Document:

Exhibit 10.17

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH
RULE 144 UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

AMENDED AND RESTATED CONVERTIBLE PROMISSORY NOTE

 

	
  $16,450,536

  	
   

  	
  March 21, 2008

  

 

Finisar
Corporation, a Delaware corporation (the “Company”), for value received,
promises and agrees to pay to Parviz Tayebati (“Holder”) the principal
sum of Sixteen Million Four Hundred Fifty Thousand Five Hundred and Thirty-six
Dollars ($16,450,536), together with interest on the outstanding principal
balance of this Amended and Restated Convertible Promissory Note (this “Note”)
at the rate of twelve percent (12.0%) per annum. This Note is issued pursuant
to that Purchase Agreement dated as of March 23, 2007 to which Company and
Holder are parties (the “Purchase Agreement”). This Note amends,
restates and replaces the Convertible Promissory Note ($15,592,926) dated as of
March 26, 2007 made by the Company to Holder (the “Prior Note”).
This Note is not intended to be and shall not be construed as a novation of the
indebtedness evidenced by the Prior Note.

 

1.                                       Definitions. As used in this Note, the following terms shall have the definitions
ascribed to them below:

 

1.1.          “Commission” means the United States Securities and Exchange Commission.

 

1.2.          “Common Stock” means the common stock, $0.001 par value, of the Company,
and any securities into which such common stock may hereafter be classified.

 

1.3.          “Conversion Shares” means any shares of Common Stock issued upon
the conversion, in whole or in part, of
this Note.

 

1.4.          “Maturity Date” shall be September 22, 2008.

 

1.5.          “Securities Act” means the Securities Act of 1933, as amended.

 

1.6.          “Trading Day”
means a day on which trading
occurs on the NNM (or any successor thereto).

 

 

2.             Payments.

 

2.1.          Initial Payment. On March 26, 2008, the Company shall
pay to the Holder cash in the amount of Four Million Five Hundred Thirty Three
Thousand Six Hundred and Twelve Dollars ($4,533,612) (the “Initial Payment”).

 

2.2.          Second Payment. On June 20, 2008 (the “Second
Payment Date”), the Company shall pay to the Holder an amount equal to Five
Million Nine Fifty Eight Thousand Four Hundred and Sixty Two Dollars
($5,958,462), together with all accrued but unpaid interest on this Note
through such date (the “Second Payment”). The Company may make the
Second Payment in cash, shares of Common Stock, or a combination of cash and
shares of Common Stock, in the Company’s sole discretion; provided, however,
that there must then be an effective Registration Statement filed by the
Company with the Commission covering such shares of Common Stock; and provided
further, that all accrued interest shall be paid in cash. The maximum number of
shares of Common Stock which may be issued pursuant to the Second Payment shall
not exceed Three Million Four Hundred Thousand (3,400,000) shares. Subject to
the foregoing, in the event the Company elects to make all or a portion of the
Second Payment in shares of Common Stock, the Holder shall be entitled to
receive that number of shares of Common Stock equal to that portion of the
Second Payment which is to be converted into shares of Common Stock divided by
the average closing trading price per share of the Common Stock on the Nasdaq
National Market (“NNM”) for the five (5) Trading Days ending two (2) days
prior to the Second Payment Date.

 

2.3.          Final Payment. The remaining outstanding principal balance
of and all accrued but unpaid interest on this Note shall be due and payable on
the Maturity Date (the “Final Payment”). The Company may make the Final
Payment in cash, shares of Common Stock, or a combination of cash and shares of
Common Stock, in the Company’s sole discretion; provided, however, that there
must then be an effective Registration Statement filed by the Company with the
Commission covering such shares of Common Stock; and provided further, that all
accrued interest shall be paid in cash. The maximum number of shares of Common
Stock which may be issued pursuant to the Final Payment shall not exceed Three
Million Four Hundred Thousand (3,400,000) shares. Subject to the foregoing, in
the event the Company elects to make all or a portion of the Final Payment in
shares of Common Stock, the Holder shall be entitled to receive that number of
shares of Common Stock equal to that portion of the Final Payment which is to
be converted into shares of Common Stock divided by the average closing trading
price per share of the Common Stock on the NNM for the five (5) Trading
Days ending two (2) days prior to the Maturity Date.

 

2.4.          Prepayment. The Company shall have the right at any time and without premium or
penalty to prepay this Note, in whole or in part, in cash on or prior to the
Maturity Date.

 

2.5.          Interest. The Company shall pay interest to the Holder on the outstanding principal
balance of this Note at the rate of twelve percent (12.0%) per annum,
calculated on the basis of a 365-day year and shall accrue daily commencing on March 26,
2008.

 

2.6.          Currency. All payments shall be in lawful money of the United States of America.

 

2

 

2.7.          Issuance of Conversion Shares. The Company shall, at its election, either (1) cause
a certificate or certificates representing the Conversion Shares to be issued
in the name of Holder and delivered to the Holder by nationally recognized
overnight delivery service within two (2) business days following any
conversion of all or a portion of this Note, or (2) cause an electronic
issuance of the Conversion Shares to the Holder by the DWAC (Deposit and
Withdrawal At Custodian) service.

 

2.8.          Fractional Shares. No fractional shares shall be issued upon
conversion of this Note and the value of any fractional shares issuable upon
such conversion shall be paid by the Company to the Holder in cash.

 

2.9.          Satisfaction of Obligations. Upon payment of the entire principal amount
of and accrued interest on this Note, whether in cash or in a combination of
cash and Conversion Shares in accordance with the provisions of this Section 2, the Company shall be forever released from all obligations and
liabilities hereunder.

 

3.             Default.

 

3.1.          Events of Default. The occurrence of either of the following
events shall constitute an “Event of Default” hereunder:

 

(a)           any failure by the Company to pay any amount payable in cash hereunder,
in accordance with the terms hereof, which default is not cured within ten (10) business
days following written notice thereof from the Holder; or

 

(b)           any failure by the Company to issue any securities issuable hereunder,
in accordance with the terms hereof.

 

3.2.          Remedies. During the continuance of an Event of Default, Holder shall have the
right to (i) accelerate the payment of the Remaining Principal Balance
hereunder, and (ii) enforce this Note by exercise of the rights and
remedies granted to it by applicable law. The Company shall pay all costs and
expenses, including, without limitation, reasonable attorneys’ fees and court
costs, incurred or expended by the Holder in enforcing or collecting this Note
as a result of an Event of Default or the protection or prescription of any
rights of Holder hereunder. The Company hereby waives demand, notice,
presentment, protest and notice of dishonor, diligence in collection and notice
of intent to accelerate maturity.

 

3.3.          Waiver; Cumulative Remedies. No course of dealing or any delay or failure
to exercise any right hereunder on the Holder’s part shall operate as a waiver
of such right or otherwise prejudice the Holder’s rights, powers or remedies.
No single or partial waiver by the Holder of any provision of this Note or of
any breach or default hereunder or of any right or remedy shall operate as a
waiver of any other provision, breach, default right or remedy or of the same
provision, breach, default, right or remedy on a future occasion. The Holder’s
rights and remedies are cumulative and are in addition to all rights and
remedies which the Holder may have in law or in equity or by statute or
otherwise; provided, however, that the Holder acknowledges that the
indemnification remedy provided in Section 9.4 of the Purchase Agreement
shall not be available to the Holder as a right or remedy for the Company’s
breach or default hereunder.

 

3

 

4.           Amendments. This Note may not be amended or modified, nor may any of its terms be
waived, except by written instruments signed by the Company and the Holder and
then only to the extent set forth therein.

 

5.           Severability. If any provision of this Note is determined
to be invalid, illegal or unenforceable, in whole or in part, the validity,
legality and enforceability of any of the remaining provisions or portions of
this Note shall not in any way be affected or impaired thereby.

 

6.           Notices. Any notice or other communication required or desired to be given
hereunder shall be in the form and manner specified below, and shall be addressed
to the party to be notified as follows:

 

	
   

  	
   

  	
  If
  to Holder:

  	
   

  	
  Parviz
  Tayebati

  
	
   

  	
   

  	
   

  	
   

  	
  2
  Avery Street, 27E 

  Boston, MA 02111

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with
  copy to:

  	
   

  	
  Mintz,
  Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

  
	
   

  	
   

  	
   

  	
   

  	
  One
  Financial Center 

  Boston, MA 02111 

  Telecopy (617) 542-2241

  
	
   

  	
   

  	
   

  	
   

  	
  Attn:
  Stanley A. Twarog, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  If
  to the Company:

  	
   

  	
  Finisar
  Corporation

  
	
   

  	
   

  	
   

  	
   

  	
  1389
  Moffett Park Drive 

  Sunnyvale, CA 94089

  
	
   

  	
   

  	
   

  	
   

  	
  Attn:
  Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Telecopy:

  	
   

  	
  (408)
  541-4154

  

 

or
to such other address as each party designates to the other by notice in the
manner herein prescribed. Notice shall be deemed given hereunder if (i) delivered
personally or otherwise actually received, (ii) sent by overnight delivery
service, (iii) mailed by first-class United States mail, postage prepaid,
registered or certified, with return receipt requested, or (iv) transmitted
by facsimile transmission (and confirmed by a copy delivered in accordance with
clauses (i), (ii) or
(iii). Notice mailed as provided in clause (iii) above shall be effective
upon the expiration of three (3) business days after its deposit in the
United States mail. Notice given in any other manner described in this section
shall be effective upon receipt by the addressee thereof; provided, however,
that if any notice is tendered to an addressee and delivery thereof is refused
by such addressee, such notice shall be effective upon such tender unless
expressly set forth in such notice.

 

7.           Replacement. Upon the Company’s receipt of reasonably satisfactory evidence of the
loss, theft, destruction or mutilation of this Note and (i) in the case of
any such loss theft or destruction, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount, or (ii) in the case of any
such mutilation, upon surrender of this Note for cancellation, the Company, at
its expense, shall execute and deliver, in lieu thereof, a new Note.

 

4

 

8.          Legal Fees. In the event of any
legal action to enforce the rights of the Holder or the Company, the party
prevailing in such action shall be entitled, in addition to such other relief
as may be granted, all reasonable costs and expenses, including reasonable
attorneys’ fees, incurred in such action.

 

9.          Assignment. Neither this Note nor
any of the rights, interests or obligations hereunder may be assigned, by
operation of law or otherwise, in whole or in part, by the Company, without the
prior written consent of the Holder, or by the Holder, without the prior
written consent of the Company, which consent shall not be unreasonably
withheld.

 

10.        No Rights as Stockholder. This Note, as such,
shall not entitle the Holder to any rights as a stockholder of the Company.

 

11.        Headings. The descriptive headings in this Note are
inserted for convenience only and do not constitute a part of this Note.

 

12.        Governing Law. The validity, meaning and effect of this
Note shall be determined in accordance with the laws of the State of Delaware,
without regard to principles of conflicts of law.

 

13.        Binding Effect. This Note shall be binding upon, and shall
inure to the benefit of, the Company and the Holder and their respective
successors and assigns.

 

14.        Time. Time is of the essence hereunder.

 

[SIGNATURE PAGE FOLLOWS]

 

5

 

IN
WITNESS WHEREOF, the Company has duly caused this Note to be signed in its name
and on its behalf by its duly authorized officer as of the date hereinabove
written.

 

	
   

  	
  FINISAR
  CORPORATION

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jerry Rawls

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   Jerry Rawls

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  CEO

  
				

 

 

	
  AGREED
  AND ACCEPTED:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Parviz
  Tayebati

  	
   

  
	
  PARVIZ
  TAYEBATI

  	
   

  

 

6Exhibit 10.20

 

LOAN AND SECURITY AGREEMENT

 

THIS LOAN AND SECURITY AGREEMENT (this “Agreement”) dated as of March 14,
2008 (the “Effective Date”) between
SILICON VALLEY BANK, a California corporation, with its
principal place of business at 3003 Tasman Drive, Santa Clara, California 95054
(“Bank”), and FINISAR CORPORATION, a Delaware 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 under the Revolving Line may
be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject
to the applicable terms and conditions precedent herein.

 

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

 

2.1.2                     Letters of Credit Sublimit.

 

(a)                                  As
part of the Revolving Line, Bank shall issue or have issued Letters of Credit
for Borrower’s account.  The face amount
of outstanding Letters of Credit (including drawn but unreimbursed Letters of
Credit and any Letter of Credit Reserve), together with the FX Reserve and the
aggregate amount of Credit Extensions made pursuant to Section 2.1.4, may
not exceed Fifteen Million Dollars ($15,000,000.00).  Such aggregate amounts utilized or reserved
under this Section 2.1.2 shall at all times reduce the amount otherwise
available for Advances under the Revolving Line.  If, on the Revolving Line Maturity Date,
there are any outstanding Letters of Credit, then on such date Borrower shall
provide to Bank cash collateral in an amount equal to 105% of the face amount
of all such Letters of Credit plus all interest, fees, and costs due or to
become due in connection therewith (as estimated by Bank in its good faith
business judgment), to secure all of the Obligations relating to said Letters
of Credit.  All Letters of Credit shall
be in form and substance acceptable to Bank in its sole discretion and shall be
subject to the terms and conditions of Bank’s standard Application and Letter
of Credit Agreement (the “Letter of Credit Application”).  Borrower agrees to execute
any further documentation in connection with the Letters of Credit as Bank may
reasonably request.  Borrower further
agrees to be bound by the regulations and interpretations of the issuer of any
Letters of Credit guarantied by Bank and opened for Borrower’s account or by
Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s
account, and Borrower understands and agrees that Bank shall not be liable for
any error, negligence, or mistake, whether of omission or commission, in
following Borrower’s instructions or those contained in the Letters of Credit
or any modifications, amendments, or supplements thereto.

 

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

 

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

 

 

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

 

2.1.3                     Foreign
Exchange Sublimit.  As part of the
Revolving Line, Borrower may enter into foreign exchange contracts with Bank
under which Borrower commits to purchase from or sell to Bank a specific amount
of Foreign Currency (each, a “FX Forward
Contract”)  on a specified date (the “Settlement Date”). 
FX Forward Contracts shall have a Settlement Date of
at least one (1) FX Business Day after the contract date and shall be
subject to a reserve of ten percent (10%) of each outstanding FX Forward
Contract in a maximum aggregate amount equal to Fifteen Million Dollars
($15,000,000.00) (the “FX Reserve”), inclusive of Credit Extensions
relating to Sections 2.1.2 and 2.1.4. 
The aggregate amount of FX Forward Contracts at any one time may not
exceed ten (10) times the amount of the FX Reserve.  The amount otherwise available for Credit
Extensions under the Revolving Line shall be reduced by an amount equal to ten
percent (10%) of each outstanding FX Forward Contract.  Any amounts needed to fully reimburse Bank
will be treated as Advances under the Revolving Line and will accrue interest
at the interest rate applicable to Advances.

 

2.1.4                     Cash
Management Services Sublimit.  Borrower
may use up to Fifteen Million Dollars ($15,000,000.00) of the Revolving Line,
inclusive of Credit Extensions relating to Sections 2.1.2 and the FX Reserve,
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 used or reserved by Borrower for any Cash Management
Services will reduce the amount otherwise available for Credit Extensions 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, 2.1.2, 2.1.3 and 2.1.4 exceed the Revolving Line,
Borrower shall immediately pay to Bank in cash such excess.

 

2.3                               General
Provisions Relating to the Credit Extensions. 
Each Credit Extension shall, at Borrower’s option in accordance with
the terms of this Agreement, be either in the form of a Prime Rate Credit
Extension or a LIBOR Credit Extension; provided,
however, that in no event shall Borrower maintain at any time LIBOR
Credit Extensions having more than two (2) different Interest
Periods.  Borrower shall pay interest
accrued on the Credit Extensions at the rates and in the manner set forth
in Section 2.4(a).

 

2.4                               Payment of Interest on the Credit Extensions.

 

(a)                                  Computation
of Interest.  Interest on the Credit
Extensions and all fees payable hereunder shall be computed on the basis of a
360-day year and the actual number of days elapsed in the period during which
such interest accrues.  In computing
interest on any Credit Extension, the date of the making of such Credit
Extension shall be included and the date of payment shall be excluded; provided, however, that if any Credit
Extension is repaid on the same day on which it is made, such day shall be
included in computing interest on such Credit Extension.

 

(b)                                 Credit
Extensions.  Each Credit Extension
shall bear interest on the outstanding principal amount thereof from the date
when made, continued or converted until paid in full at a rate per annum equal to the Prime Rate plus the
Prime Rate Margin for Prime Rate Credit Extensions or the LIBOR Rate plus the
LIBOR Rate Margin for LIBOR Credit Extensions. 
On and after the expiration of any Interest Period applicable to any
LIBOR Credit Extension outstanding on the date of occurrence of an Event of
Default or acceleration of the Obligations, the Effective Amount of such LIBOR
Credit Extension shall, during the continuance of such Event of Default or
after acceleration, bear interest at a rate per annum equal to the Prime Rate
plus five percent (5.0%).  Pursuant to
the terms hereof, interest on each Credit Extension shall be paid in arrears on
each Interest Payment Date.  Interest
shall also be paid on the date of any prepayment of any Credit Extension
pursuant to this Agreement for the portion of any Credit Extension so prepaid
and upon payment (including prepayment) in full thereof.  All accrued but unpaid interest on the Credit
Extensions shall be due and payable on the Revolving Line Maturity Date.

 

2

 

(c)                                  Default
Interest.  Except as otherwise
provided in Section 2.4(b), after an Event of Default and during the
continuance thereof, Obligations shall bear interest five percent (5.00%) above
the rate effective immediately before the Event of Default (the “Default Rate”). 
Payment or acceptance of the increased interest
provided in this Section 2.4(c) 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.

 

(d)                                 Prime
Rate Credit Extensions.  Each change
in the interest rate of the Prime Rate Credit Extensions based on changes in
the Prime Rate shall be effective on the effective date of such change and to
the extent of such change.  Bank shall
use its best efforts to give Borrower prompt notice of any such change in the
Prime Rate; provided, however, that
any failure by Bank to provide Borrower with notice hereunder shall not affect
Bank’s right to make changes in the interest rate of the Prime Rate Credit
Extensions based on changes in the Prime Rate.

 

(e)                                  LIBOR
Credit Extensions.  The interest rate
applicable to each LIBOR Credit Extension shall be determined in accordance
with Section 3.6(a) hereunder. 
Subject to Sections 3.6 and 3.7, such rate shall apply during the entire
Interest Period applicable to such LIBOR Credit Extension, and interest
calculated thereon shall be payable on the Interest Payment Date applicable to
such LIBOR Credit Extension.

 

(f)                                    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.

 

(g)                                 Payments.  Unless otherwise provided, interest is
payable monthly on the first calendar day of each month.  Payments of principal and/or interest
received after 12:00 noon 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.

 

2.5                               Fees.  Borrower shall pay to Bank:

 

(a)                                  Commitment
Fee.  A fully earned, non-refundable
commitment fee of Two Hundred Thousand Dollars ($200,000.00) on the Effective
Date;

 

(b)                                 Letter
of Credit Fee.  Bank’s customary fees
and expenses for the issuance or renewal of Letters of Credit, upon the
issuance, each anniversary of the issuance, and the renewal of such Letter of
Credit; and

 

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

 

3                                         CONDITIONS OF LOANS

 

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

 

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

 

(b)                                 Duly
executed original signatures to the Control Agreements required pursuant to
this Agreement;

 

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

 

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

 

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

 

3

 

(f)                                    Borrower
shall have delivered a landlord’s consent with respect to each of Borrower’s
leased locations executed in favor of Bank;

 

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

 

(h)                                 Borrower
shall have paid the fees and Bank Expenses then due as specified in Section 2.5
hereof.

 

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

 

(a)                                  timely
receipt of a Notice of Borrowing;

 

(b)                                 the
representations and warranties in Section 5 shall be true in all material
respects on the date of the Notice of Borrowing and on the effective 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, nor has there 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                               Procedure for the Borrowing of Credit
Extensions.

 

(a)                                  Subject
to the prior satisfaction of all other applicable conditions to the making of a
Credit Extension set forth in this Agreement, each Credit Extension shall be
made upon Borrower’s irrevocable written notice delivered to Bank in the form
of a Notice of Borrowing, each executed by a Responsible Officer of Borrower or
his or her designee or without instructions if the Credit Extensions are
necessary to meet Obligations which have become due.  Bank may rely on any telephone notice given
by a person whom Bank believes is a Responsible Officer or designee.  Borrower will indemnify Bank for any loss
Bank suffers due to such reliance.  Such
Notice of Borrowing must be received by Bank prior to 11:00 a.m.  Pacific time, (i) at least three (3) Business
Days prior to the requested Funding Date, in the case of LIBOR Credit
Extensions, and (ii) at least one (1) Business Day prior to the
requested Funding Date, in the case of Prime Rate Credit Extensions,
specifying:

 

(1)                                  the
amount of the Credit Extension, which, if a LIBOR Credit Extension is
requested, shall be in an aggregate minimum principal amount of $1,000,000 or
in any integral multiple of $1,000,000 in excess thereof;

 

(2)                                  the
requested Funding Date;

 

(3)                                  whether
the Credit Extension is to be comprised of LIBOR Credit Extensions or Prime
Rate Credit Extensions; and

 

(4)                                  the
duration of the Interest Period applicable to any such LIBOR Credit Extensions
included in such notice; provided, however, that
if the Notice of Borrowing shall fail to specify the

 

4

 

duration
of the Interest Period for any Credit Extension comprised of LIBOR Credit
Extensions, such Interest Period shall be one (1) month.

 

(b)                                 The
proceeds of all such Credit Extensions (other than Letters of Credit) will then
be made available to Borrower on the Funding Date by Bank by transfer to the
Designated Deposit Account and, subsequently, by wire transfer to such other
account as Borrower may instruct in the Notice of Borrowing.  No Credit Extensions shall be deemed made to
Borrower, and no interest shall accrue on any such Credit Extension, until the
related funds have been deposited in the Designated Deposit Account or, with
respect to Letters of Credit, Bank has honored draws thereon.

 

3.5                               Conversion and Continuation Elections.

 

(a)                                  So
long as (i) no Event of Default or Default exists; (ii) Borrower
shall not have sent any notice of termination of this Agreement; and (iii) Borrower
shall have complied with such customary procedures as Bank has established from
time to time for Borrower’s requests for LIBOR Credit Extensions, Borrower may,
upon irrevocable written notice to Bank:

 

(1)                                  elect
to convert on any Business Day, Prime Rate Credit Extensions in an amount equal
to One Million Dollars ($1,000,000.00) or any integral multiple of One Million
Dollars ($1,000,000.00) in excess thereof into LIBOR Credit Extensions;

 

(2)                                  elect
to continue on any Interest Payment Date any LIBOR Credit Extensions maturing
on such Interest Payment Date (or any part thereof in an amount equal to One
Million Dollars ($1,000,000.00) or any integral multiple of $1,000,000 in
excess thereof); provided, however, that
if the aggregate amount of LIBOR Credit Extensions shall have been reduced, by
payment, prepayment, or conversion of part thereof, to be less than One Million
Dollars ($1,000,000.00), such LIBOR Credit Extensions shall automatically
convert into Prime Rate Credit Extensions, and on and after such date the right
of Borrower to continue such Credit Extensions as, and convert such Credit
Extensions into, LIBOR Credit Extensions shall terminate; or

 

(3)                                  elect
to convert on any Interest Payment Date any LIBOR Credit Extensions maturing on
such Interest Payment Date (or any part thereof in an amount equal to One
Million Dollars ($1,000,000.00) or any integral multiple of One Million Dollars
($1,000,000.00) in excess thereof) into Prime Rate Credit Extensions.

 

(b)                                 Borrower
shall deliver a Notice of Conversion/Continuation in accordance with Section 10 to be received by Bank
prior to 11:00 a.m.  Pacific time at
least (i) three (3) Business Days in advance of the Conversion Date
or Continuation Date, if any Credit Extensions are to be converted into or
continued as LIBOR Credit Extensions; and (ii) one (1) Business Day
in advance of the Conversion Date, if any Credit Extensions are to be converted
into Prime Rate Credit Extensions, in each case specifying the:

 

(1)                                  proposed
Conversion Date or Continuation Date;

 

(2)                                  aggregate
amount of the Credit Extensions to be converted or continued which, if any
Credit Extensions are to be converted into or continued as LIBOR Credit
Extensions, shall be in an aggregate minimum principal amount of $1,000,000 or
in any integral multiple of $1,000,000 in excess thereof;

 

(3)                                  nature
of the proposed conversion or continuation; and

 

(4)                                  duration
of the requested Interest Period.

 

(c)                                  If
upon the expiration of any Interest Period applicable to any LIBOR Credit
Extensions, Borrower shall have failed to timely select a new Interest Period
to be applicable to such LIBOR Credit Extensions, Borrower shall be deemed to
have elected to convert such LIBOR Credit Extensions into Prime Rate Credit
Extensions.

 

(d)                                 Any
LIBOR Credit Extensions shall, at Bank’s option, convert into Prime Rate Credit
Extensions in the event that (i) an Event of Default or Default shall
exist, or (ii) the aggregate principal amount of the Prime Rate Credit
Extensions which have been previously converted to LIBOR Credit Extensions, or
the

 

5

 

aggregate
principal amount of existing LIBOR Credit Extensions continued, as the case may
be, at the beginning of an Interest Period shall at any time during such
Interest Period exceed the Revolving Line. 
Borrower agrees to pay Bank, upon demand by Bank (or Bank may, at its
option, charge the Designated Deposit Account or any other account Borrower
maintains with Bank) any amounts required to compensate Bank for any loss
(including loss of anticipated profits), cost, or expense incurred by Bank, as
a result of the conversion of LIBOR Credit Extensions to Prime Rate Credit
Extensions pursuant to any of the foregoing.

 

(e)                                  Notwithstanding
anything to the contrary contained herein, Bank shall not be required to
purchase United States Dollar deposits in the London interbank market or other
applicable LIBOR market to fund any LIBOR Credit Extensions, but the provisions
hereof shall be deemed to apply as if Bank had purchased such deposits to fund
the LIBOR Credit Extensions.

 

3.6                               Special Provisions Governing LIBOR Credit
Extensions.

 

Notwithstanding any other provision of this Agreement
to the contrary, the following provisions shall govern with respect to LIBOR
Credit Extensions as to the matters covered:

 

(a)                                  Determination
of Applicable Interest Rate.  As soon
as practicable on each Interest Rate Determination Date, Bank shall determine
(which determination shall, absent manifest error in calculation, be final,
conclusive and binding upon all parties) the interest rate that shall apply to
the LIBOR Credit Extensions for which an interest rate is then being determined
for the applicable Interest Period and shall promptly give notice thereof (in
writing or by telephone confirmed in writing) to Borrower.

 

(b)                                 Inability
to Determine Applicable Interest Rate. 
In the event that Bank shall have determined (which determination shall
be final and conclusive and binding upon all parties hereto), on any Interest
Rate Determination Date with respect to any LIBOR Credit Extension, that by
reason of circumstances affecting the London interbank market adequate and fair
means do not exist for ascertaining the interest rate applicable to such Credit
Extension on the basis provided for in the definition of LIBOR, Bank shall on
such date give notice (by facsimile or by telephone confirmed in writing) to
Borrower of such determination, whereupon (i) no Credit Extensions may be
made as, or converted to, LIBOR Credit Extensions until such time as Bank
notifies Borrower that the circumstances giving rise to such notice no longer
exist, and (ii) any Notice of Borrowing or Notice of
Conversion/Continuation given by Borrower with respect to Credit Extensions in
respect of which such determination was made shall be deemed to be rescinded by
Borrower.

 

(c)                                  Compensation
for Breakage or Non-Commencement of Interest Periods.  Borrower shall compensate Bank, upon written
request by Bank (which request shall set forth the manner and method of
computing such compensation), for all reasonable losses, expenses and
liabilities, if any (including any interest paid by Bank to lenders of funds
borrowed by it to make or carry its LIBOR Credit Extensions and any loss,
expense or liability incurred by Bank in connection with the liquidation or
re-employment of such funds) such that Bank may incur: (i) if for any
reason (other than a default by Bank or due to any failure of Bank to fund
LIBOR Credit Extensions due to impracticability or illegality under Sections
3.7(d) and 3.7(e)) a borrowing or a conversion to or continuation of any
LIBOR Credit Extension does not occur on a date specified in a Notice of
Borrowing or a Notice of Conversion/Continuation, as the case may be, or (ii) if
any principal payment or any conversion of any of its LIBOR Credit Extensions
occurs on a date prior to the last day of an Interest Period applicable to that
Credit Extension.

 

(d)                                 Assumptions
Concerning Funding of LIBOR Credit Extensions.  Calculation of all amounts payable to Bank
under this Section 3.6 and under Section 3.4 shall be made as though
Bank had actually funded each of its relevant LIBOR Credit Extensions through
the purchase of a Eurodollar deposit bearing interest at the rate obtained
pursuant to the definition of LIBOR Rate in an amount equal to the amount of
such LIBOR Credit Extension and having a maturity comparable to the relevant
Interest Period; provided, however, that
Bank may fund each of its LIBOR Credit Extensions in any manner it sees fit and
the foregoing assumptions shall be utilized only for the purposes of
calculating amounts payable under this Section 3.6 and under Section 3.4.

 

(e)                                  LIBOR
Credit Extensions After Default. 
After the occurrence and during the continuance of an Event of Default, (i) Borrower
may not elect to have a Credit Extension be made or continued as, or converted
to, a LIBOR Credit Extension after the expiration of any Interest Period then
in effect for such Credit Extension and (ii) subject to the provisions of Section 3.6(c),
any Notice of Conversion/Continuation given by Borrower with respect to a
requested conversion/continuation that has not yet occurred shall be deemed to
be

 

6

 

rescinded by
Borrower and be deemed a request to convert or continue Credit Extensions
referred to therein as Prime Rate Credit Extensions.

 

3.7                               Additional Requirements/Provisions Regarding
LIBOR Credit Extensions.

 

(a)                                  If
for any reason (including voluntary or mandatory prepayment or acceleration),
Bank receives all or part of the principal amount of a LIBOR Credit Extension
prior to the last day of the Interest Period for such Credit Extension,
Borrower shall immediately notify Borrower’s account officer at Bank and, on
demand by Bank, pay Bank the amount (if any) by which (i) the additional
interest which would have been payable on the amount so received had it not
been received until the last day of such Interest Period exceeds (ii) the
interest which would have been recoverable by Bank by placing the amount so
received on deposit in the certificate of deposit markets, the offshore
currency markets, or United States Treasury investment products, as the case
may be, for a period starting on the date on which it was so received and
ending on the last day of such Interest Period at the interest rate determined
by Bank in its reasonable discretion. 
Bank’s determination as to such amount shall be conclusive absent
manifest error.

 

(b)                                 Borrower
shall pay Bank, upon demand by Bank, from time to time such amounts as Bank may
determine to be necessary to compensate it for any costs incurred by Bank that
Bank determines are attributable to its making or maintaining of any amount
receivable by Bank hereunder in respect of any Credit Extensions relating
thereto (such increases in costs and reductions in amounts receivable being
herein called “Additional Costs”),  in
each case resulting from any Regulatory Change which:

 

(i)                                     changes
the basis of taxation of any amounts payable to Bank under this Agreement in
respect of any Credit Extensions (other than changes which affect taxes
measured by or imposed on the overall net income of Bank by the jurisdiction in
which Bank has its principal office);

 

(ii)                                  imposes
or modifies any reserve, special deposit or similar requirements relating to
any extensions of credit or other assets of, or any deposits with, or other
liabilities of Bank (including any Credit Extensions or any deposits referred
to in the definition of LIBOR); or

 

(iii)                               imposes any other
condition affecting this Agreement (or any of such extensions of credit or
liabilities).

 

Bank will notify Borrower of any event occurring after
the Closing Date which will entitle Bank to compensation pursuant to this Section 3.7
as promptly as practicable after it obtains knowledge thereof and determines to
request such compensation.  Bank will
furnish Borrower with a statement setting forth the basis and amount of each request
by Bank for compensation under this Section 3.7.  Determinations and allocations by Bank for
purposes of this Section 3.7 of the effect of any Regulatory Change on its
costs of maintaining its obligations to make Credit Extensions, of making or
maintaining Credit Extensions, or on amounts receivable by it in respect of
Credit Extensions, and of the additional amounts required to compensate Bank in
respect of any Additional Costs, shall be conclusive absent manifest error.

 

(c)                                  If
Bank shall determine that the adoption or implementation of any applicable law,
rule, regulation, or treaty regarding capital adequacy, or any change therein,
or any change in the interpretation or administration thereof by any
governmental authority, central bank, or comparable agency charged with the
interpretation or administration thereof, or compliance by Bank (or its
applicable lending office) with any respect or directive regarding capital
adequacy (whether or not having the force of law) of any such authority, central
bank, or comparable agency, has or would have the effect of reducing the rate
of return on capital of Bank or any person or entity controlling Bank (a “Parent”)  as a consequence of
its obligations hereunder to a level below that which Bank (or its Parent)
could have achieved but for such adoption, change, or compliance (taking into
consideration policies with respect to capital adequacy) by an amount deemed by
Bank to be material, then from time to time, within fifteen (15) days after
demand by Bank, Borrower shall pay to Bank such additional amount or amounts as
will compensate Bank for such reduction. 
A statement of Bank claiming compensation under this Section 3.7(c) and
setting forth the additional amount or amounts to be paid to it hereunder shall
be conclusive absent manifest error.

 

(d)                                 If,
at any time, Bank, in its sole and absolute discretion, determines that (i) the
amount of LIBOR Credit Extensions for periods equal to the corresponding
Interest Periods are not available to Bank in the offshore currency interbank
markets, or (ii) LIBOR does not accurately reflect the cost to Bank of
lending the LIBOR Credit Extensions, then Bank shall promptly give notice
thereof to Borrower.  Upon the giving of
such notice, Bank’s obligation to make the LIBOR Credit Extensions shall
terminate; provided, however, Credit

 

7

 

Extensions shall
not terminate if Bank and Borrower agree in writing to a different interest
rate applicable to LIBOR Credit Extensions.

 

(e)                                  If
it shall become unlawful for Bank to continue to fund or maintain any LIBOR
Credit Extensions, or to perform its obligations hereunder, upon demand by
Bank, Borrower shall prepay the Credit Extensions in full with accrued interest
thereon and all other amounts payable by Borrower hereunder (including, without
limitation, any amount payable in connection with such prepayment pursuant to Section 3.7(a)).  Notwithstanding the foregoing, to the extent
a determination by Bank as described above relates to a LIBOR Credit Extension
then being requested by Borrower pursuant to a Notice of Borrowing or a Notice
of Conversion/Continuation, Borrower shall have the option, subject to the
provisions of Section 3.6(c), to (i) rescind such Notice of Borrowing
or Notice of Conversion/Continuation by giving notice (by facsimile or by
telephone confirmed in writing) to Bank of such rescission on the date on which
Bank gives notice of its determination as described above, or (ii) modify
such Notice of Borrowing or Notice of Conversion/Continuation to obtain a Prime
Rate Credit Extension or to have outstanding Credit Extensions converted into
or continued as Prime Rate Credit Extensions by giving notice (by facsimile or
by telephone confirmed in writing) to Bank of such modification on the date on
which Bank gives notice of its determination as described above.

 

4                                         CREATION OF SECURITY INTEREST

 

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

 

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

 

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

 

5                                         REPRESENTATIONS AND WARRANTIES

 

Borrower
represents and warrants as follows:

 

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

 

8

 

The execution, delivery and performance of the Loan
Documents have been duly authorized, and do not conflict with Borrower’s
organizational documents, nor constitute an event of default under any material
agreement by which Borrower is bound. 
Borrower is not in default under any agreement to which it is a party or
by which it is bound in which the default could 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 or as Borrower has given Bank notice
pursuant to Section 7.2.  In the
event that Borrower, after the date hereof, intends to store or otherwise
deliver any portion of the Collateral to a bailee, then Borrower will first
receive the written consent of 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.

 

Except as noted on the Perfection Certificate,
Borrower is not a party to, nor is bound by, any license or other agreement
with respect to which Borrower is the licensee that prohibits or otherwise
restricts Borrower from granting a security interest in Borrower’s interest in
such license or agreement or any other property.  Borrower shall provide written notice to Bank
within ten (10) days of entering or becoming bound by any such
license or agreement which is reasonably likely to have a material impact on
Borrower’s business or financial condition (other than over-the-counter
software that is commercially available to the public).  Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for all such licenses or contract rights to be deemed “Collateral”
and for Bank to have a security interest in it that might otherwise be restricted
or prohibited by law or by the terms of any such license or agreement (such
consent or authorization may include a licensor’s agreement to a contingent
assignment of the license to Bank if Bank determines that is necessary in its
good faith judgment), whether now existing or entered into in the future.

 

5.3                               Litigation.  Except as disclosed in (a) Borrower’s
10-Q filed on December 12, 2007, or (b) the Perfection Certificate,
there are no actions or proceedings pending or, to the knowledge of the Responsible
Officers, threatened in writing against Borrower or any of its Subsidiaries
involving more than Five Hundred Thousand Dollars ($500,000.00).

 

5.4                               No Material Deterioration 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.

 

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

 

5.6                               Regulatory Compliance.   Borrower is not an “investment
company” or a company “controlled” by an “investment company” under the
Investment Company Act of 1940.  Borrower
is not engaged as one of its important activities in extending credit for
margin stock (under Regulations T and U of the Federal Reserve Board of
Governors).  Borrower has complied in all
material respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
have a material adverse effect on its business. 
None of Borrower’s or any of its Subsidiaries’ properties or assets has
been used by Borrower or any Subsidiary or, to the best of Borrower’s
knowledge, by previous Persons, in disposing, producing, storing, treating, or
transporting any hazardous substance other than legally.  Borrower and each of its Subsidiaries have
obtained all consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all government authorities that are
necessary to continue its business as currently conducted.

 

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

 

9

 

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

 

5.9                               Use
of Proceeds.  Borrower shall use the
proceeds of the Credit Extensions solely as working capital and to fund its
general business requirements and not for personal, family, household or
agricultural purposes.  Without limiting
the foregoing, Borrower may use the Credit Extensions to pay obligations on the
Indenture as they become due pursuant to the terms of the Indentures in effect
on the Effective Date.

 

5.10                        Designation of Indebtedness under this
Agreement as Designated Senior Indebtedness. 
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 shall at all times constitute “Designated Senior
Indebtedness” under the terms of the Indenture and any similar agreement.

 

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

 

6                                         AFFIRMATIVE COVENANTS

 

Borrower
shall do all of the following:

 

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

 

6.2                               Financial Statements, Reports, Certificates.

 

(a)                                  Deliver
to Bank:  (i) as soon as available,
but no later than thirty (30) days after the last day of each month, a company
prepared consolidated balance sheet and income statement covering Borrower’s consolidated
operations during the period certified by a Responsible Officer and in a form
acceptable to Bank; (ii) as soon as available, but no later than ninety
(90) days after the last day of Borrower’s fiscal year (or, by April 30,
2008 with respect to Borrower’s fiscal year ended April 30, 2007), audited
consolidated financial statements prepared under GAAP on form 10-K,
consistently applied, together with an unqualified opinion on the financial
statements from an independent certified public accounting firm acceptable to
Bank in its reasonable discretion; (iii) within five (5) days of
delivery, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt; (iv) as
soon as available, but no later than the earlier to occur of (A) five (5) days
after filing, and (B) forty-five (45) days following each quarter, all
reports on Form 10-Q as filed with the Securities and Exchange Commission
(provided, however, such documents shall be delivered to Bank by April 30,
2008 with respect to Borrower’s quarters ended/ending October 31, 2006, January 31,
2007, July 31, 2007, October 31, 2007 and January 31, 2008); (v) within
five (5) days after filing, all reports on form 8-K filed with the
Securities and Exchange Commission; (vi) a prompt report of any material
legal actions pending or threatened against Borrower or

 

10

 

any of its
Subsidiaries; (vii) as requested by Bank, Board-approved projections; and (viii) budgets,
sales projections, operating plans and other financial information reasonably
requested by Bank.

 

Borrower’s 10-K, 10-Q, and 8-K reports required to be delivered
pursuant to this Section 6.2(a) 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.

 

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

 

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 Five Hundred Thousand Dollars ($500,000.00).

 

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 5.8
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 lender
loss payee and waive subrogation against Bank, and all liability policies shall
show, or have endorsements showing, Bank as an additional insured.  All policies (or the loss payable and
additional insured endorsements) shall provide that the insurer must give Bank
at least 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.

 

6.6                               Operating
Accounts.

 

(a)                                  Maintain
its and its Subsidiaries’ primary operating, depository and
securities/investment accounts with Bank and Bank’s affiliates.  In addition, all of Borrower’s cash
management services shall be maintained with or through Bank.  Any Guarantor shall maintain all depository,
operating and securities accounts with Bank, or SVB Securities.

 

(b)                                 In
the event that the aggregate amount of Borrower’s unrestricted cash and Cash
Equivalents maintained with Bank and Bank’s affiliates is less than Fifty
Million Dollars ($50,000,000.00) at any time, Borrower shall immediately pay to
Bank a one-time fee equal to Fifty Thousand Dollars ($50,000.00), which fee
shall be deemed to be earned as of the Effective Date.

 

(c)                                  Provide
Bank five (5) days prior written notice before establishing any Collateral
Account at or with any bank or financial institution other than Bank or its
Affiliates.  In addition, for each
Collateral Account that Borrower or Guarantor at any time maintains, Borrower
shall cause the applicable bank or financial institution (other than Bank) at
or with which any Collateral Account is maintained to execute and deliver a
Control Agreement or other appropriate instrument with respect to such Collateral
Account to perfect Bank’s Lien in such Collateral Account in accordance with
the terms hereunder, which Control Agreement may not be terminated without the
prior written consent of Bank.  The
provisions of the previous sentence shall not apply to (i) 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, (ii) deposit accounts established
by Borrower in foreign countries to facilitate commercial transactions
conducted in the ordinary course of Borrower’s business and where Borrower
reasonably contemplates that the funds in such deposit accounts will be
disbursed within thirty (30) days from the date deposited, except for any
minimum amounts required to be maintained in such deposit accounts by the
financial institution in which they are held, and (iii) funds currently
held by U.S.  Bank Trust National
Association pursuant to the Indenture, together with non-accelerated regularly
scheduled payments made

 

11

 

by Borrower to
U.S.  Bank Trust National Association in
accordance with the terms of the Indenture in effect on the Effective Date,
provided that the aggregate amount of such funds does not exceed Four Million
Two Hundred Fifty Thousand Dollars ($4,250,000.00) at any time.

 

6.7                               Financial Covenants.

 

Borrower
shall maintain at all times, to be tested as of the last day of each month,
unless otherwise noted:

 

(a)                                  Adjusted
Quick Ratio.  An Adjusted Quick Ratio
of at least (i) 0.90 to 1.0 through and including the month ending June 30,
2008, (ii) 1.0 to 1.0 as of the month ending July 31, 2008 through
and including the month ending September 30, 2008, and(iii) 1.25 to
1.0 as of the month ending October 31, 2008 and thereafter.

 

(b)                                 EBITDA.  As of the last day of each of Borrower’s
fiscal quarters, commencing with the fiscal quarter ended October 31,
2007, Borrower shall have EBITDA of at least Five Million Dollars ($5,000,000.00)
for the six-month period ending on such date.

 

6.8                               Protection
of Intellectual Property Rights.  Borrower
shall protect, defend and maintain the validity and enforceability of its
intellectual property as Borrower reasonably deems necessary and consistent
with the exercise of its business judgment in good faith.

 

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 and any similar
agreement.

 

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.

 

7                                         NEGATIVE COVENANTS

 

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

 

7.1                               Dispositions. 
Convey, sell, lease, transfer, assign, 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:

 

(a)                                  Transfers
in the ordinary course of business for reasonably equivalent consideration;

 

(b)                                 Transfers
of property in connection with sale-leaseback transactions;

 

(c)                                  Transfers
of property to the extent such property is exchanged for credit against, or
proceeds are promptly applied to, the purchase price of other property used or
useful in the business of Borrower or its Subsidiaries;

 

(d)                                 Transfers
constituting non-exclusive licenses and similar arrangements for the use of the
property of Borrower or its Subsidiaries in the ordinary course of business and
other non-perpetual licenses that may be exclusive in some respects other than
territory (and/or that may be exclusive as to territory only in discreet
geographical areas outside of the United States), but that could not result in
a legal transfer of Borrower’s title in the licensed property;

 

(e)           Transfers otherwise
permitted by the Loan Documents;

 

(f)                                    sales
or discounting of delinquent accounts in the ordinary course of business,
including, without limitation, sales or discounting made pursuant to the
Purchase Agreement;

 

12

 

(g)                                 Transfers
associated with the making or disposition of Permitted Investments;

 

(h)                                 Transfers
in connection with a permitted acquisition of a portion of the assets or rights
acquired; and

 

(i)                                     Transfers
of assets (other than Accounts and Inventory (unless such Transfer is in the
ordinary course of Borrower’s business)) not otherwise permitted in this Section 7.1,
provided, that the aggregate book value of all such Transfers by Borrower and
its Subsidiaries, together, shall not exceed in any fiscal year, five percent
(5.0%) of Borrower’s consolidated total assets as of the last day of the fiscal
year immediately preceding the date of determination.

 

Notwithstanding the foregoing, Borrower shall not make any payments
pursuant to the terms of the Indenture other than non-accelerated regularly
scheduled payments pursuant to the terms of the Indenture.

 

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
(a) no Event of Default has occurred and is continuing or would result
from such action during the term of this Agreement, and (b) Borrower is
the surviving entity.

 

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

 

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

 

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 (when viewed in the
context of any series of transactions of which it may be a part, if applicable)
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

 

13

 

Reserve
System), or use the proceeds of any Credit Extension for that purpose; fail to
meet the minimum funding requirements of ERISA, permit a Reportable Event or
Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

 

8                                         EVENTS
OF DEFAULT

 

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

 

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

 

8.3                               Material
Adverse Change.  A Material Adverse
Change occurs;

 

8.4                               Attachment.  (a) Any material portion of Borrower’s
assets is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10) days;
(b) the service of process seeking to attach, by trustee or similar
process, any material funds of Borrower, or of any entity under control of
Borrower (including a Subsidiary), on deposit with Bank or Bank’s Affiliate; (c) Borrower
is enjoined, restrained, or prevented by court order from conducting a material
part of its business; (d) a judgment or other claim in excess of One
Million Dollars ($1,000,000.00) becomes a Lien on any of Borrower’s assets; or (e) a
notice of lien, levy, or assessment is filed against any of Borrower’s assets
by any government agency and not paid within ten (10) days after Borrower
receives notice.  These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower (but no
Credit Extensions shall be made during the cure period);

 

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

 

8.6                               Other
Agreements.  If there is a default in
any agreement to winch Borrower is a party with a third party or parties
resulting in a right by such third party or parties, whether or not exercised,
to accelerate the maturity of any Indebtedness in an amount in excess of One
Million Dollars ($1,000,000.00) or that could result in a Material Adverse
Change.

 

8.7                               Judgments. 
A judgment or judgments for the payment of money in an
amount, individually or in the aggregate, of at least One Million Dollars
($1,000,000.00) (not covered by independent third-party insurance)

 

14

 

shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period often (10) days
after the entry thereof (provided that no Credit Extensions will be made prior
to the satisfaction or stay of such judgment);

 

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

 

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

 

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

 

8.11                        Reimbursement
Agreement.  The occurrence of an
Event of Default (as defined in the Reimbursement Agreement) under the
Reimbursement Agreement; or

 

8.12                        Purchase Agreement.  The occurrence of an Event of
Default (as defined in the Purchase Agreement) under the Purchase Agreement.

 

9                                         BANK’S RIGHTS AND REMEDIES

 

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

 

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

 

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

 

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

 

(d)                                 terminate
any FX 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

 

15

 

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 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                               Accounts Verification; Collection.  Whether or not an Event of Default
has occurred and is continuing, Bank may notify any Person owing Borrower money
of Bank’s security interest in such funds and verify the amount of such
account.  After the occurrence of an
Event of Default, any amounts received by Borrower shall be held in trust by
Borrower for Bank, and, if requested by Bank, Borrower shall immediately
deliver such receipts to Bank in the form received from the Account Debtor,
with proper endorsements for deposit.

 

9.4                               Protective
Payments.  If Borrower fails to obtain the insurance
called for by Section 6.5 or fails to pay any premium thereon or fails to
pay any other amount which Borrower is obligated to pay under this Agreement or
any other Loan Document, 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 charged by Bank,
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.

 

9.5                               Application of Payments and Proceeds.  Unless an Event of Default has
occurred and is continuing, Bank shall apply any funds in its possession, whether
from Borrower account balances, payments, or proceeds realized as the result of
any collection of Accounts or other disposition of the Collateral, first, to
Bank Expenses, including without limitation, the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Bank in the exercise
of its rights under this Agreement; second, to the interest due upon any of the
Obligations; and third, to the principal of the Obligations and any applicable
fees and other charges, 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 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.

 

16

 

9.6          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.

 

9.7          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.

 

9.8          Demand Waiver.  Borrower waives demand, notice of default or dishonor,
notice of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of accounts,
documents, instruments, chattel paper, and guarantees held by 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 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:

  	
   

  	
  Finisar Corporation

  
	
   

  	
   

  	
  1389 Moffett Park Drive

  
	
   

  	
   

  	
  Sunnyvale, California
  94089

  
	
   

  	
   

  	
  Attn: Stephen K.
  Workman

  
	
   

  	
   

  	
  Fax: (408) 541-4154

  
	
   

  	
   

  	
  Email:
  steve.workman@finisar.com

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Finisar Corporation

  
	
   

  	
   

  	
  1389 Moffett Park Drive

  
	
   

  	
   

  	
  Sunnyvale, California
  94089

  
	
   

  	
   

  	
  Attn: Gabe Kralik

  
	
   

  	
   

  	
  Fax: (408) 541-5660

  
	
   

  	
   

  	
  Email:
  gabe.kralik@finisar.com

  
	
   

  	
   

  	
   

  
	
  If to Bank:

  	
   

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
  2400 Geng Road,
  Suite 200

  
	
   

  	
   

  	
  Palo Alto, California
  94303

  
	
   

  	
   

  	
  Attn: Mr.  Nick
  Tsiagkasl

  
	
   

  	
   

  	
  Fax: (650) 320-0016

  
	
   

  	
   

  	
  Email:
  ntsiagkas@svb.com

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Riemer &
  Braunstein LLP

  
	
   

  	
   

  	
  Three Center Plaza

  
	
   

  	
   

  	
  Boston, Massachusetts
  02108

  
	
   

  	
   

  	
  Attn: David A. Ephraim,
  Esquire

  
	
   

  	
   

  	
  Fax: (617) 880-3456

  
	
   

  	
   

  	
  Email:
  DEphraim@riemerlaw.com

  

 

17

 

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

 

California 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 Santa Clara County, California.  NOTWITHSTANDING THE FOREGOING, BANK SHALL
HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER OR ITS
PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS NECESSARY OR
APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE ENFORCE BANK’S
RIGHTS AGAINST BORROWER OR ITS PROPERTY.

 

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

 

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

 

12                                  GENERAL PROVISIONS

 

12.1        Successors and
Assigns.  This Agreement binds and is for the benefit of the
successors and permitted assigns of each party. 
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,

 

18

 

without the
consent of or notice to Borrower, to sell, transfer, assign, negotiate, or
grant participation in all or any part of, or any interest in, Bank’s
obligations, rights, and benefits under this Agreement and the other Loan
Documents.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

19

 

12.10      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.

 

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

 

13                                  DEFINITIONS

 

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

 

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

 

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

 

“Additional
Costs” is defined
in Section 3.7(b).

 

“Adjusted
Quick Ratio” is
the ratio of Quick Assets to Current Liabilities minus Deferred Revenue.

 

“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 Revolving Line minus (b) the
amount of all outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit) plus an amount equal to the Letter of Credit Reserves, and
minus (c) the outstanding principal balance of any Advances (including any
amounts used for Cash Management Services), minus (d) the FX Reserve.

 

“Bank” is defined in the preamble hereof.

 

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

 

“Borrower”
is defined in the
preamble hereof.

 

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

 

“Borrowing Resolutions” are, with respect to any Person, those
resolutions adopted by such Person’s Board of Directors and delivered by such
Person to 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,

 

20

 

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 other than a Saturday, Sunday or other day
on which banking institutions in the State of California are authorized or
required by law or other governmental action to close, except that if any
determination of a “Business Day” shall relate to a LIBOR Credit Extension, the
term “Business Day” shall also mean a day on which dealings are carried on in
the London interbank market.

 

“Cash
Equivalents” are (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 2.1.4.

 

“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 (25.0%) 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
directions 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.

 

“Claims”
are defined in Section 12.2.

 

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

 

“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

 

21

 

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.

 

“Continuation Date” means any date on which Borrower elects
to continue a LIBOR Credit Extension into another Interest Period.

 

“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.

 

“Conversion Date” means any date on which Borrower elects
to convert a Prime Rate Credit Extension to a LIBOR Credit Extension or a LIBOR
Credit Extension to a Prime Rate Credit Extension.

 

“Credit Extension” is any Advance, Letter of Credit, 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”
is any event
which with notice or passage of time or both, would constitute an Event of
Default.

 

“Default
Rate” is defined
in Section 2.4(c).

 

“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
                      
maintained with Bank.

 

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

 

“EBITDA” shall mean (a) Net Income, plus (b) Interest
Expense, plus (c) to the extent deducted in the calculation of Net Income,
depreciation expense and amortization expense, plus (d) income tax
expense, plus (e) stock compensation expense, plus (f) non-cash
charges related to inventory obsolescence, plus (g) non-cash charges
related to acquisitions, plus (h) non-cash charges related to impairment
of minority investments or goodwill in accordance with GAAP, plus (i) non-cash
charges related to modification of outstanding debt obligations required by
GAAP.

 

“Effective Amount” means with respect to any Credit
Extension on any date, the aggregate outstanding principal amount thereof after
giving effect to any borrowing and prepayments or repayments thereof occurring
on such date.

 

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

 

“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.

 

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

 

22

 

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

 

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

 

“FX
Forward Contract” is
defined in Section 2.1.3.

 

“FX
Reserve” is
defined in Section 2.1.3.

 

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

 

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

 

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

 

“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.

 

“Indenture” is, collectively, (a) that certain
Indenture dated as of October 15, 2001, executed by and between Borrower,
as issuer, and U.S.  Bank Trust National
Association, as trustee, relating to 5.25% Convertible Subordinated Notes due
2008, as supplemented from time to time, (b) that certain Indenture dated as
of October 15, 2003, executed by and between Borrower, as issuer, and
U.S.  Bank Trust National Association, as
trustee, relating to 2.50% Convertible Subordinated Notes due 2010, as
supplemented from time to time, and (c) that certain Indenture dated as of
October 12, 2006, executed by and between Borrower, as issuer, and
U.S.  Bank Trust National Association, as
trustee, relating to 2.50% Convertible Subordinated Notes due 2010, as
supplemented from time to time.

 

“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.

 

“Interest Expense” means for any fiscal period, interest
expense (whether cash or non-cash) determined in accordance with GAAP for the
relevant period ending on such date, including, in any event, interest expense
with respect to any Credit Extension and other Indebtedness of Borrower,
including, without limitation or duplication, all commissions, discounts, or
related amortization and other fees and charges with respect to letters of
credit and bankers’ acceptance financing and the net costs associated with
interest rate swap, cap, and similar arrangements, and the interest portion of
any deferred payment obligation (including leases of all types).

 

“Interest Payment Date” means, with respect to any LIBOR Credit
Extension, the last day of each Interest Period applicable to such LIBOR Credit
Extension and, with respect to Prime Rate Credit Extensions, the first (1st)
calendar day of each month (or, if the first (lst) day of the month
does not fall on a Business Day, then on the first Business Day following such
date), and each date a Prime Rate Credit Extension is converted into a LIBOR
Credit Extension to the extent of the amount converted to a LIBOR Credit
Extension.

 

23

 

“Interest
Period” means, as
to any LIBOR Credit Extension, the period commencing on the date of such LIBOR
Credit Extension, or on the conversion/continuation date on which the LIBOR
Credit Extension is converted into or continued as a LIBOR Credit Extension, and
ending on the date that is one (1), two (2), or three (3) months
thereafter, in each case as Borrower may elect in the applicable Notice of
Borrowing or Notice of Conversion/Continuation; provided, however, that (a) no Interest Period with
respect to any LIBOR Credit Extension shall end later than the Revolving Line
Maturity Date, (b) the last day of an Interest Period shall be determined
in accordance with the practices of the LIBOR interbank market as from time to
time in effect, (c) if any Interest Period would otherwise end on a day
that is not a Business Day, that Interest Period shall be extended to the
following Business Day unless, in the case of a LIBOR Credit Extension, the
result of such extension would be to carry such Interest Period into another
calendar month, in which event such Interest Period shall end on the preceding
Business Day, (d) any Interest Period pertaining to a LIBOR Credit
Extension that begins on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the calendar month at
the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period, and (e) interest shall
accrue from and include the first Business Day of an Interest Period but
exclude the last Business Day of such Interest Period.

 

“Interest
Rate Determination Date” means each date for calculating the LIBOR for purposes of determining
the interest rate in respect of an Interest Period.   The Interest Rate Determination Date shall
be the second Business Day prior to the first day of the related Interest
Period for a LIBOR Credit Extension.

 

“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.

 

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

 

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

 

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

 

“LIBOR” means, for any Interest Rate
Determination Date with respect to an Interest Period for any Credit Extension
to be made, continued as or converted into a LIBOR Credit Extension, the rate
of interest per annum determined by Bank to be the per annum rate of interest
at which deposits in United States Dollars are offered to Bank in the London
interbank market (rounded upward, if necessary, to the nearest 1/l00th of one
percent (0.01%)) in which Bank customarily participates at 11:00 a.m.  (local time in such interbank market) two (2) Business
Days prior to the first day of such Interest Period for a period approximately
equal to such Interest Period and in an amount approximately equal to the
amount of such Credit Extension.

 

“LIBOR Credit Extension” means a Credit Extension that bears
interest based at the LIBOR Rate plus the LIBOR Rate Margin.

 

“LIBOR Rate” means, for each Interest Period in
respect of LIBOR Credit Extensions comprising part of the same Credit
Extensions, an interest rate per annum (rounded
upward to the nearest 1/16th of one percent (0.0625%)) equal to LIBOR for such
Interest Period divided by one (1) minus the Reserve Requirement for such
Interest Period.

 

“LIBOR
Rate Margin” is
two and one-half of one percent (2.50%).

 

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

 

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

 

24

 

“Material
Adverse Change” is
(a) a material impairment in the perfection or priority of Bank’s Lien in
the Collateral or in the value of such Collateral; (b) a material adverse
change in the business, operations, or condition (financial or otherwise) of
Borrower; (c) a material impairment of the prospect of repayment of any
portion of the Obligations; or (d) Bank determines, based upon information
available to it and in its reasonable judgment, that there is a reasonable
likelihood that Borrower shall fail to comply with one or more of the financial
covenants in Section 6.7 during the next succeeding financial reporting
period.

 

“Net Income” means, as calculated for Borrower for any
period as at any date of determination, the net profit (or loss), after
provision for taxes, of Borrower for such period taken as a single accounting
period.

 

“Notice of Borrowing” means a notice given by Borrower to Bank
in accordance with Section 3.2(a), substantially in the form of Exhibit C,
with appropriate insertions.

 

“Notice of Conversion/Continuation” means a notice given by Borrower to Bank
in accordance with Section 3.5, substantially in the form of Exhibit D,
with appropriate insertions.

 

“Obligations” are Borrower’s obligation to pay when due
any debts, principal, interest, Bank Expenses and other amounts Borrower owes
Bank now or later, pursuant to this Agreement and the Loan Documents,
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 thirty (30) days prior to
the Effective Date, and, its bylaws in current form, each of the foregoing with
all current amendments or modifications thereto.

 

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

 

“Perfection
Certificate” is
defined in Section 5.1.

 

“Permitted
Distributions” means:

 

(a)                                 purchases of capital stock from former
employees, consultants and directors pursuant to repurchase agreements or other
similar agreements in an aggregate amount not to exceed One Hundred Thousand
Dollars ($100,000.00) in any fiscal year provided that at the time of such
purchase no Default or Event of Default has occurred and is continuing;

 

(b)                                distributions or dividends consisting
solely of Borrower’s capital stock;

 

(c)                                  purchases for value of any rights
distributed in connection with any stockholder rights plan;

 

(d)                                purchases of capital stock or options to
acquire such capital stock with the proceeds received from a substantially
concurrent issuance of capital stock or convertible securities;

 

(e)                                 purchases of capital stock pledged as
collateral for loans to employees;

 

(f)                                   purchases of capital stock in connection
with the exercise of stock options or stock appreciation rights by way of
cashless exercise or in connection with the satisfaction of withholding tax
obligations;

 

(g)                                purchases of fractional shares of capital
stock arising out of stock dividends, splits or combinations or business
combinations; and

 

(h)                                the settlement or performance of such
Person’s obligations under any equity derivative transaction, option contract
or similar transaction or combination of transactions.

 

“Permitted
Indebtedness” is:

 

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

 

25

 

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

 

(c)                                 Subordinated Debt;

 

(d)                                Indebtedness under the Indenture;

 

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

 

(f)                                   extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness (a) through
(d) 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: (i) marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agency or any state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor’s Corporation or Moody’s Investors
Service, Inc., (iii) Bank’s certificates of deposit issued maturing
no more than 1 year after issue, (iv) any other investments administered
through Bank, (v) any Investments currently owned by Borrower that were
made in accordance with Borrower’s investment policy in effect at the time the
Investment was made, and (vi) any Investments made hereafter in accordance
with Borrower’s investment policy, as amended from time to time, provided that
such investment policy (and any such amendments thereto) has been approved by
Bank.

 

“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 Borrower’s
Books, if they have no priority over any of Bank’s Liens;

 

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

 

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

 

“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.

 

“Prime Rate Credit Extension” means a Credit Extension that bears
interest based at the Prime Rate plus the Prime Rate Margin.

 

“Prime
Rate Margin” is
zero percent (0.00%).

 

“Purchase Agreement” is that certain Non-Recourse Receivables
Purchase Agreement dated as of October 28, 2004 between Borrower and Bank,
as has been and as may be further amended from time to time.

 

“Quick Assets” is, on any date, Borrower’s unrestricted
cash, Cash Equivalents, net billed trade accounts receivable and all of
Borrower’s investments determined according to GAAP.

 

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

 

“Regulatory Change” means, with respect to Bank, any change
on or after the date of this Agreement in United States federal, state, or
foreign laws or regulations, including Regulation D, or the adoption or making
on or after such date of any interpretations, directives, or requests applying
to a class of lenders including Bank, of or

 

26

 

under
any United States federal or state, or any foreign laws or regulations (whether
or not having the force of law) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.

 

“Reimbursement Agreement” is that certain Letter of Credit
Reimbursement Agreement dated as of April 29, 2005 between Borrower and
Bank, as has been and as may be further amended from time to time.

 

“Reserve Requirement” means, for any Interest Period, the
average maximum rate at which reserves (including any marginal, supplemental,
or emergency reserves) are required to be maintained during such Interest
Period under Regulation D against “Eurocurrency liabilities” (as such term is
used in Regulation D) by member banks of the Federal Reserve System Without
limiting the effect of the foregoing, the Reserve Requirement shall reflect any
other reserves required to be maintained by Bank by reason of any Regulatory
Change against (a) any category of liabilities which includes deposits by
reference to which the LIBOR Rate is to be determined as provided in the
definition of LIBOR or (b) any category of extensions of credit or other
assets which include Credit Extensions.

 

“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 aggregate
amount of up to Fifty Million Dollars ($50,000,000.00) outstanding at any time.

 

“Revolving
Line Maturity Date” is
March 13, 2009.

 

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

 

“Settlement
Date” is defined
in Section 2.1.3.

 

“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, (b) all Indebtedness
under the Indenture, and (c) 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” is, with respect to any Person, any
Person of which more than fifty percent (50.0%) of the voting stock or other
equity interests (in the case of Persons other man corporations) is owned or
controlled, directly or indirectly, by such Person or one or more Affiliates of
such Person.

 

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

 

“Transfer” is defined in Section 7.1.

 

“United
States Dollars” is
the lawful currency of the United States of America.

 

[signature page to follow]

 

27

 

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

 

BORROWER:

 

FINISAR CORPORATION

 

	
  By:

  	
    /s/ S.K. Workman

  	
   

  
	
  Name:

  	
    S.K. Workman

  	
   

  
	
  Title:

  	
    Sr. VP Finance and CFO

  	
   

  
	
   

  	
   

  	
   

  
	
  BANK:

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  
	
   

  	
   

  	
   

  
	
  By:

  	
    /s/ Nack Tsiagkas

  	
   

  
	
  Name:

  	
    Nick Tsiagkas

  	
   

  
	
  Title:

  	
    Relationship Manager

  	
   

  
								

 

 

[Signature page to Loan and Security Agreement]

 

 

EXHIBIT A

 

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

 

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

 

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

 

Notwithstanding
the foregoing, the Collateral does not include any of the following, whether
now owned or hereafter acquired any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, any patents, patent
applications and like protections, including improvements, divisions,
continuations, renewals, reissues, extensions, and continuations-in-part of the
same, trademarks, service marks and, to the extent permitted under applicable
law, any applications therefor, whether registered or not, and the goodwill of
the business of Borrower connected with and symbolized thereby, know-how, operating
manuals, trade secret rights, rights to unpatented inventions, and any claims
for damage by way of any past, present, or future infringement of any of the
foregoing; provided, however, the Collateral shall include all Accounts,
license and royalty fees and other revenues, proceeds, or income arising out of
or relating to any of the foregoing.

 

Pursuant to the terms of a certain negative
pledge arrangement with Bank, Borrower has agreed not to encumber any of its
copyright rights, copyright applications, copyright registrations and like
protections in each work of authorship and derivative work, whether published
or unpublished, any patents, patent applications and like protections,
including improvements, divisions, continuations, renewals, reissues, extensions,
and continuations-in-part of the same, trademarks, service marks and, to the
extent permitted under applicable law, any applications therefor, whether
registered or not, and the goodwill of the business of Borrower connected with
and symbolized thereby, know-how, operating manuals, trade secret rights,
rights to unpatented inventions, and any claims for damage by way of any past,
present, or future infringement of any of the foregoing, without Bank’s prior
written consent.

 

 

EXHIBIT
B

 

COMPLIANCE
CERTIFICATE

 

	
  TO:

  	
   

  	
  SILICON
  VALLEY BANK

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FROM:

  	
  FINISAR
  CORPORATION

  	
   

  	
   

  

 

The undersigned authorized officer of FINISAR
CORPORATION (“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 5.8 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 and compliance Certificate

  	
   

  	
   

  	
  Monthly within 30 days

  	
   

  	
   

  	
  Yes  No

  
	
  Annual financial statements (CPA Audited) on 10-K

  	
   

  	
   

  	
  FYE within 90 days

  	
   

  	
   

  	
  Yes  No

  
	
  10-Q

  	
   

  	
   

  	
  Quarterly, within 5 days after filing with 

  SEC or 45 days after quarter

  	
   

  	
   

  	
  Yes  No

  
	
  8-K

  	
   

  	
   

  	
  Within 5 days after SEC filing

  	
   

  	
   

  	
  Yes  No

  
	
  Board approved projections

  	
   

  	
   

  	
  As requested by Bank

  	
   

  	
   

  	
  Yes  No

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Financial Covenant

  	
   

  	
   

  	
  Required

  	
   

  	
   

  	
  Actual

  	
   

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Quick Ratio (montly)

  	
   

  	
   

  	
  : 1.0

  	
  *

  	
   

  	
  : 1.0

  	
   

  	
   

  	
  Yes  No

  
	
  EBITDA (quarterly)

  	
   

  	
   

  	
  $

  	
  **

  	
   

  	
  $

  	
   

  	
   

  	
  Yes  No

  

 

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

**As set forth in Section 6.7(b) of
the Loan and Security Agreement.

 

1

 

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

 

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

	
   

  
	
   

  
	
   

  

 

	
  FINISAR CORPORATION

  	
  BANK USE ONLY

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  	
  Received by:

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  Title:

  	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
  Date:

  	
   

  
	
   

  	
   

  
	
   

  	
  Compliance Status: 

  	
  Yes  No

  
						

 

2

 

Schedule 1 to Compliance Certificate 

Financial Covenants of Borrower

 

	
  Dated:

  	
  ___________________

  	
   

  

 

 

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

 

I.             Adjusted
Quick Ratio (Section 6.7(a))

 

Required:               ____: 1.00 (see Section  6.7(a))

 

Actual:                   ___: 1.00

 

	
  A.

  	
   

  	
  Aggregate value of the unrestricted cash and Cash Equivalents of
  Borrower

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of the net billed trade accounts receivable of
  Borrower

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Investments of Borrower

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Quick Assets (the sum of lines A through C)

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of liabilities of Borrower (including all
  Indebtedness to Bank) that mature within one (1) year and current
  portion of Subordinated Debt permitted by Bank to be paid by Borrower

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Current Liabilities (line E))

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Deferred Revenue

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  Line F minus line G

  	
  $___________

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
   

  	
  Adjusted Quick Ratio (line D divided by line H)

  	
   

  	
   

  

 

Is line H equal to or greater than         
: 1.00 (see Section 6.7(a))?

 

	
  _______

  	
   

  	
  No, not in compliance

  	
   

  	
  __________

  	
  Yes, in compliance

  

 

II.            EBITDA (Section 6.7(b))

 

	
  Required:

  	
  $5,000,000 (for prior two quarters)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Actual:

  	
   

  	
  $                                  

  	
   

  	
   

  	
   

  
						

 

Is EBITDA for prior two quarters at least $5,000,000?

 

	
  _______

  	
   

  	
  No, not in compliance

  	
   

  	
  __________

  	
  Yes, in compliance

  

 

3

 

EXHIBIT
C

 

FORM OF
NOTICE OF BORROWING

 

FINISAR
CORPORATION

 

	
   

  	
  Date:

  	
  ____________________

  

 

	
  To:

  	
   

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  	
  3003 Tasman Drive

  
	
   

  	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
   

  	
  Attention: Corporate Services Department

  

 

	
  RE:

  	
   

  	
  Loan and Security Agreement dated as of                             ,
  2008 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and Finisar
  Corporation (the “Borrower”) Silicon Valley Bank (the “Bank”)

  

 

Ladies and Gentlemen:

 

The
undersigned refers to the Loan Agreement, the terms defined therein and used
herein as so defined, and hereby gives you notice irrevocably, pursuant to Section 3.4(a) of
the Loan Agreement, of the borrowing of a Credit Extension.

 

1.             The Funding Date,
which shall be a Business Day, of the requested borrowing is                               .

 

2.             The aggregate
amount of the requested borrowing is $                        .

 

3.             The requested
Credit Extension shall consist of $                    
of Prime Rate Credit Extensions and $                  
of LIBOR Credit Extensions.

 

4.             The duration of
the Interest Period for the LIBOR Credit Extensions included in the requested
Credit Extension shall be             
months.

 

The undersigned hereby certifies that the
following statements are true on the date hereof, and will be true on the date
of the proposed Credit Extension before and after giving effect thereto, and to
the application of the proceeds therefrom, as applicable:

 

(a)           all representations and
warranties of Borrower contained in the Loan Agreement are true, accurate and
complete in all material respects as of the date hereof; 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;

 

(b)           no Default or Event of
Default has occurred and is continuing, or would result from such proposed
Credit Extension; and

 

(c)           the requested Credit
Extension will not cause the aggregate principal amount of the outstanding
Credit Extensions to exceed, as of the designated Funding Date, the Revolving
Line.

 

4

 

	
  BORROWER

  	
  FINISAR CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
					

 

For internal Bank
use only

 

	
   

  LIBOR Pricing Date

   

  	
   

  	
   

  	
   

  LIBOR

  	
   

  	
   

  	
   

  LIBOR Variance

  	
   

  	
   

  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ____________________

  	
  %

  	
   

  	
   

  

 

5

 

EXHIBIT
D

 

FORM OF
NOTICE OF CONVERSION/CONTINUATION

 

FINISAR
CORPORATION

 

	
   

  	
  Date:

  	
   

  

 

	
  To:

  	
   

  	
  SILICON VALLEY BANK

  
	
   

  	
   

  	
  3003 Tasman Drive

  
	
   

  	
   

  	
  Santa Clara, CA 95054

  
	
   

  	
   

  	
  Attention:

  

 

	
  RE:

  	
   

  	
  Loan and Security Agreement dated as of                             ,
  2008 (as amended, modified, supplemented or restated from time to time, the “Loan Agreement”), by and Finisar
  Corporation (the “Borrower”) Silicon Valley Bank (the “Bank”)

  

 

Ladies and Gentlemen:

 

The
undersigned refers to the Loan Agreement, the terms defined therein being used
herein as therein defined, and hereby gives you notice irrevocably, pursuant to
Section 3.5 of the Loan Agreement, of the [conversion] [continuation] of
the Credit Extensions specified herein, that:

 

1.             The
date of the [conversion] [continuation] is          ,
20      .

 

2.             The aggregate
amount of the proposed Credit Extensions to be [converted] is $                               
or [continued] is $                      .

 

3.             The Credit
Extensions are to be [converted into] [continued as] [LIBOR] [Prime Rate]
Credit Extensions.

 

4.             The duration of
the Interest Period for the LIBOR Credit Extensions included in the
[conversion] [continuation] shall be                 
months.

 

The undersigned, on behalf of Borrower,
hereby certifies that the following statements are true on the date hereof, and
will be true on the date of the proposed [conversion] [continuation], before
and after giving effect thereto and to the application of the proceeds
therefrom:

 

(a)           all representations and
warranties of Borrower stated in the Loan Agreement are true, accurate and
complete in all material respects as of the date hereof; 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

 

(b)           no Default or Event of
Default has occurred and is continuing, or would result from such proposed
[conversion] [continuation].

 

[Signature page follows.]

 

1

 

	
  BORROWER

  	
  FINISAR CORPORATION

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  
						

 

For internal Bank
use only

 

	
   

  LIBOR Pricing Date

   

  	
   

  	
   

  	
   

  LIBOR

  	
   

  	
   

  	
   

  LIBOR Variance

  	
   

  	
   

  Maturity Date

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  ____________________

  	
  %

  	
   

  	
   

  

 

1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00144-of-00352.parquet"}]]