Document:

Exhibit 10.5

 

EMPLOYMENT AGREEMENT 

 

THIS AGREEMENT is dated May 1, 2012
by and between Telkonet, Inc, a Utah corporation (“Telkonet” or “Company”) and Gerrit J. Reinders
(“Executive”).

 

WHEREAS, Telkonet desires to employ Executive
and to secure for itself the experience, abilities and services of Executive in the capacity of Executive Vice President of Sales
& Marketing of Telkonet upon the terms and conditions specified herein; and

 

WHEREAS, Executive desires to so provide
his services to Telkonet, upon the terms and conditions specified herein.

 

NOW, THEREFORE, in consideration
of the mutual covenants contained herein, and for such other good and valuable consideration, the receipt and sufficiency of which
are hereby conclusively acknowledged, the parties, intending to be legally bound, agree as follows:

 

1. Duties and Scope of Employment.

 

(a) Positions and Duties. Telkonet hereby
employs Executive in the capacity of Executive Vice President of Sales & Marketing of Telkonet to perform such executive, management
and administrative services and other customary duties consistent with Executive’s position as a senior executive officer
within the Company as set forth in the Telkonet by-laws and as Telkonet, by action of its Chief Executive Officer and Board of
Directors (“Board”), may request from time to time.

 

(b) Location. Executive’s place of work
shall be 10200 Innovation Dr., Suite 300, Milwaukee, WI 53226. The Company shall be entitled to require the Executive to travel
to work at such other places as business needs require.

 

2. Term. The term of this Agreement (the “Term”)
shall commence as of May 1, 2012 and shall expire on May 1, 2013. Upon expiration this term will automatically renew for an additional
twelve (12) months unless mutually agreed to otherwise or is terminated pursuant to Section 6.

 

3. Extent of Services. During the Term and any
extension thereof, Executive shall devote his full time, ability, attention and efforts to the performance, to the best of his
abilities, of such duties and responsibilities, as described in Section 1 above, and as the Chief Executive Officer shall determine,
consistent therewith.

 

4. Compensation. 

 

(a) Salary. Executive shall be paid One Hundred
Thousand Dollars ($150,000.00) on an annualized basis in accordance with Telkonet’s normal payroll practices, and be subject
to all lawfully required withholdings. The base salary may be increased, but not decreased, at any time during the term of employment
as determined by the Chief Executive Officer and the Board of Directors.

 

(b) Bonus. The Chief Executive
Officer, Board of Directors of Telkonet and the Executive will agree upon milestones for bonus achievement. The actual bonus amount
will be determined by the Board of Directors.

 

(c) Executive Participation in Telkonet Staff
Benefits Plans. During the Term, Executive shall be entitled to participate in any group health programs and other benefit
plans, which may be instituted from time-to-time for Telkonet employees, and for which Executive qualifies under the terms of such
plans. All such benefits shall be provided on the same terms and conditions as generally apply to all other Telkonet employees
under these plans and may be modified by Telkonet from time-to-time.

 

(d) Expenses. Executive shall be reimbursed
by Telkonet for all ordinary, reasonable, customary and necessary expenses incurred by him in the performance of his duties and
responsibilities. Executive agrees to prepare documentation for such expenses as may be necessary for Telkonet to comply with the
applicable rules and regulations of the Internal Revenue Service and Telkonet’s existing policy.

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(e) Equity. Executive is eligible to participate
in the Company’s Employee Stock Option Plan, in accordance with the terms of such plan and awards as granted by the Compensation
Committee of the Company’s Board of Directors.

 

(f) Commission. Telkonet has established a
commission structure for Executive’s position based on measurable goals as provided in Exhibit 1.

 

5. Vacation. At full pay and without any adverse
effect to his compensation, provided that all other terms and conditions of this Agreement are satisfied, Executive shall be entitled
to four (4) weeks of vacation for each full calendar year during the term of this Agreement. Executive agrees to schedule his vacation
leave in advance upon written notice to Chief Executive Officer or other designated individuals. Carryover of vacation days shall
be consistent with Company’s existing policy.

 

6. Termination. This Agreement
shall terminate in accordance with Section 2 of this Agreement, or upon the first to occur of any of the following events:

 

(a) The death of Executive;

 

(b) The mutual consent of Executive and Telkonet.
Executive shall then receive (i) an amount equal to Executive's base salary for the period starting on the first day after the
termination and ending upon the three (3) month anniversary date of the termination in accordance with the Company’s payroll
schedule applicable to all employees and (ii) pay for any applicable health insurance premiums, for a period starting on the first
day after the termination and ending upon the three (3) month anniversary date of the termination. If the Executive becomes eligible
for similar benefits from another employer, Telkonet will reimburse Executive for the Employee’s share of current employer’s
health insurance premium ending upon the three (3) month anniversary date of the termination;

 

(c) “Cause” exists for termination. For
purposes of this Agreement, “cause” shall mean the occurrence of any of the following: (1) theft, fraud, embezzlement,
or any other act of intentional dishonesty by Executive; (2) any material breach by Executive of any provision of this Agreement
which breach is not cured within a reasonable time (but not to exceed fourteen (14) days) after written notification thereof to
Executive by Telkonet; (3) any habitual neglect of duty or misconduct of Executive in discharging any of his duties and responsibilities
under this Agreement after a written demand for performance was delivered to Executive that specifically identified the manner
in which the Board believed the Executive had failed to discharge his duties and responsibilities, and the Executive failed to
resume substantial performance of such duties and responsibilities on a continual basis immediately following such demand; (4)
commission by Executive of a felony or any offense involving moral turpitude; or (5) any default of Executive’s obligations
hereunder, or any failure or refusal of Executive to comply with the policies, rules and regulations of Telkonet generally applicable
to Telkonet employees, which default, failure or refusal is not cured within a reasonable time (but not to exceed fourteen (14)
days) after written notification thereof to Executive by Telkonet. If cause exists for termination, Executive shall be entitled
to no further compensation, except for accrued leave and vacation and except as may be required by applicable law.

 

(d) “Good reason” exists for Executive
to terminate his employment with Telkonet. For purposes of this Agreement, “good reason” shall mean the occurrence
of any of the following: (1) any material adverse reduction in the scope of Executive’s authority or responsibilities; (2)
any reduction in the amount of Executive’s compensation or participation in any employee benefits; or (3) Executive’s
principal place of employment is actually or constructively moved to any office or other location 75 miles or more outside of Milwaukee,
WI. If Executive terminates his employment with Telkonet for “good reason,” then, upon notice to Telkonet by Executive
of such termination, Telkonet shall continue to pay Executive's base salary and provide Executive with continued participation
in each employee benefit plan in which Executive participated immediately prior to the termination date for the period starting
on the first day after the termination date and ending upon expiration of the Term, or if such period is less than three (3) months,
for a period of three (3) months from notice.

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(e) If Executive is terminated by Telkonet for any
reason other than for “cause” or Telkonet fails to renew this Agreement upon expiration of the Term, then Executive
shall receive: (i) an amount equal to Executive's base salary for the period starting on the first day after the termination and
ending upon the three (3) month anniversary date of the termination in accordance with the Company’s payroll schedule applicable
to all employees and (ii) pay for any applicable health insurance premiums, for a period starting on the first day after the termination
and ending upon the three (3) month anniversary date of the termination. If the Executive becomes eligible for similar benefits
from another employer, Telkonet will reimburse Executive for the Employee’s share of current employer’s health insurance
premium ending upon the three (3) month anniversary date of the termination.

 

(f) In the event of a termination under (a), (b),
(c) or (d) of this paragraph 6, within thirty (30) days of the separation date, Telkonet shall make a lump sum payment of any back
pay, Executive loans or deferments then due and owing. Notwithstanding anything to the contrary herein, this Agreement shall not
terminate or expire under (e) of this paragraph six unless and until (iii) Executive is reimbursed for any back pay, Executive
loans or deferments then due and owing.

 

(g) If Executive’s employment terminates by
reason of death or disability, then (i) Executive will be entitled to receive benefits only in accordance with the Company’s
then applicable plans, policies, and arrangements.

 

(h) Separation Agreement and Release of Claims.
The receipt of any severance pursuant to this Agreement will be subject to Executive signing and not revoking a separation agreement
and release of claims (the “Release”) in a form reasonably acceptable to the Company, which becomes effective within
thirty (30) days following Executive’s separation from service. The Release will provide (among other things) that Executive
will not disparage the Company, its directors, or its executive officers for 12 months following the date of termination and the
Company will instruct its officers and directors not to disparage the Executive. No severance pursuant to this Agreement will be
paid or provided until the Release becomes effective.

 

(i) No Duty to Mitigate. Executive will not
be required to mitigate the amount of any payment contemplated by this Agreement, nor will any earnings that Executive may receive
from any other source reduce any such payment.

 

(j) No-Inducement. In the event of a termination
of Executive’s employment that otherwise would entitle Executive to the receipt of severance and other benefits pursuant
to this Agreement, Executive agrees that as a condition to receipt of such severance, during the 12 month period following termination
of employment, Executive, directly or indirectly, whether as employee, owner, sole proprietor, partner, director, founder or otherwise,
will not, solicit, induce, or influence any person to modify their employment or consulting relationship with the Company (the
“No-Inducement”). If Executive breaches the No-Inducement, all payments and benefits to which Executive otherwise may
be entitled pursuant to this Section 6 will cease immediately.

 

7. Surrender of Books and Papers. Upon termination
of this Agreement (irrespective of the time, manner, or cause of termination, be it for cause or otherwise), Executive shall immediately
surrender to Telkonet all books, records, or other written papers or documents entrusted to him or which he has otherwise acquired
pertaining to Telkonet and all other Telkonet property in Executive’s possession, custody or control.

 

8. Inventions and Patents. Executive agrees that
Executive will promptly, from time-to time, fully inform and disclose to Telkonet any and all ideas, concepts, copyrights, copyrightable
material, developments, inventions, designs, improvements and discoveries of whatever nature that Executive may have or produced
during the term of Executive’s employment under this Agreement that pertain or relate to the then current business of Telkonet
(the “Creations”), whether conceived by Executive alone or with others and whether or not conceived during regular
working hours. All Creations shall be the exclusive property of Telkonet and shall be “works made for hire” as defined
in 17 U.S.C. §101, and Telkonet shall own all rights in and to the Creations throughout the world, without payment of royalty
or other consideration to Executive or anyone claiming through Executive. Executive hereby transfers and assigns to Telkonet (or
its designee) all right, title and interest in and to every Creation. Executive shall assist Telkonet in obtaining patents or copyrights
on all such inventions, designs, improvements and discoveries being patentable or copyrightable by Executive or Telkonet and shall
execute all documents and do all things reasonably necessary (at Telkonet’s sole cost and expense) to obtain letters of patent
or copyright, vest Telkonet with full and exclusive title thereto, and protect the same against infringement by third parties,
and such assistance shall be given by Executive, if needed, after termination of this Agreement for whatever cause or reason. Executive
hereby represents and warrants that Executive has no current or future obligation with respect to the assignment or disclosure
of any or all developments, inventions, designs, improvements and discoveries of whatever nature to any previous Employer, entity
or other person and that Executive does not claim any rights or interest in or to any previous unpatented or uncopyrighted developments,
inventions, designs, improvements or discoveries.

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9. Trade Secrets, Non-Competition and Non-Solicitation.

 

(a) Trade Secrets. Contemporaneous with the
execution of this Agreement and during the term of employment under this Agreement, Telkonet shall deliver to Executive or permit
Executive to have access to and become familiar with various confidential information and trade secrets of Telkonet, including
without limitation, data, production methods, customer lists, product format or developments, other information concerning the
business of Telkonet and other unique processes, procedures, services and products of Telkonet, which are regularly used in the
operation of the business of Telkonet (collectively, the “Confidential Information”). For purposes of the preceding
sentence, information is not treated as being Confidential Information if it: (i) is or becomes generally available to the public
other than by Executive in violation of this Agreement; (ii) is obtained by Executive in good faith from a third party who discloses
such information to Executive on a non-confidential basis without violating any obligation of confidentiality or secrecy relating
to the information disclosed; (iii) is independently developed by Executive outside the scope of his employment without use of
Confidential Information; or (iv) is Executive’s personnel information. Executive shall not disclose any of the Confidential
Information that he receives from Telkonet or their clients and customers in the course of his employment with Telkonet, directly
or indirectly, nor use it in any way, either during the term of this Agreement or for a period of five (5) years thereafter, except
as required in the course of employment with Telkonet. Executive further acknowledges and agrees that Executive owes Telkonet,
a fiduciary duty to preserve and protect all Confidential Information from unauthorized disclosure or unauthorized use. All files,
records, documents, drawings, graphics, processes, specifications, equipment and similar items relating to the business of Telkonet,
whether prepared by Executive or otherwise coming into Executive’s possession in the course of his employment with Telkonet,
shall remain the exclusive property of Telkonet and shall not be removed from the premises of Telkonet without the prior written
consent of Telkonet unless removed in relation to the performance of Executive’s duties under this Agreement. Any such files,
records, documents, drawings, graphics, specifications, equipment and similar items, and any and all copies of such materials which
have been removed from the premises of Telkonet, shall be returned by Executive to Telkonet. For purposes of this Section 9, “Telkonet”
means Telkonet, Inc., including its subsidiaries and affiliates and all successors and predecessors in interest to Telkonet.

 

(b) Non-Competition. Executive acknowledges
that he will be provided with and have access to the Confidential Information, the unauthorized use or disclosure of which would
cause irreparable injury to Telkonet, that Telkonet’s willingness to enter into this Agreement is based in material part
on Executive’s agreement to the provisions of this Section 9(b) and that Executive’s breach of the provisions
of this Section would materially and irreparably damage Telkonet. In consideration for Telkonet’s disclosure of Confidential
Information to Executive, Executive’s access to the Confidential Information, and the salary paid to executive hereunder,
Executive agrees that during the term of Executive’s employment under this Agreement and for one (1) year after the termination
of Executive’s employment and regardless whether such termination is with or without cause, Executive shall not, directly
or indirectly, either as an executive, employee, employer, consultant, agent, principal, partner, stockholder, corporate officer,
director, advisor or in any other individual or representative capacity, engage or participate in any business that is in competition
in any manner whatsoever with the Restricted Business (as defined herein) in North America. “Restricted Business” means
any business conducted by Telkonet at the time of separation of the Executive from Telkonet.

 

(c) Reasonableness of Restrictions. Executive
acknowledges that the restrictions set forth in Section 9(b) of this Agreement are reasonable in scope and necessary for
the protection of the business and goodwill of Telkonet. Executive agrees that should any portion of the covenants in Section
9 be unenforceable because of the scope thereof or the period covered thereby or otherwise, the covenant shall be deemed to
be reduced and limited to enable it to be enforced to the maximum extent permissible under the laws and public policies applied
in the jurisdiction in which enforcement is sought.

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(d) Injunctive Relief; Extension of Restrictive
Period. In the event of a breach of any of the covenants by Executive or Telkonet contained in this Agreement, it is understood
that damages will be difficult to ascertain, and either party may petition a court of law or equity for injunctive relief in addition
to any other relief which Executive or Telkonet may have under the law, including but not limited to reasonable attorneys’
fees.

 

10. Indemnification and Insurance. Executive will
be covered under the Company’s insurance policies and, subject to applicable law, will be provided indemnification to the
maximum extent permitted by the Company’s bylaws, Certificate of Incorporation, and standard form of Indemnification Agreement,
with such insurance coverage and indemnification to be in accordance with the Company’s standard practices for senior executive
officers but on terms no less favorable than provided to any other Company senior executive officer or director.

 

11. Miscellaneous. 

 

(a) This Agreement shall be binding upon the parties
and their respective heirs, executors, administrators, successors and assigns. Executive shall not assign any part of his rights
under this Agreement without the prior written consent of Telkonet.

 

(b) This Agreement contains the entire agreement
and understanding between the parties and supersedes any and all prior understandings and agreements between the parties regarding
Executive’s employment.

 

(c) No modification hereof shall be binding unless
made in writing and signed by the party against whom enforcement is sought. No waiver of any provisions of this Agreement shall
be valid unless the same is in writing and signed by the party against whom it is sought to be enforced, unless it can be shown
through custom, usage or course of action.

 

(d) This Agreement is executed in, and it is the
intention of the parties hereto that it shall be governed by, the laws of the State of Wisconsin without giving effect to applicable
conflict of laws provisions.

 

(e) The provisions of this Agreement shall be deemed
to be severable, and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the
other provisions hereof.

 

(f) Any notice or communication permitted or required
by this Agreement shall be in writing and shall become effective upon personal service, or service by wire transmission, which
has been acknowledged by the other party as being received, or two (2) days after its mailing by certified mail, return receipt
requested, postage prepaid addressed as follows:

 

(1) If to Telkonet: Attn: General Counsel Telkonet,
Inc. 10200, Suite 300, Innovation Drive Milwaukee, WI 53226.

 

(2) If to Executive, to: Gerritt J. Reinders at the
last residential address known by the Company as provided by Executive in writing.

 

(g) Acknowledgment. Executive acknowledges
that he has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time
to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering
into this Agreement.

 

(h) Counterparts. This Agreement may be executed
in counterparts, and each counterpart will have the same force and effect as an original and will constitute an effective, binding
agreement on the part of each of the undersigned.

 

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IN WITNESS WHEREOF, Telkonet and Executive have executed
this Agreement as of the date first set forth above.

 

	/s/ Glenn
    A. Garland	 	/s/ Gerrit J. Reinders
	 	 	 
	Chairman - Compensation Committee	 	Gerrit J. Reinders
	 	 	 
	5/1/12	 	5/1/12
	Date	 	Date

 

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Exhibit 1

 

Commission Structure

 

The Company has established a commission structure for your
role based on measurable goals for the fiscal 2012 year. In addition to Executive’s base salary during 2012, target cash
incentive compensation is $100,000 based on delivering EcoSmart Sales Revenue of $7.5 Million. EcoSmart Sales Revenue will be defined
as monies received from customers for the delivery of EcoSmart goods and services. The goal is to deliver linear sales per quarter
leading to an annual target of $7.5 Million.

 

For recognized revenue above annual target, 1% commission will
be paid following the 2012 fiscal year. Successful sales meeting the quarterly target will result in quarterly commissions being
paid in full at the end of the quarter in which sales revenue results were delivered.

 

Executive’s incentive compensation plan will be reviewed
and adjusted by the Compensation Committee after the 2012 fiscal year to ensure overall company performance and compensation goals
are being achieved. After the 2012 fiscal year, Executive compensation, including incentive, will be set by the Compensation Committee
with the input of the Chief Executive Officer. It is the intent of the Company that the incentive compensation will not be capped.
In the event of a termination, bonus will be prorated upon termination.

 

 

    	7Exhibit 10.1

 

ELEVENTH AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

THIS ELEVENTH
AMENDMENT to Loan and Security Agreement (this “Amendment”) is entered into as of April 30, 2012, by and
between SILICON VALLEY BANK (“Bank”) and EDGEWAVE, INC., a Delaware corporation (“Borrower”)
whose address is 15333 Avenue of Science, San Diego, CA 92128.

Recitals

A.     Bank
and Borrower have entered into that certain Loan and Security Agreement dated as of May 11, 2007 as amended by that certain First
Amendment to Loan and Security Agreement dated as of July 9, 2007, that certain Second Amendment to Loan and Security Agreement
dated as of August 13, 2007, that certain Third Amendment to Loan and Security Agreement dated as of January 25, 2008, that certain
Fourth Amendment to Loan and Security Agreement dated as of July 23, 2008, that certain Fifth Amendment to Loan and Security Agreement
dated as of February 27, 2009, that certain Sixth Amendment to Loan and Security Agreement dated as of March 23, 2010, that certain
Seventh Amendment to Loan and Security Agreement dated as of September 29, 2010, that certain Eighth Amendment to Loan and Security
Agreement dated as of May 12, 2011, that certain Ninth Amendment to Loan and Security Agreement dated as of June 30, 2011 and that
certain Tenth Amendment to Loan and Security Agreement dated as of September 2, 2011 (as the same may from time to time be further
amended, modified, supplemented or restated, the “Loan Agreement”).

B.     Bank
has extended credit to Borrower for the purposes permitted in the Loan Agreement.

C.     Borrower
has requested that Bank amend the Loan Agreement to make certain revisions to the Loan Agreement as more fully set forth herein.

D.     Bank
has agreed to so amend certain provisions of the Loan Agreement, but only to the extent, in accordance with the terms, subject
to the conditions and in reliance upon the representations and warranties set forth below.

Agreement

Now,
Therefore, in consideration of the foregoing recitals and other good and valuable consideration, the receipt
and adequacy of which hereby is acknowledged, and intending to be legally bound, the parties hereto agree as follows:

1.     Definitions.
Capitalized terms used but not defined in this Amendment shall have the meanings given to them in the Loan Agreement.

2.     Amendments
to Loan Agreement.

2.1     Section
2.1.2 (Letters of Credit Sublimit). Section 2.1.2 of the Loan Agreement hereby is amended and restated in its entirety to read
as follows:

“2.1.2     Letters
of Credit.     

     (a)     Bank
shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for Borrower’s account. The Dollar
Equivalent of the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter
of Credit Reserve) may not exceed Two Hundred Fifty Thousand Dollars ($250,000).

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     (b)     If,
on the Revolving Line Maturity Date (or the effective date of any termination of this Agreement), there are any outstanding Letters
of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to one hundred five percent (105%)
of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due
in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to
such Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall
be subject to the terms and conditions of Bank’s standard Application and Letter of Credit Agreement (the “Letter
of Credit Application”). Borrower agrees to execute any further documentation in connection with the Letters of Credit
as Bank may reasonably request. Borrower further agrees to be bound by the regulations and interpretations
of the issuer of any Letters of Credit guarantied by Bank and opened for Borrower’s account or by Bank’s interpretations
of any Letter of Credit issued by Bank for Borrower’s account, and Borrower understands and agrees that Bank shall not be
liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower’s instructions or
those contained in the Letters of Credit or any modifications, amendments, or supplements thereto.

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

     (d)     Borrower
may request that Bank issue a Letter of Credit payable in a Foreign Currency. If a demand for payment is made under any such Letter
of Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar Equivalent of the amount thereof (plus fees and
charges in connection therewith such as wire, cable, SWIFT or similar charges).

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

2.2     Section
2.1.3 (Foreign Exchange Sublimit). Section 2.1.3 of the Loan Agreement hereby is amended and restated in its entirety to read
as follows:     

 “2.1.3     Intentionally
Omitted.”

2.3     Section
2.1.4 (Cash Management Services Sublimit). Section 2.1.4 of the Loan Agreement hereby is amended and restated in its entirety
to read as follows:     

 “2.1.4     Intentionally
Omitted.”     

2.4     Section
3.4 (Procedures for Borrowing). Section 3.4 of the Loan Agreement hereby is amended and restated in its entirety to read as
follows:

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

2.5     Section
4.1 (Grant of Security Interest). The following new paragraphs hereby are added to the end of Section 4.1 of the Loan Agreement
as follows:

“Borrower
acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank. Regardless
of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to
be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by the first priority
perfected security interest in the Collateral granted herein (subject only to Permitted Liens that may have superior priority to
Bank’s Lien in this Agreement).

If this Agreement
is terminated, Bank’s Lien in the Collateral shall continue until the Obligations (other than inchoate indemnity obligations)
are satisfied in full, and at such time, Bank shall, at Borrower’s
sole cost and expense, terminate its security interest in the Collateral and all rights therein shall revert to Borrower.
In the event (x) all Obligations (other than inchoate indemnity obligations), except for Bank Services, are satisfied in full,
and (y) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral
acceptable to Bank in its good faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding
Letters of Credit, Borrower shall provide to Bank cash collateral in an amount equal to one hundred ten percent (110%) of the Dollar
Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection
therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters
of Credit.”

2.6     Section
6.9 (Financial Covenants). Section 6.9 of the Loan Agreement hereby is amended and restated in its entirety to read as follows:

 “6.9     Modified
Cumulative Net Income. Borrower shall maintain at all times, to be tested as of the last day of each month, on a consolidated
basis with respect to Borrower and its Subsidiaries, a Modified Cumulative Net Income of at least, (i) on a cumulative, year to
date basis for 2012, negative Three Million Dollars (-$3,000,000), (ii) on a trailing three (3) month basis from January 2013 through
March 2013, an amount equal to at least eighty percent (80%) of Borrower’s projected Modified Cumulative Net Income for the
applicable period, as set forth in Borrower’s annual financial projections delivered to Bank pursuant to Section 6.2(v)(B),
and (iii) on a trailing three (3) month basis at all times thereafter, One Dollar ($1.00).”

2.7     Section
9.1 (Rights and Remedies). Section 9.1(d) of the Loan Agreement hereby is amended and restated in its entirety to read as follows:

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     “(d)     terminate
any FX Contracts;”     

2.8     Section
12.8 (Survival). Section 12.8 of the Loan Agreement hereby is amended and restated in its entirety to read as follows:

“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 paid in full and satisfied. The grant of security interest by
Borrower in Section 4.1 shall survive until the termination of all Bank Services Agreements, and the obligation of Borrower in
Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall
have run.”

2.9     Section
13 (Definitions). The following terms and their definitions set forth in Section 13.1 hereby are amended in their entirety
and replaced with the following:

“Availability
Amount” is, at the time of determination (a) the lesser of (i) the Revolving Line or
(ii) or the Borrowing Base, minus (b) the aggregate outstanding principal amount of Term Loan A, Term Loan B and Term Loan C, minus
(c) the outstanding principal balance of any Advances.

“Bank
Services”  are any products, credit services, and/or financial accommodations previously, now, or hereafter provided
to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash
management services (including, without limitation, merchant services, direct deposit of payroll, business credit cards, and check
cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified
in Bank’s various agreements related thereto (each, a “Bank Services Agreement”).     

“Borrowing
Base” means (i) eighty five percent (85%) of Eligible Accounts and (ii) the lesser of (a) sixty percent (60%) of Advanced
Billing Accounts or (b) Seven Hundred Thousand Dollars ($700,000), as determined by Bank from (I) if no Event of Default has occurred
an is continuing, Borrower’s Transaction Report submitted at the end of the most recently ended month or (II) if an Event
of Default has occurred and is continuing, Borrower’s Transaction Report submitted at the end of the most recently ended
week, provided, however, that Bank may, with notice to Borrower, decrease the foregoing percentage in its good faith business judgment
based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.

“Credit
Extension” is any Advance, Term Loan A, Term Loan B, Term Loan C, each Letter of Credit, or any other extension of credit
by Bank for Borrower’s benefit.

“Eleventh
Amendment Effective Date” is April 30, 2012.

“Eligible
Billings” means invoices sent to Borrower’s customers arising in the ordinary course of Borrower’s business
from the sale of goods or the rendition of services; provided that such invoices (i) are consistent with past recognition policies
of Borrower and (ii) are not owing from an Affiliate of Borrower or any Person with respect to which there exists a material dispute
involving Borrower.

    	4

    	 

    

 

“FX Contract”
is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to purchase from or sell to Bank
a specific amount of Foreign Currency on a specified date.

“Letter
of Credit” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an application,
guarantee, indemnity, or similar agreement.

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

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

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

  “Modified Cumulative Net Income” means (a) Eligible Billings, less (b) (i) expenses related to costs of goods sold determined in accordance with GAAP and (ii) operating expenses, plus (c) (i) amortization of stock based compensation expense (ii) depreciation expense, (iii) estimated amounts of bad debt and (iv) other non-cash accounting charges, including charges incurred in connection with the impairment of goodwill and/or long lived assets.

2.10     Section
13 (Definitions). The following terms and their respective definitions set forth in Section 13 hereby are deleted in their
entireties:

     “Cash
Management Services”, “Cash Management Sublimit”, “FX Business Day”, “FX
Reserve”, “FX Forward Contract”, “Letter of Credit Sublimit”, “Liquidity”,
“Liquidity Amount” “Liquidity Period” and “Minimum Liquidity Amount”

2.11     Exhibit
C to the Agreement hereby is replaced with Exhibit C attached hereto.

3.     Limitation
of Amendments.

3.1     The
amendments set forth in Section 2, above, are effective for the purposes set forth herein and shall be limited precisely
as written and shall not be deemed to (a) be a consent to any amendment, waiver or modification of any other term or condition
of any Loan Document, or (b) otherwise prejudice any right or remedy which Bank may now have or may have in the future under or
in connection with any Loan Document.

3.2     This
Amendment shall be construed in connection with and as part of the Loan Documents and all terms, conditions, representations, warranties,
covenants and agreements set forth in the Loan Documents, except as herein amended, hereby are ratified and confirmed and shall
remain in full force and effect.

4.     Representations
and Warranties. To induce Bank to enter into this Amendment, Borrower hereby represents and warrants to Bank as follows:

4.1     The
representations and warranties contained in the Loan Documents are true, accurate and complete in all material respects as of the
date hereof (except to the extent such representations and warranties relate to an earlier date, in which case they are true and
correct as of such date) and no Event of Default has occurred and is continuing;

    	5

    	 

    

4.2     Borrower
has the power and authority to execute and deliver this Amendment and to perform its obligations under the Loan Agreement, as amended
by this Amendment;

4.3     The
organizational documents of Borrower delivered to Bank in connection with the execution hereof remain true, accurate and complete
and have not been amended, supplemented or restated and are and continue to be in full force and effect;

4.4     The
execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement,
as amended by this Amendment, have been duly authorized;

4.5     The
execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement,
as amended by this Amendment, do not and will not contravene (a) any law or regulation binding on or affecting Borrower, (b) any
contractual restriction with a Person binding on Borrower, (c) any order, judgment or decree of any court or other governmental
or public body or authority, or subdivision thereof, binding on Borrower, or (d) the organizational documents of Borrower;

4.6     The
execution and delivery by Borrower of this Amendment and the performance by Borrower of its obligations under the Loan Agreement,
as amended by this Amendment, do not require any order, consent, approval, license, authorization or validation of, or filing,
recording or registration with, or exemption by any governmental or public body or authority, or subdivision thereof, binding on
either Borrower, except as already has been obtained or made; and

4.7     This
Amendment has been duly executed and delivered by Borrower and is the binding obligation of Borrower, enforceable against Borrower
in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, liquidation,
moratorium or other similar laws of general application and equitable principles relating to or affecting creditors’ rights.

5.     Counterparts.
This Amendment may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute
one and the same instrument.

6.     Effectiveness.
This Amendment shall be effective as of the date first written above upon (a) the due execution and delivery to Bank of this Amendment
by each party hereto (b) the due execution and delivery to Bank of updated Borrowing Resolutions for Borrower, (c) the payment
by Borrower of a variance fee in the amount of Five Thousand Dollars ($5,000) and (d) the payment by Borrower of all Bank Expenses
incurred through the date of this Amendment.

7.     Reference
to and Effect on the Loan Agreement and the Other Documents. (i) On and after the Eleventh Amendment Effective Date, each reference
in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words
of like import referring to the Loan Agreement, and each reference in the other Loan Documents to the “Loan Agreement,”
“thereunder,” “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference
to the Loan Agreement as amended by this Amendment; and (ii) except as specifically amended by this Amendment, the Loan Agreement
and the other Loan Documents shall remain in full force and effect and are hereby ratified and confirmed.

 

[Signature page follows.]

    	6

    	 

    

 

In
Witness Whereof, the parties hereto have caused this Amendment to be duly executed and delivered as of the date first
written above.

	
        BANK

         

        SILICON VALLEY BANK

         

         

        By: /s/ Derek R. Brunelle

        Name:    Derek R. Brunelle

        Title:    Dept. Team Leader
	
        BORROWER

         

        EDGEWAVE, INC.

         

         

        By: /s/ Thalia Gietzen

        Name:    Thalia Gietzen

        Title:     VP of Finance

	 	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Eleventh Amendment
to Loan and Security Agreement]

    	 

    	 

    

 

EXHIBIT C

 

COMPLIANCE CERTIFICATE

 

	TO:   SILICON VALLEY BANK	Date:  ____________
	FROM:  EDGEWAVE, INC.	 

 

The undersigned
authorized officer of EDGEWAVE, INC. (“Borrower”) certifies that under the terms and conditions of the Loan
and Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in complete compliance for the
period ending _______________ with all required covenants except as noted below, (2) there are no Events of Default, (3) all
representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further that those representations
and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such
date, (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower
has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement, and (5) no Liens have been levied or claims
made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower has not previously
provided written notification to Bank. Attached are the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying
letter or footnotes and except as otherwise permitted in the Agreement. 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 Projections	FYE within 45 days	Yes   No
	10-Q, 10-K and 8-K	Within 5 days after filing with SEC	Yes   No
	A/R & A/P Agings, Deferred Revenue Report	Monthly within 15 days	Yes   No
	Transaction Report	(A) the more frequent of weekly or with each Advance request when there are Advances outstanding or (B) if there are no Advances outstanding, within fifteen (15) days after the end of each month	Yes   No

 

	Financial Covenant	Required	Actual	Complies
	 	 	 	 
	Maintain on a Monthly Basis:	 	 	 
	               Minimum Modified Cumulative Net Income (Loss)	$_______*	$_______	Yes   No

 

* a Modified Cumulative Net Income of at least,
(i) on a cumulative, year to date basis for 2012, negative Three Million Dollars (-$3,000,000), (ii) on a trailing three (3) month
basis from January 1, 2013 through March 31, 2013, an amount equal to at least eighty percent (80%) of Borrower’s projected
Modified Cumulative Net Income for the applicable period, as set forth in Borrower’s annual financial projections delivered
to Bank pursuant to Section 6.2(v)(B), and (iii) on a trailing three (3) month basis at all times thereafter, One Dollar ($1.00)

 

    	 

    	 

    

 

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

 

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

 

 

 

 

 

 

 

	
        EDGEWAVE, INC.

         

         

        By: __________________________

        Name: _______________________

        Title: ________________________

         
	
        BANK USE ONLY

         

        Received by: _____________________

        authorized
        signer

        Date:   _________________________

         

        Verified:   ________________________

        authorized
        signer

        Date:   _________________________

         

        Compliance Status:   Yes No

 

 

 

    	 

    	 

    

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

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

 

Dated:     ____________________

 

Modified Cumulative Net Income (Section
6.9)

Required:     A Modified Cumulative Net Income of at least,
(i) on a on a cumulative, year to date basis for 2012, negative Three Million Dollars (-$3,000,000), (ii) on a trailing three (3)
month basis from January 1, 2013 through March 31, 2013, an amount equal to at least eighty percent (80%) of Borrower’s projected
Modified Cumulative Net Income for the applicable period, as set forth in Borrower’s annual financial projections delivered
to Bank pursuant to Section 6.2(v)(B), and (iii) on a trailing three (3) month basis at all times thereafter, One Dollar ($1.00)

Actual:

 

	A.	Aggregate value of invoices sent to Borrower’s customers in the ordinary course of Borrower’s business that are consistent with Borrower’s past recognition policies	$______
	 	 	 
	B.	Aggregate value of invoices owing from an Affiliate of Borrower  or any Person with respect to which there exists a material dispute involving Borrower	$______
	 	 	 
	C.	
        Total Eligible Billings (Line A minus Line B)

         
	$______
	D.	Aggregate value of expenses related to costs of goods sold in accordance with GAAP	$______
	 	 	 
	E.	Aggregate value of operating expenses	 
	 	 	 
	F.	Aggregate value of amortization of stock based compensation and depreciation expenses	$______
	 	 	 
	G.	Estimated amounts of bad debt	$______
	 	 	 
	H.	Aggregate value of other non-cash accounting charges, including charges incurred in connection with the impairment of goodwill and/or long lived assets	$______
	 	 	 
	I.	Modified Cumulative Net Income (line C less line D less line E plus line F plus line G plus line H)	$______

 

 

 

Is line I equal to or greater than the dollar amount required
above?

	_____  No, not in compliance	_____  Yes, in compliance

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