Document:

exv10w23wb

Exhibit 10.23(b)

AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

          This Amendment no. 2 to Employment Agreement (this “Amendment”) is entered into as of December
21, 2010, between JetBlue Airways Corporation, a Delaware corporation (the “Company”) and Dave
Barger (“Executive”).

          WHEREAS, Executive became the Chief Executive Officer of the Company on May 10, 2007.

          WHEREAS, on February 11, 2008, Executive and the Company entered into an Employment Agreement
and Executive and the Company amended such Agreement as of July 8, 2009 (as amended, the
“Employment Agreement”). (Capitalized terms used in this Amendment without definition shall have
the meanings given to them in the Employment Agreement.)

          WHEREAS, in the Employment Agreement, the Term of Executive’s employment is defined as the
period ending on February 13, 2013 (if not earlier terminated by the parties).

          WHEREAS, at the request and direction of the Board of Directors of the Company, the parties
now desire to enter into this Amendment to extend the Employment Term through February 11, 2015.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements hereinafter set forth,
the parties agree that the Employment Agreement is hereby amended as follows:

	 	1.	 	The “Term of Employment” described in Section 2 of the Employment Agreement is hereby
amended to be that period beginning on the Effective Date of the Employment Agreement and
ending on February 11, 2015, unless sooner terminated in accordance with the terms of the
Employment Agreement.

Except as specifically amended above, all other provisions of the Employment Agreement shall remain
in full force and effect.

     IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the date first written
above.

	 	 	 	 	 
	 	JetBlue Airways Corporation

 	 
	 	By:  	/s/  James G. Hnat
 	 
	 	 	Name:  	James G. Hnat 	 
	 	 	Title:  	Executive Vice President and General Counsel 
	 
	 	ACCEPTED AND AGREED TO:

 	 
	 	/s/ Dave Barger
 	 
	 	Dave BargerExhibit 10.1

Exhibit 10.1

VENTURE LOAN AND SECURITY AGREEMENT

Dated as
of December 21, 2010

by and between

COMPASS HORIZON FUNDING COMPANY LLC,

a Delaware limited liability company

76 Batterson Park Road

Farmington, CT 06032

as Lender

And

CEREPLAST, INC.,

a Nevada corporation

300 North Continental Blvd., Suite 100

El Segundo, CA 90245

as Borrower

	 	 	 

	Commitment Amount Loan A:

	 	 $2,500,000
	Commitment Amount Loan B:

	 	 $2,500,000
	Commitment Termination Date Loan A:

	 	 December 31, 2010
	Commitment Termination Date Loan B:

	 	 March 2, 2011

 

 

The Lender and Borrower hereby agree as follows:

AGREEMENT

1. Definitions and Construction.

1.1 Definitions. As used in this Agreement, the following capitalized terms shall have
the following meanings:

“Account Control Agreement” means an agreement acceptable to Lender which perfects via
control Lender’s security interest in Borrower’s deposit accounts and/or accounts holding
securities.

“Affiliate” means any Person that owns or controls directly or indirectly ten percent
(10%) or more of the stock of another entity, any Person that controls or is controlled by or is
under common control with such Persons or any Affiliate of such Persons and each of such Person’s
officers, directors, managers, joint venturers or partners.

“Agreement” means this certain Venture Loan and Security Agreement by and between
Borrower and Lender dated as of the date on the cover page hereto (as it may from time to time be
amended or supplemented in writing signed by the Borrower and Lender).

“Borrower” means the Borrower as set forth on the cover page of this Agreement.

“Business Day” means any day that is not a Saturday, Sunday, or other day on which
banking institutions are authorized or required to close in Connecticut or California.

“Claim” has the meaning given such term in Section 10.3 of this Agreement

“Code” means the Uniform Commercial Code as adopted and in effect in the State of
Connecticut, as amended from time to time; provided that if by reason of mandatory
provisions of law, the creation and/or perfection or the effect of perfection or non-perfection of
the security interest in any Collateral is governed by the Uniform Commercial Code as in effect in
a jurisdiction other than Connecticut, the term “Code” shall also mean the Uniform Commercial Code
as in effect from time to time in such jurisdiction for purposes of the provisions hereof relating
to such creation, perfection or effect of perfection or non-perfection.

“Collateral” has the meaning given such term in Section 4.1 of this Agreement.

“Commitment Amount Loan A” and “Commitment Amount Loan B” have the meanings as
set forth on the cover page of this Agreement and collectively, shall be referred to as the
“Commitment Amounts”.

“Commitment Fee” has the meaning given such term in Section 2.6(c) of this
Agreement.

“Commitment Termination Date Loan A” and “Commitment Termination Date Loan B”
have the meanings as set forth on the cover page of this Agreement.

 

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“Default” means any event which with the passing of time or the giving of notice or
both would become an Event of Default hereunder.

“Default Rate” means the per annum rate of interest equal to five percent (5%) over
the Loan Rate, but such rate shall in no event be more than the highest rate permitted by
applicable law to be charged on commercial loans in a default situation.

“Disclosure Schedule” means Exhibit A attached hereto.

“Environmental Laws” means all foreign, federal, state or local laws, statutes, common
law duties, rules, regulations, ordinances and codes, together with all administrative orders,
directed duties, requests, licenses, authorizations and permits of, and agreements with, any
Governmental Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Solid Waste Disposal
Act, the Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act and the
Emergency Planning and Community Right-to-Know Act.

“Equity Securities” of any Person means (a) all common stock, preferred stock,
participations, shares, partnership interests, membership interests or other equity interests in
and of such Person (regardless of how designated and whether or not voting or non-voting) and (b)
all warrants, options and other rights to acquire any of the foregoing.

“ERISA” has the meaning given to such term in Section 7.12 of this Agreement.

“Event of Default” has the meaning given to such term in Section 8 of this
Agreement.

“Funding Certificate” means a certificate executed by a Responsible Officer of
Borrower substantially in the form of Exhibit B or such other form as Lender may agree to
accept.

“Funding Date” means any date on which a Loan is made to or on account of Borrower
under this Agreement.

“GAAP” means generally accepted accounting principles as in effect in the United
States of America from time to time, consistently applied.

“Good Faith Deposit” has the meaning given such term in Section 2.6(a) of this
Agreement.

“Governmental Authority” means (a) any federal, state, county, municipal or foreign
government, or political subdivision thereof, (b) any governmental or quasi-governmental agency,
authority, board, bureau, commission, department, instrumentality or public body, (c) any court or
administrative tribunal, or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.

“Hazardous Materials” means all those substances which are regulated by, or which may
form the basis of liability under, any Environmental Law, including all substances identified under
any Environmental Law as a pollutant, contaminant, hazardous waste, hazardous
constituent, special waste, hazardous substance, hazardous material, or toxic substance, or
petroleum or petroleum derived substance or waste.

 

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“Indebtedness” means, with respect to Borrower or any Subsidiary, the aggregate amount
of, without duplication, (a) all obligations of such Person for borrowed money, (b) all obligations
of such Person evidenced by bonds, debentures, notes or other similar instruments, (c) all
obligations of such Person to pay the deferred purchase price of property or services (excluding
trade payables aged less than one hundred eighty (180) days), (d) all capital lease obligations of
such Person, (e) all obligations or liabilities of others secured by a Lien on any asset of such
Person, whether or not such obligation or liability is assumed, (f) all obligations or liabilities
of others guaranteed by such Person, and (g) any other obligations or liabilities which are
required by GAAP to be shown as debt on the balance sheet of such Person. Unless otherwise
indicated, the term “Indebtedness” shall include all Indebtedness of Borrower and the
Subsidiaries.

“Indemnified Person” has the meaning given such term in Section 10.3 of this
Agreement.

“Intellectual Property” means all of Borrower’s right, title and interest in and to
patents, patent rights (and applications and registrations therefor and divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same), trademarks and service marks
(and applications and registrations therefor and the goodwill associated therewith), inventions,
copyrights (including applications and registrations therefor and like protections in each work or
authorship and derivative work thereof), mask works (and applications and registrations therefor),
trade names, trade styles, software and computer programs, source code, object code, trade secrets,
methods, processes, know how, drawings, specifications, descriptions, and all memoranda, notes, and
records with respect to any research and development, all whether now owned or subsequently
acquired or developed by Borrower and whether in tangible or intangible form or contained on
magnetic media readable by machine together with all such magnetic media (but not including
embedded computer programs and supporting information included within the definition of “goods”
under the Code).

“Investment” means the purchase or acquisition of any capital stock, equity interest,
or any obligations or other securities of, or any interest in, any Person, or the extension of any
advance, loan, extension of credit or capital contribution to, or any other investment in, or
deposit with, any Person.

“Landlord Agreement” means an agreement substantially in the form provided by Lender
to Borrower or such other form as Lender may agree to accept.

“Lender” means the Lender as set forth on the cover page of this Agreement.

“Lender’s Expenses” means all reasonable costs or expenses (including reasonable
attorneys’ fees and expenses) incurred in connection with the preparation, negotiation,
documentation, administration, perfection and funding of the Loan Documents; and Lender’s
reasonable attorneys’ fees, costs and expenses incurred in drafting, amending, modifying, enforcing
or defending the Loan Documents (including fees and expenses of appeal or review), including the
exercise of any rights or remedies afforded hereunder or under applicable law,
whether or not suit is brought, whether before or after bankruptcy or insolvency, including
without limitation all fees and costs incurred by Lender in connection with Lender’s enforcement of
its rights in a bankruptcy or insolvency proceeding filed by or against Borrower or its Property.

 

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“Lien” means any voluntary or involuntary security interest, pledge, bailment, lease,
mortgage, hypothecation, conditional sales and title retention agreement, encumbrance or other lien
with respect to any Property in favor of any Person.

“Loan” means each advance of credit by Lender to Borrower under this Agreement and,
“Loans” means, collectively all such advances of credit.

“Loan A” means the advance of credit by Lender to Borrower under this Agreement in the
Commitment Amount Loan A.

“Loan B” means the advance of credit by Lender to Borrower under this Agreement in the
Commitment Amount Loan B.

“Loan Documents” means, collectively, this Agreement, the Notes, the Warrant, any
Landlord Agreement, any Account Control Agreement and all other documents, instruments and
agreements entered into in connection with this Agreement, all as amended or extended from time to
time.

“Loan Rate” means, with respect to each Loan, the per annum rate of interest (based on
a year of twelve 30-day months) equal to the greater of (a) 12.0% or (b) 12.0% plus the
difference between (i) the one month LIBOR Rate (rounded to the nearest one hundredth percent), as
reported in the Wall Street Journal, on the date which is five (5) Business Days before the
Funding Date for such Loan (or, if the Wall Street Journal is not published on such date,
the next earlier date on which it is published) and (ii) 0.30%.

“Maturity Date” means, with respect to each Loan, thirty-nine (39) months from the
first day of the month next following the first day of the month following the Funding Date for
such Loan, or if earlier, the date of acceleration of such Loan following an Event of Default or
the date of prepayment, whichever is applicable.

“Note” means each promissory note executed in connection with a Loan in substantially
the form of Exhibit C attached hereto, and, collectively, “Notes” means all such
promissory notes.

“Obligations” means all debt, principal, interest, fees, charges, expenses and
attorneys’ fees and costs and other amounts, obligations, covenants, and duties owing by Borrower
to Lender of any kind and description (whether pursuant to or evidenced by the Loan Documents
(other than the Warrant), or by any other agreement between Lender and Borrower, and whether or not
for the payment of money), whether direct or indirect, absolute or contingent, due or to become
due, now existing or hereafter arising, including all Lender’s Expenses.

“Officer’s Certificate” means a certificate executed by a Responsible Officer
substantially in the form of Exhibit E or such other form as Lender may agree to accept.

 

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“Payment Date” has the meaning given such term in Section 2.2(a) of this
Agreement.

“Permitted Indebtedness” means and includes:

(a) Indebtedness of Borrower to Lender;

(b) Indebtedness of Borrower secured by Liens permitted under clause (e) of the definition of
Permitted Liens in an aggregate original principal amount not to exceed One Million Dollars
($1,000,000);

(c) Indebtedness arising from the endorsement of instruments in the ordinary course of
business; and

(d) Indebtedness existing on the date hereof and set forth on the Disclosure Schedule.

“Permitted Investments” means and includes any of the following Investments as to
which Lender has a perfected security interest:

(a) Deposits and deposit accounts with commercial banks organized under the laws of the United
States or a state thereof to the extent: (i) the deposit accounts of each such institution are
insured by the Federal Deposit Insurance Corporation up to the legal limit; and (ii) each such
institution has an aggregate capital and surplus of not less than One Hundred Million Dollars
($100,000,000);

(b) Investments in marketable obligations issued or fully guaranteed by the United States and
maturing not more than one (1) year from the date of issuance;

(c) Investments in open market commercial paper rated at least “A1” or “P1” or higher by a
national credit rating agency and maturing not more than one (1) year from the creation thereof;

(d) Investments pursuant to or arising under currency agreements or interest rate agreements
entered into in the ordinary course of business; and

(e) Other Investments aggregating not in excess of Two Hundred Fifty Thousand Dollars
($250,000) at any time.

“Permitted Liens” means and includes:

(a) the Lien created by this Agreement;

(b) Liens for fees, taxes, levies, imposts, duties or other governmental charges of any kind
which are not yet delinquent or which are being contested in good faith by appropriate proceedings
which suspend the collection thereof (provided that such appropriate proceedings do
not involve any substantial danger of the sale, forfeiture or loss of any material item of
Collateral which in the aggregate is material to Borrower and that Borrower has
adequately bonded such Lien or reserves sufficient to discharge such Lien have been provided
on the books of Borrower);

 

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(c) Liens identified on the Disclosure Schedule;

(d) carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens
arising in the ordinary course of business and which are not delinquent or remain payable without
penalty or which are being contested in good faith and by appropriate proceedings (provided
that such appropriate proceedings do not involve any substantial danger of the sale,
forfeiture or loss of any material item of Collateral or Collateral which in the aggregate is
material to Borrower and that Borrower has adequately bonded such Lien or reserves sufficient to
discharge such Lien have been provided on the books of Borrower);

(e) Liens upon any equipment or other personal property acquired by Borrower after the date
hereof to secure (i) the purchase price of such equipment or other personal property, or (ii) lease
obligations or indebtedness incurred solely for the purpose of financing the acquisition of such
equipment or other personal property; provided that (A) such Liens are confined
solely to the equipment or other personal property so acquired and the amount secured does not
exceed the acquisition price thereof, and (B) no such Lien shall be created, incurred, assumed or
suffered to exist in favor of Borrower’s officers, directors or shareholders holding five percent
(5%) or more of Borrower’s Equity Securities;

(f) non-exclusive licenses of Intellectual Property entered into in the ordinary course of
business.

“Person” means and includes any individual, any partnership, any corporation, any
business trust, any joint stock company, any limited liability company, any unincorporated
association or any other entity and any domestic or foreign national, state or local government,
any political subdivision thereof, and any department, agency, authority or bureau of any of the
foregoing.

“Property” means any interest in any kind of property or asset, whether real, personal
or mixed, whether tangible or intangible.

“Responsible Officer” has the meaning given such term in Section 6.3 of this
Agreement.

“Scheduled Payments” has the meaning given such term in Section 2.2(a) of this
Agreement.

“Solvent” has the meaning given such term in Section 5.11 of this Agreement.

“Subsidiary” means any corporation or other entity of which a majority of the
outstanding Equity Securities entitled to vote for the election of directors or other governing
body (otherwise than as the result of a default) is owned by Borrower directly or indirectly
through Subsidiaries.

“Third Party Equipment” has the meaning given such term in Section 4.8 of this
Agreement.

 

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“Transfer” has the meaning given such term in Section 7.4 of this Agreement.

“Warrant” means the separate warrant or warrants dated on or about the date hereof in
favor of the Lender or its designees to purchase securities of Borrower.

1.2 Construction. References in this Agreement to “Articles,” “Sections,” “Exhibits,”
“Schedules” and “Annexes” are to recitals, articles, sections, exhibits, schedules and annexes
herein and hereto unless otherwise indicated. References in this Agreement and each of the other
Loan Documents to any document, instrument or agreement shall include (a) all exhibits, schedules,
annexes and other attachments thereto, (b) all documents, instruments or agreements issued or
executed in replacement thereof, and (c) such document, instrument or agreement, or replacement or
predecessor thereto, as amended, modified and supplemented from time to time and in effect at any
given time. The words “hereof,” “herein” and “hereunder” and words of similar import when used in
this Agreement or any other Loan Document shall refer to this Agreement or such other Loan
Document, as the case may be, as a whole and not to any particular provision of this Agreement or
such other Loan Document, as the case may be. The words “include” and “including” and words of
similar import when used in this Agreement or any other Loan Document shall not be construed to be
limiting or exclusive. Unless otherwise indicated in this Agreement or any other Loan Document,
all accounting terms used in this Agreement or any other Loan Document shall be construed, and all
accounting and financial computations hereunder or thereunder shall be computed, in accordance with
GAAP, and all terms describing Collateral shall be construed in accordance with the Code. The terms
and information set forth on the cover page of this Agreement are incorporated into this Agreement.

2. Loans; Repayment.

2.1 Commitment.

(a) The Commitment Amount. Subject to the terms and conditions of this Agreement and
relying upon the representations and warranties herein set forth as and when made or deemed to be
made, Lender agrees to lend to Borrower prior to the Commitment Termination Date Loan A, Loan A.
Subject to the terms and conditions of this Agreement, including, without limitation, Section 3.3
below, and relying upon the representations and warranties herein set forth as and when made or
deemed to be made, Lender agrees to lend to Borrower prior to the Commitment Termination Date Loan
B, Loan B.

(b) The Loans and the Notes. The obligation of Borrower to repay the unpaid principal
amount of and interest on each Loan shall be evidenced by a Note issued to Lender.

(c) Use of Proceeds. The proceeds of each Loan shall be used solely for working
capital or general corporate purposes of Borrower.

 

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(d) Termination of Commitment to Lend. Notwithstanding anything in the Loan
Documents, Lender’s obligation to lend the undisbursed portion of the Commitment Amount Loan A or
Commitment Amount Loan B to Borrower hereunder shall terminate on the earlier of (i) at Lender’s
sole election, the occurrence of any Default or Event of Default
hereunder, and (ii) with respect to Loan A, Commitment Termination Date Loan A and with
respect to Loan B, Commitment Termination Date Loan B. Notwithstanding the foregoing, Lender’s
obligation to lend the undisbursed portion of the Commitment Amount Loan A or Commitment Amount
Loan B to Borrower shall terminate if, in Lender’s sole judgment, there has been a material adverse
change in the business, results of operations, condition (financial or otherwise) or prospects of
Borrower, whether or not arising from transactions in the ordinary course of business.

2.2 Payments.

(a) Scheduled Payments. Borrower shall make a payment of accrued interest only on the
outstanding principal amount of each Loan on the first nine (9) Payment Dates specified in the Note
applicable to such Loan and an equal payment of principal plus accrued interest on the outstanding
principal amount of each Loan on the next thirty (30) Payment Dates as set forth in the Note
applicable to such Loan (collectively, the “Scheduled Payments”). Borrower shall make such
Scheduled Payments commencing on the date set forth in the Note applicable to such Loan and
continuing thereafter on the first Business Day of each calendar month (each a “Payment
Date”) through the Maturity Date. In any event, all unpaid principal and accrued interest
shall be due and payable in full on the Maturity Date.

(b) Interim Payment. Unless the Funding Date for a Loan is the first day of a
calendar month, Borrower shall pay the per diem interest (accruing at the Loan Rate from the
Funding Date through the last day of that month) payable with respect to such Loan on the first
Business Day of the next calendar month.

(c) Payment of Interest. Borrower shall pay interest on each Loan at a per annum rate
of interest equal to the Loan Rate. All computations of interest (including interest at the
Default Rate, if applicable) shall be based on a year of twelve 30-day months. Notwithstanding any
other provision hereof, the amount of interest payable hereunder shall not in any event exceed the
maximum amount permitted by the law applicable to interest charged on commercial loans.

(d) Application of Payments. All payments received by Lender prior to an Event of
Default shall be applied as follows: (1) first, to Lender’s Expenses then due and owing; and (2)
second to all Scheduled Payments then due and owing (provided, however, if such
payments are not sufficient to pay the whole amount then due, such payments shall be applied first
to unpaid interest at the Loan Rate, then to the remaining amount then due). After an Event of
Default, all payments and application of proceeds shall be made as set forth in Section
9.7.

(e) Late Payment Fee. Borrower shall pay to Lender a late payment fee equal to four
percent (4%) of any Scheduled Payment not paid five (5) days after receipt of written notice from
Lender that such payment is due.

(f) Default Rate. Borrower shall pay interest at a per annum rate equal to the
Default Rate on any amounts required to be paid by Borrower under this Agreement or the other Loan
Documents (including Scheduled Payments), payable with respect to any Loan, accrued and unpaid
interest, and any fees or other amounts which remain unpaid after such
amounts are due. If an Event of Default has occurred and the Obligations have been
accelerated (whether automatically or by Lender’s election), Borrower shall pay interest on the
aggregate, outstanding accelerated balance hereunder from the date of the Event of Default until
all Events of Default are cured, at a per annum rate equal to the Default Rate.

 

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2.3 Prepayments.

(a) Mandatory Prepayment Upon an Acceleration. If the Loans are accelerated following
the occurrence of an Event of Default pursuant to Section 9.1(a) hereof, then Borrower, in addition
to any other amounts which may be due and owing hereunder, shall immediately pay to Lender the
amount set forth in Section 2.3(b) below, as if the Borrower had opted to prepay on the date of
such acceleration.

(b) Optional Prepayment. Upon ten (10) Business Days’ prior written notice to Lender,
Borrower may, at its option, at any time, prepay all of the Loans by paying to Lender an amount
equal to (i) any accrued and unpaid interest on the outstanding principal balance of the Loans;
(ii)an amount equal to (A) if the Loan is prepaid within twelve (12) months from the Funding Date
thereof, four (4%) percent of the then outstanding principal balance of the Loan, (B) if the Loan
is prepaid more than twelve (12) months from the Funding Date thereof but less than eighteen (18)
months from the Funding Date, two (2%) percent of the then outstanding principal balance of the
Loan, or (C) if the Loan is prepaid more than eighteen (18) months from the Funding Date thereof,
one and one half (1.5%) percent of the then outstanding principal balance of the Loan; (iii) the
outstanding principal balance of the Loans and (iv) all other sums, if any, that shall have become
due and payable hereunder.

2.4 Other Payment Terms.

(a) Place and Manner. Borrower shall make all payments due to Lender in lawful money
of the United States. All payments of principal, interest, fees and other amounts payable by
Borrower hereunder shall be made, in immediately available funds, not later than 2:00 p.m.
Connecticut time, on the date on which such payment is due. Borrower shall make such payments to
Lender via wire transfer or ACH as follows:

	 	 	 	 	 

	Payment via wire transfer or
ACH 

to Compass Horizon:

	 	

Compass Horizon Funding Company

	Credit:

	 	LLC/Horizon Credit I LLC

	Bank Name:

	 	U.S. Bank National Association

	Bank Address:

	 	P.O. Box 643857

	 

	 	Cincinnati OH 45264-3857

	Account No.:

	 	Lockbox No.: 153910632600

	ABA Routing No.:

	 	123000848	 	 
	Reference:

	 	Cereplast, Inc. Invoice #

(b) Date. Whenever any payment is due hereunder on a day other than a Business Day,
such payment shall be made on the next succeeding Business Day, and such extension of time shall be
included in the computation of interest or fees, as the case may be.

 

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2.5 Procedure for Making the Loans.

(a) Notice. Borrower shall notify Lender of the date on which Borrower desires Lender
to make any Loan at least five (5) Business Days in advance of the desired Funding Date, unless
Lender elects at its sole discretion to allow the Funding Date to be within five (5) Business Days
of Borrower’s notice. Borrower’s execution and delivery to Lender of a Note shall be Borrower’s
agreement to the terms and calculations thereunder with respect to the Loan. Lender’s obligation
to make any Loan shall be expressly subject to the satisfaction of the conditions set forth in
Section 3.

(b) Loan Rate Calculation. Prior to each Funding Date, Lender shall establish the
Loan Rate with respect to such Loan, which shall be set forth in the Note to be executed by
Borrower with respect to such Loan and shall be conclusive in the absence of a manifest error.

(c) Disbursement. Lender shall disburse the proceeds of each Loan by wire transfer to
Borrower at the account specified in the Funding Certificate for the Loan.

2.6 Good Faith Deposit; Legal and Closing Expenses; and Commitment Fee.

(a) Good Faith Deposit. Borrower has delivered to Lender a good faith deposit in the
amount of Thirty Thousand Dollars ($30,000) (the “Good Faith Deposit”). The Good Faith
Deposit will be credited to the Commitment Fee. If the Funding Date does not occur, Lender shall
retain the Good Faith Deposit as compensation for its time, expenses and opportunity cost.

(b) Legal, Due Diligence and Documentation Expenses. Concurrently with its execution
and delivery of this Agreement, Borrower shall pay to Lender Lender’s reasonable legal, due
diligence and documentation expenses in connection with the negotiation and documentation of this
Agreement and the Loan Documents.

(c) Commitment Fee. Borrower shall pay Lender concurrently with its execution and
delivery of this Agreement a commitment fee in the amount of Fifty Thousand Dollars ($50,000) (the
“Commitment Fee”). The Commitment Fee shall be retained by Lender and be deemed fully
earned upon receipt.

3. Conditions of Loan.

3.1 Conditions Precedent to Closing. At the time of the execution and delivery of
this Agreement, Lender shall have received, in form and substance reasonably satisfactory to
Lender, all of the following (unless Lender has agreed to waive such condition or document, in
which case such condition or document shall be a condition precedent to the making of any Loan and
shall be deemed added to Section 3.2):

(a) Loan Agreement. This Agreement duly executed by Borrower and Lender.

(b) Warrant. The Warrant duly executed by Borrower.

 

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(c) Secretary’s Certificate. A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the articles of incorporation and
bylaws of Borrower certified by Borrower as being complete and in full force and effect on the date
thereof, (ii) incumbency and representative signatures, and (iii) resolutions authorizing the
execution and delivery of this Agreement and each of the other Loan Documents.

(d) Good Standing Certificates. A good standing certificate from Borrower’s state of
incorporation and the state in which Borrower’s principal place of business is located, each dated
as of a recent date.

(e) Certificate of Insurance. Evidence of the insurance coverage required by
Section 6.8 of this Agreement.

(f) Consents. All necessary consents of shareholders and other third parties with
respect to the execution, delivery and performance of this Agreement, the Warrant and the other
Loan Documents.

(g) Legal Opinion. A legal opinion of Borrower’s counsel covering the matters set
forth in Exhibit D hereto.

(h) Account Control Agreements. Account Control Agreements for all of Borrower’s
deposit accounts and accounts holding securities duly executed by all of the parties thereto, in
the forms provided by or reasonably acceptable to Lender.

(i) Grants of Security Interests in Intellectual Property. Grants of security
interests in any U.S. federally registered Intellectual Property, in the forms provided by Lender.

(j) Other Documents. Such other documents and completion of such other matters, as
Lender may reasonably deem necessary or appropriate.

3.2 Conditions Precedent to Making a Loan. The obligation of Lender to make each Loan
is further subject to the following conditions:

(a) No Default. No Default or Event of Default shall have occurred and be continuing.

(b) Landlord Agreements. Borrower shall have provided Lender with a Landlord Agreement
for each location where Borrower’s books and records and the Collateral is located (unless Borrower
is the fee owner thereof).

(c) Note. Borrower shall have duly executed and delivered to Lender a Note in the
amount of the Loan.

(d) UCC Financing Statements. Lender shall have received such documents, instruments
and agreements, including UCC financing statements or amendments to UCC financing statements, as
Lender shall reasonably request to evidence the perfection and priority of the security interests
granted to Lender pursuant to Section 4. Borrower authorizes
Lender to file any UCC financing statements, continuations of or amendments to UCC financing
statements it deems necessary to perfect its security interest in the Collateral.

 

11

 

(e) Funding Certificate. Borrower shall have duly executed and delivered to Lender a
Funding Certificate for such Loan.

(f) Other Documents. Such other documents and completion of such other matters, as
Lender may reasonably deem necessary or appropriate.

3.3 Conditions to Making of Loan B. Lender shall have no obligation to make, Loan B,
unless and until Borrower provides Lender with evidence reasonably satisfactory to Lender that
Borrower has achieved revenues of (i) not less than Two Million Dollars ($2,000,000) in calendar
month January 2011 and (ii) not less than Two Million Five Hundred Thousand Dollars ($2,500,000) in
calendar month February 2011.

3.4 Covenant to Deliver. Borrower agrees (not as a condition but as a covenant) to
deliver to Lender each item required to be delivered to Lender as a condition to each Loan, if such
Loan is advanced. Borrower expressly agrees that the extension of such Loan prior to the receipt
by Lender of any such item shall not constitute a waiver by Lender of Borrower’s obligation to
deliver such item, and any such extension in the absence of a required item shall be in Lender’s
sole discretion.

4. Creation of Security Interest.

4.1 Grant of Security Interest. Borrower grants to Lender a valid, first priority,
continuing security interest in all presently existing and hereafter acquired or arising Collateral
in order to secure prompt, full and complete payment of any and all Obligations and in order to
secure prompt, full and complete performance by Borrower of each of its covenants and duties under
each of the Loan Documents (other than the Warrant). The “Collateral” shall mean and
include all right, title, interest, claims and demands of Borrower in and to all personal property
of Borrower, including without limitation, all of the following:

(a) All goods (and embedded computer programs and supporting information included within the
definition of “goods” under the Code) and equipment now owned or hereafter acquired, including,
without limitation, all laboratory equipment, computer equipment, office equipment, machinery,
fixtures, vehicles (including motor vehicles and trailers), and any interest in any of the
foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

(b) All inventory now owned or hereafter acquired, including, without limitation, all
merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of Borrower’s custody or
possession or in transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the foregoing and any
documents of title representing any of the above, and Borrower’s books relating to any of the
foregoing;

 

12

 

(c) All contract rights and general intangibles (including Intellectual Property), now owned
or hereafter acquired, including, without limitation, goodwill, license agreements, franchise
agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements,
claims, software, computer programs, computer disks, computer tapes, literature, reports, catalogs,
design rights, income tax refunds, payment intangibles, commercial tort claims, payments of
insurance and rights to payment of any kind;

(d) All now existing and hereafter arising accounts, contract rights, royalties, license
rights, license fees and all other forms of obligations owing to Borrower arising out of the sale
or lease of goods, the licensing of technology or the rendering of services by Borrower (subject,
in each case, to the contractual rights of third parties to require funds received by Borrower to
be expended in a particular manner), whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise returned to or
reclaimed by Borrower and Borrower’s books relating to any of the foregoing;

(e) All documents, cash, deposit accounts, letters of credit (whether or not the letter of
credit is evidenced by a writing), certificates of deposit, instruments, promissory notes, chattel
paper (whether tangible or electronic) and investment property, including, without limitation, all
securities, whether certificated or uncertificated, security entitlements, securities accounts,
commodity contracts and commodity accounts, and all financial assets held in any securities account
or otherwise, wherever located, now owned or hereafter acquired and Borrower’s books relating to
the foregoing; and

(f) Any and all claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof, including, without limitation, insurance,
condemnation, requisition or similar payments and proceeds of the sale or licensing of Intellectual
Property.

4.2 After-Acquired Property. If Borrower shall at any time acquire a commercial tort
claim, as defined in the Code, Borrower shall immediately notify Lender in writing signed by
Borrower of the brief details thereof and grant to Lender 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 satisfactory to Lender.

4.3 Duration of Security Interest. Lender’s security interest in the Collateral shall
continue until the payment in full and the satisfaction of all Obligations and termination of
Lender’s commitment to fund the Loans, whereupon such security interest shall terminate. Lender
shall, at Borrower’s sole cost and expense, execute such further documents and take such further
actions as may be reasonably necessary to make effective the release contemplated by this
Section 4.3, including duly authorizing and delivering termination statements for filing in
all relevant jurisdictions under the Code.

4.4 Location and Possession of Collateral. The Collateral is and shall remain in the
possession of Borrower at its location listed on the cover page hereof or as set forth in the
Disclosure Schedule. Borrower shall remain in full possession, enjoyment and control of the
Collateral (except only as may be otherwise required by Lender for perfection of its security
interest therein) and so long as no Event of Default has occurred, shall be entitled to manage,
operate and use the same and each part thereof with the rights and franchises appertaining
thereto; provided that the possession, enjoyment, control and use of the Collateral
shall at all time be subject to the observance and performance of the terms of this Agreement.

 

13

 

4.5 Delivery of Additional Documentation Required. Borrower shall from time to time
execute and deliver to Lender, at the request of Lender, all financing statements and other
documents Lender may reasonably request, in form satisfactory to Lender, to perfect and continue
Lender’s perfected security interests in the Collateral and in order to consummate fully all of the
transactions contemplated under the Loan Documents.

4.6 Right to Inspect. Lender (through any of its officers, employees, or agents)
shall have the right, upon reasonable prior notice, from time to time during Borrower’s usual
business hours, to inspect Borrower’s books and records and to make copies thereof and to inspect,
test, and appraise the Collateral in order to verify Borrower’s financial condition or the amount,
condition of, or any other matter relating to, the Collateral.

4.7 Intellectual Property.

(a) Registration of Existing and Future Copyrights. At Lender’s request, Borrower
shall register or cause to be registered with the United States Copyright Office (i) any software
(material to the business of Borrower) developed or acquired by Borrower in connection with any
product developed or acquired for sale or licensing (ii) any software (material to the business of
Borrower) developed or acquired by Borrower hereafter from time to time in connection with any
product developed or acquired for sale or licensing, and (iii) any major revisions or upgrades to
any software that has previously been registered by or on behalf of Borrower with the United States
Copyright Office.

(b) Additional Intellectual Property. Borrower shall promptly notify Lender on or
before the federal registration or filing by Borrower of any patent or patent application, or
trademark or trademark application, or copyright or copyright application and shall promptly
execute and deliver to Lender any grants of security interests in same, in form acceptable to
Lender, to file with the United States Patent and Trademark Office or the United States Copyright
Office, as applicable.

(c) Protection of Intellectual Property. Borrower shall (i) protect, defend and
maintain the validity and enforceability of its Intellectual Property and promptly advise Lender in
writing of material infringements, and (ii) not allow any Intellectual Property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public without Lender’s written
consent.

4.8 Lien Subordination. Lender agrees that the Liens granted to it hereunder in Third
Party Equipment shall be subordinate to the Liens of future lenders providing equipment financing
and equipment lessors for equipment and other personal property acquired by Borrower after the date
hereof (“Third Party Equipment”); provided that such Liens are confined
solely to the equipment so financed and the proceeds thereof and are Permitted Liens.
Notwithstanding the foregoing, the Obligations hereunder shall not be

 

14

 

subordinate in right of
payment to any obligations to other equipment lenders or equipment lessors and Lender’s rights and remedies hereunder shall not in any way be subordinate to the rights and remedies of any
such lenders or equipment lessors. So long as no Event of Default has occurred, Lender agrees to
execute and deliver such agreements and documents as may be reasonably requested by Borrower from
time to time which set forth the lien subordination described in this Section 4.8 and are
reasonably acceptable to Lender. Lender shall have no obligation to execute any agreement or
document which would impose obligations, restrictions or lien priority on Lender which are less
favorable to Lender than those described in this Section 4.8.

5. Representations and Warranties. Except as set forth in the Disclosure Schedule,
Borrower represents and warrants as follows:

5.1 Organization and Qualification. Borrower is a corporation duly organized and
validly existing under the laws of its state of incorporation and qualified and licensed to do
business in, and is in good standing in, any state in which the conduct of its business or its
ownership of Property requires that it be so qualified or in which the Collateral is located,
except for such states as to which any failure to so qualify would not have a material adverse
effect on Borrower.

5.2 Authority. Borrower has all necessary power and authority to execute, deliver,
and perform in accordance with the terms thereof, the Loan Documents to which it is a party.
Borrower has all requisite power and authority to own and operate its Property and to carry on its
businesses as now conducted. Borrower has obtained all licenses, permits, approvals and other
authorizations necessary for the operation of its business.

5.3 Conflict with Other Instruments, etc. Neither the execution and delivery of any
Loan Document to which Borrower is a party nor the consummation of the transactions therein
contemplated nor compliance with the terms, conditions and provisions thereof will conflict with or
result in a breach of any of the terms, conditions or provisions of the articles of incorporation,
the by-laws, or any other organizational documents of Borrower or any law or any regulation, order,
writ, injunction or decree of any court or governmental instrumentality or any material agreement
or instrument to which Borrower is a party or by which it or any of its Property is bound or to
which it or any of its Property is subject, or constitute a default thereunder or result in the
creation or imposition of any Lien, other than Permitted Liens.

5.4 Authorization; Enforceability. The execution and delivery of this Agreement, the
granting of the security interest in the Collateral, the incurring of the Loans, the execution and
delivery of the other Loan Documents to which Borrower is a party and the consummation of the
transactions herein and therein contemplated have each been duly authorized by all necessary action
on the part of Borrower. No authorization, consent, approval, license or exemption of, and no
registration, qualification, designation, declaration or filing with, or notice to, any Person is,
was or will be necessary to (i) the valid execution and delivery of any Loan Document to which
Borrower is a party, (ii) the performance of Borrower’s obligations under any Loan Document, or
(iii) the granting of the security interest in the Collateral, except for filings in connection
with the perfection of the security interest in any of the Collateral or the issuance of the
Warrant. The Loan Documents have been duly executed and delivered and constitute legal, valid and
binding obligations of Borrower, enforceable in accordance with their respective terms, except as
the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application relating to or affecting
the enforcement of creditors’ rights or by general principles of equity.

 

15

 

5.5 No Prior Encumbrances. Borrower has good and marketable title to the Collateral,
free and clear of Liens except for Permitted Liens. Borrower has good title and ownership of, or is
licensed under, all of Borrower’s current Intellectual Property. Borrower has not received any
communications alleging that Borrower has violated, or by conducting its business as proposed,
would violate any proprietary rights of any other Person. Borrower has no knowledge of any
infringement or violation by it of the intellectual property rights of any third party and has no
knowledge of any violation or infringement by a third party of any of its Intellectual Property.
The Collateral and the Intellectual Property constitute substantially all of the assets and
property of Borrower.

5.6 Name; Location of Chief Executive Office, Principal Place of Business and
Collateral. Borrower has not done business under any name other than that specified on the
signature page hereof. Borrower’s jurisdiction of incorporation, chief executive office, principal
place of business, and the place where Borrower maintains its records concerning the Collateral are
presently located in the state and at the address set forth on the cover page of this Agreement.
The Collateral is presently located at the address set forth on the cover page hereof or as set
forth in the Disclosure Schedule.

5.7 Litigation. There are no actions or proceedings pending by or against Borrower
before any court or administrative agency in which an adverse decision could have a material
adverse effect on Borrower or the aggregate value of the Collateral. Borrower does not have
knowledge of any such pending or threatened actions or proceedings.

5.8 Financial Statements. All financial statements relating to Borrower or any
Affiliate that have been or may hereafter be delivered by Borrower to Lender present fairly in all
material respects Borrower’s financial condition as of the date thereof and Borrower’s results of
operations for the period then ended.

5.9 No Material Adverse Effect. No event has occurred and no condition exists which
could reasonably be expected to have a material adverse effect on the financial condition, business
or operations of Borrower since December 31, 2010.

5.10 Full Disclosure. No representation, warranty or other statement made by Borrower
in any Loan Document (including the Disclosure Schedule), certificate or written statement
furnished to Lender contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained in such certificates or statements not
misleading. There is no fact known to Borrower which materially adversely affects, or which could
in the future be reasonably expected to materially adversely affect, its ability to perform its
obligations under this Agreement.

 

16

 

5.11 Solvency, Etc. Borrower is Solvent (as defined below) and, after the execution
and delivery of the Loan Documents and the consummation of the transactions contemplated thereby,
Borrower will be Solvent. “Solvent” means, with respect to any Person on any date, that on
such date (a) the fair value of the property of such Person is greater than the
fair value of the liabilities (including, without limitation, contingent liabilities) of such
Person, (b) the present fair saleable value of the assets of such Person is not less than the
amount that will be required to pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person’s ability to pay as such debts and liabilities mature
and (d) such Person is not engaged in business or a transaction, and is not about to engage in
business or a transaction, for which such Person’s property would constitute an unreasonably small
capital.

5.12 Subsidiaries. Borrower has no Subsidiaries.

5.13 Catastrophic Events; Labor Disputes. Neither Borrower nor its properties is or
has been affected by any fire, explosion, accident, strike, lockout or other labor dispute,
drought, storm, hail, earthquake, embargo, act of God or other casualty that could reasonably be
expected to have a material adverse effect on the financial condition, business or operations of
Borrower. There are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employment contracts or employee
welfare or incentive plans to which Borrower is a party, and there are no strikes, lockouts, work
stoppages or slowdowns, or, to the knowledge of Borrower, jurisdictional disputes or organizing
activity occurring or threatened which could reasonably be expected to have a material adverse
effect on the financial condition, business or operations of Borrower.

5.14 Certain Agreements of Officers, Employees and Consultants.

(a) No Violation. To the knowledge of Borrower, no officer, employee or consultant of
Borrower is, or is now expected to be, in violation of any term of any employment contract,
proprietary information agreement, nondisclosure agreement, noncompetition agreement or any other
material contract or agreement or any restrictive covenant relating to the right of any such
officer, employee or consultant to be employed by Borrower because of the nature of the business
conducted or to be conducted by Borrower or relating to the use of trade secrets or proprietary
information of others, and to Borrower’s knowledge, the continued employment of Borrower’s
officers, employees and consultants does not subject Borrower to any material liability for any
claim or claims arising out of or in connection with any such contract, agreement, or covenant.

(b) No Present Intention to Terminate. To the knowledge of Borrower, no officer of
Borrower, and no employee or consultant of Borrower whose termination, either individually or in
the aggregate, could reasonably be expected to have a material adverse effect on the financial
condition, business or operations of Borrower, has any present intention of terminating his or her
employment or consulting relationship with Borrower.

6. Affirmative Covenants. Borrower, until the full and complete payment of the
Obligations, covenants and agrees that:

6.1 Good Standing. Borrower shall maintain its corporate existence and its good
standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in
which the failure to so qualify could reasonably be expected to have a material adverse effect on
the financial condition, operations or business of Borrower. Borrower shall maintain in force all
licenses, approvals and agreements, the loss of which could reasonably be expected to have a
material adverse effect on its financial condition, operations or business.

 

17

 

6.2 Government Compliance. Borrower shall comply with all statutes, laws, ordinances
and government rules and regulations to which it is subject, noncompliance with which could
reasonably be expected to materially adversely affect the financial condition, operations or
business of Borrower.

6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to Lender as
soon as available, but in any event within fifty (50) days after the end of each month, a company
prepared balance sheet, income statement and cash flow statement covering Borrower’s operations
during such period, certified by Borrower’s president, treasurer or chief financial officer (each,
a “Responsible Officer”); and (b) as soon as available, but in any event within one hundred
thirty-five (135) days after the end of Borrower’s fiscal year, audited financial statements of
Borrower prepared in accordance with GAAP, together with an unqualified opinion on such financial
statements of a nationally recognized or other independent public accounting firm reasonably
acceptable to Lender, which initially shall be HJ Associates & Consultants, LLP; and (c) such other
financial information as Lender may reasonably request from time to time. Promptly as they are
available and in any event: (x) at the time of filing of Borrower’s Form 10-K with the Securities
and Exchange Commission after the end of each fiscal year of Borrower, the financial statements of
Borrower filed with such Form 10-K; and (y) at the time of filing of Borrower’s Form 10-Q with the
Securities and Exchange Commission after the end of each of the first three fiscal quarters of
Borrower, the financial statements of Borrower filed with such Form 10-Q. In addition, Borrower
shall deliver to Lender (i) promptly upon becoming available, copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders; and (ii) immediately
upon receipt of notice thereof, a report of any material legal actions pending or threatened
against Borrower or the commencement of any action, proceeding or governmental investigation
involving Borrower is commenced that is reasonably expected to result in damages or costs to
Borrower of Two Hundred Fifty Thousand Dollars ($250,000).

6.4 Certificates of Compliance. Each time financial statements are furnished pursuant
to Section 6.3 above, Borrower shall deliver to Lender an Officer’s Certificate signed by a
Responsible Officer in the form of, and certifying to the matters set forth in Exhibit E
hereto.

6.5 Notice of Defaults. As soon as possible, and in any event within five (5) days
after the discovery of a Default or an Event of Default, Borrower shall provide Lender with an
Officer’s Certificate setting forth the facts relating to or giving rise to such Default or Event
of Default and the action which Borrower proposes to take with respect thereto.

6.6 Taxes. Borrower shall make due and timely payment or deposit of all federal,
state, and local taxes, assessments, or contributions required of it by law or imposed upon any
Property belonging to it, and will execute and deliver to Lender, on demand, appropriate
certificates attesting to the payment or deposit thereof; and Borrower will make timely payment or
deposit of all tax payments and withholding taxes required of it by applicable laws, including
those laws concerning F.I.C.A., F.U.T.A., state disability,

 

18

 

and local, state, and federal income taxes, and will, upon request, furnish Lender with proof satisfactory to Lender
indicating that Borrower has made such payments or deposits; provided that Borrower
need not make any payment if the amount or validity of such payment is contested in good faith by
appropriate proceedings which suspend the collection thereof (provided that such
proceedings do not involve any substantial danger of the sale, forfeiture or loss of any material
item of Collateral or Collateral which in the aggregate is material to Borrower and that Borrower
has adequately bonded such amounts or reserves sufficient to discharge such amounts have been
provided on the books of Borrower).

6.7 Use; Maintenance. Borrower shall keep and maintain all items of equipment and
other similar types of personal property that form any significant portion or portions of the
Collateral in good operating condition and repair and shall make all necessary replacements thereof
and renewals thereto so that the value and operating efficiency thereof shall at all times be
maintained and preserved. Borrower shall not permit any such material item of Collateral to become
a fixture to real estate or an accession to other personal property, without the prior written
consent of Lender. Borrower shall not permit any such material item of Collateral to be operated
or maintained in violation of any applicable law, statute, rule or regulation. With respect to
items of leased equipment (to the extent Lender has any security interest in any residual
Borrower’s interest in such equipment under the lease), Borrower shall keep, maintain, repair,
replace and operate such leased equipment in accordance with the terms of the applicable lease.

6.8 Insurance. Borrower shall keep its business and the Collateral insured for risks
and in amounts, as Lender may reasonably request. Insurance policies shall be in a form, with
companies, and in amounts that are satisfactory to Lender. All property policies shall have a
lender’s loss payable endorsement showing Horizon Technology Finance Management LLC as an
additional loss payee and all liability policies shall show Horizon Technology Finance Management
LLC as an additional insured and all policies shall provide that the insurer must give Horizon
Technology Finance Management LLC at least thirty (30) days notice before canceling its policy. At
Lender’s request, Borrower shall deliver certified copies of policies and evidence of all premium
payments. Proceeds payable under any property policy shall, at Lender’s option, be payable to
Horizon Technology Finance Management LLC on account of the Obligations. Notwithstanding the
foregoing, so long as no Event of Default has occurred and is continuing, Borrower shall have the
option of applying the proceeds of any property policy, toward the replacement or repair of
destroyed or damaged property; provided that (i) any such replaced or repaired property (a) shall
be of equal or like value as the replaced or repaired Collateral and (b) shall be deemed Collateral
in which Lender has been granted a first priority security interest and (ii) after the occurrence
and during the continuation of an Event of Default all proceeds payable under such property policy
shall, at the option of Lender, be payable to Horizon Technology Finance Management LLC, on account
of the Obligations. If Borrower fails to obtain insurance as required under Section 6.8 or to pay
any amount or furnish any required proof of payment to third persons and Lender, Lender may make
all or part of such payment or obtain such insurance policies required in Section 6.8, and take any
action under the policies Lender deems prudent. On or prior to the first Funding Date and prior to
each policy renewal, Borrower shall furnish to Lender certificates of insurance or other evidence
satisfactory to Lender that insurance complying with all of the above requirements is in effect.

 

19

 

6.9 Security Interest. Assuming the proper filing of one or more financing
statement(s) identifying the Collateral with the proper state and/or local authorities, the
security interests in the Collateral granted to Lender pursuant to this Agreement (i) constitute
and will continue to constitute first priority security interests (except to the extent any
Permitted Liens may have a superior priority to Lender’s Lien under this Agreement) and (ii) are
and will continue to be superior and prior to the rights of all other creditors of Borrower (except
to the extent of such Permitted Liens). Except as set forth in the Disclosure Schedule, none of
Borrower’s Intellectual Property is registered with either the US Patent and Trademark Office or
the US Copyright Office.

6.10 Further Assurances. At any time and from time to time Borrower shall execute and
deliver such further instruments and take such further action as may reasonably be requested by
Lender to make effective the purposes of this Agreement, including without limitation, the
continued perfection and priority of Lender’s security interest in the Collateral.

6.11 Subsidiaries. Borrower, upon Lender’s request, shall cause any Subsidiary of
Borrower to provide Lender with a guaranty of the Obligations and a security interest in such
Subsidiary’s assets to secure such guaranty.

7. Negative Covenants. Borrower, until the full and complete payment of the
Obligations, covenants and agrees that Borrower shall not:

7.1 Chief Executive Office. Change its name, jurisdiction of incorporation, chief
executive office, principal place of business or any of the items set forth in Section 1 of the
Disclosure Schedule without thirty (30) days prior written notice to Lender.

7.2 Collateral Control. Subject to its rights under Sections 4.4 and 7.4,
remove, other than in the ordinary course of Borrower’s business, any items of Collateral from
Borrower’s facility located at the address set forth on the cover page hereof or as set forth on
the Disclosure Schedule.

7.3 Liens. Create, incur, assume or suffer to exist any Lien of any kind upon any of
Borrower’s Property, whether now owned or hereafter acquired, except Permitted Liens.

7.4 Other Dispositions of Collateral. Convey, sell, lease or otherwise dispose of all
or any part of the Collateral to any Person (collectively, a “Transfer”), except for: (i)
Transfers of inventory in the ordinary course of business; (ii) Transfers of worn-out or obsolete
equipment; or (iii) Transfers permitted under subclause (f) of the definition of Permitted Liens
with respect to Collateral.

7.5 Distributions. (i) Pay any dividends or make any distributions on its Equity
Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for value any of its Equity
Securities (other than repurchases pursuant to the terms of employee stock purchase plans, employee
restricted stock agreements or similar arrangements in an aggregate amount not to exceed Two
Hundred Fifty Thousand Dollars ($250,000)); (iii) return any capital to any holder of its Equity
Securities as such; (iv) make any distribution of assets, Equity Securities, obligations or
securities to any holder of its Equity Securities as such; or (v) set apart any sum
for any such purpose; provided, however, Borrower may pay dividends payable
solely in Borrower’s common stock.

 

20

 

7.6 Mergers or Acquisitions. Merge or consolidate with or into any other Person or
acquire all or substantially all of the capital stock or assets of another Person.

7.7 Change in Business or Ownership. Engage in or permit any of its Subsidiaries to
engage in any business other than the businesses currently engaged in by Borrower or reasonably
related thereto or have a change in its ownership of greater than forty five percent (45%) (other
than by the sale by Borrower of Borrower’s Equity Securities in a public offering.

7.8 Transactions With Affiliates/Subsidiaries. (i) Enter into any contractual
obligation with any Affiliate or engage in any other transaction with any Affiliate except upon
terms at least as favorable to Borrower as an arms-length transaction with Persons who are not
Affiliates of Borrower or (ii) create a Subsidiary, unless, at Lender’s election, such Subsidiary
guarantees the Obligations and grants a security interest in its assets to secure such guaranty.

7.9 Indebtedness Payments. (i) Prepay, redeem, purchase, defease or otherwise satisfy
in any manner prior to the scheduled repayment thereof any Indebtedness for borrowed money (other
than amounts due or permitted to be prepaid under this Agreement) or lease obligations, (ii) amend,
modify or otherwise change the terms of any Indebtedness for borrowed money or lease obligations so
as to accelerate the scheduled repayment thereof or (iii) repay any notes to officers, directors or
shareholders.

7.10 Indebtedness. Create, incur, assume or permit to exist any Indebtedness except
Permitted Indebtedness.

7.11 Investments. Make any Investment except for Permitted Investments.

7.12 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, or use the proceeds of any Loan for
that purpose; fail to meet the minimum funding requirements of the Employment Retirement Income
Security Act of 1974, and its regulations, as amended from time to time (“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 operations or
could reasonably be expected to cause a material adverse change, or permit any of its Subsidiaries
to do so.

7.13 Maintenance of Accounts. (i) Maintain any deposit account or account holding
securities owned by Borrower except accounts with respect to which Lender is able to take such
actions as it deems necessary to obtain a perfected security interest in such accounts through one
or more Account Control Agreements; or (ii) grant or allow any other Person (other than Lender) to
perfect a security interest in, or enter into any agreements with any Persons (other than Lender)
accomplishing perfection via control as to, any of its deposit accounts or accounts holding
securities.

 

21

 

8. Events of Default. Any one or more of the following events shall constitute an
“Event of Default” by Borrower under this Agreement:

8.1 Failure to Pay. If Borrower fails to pay when due and payable or when declared
due and payable in accordance with the Loan Documents: (i) any Scheduled Payment on the relevant
Payment Date or on the relevant Maturity Date, or (ii) any other portion of the Obligations within
five (5) days after receipt of written notice from Lender that such payment is due.

8.2 Certain Covenant Defaults. If Borrower fails to perform any obligation under
Section 6.8 or violates any of the covenants contained in Section 7 of this
Agreement.

8.3 Other Covenant Defaults. If Borrower fails or neglects to perform, keep, or
observe any other material term, provision, condition, covenant, or agreement contained in this
Agreement (other than as set forth in Sections 8.1, 8.2 or 8.4 through 8.13), in any of the
other Loan Documents and Borrower has failed to cure such default within fifteen (15) days of the
occurrence of such default. During this fifteen (15) day period, the failure to cure the default
is not an Event of Default (but no Loan will be made during the cure period).

8.4 Material Adverse Change. If there occurs a material adverse change in Borrower’s
business, or if there is a material impairment of the prospect of repayment of any portion of the
Obligations owing to Lender or a material impairment of the value or priority of Lender’s security
interest in the Collateral.

8.5 Seizure of Assets, Etc. If any material portion of Borrower’s assets is attached,
seized, subjected to a writ or distress warrant, or is levied upon, or comes into the possession of
any trustee, receiver or Person acting in a similar capacity and such attachment, seizure, writ or
distress warrant or levy has not been removed, discharged or rescinded within ten (10) days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business affairs, or if a judgment or other claim becomes a lien or
encumbrance upon any material portion of Borrower’s assets, or if a notice of lien, levy, or
assessment is filed of record with respect to any of Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days after Borrower
receives notice thereof; provided that none of the foregoing shall constitute an
Event of Default where such action or event is stayed or an adequate bond has been posted pending a
good faith contest by Borrower.

8.6 Service of Process. The service of process upon Lender seeking to attach by a
trustee or other process any funds of the Borrower on deposit or otherwise held by Lender, or the
delivery upon Lender of a notice of foreclosure by any Person seeking to attach or foreclose on any
funds of the Borrower on deposit or otherwise held by Lender, or the delivery of a notice of
foreclosure or exclusive control to any entity holding or maintaining Borrower’s deposit accounts
or accounts holding securities by any Person (other than Lender) seeking to foreclose or attach any
such accounts or securities.

 

22

 

8.7 Default on Indebtedness. One or more defaults shall exist under any agreement
with any third party or parties which consists of the failure to pay any Indebtedness at maturity
or which results in a right by such third party or parties, whether or not exercised, to accelerate
the maturity of Indebtedness in an aggregate amount in excess of Two Hundred Fifty Thousand Dollars
($250,000) or a default shall exist under any financing agreement with Lender or any of Lender’s
Affiliates.

8.8 Judgments. If a judgment or judgments for the payment of money in an amount,
individually or in the aggregate, of at least Two Hundred Fifty Thousand Dollars ($250,000) shall
be rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10)
days or more.

8.9 Misrepresentations. If any material misrepresentation or material misstatement
exists now or hereafter in any warranty, representation, statement, certification, or report made
to Lender by Borrower or any officer, employee, agent, or director of Borrower.

8.10 Breach of Warrant. If Borrower shall breach any material term of the Warrant.

8.11 Unenforceable Loan Document. If any Loan Document shall in any material respect
cease to be, or Borrower shall assert that any Loan Document is not, a legal, valid and binding
obligation of Borrower enforceable in accordance with its terms.

8.12 Involuntary Insolvency Proceeding. If a proceeding shall have been instituted in
a court having jurisdiction in the premises seeking a decree or order for relief in respect of
Borrower in an involuntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee (or similar official) of Borrower or for any substantial part of its Property, or for the
winding-up or liquidation of its affairs, and such proceeding shall remain undismissed or unstayed
and in effect for a period of thirty (30) consecutive days or such court shall enter a decree or
order granting the relief sought in such proceeding.

8.13 Voluntary Insolvency Proceeding. If Borrower shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall
consent to the entry of an order for relief in an involuntary case under any such law, or shall
consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee,
custodian (or other similar official) of Borrower or for any substantial part of its Property, or
shall make a general assignment for the benefit of creditors, or shall fail generally to pay its
debts as they become due, or shall take any corporate action in furtherance of any of the
foregoing.

 

23

 

9. Lender’s Rights and Remedies.

9.1 Rights and Remedies. Upon the occurrence of any Default or Event of Default,
Lender shall not have any further obligation to advance money or extend credit to or for the
benefit of Borrower. In addition, upon the occurrence of an Event of Default, Lender shall have
the rights, options, duties and remedies of a secured party as permitted by law and, in addition to
and without limitation of the foregoing, Lender may, at its election, without notice of
election and without demand, do any one or more of the following, all of which are authorized
by Borrower:

(a) Acceleration of Obligations. Declare all Obligations, whether evidenced by this
Agreement, by any of the other Loan Documents, or otherwise, including (i) any accrued and unpaid
interest, (ii) the amounts which would have otherwise come due under Section 2.3(b)(ii) if the
Loans had been voluntarily prepaid, (iii) the unpaid principal balance of the Loans and (iv) all
other sums, if any, that shall have become due and payable hereunder, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.12 or 8.13 all Obligations shall become immediately due and payable without any action by
Lender);

(b) Protection of Collateral. Make such payments and do such acts as Lender considers
necessary or reasonable to protect Lender’s security interest in the Collateral. Borrower agrees
to assemble the Collateral if Lender so requires and to make the Collateral available to Lender as
Lender may designate. Borrower authorizes Lender and its designees and agents to enter the
premises where the Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any Lien which in Lender’s determination
appears or is claimed to be prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any of Borrower’s owned premises, Borrower
hereby grants Lender a license to enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to exercise any of Lender’s rights
or remedies provided herein, at law, in equity, or otherwise;

(c) Preparation of Collateral for Sale. Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Lender and its agents and any purchasers at or after foreclosure are
hereby granted a non-exclusive, irrevocable, perpetual, fully paid, royalty-free license or other
right, solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower’s Intellectual Property, including without limitation, labels, patents, copyrights, rights
of use of any name, trade secrets, trade names, trademarks, service marks, and advertising matter,
or any Property of a similar nature, now or at any time hereafter owned or acquired by Borrower or
in which Borrower now or at any time hereafter has any rights; provided that such
license shall only be exercisable in connection with the disposition of Collateral upon Lender’s
exercise of its remedies hereunder;

(d) Sale of Collateral. Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in such manner and at
such places (including Borrower’s premises) as Lender determines are commercially reasonable; and

(e) Purchase of Collateral. Credit bid and purchase all or any portion of the
Collateral at any public sale.

Any deficiency that exists after disposition of the Collateral as provided above will be paid
immediately by Borrower.

 

24

 

9.2 Set Off Right. Lender may set off and apply to the Obligations any and all
indebtedness at any time owing to or for the credit or the account of Borrower or any other assets
of Borrower in Lender’s possession or control.

9.3 Effect of Sale. Upon the occurrence of an Event of Default, to the extent
permitted by law, Borrower covenants that it will not at any time insist upon or plead, or in any
manner whatsoever claim or take any benefit or advantage of, any stay or extension law now or at
any time hereafter in force, nor claim, take nor insist upon any benefit or advantage of or from
any law now or hereafter in force providing for the valuation or appraisement of the Collateral or
any part thereof prior to any sale or sales thereof to be made pursuant to any provision herein
contained, or to the decree, judgment or order of any court of competent jurisdiction; nor, after
such sale or sales, claim or exercise any right under any statute now or hereafter made or enacted
by any state or otherwise to redeem the property so sold or any part thereof, and, to the full
extent legally permitted, except as to rights expressly provided herein, hereby expressly waives
for itself and on behalf of each and every Person, except decree or judgment creditors of Borrower,
acquiring any interest in or title to the Collateral or any part thereof subsequent to the date of
this Agreement, all benefit and advantage of any such law or laws, and covenants that it will not
invoke or utilize any such law or laws or otherwise hinder, delay or impede the execution of any
power herein granted and delegated to Lender, but will suffer and permit the execution of every
such power as though no such power, law or laws had been made or enacted. Any sale, whether under
any power of sale hereby given or by virtue of judicial proceedings, shall operate to divest all
right, title, interest, claim and demand whatsoever, either at law or in equity, of Borrower in and
to the Property sold, and shall be a perpetual bar, both at law and in equity, against Borrower,
its successors and assigns, and against any and all Persons claiming the Property sold or any part
thereof under, by or through Borrower, its successors or assigns.

9.4 Power of Attorney in Respect of the Collateral. Borrower does hereby irrevocably
appoint Lender (which appointment is coupled with an interest), the true and lawful attorney in
fact of Borrower with full power of substitution, for it and in its name to file any notices of
security interests, financing statements and continuations and amendments thereof pursuant to the
Code or federal law, as may be necessary to perfect, or to continue the perfection of Lender’s
security interests in the Collateral. Borrower does hereby irrevocably appoint Lender (which
appointment is coupled with an interest) on the occurrence of an Event of Default, the true and
lawful attorney in fact of Borrower with full power of substitution, for it and in its name: (a)
to ask, demand, collect, receive, receipt for, sue for, compound and give acquittance for any and
all rents, issues, profits, avails, distributions, income, payment draws and other sums in which a
security interest is granted under Section 4 with full power to settle, adjust or
compromise any claim thereunder as fully as if Lender were Borrower itself; (b) to receive payment
of and to endorse the name of Borrower to any items of Collateral (including checks, drafts and
other orders for the payment of money) that come into Lender’s possession or under Lender’s
control; (c) to make all demands, consents and waivers, or take any other action with respect to,
the Collateral; (d) in Lender’s discretion to file any claim or take any other action or
proceedings, either in its own name or in the name of Borrower or otherwise, which Lender may
reasonably deem necessary or appropriate to protect and preserve the right, title and interest of
Lender in and to the Collateral; (e) endorse Borrower’s name on any checks or other forms of
payment or security; (f) sign Borrower’s name on any invoice or bill of lading for any
account or drafts against account debtors; (g) make, settle, and adjust all claims under
Borrower’s insurance policies; (h) settle and adjust disputes and claims about the accounts
directly with account debtors, for amounts and on terms Lender determines reasonable; (i) transfer
the Collateral into the name of Lender or a third party as the Code permits; and (j) to otherwise
act with respect thereto as though Lender were the outright owner of the Collateral.

 

25

 

9.5 Lender’s Expenses. If Borrower fails to pay any amounts or furnish any required
proof of payment due to third persons or entities, as required under the terms of this Agreement,
then Lender may do any or all of the following: (a) make payment of the same or any part thereof;
or (b) obtain and maintain insurance policies of the type discussed in Section 6.8 of this
Agreement, and take any action with respect to such policies as Lender deems prudent. Any amounts
paid or deposited by Lender shall constitute Lender’s Expenses, shall be immediately due and
payable, shall bear interest at the Default Rate and shall be secured by the Collateral. Any
payments made by Lender shall not constitute an agreement by Lender to make similar payments in the
future or a waiver by Lender of any Event of Default under this Agreement. Borrower shall pay all
reasonable fees and expenses, including without limitation, Lender’s Expenses, incurred by Lender
in the enforcement or attempt to enforce any of the Obligations hereunder not performed when due.

9.6 Remedies Cumulative. Lender’s rights and remedies under this Agreement, the Loan
Documents, and all other agreements shall be cumulative. Lender shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise
by Lender of one right or remedy shall be deemed an election, and no waiver by Lender of any Event
of Default on Borrower’s part shall be deemed a continuing waiver. No delay by Lender shall
constitute a waiver, election, or acquiescence by it.

9.7 Application of Collateral Proceeds. The proceeds and/or avails of the Collateral,
or any part thereof, and the proceeds and the avails of any remedy hereunder (as well as any other
amounts of any kind held by Lender, at the time of or received by Lender after the occurrence of an
Event of Default hereunder) shall be paid to and applied as follows:

(a) First, to the payment of out-of-pocket costs and expenses, including all amounts
expended to preserve the value of the Collateral, of foreclosure or suit, if any, and of such sale
and the exercise of any other rights or remedies, and of all proper fees, expenses, liability and
advances, including reasonable legal expenses and attorneys’ fees, incurred or made hereunder by
Lender, including, without limitation, Lender’s Expenses;

(b) Second, to the payment to Lender of the amount then owing or unpaid on the Loans
for any accrued and unpaid interest, the amounts which would have otherwise come due under Section
2.3(b)(ii), if the Loans had been voluntarily prepaid, the principal balance of the Loans, and all
other Obligations with respect to the Loans (provided, however, if such proceeds
shall be insufficient to pay in full the whole amount so due, owing or unpaid upon the Loans, then
to the unpaid interest thereon, then to the amounts which would have otherwise come due under
Section 2.3(b)(ii), if the Loans had been voluntarily prepaid, then to the principal balance of the
Loans, and then to the payment of other amounts then payable to Lender under any of the Loan
Documents); and

(c) Third, to the payment of the surplus, if any, to Borrower, its successors and
assigns, or to the Person lawfully entitled to receive the same.

 

26

 

9.8 Reinstatement of Rights. If Lender shall have proceeded to enforce any right
under this Agreement or any other Loan Document by foreclosure, sale, entry or otherwise, and such
proceedings shall have been discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of competent
jurisdiction), Lender shall be restored to its former position and rights hereunder with respect to
the Property subject to the security interest created under this Agreement.

10. Waivers; Indemnification.

10.1 Demand; Protest. Borrower waives demand, protest, notice of protest, 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 at any time held by Lender on which Borrower may in any
way be liable.

10.2 Lender’s Liability for Collateral. So long as Lender complies with its
obligations, if any, under the Code, Lender shall not in any way or manner be liable or responsible
for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring or arising in
any manner or fashion from any cause other than Lender’s gross negligence or willful misconduct;
(c) any diminution in the value thereof; or (d) any act or default of any carrier, warehouseman,
bailee, forwarding agency, or other Person whomsoever. All risk of loss, damage or destruction of
the Collateral shall be borne by Borrower.

10.3 Indemnification and Waiver. Whether or not the transactions contemplated hereby
shall be consummated:

(a) General Indemnity. Borrower agrees upon demand to pay or reimburse Lender for all
liabilities, obligations and out-of-pocket expenses, including Lender’s Expenses and reasonable
fees and expenses of counsel for Lender from time to time arising in connection with the
enforcement or collection of sums due under the Loan Documents, and in connection with any
amendment or modification of the Loan Documents or any “work-out” in connection with the Loan
Documents. Borrower shall indemnify, reimburse and hold Lender, and each of its respective
successors, assigns, agents, attorneys, officers, directors, equity holders, servants, agents and
employees (each an “Indemnified Person”) harmless from and against all liabilities, losses,
damages, actions, suits, demands, claims of any kind and nature (including claims relating to
environmental discharge, cleanup or compliance), all costs and expenses whatsoever to the extent
they may be incurred or suffered by such Indemnified Person in connection therewith (including
reasonable attorneys’ fees and expenses), fines, penalties (and other charges of any applicable
Governmental Authority), licensing fees relating to any item of Collateral, damage to or loss of
use of property (including consequential or special damages to third parties or damages to
Borrower’s property), or bodily injury to or death of any person (including any agent or employee
of Borrower) (each, a “Claim”), directly or indirectly relating to or arising out of the
use of the proceeds of the Loans or otherwise, the falsity of any representation or warranty of
Borrower or Borrower’s failure to comply with the terms of this Agreement or any other

 

27

 

Loan Document. The foregoing indemnity shall cover, without limitation, (i) any Claim in
connection with a design or other defect (latent or patent) in any item of equipment or product
included in the Collateral, (ii) any Claim for infringement of any patent, copyright, trademark or
other intellectual property right, (iii) any Claim resulting from the presence on or under or the
escape, seepage, leakage, spillage, discharge, emission or release of any Hazardous Materials on
the premises owned, occupied or leased by Borrower, including any Claims asserted or arising under
any Environmental Law, (iv) any Claim for negligence or strict or absolute liability in tort, or
(v) any Claim asserted as to or arising under any Account Control Agreement or any Landlord
Agreement; provided, however, Borrower shall not indemnify Lender for any liability
incurred by Lender as a direct and sole result of Lender’s gross negligence or willful misconduct.
Such indemnities shall continue in full force and effect, notwithstanding the expiration or
termination of this Agreement. Upon Lender’s written demand, Borrower shall assume and diligently
conduct, at its sole cost and expense, the entire defense of Lender, each of its members, partners,
and each of their respective, agents, employees, directors, officers, equity holders, successors
and assigns against any indemnified Claim described in this Section 10.3(a). Borrower
shall not settle or compromise any Claim against or involving Lender without first obtaining
Lender’s written consent thereto, which consent shall not be unreasonably withheld.

(b) Waiver. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT OR
ANYWHERE ELSE, BORROWER AGREES THAT IT SHALL NOT SEEK FROM LENDER UNDER ANY THEORY OF LIABILITY
(INCLUDING ANY THEORY IN TORTS), ANY SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES.

(c) Survival; Defense. The obligations in this Section 10.3 shall survive
payment of all other Obligations pursuant to Section 12.8. At the election of any
Indemnified Person, Borrower shall defend such Indemnified Person using legal counsel satisfactory
to such Indemnified Person in such Person’s reasonable discretion, at the sole cost and expense of
Borrower. All amounts owing under this Section 10.3 shall be paid within thirty (30) days
after written demand.

 

28

 

11. Notices. Unless otherwise provided in this Agreement, all notices or demands by
any party relating to this Agreement or any other agreement entered into in connection herewith
shall be in writing and (except for financial statements and other informational documents which
may be sent by first-class mail, postage prepaid) shall be personally delivered or sent by
certified mail, postage prepaid, return receipt requested, by prepaid nationally recognized
overnight courier, or by prepaid facsimile to Borrower or to Lender, as the case may be, at their
respective addresses set forth below:

	 	 	 

	If to Borrower:

	 	Cereplast, Inc.
	 

	 	300 North Continental Blvd.
	 

	 	Suite 100
	 

	 	El Segundo, CA 90245
	 

	 	Attention: Frederic Scheer
	 

	 	Fax: (310) 676-5000
	 

	 	Ph: (310) 615-9800
	 
	 	 
	If to Lender:

	 	Compass Horizon Funding Company LLC
	 

	 	76 Batterson Park Road
	 

	 	Farmington, CT 06032
	 

	 	Attention: Legal Department
	 

	 	Fax: (860) 676-8655
	 

	 	Ph: (860) 676-8654

The parties hereto may change the address at which they are to receive notices hereunder, by
notice in writing in the foregoing manner given to the other.

12. General Provisions.

12.1 Successors and Assigns. This Agreement and the Loan Documents shall bind and
inure to the benefit of the respective successors and permitted assigns of each of the parties;
provided, however, neither this Agreement nor any rights hereunder may be assigned
by Borrower without Lender’s prior written consent, which consent may be granted or withheld in
Lender’s sole discretion. Lender shall have the right without the consent of or notice to Borrower
to sell, transfer, assign, negotiate, or grant participations in all or any part of, or any
interest in Lender’s rights and benefits hereunder. Lender may disclose the Loan Documents and any
other financial or other information relating to Borrower or any Subsidiary to any potential
participant or assignee of any of the Loans, provided that such participant or
assignee agrees to protect the confidentiality of such documents and information using the same
measures that it uses to protect its own confidential information. Borrower hereby authorizes and
directs Lender, for and on behalf of the Borrower, to maintain a record of ownership of the Notes
and any interest therein, which record, or “book-entry system”, shall identify the owner or owners
of the Notes and any interests therein. Notwithstanding any other provision of this Agreement or
the Loan Documents, the right to the principal of, and stated interest on, the Notes may be
transferred only through such book-entry system.

12.2 Time of Essence. Time is of the essence for the performance of all obligations
set forth in this Agreement.

 

29

 

12.3 Severability of Provisions. Each provision of this Agreement shall be severable
from every other provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.

12.4 Entire Agreement; Construction; Amendments and Waivers.

(a) Entire Agreement. This Agreement and each of the other Loan Documents dated as of
the date hereof, taken together, constitute and contain the entire agreement between Borrower and
Lender and supersede any and all prior agreements, negotiations, correspondence, understandings and
communications between the parties, whether written or oral, respecting the subject matter hereof.
Borrower acknowledges that it is not relying on any representation or agreement made by Lender or
any employee, attorney or agent thereof, other than the specific agreements set forth in this
Agreement and the Loan Documents.

(b) Construction. This Agreement is the result of negotiations between and has been
reviewed by each of Borrower and Lender as of the date hereof and their respective counsel;
accordingly, this Agreement shall be deemed to be the product of the parties hereto, and no
ambiguity shall be construed in favor of or against Borrower or Lender. Borrower and Lender agree
that they intend the literal words of this Agreement and the other Loan Documents and that no parol
evidence shall be necessary or appropriate to establish Borrower’s or Lender’s actual intentions.

(c) Amendments and Waivers. Any and all discharges or waivers of, or consents to any
departures from any provision of this Agreement or of any of the other Loan Documents shall not be
effective without the written consent of Lender. Any and all amendments and modifications of this
Agreement or of any of the other Loan Documents shall not be effective without the written consent
of Lender and Borrower. Any waiver or consent with respect to any provision of the Loan Documents
shall be effective only in the specific instance and for the specific purpose for which it was
given. No notice to or demand on Borrower in any case shall entitle Borrower to any other or
further notice or demand in similar or other circumstances. Any amendment, modification, waiver or
consent affected in accordance with this Section 12.4 shall be binding upon Lender and on
Borrower.

12.5 Reliance by Lender. All covenants, agreements, representations and warranties
made herein by Borrower shall be deemed to be material to and to have been relied upon by Lender,
notwithstanding any investigation by Lender.

12.6 No Set-Offs by Borrower. All sums payable by Borrower pursuant to this Agreement
or any of the other Loan Documents shall be payable without notice or demand and shall be payable
in United States Dollars without set-off or reduction of any manner whatsoever.

12.7 Counterparts. This Agreement may be executed in any number of counterparts and
by different parties on separate counterparts (including signatures delivered by facsimile or other
electronic means), each of which, when executed and delivered, shall be deemed to be an original,
and all of which, when taken together, shall constitute but one and the same Agreement.

 

30

 

12.8 Survival. All covenants, representations and warranties made in this Agreement
shall continue in full force and effect so long as any Obligations or commitment to fund remain
outstanding. The obligations of Borrower to indemnify Lender with respect to the expenses,
damages, losses, costs and liabilities described in Section 10.3 shall survive until all
applicable statute of limitations periods with respect to actions that may be brought against
Lender have run.

13. Relationship of Parties. Borrower and Lender acknowledge, understand and agree
that the relationship between Borrower, on the one hand, and Lender, on the other, is, and at all
time shall remain solely that of a borrower and lender. Lender shall not under any circumstances
be construed to be a partner or a joint venturer of Borrower or any of its Affiliates; nor shall
Lender under any circumstances be deemed to be in a relationship of confidence or trust or a
fiduciary relationship with Borrower or any of its Affiliates, or to owe any fiduciary duty to
Borrower or any of its Affiliates. Lender does not undertake or assume any responsibility or duty
to Borrower or any of its Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform Borrower or any of its Affiliates of any matter in connection with its or their
Property, any Collateral held by Lender or the operations of Borrower or any of its Affiliates.
Borrower and each of its Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply of information
undertaken or assumed by Lender in connection with such matters is solely for the protection of
Lender and neither Borrower nor any Affiliate is entitled to rely thereon.

14. Confidentiality. All information (other than periodic reports filed by Borrower
with the Securities and Exchange Commission) disclosed by Borrower to Lender in writing or through
inspection pursuant to this Agreement that is marked confidential shall be considered confidential.
Lender agrees to use the same degree of care to safeguard and prevent disclosure of such
confidential information as Lender uses with its own confidential information, but in any event no
less than a reasonable degree of care. Lender shall not disclose such information to any third
party (other than to Lender’s members, partners, attorneys, governmental regulators, or auditors,
or to Lender’s subsidiaries and affiliates and prospective transferees and purchasers of the Loans,
all subject to the same confidentiality obligation set forth herein or as required by law,
regulation, subpoena or other order to be disclosed) and shall use such information only for
purposes of evaluation of its investment in Borrower and the exercise of Lender’s rights and the
enforcement of its remedies under this Agreement and the other Loan Documents. The obligations of
confidentiality shall not apply to any information that (a) was known to the public prior to
disclosure by Borrower under this Agreement, (b) becomes known to the public through no fault of
Lender, (c) is disclosed to Lender by a third party having a legal right to make such disclosure,
or (d) is independently developed by Lender. Notwithstanding the foregoing, Lender’s agreement of
confidentiality shall not apply if Lender has acquired indefeasible title to any Collateral or in
connection with any enforcement or exercise of Lender’s rights and remedies under this Agreement
following an Event of Default, including the enforcement of Lender’s security interest in the
Collateral.

15. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CONNECTICUT,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. EACH OF BORROWER AND LENDER
HEREBY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED IN
THE STATE OF CONNECTICUT. BORROWER AND LENDER HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY
CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY CLAIMS.

[Remainder of page intentionally left blank.]

 

31

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the
date first above written.

	 	 	 	 	 	 	 

	 	 	BORROWER:

CEREPLAST, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By: 	 	 	 
	 

	 	 	 

	 	 
	 

	 	 	Name: 	Frederic Scheer	 

	 
	 

	 	 	 	 	 	 
	 

	 	 	Title:	CEO	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	LENDER:

COMPASS HORIZON FUNDING COMPANY LLC

By: Horizon Technology Finance Corporation,

its sole member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 
	 

	 	 	Name:
	Robert D. Pomeroy, Jr.	 	 
	 

	 	 	Title:
	Chief Executive Officer	 	 

 

32

 

LIST OF EXHIBITS AND SCHEDULES

	 	 	 

	Exhibit A

	 	Disclosure Schedule
	Exhibit B

	 	Funding Certificate
	Exhibit C

	 	Form of Note
	Exhibit D

	 	Form of Legal Opinion
	Exhibit E

	 	Form of Officer’s Certificate

 

 

EXHIBIT A

DISCLOSURE SCHEDULE

Borrower hereby certifies the following information to Lender:

			
	Section 1.	 	Information For UCC Financing Statements and Searches and Deposit Accounts and
Accounts Holding Securities.

(a) The exact corporate name of Borrower as it appears in its Articles of Incorporation, as
amended to date is Cereplast, Inc.

(b) Borrower’s state of incorporation is: Nevada.

(c) The organizational ID number of Borrower from its jurisdiction of incorporation is
C25164-2001.

(d) Borrower’s taxpayer identification number is 91-2154289.

(e) The following is a list of all corporate names, dba or trade names used by Borrower in the
past five years: Cereplast, Inc., Cereplast International, Sarl and Cereplast Europe SAS.

(f) The following is a list of all Subsidiaries of Borrower: Cereplast International, Sarl AND
Cereplast Europe SAS.

(g) The address of Borrower’s headquarters and chief executive office is: 300 North
Continental Blvd., El Segundo, CA 90245. The following is a list of all States where Borrower’s
headquarters and chief executive office has been located in the past five years: California.

(h) The following is a list of all States where Borrower’s property and assets have been
located in the past five years: California, Indiana.

(i) Attachment 1 to Exhibit A is a list of all of Borrower’s deposit accounts (bank name,
address and account names and numbers).

(j) The following is a list of all of Borrower’s accounts holding securities (broker/bank
name, address and account names and numbers): None.

			
	Section 2.	 	Information Regarding Intellectual Property. All of Borrower’s Intellectual
Property which is registered with either the U.S. Patent and Trademark Office or the U.S. Copyright
Office is attached hereto.

 

34

 

ATTACHMENT 1 TO EXHIBIT A

Borrower’s Deposit Accounts

	 	 	 	 	 
	Bank	 	 	Accounts #
	Wells Fargo Bank, N.A. (182)
	 	 	4121693816 - General
	PO Box 63020
	 	 	4121693824 - Payroll
	San Francisco, CA 94163
	 	 	 	 
	 
	 	 	 	 
	Bank of America
	 	 	00645-10199	 
	Manhattan Beach Branch 

PO Box 37176

San Francisco, CA 94137-0176	 	 	 	 
	 
	 	 	 	 
	Indiana Bank & Trust Company
	 	 	99001890799	 
	PO Box 648

222 W 2nd St

Seymour, IN 47274	 	 	 	 
	 
	 	 	 	 
	HSBC France
	 	 	0070027066	 
	103 Avenue Des Champs Elysees

Paris, France

007000	 	 	 	 
	 
	 	 	 	 

 

 

EXHIBIT B

FUNDING CERTIFICATE

(Loan [A])

The undersigned, being the duly elected and acting ______________________________  of CEREPLAST, INC., a Nevada corporation (“Borrower”), does hereby certify to COMPASS
HORIZON FUNDING COMPANY LLC (the “Lender”) in connection with that certain Venture Loan and
Security Agreement dated as of [Date] by and between Borrower and Lender (the “Loan Agreement”;
with other capitalized terms used below having the meanings ascribed thereto in the Loan Agreement)
that:

1. The representations and warranties made by Borrower in Section 5 of the Loan
Agreement and in the other Loan Documents are true and correct as of the date hereof.

2. No event or condition has occurred that would constitute a Default or an Event of Default
under the Loan Agreement or any other Loan Document.

3. Borrower is in compliance with the covenants and requirements contained in Sections 4,
6 and 7 of the Loan Agreement.

4. All conditions referred to in Section 3 of the Loan Agreement to the making of the
Loan to be made on or about the date hereof have been satisfied.

5. No material adverse change in the general affairs, management, results of operations,
condition (financial or otherwise) or prospects of Borrower, whether or not arising from
transactions in the ordinary course of business, has occurred.

6. The proceeds for Loan [A] shall be disbursed as follows:

	 	 	 	 	 

	Disbursement from Lender:
	 	 	 	 
	Loan Amount
	 	$	 	 
	Less:
	 	 	 	 
	Legal Fees
	 	$	 	 
	Balance of Commitment Fee
	 	$	 	 
	 
	 
	Net Proceeds due from Lender:
	 	$	 	 

 

 

7. The aggregate net proceeds of Loan [A] in the amount of $_____
shall be
transferred to Borrower’s account as follows:

	 	 	 	 	 	 	 
	Account Name:

	 	 	 	 	 	 
	Bank Name:

	 	 	 	 	 	 
	Bank Address:

	 	 	 	 	 	 
	Attention:

	 	 	 	 	 	 
	Telephone:

	 	 	 	 	 	 
	Account Number:

	 	 	 	 	 	 
	ABA Number:

	 	 	 	 	 	 

Dated: _____, 201_

	 	 	 	 	 	 	 

	 	 	BORROWER: 

CEREPLAST, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 
	 
	 
	 

	 	 	Name: 	Frederic Scheer	 	 
	 

	 	 	 	 	 
	 
	 
	 

	 	 	Title: 	CEO	 	 
	 

	 	 	 	 	 	 

 

 

EXHIBIT C

SECURED PROMISSORY NOTE

(Loan [A])

			
	 	 	 
	$2,500,000.00
	 	Dated: December _____, 2010

FOR VALUE RECEIVED, the undersigned, CEREPLAST, INC., a Nevada corporation
(“Borrower”), HEREBY PROMISES TO PAY to COMPASS HORIZON FUNDING COMPANY LLC, a Delaware
limited liability company (“Lender”) the principal amount of Two Million Five Hundred
Thousand Dollars ($2,500,000.00) or such lesser amount as shall equal the outstanding principal
balance of the Loan [A] (the “Loan”) made to Borrower by Lender pursuant to the Loan
Agreement (as defined below), and to pay all other amounts due with respect to the Loan on the
dates and in the amounts set forth in the Loan Agreement.

Interest on the principal amount of this Note from the date of this Note shall accrue at the
Loan Rate or, if applicable, the Default Rate. The Loan Rate for this Note is _____% per annum based
on a year of twelve 30-day months. If the Funding Date is not the first day of the month, interim
interest accruing from the Funding Date through the last day of that month shall be paid on the
first calendar day of the next calendar month. Commencing _____, 201_, through and including
_____, 201_, on the first day of each month (each an “Interest Payment Date”) Borrower
shall make payments of accrued interest only on the outstanding principal amount of the Loan in the
amount of _____ Dollars ($_____). Commencing on _____, 2010, and continuing on the first
day of each month thereafter (each a “Principal and Interest Payment Date” and,
collectively with each Interest Payment Date, each a “Payment Date”), Borrower shall make
to Lender _____ (_____) equal payments of principal plus accrued interest on the then outstanding
principal amount due hereunder each in the amount of _____ Dollars ($_____). If not sooner
paid, all outstanding amounts hereunder and under the Loan Agreement shall become due and payable
on _____.

Principal, interest and all other amounts due with respect to the Loan, are payable in lawful
money of the United States of America to Lender as set forth in the Loan Agreement. The principal
amount of this Note and the interest rate applicable thereto, and all payments made with respect
thereto, shall be recorded by Lender and, prior to any transfer hereof, endorsed on the grid
attached hereto which is part of this Note.

This Note is referred to in, and is entitled to the benefits of, the Venture Loan and Security
Agreement dated as of [Date] by and between Borrower and Lender (the “Loan Agreement”). The Loan
Agreement, among other things, (a) provides for the making of a secured Loan to Borrower, and (b)
contains provisions for acceleration of the maturity hereof upon the happening of certain stated
events.

This Note may not be prepaid, except as set forth in Section 2.3 of the Loan
Agreement.

This Note and the obligation of Borrower to repay the unpaid principal amount of the Loan,
interest on the Loan and all other amounts due Lender under the Loan Agreement is secured under the
Loan Agreement.

 

 

Presentment for payment, demand, notice of protest and all other demands and notices of any
kind in connection with the execution, delivery, performance and enforcement of this Note are
hereby waived.

Borrower shall pay all reasonable fees and expenses, including, without limitation, reasonable
attorneys’ fees and costs, incurred by Lender in the enforcement or attempt to enforce any of
Borrower’s obligations hereunder not performed when due. This Note shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Connecticut.

IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed by one of its officers
thereunto duly authorized on the date hereof.

	 	 	 	 	 	 	 

	 	 	BORROWER:

CEREPLAST, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 
	 	 	 
	 
	 
	 

	 	 	Name:	 	 	 
	 

	 	 
	 	 	 	 
	 
	 
	 

	 	 	Title:	 	 	 
	 

	 	 
	 	 	 	 

 

 

EXHIBIT D

ITEMS TO BE COVERED BY OPINION OF BORROWER’S COUNSEL

1. Borrower is a corporation, duly organized, validly existing and in good standing under the
laws of the State of Nevada, and is duly qualified and authorized to do business in the State of
California.

2. Borrower has the full corporate power, authority and legal right, and has obtained all
necessary approvals, consents and given all notices to execute and deliver the Loan Documents and
perform the terms thereof.

3. The Loan Documents have been duly authorized, executed and delivered by Borrower and
constitute valid, legal and binding agreements, and are enforceable in accordance with their terms.

4. To our knowledge, there is no action, suit, audit, investigation, proceeding or patent
claim pending or threatened against Borrower in any court or before any governmental commission,
agency, board or authority which might have a material adverse effect on the business, condition or
operations of Borrower or the ability of Borrower to perform its obligations under the Loan
Documents.

5. The Shares (as defined in the Warrant) issuable pursuant to exercise or conversion of the
Warrant have been duly authorized and reserved for issuance by Borrower and, when issued in
accordance with the terms thereof, will be validly issued, fully paid and nonassessable.

6. The shares of Common Stock issuable upon conversion of the Shares have been duly authorized
and reserved and, when issued in accordance with the terms of Borrower’s Articles of Incorporation,
as amended, will be validly issued, fully paid and nonassessable.

7. The execution and delivery of the Loan Documents are not, and the issuance of the Shares
upon exercise of the Warrant in accordance with the terms thereof will not be, inconsistent with
Borrower’s Articles of Incorporation, as amended, or Bylaws, do not and will not contravene any
law, governmental rule or regulation, judgment or order applicable to Borrower, and do not and will
not conflict with or contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other agreement or instrument of which Borrower is a party or by which it is
bound or require the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any federal, state or local government
authority or agency or other person, except for the filing of notices pursuant to federal and state
securities laws, which filings will be effected by the time required thereby.

 

 

EXHIBIT E

FORM OF OFFICER’S CERTIFICATE

TO: COMPASS HORIZON FUNDING COMPANY LLC

Reference is made to the Venture Loan and Security Agreement dated as of _____, 2010 (as it
may be amended from time to time, the “Loan Agreement”) by and between CEREPLAST, INC.
(“Borrower”) and COMPASS HORIZON FUNDING COMPANY LLC (“Lender”). Unless otherwise
defined herein, capitalized terms have the meanings given such terms in the Loan Agreement.

The undersigned Responsible Officer of Borrower hereby certifies to Lender that:

	1.	 	No Event of Default or Default has occurred under the Loan Agreement. (If a Default or Event
of Default has occurred, specify the nature and extent thereof and the action Borrower
proposes to take with respect thereto.)

	 
	2.	 	The information provided in Section 1 of the Disclosure Schedule is currently true and
accurate, except as noted below.

	 
	3.	 	The Disclosure Schedule accurately lists all of Borrower’s Intellectual Property as to which
Borrower has made filings, applications or registrations with the United States Copyright
Office or the United States Patent and Trademark Office except as noted below.

	 
	4.	 	Borrower is in compliance with the provisions of Sections 4, 6 and 7 of the Loan
Agreement, except as noted below.

	 
	5.	 	Attached herewith are the [monthly financial statements pursuant to Section 6.3(a) of the
Loan Agreement/annual audited financial statements pursuant to Section 6.3(b) of the Loan
Agreement]. These have been prepared in accordance with GAAP and are consistent from one
period to the next except as noted below.

NOTES TO ABOVE CERTIFICATIONS:

 

 

	 	 	 	 	 	 	 

	 	 	BORROWER:

CEREPLAST, INC.
 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 	 
	 

	 	 	Name:	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	Title:

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