locations other than
as provided in the Perfection Certificate or as Borrower has given Agent notice pursuant to
Section 7.2. 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 Agent and such bailee must execute and deliver a bailee agreement in form and
substance satisfactory to Agent in its sole discretion.



     Borrower is the sole owner of its intellectual property material to the operation of its
business, 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 that the foregoing would not reasonably be expected to have a material
adverse effect on Borrower’s business. Except as noted on the Perfection Certificate or as
disclosed to Agent in any Compliance 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 Agent within
thirty (30) 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 Agent reasonably requests to obtain the consent of, or waiver by, any person whose consent
or waiver is necessary for all such licenses or contract rights material to the Borrower’s business
to be deemed “Collateral” and for Agent and Lenders to have a security interest in it that might
otherwise be restricted or prohibited 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 Agent if Agent determines that is necessary in its good faith judgment), whether
now existing or entered into in the future.



     5.3 Intentionally omitted.



     5.4 Litigation. As of the Effective Date, each Growth Capital Funding Date and as of the
delivery date of any Compliance Certificate, except as disclosed to Agent in any Compliance
Certificate, there are no actions



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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 One Hundred Thousand Dollars ($100,000).




     5.5 No Material Deviation in Financial Statements. All consolidated financial statements for
Borrower and any of its Subsidiaries delivered to Agent 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 Agent.



     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 has 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 Agent 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.” As
of the Effective Date, each Growth Capital Funding Date, and as of the delivery date of any
Compliance Certificate, except as disclosed to Agent in any Compliance Certificate, 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, except as disclosed in the
Perfection Certificate. 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 Agent or Lenders, as of the date such
representations, warranties, or other statements were made, taken together with all such written
certificates and written statements given to Agent or
Lenders, 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 Agent and Lenders 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



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     Borrower shall do all of the following:



     6.1 Government Compliance. Except where failure to do so would reasonably be expected to
have a material adverse effect on Borrower’s business or operations, 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 Borrower or its Subsidiaries respectively,
conducts business. 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.



     6.2      Financial Statements, Reports, Certificates.



               (a) Deliver to Agent: (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 Agent; (ii) as soon as available, but no later than one hundred eighty (180)
days after the last day of Borrower’s fiscal year, audited consolidated financial statements
prepared under GAAP, consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to Agent in its
reasonable discretion; (iii) annual financial projections approved by Borrower’s Board of Directors
consistent in form and detail with those provided to Borrower’s venture capital investors as soon
as available, but no later than thirty (30) days after Board approval; (iv) within five (5) days of
delivery, copies of all statements, reports and notices made available to Borrower’s security
holders or to any holders of Subordinated Debt; (v) in the event that Borrower becomes subject to
the reporting requirements under the Securities Exchange Act of 1934, as amended, within five (5)
days of 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 (in the case of
electronic links being provided to Agent, Borrower shall still be required to submitted Agent the
applicable compliance certificate in the form of Exhibit C); (vi) a prompt report of any
legal actions pending or threatened against Borrower or any of its Subsidiaries that could result
in damages or costs to Borrower or any of its Subsidiaries of One Hundred Thousand Dollars
($100,000) or more; and (vii) other financial information reasonably requested by Agent.



               (b) Within thirty (30) days after the last day of each month, deliver to Agent with the
monthly financial statements, a duly completed Compliance Certificate signed by a Responsible
Officer.



               (c) Borrower shall deliver to Agent any redemption requests or notices from the requisite
number of its preferred shareholders to redeem stock pursuant to Borrower’s Seventh Amended and
Restated Certificate of Incorporation, as it may be amended from time to time), as soon as
available, but no later than ten (10) days after Borrower has received such redemption request or
notice.



               (d) Allow Agent to audit or inspect Borrower’s Collateral at Borrower’s expense. Such audits
or inspections shall be conducted no more often than once every twelve (12) months unless a Default
or an Event of Default has occurred and is continuing.



     6.3 Inventory; Returns. Keep the material portion of its Inventory in good and marketable
condition, free from material defects. Returns and allowances between Borrower and its Account
Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower
must promptly notify Agent of all returns, recoveries, disputes and claims that involve more than
One Hundred Thousand Dollars ($100,000).



     6.4 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
Agent, 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.



     6.5 Insurance. Keep its business and the Collateral insured for risks and in amounts standard
for companies in Borrower’s industry and location and as Agent may reasonably request. Insurance
policies shall be in a form, with companies, and in amounts that are satisfactory to Lenders and
Agent. All property policies shall have a lender’s loss payable endorsement showing each Lender as
an additional lender loss payee and waive subrogation against Lenders, and all liability policies
shall show, or have endorsements showing, each Lender as an additional insured. All policies (or
the loss payable and additional insured endorsements) shall provide that the insurer must



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give
Lenders at least twenty (20) days notice before canceling, amending, or declining to renew its
policy (10 days in the case of cancellation for non-payment. At Agent’s request, Borrower shall
deliver certified copies of policies and evidence of all premium payments. Proceeds payable under
any policy shall, at Agent’s option, be payable to Agent on behalf of Lenders 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
$250,000, in the aggregate for any one casualty, 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
Agent and Lenders have 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 Agent, be payable to Agent on behalf of Lenders on account
of the Obligations. If Borrower fails to obtain insurance as required under this Section
6.5 or to pay any amount or furnish any required proof of payment to third persons and Agent,
Agent may make all or part of such payment or obtain such insurance policies required in this
Section 6.5, and take any action under the policies Agent deems prudent.




     6.6      Operating Accounts.



               (a) Maintain its primary depository and operating accounts and securities accounts with Agent
and Agent’s affiliates, which accounts shall represent at least 80% of the dollar value of
Borrower’s accounts at all financial institutions.



               (b) Provide Agent five (5) days prior written notice before establishing any Collateral
Account at or with any bank or financial institution other than Agent or its Affiliates. In
addition, for each Collateral Account that Borrower at any time maintains, Borrower shall cause the
applicable bank or financial institution (other than Agent) 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 Agent by Borrower as such.



     6.7 Protection and Registration of Intellectual Property Rights. Borrower shall: (a)
protect, defend and maintain the validity and enforceability of its intellectual property material
to the operation of its business; (b) promptly advise Agent 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 Agent’s written consent,
which shall not be unreasonably withheld. If Borrower decides to register any copyrights or mask
works in the United States Copyright Office, Borrower shall: (x) provide Agent 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 Agent may reasonably request to maintain the perfection and priority of Agent’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 Agent 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 Agent to maintain the
perfection and priority of its security interest in such copyrights or mask works. Borrower shall
provide written notice to Agent 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.



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



     6.9 Right to Invest. Grant to Lenders or their Affiliates a right (but not an obligation) to
purchase, within seven (7) days after the Effective Date, up to $64,500 of Borrower’s Series C
Preferred Stock on the same terms, conditions and pricing offered to its investors in Borrower’s
Series C financing round at the price of $2.58 per



8









 




share. Borrower shall provide Lenders with the
financing documentation for Borrower’s Series C financing round before the Effective Date. Grant to
Lenders or their Affiliates a right (but not an obligation) to purchase, within seven (7) days
after the Effective Date, up to $229,500 of Borrower’s Common Stock at the price of $1.35 per
share.




     6.10 Further Assurances. Borrower shall execute any further instruments and take further
action as Agent reasonably requests to perfect or continue Agent’s Lien (for the benefit of
Lenders) in the Collateral or to effect the purposes of this Agreement.



     7 NEGATIVE COVENANTS



     Borrower shall not do any of the following without the Agent’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 for the use of the property of Borrower or its Subsidiaries in the ordinary
course of business.



     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) without Lenders’ prior written consent (not to be unreasonably
withheld and based on their capacities as lenders to Borrower), 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 75% 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 Agent the venture capital investors prior to the closing of the transaction).
Borrower shall not, without at least thirty (30) days prior written notice to Agent: (1) add any
new offices or business locations, including warehouses (unless such new offices or business
locations contain less than Twenty Five Thousand Dollars ($25,000) 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.



     7.3 Mergers or Acquisitions. Without Lenders’ prior written consent (not to be unreasonably
withheld and based on their capacities as lenders to Borrower), 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 (i) such transaction is an acquisition by Borrower which would not result in a
decrease of more than 25% of Borrower’s Tangible Net Worth, and (ii) no Event of Default
has occurred and is continuing or would result from such transaction during the term of this
Agreement. Notwithstanding the foregoing, 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. Except for Permitted Liens: (i) 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, or permit any Collateral not to be subject to the first
priority security interest granted herein, or (ii) enter into any agreement, document, instrument
or other arrangement (except with or in favor of Agent or Lenders) with any Person which directly
or indirectly prohibits or has the effect of prohibiting Borrower from
assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any
of Borrower’s intellectual property, except as is otherwise permitted in Section 7.1
hereof.



     7.6 Maintenance of Collateral Accounts. Maintain any Collateral Account except pursuant to
the terms of Section 6.6 hereof.



     7.7 Investments; Distributions. (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 provided that (i)
Borrower may convert any of its convertible



9









 




securities into other securities pursuant to the terms
of such convertible securities or otherwise in exchange thereof, (ii) Borrower may pay dividends
solely in common stock; and (iii) Borrower may repurchase the stock of former employees or
consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist
at the time of such repurchase and would not exist after giving effect to such repurchase, provided
such repurchase does not exceed in the aggregate of $250,000 per fiscal year.




     7.8 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.



     7.9 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 Lenders.



     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 (a) make any payment of principal or interest on any
Credit Extension on its due date, or (b) 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);



     8.2      Covenant Default.



               (a) Borrower fails or neglects to perform any obligation in Sections 6.2 or 6.7 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 Senior Management. Either of Dan Fishback or Mark Culhane shall cease to hold a position
with Borrower as a Senior Officer and, within ninety (90) days thereafter, Borrower has not
replaced such person’s services with services of a person or persons reasonably satisfactory to
Lenders.



10









 





     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 Bank 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 Bank; (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) 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 thirty (30) 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 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 Two Hundred
Fifty Thousand Dollars ($250,000) or that could have a material adverse effect on Borrower’s
business or there is a defined “Event of Default” that exists after any period of grace under the
SVB Working Capital Facility;



     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 Fifty Thousand Dollars ($250,000) 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 Agent or a Lender or to induce Agent or a Lender 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 and continues after any period of grace
under any agreement between Borrower and any creditor of Borrower that signed a subordination,
intercreditor, or other similar agreement with Agent or a Lender; or



     8.10 Lien Priority. There is a material impairment in the priority of Agent’s or any Lender’s
security interest in the Collateral.



     9      RIGHTS AND REMEDIES



     9.1      Rights and Remedies. While an Event of Default occurs and continues Agent 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
Agent or Lenders);



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



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



               (d) 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 Agent requests and make it available as Agent designates. Agent 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



11









 




prior or superior to its security
interest and pay all expenses incurred. Borrower grants Agent a license to enter and occupy any of
its premises, without charge, to exercise any of Agent’s or Lenders’ rights or remedies;




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



               (f) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for
sale, and sell the Collateral. Agent 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 Agent’s exercise of its rights under this
Section, Borrower’s rights under all licenses and all franchise agreements inure to Agent’s benefit
(for the benefit of Lenders);



               (g) place a “hold” on any account maintained with Agent 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;



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



               (i) exercise all rights and remedies available to Agent or Lenders 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).



     9.2 Power of Attorney. Borrower hereby irrevocably appoints Agent 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 Agent 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 Agent for the benefit of Lenders or a third party as the Code permits.
Borrower hereby appoints Agent 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
Lender are under no further obligation to make Credit Extensions hereunder. Agent’s foregoing
appointment as Borrower’s attorney in fact, and all of Agent’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and performed and Lenders’
obligation to provide Credit Extensions terminates.



     9.3 Accounts Verification; Collection. If an Event of Default has occurred and is continuing,
Agent may notify any Person owing Borrower money of Agent’s and Lenders’ security interest in such
funds and verify the amount of such account. After the occurrence of an Event of Default, any
amounts received by Borrower shall be held in trust by Borrower for Agent, and, if requested by
Agent, Borrower shall immediately deliver such receipts to Agent in the form received from the
Account Debtor, with proper endorsements for deposit.



     9.4 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, Agent may obtain such insurance
or make such payment, and all amounts so paid by Agent are Agent Expenses and immediately due and
payable, bearing interest at the then highest applicable rate, and secured by the Collateral.
Agent will make reasonable efforts to provide Borrower with notice
of Agent obtaining such insurance at the time it is obtained or within a reasonable time
thereafter. No payments by Agent are deemed an agreement to make similar payments in the future or
Agent’s or Lenders’ waiver of any Event of Default.



     9.5 Application of Payments and Proceeds. If an Event of Default has occurred and is
continuing, Lenders may apply any funds in their 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 Lenders shall
determine in their sole discretion. Any surplus shall be paid to Borrower



12









 




or other Persons legally
entitled thereto; Borrower shall remain liable to Agent and Lenders for any deficiency. If Agent
or Lenders, in their good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of Collateral, Agent and Lenders
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 Agent or Lenders of cash therefor.




     9.6 Agent’s and Lenders’ Liability for Collateral. So long as Agent and Lenders comply with
reasonable banking practices regarding the safekeeping of the Collateral in the possession or under
the control of Agent and/or Lenders, the Agent and Lenders 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.



     9.7 No Waiver; Remedies Cumulative. Agent’s or Lenders’ 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 Agent or Lenders thereafter to demand
strict performance and compliance herewith or therewith. No waiver hereunder shall be effective
unless signed by Agent and Lenders and then is only effective for the specific instance and purpose
for which it is given. Agent’s and Lenders’ rights and remedies under this Agreement and the other
Loan Documents are cumulative. Agent and Lenders have all rights and remedies provided under the
Code, by law, or in equity. Agent’s or Lenders’ exercise of one right or remedy is not an
election, and Agent’s or Lenders’ waiver of any Event of Default is not a continuing waiver.
Agent’s or Lenders’ delay in exercising any remedy is not a waiver, election, or acquiescence.



     9.8 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
Agent or Lenders on which Borrower is liable.



     10 NOTICES



     All notices, consents, requests, approvals, demands, or other communication (collectively,
“Communication”) by any party to this Agreement or any other Loan Document must be in writing and
shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or
certified mail return receipt requested, with proper postage prepaid; (b) one (1) Business Day
after deposit with a reputable overnight courier with all charges prepaid; or (c) 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. Any party may change its address or
facsimile number by giving the other party written notice thereof in accordance with the terms of
this Section 10.



	 	 	 	 	 
	 

	 	If to Borrower:
	 	DemandTec, Inc.

1 Circle Way, Suite 200

San Carlos, CA 94070

Attn: Chief Financial Officer

Fax: (650) 556-1223
	 
	 	 	 	 
	 

	 	If to Agent
or Bank:
	 	Silicon Valley Bank

2400 Geng Road, Suite 200

Palo Alto, California 94303

Attn: Albert Martinez

Fax: (650) 320-0016
	 
	 	 	 	 
	 

	 	If to Gold Hill:
	 	Gold Hill Venture Lending Partners 

One Almaden Blvd., Suite 630

San Jose, California 95113

Attn: Tim McDonough

Fax: (408) 200-7841






13









 





     11 CHOICE OF LAW, VENUE AND JUDICIAL REFERENCE



     California law governs the Loan Documents without regard to principles of conflicts of law.
Borrower, Agent and Lenders each submit to the exclusive jurisdiction of the State and Federal
courts in Santa Clara County, California; provided, however, that nothing in this Agreement shall
be deemed to operate to preclude Agent or Lenders 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 Agent or Lenders. 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.



     TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER, AGENT AND LENDERS 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.



     WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT
TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury is not enforceable, the
parties hereto agree that any and all disputes or controversies of any nature between them arising
at any time shall be decided by a reference to a private judge, mutually selected by the parties
(or, if they cannot agree, by the Presiding Judge of the Santa Clara County, California Superior
Court) appointed in accordance with California Code of Civil Procedure Section 638 (or pursuant to
comparable provisions of federal law if the dispute falls within the exclusive jurisdiction of the
federal courts), sitting without a jury, in Santa Clara County, California; and the parties hereby
submit to the jurisdiction of such court. The reference proceedings shall be conducted pursuant to
and in accordance with the provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive. The private judge shall have the power, among others, to grant provisional relief,
including without limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. All such proceedings shall be closed to the public
and confidential and all records relating thereto shall be permanently sealed. If during the
course of any dispute, a party desires to seek provisional relief, but a judge has not been
appointed at that point pursuant to the judicial reference procedures, then such party may apply to
the Santa Clara County, California Superior Court for such relief. The proceeding before the
private judge shall be conducted in the same manner as it would be before a court under the rules
of evidence applicable to judicial proceedings. The parties shall be entitled to discovery which
shall be conducted in the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings. The private judge shall oversee discovery and may enforce all
discovery rules and order applicable to judicial proceedings in the same manner as a trial court
judge. The parties agree that the selected or appointed private judge shall have the power to
decide all issues in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil Procedure § 644(a). Nothing
in this paragraph shall limit the right of any party at any time to exercise self-help remedies,
foreclose against collateral, or obtain provisional remedies. The private judge shall also
determine all issues relating to the applicability, interpretation, and enforceability of this
paragraph.



     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. Except as permitted pursuant to Section 7.3, Borrower
may not assign this Agreement or any rights or obligations under it without Agent’s prior written
consent (which may be granted or withheld in Agent’s discretion). Each of Agent and Lenders has
the right, without the consent of or notice to



14









 




Borrower, to sell, transfer, negotiate, or grant
participation in all or any part of, or any interest in, its obligations, rights, and benefits
under this Agreement and the other Loan Documents.




     12.2 Indemnification. Borrower agrees to indemnify, defend and hold Agent and Lenders and
their respective directors, officers, employees, agents, attorneys, or any other Person affiliated
with or representing them 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 Agent Expenses or Lender Expenses
incurred, or paid by Agent or Lenders from, following, or arising from transactions between Agent,
Lenders and Borrower (including reasonable attorneys’ fees and expenses), except for Claims and/or
losses directly caused by Agent’s or a Lender’s gross negligence or willful misconduct.



     12.3 Limitation of Actions. Any claim or cause of action by Borrower against Agent or
Lenders, their respective directors, officers, employees, agents, accountants, attorneys, or any
other Person affiliated with or representing them 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 Agent or a Lender, its respective 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 officers 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 Agent or a Lender, or on any other person authorized to
accept service on behalf of Agent or a Lender, 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 Lenders in their 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 each of Agent, Lenders 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 Agent and Lenders 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, Agent and Lenders shall
exercise the same degree of care that it exercises for its own proprietary information, but
disclosure of information may be made:
(a) to Lenders’ or Agent’s Subsidiaries or Affiliates (which shall be bound by this
Section 12.9 as to such disclosures); (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Lenders and Agent 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 Lenders’ or
Agent’s regulators or as otherwise required in connection with its examination or audit; and (e) as
Lenders and Agent consider appropriate in exercising remedies under this Agreement. Confidential
information does not include information that either: (i) is in the public domain or in Agent’s or
a Lender’s possession when



15









 




disclosed to it, or becomes part of the public domain after disclosure
to Agent or a Lender, in each case other than as a consequence of a breach of this Section
12.9; or (ii) is disclosed to Agent or a Lender by a third party, if Agent or Lender does not
know that the third party is prohibited from disclosing the information.




     12.10 Attorneys’ Fees, Costs and Expenses. In any action or proceeding between Borrower and
Agent and/or Lenders arising out of or relating to the Loan Documents, the prevailing party shall
be entitled to recover its reasonable attorneys’ fees and other costs and expenses incurred, in
addition to any other relief to which it may be entitled.



     12.11 SVB Working Capital Facility.



     Bank hereby consents to the incurrence of Indebtedness by Borrower pursuant to this Agreement
and to the grant of a security interest in the Collateral to Lenders, notwithstanding anything to
the contrary contained in the SVB Working Capital Facility and agrees that the incurrence of the
Indebtedness hereunder and the grant of the security interest hereunder shall not result in or
constitute a breach or violation of any covenant contained in the SVB Working Capital Facility.



     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.



     “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.



     “Agent 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.



     “Agreement” is defined in the preamble hereof.



     “Bank” is defined in the preamble hereof.



     “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 Resolutions” are, with respect to any Person, those resolutions adopted by such
Person’s Board of Directors and delivered by such Person to Agent 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 an
exhibit 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 Agent and Lenders may conclusively rely on such
certificate unless and until such Person shall have delivered to Agent a further certificate
canceling or amending such prior certificate.



16









 





     “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.



     “Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the State of California; 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, Agent’s or Lenders’
Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other
than the State of California, the term “Code” shall mean the Uniform Commercial Code as enacted and
in effect in such other jurisdiction solely for purposes of 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.



     “Communication” is defined in Section 10.



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



     “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 Agent
pursuant to which Agent obtains control (within the meaning of the Code) over such Deposit Account,
Securities Account, or Commodity Account.



     “Credit Extension” is any Growth Capital Advance, or any other extension of credit by either
Lender for Borrower’s benefit.



     “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 2.2(b).



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



17









 





     “Designated Deposit Account” is Borrower’s deposit account, account number 3300337567,
maintained with Agent.



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



     “Effective Date” is the date Lenders execute and deliver this Agreement and as indicated on
the signature page hereof.



     “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.



     “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.



     “Growth Capital Advance” or “Growth Capital Advances” is defined in Section 2.1.1.



     “Growth Capital Amortization Date” means, for each Growth Capital Advance, the day twelve (12)
months after its Growth Capital Funding Date, or if such date is not the first day of the month,
then the first day of the calendar month immediately following such date.



     “Growth Capital Commitment Percentage” means: (i) 30% with respect to Bank, and (ii) 70% with
respect to Gold Hill.



     “Growth Capital Commitment Termination Date” is the day three (3) months after the Effective
Date.



     “Growth Capital Final Payment” is a payment (in addition to and not a substitution for the
regular monthly payments of principal plus accrued interest) for each Growth Capital Advance due on
the earlier of (a) the Growth Capital Maturity Date for such Growth Capital Advance or (b) the
acceleration of such Growth Capital Advance, equal to the Growth Capital Loan Amount for such
Growth Capital Advance multiplied by the Growth Capital Final Payment Percentage.



     “Growth Capital Final Payment Percentage” is, for each Growth Capital Advance, four percent
(4.0%).



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



     “Growth Capital Interest Only Period” means, for each Growth Capital Advance, the period of
time commencing on its Growth Capital Funding Date through the day before the Growth Capital
Amortization Date.



18









 





     “Growth Capital Loan Amount” in respect of each Growth Capital Advance is the original
principal amount of such Growth Capital Advance.



     “Growth Capital Loan Commitment” is Ten Million Dollars ($10,000,000).



     “Growth Capital Maturity Date” is, for each Growth Capital Advance, the earliest of: (a) the
36th Growth Capital Scheduled Payment Date for such Growth Capital Advance, (b) the date
on which all Obligations become immediately due and payable pursuant to Section 9.1(a), and
(c) at Lenders’ election, seven (7) days before a Redemption Date (as defined in section 5 of
Borrower’s Seventh Amended and Restated Certificate of Incorporation, as amended from time to
time).



     “Growth Capital Payment Date” is defined in Section 2.1.1.



     “Growth Capital Scheduled Payment Date” is defined in Section 2.1.1.



     “Growth Capital Repayment Period” is a period of time equal to thirty-six (36) consecutive
months commencing on the Growth Capital Amortization Date.



     “Guarantor” is any present or future guarantor of the Obligations.



     “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 executed and delivered
by Borrower to Agent dated as of Effective Date.



     “Lenders Expenses” are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for defending and enforcing the Loan Documents (including, without
limitation, those incurred in connection with appeals or Insolvency Proceedings).



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



     “Loan Documents” are, collectively, this Agreement, the Warrants, 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 Agent or any Lender in connection with this
Agreement, all as amended, restated, or otherwise modified.



     “Obligations” are Borrower’s obligation to pay when due any debts, principal, interest, Agent
Expenses, Lender Expenses and other amounts Borrower owes Agent or Lenders now or later, whether
under this Agreement or the other Loan Documents, 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 Agent or Lenders, and the performance of Borrower’s duties
under the Loan Documents.



19









 





     “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, (a) if such Person is a corporation, its bylaws in
current form, (b) if such Person is a limited liability company, its limited liability company
agreement (or similar agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current amendments or
modifications thereto.



     “Payment/Advance Form” is that certain form attached hereto as Exhibit B.



     “Perfection Certificate” is defined in Section 5.1.



     “Permitted Indebtedness” is:



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



     (b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate,
including Indebtedness to Bank under the SVB Working Capital Facility;



     (c) Subordinated Debt;



     (d) Indebtedness incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;



     (e) Indebtedness in an aggregate principal amount not to exceed Three Million Dollars
($3,000,000) 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 then outstanding 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 Effective Date;



     (b) Cash Equivalents; and



     (c) Investments made pursuant to Borrower’s Investment Guidelines.



     “Permitted Liens” are:



     (a) Liens existing on the Effective Date and shown on the Perfection Certificate, including
Liens to Bank under the SVB Working Capital Facility, 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 Agent’s or Lenders’ Liens;



     (c) purchase money Liens (i) on Equipment acquired or held by Borrower incurred for financing
the acquisition of the Equipment securing no more than Two Million Dollars ($2,000,000) 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) statutory Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties, provided, they
have no priority over any of Agent’s or Lenders’ Lien and the aggregate amount of such Liens does
not at any time exceed $250,000;



20









 





     (e) Liens to secure payment of workers’ compensation, employment insurance, old-age pensions,
social security and other like obligations incurred in the ordinary course of business, provided,
they have no priority over any of Agent’s or Lenders’ Liens and the aggregate amount of the
Indebtedness secured by such Liens does not at any time exceed $250,000;



     (f) 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 then outstanding principal amount
of the indebtedness may not increase;



     (g) leases or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other than real property or
intellectual property) granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses do not prohibit granting Agent or Lenders a security
interest;



     (h) (1) non-exclusive licenses of intellectual property in the ordinary course of business,
where Borrower is the licensor if the licenses do not prohibit granting Agent or Lenders a
security interest, (2) non-exclusive licenses of intellectual property in the ordinary course of
business, where Borrower is the licensee, and (3) intellectual property source code escrow
arrangements to support any of the intellectual property licensing described in this clause (h);



     (i) Liens arising from judgments, decrees or attachments in circumstances not constituting an
Event of Default under Section 8.4 or 8.7; and



     (j) Liens in favor of other financial institutions securing the customary fees and expenses of
such institutions arising in connection with Borrower’s deposit accounts or investment accounts
held at such institutions.



     “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.



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



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



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



     “Senior Officer” is any of the Chief Executive Officer, Executive Vice President, and Chief
Financial Officer of Borrower.



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



     “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.



     “SVB Working Capital Facility” is the Third Amended and Restated Loan and Security Agreement
dated as of May 23, 2006 between Bank and Borrower, as it may be amended from time to time.



21









 





     “Tangible Net Worth” is, on any date, the consolidated total assets of Borrower and its
Subsidiaries minus (a) any amounts attributable to (i) goodwill, (ii) intangible items
including unamortized debt discount and expense, patents, trade and service marks and names,
copyrights and research and development expenses except prepaid expenses, (iii) notes, accounts
receivable and other obligations owing to Borrower from its officers or other Affiliates, and (iv)
reserves not already deducted from assets, and (b) Total Liabilities.



     “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.



     “Warrants” are that certain Warrant to Purchase Stock dated as of the Effective Date executed
by Borrower in favor of Bank and that certain Warrant to Purchase Stock dated as of the Effective
Date executed by Borrower in favor of Gold Hill.



[Signature page follows.]




22









 





     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
Effective Date.



	 	 	 	 	 
	BORROWER:	 	 
	 
	 	 	 	 
	DEMANDTEC, INC.	 	 
	 
	 	 	 	 
	By: 

Name:

	 	/s/ Mark Culhane
 

Mark Culhane
	 	 
	Title:

	 	EVP & CFO	 	 
	 
	 	 	 	 
	AGENT:
	 	 	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jeffrey Javier	 	 
	 

	 	 	 	 
	Name:

	 	Jeffrey Javier	 	 
	Title:

	 	RM	 	 
	 
	 	 	 	 
	LENDERS:
	 	 	 	 
	 
	 	 	 	 
	GOLD HILL VENTURE LENDING 03, LP

By: Gold Hill Venture Lending Partners 03, LLC, General Partner	 	 
	 
	 	 	 	 
	By:

	 	/s/ Sean Lyden	 	 
	 

	 	 	 	 
	Name:

	 	Sean Lyden	 	 
	Manager

	 	Partner, Gold Hill	 	 
	 
	 	 	 	 
	SILICON VALLEY BANK	 	 
	 
	 	 	 	 
	By:

	 	/s/ Jeffrey Javier	 	 
	 

	 	 	 	 
	Name:

	 	Jeffrey Javier	 	 
	Title:

	 	RM	 	 
	 
	 	 	 	 
	Effective as of July 25, 2006	 	 






[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, 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




Loan Payment/Advance Request Form




Deadline for same day processing is Noon P.S.T.




	 	 	 	 	 	 	 	 	 
	Fax To:

	 	 	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 	 	 








									
	LOAN PAYMENT :
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	DEMANDTEC, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	From Account #

	 	 	 	 	 	To Account #	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	(Deposit Account #)
	 	 	 	 	 	                         (Loan Account #)
	Principal $

	 	 	 	 	 	and/or Interest $	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 





	 	 	 	 	 	 	 	 	 
	Authorized Signature:

	 	 	 	 	 	           Phone Number:	 	 
	 

	 	 
	 	 	 	 	 	 
	Print Name/Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 











									
	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 representations and warranties in the Loan and Security Agreement are true, correct
and complete in all material respects on the date of the request for an advance; 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:






	 	 	 	 	 	 	 	 	 
	Authorized Signature:

	 	 	 	 	 	Phone Number:	 	 
	 

	 	 
	 	 	 	 	 	 
	Print Name/Title:
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 











									
	Outgoing Wire Request:

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

Deadline for same day processing is noon, P.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 #:	 	 
	 

	 	 
	 	 	 	 	 	 








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EXHIBIT C




COMPLIANCE CERTIFICATE




	 	 	 	 	 	 	 	 	 
	TO:

	 	SILICON VALLEY BANK, as Agent
	 	 	 	Date:	 	 
	 

	 	 	 	 	 	 	 	 
	FROM:

	 	DEMANDTEC, INC.	 	 	 	 	 	 






     The undersigned authorized officer of DemandTec, Inc. (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement among Borrower, Agent and Lenders (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, have 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 Agent. 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 180 days
	 	Yes No
	10-Q, 10-K and 8-K

	 	Within 5 days after filing with SEC
	 	Yes No
	Annual projections

	 	FYE within 30 days of Board approval
	 	Yes No






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


                                                                                                                                                                                                                                                                                        



                                                                                                                                                                                                                                                                                        



                                                                                                                                                                                                                                                                                        




	 	 	 	 	 	 	 	 	 	 	 
	DEMANDTEC, INC.	 	 	 	BANK USE ONLY	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Received by:	 	 	 	 
	By:

	 	 	 	 	 	 	 	 

AUTHORIZED SIGNER
	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

	 	 
	Title:

	 	 	 	 	 	Verified:	 	 	 	 
	 

	 	 

	 	 	 	 	 	 

AUTHORIZED SIGNER
	 	 
	 

	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

	 	 
	 	 	 	 	 	 	Compliance Status:            Yes      No	 	 






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SCHEDULE 1 (FOR LOAN ADMINISTRATION PURPOSES ONLY)




GROWTH CAPITAL LOAN COMMITMENT: $10,000,000.00




	 	 	 	 	 	 	 	 	 
	 	 	Commitment	 	Commitment Percentage
	Gold Hill Venture Lending 03, LP:

	 	$	7,000,000	 	 	 	70	%
	Silicon Valley Bank:

	 	$	3,000,000	 	 	 	30	%
	 

	 	 	 	 	 	 	 	 






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