Document:

Exhibit 4.5

 

POWER MEDICAL INTERVENTIONS, INC.

 

2007 EMPLOYEE STOCK PURCHASE PLAN

 

1.             PURPOSE.

 

The Power Medical Interventions, Inc. 2007
Employee Stock Purchase Plan (the “Plan”) is intended to provide a method
whereby employees of  Power Medical
Interventions, Inc. (the “Company”) will have an opportunity to acquire an
ownership interest (or increase an existing ownership interest) in the Company
through the purchase of shares of the Common Stock of the Company.  It is the intention of the Company that the
Plan qualify as an “employee stock purchase plan” under Section 423 of the
Internal Revenue Code of 1986, as amended (the “Code”). The provisions of the
Plan shall, accordingly, be construed so as to extend and limit participation
in a manner consistent with the requirements of that section of the Code.

 

2.             DEFINITIONS.

 

(a)   “Board” means the Board of
Directors of the Company.

 

(b)   “Code” shall have the meaning
set forth in Paragraph 1.

 

(c)   “Committee” means the
Compensation Committee of the Board.

 

(d)   “Common Stock” means the common
stock, $.001 par value per share, of the Company.

 

(e)   “Company” shall also include any
subsidiary of Power Medical Interventions, Inc. designated as a
participant in the Plan by the Board, unless the context otherwise requires.

 

(f)    “Compensation” means, for the
purpose of any Offering pursuant to this Plan, base pay in effect as of the
Offering Commencement Date (as hereinafter defined).  Compensation shall not include any deferred
compensation other than contributions by an individual through a salary
reduction agreement to a cash or deferred plan pursuant to Section 401(k) of
the Code or to a cafeteria plan pursuant to Section 125 of the Code.

 

(g)   “Employee” means any person who
is customarily employed at least 20 hours per week and more than five months in
a calendar year by (i) the Company or (ii) any subsidiary
corporation.

 

(h)   “Investment Accounts” shall have
the meaning set forth in Paragraph 9.

 

(i)    “Offering” shall have the
meaning set forth in Paragraph 4.

 

 

(j)    “Offering Commencement Date”
shall have the meaning set forth in Paragraph 4.

 

(k)   “Offering Termination Date”
shall have the meaning set forth in Paragraph 4.

 

(l)    “Plan” shall have the meaning
set forth in Paragraph 1.

 

(m)  “Subsidiary corporation” shall
mean any present or future corporation which is or would constitute a “subsidiary
corporation” as that term is defined in Section 425 of the Code.

 

3.             ELIGIBILITY.

 

(a)   Participation in the Plan is
completely voluntary. Participation in any one or more of the offerings under
the Plan shall neither limit, nor require, participation in any other offering.

 

(b)   Each employee of the Company
shall be eligible to participate in the Plan on the first Offering Commencement
Date, as hereafter defined, following the completion of twelve months of
continuous service with the Company and/or its subsidiary corporations.  Notwithstanding the foregoing, no employee
shall be granted an option under the Plan:

 

(i)            if, immediately after the grant,
such employee would own stock, and/or hold outstanding options to purchase
stock, possessing 5% or more of the total combined voting power or value of all
classes of stock of the Company or any subsidiary corporation; for purposes of
this Paragraph the rules of Section 425(d) of the Code shall
apply in determining stock ownership of any employee; or

 

(ii)           which permits his rights to purchase stock under all Section 423
employee stock purchase plans of the Company and its subsidiary corporations to
exceed $25,000 of the fair market value of the stock (determined at the time
such option is granted) for each calendar year in which such option is
outstanding; for purposes of this Paragraph, the rules of Section 423(b)(8) of
the Code shall apply.

 

4.             OFFERING DATES.

 

The right to purchase stock hereunder shall
be made available by a series of  six-month offerings
(the “Offering” or “Offerings”) to employees eligible in accordance with
Paragraph 3 hereof. The Committee will, in its discretion, determine the
applicable date of commencement (“Offering Commencement Date”) and termination
date (“Offering Termination Date”) for each Offering.  Participation in any one or more of the
Offerings under the Plan shall neither limit, nor require, participation in any
other Offering.

 

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5.             PARTICIPATION.

 

Any eligible employee may become a
participant by completing a payroll deduction authorization form provided by
the Company and filing it with the office of the Company’s Treasurer [not less than ten business days; TBD by Board] prior to
each applicable Offering Commencement Date, as determined by the Committee
pursuant to Paragraph 4.

 

6.             PAYROLL DEDUCTIONS.

 

(a)   At the time a participant files
his authorization for a payroll deduction, he shall elect to have deductions
made from his pay on each payday during any Offering in which he is a
participant at a specified percentage of his Compensation as determined on the
applicable Offering Commencement Date; said percentage shall be in increments
of one percent up to a maximum percentage of 5%.

 

(b)   Payroll deductions for a
participant shall commence on the applicable Offering Commencement Date when
his authorization for a payroll deduction becomes effective and shall end on
the Offering Termination Date of the Offering to which such authorization is
applicable unless sooner terminated by the participant as provided in Paragraph
10.

 

(c)   All payroll deductions made for
a participant shall be credited to his account under the Plan.  A participant may not make any separate cash
payment into such account.

 

(d)   A participant may withdraw from
the Plan at any time during the applicable Offering period.

 

7.             GRANTING OF OPTION.

 

(a)   On the Offering Termination Date
of each Offering, a participating employee shall be deemed to have been granted
an option to purchase a maximum number of shares of the Common Stock equal to
an amount determined by dividing 85% of the market value per share of the
Common Stock on the applicable Offering Termination Date into an amount equal
to the sum of (i) the payroll deductions that have been withheld for the
account of the participating employee during the applicable Offering period
plus (ii) any amounts in the employee’s account on the Offering
Commencement Date that have been carried forward from prior Offerings. Such
market value per share of the Common Stock shall be determined as provided in
clause (i) of Paragraph 7(b).

 

(b)       The option price of the Common Stock purchased with payroll
deductions made during each such Offering for a participant therein shall be 85%
of the last sale price as reported by The Nasdaq Stock Market LLC or, if the
Common Stock is listed on another exchange, the closing price of the Common
Stock on the exchange, in each case on the Offering Termination Date applicable
to such Offering (or on the next regular business date on which shares of the
Common Stock shall be traded in the event that no shares of the Common Stock
have been traded on the Offering 

 

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Termination Date); or if the Common Stock is
not listed on Nasdaq or on another exchange, 85% of the fair market value on
the Offering Termination Date as determined by the Committee.

 

8.             EXERCISE OF OPTION.

 

(a)   Unless a participant gives
written notice to the Treasurer of the Company as hereinafter provided, his
option for the purchase of Common Stock with payroll deductions made during any
Offering will be deemed to have been exercised automatically on the Offering
Termination Date applicable to such Offering for the purchase of the number of whole
shares of Common Stock which the accumulated payroll deductions in his account
at that time will purchase at the applicable option price (but not in excess of
the number of shares for which options have been granted the employee pursuant
to Paragraph 7(a)), and any excess in his account at that time will be returned
to the Participant.

 

(b)   Fractional shares will not be
issued under the Plan and any accumulated payroll deductions which would have
been used to purchase fractional shares shall be automatically carried forward
to the next Offering unless the participant elects, by written notice to the
Treasurer of the Company, to have the excess cash returned to him.

 

9.             DELIVERY OF SHARES.

 

The Company shall deliver to each participant (as promptly as possible
after the appropriate Offering Termination Date), through book entry or, at the
written request of the participant made not less than five business days prior
to the Offering Termination Date, by delivery of a certificate representing
such shares, the shares of Common Stock purchased upon exercise of his or her
option.

 

10.           WITHDRAWAL AND TERMINATION.

 

(a)   Prior to the Offering
Termination Date for an Offering, any participant may withdraw the payroll
deductions credited to his account under the Plan for such Offering by giving
written notice to the Treasurer of the Company.  All of the participant’s payroll deductions
credited to such account will be paid to him promptly after receipt of notice
of withdrawal, without interest, and no future payroll deductions will be made
from his pay during such offering.

 

(b)   A participant’s election not to
participate in, or withdrawal from, any Offering will not have any effect upon
his eligibility to participate in any succeeding Offering or in any similar
plan which may hereafter be adopted by the Company.

 

(c)   Upon termination of the
participant’s employment for any reason, including retirement but excluding
death, the payroll deductions credited to his account will be returned to him,
or, in the case of his death, to the person or persons entitled thereto under
Paragraph 14.

 

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(d)   Upon termination of the
participant’s employment because of death, his beneficiary (as defined in Paragraph
14) shall have the right to elect, by written notice given to the Company’s
Treasurer prior to the expiration of a period of 90 days commencing with the
date of the death of the participant, either:

 

(i)            to withdraw all of the payroll
deductions credited to the participant’s account under the Plan; or

 

(ii)           to exercise the participant’s option for the purchase of
stock on the Offering Termination Date next following the date of the
participant’s death for the purchase of the number of full shares which the
accumulated payroll deductions in the participant’s account at the date of the
participant’s death will purchase at the applicable option price (subject to
the limitation contained in Paragraph 7(a)), and any excess in such account
will be returned to said beneficiary.  In
the event that no such written notice of election shall be duly received by the
office of the Company’s Treasurer, the beneficiary shall automatically be
deemed to have elected to withdraw the payroll deductions credited to the participant’s
account at the date of the participant’s death and the same will be paid
promptly to said beneficiary.

 

11.           INTEREST.

 

No interest will be paid or allowed on any
money paid into the Plan or credited to the account of any participating
employee.

 

12.           STOCK.

 

(a)   The maximum number of shares of
Common Stock available for issuance and purchase by employees under the Plan,
subject to adjustment upon changes in capitalization of the Company as provided
in Paragraph 17, shall be 1,200,000 shares of Common Stock, $.001 par value per
share, of the Company, subject to adjustment for splits and recapitalizations.  If the total number of shares for which
options are exercised on any Offering Termination Date in accordance with
Paragraph 8 exceeds the maximum number of shares for the applicable Offering,
the Company shall make a pro rata allocation of the shares available for
delivery and distribution in an equitable manner, and the balances of payroll
deductions credited to the account of each participant under the Plan shall be returned
to the participant.

 

(b)   The participant will have no
interest in stock covered by his option until such option has been exercised.

 

13.           ADMINISTRATION.

 

The Plan shall be administered by the
Committee. The interpretation and construction of any provision of the Plan and
adoption of rules and regulations for administering the Plan shall be made
by the Committee. Determinations made by the Committee with respect to any
matter or provision contained in the Plan shall be final, conclusive and
binding upon the Company and upon all participants, their heirs or legal
representatives. Any rule or regulation adopted by the 

 

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Committee
shall remain in full force and effect unless and until altered, amended, or
repealed by the Committee.

 

14.           DESIGNATION OF BENEFICIARY.

 

A participant shall file with the Treasurer
of the Company a written designation of a beneficiary who is to receive any
Common Stock and/or cash under the Plan. Such designation of beneficiary may be
changed by the participant at any time by written notice. Upon the death of a
participant and upon receipt by the Company of proof of the identity and
existence at the participant’s death of a beneficiary validly designated by him
under the Plan, the Company shall deliver such Common Stock and/or cash to such
beneficiary. In the event of the death of a participant and in the absence of a
beneficiary validly designated under the Plan who is living at the time of such
participant’s death, the Company shall deliver such Common Stock and/or cash to
the executor or administrator of the estate of the participant. No beneficiary
shall prior to the death of the participant by whom he has been designated,
acquire any interest in the Common Stock and/or cash credited to the
participant under the Plan.

 

15.           TRANSFERABILITY.

 

Neither payroll deductions credited to a
participant’s account nor any rights with regard to the exercise of an option
or to receive Common Stock under the Plan may be assigned, transferred,
pledged, or otherwise disposed of in any way by the participant other than by
will or the laws of descent and distribution. Any such attempted assignment,
transfer, pledge, or other disposition shall be without effect.

 

16.           USE OF FUNDS.

 

All payroll deductions received or held by
the Company under this Plan may be used by the Company for any corporate
purpose, and the Company shall not be obligated to segregate such payroll
deductions.

 

17.           EFFECT OF CHANGES OF COMMON STOCK.

 

If the Company shall subdivide or reclassify
the Common Stock which has been or may be optioned under this Plan, or shall
declare thereon any dividend payable in shares of such Common Stock, or shall
take any other action of a similar nature affecting such Common Stock, then the
number and class of shares of Common Stock which may thereafter be optioned (in
the aggregate and to any participant) shall be adjusted accordingly and in the
case of each option outstanding at the time of any such action, the number and
class of shares which may thereafter be purchased pursuant to such option and
the option price per share shall be adjusted to such extent as may be
determined by the Committee, with the approval of independent public
accountants and counsel, to be necessary to preserve the rights of the holder
of such option.

 

18.           AMENDMENT OR TERMINATION.

 

The Board may at any time terminate or amend
the Plan. No such termination shall affect options previously granted, nor may
an amendment make any change in any option theretofore 

 

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granted which
would adversely affect the rights of any participant holding options under the
Plan.

 

19.           NOTICES.

 

All notices or other communications by a
participant to the Company under or in connection with the Plan shall be deemed
to have been duly given when received by the Treasurer of the Company.

 

20.           MERGER OR CONSOLIDATION.

 

If the Company shall at any time merge into
or consolidate with another corporation, the holder of each option then
outstanding will thereafter be entitled to receive at the next Offering
Termination Date upon the exercise of such option for each share as to which
such option shall be exercised, the securities or property which a holder of
one share of the Common Stock was entitled to upon and at the time of such
merger or consolidation.  In accordance
with this Paragraph and Paragraph 17, the Committee shall determine the kind
and amount of such securities or property which such holder of an option shall
be entitled to receive.  A sale of all or
substantially all of the assets of the Company shall be deemed a merger or
consolidation for the foregoing purposes.

 

21.           APPROVAL OF STOCKHOLDERS.

 

The Plan is subject to the approval of the
stockholders of the Company by written consent or at their next annual meeting
or at any special meeting of the stockholders for which one of the purposes of
such a special meeting shall be to act upon the Plan.

 

22.           GOVERNMENTAL AND OTHER REGULATIONS.

 

The Plan, and the grant and exercise of the
rights to purchase shares hereunder, and the Company’s obligation to sell and
deliver shares upon the exercise of rights to purchase shares, shall be subject
to all applicable federal, state and foreign laws, rules and regulations,
and to such approvals by any regulatory or governmental agency as may, in the
opinion of counsel for the Company, be required.  The Plan shall be governed by, and construed
and enforced in accordance with, the provisions of Sections 421, 423 and 424 of
the Code and the substantive laws of the Commonwealth of Massachusetts.  In the event of any inconsistency between such
provisions of the Code and any such laws, said provisions of the Code shall
govern to the extent necessary to preserve favorable federal income tax treatment
afforded employee stock purchase plans under Section 423 of the Code.

 

* * *

 

7EXHIBIT 10.1

 

LOAN
AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT
(this “Agreement”) dated as of the Effective
Date between SILICON VALLEY BANK, a California
corporation (“Bank”), and CIMETRIX
INCORPORATED, a Nevada corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall
repay Bank.  The parties agree as
follows:

 

1                                         ACCOUNTING
AND OTHER TERMS

 

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

 

2                                         LOAN
AND TERMS OF PAYMENT

 

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

 

2.1.1                     Revolving
Advances.

 

(a)                                  Availability.  Subject to the terms and conditions of this
Agreement, Bank shall make Advances not exceeding the Availability Amount.  Amounts borrowed hereunder may be repaid and,
prior to the Revolving Line Maturity Date, reborrowed, subject to the
applicable terms and conditions precedent herein.

 

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

 

2.1.2                     Cash
Management Services Sublimit. 
Borrower may use up to One Hundred Thousand Dollars ($100,000.00) of the
Revolving Line for Bank’s cash management services which may include merchant
services, direct deposit of payroll, business credit card, and check cashing
services identified in Bank’s various cash management services agreements
(collectively, the “Cash Management Services”).  The dollar amount of any Cash Management
Services provided under this sublimit will reduce the amount otherwise
available under the Revolving Line.  Any
amounts Bank pays on behalf of Borrower for any Cash Management Services will
be treated as Advances under the Revolving Line and will accrue interest at the
interest rate applicable to Advances.

 

2.2                               Overadvances.  If, at any time, the Credit Extensions under
Sections 2.1.1 and 2.1.2 exceed the lesser of either (a) the Revolving
Line or (b) the Borrowing Base, Borrower shall immediately pay to Bank in
cash such excess.

 

2.3                               Payment
of Interest on the Credit Extensions.

 

(a)                                  Interest
Rate.  Subject to Section 2.3(b),
the principal amount outstanding under the Revolving Line shall accrue interest
at a floating per annum rate equal to one (1.00) percentage point above the
Prime Rate, which interest shall be payable monthly in accordance with Section 2.3(f) below.

 

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

 

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

 

 

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

 

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

 

(f)                                    Payments.  Unless otherwise provided, interest is
payable monthly on the last 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.

 

2.4                               Fees.  Borrower shall pay to Bank:

 

(a)                                  Commitment
Fee.  A fully earned, non-refundable
commitment fee of $7,500.00 equal to three-quarters percent (0.75%) of the
Revolving Line, on the Effective Date; and

 

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

 

3                                         CONDITIONS
OF LOANS

 

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

 

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

 

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

 

(c)                                  duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;

 

(d)                                 the
Subordination Agreements duly executed by certain Persons in favor of Bank;

 

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

 

(f)                                    the
Perfection Certificate executed by Borrower;

 

(g)                                 a
landlord’s consent for Borrower’s location at 6979 South High Tech Drive, Salt
Lake City, Utah 84047 executed by the landlord in favor of Bank;

 

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

 

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

 

(j)                                     payment
of the fees and Bank Expenses then due as specified in Section 2.4 hereof.

 

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

 

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

 

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

 

3.3                               Covenant
to Deliver.

 

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

 

3.4                               Procedures
for Borrowing.

 

Subject to the prior satisfaction of all other
applicable conditions to the making of an Advance set forth in this Agreement,
to obtain an Advance (other than Advances under Section 2.1.2), 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 any such
electronic or facsimile notification, Borrower shall deliver to Bank by
electronic mail or facsimile a completed Payment/Advance Form executed by
a Responsible Officer or his or her designee. 
Bank may rely on any telephone notice given by a person whom Bank
believes is a Responsible Officer or designee. 
Bank shall credit Advances to the Designated Deposit Account.  Bank may make Advances under this Agreement
based on instructions from a Responsible Officer or his or her designee or
without instructions if the Advances are necessary to meet Obligations which have
become due.

 

4                                         CREATION
OF SECURITY INTEREST

 

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

 

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

 

4.2                               Authorization
to File Financing Statements. 
Borrower hereby authorizes Bank to file financing statements, without notice
to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s
interest or 

 

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rights hereunder, including a notice that any disposition of the
Collateral, by either Borrower or any other Person, shall be deemed to violate
the rights of Bank under the Code.

 

5                                         REPRESENTATIONS
AND WARRANTIES

 

Borrower
represents and warrants as follows:

 

5.1                               Due
Organization, Authorization; Power and Authority.  Borrower is duly existing and in good standing
as a Registered Organization in its jurisdiction of formation and is qualified
and licensed to do business and is in good standing in any jurisdiction in
which the conduct of its business or its ownership of property requires that it
be qualified except where the failure to do so could not reasonably be expected
to have a material adverse effect on Borrower’s business.  In connection with this Agreement, Borrower
has delivered to Bank a completed certificate signed by Borrower, entitled “Perfection
Certificate”.  Borrower represents and
warrants to Bank that (a) Borrower’s exact legal name is that indicated on
the Perfection Certificate and on the signature page hereof; (b) Borrower
is an organization of the type and is organized in the jurisdiction set forth
in the Perfection Certificate; (c) the Perfection Certificate accurately
sets forth Borrower’s organizational identification number or accurately states
that Borrower has none; (d) the Perfection Certificate accurately sets
forth Borrower’s place of business, or, if more than one, its chief executive
office as well as Borrower’s mailing address (if different than its chief
executive office); (e) Borrower (and each of its predecessors) has not, in
the past five (5) years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete (it being understood and
agreed that Borrower may from time to time update certain information in the
Perfection Certificate after the Effective Date to the extent permitted by one
or more specific provisions in this Agreement).  If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification
number.

 

The execution, delivery
and performance by Borrower of the Loan Documents to which it is a party have
been duly authorized, and do not (i) conflict with any of Borrower’s
organizational documents, (ii) contravene, conflict with, constitute a
default under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any
of its Subsidiaries or any of their property or assets may be bound or
affected, (iv) require any action by, filing, registration, or
qualification with, or Governmental Approval from, any Governmental Authority
(except such Governmental Approvals which have already been obtained and are in
full force and effect or (v) constitute an event of default under any
material agreement by which Borrower is bound. 
Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could have a material adverse effect
on Borrower’s business.

 

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

 

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

 

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

 

Borrower is the sole owner of its intellectual property, except for
non-exclusive licenses granted to its customers in the ordinary course of
business.  Each patent is valid and
enforceable, and no part of the intellectual property has been judged invalid
or unenforceable, in whole or in part, and to the best of Borrower’s knowledge,
no claim has been made that any part of the intellectual property violates the
rights of any third party except to the extent such claim could not reasonably
be expected to have a material adverse effect on Borrower’s business.  

 

4

 

Except as noted on
the Perfection Certificate, Borrower is not a party to, nor is bound by, any
material license or other agreement with respect to which Borrower is the
licensee (a) that prohibits or otherwise restricts Borrower from granting
a security interest in Borrower’s interest in such license or agreement or any
other property, or (b) for which a default under or termination of could
interfere with the Bank’s right to sell any Collateral.  Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such license or
agreement (other than over-the-counter software that is commercially available
to the public).  Borrower shall take such
steps as Bank requests to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for (x) all such licenses or agreements to
be deemed “Collateral” and for Bank to have a security interest in it that
might otherwise be restricted or prohibited by law or by the terms of any such
license or agreement, whether now existing or entered into in the future, and (y) Bank
to have the ability in the event of a liquidation of any Collateral to dispose
of such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

 

5.3                               Accounts
Receivable.  For any Eligible Account
in any Borrowing Base Certificate, all statements made and all unpaid balances
appearing in all invoices, instruments and other documents evidencing such
Eligible Accounts are and shall be true and correct and all such invoices,
instruments and other documents, and all of Borrower’s Books are genuine and in
all respects what they purport to be.  [Whether or not an Event of Default has occurred and is
continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s
security interest in such funds and verify the amount of such Eligible Account.]  All sales and other
transactions underlying or giving rise to each Eligible Account shall comply in
all material respects with all applicable laws and governmental rules and
regulations.  Borrower has no knowledge
of any actual or imminent Insolvency Proceeding of any Account Debtor whose
accounts are an Eligible Account in any Borrowing Base Certificate.  To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements
relating to all Eligible Accounts are genuine, and all such documents,
instruments and agreements are legally enforceable in accordance with their
terms.

 

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

 

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

 

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

 

5.7                               Regulatory
Compliance.  Borrower is not an “investment
company” or a company “controlled” by an “investment company” under the
Investment Company Act.  Borrower is not
engaged as one of its important activities in extending credit for margin stock
(under Regulations T and U of the Federal Reserve Board of Governors).  Borrower has complied in all material
respects with the Federal Fair Labor Standards Act.  Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public
Utility Holding Company Act of 2005. 
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 their respective
businesses 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 

 

5

 

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

 

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

 

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

 

6                                         AFFIRMATIVE
COVENANTS

 

Borrower shall do all of
the following:

 

6.1                               Government
Compliance.

 

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

 

(b)                                 Obtain
all of the Governmental Approvals necessary for the performance by Borrower of
its obligations under the Loan Documents to which it is a party and the grant
of a security interest to Bank in all of its property.  Borrower shall promptly provide copies of any
such obtained Governmental Approvals to Bank.

 

6.2                               Financial
Statements, Reports, Certificates.

 

(a)                                  Deliver
to Bank:  (i) as soon as available,
but no later than five (5) days after filing with the Securities Exchange
Commission, Borrower’s 10K and 10Q reports; (ii) a Compliance Certificate
together with delivery of the 10K and 10Q reports; (iii) a prompt report
of any legal actions pending or threatened against Borrower or any Subsidiary
that could result in damages or costs to Borrower or any Subsidiary of
$50,000.00 or more; and (iv) budgets, sales projections, operating plans
or other financial information Bank reasonably requests.

 

Borrower’s 10K and 10Q reports required to be
delivered pursuant to Section 6.2(a)(i) shall be deemed to have been
delivered on the date on which Borrower posts such report or provides a link
thereto on Borrower’s or another website on the Internet; provided, that
Borrower shall provide paper copies to Bank of the Compliance Certificates
required by Section 6.2(a)(ii).

 

(b)                                 Within
thirty (30) days after the last day of each month, deliver to Bank a duly
completed Borrowing Base Certificate signed by a Responsible Officer, with (i) aged
listings of accounts receivable and accounts payable (by invoice date) and (ii) a
schedule of Deferred Revenue by customer.

 

6

 

(c)                                  Within
thirty (30) days after the last day of each month, deliver to Bank its monthly  financial statements together with a duly completed
Compliance Certificate signed by a Responsible Officer setting forth calculations
showing compliance with the financial covenants set forth in this Agreement.

 

(d)                                 Allow
Bank to audit Borrower’s Collateral at Borrower’s expense.  Such audits 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 all 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 Bank of all returns, recoveries, disputes and claims that
involve more than Fifty Thousand Dollars ($50,000.00).

 

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 Bank, on demand, appropriate certificates attesting to such payments, and
pay all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms.

 

6.5                               Insurance.  Keep its business and the Collateral insured
for risks and in amounts standard for companies in Borrower’s industry and
location and as Bank may reasonably request. 
Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Bank.  All
property policies shall have a lender’s loss payable endorsement showing Bank
as the sole lender loss payee and waive subrogation against Bank, and all
liability policies shall show, or have endorsements showing, Bank as an
additional insured.  All policies (or the
loss payable and additional insured endorsements) shall provide that the
insurer shall endeavor to give Bank at least twenty (20) days notice before
canceling, amending, or declining to renew its policy.  At Bank’s request, Borrower shall deliver
certified copies of policies and evidence of all premium payments.  Proceeds payable under any policy shall, at
Bank’s option, be payable to Bank 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 Bank, Bank 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 Bank deems prudent.

 

WARNING

 

Unless Borrower (“you” or “your”) provides Bank (“us”, “we” or “our”)
with evidence of the insurance coverage as required by our contract or loan
agreement, we may purchase insurance at your expense to protect our
interest.  This insurance may, but need
not, also protect your interest.  If the
collateral becomes damaged, the coverage we purchase may not pay any claim you
make or any claim made against you.  You
may later cancel this coverage by providing evidence that you have obtained
property coverage elsewhere.

 

You are responsible for the cost of any insurance purchased by us.  The cost of this insurance may be added to
your contract or loan balance.  If the
cost is added to your contract or loan balance, the interest rate on the underlying
contract or loan will apply to this added amount.  The effective date of coverage may be the
date your prior coverage lapsed or the date you failed to provide proof of
coverage.

 

This coverage we purchased may be
considerably more expensive than insurance you can obtain on your own and may
not satisfy any need for property damage coverage or any mandatory liability
insurance requirements imposed by applicable law.

 

6.6                               Operating
Accounts.

 

(a)                          Maintain
its primary operating and other deposit accounts and securities accounts with
Bank and Bank’s Affiliates.

 

(b)                                 Provide
Bank five (5) days prior written notice before establishing any Collateral
Account at or with any bank or financial institution other than Bank or Bank’s
Affiliates.  For each Collateral Account
that Borrower at any time maintains, Borrower shall cause the applicable bank
or financial institution (other 

 

7

 

than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder.  The provisions of the previous sentence shall
not apply to deposit accounts exclusively used for payroll, payroll taxes and
other employee wage and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as such.

 

6.7                               Financial
Covenants.

 

Borrower shall
maintain at all times, to be tested as of the last day of each month, unless
otherwise noted, on a consolidated basis with respect to Borrower and its
Subsidiaries:

 

(a)                                  Quick
Ratio.  A ratio of Quick Assets to
Current Liabilities of at least: (i) 1.15 to 1.00 from the Effective Date
through May 31, 2008 and (ii) 1.35 to 1.00 from and after June 1,
2008.

 

(b)                                 Maximum
Losses.  Borrower shall not suffer
any loss, calculated on a rolling three-month period, in excess of:  (i) $650,000.00 from the Effective Date
through December 31, 2007; (ii) $625,000.00 from January 1, 2008
through March 31, 2008; (iii) $385,000.00 from April 1, 2008
through June 30, 2008; (iv) $200,000.00 from July 1, 2008
through September 30, 2008; and (v)  $0 from and after October 1,
2008.

 

6.8                               Protection
and Registration of Intellectual Property Rights.  Borrower shall:  (a) protect, defend and maintain the
validity and enforceability of its intellectual property; (b) promptly
advise Bank in writing of material infringements of its intellectual property;
and (c) not allow any intellectual property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without Bank’s
written consent.  [If
Borrower (i) obtains any patent, registered trademark or servicemark,
registered copyright, registered mask work, or any pending application for any
of the foregoing, whether as owner, licensee or otherwise, or (ii) applies
for any patent or the registration of any trademark or servicemark, then
Borrower shall immediately provide written notice thereof to Bank and shall
execute such intellectual property security agreements and other documents and
take such other actions as Bank shall request in its good faith business
judgment to perfect and maintain a first priority perfected security interest
in favor of Bank in such property.  If
Borrower decides to register any copyrights or mask works in the United States
Copyright Office, Borrower shall: (x) provide Bank with at least fifteen
(15) days prior written notice of Borrower’s 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 and such other documents and take
such other actions as Bank may request in its good faith business judgment to
perfect and maintain a first priority perfected security interest in favor of
Bank in the copyrights or mask works intended to be registered with the United
States Copyright Office; and (z) record such intellectual property
security agreement with the United States Copyright Office contemporaneously
with filing the copyright or mask work application(s) with the United
States Copyright Office.  Borrower shall
promptly provide to Bank copies of all applications that it files for patents
or for the registration of trademarks, servicemarks, copyrights or mask works,
together with evidence of the recording of the intellectual property security
agreement necessary for Bank to perfect and maintain a first priority perfected
security interest in such property.

 

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

 

6.10                        Designated
Senior Indebtedness.  Borrower shall
designate all principal of, interest (including all interest accruing after the
commencement of any bankruptcy or similar proceeding, whether or not a claim
for post-petition interest is allowable as a claim in any such proceeding), and
all fees, costs, expenses and other amounts accrued or due under this Agreement
as “Designated Senior Indebtedness”, or such similar term, in any future
Subordinated Debt incurred by Borrower after the date hereof, if such
Subordinated Debt contains such term or similar term and if the effect of such
designation is to grant to Bank the same or similar rights as granted to Bank
as a holder of “Designated Senior Indebtedness” under the Indenture.

 

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

 

8

 

7                                         NEGATIVE
COVENANTS

 

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

 

7.1                               Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively, “Transfer”), or
permit any of its Subsidiaries to Transfer, all or any part of its business or
property, except for Transfers (a) of Inventory in the ordinary course of
business; (b) of worn-out or obsolete Equipment; and (c) in
connection with Permitted Liens and Permitted Investments.

 

7.2                               Changes
in Business; Change in Control; Jurisdiction of Formation.  Engage in any material line of business other
than those lines of business conducted by Borrower and its Subsidiaries on the
date hereof and any businesses reasonably related, complementary or incidental
thereto or reasonable extensions thereof;  permit or
suffer any Change in Control.  Borrower
will not, without prior written notice, change its jurisdiction of formation.

 

7.3                               Mergers
or Acquisitions.  Merge or
consolidate, or permit any of its Subsidiaries to merge or consolidate, with
any Person other than with Borrower or any Subsidiary, or acquire, or permit
any of its Subsidiaries to acquire, all or substantially all of the capital
stock or property of a Person other than Borrower or any Subsidiary, except
where no Event of Default has occurred and is continuing or would result from
such action during the term of this Agreement, and (a) Borrower is the
surviving entity or (b) such merger or consolidation is a Transfer
otherwise permitted pursuant to Section 7.1 hereof.

 

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

 

7.5                               Encumbrance.  Create, incur, allow, or suffer any Lien on
any of its property, or assign or convey any right to receive income, including
the sale of any Accounts, or permit any of its Subsidiaries to do so, except
for Permitted Liens, permit any Collateral not to be subject to the first
priority security interest granted herein, or enter into any agreement,
document, instrument or other arrangement (except with or in favor of Bank)
with any Person which directly or indirectly prohibits or has the effect of
prohibiting Borrower 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 and the definition
of “Permitted Lien” herein.

 

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

 

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

 

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 Bank.

 

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

 

9

 

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 (which three (3) day grace period
shall not apply to payments due on the Revolving Line Maturity Date).  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, 6.5, 6.6, 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 or any Loan Documents, and as to any default (other
than those specified in this Section 8) under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure the
default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but no Credit Extensions shall be made during such cure period).  Grace periods provided under this section
shall not apply, among other things, to financial covenants or any other
covenants set forth in subsection (a) above;

 

8.3                               Material
Adverse Change.  A Material Adverse
Change occurs;

 

8.4                               Attachment.  (a) Any material portion of Borrower’s
assets is seized, levied on, or comes into possession of a trustee or receiver;
(b) the service of process seeking to attach, by trustee or similar
process, any funds of Borrower or of any entity under control of Borrower
(including a Subsidiary) on deposit with Bank or any Bank Affiliate; (c) Borrower
is enjoined, restrained, or prevented by court order from conducting any part
of its business; or (d) a notice of lien, levy, or assessment is filed
against any of Borrower’s assets by any government agency, and the same under
clauses (a) through (d) hereof are not, within ten (10) days
after the occurrence thereof, discharged or stayed (whether through the posting
of a bond or otherwise); provided, however, no Credit Extensions shall be made
during any ten (10) day 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 or any Guarantor is a party with a third party
or parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in
excess of Fifty Thousand Dollars ($50,000.00) or that could have a material
adverse effect on Borrower’s or any Guarantor’s business;

 

8.7                               Judgments.  One or more judgments, orders, or decrees for
the payment of money in an amount, individually or in the aggregate, of at
least Fifty Thousand Dollars ($50,000.00) (not covered by independent
third-party insurance as to which liability has been accepted by such insurance
carrier) shall be rendered against Borrower and shall remain unsatisfied,
unvacated, or unstayed for a period of ten (10) days after the entry
thereof (provided that no Credit Extensions will be made prior to the
satisfaction, vacation, or stay of such judgment, order, or decree);

 

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

 

10

 

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

 

9                                         BANK’S
RIGHTS AND REMEDIES

 

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

 

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

 

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

 

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

 

(d)                                 terminate
any FX Forward Contracts;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

9.2                               Power
of Attorney.  Borrower hereby
irrevocably appoints Bank as its lawful attorney-in-fact, exercisable upon the
occurrence and during the continuance of an Event of Default, to:  (a) endorse Borrower’s name on any
checks or other forms of payment or security; (b) sign Borrower’s name on
any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts
directly with Account Debtors, for amounts and on terms Bank determines
reasonable; (d) make, settle, and adjust 

 

11

 

all claims under Borrower’s insurance policies; (e) pay, contest
or settle any Lien, charge, encumbrance, security interest, and adverse claim
in or to the Collateral, or any judgment based thereon, or otherwise take any
action to terminate or discharge the same; and (f) transfer the Collateral
into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral
regardless of whether an Event of Default has occurred until all Obligations
have been satisfied in full and Bank is under no further obligation to make
Credit Extensions hereunder.  Bank’s
foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights
and powers, coupled with an interest, are irrevocable until all Obligations
have been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.

 

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

 

9.4                               Application
of Payments and Proceeds.  Borrower
shall have no right to specify the order or the accounts to which Bank shall
allocate or apply any payments required to be made by Borrower to Bank or
otherwise received by Bank under this Agreement when any such allocation or
application is not specified elsewhere in this Agreement.  If an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, proceeds realized as the result of any collection
of Accounts or other disposition of the Collateral, or otherwise, to the
Obligations in such order as Bank shall determine in its sole discretion.  Any surplus shall be paid to Borrower or
other Persons legally entitled thereto; Borrower shall remain liable to Bank
for any deficiency.  If Bank, in its good
faith business judgment, directly or indirectly enters into a deferred payment
or other credit transaction with any purchaser at any sale of Collateral, Bank
shall have the option, exercisable at any time, of either reducing the
Obligations by the principal amount of the purchase price or deferring the
reduction of the Obligations until the actual receipt by Bank of cash therefor.

 

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

 

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

 

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

 

10                                  NOTICES

 

All notices, consents,
requests, approvals, demands, or other communication (collectively, “Communication”) 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) upon transmission, when sent by electronic mail or facsimile
transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address, facsimile 

 

12

 

number, or email address
indicated below.  Bank or Borrower 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:

  	
  Cimetrix Incorporated

  	
   

  
	
   

  	
  6979 S. High Tech Drive

  	
   

  
	
   

  	
  Salt Lake City, Utah 84047

  	
   

  
	
   

  	
  Attn: Robert Reback

  	
   

  
	
   

  	
  Fax: 801.256.6510

  	
   

  
	
   

  	
  Email:  bob.reback@cimetrix.com

  	
   

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
  Silicon Valley Bank

  	
   

  
	
   

  	
  8705 SW Nimbus, Suite 240

  	
   

  
	
   

  	
  Beaverton, OR 97008

  	
   

  
	
   

  	
  Attn: Ron Sherman

  	
   

  
	
   

  	
  Fax: 503.526.0818

  	
   

  
	
   

  	
  Email: rsherman@svb.com

  	
   

  

 

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

 

Oregon law governs the Loan Documents without regard
to principles of conflicts of law. 
Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in Multnomah County, Oregon; provided, however, that nothing
in this Agreement shall be deemed to operate to preclude Bank from bringing
suit or taking other legal action in any other jurisdiction to realize on the
Collateral or any other security for the Obligations, or to enforce a judgment
or other court order in favor of Bank. 
Borrower expressly submits and consents in advance to such jurisdiction
in any action or suit commenced in any such court, and Borrower hereby waives
any objection that it may have based upon lack of personal jurisdiction,
improper venue, or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of
the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

 

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

 

12                                  GENERAL
PROVISIONS

 

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

 

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

 

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

 

13

 

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

 

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

 

12.6                        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.

 

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

 

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

 

12.9                        Attorneys’
Fees, Costs and Expenses.  In any
action or proceeding between Borrower and Bank 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, including without limitation
its reasonable attorneys’ fees and other costs and expenses incurred at trial,
on appeal and in any arbitration or bankruptcy proceeding.

 

13                                  DEFINITIONS

 

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

 

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

 

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

 

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

 

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

 

“Agreement” is
defined in the preamble hereof.

 

“Availability Amount”
is (a) the lesser of (i) the Revolving Line or (ii) the
Borrowing Base minus (b) any amounts used for Cash Management Services,
and minus (c) the outstanding principal balance of any Advances.

 

“Bank” is
defined in the preamble hereof.

 

14

 

“Bank Expenses”
are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, amending, 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.

 

“Borrower” is
defined in the preamble hereof.

 

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

 

“Borrowing Base”
means 80% of Eligible Accounts as determined by Bank from Borrower’s most
recent Borrowing Base Certificate; provided, however, that Bank may 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.

 

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

 

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

 

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

 

“Cash Equivalents” means (a) marketable
direct obligations issued or unconditionally guaranteed by the United States or
any agency or any State thereof having maturities of not more than one (1) year
from the date of acquisition; (b) commercial paper maturing no more than
one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.;
(c) Bank’s certificates of deposit issued maturing no more than one (1) year
after issue; and (d) money market funds at least ninety-five percent (95%)
of the assets of which constitute Cash Equivalents of the kinds described in
clauses (a) through (c) of this definition.

 

“Cash Management Services” is
defined in Section 2.1.2.

 

“Change in Control” means any event, transaction, or occurrence as a result of which (a) any “person” (as such term is defined in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as an amended (the “Exchange Act”)), other than a trustee or other fiduciary holding securities under an employee benefit plan of Borrower, is or becomes a beneficial owner (within the meaning Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of securities of Borrower, representing twenty-five percent (25%) or more of the combined voting power of Borrower’s then outstanding securities; or (b) during any period of twelve consecutive calendar months, individuals who at the beginning of such period constituted the Board of Directors of Borrower (together with any new directors whose election by the Board of Directors of Borrower was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period  or whose election or nomination for election was previously so approved) cease for any reason other than death or disability to constitute a majority of the directors then in office.
 
“Code” is the Uniform Commercial Code, as the same may, from time to time, be enacted and in effect in the State of Oregon; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the State of Oregon, the term “Code” shall mean the Uniform Commercial Code as enacted and in effect in such other 

 

15

 

jurisdiction solely for purposes on the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
 

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

 

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

 

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

 

“Communication”
is defined in Section 10.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Designated Deposit Account”
is Borrower’s deposit account, account number 3300570396, maintained with Bank.

 

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

 

“Effective Date”
is the date Bank executes this Agreement as indicated on the signature page hereof.

 

“Eligible Accounts”
means Accounts which arise in the ordinary course of Borrower’s business that
meet all Borrower’s representations and warranties in Section 5.3.  Bank reserves the right at any time after the
Effective Date to adjust any of the criteria set forth below and to establish
new criteria in its good faith business judgment.  Eligible Accounts shall not include:

 

16

 

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

 

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

 

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

 

(d)                                 Accounts
with credit balances over ninety (90) days from invoice date;

 

(e)                                  Accounts
owing from an Account Debtor, including Affiliates, whose total obligations to
Borrower exceed twenty-five (25%) of all Accounts, for the amounts that exceed
that percentage, unless Bank approves in writing;

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“Eligible Foreign Accounts”
are Accounts for which the Account Debtor does not have its principal place of
business in the United States but are otherwise Eligible Accounts that are (a) if
required by Bank, covered by credit insurance satisfactory to Bank, less any
deductible; (b) supported by letter(s) of credit acceptable to Bank; (c) that
Bank approves in writing in its sole discretion; and (d) do not exceed 20%
of Eligible Accounts.

 

“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
Employee Retirement Income Security Act of 1974, and its regulations.

 

“Event of Default”
is defined in Section 8.

 

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

 

“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 

 

17

 

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.

 

“Governmental Approval” is any consent, authorization, approval,
order, license, franchise, permit, certificate, accreditation, registration,
filing or notice, of, issued by, from or to, or other act by or in respect of,
any Governmental Authority.

 

“Governmental Authority”
is any nation or government, any state or other political subdivision thereof,
any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative functions of or pertaining to government, any securities
exchange and any self-regulatory organization.

 

“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 Bank dated as of December     , 2007.

 

“Lien” is a
claim, mortgage, deed of trust, levy, charge, pledge, security interest or
other encumbrance of any kind, whether voluntarily incurred or arising by
operation of law or otherwise against any property.

 

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

 

“Material Adverse Change”
is (a) a material impairment in the perfection or priority of Bank’s Lien
in the Collateral or in the value of such Collateral; (b) a material
adverse change in the business, operations, or condition (financial or
otherwise) of Borrower; (c) a material impairment of the prospect of
repayment of any portion of the Obligations or  (d) Bank
determines, based upon information available to it and in its reasonable
judgment, that there 

 

18

 

is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the
next succeeding financial reporting period.

 

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

 

“Operating Documents” are, for
any Person, such Person’s formation documents, as certified with the Secretary
of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (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 Bank under this Agreement and the other Loan Documents;

 

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

 

(c)                                  Subordinated
Debt;

 

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

 

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

 

(f)                                    Indebtedness
in an aggregate principal amount not to exceed $50,000.00 secured by Permitted
Liens; and

 

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

 

“Permitted Investments” are:

 

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

 

(b)                                 (i) Cash
Equivalents, and (ii) any Investments permitted by Borrower’s investment
policy, as amended from time to time, provided that such investment policy (and
any such amendment thereto) has been approved by Bank;

 

(c)                                  Investments
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower;

 

(d)                                 Investments
consisting of deposit accounts in which Bank has a perfected security interest;

 

(e)                                  Investments
accepted in connection with Transfers permitted by Section 7.1;

 

(f)                                    Investments
of Subsidiaries in or to other Subsidiaries or Borrower and Investments by
Borrower in Subsidiaries not to exceed $50,000.00 in the aggregate in any
fiscal year;

 

19

 

(g)                                 Investments
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s Board of Directors;

 

(h)                                 Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business; and

 

(i)                                     Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business; provided that this paragraph (i) shall not apply to
Investments of Borrower in any Subsidiary.

 

“Permitted Liens”
are:

 

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

 

(b)                                 Liens
for taxes, fees, assessments or other government charges or levies, either not
delinquent or being contested in good faith and for which Borrower maintains
adequate reserves on its Books, provided that no notice of any such Lien
has been filed or recorded under the Internal Revenue Code of 1986, as amended,
and the Treasury Regulations adopted thereunder;

 

(c)                                  purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for
financing the acquisition of the Equipment securing no more than $50,000.00 in
the aggregate amount outstanding, or (ii) existing on Equipment when
acquired, if the Lien is confined to the property and improvements and
the proceeds of the Equipment;

 

(d)                                 Liens
of carriers, warehousemen, suppliers, or other Persons that are possessory in
nature arising in the ordinary course of business so long as such Liens attach
only to Inventory, securing liabilities in the aggregate amount not to exceed
$10,000.00 and which are not delinquent or remain payable without penalty or
which are being contested in good faith and by appropriate proceedings which
proceedings have the effect of preventing the forfeiture or sale of the
property subject thereto;

 

(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 (other than Liens imposed by ERISA);

 

(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 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 Bank a security interest;

 

(h)                                 non-exclusive
license of intellectual property granted to third parties in the ordinary
course of business;

 

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

 

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

 

20

 

“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.

 

“Quick Assets”
is, on any date, Borrower’s consolidated unrestricted cash and Cash Equivalents
maintained with Bank and net billed accounts receivable.

 

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

 

 “Requirement of Law”
is as to any Person, the organizational or governing documents of such Person,
and any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in
each case applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.

 

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

 

“Revolving Line”
is an Advance or Advances in an amount equal to One Million Dollars
($1,000,000.00).

 

“Revolving Line Maturity Date” is
the 364th day after the Effective Date.

 

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

 

“Subordinated Debt”
is (a) Indebtedness incurred by Borrower subordinated to Borrower’s
Indebtedness owed to Bank and which is reflected in a written agreement in a
manner and form reasonably acceptable to Bank and approved by Bank in writing
and (b) to the extent the terms of subordination do not change adversely
to Bank, refinancings, refundings, renewals, amendments or extensions of any of
the foregoing.

 

“Subsidiary”
means, with respect to any Person, any Person of which more than 50.0% of the
voting stock or other equity interests (in the case of Persons other than
corporations) is owned or controlled directly or indirectly by such Person or
one or more of Affiliates of such Person.

 

“Transfer” is
defined in Section 7.1.

 

UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY BANK CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH ARE NOT FOR
PERSONAL FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE BORROWER’S
RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY BANK TO BE
ENFORCEABLE.

 

Signature page follows.

 

 

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

 

BORROWER:

 

21

 

CIMETRIX
INCORPORATED

 

	
  By: 

  	
  /s/
  Robert H. Reback

  	
   

  
	
  Name:

  	
  Robert
  H. Reback

  	
   

  
	
  Title:

  	
  President &
  CEO

  	
   

  
					

 

BANK:

 

SILICON
VALLEY BANK

 

	
  By

  	
   /s/ Todd Hardy

  	
   

  
	
  Name:

  	
  Todd Hardy

  	
   

  
	
  Title:

  	
  Relationship Manager

  	
   

  
	
  Effective Date:

  	
  12/26/07

  	
   

  
						

 

22

 

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:

 

Cimetrix Incorporated

 

	
  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 #:

  	
   

  	
   

  
											

 

* Unless otherwise provided for an Advance bearing interest at
LIBOR.

 

2

 

EXHIBIT C

 

BORROWING BASE CERTIFICATE

 

Borrower: Cimetrix Incorporated

Lender:   Silicon Valley Bank

Commitment Amount:         $1,000,000.00

 

	
  ACCOUNTS RECEIVABLE

  	
   

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable (invoiced) Book Value
  as of

  	
   

  	
  $

  	
   

  
	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
  $

  	
   

  
	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
  $

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS RECEIVABLE DEDUCTIONS (without
  duplication)

  	
   

  	
   

  	
   

  
	
  4.

  	
  Un-invoiced Accounts

  	
   

  	
  $

  	
   

  
	
  5.

  	
  Amounts over 90 days due

  	
   

  	
  $

  	
   

  
	
  6.

  	
  Balance of 50% over 90 day accounts

  	
   

  	
  $

  	
   

  
	
  7.

  	
  Credit balances over 90 days

  	
   

  	
  $

  	
   

  
	
  8.

  	
  Concentration Limits

  	
   

  	
  $

  	
   

  
	
  9.

  	
  Foreign Accounts (* except Eligible Foreign
  Accounts)

  	
   

  	
  $

  	
   

  
	
  10.

  	
  Governmental Accounts

  	
   

  	
  $

  	
   

  
	
  11.

  	
  Contra Accounts

  	
   

  	
  $

  	
   

  
	
  12.

  	
  Promotion or Demo Accounts

  	
   

  	
  $

  	
   

  
	
  13.

  	
  Intercompany/Employee Accounts

  	
   

  	
  $

  	
   

  
	
  14.

  	
  Disputed Accounts

  	
   

  	
  $

  	
   

  
	
  15.

  	
  Deferred Revenue

  	
   

  	
  $

  	
   

  
	
  16.

  	
  Other (please explain on reverse)

  	
   

  	
  $

  	
   

  
	
  17.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
  $

  	
   

  
	
  18.

  	
  Eligible Accounts (#3 minus #17)

  	
   

  	
  $

  	
   

  
	
  19.

  	
  ELIGIBLE AMOUNT OF ACCOUNTS (80% of #18)

  	
   

  	
  $

  	
   

  

 

* Eligible Foreign Accounts shall not exceed 20% of Eligible Accounts

 

	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  	
   

  
	
  20.

  	
  Maximum Loan Amount

  	
   

  	
  $

  	
   

  
	
  21.

  	
  Total Funds Available (Lesser of #20 or
  #19)

  	
   

  	
  $

  	
   

  
	
  22.

  	
  Present balance owing on Line of Credit

  	
   

  	
  $

  	
   

  
	
  23.

  	
  Outstanding under Sublimits

  	
   

  	
  $

  	
   

  
	
  24.

  	
  RESERVE POSITION (#21 minus #22 and #23)

  	
   

  	
  $

  	
   

  

 

The undersigned represents and warrants that this
is true, complete and correct, and that the information in this Borrowing Base
Certificate complies with the representations and warranties in the Loan and
Security Agreement between the undersigned and Silicon Valley Bank.

 

	
   

  	
  BANK USE ONLY

  	
   

  
	
  COMMENTS:  

  	
  Received by:

  	
   

  	
   

  
	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
  Authorized Signer

  	
   

  	
  AUTHORIZED SIGNER

  	
   

  
	
  Date:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
  Compliance Status:                 Yes                No

  	
   

  
									

 

1

 

EXHIBIT D

 

BORROWING RESOLUTIONS

 

 

CORPORATE BORROWING CERTIFICATE

 

	
  BORROWER:

  	
   

  	
   

  	
  DATE:

  	
   

  

BANK:             Silicon
Valley Bank

 

I hereby certify as follows,
as of the date set forth above:

 

1.  I am the Secretary, Assistant Secretary or
other officer of the Borrower.   My title
is as set forth below.

 

2.  Borrower’s exact legal name is set forth
above.  Borrower is a corporation
existing under the laws of the State of

                                                               .

[print name of state]

 

3.  Attached hereto are true, correct and
complete copies of Borrower’s Articles/Certificate of Incorporation (including
amendments), as filed with the Secretary of State of the state in which
Borrower is incorporated as set forth in paragraph 2 above.  Such Articles/Certificate of Incorporation
have not been amended, annulled, rescinded, revoked or supplemented, and remain
in full force and effect as of the date hereof.

 

4.  The following resolutions were duly and
validly adopted by Borrower’s Board of Directors at a duly held meeting of such
directors (or pursuant to a unanimous written consent or other authorized
corporate action).  Such resolutions are
in full force and effect as of the date hereof and have not been in any way
modified, repealed, rescinded, amended or revoked, and Bank may rely on them
until Bank receives written notice of revocation from Borrower.

 

RESOLVED, that any
one of the following officers or employees of Borrower, whose names,
titles and signatures are below, may act on behalf of Borrower:

 

	
  Name

  	
   

  	
  Title

  	
   

  	
  Signature

  	
   

  	
  Authorized to

  Add or Remove

  Signatories

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  o

  

 

RESOLVED
FURTHER, that any one of the persons designated above
with a checked box beside his or her name may, from time to time, add or remove
any individuals to and from the above list of persons authorized to act on
behalf of Borrower.

 

RESOLVED
FURTHER, that such
individuals may, on behalf of Borrower:

 

Borrow
Money.  Borrow money from Silicon Valley Bank (“Bank”).

Execute
Loan Documents.  Execute any loan documents Bank requires.

Grant
Security.  Grant Bank a security interest in any of
Borrower’s assets.

 

1

 

Negotiate
Items.  Negotiate or discount all drafts, trade
acceptances, promissory notes, or other indebtedness in which Borrower has an
interest and receive cash or otherwise use the proceeds.

Letters of
Credit.  Apply for letters of credit from Bank.

Foreign
Exchange Contracts.  Execute
spot or forward foreign exchange contracts.

Issue Warrants. 
Issue warrants for Borrower’s capital stock.

Further
Acts.  Designate other individuals to request
advances, pay fees and costs and execute other documents or agreements
(including documents or agreement that waive Borrowers right to a jury trial)
they believe to be necessary to effectuate such resolutions.

 

RESOLVED
FURTHER, that all
acts authorized by the above resolutions and any prior acts relating thereto
are ratified.

 

5.  The
persons listed above are Borrower’s officers or employees with their titles and
signatures shown next to their names.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

*** If the Secretary, Assistant Secretary or other
certifying officer executing above is designated by the resolutions set forth
in paragraph 4 as one of the authorized signing officers, this Certificate must
also be signed by a second authorized officer or director of Borrower.

 

I, the
                                                    
of Borrower, hereby certify as to paragraphs 1 through 5 above, as [print
title]

of the date set forth above.

 

 

	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
				

 

2

 

EXHIBIT E

 

COMPLIANCE CERTIFICATE

 

	
  TO:

  	
  SILICON VALLEY BANK

  	
  Date:

  	
   

  
	
  FROM:

  	
  CIMETRIX INCORPORATED

  	
   

  

 

The undersigned authorized
officer of Cimetrix Incorporated (“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.  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

  
	
  10-Q, 10-K and 8-K with
  Compliance Certificate

  	
   

  	
  Within 5 days after filing
  with SEC

  	
   

  	
  Yes   No

  
	
  Borrowing Base Certificate
  A/R & A/P Agings

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes   No

  
	
  Deferred Revenue Report

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes   No

  
	
   

  	
   

  	
   

  	
   

  	
   

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

  
	
   

  
	
   

  
	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Monthly
  Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Quick Ratio

  	
   

  	
  1.15:1.00 through
  5/31/2008; 1.35:1.00 after 6/1/2008

  	
   

  	
  :1.0

  	
   

  	
  Yes   No

  
	
  Maximum Losses (calculated
  on a rolling  three-month
  basis)

  	
   

  	
  $650,000.00 through
  12/31/2007; $625,000.00 from 1/1/2008 through 3/31/2008; $385,000.00 from
  4/1/2008 through 6/30/2008;
  $200,000.00 from 7/1/2008 through 9/30/2008; $0.00 after 10/1/2008

  	
   

  	
   

  	
   

  	
  Yes   No

  
											

 

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

 

1

 

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

 

 

 

	
  Cimetrix Incorporated

  	
   

  	
  BANK USE
  ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by:

  	
   

  
	
  By:

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  Name:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Compliance Status:

  	
  Yes

  	
  No

  
													

 

2

 

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:

  	
   

  	
   

  	
   

  

 

I.              Quick Ratio
(Section 6.7(a))

 

Required:               (i) 1.15 to 1.00 from the
Effective Date through May 31, 2008 and (ii) 1.35 to 1.00 from and
after June 1, 2008.

 

Actual:

 

	
  A.

  	
   

  	
  Aggregate value of the
  unrestricted cash and cash equivalents of Borrower and its Subsidiaries
  deposited with Bank

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of the net
  billed accounts receivable of Borrower and its Subsidiaries

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Quick Assets (the sum of
  lines A and B)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Aggregate value of
  Obligations to Bank

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of
  liabilities that should, under GAAP, be classified as liabilities on
  Borrower’s consolidated balance sheet, including all Indebtedness, and not
  otherwise reflected in line E above that matures within one (1) year

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Current Liabilities (the
  sum of lines D and E)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Quick Ratio (line C
  divided by line F)

  	
   

  	
   

  

 

Is line G equal to or
greater than:  (i) 1.15 to 1.00 from
the Effective Date through May 31, 2008; and (ii) 1.35 to 1.00 from
and after June 1, 2008?

 

	
  No, not in compliance

  	
   

  	
  Yes, in compliance

  

 

II.            Maximum Losses
(Section 6.7(b))

 

Required:               No loss, calculated based on a
rolling three-month period in excess of: (i) $650,000.00 from the
Effective Date through December 31, 2007; (ii) $625,000.00 from January 1,
2008 through March 31, 2008; (iii) $385,000.00 from April 1,
2008 through June 30, 2008; (iv) $200,000.00 from July 1, 2008
through September 30, 2008; and (v) $0 from and after October 1,
2008.

 

Actual:

 

	
  A.

  	
   

  	
  Value of Borrower’s loss
  for the just completed month

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  Value of Borrower’s loss for
  the monthly period one month prior to the just completed month

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  A.

  	
   

  	
  Value of Borrower’s loss
  for the monthly period two months prior to the just completed month

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Aggregate value of
  Borrower’s losses for the prior three-month period (the sum of lines A
  through C)

  	
   

  	
  $

  

 

3

 

Is line A less than or equal
to:  (i) $650,000.00 from the
Effective Date through December 31, 2007; (ii) $625,000.00 from January 1,
2008 through March 31, 2008; (iii) $385,000.00 from April 1,
2008 through June 30, 2008, (iv) $200,000.00 from July 1, 2008
through September 30, 2008; and (v) $0 from and after October 1,
2008?

 

	
  No,
  not in compliance

  	
   

  	
  Yes, in compliance

  

 

4

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