Document:

Bayshore Exploration L.L.C.
 	
            20501 Katy Freeway, Suite 216
 
	
             
 	
            Katy, Texas  77450
 
	
             
 	
            Phone (281) 646-1919
 
	
             
 	
            Fax (281) 647-9448
 
	
             
 	
            bayshoreexpl@sbcglobal.net
 

 

 

December 29, 2006

 

Paxton Energy, Inc.

4120 Douglas Blvd.

Suite 206-428

Granite Bay, CA  95746

 

	
            RE:
 	
            Farmout Agreement
 
	
             
 	
            Fiedler No. 1 Well
 
	
             
 	
            Storey Ranch Prospect
 
	
             
 	
            La Salle County, Texas
 

 

Gentlemen:

 

This Farmout Agreement is entered into on this 29th day of December, 2006, by and between Bayshore Exploration L.L.C. (“Bayshore”), as Farmor, and Paxton Energy, Inc. (“Paxton”), as Farmee, pertaining to the Fiedler No. 1 Well located on the Storey Ranch Prospect in La Salle County, Texas. The parties hereto agree to the following terms and conditions:

 

Paxton is the owner and holder of 75% of the leasehold and working interest in and to the SE/4 of the SE/4 of Section 167, Abstract 281, La Salle County, Texas, containing 40 acres of land, more or less, to be known as the “farmout acreage”. Bayshore is the owner and holder of 25% of the leasehold and working interest in and to the SE/4 of the SE/4 of Section 167, Abstract 281, La Salle County, Texas, containing 40 acres of land, more or less.

 

Bayshore has expressed a desire to acquire all of Paxton’s leasehold and working interest in the farmout acreage by conducting drilling operations as hereinafter provided, and Paxton agrees to assign to Bayshore all of its right, title and interest in the farmout acreage, subject to the terms, reservations and limitations set out below. 

 

	
             
 	
            1.
 	
            On or before March 31, 2007, Bayshore, as operator, shall commence or cause to commence the actual drilling of a test well to be known as the Fiedler No. 1 Well at a legal location on the farmout acreage in search for commercial oil and/or gas production. Bayshore shall drill the Fiedler No. 1 Well with due diligence to a total depth of 8,100 feet or a depth sufficient to test the Wilcox, Escondido and Olmos formations, whichever is the lesser depth. 
 

 

	
             
 	
            2.
 	
            Bayshore shall permit the Fiedler No. 1 Well with the Railroad Commission of Texas, survey and stake the drilling location, build a necessary lease road to the wellsite, prepare the wellsite for the drilling rig, cure title to the drillsite, contract with third party contractors and drill with due diligence said test well to its total depth (8,100 feet), log and test said well for the purpose of establishing commercial oil and/or gas production or plugging and abandoning same. 
 

 

	
             
 	
            3.
 	
            During drilling and completion operations, Paxton shall receive the following:
 

	
             
 	
            a.
 	
            Daily drilling and completion reports on said test well. 
 

	
             
 	
            b.
 	
            Copies of all logs, tests and samples gained from the drilling and completion of said test well.
 

	
             
 	
            c.
 	
            Copies of all Railroad Commission of Texas filings on said test well. 
 

Page 2

December 29, 2006

Farmout Agreement

 

	
             
 	
            4.
 	
            Upon reaching “casing point” in the Fiedler No. 1 Well, Bayshore shall notify Paxton of its intent to either complete said test well as a producer or plug and abandon same as a dry hole. In the event that Bayshore elects to complete said test well as a producer, Paxton shall have the option to participate in said test well at “casing point” for an 18.75% working interest ownership subject to a 75% net revenue lease. “Casing Point” shall be defined as that point in time in which the test well has been drilled to its total depth of 8,100 feet and well evaluation has been completed with electric logging and subsequent testing for commercial oil and/or gas production. If Paxton elects to participate in the completion of said test well at “casing point”, Paxton agrees to pay to Bayshore its share (18.75%) of the completion costs ($123,11

 

 

 

 

	
             
 	
            5.
 	
            In the event that Bayshore establishes commercial oil and/or gas production on the farmout acreage with said test well, then both Bayshore and Paxton shall enter into a mutually acceptable Joint Operating Agreement Model Form 610-1989 for the operation of said test well. All subsequent operations on the farmout acreage shall be governed by said Joint Operating Agreement.
 

 

	
             
 	
            6.
 	
            Prior to plugging and abandoning said test well, Bayshore shall notify Paxton of its intent to plug and abandon said test well. Paxton shall have the right to take over operations of said test well along with assuming all risk, cost and liability thereto. 
 

 

	
             
 	
            7.
 	
            Bayshore agrees to abide by all of the terms and conditions of the oil and gas leases covering the farmout acreage. Bayshore shall also comply with all valid and applicable laws, regulations, rules, ordinances and codes of all federal, state, local or other governmental entities having jurisdiction. Further, this Agreement shall be construed under and in accordance with the laws of the State of Texas.
 

 

	
             
 	
            8.
 	
            This Agreement does not create, and shall not be construed to create, a partnership, association, joint venture or fiduciary relationship of any kind or character between the parties hereto, and shall not be construed to impose any duty, obligation, or liability arising from such a relationship by or with respect to either party. The rights, duties, obligations, and liabilities or the parties hereunder shall be several and not joint or collective.
 

 

	
             
 	
            9.
 	
            This Agreement shall be binding upon the parties hereto and shall extend to and be binding upon their respective successors and assigns. 
 

 

	
             
 	
            10.
 	
            This Farmout Agreement is the entire agreement between the parties hereto pertaining to the Fiedler No. 1 Well on the Storey Ranch Prospect. Any changes to this Agreement shall be agreed to in writing by both parties. 
 

 

If the foregoing is your understanding of our agreement, please acknowledge your acceptance by signing in the space provided below and return one fully executed copy to this office on or before January 10, 2007.

 

Sincerely,

 

	
            BAYSHORE EXPLORATION L.L.C.
 	
            AGREED TO and ACCEPTED on this 10 day
 
	
             
 	
            of January, 2007.
 
	
             
 	
             
 
	
            /s/ Jamin Swantner
 	
            PAXTON ENERGY, INC.
 
	
            Jamin Swantner
 	
             
 
	
            President
 	
            /s/ Robert Freiheit
 
	
            Attachment:  Exhibit “A” AFE
 	
            Robert Freiheit, PresidentExhibit 10.4

 

Silicon Valley Bank

 

Loan and Security Agreement

 

	
  Borrower:

  	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  
	
  Address:

  	
  14000 Summit Drive, Suite 900

  
	
   

  	
  Austin, Texas 78728

  
	
   

  	
  (FAX: 512-336-7791)

  
	
   

  	
   

  
	
  Date:

  	
  September 15, 2005

  

 

 

THIS LOAN AND SECURITY AGREEMENT is entered into on the above date between
SILICON VALLEY BANK (“Silicon” or “Bank”), whose address is 3003 Tasman Drive,
Santa Clara, California 95054 and the borrower(s) named above (jointly and
severally, the “Borrower”), whose chief executive office is located at the
above address (“Borrower’s Address”). The Schedule to this Agreement (the “Schedule”)
shall for all purposes be deemed to be a part of this Agreement, and the same
is an integral part of this Agreement. (Definitions of certain terms used in
this Agreement are set forth in Section 8 below.)

 

1.             LOANS.

 

1.1 
Loans. Silicon
will make loans to Borrower (the “Loans”) up to the amounts (the “Maximum
Credit Limit”) shown on the Schedule, provided no Default or Event of Default
has occurred and is continuing, and subject to deduction of Reserves for
accrued interest and such other Reserves as Silicon deems proper from time to
time in its good faith business judgment.

 

1.2 
Interest. All
Loans and all other monetary Obligations shall bear interest at the rate shown
on the Schedule, except where expressly set forth to the contrary in this
Agreement. Interest shall be payable monthly, on the last day of the month. Interest
may, in Silicon’s discretion, be charged to Borrower’s loan account, and the
same shall thereafter bear interest at the same rate as the other Loans. Silicon
may, in its discretion, charge interest to Borrower’s Deposit Accounts
maintained with Silicon. Regardless of the amount of Obligations that may be
outstanding from time to time, Borrower shall pay Silicon minimum monthly
interest during the term of this Agreement in the amount set forth on the
Schedule (the “Minimum Monthly Interest”).

 

1.3 
Overadvances. If at any time or for any reason the total of all outstanding Loans and
all other monetary Obligations exceeds the Maximum Credit Limit (an “Overadvance”),
Borrower shall immediately pay the amount of the excess to Silicon, without
notice or demand. Without limiting Borrower’s obligation to repay to Silicon
the amount of any Overadvance, Borrower agrees to pay Silicon interest on the
outstanding amount of any Overadvance, on demand, at the Default Rate.

 

1.4 
Fees. Borrower
shall pay Silicon the fees shown on the Schedule, which are in addition to all
interest and other sums payable to Silicon and are not refundable.

 

1.5 Loan Requests. To obtain a Loan, Borrower shall make a
request to Silicon by facsimile or telephone. Loan requests received after
12:00 Noon (Pacific Standard Time) will not be considered by Silicon until the
next Business Day. Silicon may rely on any telephone request for a Loan given
by a person whom Silicon believes is an authorized representative of Borrower,
and Borrower will indemnify Silicon for any loss Silicon suffers as a result of
that reliance.

 

1.6 
Letters of Credit. At the request of Borrower, Silicon may, in its good faith business
judgment, issue or arrange for the issuance of letters of credit for the
account of Borrower, in each case in form and substance satisfactory to Silicon
in its sole discretion (collectively, “Letters of Credit”). The aggregate face
amount of all Letters of Credit from time to time outstanding shall not exceed
the amount shown on the Schedule (the “Letter of Credit Sublimit”), and shall
be reserved against Loans which would otherwise be available hereunder, and in
the event at any time there are insufficient Loans available to Borrower for
such reserve, Borrower shall deposit and maintain with Silicon cash collateral
in an amount at all

 

1

 

times
equal to such deficiency, which shall be held as Collateral for all purposes of
this Agreement. Borrower shall pay all bank charges (including charges of
Silicon) for the issuance of Letters of Credit, together with such additional
fee as Silicon’s letter of credit department shall charge in connection with
the issuance of the Letters of Credit. Any payment by Silicon under or in
connection with a Letter of Credit shall constitute a Loan hereunder on the
date such payment is made. Each Letter of Credit shall have an expiry date no
later than thirty days prior to the Maturity Date. Borrower hereby agrees to
indemnify and hold Silicon harmless from any loss, cost, expense, or liability,
including payments made by Silicon, expenses, and reasonable attorneys’ fees
incurred by Silicon arising out of or in connection with any Letters of Credit
other than those arising from Silicon’s gross negligence or willful misconduct.
Borrower agrees to be bound by the regulations and interpretations of the
issuer of any Letters of Credit guarantied by Silicon and opened for Borrower’s
account or by Silicon’s interpretations of any Letter of Credit issued by
Silicon for Borrower’s account, and Borrower understands and agrees that
Silicon shall not be liable for any error, negligence, or mistake, whether of
omission or commission, in following Borrower’s instructions or those contained
in the Letters of Credit or any modifications, amendments, or supplements
thereto other than Silicon’s gross negligence or willful misconduct. Borrower
understands that Letters of Credit may require Silicon to indemnify the issuing
bank for certain costs or liabilities arising out of claims by Borrower against
such issuing bank. Borrower hereby agrees to indemnify and hold Silicon
harmless with respect to any loss, cost, expense, or liability incurred by
Silicon under any Letter of Credit as a result of Silicon’s indemnification of
any such issuing bank. The provisions of this Loan Agreement, as it pertains to
Letters of Credit, and any other Loan Documents relating to Letters of Credit
are cumulative.

 

2. SECURITY INTEREST.  To
secure the payment and performance of all of the Obligations when due, Borrower
hereby grants to Silicon a security interest in all of the following (collectively,
the “Collateral”):  all right, title and
interest of Borrower in and to all of the following, whether now owned or
hereafter arising or acquired and wherever located: all Accounts; all
Inventory; all Equipment; all Deposit Accounts; all General Intangibles
(including without limitation all Intellectual Property); all Investment
Property; all Other Property; and any and all claims, rights and interests in
any of the above, and all guaranties and security for any of the above, and all
substitutions and replacements for, additions, accessions, attachments,
accessories, and improvements to, and proceeds (including proceeds of any
insurance policies, proceeds of proceeds and claims against third parties) of,
any and all of the above, and all Borrower’s books relating to any and all of
the above.

 

3. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER.

 

In
order to induce Silicon to enter into this Agreement and to make Loans,
Borrower represents and warrants to Silicon as follows, and Borrower covenants
that the following representations will continue to be true, and that Borrower
will at all times comply with all of the following covenants, throughout the
term of this Agreement and until all Obligations have been paid and performed
in full:

 

3.1 
Corporate Existence and Authority. Borrower is and will continue to be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation. Borrower is and will continue to be
qualified and licensed to do business in all jurisdictions in which any failure
to do so would result in a Material Adverse Change. The execution, delivery and
performance by Borrower of this Agreement, and all other documents contemplated
hereby (i) have been duly and validly authorized, (ii) are enforceable against
Borrower in accordance with their terms (except as enforcement may be limited
by equitable principles and by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to creditors’ rights generally), and (iii)
do not violate Borrower’s articles or certificate of incorporation, or Borrower’s
by-laws, or any law or any  material
agreement or instrument which is binding upon Borrower or its property, and
(iv) do not constitute grounds for acceleration of any material indebtedness or
obligation under any agreement or instrument which is binding upon Borrower or
its property.

 

3.2 
Name; Trade Names and Styles. The name of Borrower set forth in the heading
to this Agreement is its correct name. Listed in the Representations are all
prior names of Borrower and all of Borrower’s present and prior trade names. Borrower
shall give Silicon 30 days’ prior written notice before changing its name or
doing business under any other name. Borrower has complied, and will in the
future comply, in all material respects, with all laws relating to the conduct
of business under a fictitious business name, except where the failure to so
comply would not reasonably be expected to result in a Material Adverse Change.

 

3.3 
Place of Business; Location of Collateral. The address set forth in the heading to this
Agreement is Borrower’s chief executive office. In addition, Borrower has
places of business and Collateral is located only at the locations set forth in
the Representations. Borrower will give Silicon at least 30 days prior written
notice before opening any additional place of business, changing its chief
executive office, or moving any of the Collateral to a location other than
Borrower’s Address or

 

2

 

one of the locations set forth in the
Representations, except that Borrower may maintain sales offices in the
ordinary course of business at which not more than a total of $30,000 fair
market value of Equipment is kept at each location.

 

3.4 
Title to Collateral; Perfection; Permitted Liens.

 

(a)  Borrower is now, and will at all times in the
future be, the sole owner of all the Collateral, except for items of Equipment
which are leased to Borrower. The Collateral now is and will remain free and
clear of any and all liens, charges, security interests, encumbrances and
adverse claims, except for Permitted Liens. Silicon now has, and will continue
to have, a first-priority perfected and enforceable security interest in all of
the Collateral, subject only to the Permitted Liens, and Borrower will at all
times defend Silicon and the Collateral against all claims of others.

 

(b)   Borrower has set forth in the Representations
all of Borrower’s Deposit Accounts, and Borrower will give Silicon five Business
Days advance written notice before establishing any new Deposit Accounts and
will cause the institution where any such new Deposit Account is maintained to
execute and deliver to Silicon a control agreement in form sufficient to
perfect Silicon’s security interest in the Deposit Account and otherwise
satisfactory to Silicon in its good faith business judgment. Nothing herein
limits any requirements which may be set forth in the Schedule as to where
Deposit Accounts will be maintained.

 

(c)
In the event that Borrower shall at any time after the date hereof have any
commercial tort claims against others, which it is asserting or intends to
assert, and in which the potential recovery exceeds $100,000, Borrower shall
promptly notify Silicon thereof in writing and provide Silicon with such
information regarding the same as Silicon shall request (unless providing such
information would waive the Borrower’s attorney-client privilege). Such
notification to Silicon shall constitute a grant of a security interest in the
commercial tort claim and all proceeds thereof to Silicon, and Borrower shall
execute and deliver all such documents and take all such actions as Silicon
shall request in connection therewith.

 

(d)   None of the Collateral now is or will be
affixed to any real property in such a manner, or with such intent, as to
become a fixture. Borrower is not and will not become a lessee under any real
property lease pursuant to which the lessor may obtain any non-statutory rights
in any of the Collateral and no such lease now prohibits, restrains, impairs or
will prohibit, restrain or impair Borrower’s right to remove any Collateral
from the leased premises. Whenever any Collateral is located upon premises in
which any third party has an interest, Borrower shall, whenever requested by
Silicon, use its best efforts to cause such third party to execute and deliver
to Silicon, in form acceptable to Silicon, such waivers and subordinations as
Silicon shall specify in its good faith business judgment. Borrower will keep
in full force and effect, and will comply with all material terms of, any lease
of real property where any of the Collateral now or in the future may be
located.

 

3.5 
Maintenance of Collateral. Borrower will maintain the Collateral in good working condition
(ordinary wear and tear and damage due to casualty excepted), and Borrower will
not use the Collateral for any unlawful purpose. Borrower will immediately
advise Silicon in writing of any material loss or damage to the Collateral.

 

3.6 
Books and Records. Borrower has maintained and will maintain at Borrower’s Address
complete and accurate books and records, comprising an accounting system in
accordance with GAAP.

 

3.7 
Financial Condition, Statements and Reports. With the exception of certain restatements of
Borrower’s financial statements for fiscal years 2002, 2003 and 2004 and
certain interim periods for fiscal year 2005, all financial statements now or
in the future delivered to Silicon have been, and will be, prepared in
conformity with GAAP and now and in the future will fairly present the results
of operations and financial condition of Borrower, in accordance with GAAP, at
the times and for the periods therein stated. Between the last date covered by
any such statement provided to Silicon and the date hereof, there has been no
Material Adverse Change.

 

3.8 
Tax Returns and Payments; Pension Contributions. Borrower has timely filed, and will timely
file, all required tax returns and reports, and Borrower has timely paid, and
will timely pay, all foreign, federal, state and local taxes, assessments,
deposits and contributions now or in the future owed by Borrower. Borrower may,
however, defer payment of any contested taxes, provided that Borrower (i) in
good faith contests Borrower’s obligation to pay the taxes by appropriate
proceedings promptly and diligently instituted and conducted, (ii) notifies
Silicon in writing of the commencement of, and any material development in, the
proceedings, and (iii) posts bonds or takes any other steps required to keep
the contested taxes from becoming a lien upon any of the Collateral. Borrower
is unaware of any claims or adjustments proposed for any of Borrower’s prior
tax years which could result in additional taxes becoming due and payable by
Borrower. Borrower has paid, and shall continue to pay all amounts necessary to
fund all present and future pension, profit sharing and deferred compensation
plans in accordance with their terms, and Borrower has not and will not
withdraw from participation in, permit partial or complete termination of, or
permit the occurrence of any other event with respect to, any such plan which
could reasonably be expected to result in any liability of Borrower, including
any liability to the Pension Benefit Guaranty Corporation or its successors or
any other governmental agency.

 

3

 

3.9 
Compliance with Law. Borrower has, to the best of its knowledge, complied, and will comply,
in all material respects, with all provisions of all foreign, federal, state
and local laws and regulations applicable to Borrower, including, but not
limited to, those relating to Borrower’s ownership of real or personal
property, the conduct and licensing of Borrower’s business, and all
environmental matters.

 

3.10 
Litigation. There
is no claim, suit, litigation, proceeding or investigation pending or (to best
of Borrower’s knowledge) threatened against or affecting Borrower in any court
or before any governmental agency (or any basis therefor known to Borrower)
which could reasonably be expected to result, either separately or in the
aggregate, in any Material Adverse Change. Borrower will promptly inform
Silicon in writing of any claim, proceeding, litigation or investigation in the
future threatened or instituted against Borrower involving any single claim of
$50,000 or more, or involving $100,000 
or more in the aggregate.

 

3.11 
Use of Proceeds. All proceeds of all Loans shall be used solely for lawful business
purposes. Borrower is not purchasing or carrying any “margin stock” (as defined
in Regulation U of the Board of Governors of the Federal Reserve System) and no
part of the proceeds of any Loan will be used to purchase or carry any “margin
stock” or to extend credit to others for the purpose of purchasing or carrying
any “margin stock.”

 

4. ACCOUNTS.

 

4.1 
Representations Relating to Accounts. Borrower represents and warrants to Silicon
as follows:  Each Account with respect to
which Loans are requested by Borrower shall, on the date each Loan is requested
and made, (i) represent an undisputed bona fide existing unconditional
obligation of the Account Debtor created by the sale and delivery of goods or
the rendition of services, or the non-exclusive licensing of Intellectual
Property, in the ordinary course of Borrower’s business, and (ii) meet the
Minimum Eligibility Requirements set forth in Section 8 below.

 

4.2 
Representations Relating to Documents and Legal Compliance. Borrower represents and warrants to Silicon
as follows:  All statements made and all
unpaid balances appearing in all invoices, instruments and other documents
evidencing the Accounts are and shall be true and correct and all such
invoices, instruments and other documents and all of Borrower’s books and
records are and shall be genuine and in all respects what they purport to be. All
sales and other transactions underlying or giving rise to each Account shall
comply in all material respects with all applicable laws and governmental rules
and regulations. To the best of Borrower’s knowledge, all signatures and
endorsements on all documents, instruments, and agreements relating to all
Accounts are and shall be genuine, and all such documents, instruments and
agreements are and shall be legally enforceable in accordance with their terms.

 

4.3 
Schedules and Documents relating to Accounts. Borrower shall deliver to Silicon transaction
reports and schedules of collections, as provided in the Schedule, on Silicon’s
standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Silicon’s security interest and
other rights in all of Borrower’s Accounts, nor shall Silicon’s failure to
advance or lend against a specific Account affect or limit Silicon’s security
interest and other rights therein. If requested by Silicon, Borrower shall
furnish Silicon with copies (or, at Silicon’s request, originals) of all
contracts, orders, invoices, and other similar documents, and all shipping
instructions, delivery receipts, bills of lading, and other evidence of delivery,
for any goods the sale or disposition of which gave rise to such Accounts, and
Borrower warrants the genuineness of all of the foregoing. Borrower shall also
furnish to Silicon an aged accounts receivable trial balance as provided in the
Schedule. In addition, Borrower shall deliver to Silicon, on its request, the
originals of all instruments, chattel paper, security agreements, guarantees
and other documents and property evidencing or securing any Accounts, in the
same form as received, with all necessary endorsements, and copies of all
credit memos.

 

4.4 
Collection of Accounts. Borrower shall have the right to collect all Accounts, unless and until
a Default or an Event of Default has occurred and is continuing. Whether or not
an Event of Default has occurred and is continuing, subject to the terms
provided in the Schedule, Borrower shall hold all payments on, and proceeds of,
Accounts in trust for Silicon, and Borrower shall immediately deliver all such
payments and proceeds to Silicon in their original form, duly endorsed, to be
applied to the Obligations in such order as Silicon shall determine. Any
proceeds in excess of the Obligations shall be transferred to Borrower’s
operating account with Silicon. Silicon may, in its good faith business judgment,
require that all proceeds of Collateral be deposited by Borrower into a lockbox
account, or such other “blocked account” as Silicon may specify, pursuant to a
blocked account agreement in such form as Silicon may specify in its good faith
business judgment.

 

4.5. Remittance of Proceeds. All proceeds arising from the disposition of
any Collateral shall be delivered, in kind, by Borrower to Silicon in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations in
such order as Silicon shall determine; provided that, if no Default or Event of
Default has occurred and is continuing, Borrower shall not be obligated to
remit to Silicon the proceeds of the sale of worn out or obsolete Equipment
disposed of by Borrower in good faith in an arm’s length transaction for an
aggregate purchase price of $25,000 or less (for all such transactions in any
fiscal year). Borrower agrees that it will not commingle

 

4

 

proceeds of Collateral with any of Borrower’s
other funds or property, but will hold such proceeds separate and apart from
such other funds and property and in an express trust for Silicon. Nothing in
this Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.

 

4.6 
Disputes. Borrower
shall notify Silicon promptly of all disputes or claims relating to Accounts. Borrower
shall not forgive (completely or partially), compromise or settle any Account
for less than payment in full, or agree to do any of the foregoing, except that
Borrower may do so, provided that: (i) Borrower does so in good faith, in a
commercially reasonable manner, in the ordinary course of business, and in arm’s
length transactions, which are reported to Silicon on the regular reports
provided to Silicon; (ii) no Default or Event of Default has occurred and is
continuing; and (iii) taking into account all such discounts, settlements and
forgiveness, the total outstanding Loans will not exceed the Maximum Credit
Limit.

 

4.7 
Returns. Provided
no Event of Default has occurred and is continuing, if any Account Debtor
returns any Inventory to Borrower, Borrower shall promptly determine the reason
for such return and promptly issue a credit memorandum to the Account Debtor in
the appropriate amount. In the event any attempted return occurs after the
occurrence and during the continuance of any Event of Default, Borrower shall
hold the returned Inventory in trust for Silicon, and immediately notify
Silicon of the return of the Inventory.

 

4.8 
Verification. Silicon may, from time to time, verify directly with the respective
Account Debtors the validity, amount and other matters relating to the
Accounts, by means of mail, telephone or otherwise, either in the name of
Borrower or Silicon or such other name as Silicon may choose.

 

4.9 
No Liability. Silicon shall not be responsible or liable for any shortage or
discrepancy in, damage to, or loss or destruction of, any goods, the sale or
other disposition of which gives rise to an Account, or for any error, act,
omission, or delay of any kind occurring in the settlement, failure to settle,
collection or failure to collect any Account, or for settling any Account in
good faith for less than the full amount thereof, nor shall Silicon be deemed
to be responsible for any of Borrower’s obligations under any contract or
agreement giving rise to an Account. Nothing herein shall, however, relieve
Silicon from liability for its own gross negligence or willful misconduct.

 

5. ADDITIONAL DUTIES OF BORROWER.

 

5.1 
Financial and Other Covenants. Borrower shall at all times comply with the
financial and other covenants set forth in the Schedule.

 

5.2 
Insurance. Borrower
shall, at all times insure all of the tangible personal property Collateral and
carry such other business insurance, with insurers reasonably acceptable to
Silicon, in such form and amounts as Silicon may reasonably require and that
are customary and in accordance with standard practices for Borrower’s industry
and locations, and Borrower shall provide evidence of such insurance to Silicon.
All such insurance policies shall name Silicon as an additional loss payee, and
shall contain a lenders loss payee endorsement in form reasonably acceptable to
Silicon. Upon receipt of the proceeds of any such insurance, Silicon shall
apply such proceeds in reduction of the Obligations as Silicon shall determine
in its good faith business judgment, except that, provided no Default or Event
of Default has occurred and is continuing, Silicon shall release to Borrower
insurance proceeds with respect to Equipment totaling less than $100,000, which
shall be utilized by Borrower for the replacement of the Equipment with respect
to which the insurance proceeds were paid. Silicon may require reasonable
assurance that the insurance proceeds so released will be so used. If Borrower
fails to provide or pay for any insurance, Silicon may, but is not obligated
to, obtain the same at Borrower’s expense. Borrower shall promptly deliver to
Silicon copies of all material reports made to insurance companies.

 

5.3 
Reports. Borrower,
at its expense, shall provide Silicon with the written reports set forth in the
Schedule, and such other written reports with respect to Borrower (including
budgets, sales projections, operating plans and other financial documentation),
as Silicon shall from time to time specify in its good faith business judgment.

 

5.4 
Access to Collateral, Books and Records. At reasonable times, and on one Business Day’s
notice, Silicon, or its agents, shall have the right to inspect the Collateral,
and the right to audit and copy Borrower’s books and records. Silicon shall
take reasonable steps to keep confidential all information obtained in any such
inspection or audit, but Silicon shall have the right to disclose any such
information to its subsidiaries or affiliates in connection with their business
with Borrower and to its auditors, regulatory agencies, and attorneys, and
pursuant to any subpoena or other legal process. The foregoing inspections and
audits shall be at Borrower’s expense and the charge therefor shall be $750 per
person per day (or such higher amount as shall represent Silicon’s then current
standard charge for the same), plus reasonable out-of-pocket expenses. In the
event Borrower and Silicon schedule an audit more than 10 days in advance, and
Borrower seeks to reschedules the audit with less than 10 days written notice
to Silicon, then (without limiting any of Silicon’s rights or remedies),
Borrower shall pay Silicon a cancellation fee of the amount of any actual
out-of-pocket expenses incurred by Silicon, to compensate Silicon for the
anticipated costs and expenses of the cancellation.

 

5

 

5.5 
Negative Covenants. Except as may be permitted in the Schedule, Borrower shall not, without
Silicon’s prior written consent (which shall be a matter of its good faith
business judgment), do any of the following: 
(i) merge or consolidate with another corporation or entity; (ii)
acquire any assets, except in the ordinary course of business; (iii) enter into
any other transaction outside the ordinary course of business, except the
re-incorporation contemplated by Section 8(c) of the Schedule; (iv) sell or
transfer any Collateral, except for the sale of finished Inventory in the
ordinary course of Borrower’s business, the grant of non-exclusive licenses and
similar arrangements for the use of property of Borrower in the ordinary course
of business, and the sale of obsolete or unneeded Equipment in the ordinary
course of business; (v) store any Inventory or other Collateral with any
warehouseman or other third party unless Borrower obtains subordination
agreements acceptable to Silicon; (vi) sell any Inventory on a sale-or-return,
guaranteed sale, consignment, or other contingent basis; (vii) make any loans
of any money or other assets, other than Permitted Investments; (viii) incur
any debts, outside the ordinary course of business, which would result in a Material
Adverse Change, other than Permitted Indebtedness; (ix) guarantee or otherwise
become liable with respect to the obligations of another party or entity, other
than Permitted Indebtedness; (x) pay or declare any dividends on Borrower’s
stock (except for dividends payable solely in stock of Borrower); (xi) redeem,
retire, purchase or otherwise acquire, directly or indirectly, any of Borrower’s
stock; (xii) make any change in Borrower’s capital structure which would result
in a Material Adverse Change, except the sale of Borrower’s equity securities
in a public offering or to venture capital investors so long as Borrower
identifies to Bank the venture capital investors prior to the closing of the
investment; or (xiii) engage, directly or indirectly, in any business other
than the businesses currently engaged in by Borrower or reasonably related
thereto; or (xiv) dissolve or elect to dissolve; or (xv) prepay any
Subordinated Debt, except as permitted pursuant to the terms thereof or the
terms of the relevant subordination agreement governing such Subordinated Debt.
Transactions permitted by the foregoing provisions of this Section are only
permitted if no Default or Event of Default would occur as a result of such
transaction.

 

5.6 
Litigation Cooperation. Should any third-party suit or proceeding be instituted by or against
Silicon with respect to any Collateral or relating to Borrower, Borrower shall,
without expense to Silicon, make available Borrower and its officers, employees
and agents and Borrower’s books and records, to the extent that Silicon may
deem them reasonably necessary in order to prosecute or defend any such suit or
proceeding.

 

5.7 
Further Assurances. Borrower agrees, at its expense, on request by Silicon, to execute all
documents and take all actions as Silicon may in its good faith business
judgment, deem necessary or useful in order to perfect and maintain Silicon’s
perfected first-priority security interest in the Collateral (subject to
Permitted Liens), and in order to fully consummate the transactions
contemplated by this Agreement. Borrower authorizes Silicon to file such UCC-1
financing statements under the Code as Silicon deems necessary.

 

6. TERM.

 

6.1 
Maturity Date. This Agreement shall continue in effect until the maturity date set
forth on the Schedule (the “Maturity Date”), subject to Section 6.3 below.

 

6.2 
Early Termination. This Agreement may be terminated prior to the Maturity Date as
follows:  (i) by Borrower, effective
three Business Days after written notice of termination is given to Silicon; or
(ii) by Silicon at any time after the occurrence and during the continuance of
an Event of Default after any applicable cure period has expired, without
notice, effective immediately. If this Agreement is terminated by Borrower
under this Section 6.2 (a) at any time within the first twelve (12) months
after the date of this Agreement, Borrower shall pay to Silicon a termination
fee in an amount equal to one percent (1.0%) of the Maximum Credit Limit; and,
(b) at any time after the first anniversary of the date of this Agreement but
prior to the  Maturity Date, Borrower
shall pay to Silicon a termination fee in an amount equal to one-half of one
percent (0.50%) of the Maximum Credit Limit; provided that no termination fee
shall be charged if the credit facility hereunder is replaced with a new
facility from Silicon or another division of Silicon. The termination fee shall
be due and payable on the effective date of any such termination and thereafter
shall bear interest at a rate equal to the highest rate applicable to any of
the Obligations.

 

6.3 
Payment of Obligations. On the Maturity Date or on any earlier effective date of termination,
Borrower shall pay and perform in full all Obligations, whether evidenced by
installment notes or otherwise, and whether or not all or any part of such
Obligations are otherwise then due and payable. Without limiting the generality
of the foregoing, if on the Maturity Date, or on any earlier effective date of
termination, there are any outstanding Letters of Credit issued by Silicon or
issued by another institution based upon an application, guarantee, indemnity
or similar agreement on the part of Silicon, then on such date Borrower shall
provide to Silicon cash collateral in an amount equal to 105% of the face
amount of all such Letters of Credit plus all interest, fees and cost due or to
become due in connection therewith (as estimated by Silicon in its good faith
business judgment), to secure all of the Obligations relating to said Letters
of Credit, pursuant to Silicon’s then standard form cash pledge agreement. Notwithstanding
any termination of this Agreement, all of Silicon’s security interests in all
of the Collateral and all of the terms and provisions of this Agreement shall
continue in full force and effect until all Obligations

 

6

 

have been paid and performed in full;
provided that Silicon may, in its sole discretion, refuse to make any further
Loans after termination. No termination shall in any way affect or impair any
right or remedy of Silicon, nor shall any such termination relieve Borrower of
any Obligation to Silicon, until all of the Obligations have been paid and
performed in full. Upon payment and performance in full of all the Obligations
and termination of this Agreement, Silicon shall promptly terminate its
financing statements with respect to the Borrower and deliver to Borrower such
other documents as may be required to fully terminate Silicon’s security
interests.

 

7. EVENTS OF DEFAULT AND REMEDIES.

 

7.1 
Events of Default. The  occurrence of any of the
following events shall constitute an “Event of Default” under this Agreement,
and Borrower shall give Silicon immediate written notice thereof: (a) Any
warranty, representation, statement, report or certificate made or delivered to
Silicon by Borrower or any of Borrower’s officers, employees or agents, now or
in the future, shall be untrue or misleading in a material respect when made or
deemed to be made; or (b) Borrower shall fail to pay when due any Loan or any
interest thereon or any other monetary Obligation; or (c) the total Loans and
other Obligations outstanding at any time shall exceed the Maximum Credit
Limit; or (d) Borrower shall fail to comply with any of the financial covenants
set forth in the Schedule, or shall fail to perform any other non-monetary
Obligation which by its nature cannot be cured, or shall fail to permit Silicon
to conduct an inspection or audit as specified in Section 5.4 hereof; or (e)
Borrower shall fail to perform any other non-monetary Obligation, which failure
is not cured within five Business Days after the date due; or (f) any levy,
assessment, attachment, seizure, lien or encumbrance (other than a Permitted
Lien) is made on all or any part of the Collateral which is not cured within 10
days after the occurrence of the same; or (g) any default or event of default
occurs under any obligation secured by a Permitted Lien, which is not cured
within any applicable cure period or waived in writing by the holder of the
Permitted Lien; or (h) Borrower breaches any material contract or obligation,
which has resulted or may reasonably be expected to result in a Material
Adverse Change; or (i) Dissolution, termination of existence, insolvency or
business failure of Borrower; or appointment of a receiver, trustee or
custodian, for all or any part of the property of, assignment for the benefit
of creditors by, or the commencement of any proceeding by Borrower under any
reorganization, bankruptcy, insolvency, arrangement, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction, now or in the
future in effect; or (j) the commencement of any proceeding against Borrower or
any guarantor of any of the Obligations under any reorganization, bankruptcy,
insolvency, arrangement, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction, now or in the future in effect, which is not
cured by the dismissal thereof within 30 days after the date commenced; or (k)
revocation or termination of, or limitation or denial of liability upon, any
guaranty of the Obligations or any attempt to do any of the foregoing, or
commencement of proceedings by any guarantor of any of the Obligations under
any bankruptcy or insolvency law; or (l) revocation or termination of, or
limitation or denial of liability upon, any pledge of any certificate of
deposit, securities or other property or asset of any kind pledged by any third
party to secure any or all of the Obligations, or any attempt to do any of the
foregoing, or commencement of proceedings by or against any such third party
under any bankruptcy or insolvency law; or (m) Borrower makes any payment on
account of any indebtedness or obligation which has been subordinated to the
Obligations other than as permitted in the applicable subordination agreement,
or if any Person who has subordinated such indebtedness or obligations
terminates or in any way limits his subordination agreement; or (n) there shall
be a change in the record or beneficial ownership of an aggregate of more than
20% of the outstanding shares of stock of Borrower, in one or more
transactions, compared to the ownership of outstanding shares of stock of
Borrower in effect on the date hereof, without the prior written consent of
Silicon; or (o) Borrower shall generally not pay its debts as they become due,
or Borrower shall conceal, remove or transfer any part of its property, with
intent to hinder, delay or defraud its creditors, or make or suffer any
transfer of any of its property which may be fraudulent under any bankruptcy,
fraudulent conveyance or similar law; or (p) a Material Adverse Change shall
occur. Silicon may cease making any Loans hereunder during any of the above
cure periods, and thereafter if an Event of Default has occurred and is
continuing.

 

7.2 
Remedies. Upon
the occurrence and during the continuance of any Event of Default,  Silicon, at its option, and without notice or
demand of any kind (all of which are hereby expressly waived by Borrower), may
do any one or more of the following: (a) Cease making Loans or otherwise
extending credit to Borrower under this Agreement or any other Loan Document;
(b) Accelerate and declare all or any part of the Obligations to be immediately
due, payable, and performable, notwithstanding any deferred or installment
payments allowed by any instrument evidencing or relating to any Obligation;
(c) Take possession of any or all of the Collateral wherever it may be found,
and for that purpose Borrower hereby authorizes Silicon without judicial
process to enter onto any of Borrower’s premises without interference to search
for, take possession of, keep, store, or remove any of the Collateral, and
remain on the premises or cause a custodian to remain on the premises in
exclusive control thereof, without charge for so long as Silicon deems it
necessary, in its good faith business judgment, in order to complete the
enforcement of its rights under this Agreement or any other agreement;
provided, however, that should Silicon seek to take possession of any of the
Collateral by court process, Borrower hereby irrevocably waives: (i) any bond
and any surety or security relating thereto required by any statute, court rule
or otherwise as an incident to such possession;

 

7

 

(ii) any demand for possession prior to the
commencement of any suit or action to recover possession thereof; and (iii) any
requirement that Silicon retain possession of, and not dispose of, any such
Collateral until after trial or final judgment; (d) Require Borrower to
assemble any or all of the Collateral and make it available to Silicon at
places designated by Silicon which are reasonably convenient to Silicon and
Borrower, and to remove the Collateral to such locations as Silicon may deem
advisable; (e) Complete the processing, manufacturing or repair of any
Collateral prior to a disposition thereof and, for such purpose and for the
purpose of removal, Silicon shall have the right to use Borrower’s premises,
vehicles, hoists, lifts, cranes, and other Equipment and all other property
without charge; (f) Sell, lease or otherwise dispose of any of the Collateral,
in its condition at the time Silicon obtains possession of it or after further
manufacturing, processing or repair, at one or more public and/or private
sales, in lots or in bulk, for cash, exchange or other property, or on credit,
and to adjourn any such sale from time to time without notice other than oral
announcement at the time scheduled for sale. Silicon shall have the right to
conduct such disposition on Borrower’s premises without charge, for such time
or times as Silicon deems reasonable, or on Silicon’s premises, or elsewhere
and the Collateral need not be located at the place of disposition. Silicon may
directly or through any affiliated company purchase or lease any Collateral at
any such public disposition, and if permissible under applicable law, at any
private disposition. Any sale or other disposition of Collateral shall not
relieve Borrower of any liability Borrower may have if any Collateral is
defective as to title or physical condition or otherwise at the time of sale;
(g) Demand payment of, and collect any Accounts and General Intangibles
comprising Collateral and, in connection therewith, Borrower irrevocably
authorizes Silicon to endorse or sign Borrower’s name on all collections,
receipts, instruments and other documents, to take possession of and open mail
addressed to Borrower and remove therefrom payments made with respect to any
item of the Collateral or proceeds thereof, and, in Silicon’s good faith
business judgment, to grant extensions of time to pay, compromise claims and
settle Accounts and the like for less than face value; (h) Offset against any
sums in any of Borrower’s general, special or other Deposit Accounts with
Silicon against any or all of the Obligations; and (i) Demand and receive
possession of any of Borrower’s federal and state income tax returns and the
books and records utilized in the preparation thereof or referring thereto. All
reasonable attorneys’ fees, expenses, costs, liabilities and obligations
incurred by Silicon with respect to the foregoing shall be added to and become
part of the Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations. Without
limiting any of Silicon’s rights and remedies, from and after the occurrence
and during the continuance of any Event of Default, the interest rate
applicable to the Obligations shall be increased by an additional four percent
(4%) per annum (the “Default Rate”).

 

7.3 
Standards for Determining Commercial Reasonableness. Borrower and Silicon agree that a sale or
other disposition (collectively, “sale”) of any Collateral which complies with
the following standards will conclusively be deemed to be commercially
reasonable:  (i) written notice of the
sale is given to Borrower at least ten days prior to the sale, and, in the case
of a public sale, notice of the sale is published at least five days before the
sale in a newspaper of general circulation in the county where the sale is to
be conducted; (ii) written notice of the sale describes the collateral in
general, non-specific terms; (iii) The sale is conducted at a place designated
by Silicon, with or without the Collateral being present; (iv) The sale
commences at any time between 8:00 a.m. and 6:00 p.m;  (v) Payment of the purchase price in cash or
by cashier’s check or wire transfer is required; (vi) With respect to any sale
of any of the Collateral, Silicon may (but is not obligated to) direct any
prospective purchaser to ascertain directly from Borrower any and all
information concerning the same. Silicon shall be free to employ other methods
of noticing and selling the Collateral, in its discretion, if they are
commercially reasonable.

 

7.4 
Power of Attorney. Upon the occurrence and during the continuance of any Event of Default,
without limiting Silicon’s other rights and remedies, Borrower grants to
Silicon an irrevocable power of attorney coupled with an interest, authorizing
and permitting Silicon (acting through any of its employees, attorneys or
agents) at any time, at its option, but without obligation, with or without
notice to Borrower, and at Borrower’s expense, to do any or all of the following,
in Borrower’s name or otherwise, but Silicon agrees that if it exercises any
right hereunder, it will do so in good faith and in a commercially reasonable
manner:  (a) Execute on behalf of
Borrower any documents that Silicon may, in its good faith business judgment,
deem advisable in order to perfect and maintain Silicon’s security interest in
the Collateral, or in order to exercise a right of Borrower or Silicon, or in
order to fully consummate all the transactions contemplated under this Agreement,
and all other Loan Documents; (b) Execute on behalf of Borrower, any invoices
relating to any Account, any draft against any Account Debtor and any notice to
any Account Debtor, any proof of claim in bankruptcy, any Notice of Lien, claim
of mechanic’s, materialman’s or other lien, or assignment or satisfaction of
mechanic’s, materialman’s or other lien; (c) Take control in any manner of any
cash or non-cash items of payment or proceeds of Collateral; endorse the name
of Borrower upon any instruments, or documents, evidence of payment or
Collateral that may come into Silicon’s possession; (d) Endorse all checks and
other forms of remittances received by Silicon; (e) Pay, contest or settle any
lien, charge, encumbrance, security interest and adverse claim in or to any of
the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; (f) Grant extensions of time to pay,
compromise claims and settle Accounts and General Intangibles for less than
face value and execute all releases and other documents in connection
therewith; (g) Pay any sums required on account of Borrower’s taxes or to
secure the release of any liens therefor, or both; (h) 

 

8

 

Settle and adjust, and give releases of, any
insurance claim that relates to any of the Collateral and obtain payment
therefor; (i) Instruct any third party having custody or control of any books
or records belonging to, or relating to, Borrower to give Silicon the same rights
of access and other rights with respect thereto as Silicon has under this
Agreement; and (j) Take any action or pay any sum required of Borrower pursuant
to this Agreement and any other Loan Documents. Any and all reasonable sums
paid and any and all reasonable costs, expenses, liabilities, obligations and
attorneys’ fees incurred by Silicon with respect to the foregoing shall be
added to and become part of the Obligations, shall be payable on demand, and
shall bear interest at a rate equal to the highest interest rate applicable to
any of the Obligations. In no event shall Silicon’s rights under the foregoing
power of attorney or any of Silicon’s other rights under this Agreement be
deemed to indicate that Silicon is in control of the business, management or
properties of Borrower.

 

7.5 
Application of Proceeds. All proceeds realized as the result of any sale of the Collateral shall
be applied by Silicon first to the reasonable costs, expenses, liabilities,
obligations and attorneys’ fees incurred by Silicon in the exercise of its
rights under this Agreement, second to the interest due upon any of the
Obligations, and third to the principal of the Obligations, in such order as
Silicon shall determine in its sole discretion. Any surplus shall be paid to
Borrower or other persons legally entitled thereto; Borrower shall remain
liable to Silicon for any deficiency. If, Silicon, in its good faith business
judgment, directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Silicon shall have
the option, exercisable at any time, in its good faith business judgment, of
either reducing the Obligations by the principal amount of purchase price or
deferring the reduction of the Obligations until the actual receipt by Silicon
of the cash therefor.

 

7.6 
Remedies Cumulative. In addition to the rights and remedies set forth in this Agreement,
Silicon shall have all the other rights and remedies accorded a secured party
under the Code and under all other applicable laws, and under any other
instrument or agreement now or in the future entered into between Silicon and
Borrower, and all of such rights and remedies are cumulative and none is
exclusive. Exercise or partial exercise by Silicon of one or more of its rights
or remedies shall not be deemed an election, nor bar Silicon from subsequent
exercise or partial exercise of any other rights or remedies. The failure or
delay of Silicon to exercise any rights or remedies shall not operate as a
waiver thereof, but all rights and remedies shall continue in full force and
effect until all of the Obligations have been fully paid and performed.

 

8.             DEFINITIONS. As used in this Agreement, the following
terms have the following meanings:

 

“Account
Debtor” means the obligor on an Account.

 

“Accounts”
means all present and future “accounts” as defined in the Code in effect on the
date hereof with such additions to such term as may hereafter be made, and
includes without limitation all accounts receivable and other sums owing to
Borrower.

 

“Affiliate”
means, with respect to any Person, a relative, partner, shareholder, director,
officer, or employee of such Person, or any parent or subsidiary of such
Person, or any Person controlling, controlled by or under common control with
such Person.

 

“Business
Day” means a day on which Silicon is open for business.

 

“Code”
means the Uniform Commercial Code as adopted and in effect in the State of
California from time to time.

 

“Collateral”
has the meaning set forth in Section 2 above.

 

“continuing”
and “during the continuance of” when used with reference to a Default or
Event of Default means that the Default or Event of Default has occurred and
has not been either waived in writing by Silicon or cured within any applicable
cure period.

 

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

 

“Default
Rate” has the meaning set forth in Section 7.2 above.

 

“Deposit
Accounts” means all present and future “deposit accounts” as defined in the
Code in effect on the date hereof with such additions to such term as may
hereafter be made, and includes without limitation all general and special bank
accounts, demand accounts, checking accounts, savings accounts and certificates
of deposit.

 

“Eligible
Inventory” - Not Applicable

 

“Eligible
Accounts”  means Accounts and General
Intangibles arising in the ordinary course of Borrower’s business from the sale
of goods or the rendition of services, or the non-exclusive licensing of
Intellectual Property, for which an invoice has been issued, which Silicon, in
its good faith business judgment, shall deem eligible for borrowing. Without
limiting the fact that the determination of which Accounts are eligible for
borrowing is a matter of Silicon’s good faith business judgment, the

 

9

 

following (the “Minimum Eligibility
Requirements”) are the minimum requirements for an Account to be an
Eligible Account:  (i) the Account must
not be outstanding for more than 90 days from its invoice date (the “Eligibility
Period”), (ii) the Account must not represent progress billings, or be due
under a fulfillment or requirements contract with the Account Debtor, or be
offsetting deferred revenue (iii) the Account must not be subject to any
contingencies (including Accounts arising from sales on consignment, guaranteed
sale or other terms pursuant to which payment by the Account Debtor may be
conditional), (iv) the Account must not be owing from an Account Debtor with
whom Borrower has any dispute (whether or not relating to the particular
Account), (v) the Account must not be owing from an Affiliate of Borrower, (vi)
the Account must not be owing from an Account Debtor which is subject to any
insolvency or bankruptcy proceeding, or whose financial condition is not
reasonably acceptable to Silicon, or which, fails or goes out of a material
portion of its business, (vii) the Account must not be owing from the United
States or any department, agency or instrumentality thereof (unless there has
been compliance, to Silicon’s satisfaction, with the United States Assignment
of Claims Act), (viii) the Account must not be owing from an Account Debtor
located outside the United States or Canada (unless pre-approved by Silicon in
its discretion in writing, or backed by a letter of credit satisfactory to
Silicon, or FCIA insured satisfactory to Silicon),  (ix) the Account must not be owing from an
Account Debtor to whom Borrower is or may be liable for goods purchased from
such Account Debtor or otherwise (but, in such case, the Account will be deemed
not eligible only to the extent of any amounts owed by Borrower to such Account
Debtor). Accounts owing from one Account Debtor will not be deemed Eligible
Accounts to the extent they exceed 25%
of the total Accounts outstanding. In addition, if more than 50% of the
Accounts owing from an Account Debtor are outstanding for a period longer than
their Eligibility Period (without regard to unapplied credits) or are otherwise
not eligible Accounts, then all Accounts owing from that Account Debtor will be
deemed ineligible for borrowing. Silicon may, from time to time, in its good
faith business judgment, revise the Minimum Eligibility Requirements, upon
written notice to Borrower, and, in the event that such revisions are material,
Borrower may prepay the outstanding Loans and terminate this Agreement without
payment of any early termination fee.

 

“Equipment”
means all present and future “equipment” as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
includes without limitation all machinery, fixtures, goods, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing.

 

“Event
of Default” means any of the events set forth in Section 7.1 of this
Agreement.

 

“GAAP”
means generally accepted accounting principles consistently applied.

 

“Guarantor”
means any present or future guarantor of the Obligations, including XPLORE
TECHNOLOGIES CORP.

 

“General
Intangibles” means all present and future “general intangibles” as defined
in the Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation all Intellectual
Property, payment intangibles, royalties, contract rights, goodwill, franchise
agreements, purchase orders, customer lists, route lists, telephone numbers,
domain names, claims, income tax refunds, security and other deposits, options
to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in contract, tort or otherwise),
insurance policies (including without limitation key man, property damage, and
business interruption insurance), payments of insurance and rights to payment
of any kind.

 

“good
faith business judgment” means honesty in fact and good faith (as defined
in Section 1-201 of the Code) in the exercise of Silicon’s business judgment.

 

“including”
means including (but not limited to).

 

 “Intellectual Property” means all
present and future (a) copyrights, copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work thereof, whether published or unpublished, (b) trade secret
rights, including all rights to unpatented inventions and know-how, and
confidential information; (c) mask work or similar rights available for the
protection of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same; (e)
trademarks, servicemarks, trade styles, and trade names, whether or not any of
the foregoing are registered, and all applications to register and
registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by any such trademarks; (f)
computer software and computer software products; (g) designs and design
rights; (h) technology; (i) all claims for damages by way of past, present and
future infringement of any of the rights included above; and (j) all licenses
or other rights to use any property or rights of a type described above.

 

“Inventory”
means all present and future “inventory” as defined in the Code in effect on
the date hereof with such additions to such term as may hereafter be made, and
includes, without limitation, all merchandise, raw materials, parts, supplies,
packing and shipping materials, work in process and finished products,
including without limitation such inventory as is temporarily out of Borrower’s
custody or possession or in transit and including any returned goods and any
documents of title representing any of the above.

 

10

 

“Investment
Property” means all present and future investment property, securities,
stocks, bonds, debentures, debt securities, partnership interests, limited
liability company interests, options, security entitlements, securities
accounts, commodity contracts, commodity accounts, and all financial assets
held in any securities account or otherwise, and all options and warrants to
purchase any of the foregoing, wherever located, and all other securities of
every kind, whether certificated or uncertificated.

 

“Loan
Documents” means, collectively, this Agreement, the Representations, and
all other present and future documents, instruments and agreements between
Silicon and Borrower related to the Loans, including, but not limited to those
relating to this Agreement, and all amendments and modifications thereto and
replacements therefor.

 

“Material
Adverse Change” means any of the following: (i) a material adverse change
in the business, operations, or financial or other condition of the Borrower,
or (ii) a material impairment of the prospect of repayment of any material
portion of the Obligations; or (iii) a material impairment of the value or
priority of Silicon’s security interests in the Collateral.

 

“Obligations”
means all present and future Loans, advances, debts, liabilities, obligations,
guaranties, covenants, duties and indebtedness at any time owing by Borrower to
Silicon, whether evidenced by this Agreement or any note or other instrument or
document, or otherwise, whether arising from an extension of credit, opening of
a letter of credit, banker’s acceptance, loan, guaranty, indemnification or
otherwise, whether direct or indirect (including, without limitation, those
acquired by assignment and any participation by Silicon in Borrower’s debts
owing to others), absolute or contingent, due or to become due, including,
without limitation, all interest, charges, expenses, fees, attorney’s fees,
expert witness fees, audit fees, letter of credit fees, collateral monitoring
fees, closing fees, facility fees, termination fees, minimum interest charges
and any other sums chargeable to Borrower under this Agreement or under any
other Loan Documents.

 

“Other
Property” means the following as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and all
rights relating thereto: all present and future “commercial tort claims”
(including without limitation any commercial tort claims identified in the
Representations), “documents”, “instruments”, “promissory notes”, “chattel
paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm
products” and “money”; and all other goods and personal property of every kind,
tangible and intangible, whether or not governed by the Code.

 

“Payment”
means all checks, wire transfers and other items of payment received by Silicon
(including proceeds of Accounts and payment of the Obligations in full) for
credit to Borrower’s outstanding Loans or, if the balance of the Loans have
been reduced to zero, for credit to its Deposit Accounts.

 

“Permitted
Indebtedness” means the following: 
(a) Borrower’s indebtedness to Silicon under this Agreement or the Loan
Documents; (b) indebtedness existing on the date hereof which is disclosed in
writing to Bank in the Representations; (c) Subordinated Debt; (d) indebtedness
incurred after the date hereof not to exceed $50,000 in the aggregate in any
fiscal year of Borrower secured by a lien described in clause (i) of the
defined term “Permitted Liens;” (e) indebtedness to trade creditors incurred in
the ordinary course of business; (f) indebtedness secured by Permitted Liens;
and (g) extensions, refinancings and renewals of any items of Permitted
Indebtedness, provided that the principal amount is not increased or the terms
modified to impose more burdensome terms upon Borrower.

 

“Permitted
Investments” means the following: (a) (i) marketable direct obligations
issued or unconditionally guaranteed by the United States or its agency or any
state maturing within 1 year from its acquisition, (ii) commercial paper
maturing no more than 1 year after its creation and having the highest rating
from either Standard & Poor’s Corporation or Moody’s Investors Service,
Inc., (iii) Bank’s certificates of deposit issued maturing no more than 1 year
after issue, (iv) any other investments administered through Bank; (b)
Investments not to exceed $50,000 in the aggregate at any one time consisting
of (i) travel advances and employee relocation loans and other employee loans
and advances in the ordinary course of business, and (ii) loans to employees,
officers or directors relating to the purchase of equity securities of Borrower
or its Subsidiaries pursuant to employee stock purchase plan agreements
approved by Borrower’s Board of Directors; (c) Investments (including debt obligations)
received in connection with the bankruptcy or reorganization of customers or
suppliers and in settlement of delinquent obligations of, and other disputes
with, customers or suppliers arising in the ordinary course of Borrower’s
business; and (d) Investments consisting of notes receivable of, or prepaid
royalties and other credit extensions to, customers and suppliers who are not
Affiliates, in the ordinary course of Borrower’s business.

 

“Permitted
Liens” means the following:  (i)
purchase money security interests in specific items of Equipment; (ii) leases
of specific items of Equipment; (iii) liens for taxes not yet payable; (iv)
additional security interests and liens consented to in writing by Silicon,
which consent may be withheld in its good faith business judgment; (v) security
interests being terminated substantially concurrently with this Agreement; (vi)
liens of materialmen, mechanics, warehousemen, carriers, or other similar liens
arising in the ordinary course of business and securing obligations which are
not delinquent; (vii) liens incurred in connection with the extension, renewal
or refinancing of the indebtedness secured by liens of the type described above
in

 

11

 

clauses (i) or (ii) above, provided that any
extension, renewal or replacement lien is limited to the property encumbered by
the existing lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase; (viii) Liens in favor of customs and
revenue authorities which secure payment of customs duties in connection with
the importation of goods; (ix) leases or subleases and non-exclusive licenses
or sublicenses granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses permit granting Bank a security
interest; and (x) liens related to the Subordinated Debt, including the New
Phoenix Agreement referred to in the Schedule. Silicon will have the right to
require, as a condition to its consent under subparagraph (iv) above, that the
holder of the additional security interest or lien sign an intercreditor
agreement on Silicon’s then standard form, acknowledge that the security
interest is subordinate to the security interest in favor of Silicon, and agree
not to take any action to enforce its subordinate security interest so long as
any Obligations remain outstanding, and that Borrower agree that any uncured
default in any obligation secured by the subordinate security interest shall
also constitute an Event of Default under this Agreement.

 

“Person”
means any individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, government, or any
agency or political division thereof, or any other entity.

 

“Representations”
means the written Representations and Warranties or Perfection Certificate
provided by Borrower to Silicon referred to in the Schedule.

 

“Reserves”
means, as of any date of determination, such amounts as Silicon may from time
to time establish and revise in its good faith business judgment, reducing the
amount of Loans, Letters of Credit and other financial accommodations which
would otherwise be available to Borrower under the lending formula(s) provided
in the Schedule:  (a) to reflect events,
conditions, contingencies or risks which, as determined by Silicon in its good
faith business judgment, do or may adversely affect (i) the Collateral or any
other property which is security for the Obligations or its value (including
without limitation any increase in delinquencies of Accounts), (ii) the assets,
business or prospects of Borrower or any Guarantor, or (iii) the security
interests and other rights of Silicon in the Collateral (including the
enforceability, perfection and priority thereof); or (b) to reflect Silicon’s
good faith belief that any collateral report or financial information furnished
by or on behalf of Borrower or any Guarantor to Silicon is or may have been
incomplete, inaccurate or misleading in any material respect; or (c) in respect
of any state of facts which Silicon determines in good faith constitutes an
Event of Default or may reasonably be expected to, with notice or passage of
time or both, constitute an Event of Default.

 

“Subordinated
Debt” means debt incurred by Borrower subordinated to Borrower’s
indebtedness owed to Silicon and which is reflected in a written agreement in a
manner and form acceptable to Silicon in its sole discretion and approved by
Silicon in writing, including the Subordination Agreement between Phoenix
Enterprises LLC and others and Bank, the Subordination Agreement between
Phoenix Venture Fund LLC and another and Bank, and the Subordination Agreement
between Guarantor and Bank, each dated as of April 22, 2005; the Subordination
Agreement between Phoenix Venture Fund LLC and others and Bank dated the date
hereof; and for purposes of this Agreement shall also include the Intercreditor
Agreement entered into between Wistron Corporation and Bank dated as of April
22, 2005 and entered into in connection with the Prior Agreement (defined
below).

 

Other Terms. All
accounting terms used in this Agreement, unless otherwise indicated, shall have
the meanings given to such terms in accordance with GAAP, consistently applied.
All other terms contained in this Agreement, unless otherwise indicated, shall
have the meanings provided by the Code, to the extent such terms are defined
therein.

 

9.             GENERAL PROVISIONS.

 

9.1 
Interest Computation; Float Charge. In computing interest on the Obligations, all
Payments received after 12:00 Noon (Pacific Standard Time) on any day shall be
deemed received on the next Business Day. In addition, Silicon shall be
entitled to charge Borrower a “float” charge in an amount equal to two Business
Days interest, at the interest rate applicable to the Loans, on all Payments
received by Silicon. Said float charge is not included in interest for purposes
of computing Minimum Monthly Interest (if any) under this Agreement. The float
charge for each month shall be payable on the last day of the month. Silicon
shall not, however, be required to credit Borrower’s account for the amount of
any item of payment, which is unsatisfactory to Silicon in its good faith
business judgment, and Silicon may charge Borrower’s loan account for the amount
of any item of payment which is returned to Silicon unpaid.

 

9.2 
Application of Payments. All payments with respect to the Obligations may be applied, and in
Silicon’s good faith business judgment reversed and re-applied, to the
Obligations, in such order and manner as Silicon shall determine in its good
faith business judgment.

 

9.3 
Charges to Accounts. Silicon may, in its discretion, require that Borrower pay monetary
Obligations in cash to Silicon, or charge them to Borrower’s Loan account, in
which event they will bear interest at the same rate applicable to the

 

12

 

Loans. Silicon may also, in its discretion,
charge any monetary Obligations to Borrower’s Deposit Accounts maintained with
Silicon.

 

9.4 
Monthly Accountings. Silicon shall provide Borrower monthly with an account of advances,
charges, expenses and payments made pursuant to this Agreement. Such account
shall be deemed correct, accurate and binding on Borrower and an account stated
(except for reverses and reapplications of payments made and corrections of
errors discovered by Silicon), unless Borrower notifies Silicon in writing to
the contrary within 60 days after such account is rendered, describing the
nature of any alleged errors or omissions.

 

9.5 
Notices. All
notices to be given under this Agreement shall be in writing and shall be given
either personally or by reputable private delivery service or by regular
first-class mail, or certified mail return receipt requested, addressed to Silicon
or Borrower at the addresses shown in the heading to this Agreement, or at any
other address designated in writing by one party to the other party. Notices to
Silicon shall be directed to the Commercial Finance Division, to the attention
of the Division Manager or the Division Credit Manager. All notices shall be
deemed to have been given upon delivery in the case of notices personally
delivered, or at the expiration of one Business Day following delivery to the
private delivery service, or two Business Days following the deposit thereof in
the United States mail, with postage prepaid.

 

9.6 
Severability. Should any provision of this Agreement be held by any court of
competent jurisdiction to be void or unenforceable, such defect shall not
affect the remainder of this Agreement, which shall continue in full force and
effect.

 

9.7 
Integration. This
Agreement and such other written agreements, documents and instruments as may
be executed in connection herewith are the final, entire and complete agreement
between Borrower and Silicon and supersede all prior and contemporaneous
negotiations and oral representations and agreements, all of which are merged
and integrated in this Agreement. There are no oral understandings,
representations or agreements between the parties which are not set forth in
this Agreement or in other written agreements signed by the parties in
connection herewith.

 

9.8 
Waivers; Indemnity. The failure of Silicon at any time or times to require Borrower to
strictly comply with any of the provisions of this Agreement or any other Loan
Document shall not waive or diminish any right of Silicon later to demand and
receive strict compliance therewith. Any waiver of any default shall not waive
or affect any other default, whether prior or subsequent, and whether or not
similar. None of the provisions of this Agreement or any other Loan Document
shall be deemed to have been waived by any act or knowledge of Silicon or its
agents or employees, but only by a specific written waiver signed by an authorized
officer of Silicon and delivered to Borrower. Borrower waives the benefit of
all statutes of limitations relating to any of the Obligations or this
Agreement or any other Loan Document, and Borrower waives demand, protest,
notice of protest and notice of default or dishonor, notice of payment and
nonpayment, release, compromise, settlement, extension or renewal of any
commercial paper, instrument, account, General Intangible, document or guaranty
at any time held by Silicon on which Borrower is or may in any way be liable,
and notice of any action taken by Silicon, unless expressly required by this
Agreement. Borrower hereby agrees to indemnify Silicon and its affiliates,
subsidiaries, parent, directors, officers, employees, agents, and attorneys,
and to hold them harmless from and against any and all claims, debts,
liabilities, demands, obligations, actions, causes of action, penalties, costs
and expenses (including reasonable attorneys’ fees), of every kind, which they
may sustain or incur based upon or arising out of any of the Obligations, or
any relationship or agreement between Silicon and Borrower, or any other matter
relating to Borrower or the Obligations; provided that this indemnity shall not
extend to damages proximately caused by the indemnitee’s own gross negligence
or willful misconduct. Notwithstanding any provision in this Agreement to the
contrary, the indemnity agreement set forth in this Section shall survive any
termination of this Agreement and shall for all purposes continue in full force
and effect.

 

9.9 
No Liability for Ordinary Negligence. Neither Silicon, nor any of its directors,
officers, employees, agents, attorneys or any other Person affiliated with or
representing Silicon shall be liable for any claims, demands, losses or
damages, of any kind whatsoever, made, claimed, incurred or suffered by
Borrower or any other party through the ordinary negligence of Silicon, or any
of its directors, officers, employees, agents, attorneys or any other Person
affiliated with or representing Silicon, but nothing herein shall relieve
Silicon from liability for its own gross negligence or willful misconduct.

 

9.10 
Amendment. The
terms and provisions of this Agreement may not be waived or amended, except in
a writing executed by Borrower and a duly authorized officer of Silicon.

 

9.11 
Time of Essence. Time is of the essence in the performance by Borrower of each and every
obligation under this Agreement.

 

9.12 
Attorneys Fees and Costs. Borrower shall reimburse Silicon for all reasonable attorneys’ fees and
all filing, recording, search, title insurance, appraisal, audit, and other
reasonable costs incurred by Silicon, pursuant to, or in connection with, or
relating to this Agreement (whether or not a lawsuit is filed), including, but
not limited to, any reasonable attorneys’ fees and costs Silicon incurs in
order to do the following: prepare and negotiate this Agreement and all present
and future documents relating to this Agreement; obtain legal advice in
connection with this Agreement or Borrower; enforce, or

 

13

 

seek to enforce, any of its rights; prosecute
actions against, or defend actions by, Account Debtors; commence, intervene in,
or defend any action or proceeding; initiate any complaint to be relieved of
the automatic stay in bankruptcy; file or prosecute any probate claim,
bankruptcy claim, third-party claim, or other claim; examine, audit, copy, and
inspect any of the Collateral or any of Borrower’s books and records; protect,
obtain possession of, lease, dispose of, or otherwise enforce Silicon’s
security interest in, the Collateral; and otherwise represent Silicon in any
litigation relating to Borrower. In satisfying Borrower’s obligation hereunder
to reimburse Silicon for attorneys fees, Borrower may, for convenience, issue
checks directly to Silicon’s attorneys, but Borrower acknowledges and agrees
that Silicon’s attorneys are representing only Silicon and not Borrower in
connection with this Agreement. If either Silicon or Borrower files any lawsuit
against the other predicated on a breach of this Agreement, the prevailing
party in such action shall be entitled to recover its reasonable costs and
attorneys’ fees, including (but not limited to) reasonable attorneys’ fees and
costs incurred in the enforcement of, execution upon or defense of any order,
decree, award or judgment. All attorneys’ fees and costs to which Silicon may
be entitled pursuant to this Paragraph shall immediately become part of
Borrower’s Obligations, shall be due on demand, and shall bear interest at a
rate equal to the highest interest rate applicable to any of the Obligations.

 

9.13 
Benefit of Agreement. The provisions of this Agreement shall be binding upon and inure to the
benefit of the respective successors, assigns, heirs, beneficiaries and
representatives of Borrower and Silicon; provided, however, that Borrower may
not assign or transfer any of its rights under this Agreement without the prior
written consent of Silicon, and any prohibited assignment shall be void. No
consent by Silicon to any assignment shall release Borrower from its liability
for the Obligations.

 

9.14 
Joint and Several Liability. If Borrower consists of more than one Person,
their liability shall be joint and several, and the compromise of any claim
with, or the release of, any Borrower shall not constitute a compromise with,
or a release of, any other Borrower.

 

9.15 
Limitation of Actions. Any claim or cause of action by Borrower against Silicon, its
directors, officers, employees, agents, accountants or attorneys, based upon,
arising from, or relating to this Loan Agreement, or any other Loan Document,
or any other transaction contemplated hereby or thereby or relating hereto or
thereto, or any other matter, cause or thing whatsoever, occurred, done,
omitted or suffered to be done by Silicon, its directors, officers, employees,
agents, accountants or attorneys, shall be barred unless asserted by Borrower
by the commencement of an action or proceeding in a court of competent jurisdiction
by the filing of a complaint within one year after Borrower has knowledge of
the first act, occurrence or omission upon which such claim or cause of action,
or any part thereof, is based, and the service of a summons and complaint on an
officer of Silicon, or on any other person authorized to accept service on
behalf of Silicon, within thirty (30) days thereafter. Borrower agrees that
such one-year period is a reasonable and sufficient time for Borrower to
investigate and act upon any such claim or cause of action. The one-year period
provided herein shall not be waived, tolled, or extended except by the written
consent of Silicon in its sole discretion. This provision shall survive any
termination of this Loan Agreement or any other Loan Document.

 

9.16 
Paragraph Headings; Construction. Paragraph headings are only used in this
Agreement for convenience. Borrower and Silicon acknowledge that the headings
may not describe completely the subject matter of the applicable paragraph, and
the headings shall not be used in any manner to construe, limit, define or
interpret any term or provision of this Agreement. This Agreement has been
fully reviewed and negotiated between the parties and no uncertainty or
ambiguity in any term or provision of this Agreement shall be construed
strictly against Silicon or Borrower under any rule of construction or
otherwise.

 

9.17 
Governing Law; Jurisdiction; Venue. This Agreement and all acts and transactions
hereunder and all rights and obligations of Silicon and Borrower shall be
governed by the laws of the State of California. As a material part of the
consideration to Silicon to enter into this Agreement, Borrower (i) agrees that
all actions and proceedings relating directly or indirectly to this Agreement
shall, at Silicon’s option, be litigated in courts located within California,
and that the exclusive venue therefor shall be the County of Santa Clara,
California; (ii) consents to the jurisdiction and venue of any such court and
consents to service of process in any such action or proceeding by personal
delivery or any other method permitted by law; and (iii) waives any and all
rights Borrower may have to object to the jurisdiction of any such court, or to
transfer or change the venue of any such action or proceeding.

 

9.18 
Confidentiality. In handling any confidential information, Bank shall exercise the same
degree of care that it exercises for its own proprietary information, but
disclosure of information may be made: (i) to Bank’s subsidiaries or affiliates
in connection with their business with Borrower; (ii) to prospective
transferees or purchasers of any interest in the Advances (provided, however,
Bank shall use commercially reasonable efforts in obtaining such prospective
transferee’s or purchaser’s agreement to the terms of this provision); (iii) as
required by law, regulation, subpoena, or other order, (iv) as required in
connection with Bank’s examination or audit; and (v) as Bank considers
appropriate in exercising remedies under this Agreement. Confidential information
does not include information that either: (a) is in the public domain or in
Bank’s

 

14

 

possession when disclosed to Bank, or becomes
part of the public domain after disclosure to Bank; or (b) is disclosed to Bank
by a third party, if Bank does not know that the third party is prohibited from
disclosing the information.

 

9.19 
Mutual Waiver of Jury Trial. BORROWER AND SILICON EACH
HEREBY WAIVE THE RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON,
ARISING OUT OF, OR IN ANY WAY RELATING TO, THIS AGREEMENT OR ANY OTHER RELATED
PRESENT OR FUTURE INSTRUMENT OR AGREEMENT BETWEEN SILICON AND BORROWER, OR ANY
CONDUCT, ACTS OR OMISSIONS OF SILICON OR BORROWER OR ANY OF THEIR DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS OR ANY OTHER PERSONS AFFILIATED WITH
SILICON OR BORROWER, IN ALL OF THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT OR TORT OR OTHERWISE.

 

	
  Borrower:

  	
  Silicon:

  
	
   

  	
   

  
	
   

  	
  XPLORE
  TECHNOLOGIES CORPORATION

  	
  SILICON
  VALLEY BANK

  
	
   

  	
  OF AMERICA

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Michael J. Rapisand

  	
   

  	
  By:

  	
  /s/
  Shelia Colson

  	
   

  
	
   

  	
   

  	
  Title:
  Chief Financial Officer and Secretary

  	
  Title:
  Vice President

  
								

 

15

 

Silicon Valley Bank

 

Schedule to

 

Loan and Security Agreement

 

	
  Borrower:

  	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  
	
  Address:

  	
  14000 Summit Drive, Suite 900

  
	
   

  	
  Austin, Texas 78728

  
	
   

  	
  (FAX: 512-336-7791)

  
	
   

  	
   

  
	
  Date:

  	
  September  15, 2005

  

 

This Schedule forms an integral part of the Loan and Security Agreement
between Silicon Valley Bank and the above-borrower of even date.

 

1.              CREDIT LIMIT 

 

(Section 1.1): For Revolving Loans:

 

An amount not to exceed the lesser of: 
(i) $5,000,000.00 at any
one time outstanding (the “Maximum Credit Limit”), or (ii) the “Borrowing Base”
which is 75% (an “Advance Rate”
and the “A/R Advance Rate”) of the amount of Borrower’s Eligible Accounts (as
defined in Section 8 above in this Agreement).

 

Silicon may, from time to time, modify the Advance Rate, in its good
faith business judgment, upon notice to the Borrower, based on changes in
collection experience with respect to Accounts or other issues or factors
relating to the Accounts, or other Collateral, and, in the event that Silicon
decreases such Advance Rate by more than 5%, Borrower may prepay the outstanding
Loans and terminate this Agreement without payment of any early termination
fee. In addition, Silicon may, in its sole discretion, reserve against Loans
which would otherwise be available hereunder such sums as Silicon shall
determine in its good faith business judgment.

 

Letter of Credit Sublimit

(Section 1.6):

 

An amount not to exceed $500,000.00,
provided that the total utilization under the Letter of Credit Sublimit, Cash
Management Services Sublimit, and the Foreign Exchange Contract Sublimit shall
not, at any time, exceed $500,000.00.

 

Cash Management Services Sublimit:

 

An amount not to exceed $500,000.00,
provided that the total utilization under the Letter of Credit Sublimit, Cash
Management Services Sublimit, and the Foreign Exchange Contract Sublimit shall
not, at any time, exceed $500,000.00.

 

 

Cash Management Services and Reserves:

 

Borrower may use Loans available hereunder, up to the Cash Management
Services Sublimit set forth above, for Silicon’s Cash Management Services (as
defined below), including, merchant services, business credit card, automated
clearing house services and other services identified in any cash management
services agreement with Silicon related to such service (the “Cash Management
Services”). Silicon may, in its sole discretion, reserve against Loans which
would otherwise be available hereunder such sums as Silicon shall determine in
its good faith business judgment in connection with the Cash Management
Services, and Silicon may charge to Borrower’s Loan account, any amounts that
may become due or owing to Silicon in connection with the Cash Management
Services. Borrower agrees to execute and deliver to Silicon all standard form
applications and agreements of Silicon in connection with the Cash Management
Services, and, without limiting any of the terms of such applications and
agreements, Borrower will pay all standard fees and charges of Silicon in
connection with the Cash Management Services. The Cash Management Services
shall terminate on the Maturity Date.

 

Foreign Exchange Contract Sublimit:

 

$500,000.00,
provided that the total utilization under the Letter of Credit Sublimit, Cash
Management Services Sublimit, and the Foreign Exchange Contract Sublimit shall
not, at any time, exceed $500,000.00.

 

Borrower may enter into foreign exchange forward contracts with
Silicon, on its standard forms, under which Borrower commits to purchase from
or sell to Silicon a set amount of foreign currency more than one business day
after the contract date (the “FX Forward Contracts”); provided that (1) at the
time the FX Forward Contract is entered into Borrower has Loans available to it
under this Agreement in an amount at least equal to 10% of the amount of the FX
Forward Contract; (2) the total FX Forward Contracts at any one time
outstanding may not exceed 10 times the amount of the Foreign Exchange Contract
Sublimit set forth above. Silicon shall have the right to withhold, from the
Loans otherwise available to Borrower under this Agreement, a reserve (which
shall be in addition to all other reserves) in an amount equal to 10% of the
total FX Forward Contracts from time to time outstanding, and in the event at
any time there are insufficient Loans available to Borrower for such reserve,
Borrower shall deposit and maintain with Silicon cash collateral in an amount
at all times equal to such deficiency, which shall be held as Collateral for
all purposes of this Agreement. Silicon may, in its discretion, terminate the
FX Forward Contracts at any time that an Event of Default occurs and is
continuing. Borrower shall execute all standard form applications and
agreements of Silicon in connection with the FX

 

2

 

Forward Contracts, and without limiting any of the terms of such applications
and agreements, Borrower shall pay all standard fees and charges of Silicon in
connection with the FX Forward Contracts.

 

2.              INTEREST.

 

Interest Rate (Section
1.2):

 

A rate equal to the “Prime Rate” in effect from time to time, plus 2.25% (the “Margin”) per annum, subject to
adjustment as set forth below. Interest shall be calculated on the basis of a
360-day year for the actual number of days elapsed. “Prime Rate” means the rate
announced from time to time by Silicon as its “prime rate;” it is a base rate
upon which other rates charged by Silicon are based, and it is not necessarily
the best rate available at Silicon. The interest rate applicable to the
Obligations shall change on each date there is a change in the Prime Rate.

 

If Borrower’s EBITDA (as defined in Section 5 of this Schedule)
for  a fiscal quarter, on an aggregate
basis for the 3 months in each fiscal quarter, falls within the range under the
heading “Quarterly EBITDA” below, then the Margin shall be adjusted to the
percentage set forth under the heading “Margin” below, as of the end of each
fiscal quarter, upon receipt of Borrower’s monthly financial statement for the
last month of such quarter, and such adjustment, if any, shall take effect on
the first day of the following quarter:

 

	
  Quarterly EBITDA

  	
   

  	
  Margin

  	
   

  
	
  < $0.00

  	
   

  	
  2.25

  	
  %

  
	
  > $0.00 but < $250,000

  	
   

  	
  2.00

  	
  %

  
	
  > $250,000

  	
   

  	
  1.50

  	
  %

  

 

 

Minimum Monthly Interest (Section
1.2):

 

Not Applicable

 

3.              FEES (Section
1.4):

 

Loan Fee:

 

$50,000.00, payable
concurrently herewith.

 

Unused Line Fee:

 

In the event, in any calendar month (or portion thereof at the
beginning and end of the term hereof), the average daily principal balance of
the Loans outstanding during the month is less than the amount of the Maximum
Credit Limit, Borrower shall pay Silicon an unused line fee in an amount equal
to 0.25% per annum on the
difference between the amount of the Maximum Credit Limit and the average daily
principal balance of the Loans outstanding during the month, which unused line

 

3

 

fee shall be computed and paid monthly, in arrears, on the last day of
the month.

 

Collateral Monitoring Fee:

 

$1,000.00, per
month, payable in arrears (prorated for any partial month at the beginning and
at termination of this Agreement).

 

4.              COLLECTIONS (SECTION
4.4):

 

All payments on, and proceeds of Borrower’s Accounts shall be deposited
into a lockbox account at Silicon and applied directly to the Obligations.

 

5.              FINANCIAL COVENANTS (Section
5.1):

 

Borrower shall comply with the following covenant. Compliance shall be
determined as of the end of each month, except as otherwise specifically
provided below:

 

Minimum Cumulative EBITDA:

 

Borrower shall maintain a minimum cumulative EBITDA of not less than
($4,300,000.00), or in other words, no cumulative EBITDA loss exceeding
$4,300,000.00, on a fiscal year-to-date basis, beginning with April, 2005,
subject to the right of Silicon to reset the EBITDA amount specified in this
covenant, in Silicon’s sole discretion, upon receipt of Borrower’s annual
financial projections for the fiscal year ending 03/31/2007 and, in Silicon’s
analysis, Silicon will allow for a 25% deviation from Board-approved
projections for such fiscal year.

 

Definitions.

 

For purposes of the foregoing financial covenant, the following term
shall have the following meaning:

 

“EBITDA” means earnings before interest, taxes, depreciation and
amortization, excluding any non-cash expenses related to stock compensation
activities and gains from the Xpad sale, with all such terms being determined
in accordance with GAAP.

 

6.              REPORTING. (Section
5.3):

 

Borrower shall provide Silicon with the following:

 

1.               Weekly Transaction Reports and schedules
of sales and collections, on Silicon’s standard form, on a weekly basis and
with each request for a Loan.

 

4

 

2.               Monthly accounts receivable agings, aged
by invoice date, within 20 days after the end of each month.

 

3.               Monthly accounts payable agings, aged by
invoice date, and outstanding or held check registers, if any, within 20 days
after the end of each month.

 

4.               Monthly unaudited financial statements,
as soon as available, and in any event within thirty (30) days after the end of
each month.

 

5.               Monthly Compliance Certificates, within
thirty (30) days after the end of each month, in such form as Silicon shall
reasonably specify, signed by the Chief Financial Officer of Borrower,
certifying that as of the end of such month Borrower was in full compliance
with all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenants set forth in this
Agreement and such other information as Silicon shall reasonably request,
including, without limitation, a statement that at the end of such month there
were no held checks.

 

6.               Annual projected, operating budgets
(including income statements, balance sheets and cash flow statements, by
month) for the upcoming fiscal year of Borrower within thirty days prior to the
end of each fiscal year of Borrower.

 

7.               Annual consolidated financial
statements, as soon as available, and in any event within 90  days following the end of Borrower’s
fiscal year, audited by, and with an unqualified opinion of, independent
certified public accountants acceptable to Silicon.

 

7.     COLLATERAL AUDITS. (Section
5.4):

 

Collateral audits may be required in Silicon’s sole discretion every 4
months, subject at all times to the terms of Section 5.4 of this Agreement and
as conditions or circumstances may require.

 

8.     NEGATIVE COVENANTS. (Section
5.5):

 

As exceptions to Section 5.5 of this
Agreement:

 

(a)          Borrower may incur up to $5,000,000.00 in new
debt under the New Phoenix Agreement defined below (it being recognized that
$3,000,000.00 of such debt is refinancing previous indebtedness of Borrower) as
long as such debt becomes Subordinated Debt as referred to in Section 11(2) of
this Schedule.

 

(b)         Upon receipt of net proceeds of a new issue of
Borrower’s or Guarantor’s equity securities in which such net proceeds exceed
$5,000,000.00, Borrower may use the

 

5

 

amount of such net proceeds which exceed $5,000,000.00 to prepay the
interest on and up to $5,000,000.00 in principal of the Subordinated Debt most
recently incurred and owing to Phoenix Venture Fund LLC and others under the
New Phoenix Agreement defined below.

 

(c)          Guarantor may re-incorporate in the United
States, as long as Silicon has received 30 days’ advance notice thereof.

 

(d)         Borrower may make (a) distributions to Guarantor
in amounts not to materially exceed the amount identified as Canadian Operating
Expenses in the forecasts and projections of Guarantor and Borrower provided to
Silicon from time to time as long as such amounts are used for or relate
directly to the support of Borrower’s business or operations, and (b)
repurchases of stock in Borrower from former employees or directors of Borrower
under the terms of applicable repurchase agreements in an aggregate amount not
to exceed $50,000 in any fiscal year, provided that no Event of Default has
occurred and is continuing or would exist after giving  effect to any such repurchase.

 

9.     MATURITY DATE (Section
6.1):

 

The date two (2) years from the date of this Agreement.

 

10.  BORROWER INFORMATION:

 

Borrower represents and warrants that the information set forth in the
Perfection Certificate of the Borrower dated September           ,
2005, previously submitted to Silicon (the “Representations”) is true and
correct as of the date hereof.

 

11.       ADDITIONAL PROVISIONS

 

(1)           Banking
Relationship. Borrower shall at all times maintain its
primary banking relationship with Silicon. As to any Deposit Accounts and
investment accounts maintained with another institution, Borrower shall cause
such institution, within 90 days after the date of this Agreement, to enter
into a control agreement in form acceptable to Silicon in its good faith
business judgment in order to perfect Silicon’s first-priority security
interest in said Deposit Accounts and investment accounts.

 

(2)           Subordination
of Debt. All present and future indebtedness of Borrower for
borrowed money which is secured by any assets of Borrower shall, at all times,
be subordinated to the Obligations pursuant to a subordination agreement on
Silicon’s standard form or otherwise satisfactory to Silicon in its sole
discretion. Borrower represents and warrants that there is no secured debt for
borrowed money presently outstanding, except for that described on Annex 11–(2) attached hereto. Prior to
incurring any such debt in the future, Borrower shall obtain Silicon’s prior
written consent and cause the person to whom such debt will be owed to execute
and deliver to Silicon a subordination agreement on Silicon’s standard form.

 

6

 

(3)           Conditions
Precedent. The making of the first Loan hereunder is subject to the
following conditions precedent:  Silicon
shall have received: (a) the Loan Fee specified above in Section 3 of this
Schedule; (b) evidence satisfactory to Silicon that Borrower and Guarantor have
closed (or are closing contemporaneously with the execution of this Agreement)
that certain September 2005 Debenture Purchase Agreement dated September 15,
2005 with Phoenix Venture Fund LLC and other lenders named therein, providing
for the purchase and  funding of
Debentures thereunder of up to $5,000,000.00 (the “New Phoenix Agreement”), and
have executed and delivered (or are executing and delivering) all documents
required in connection with the New Phoenix Agreement, including the purchase
and funding of Debentures for $3,000,000.00 to be applied to the Secured
Promissory Notes of the Borrower issued in May and July, 2005 in an aggregate
of $3,000,000.00, and that all debt incurred under the New Phoenix Agreement by
Borrower shall be Subordinated Debt as defined in this Agreement and confirmed
by a new Subordination Agreement between the Lenders under the New Phoenix
Agreement and  Silicon dated the date of
this Agreement; (c) a replacement Intellectual Property Security Agreement executed
by Borrower in a form specified by Silicon covering all of Borrower’s
Intellectual Property as of the date of this Agreement; and (d) reaffirmations
in form and substance satisfactory to Silicon of (i) the Unconditional Guaranty
from the Guarantor, (ii) each existing Subordination Agreement from the
respective creditors identified therein, and (iii) the Intercreditor Agreement
from Wistron Corporation.

 

(4)           Intellectual
Property. Borrower shall provide written notice to
Bank of any new application filed by Borrower in the United States Patent and
Trademark Office for a patent or to register a trademark or service mark within
30 days of any such filing. Borrower shall not register any Intellectual
Property with the United States Copyright Office unless it: (i) has given at
least fifteen (15) days’ prior notice to Bank of its intent to register such
Intellectual Property and has provided Bank with a copy of the application it
intends to file with the United States Copyright Office (excluding exhibits
thereto); (ii) executes a security agreement or such other documents as Bank
may reasonably request in order to maintain the perfection and priority of Bank’s
security interest in the Intellectual Property 
proposed to be registered with the United States Copyright Office; and
(iii) records such security documents with the United States Copyright Office
contemporaneously with filing the application(s) with the United States
Copyright Office. Borrower shall promptly provide to Bank a copy of the
application(s) filed with the United States Copyright Office, together with
evidence of the recording of the security documents necessary for Bank to
maintain the perfection and priority of its security interest in such
Intellectual Property.

 

(5)           Prior
Agreement. This Agreement constitutes an amendment and
restatement of that certain Loan and Security Agreement dated as of April 22,
2005 between Silicon and Borrower, as amended (the “Prior Agreement”), and any
and all Obligations of Borrower to Silicon under the Prior Agreement shall
continue and shall be governed by this Agreement. This Agreement shall not
constitute a novation of any Obligation of Borrower to Silicon. All references
to the “Loan and Security Agreement” in any of the Loan Documents executed in
connection with the Prior Agreement shall mean this Agreement.

 

7

 

	
  Borrower:

  	
   

  	
   

  	
  Silicon:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  XPLORE
  TECHNOLOGIES CORPORATION

  	
   

  	
  SILICAON
  VALLEY BANK

  
	
   

  	
  OF
  AMERICA

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Michael
  J. Rapisand

  	
   

  	
   

  	
  By:

  	
  /s/ Shelia
  Colson

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Financial Officer and Secretary

  	
   

  	
  Title:

  	
  Vice
  President

  
									

 

8

 

Annex 11-2

 

Outstanding secured debt for borrowed money

 

	
  Creditor

  	
   

  	
  Aggregate Principal

  Amount of Debentures

  Issued

  	
   

  	
  Aggregate

  Principal Amount

  of Debentures

  Outstanding

  	
   

  	
  Security

  
	
  The Lenders set forth in Schedule 1 to the November 2002 Debenture
  Agreement

  	
   

  	
  US$5,000,000

  	
   

  	
  US$4,664,872.55

  	
   

  	
  Guaranty
  and General Security Agreement executed by Xplore Technologies Corporation of
  America granting security over all its assets, together with security granted
  by Xplore Technologies Corp. pursuant to the November 2002 Debenture
  Agreement over all its assets.

  
	
  The Lenders set forth in Schedule 1 to the December 2002 Debenture
  Agreement

  	
   

  	
  US$1,000,000

  	
   

  	
  US$970,000

  	
   

  	
  Guaranty
  and General Security Agreement executed by Xplore Technologies Corporation of
  America granting security over all its assets, together with security granted
  by Xplore Technologies Corp. pursuant to the December 2002 Debenture
  Agreement over all its assets.

  
	
  The Lenders set forth in Schedule 1 to the April 2003 Debenture
  Agreement

  	
   

  	
  US$1,000,000

  	
   

  	
  US$725,000

  	
   

  	
  Guaranty
  and General Security Agreement executed by Xplore Technologies Corporation of
  America granting security over all its assets, together with security granted
  by Xplore Technologies Corp. pursuant to the April 2003 Debenture Agreement
  over all its assets.

  
	
  The Lenders set forth in Schedule 1 to the Second April 2003
  Debenture Agreement

  	
   

  	
  US$1,000,000

  	
   

  	
  US$725,000

  	
   

  	
  Guaranty
  and General Security Agreement executed by Xplore Technologies Corporation of
  America granting 

  

 

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  security
  over all its assets, together with security granted by Xplore Technologies
  Corp. pursuant to the Second April 2003 Debenture Agreement over all its
  assets.

  
	
  Silicon Valley Bank

  	
   

  	
  US$2,625,000

  	
   

  	
  US$593,323.44

  	
   

  	
  General
  Security Agreement executed by Xplore Technologies Corporation of America
  granting security over all its assets.

  
	
  The Lenders set forth in Schedule 1 to the December 2004 Debenture
  Agreement

  	
   

  	
  US$5,000,000

  	
   

  	
  US$5,000,000

  	
   

  	
  Guaranty
  and General Security Agreement executed by Xplore Technologies Corporation of
  America granting security over all its assets, together with security granted
  by Xplore Technologies Corp. pursuant to the December 2004 Debenture
  Agreement over all its assets.

  
	
  The Phoenix Venture Fund

  	
   

  	
  US$2,500,000

  	
   

  	
  US$2,500,000

  	
   

  	
  General
  Security Agreement executed by Xplore Technologies Corporation of America
  granting security over all its assets.

  
	
  The Philip S. Sassower 1996 Charitable Remainder Annuity Trust

  	
   

  	
  US$250,000

  	
   

  	
  US$250,000

  	
   

  	
  General
  Security Agreement executed by Xplore Technologies Corporation of America
  granting security over all its assets.

  
	
  MAG Multi Corp.

  	
   

  	
  US$250,000

  	
   

  	
  US$250,000

  	
   

  	
  General
  Security Agreement executed by Xplore Technologies Corporation of America
  granting security over all its assets.

  

 

2

 

FIRST AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

THIS FIRST AMENDMENT to Loan and Security Agreement (this  “Amendment”) is entered into this 28th day of November,
2005, by and between SILICON VALLEY BANK (“Bank”) and XPLORE TECHNOLOGIES
CORPORATION OF AMERICA, a Delaware corporation (“Borrower”) whose address is
14000 Summit Drive, Suite 900, Austin, Texas 78728.

 

RECITALS

 

A.            Bank and Borrower have entered into
that certain Loan and Security Agreement dated as of September 15, 2005 (as the
same may from time to time be amended, modified, supplemented or restated, the “Loan
Agreement”).

 

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

 

C.            Borrower has requested that Bank
amend the Loan Agreement to increase the amount available to be borrowed as
Revolving Loans by providing a foreign account receivable sublimit in the
Borrowing Base, as more fully set forth herein.

 

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

 

AGREEMENT

 

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

 

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

 

2.             Amendments to Loan Agreement.

 

2.1          Schedule Section 1 (Credit Limit – For Revolving Loans). The
first two paragraphs of Section 1 of the Schedule to the Loan Agreement are
amended in their entirety and replaced with the following:

 

An amount not to exceed the lesser of: 
(i) $5,000,000.00 at any
one time outstanding (the “Maximum Credit Limit”), or (ii) the “Borrowing Base”
which is (a) 80% (an “Advance Rate”)
of the amount of Borrower’s Eligible Accounts (as defined in Section 8 above in
this Agreement) owing from Account Debtors located in or having their principal
place of business in the United States or Canada (“Eligible Domestic Accounts”)
plus (b) the lesser of (1) 80%
(also an

 

1

 

“Advance Rate”) of Eligible Foreign Accounts
(as defined below), or (2) 30%
(also an “Advance Rate”) of the total of Eligible Accounts, or (3) $1,000,000.00.

 

“Eligible Foreign Accounts” are Accounts owing by an Account Debtor
which is not located in or does not have its principal place of business in the
United States or Canada, but are otherwise Eligible Accounts (except that if
more than 25% of the Accounts owing from such an Account Debtor are outstanding
for a period longer than 90 days from invoice date (without regard to unapplied
credits) or are otherwise not Eligible Accounts, then all Accounts owing from
that Account Debtor will be deemed ineligible for borrowing), and that are
Accounts (a) covered by credit insurance satisfactory to Bank, less any
deductible; (b) supported by letter(s) of credit acceptable to Bank; or (c)
that Bank approves in writing.

 

Silicon may, from time to time, modify any Advance Rate, in its good
faith business judgment, upon notice to the Borrower, based on changes in
collection experience with respect to Accounts or other issues or factors
relating to the Accounts, or other Collateral, and, in the event that Silicon
decreases any such Advance Rate by more than 5%, Borrower may prepay the
outstanding Loans and terminate this Agreement without payment of any early
termination fee. In addition, Silicon may, in its sole discretion, reserve
against Loans which would otherwise be available hereunder such sums as Silicon
shall determine in its good faith business judgment.

 

3.             Limitation
of Amendments.

 

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

 

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

 

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

 

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

 

2

 

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

 

4.3          The organizational documents of Borrower
delivered to Bank on or before September 15, 2005 remain true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;

 

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

 

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

 

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

 

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

 

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

 

6.             Effectiveness. This Amendment shall be
deemed effective upon the due execution and delivery to Bank of this Amendment
by each party hereto.

 

[Signature page follows.]

 

3

 

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

 

 

 

	
  BANK

  	
   

  	
  BORROWER

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bank

  	
   

  	
  XPLORE TECHNOLOGIES

  
	
   

  	
   

  	
  CORPORATION OF AMERICA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Renaie Hundall

  	
   

  	
   

  	
  By:

  	
  /s/ Michael J. Rapisand

  	
   

  
	
  Name:

  	
   

  	
  Renaie Hundall

  	
   

  	
   

  	
  Name:

  	
   

  	
  Michael J. Rapsiand

  	
   

  
	
  Title:

  	
   

  	
  Relationship Manager

  	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  	
   

  
											

 

 

4

 

SILICON
VALLEY BANK

 

 

PRO FORMA INVOICE FOR LOAN CHARGES

 

 

	
  BORROWER:

  	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  
	
   

  	
   

  
	
  LOAN OFFICER:

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  
	
   

  	
   

  
	
   

  	
  Loan Fee

  	
  $

  	
   

  	
   

  
	
   

  	
  Documentation Fee

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TOTAL FEES DUE

  	
  $

  	
   

  	
   

  

 

{   }   A check for the total amount is attached.

 

{   }   Debit DDA #                                 
for the total amount.

 

 

BORROWER:

XPLORE
TECHNOLOGIES CORPORATION OF AMERICA

 

 

	
   

  	
   

  	
   

  
	
  Authorized Signer

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Loan Officer Signature

  	
  (Date)

  	
   

  

 

5

 

SECOND AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

THIS SECOND AMENDMENT to Loan and Security Agreement (this  “Amendment”) is entered into this 15th day of May, 2006, by
and between SILICON VALLEY BANK (“Bank”) and XPLORE TECHNOLOGIES CORPORATION OF
AMERICA, a Delaware corporation (“Borrower”) whose address is 14000 Summit
Drive, Suite 900, Austin, Texas 78728.

 

RECITALS

 

A.            Bank and Borrower entered into that
certain Loan and Security Agreement dated as of September 15, 2005 as amended
by that certain First Amendment thereto dated as of November 28, 2005 (as the
same may from time to time be amended, modified, supplemented or restated, the “Loan
Agreement”).

 

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

 

C.            Borrower has requested that Bank
amend the Loan Agreement to clarify the definition of “Eligible Foreign
Accounts”, as more fully set forth herein.

 

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

 

AGREEMENT

 

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

 

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

 

2.             Amendment to Loan Agreement.

 

2.1          Schedule Section 1 (Credit Limit – For Revolving Loans). The
definition of “Eligible Foreign Accounts” set forth in of Section 1 of the
Schedule to the Loan Agreement as amended by the First Amendment to Loan and
Security Agreement dated November 28, 2005 is amended in its entirety and
replaced with the following:

 

“Eligible Foreign Accounts” are Accounts owing by an Account Debtor
which is not located in or does not have its principal place of business in the
United States or Canada, but are otherwise Eligible Accounts (except that if
more than 25% of the Accounts owing from such an Account Debtor are outstanding
for a period longer than 90 days from invoice date (without regard to unapplied

 

1

 

credits) or are otherwise not Eligible
Accounts, then all Accounts owing from that Account Debtor will be deemed
ineligible for borrowing).

 

3.             Limitation
of Amendment.

 

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

 

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

 

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

 

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

 

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

 

4.3          The organizational documents of Borrower
delivered to Bank on or before September 15, 2005 remain true, accurate and
complete and have not been amended, supplemented or restated and are and continue
to be in full force and effect;

 

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

 

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

 

4.6          The execution and delivery by Borrower of
this Amendment and the performance by Borrower of its obligations under the
Loan Agreement, as amended

 

2

 

by this Amendment, do not require any order, consent, approval, license,
authorization or validation of, or filing, recording or registration with, or
exemption by any governmental or public body or authority, or subdivision
thereof, binding on Borrower, except as already has been obtained or made; and

 

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

 

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

 

6.             Effectiveness. This Amendment shall be
deemed effective upon the due execution and delivery to Bank of this Amendment
by each party hereto.

 

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

 

 

 

	
  BANK

  	
   

  	
  BORROWER

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bank

  	
   

  	
  XPLORE TECHNOLOGIES

  
	
   

  	
   

  	
  CORPORATION OF AMERICA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Benjie Polnick

  	
   

  	
   

  	
  By:

  	
  /s/ Michael J. Rapisand

  	
   

  
	
  Name:

  	
   

  	
  Benjie Polnick

  	
   

  	
   

  	
  Name:

  	
   

  	
  Michael J. Rapsiand

  	
   

  
	
  Title:

  	
   

  	
  Vice President

  	
   

  	
   

  	
  Title:

  	
   

  	
  Chief Financial Officer

  	
   

  
											

 

 

3

 

SILICON
VALLEY BANK

 

 

PRO FORMA INVOICE FOR LOAN CHARGES

 

 

	
  BORROWER:

  	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  
	
   

  	
   

  
	
  LOAN OFFICER:

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  
	
   

  	
   

  
	
   

  	
  Loan Fee

  	
  $

  	
   

  	
   

  
	
   

  	
  Documentation Fee

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TOTAL FEES DUE

  	
  $

  	
   

  	
   

  

 

{   }   A check for the total amount is attached.

 

{   }   Debit DDA #                             
for the total amount.

 

 

BORROWER:

XPLORE
TECHNOLOGIES CORPORATION OF AMERICA

 

 

	
   

  	
   

  	
   

  
	
  Authorized Signer

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Loan Officer Signature

  	
  (Date)

  	
   

  

 

4

 

THIRD AMENDMENT

TO

LOAN AND SECURITY AGREEMENT

 

THIS THIRD AMENDMENT to Loan and Security Agreement (this  “Amendment”) is entered into this 28th day of February,
2007, by and between SILICON VALLEY BANK (“Bank”) and XPLORE TECHNOLOGIES
CORPORATION OF AMERICA, a Delaware corporation (“Borrower”) whose address is
14000 Summit Drive, Suite 900, Austin, Texas 78728.

 

RECITALS

 

A.            Bank and Borrower entered into that
certain Loan and Security Agreement dated as of September 15, 2005, as amended
by that certain First Amendment to Loan and Security Agreement dated as of
November 28, 2005 and that certain Second Amendment to Loan and Security
Agreement dated as of May 15, 2006 (as the same may from time to time be
further amended, modified, supplemented or restated, the “Loan Agreement”). Bank
has extended credit to Borrower for the purposes permitted in the Loan
Agreement. Xplore Technologies Corp. (“Guarantor”) is the Guarantor of Borrower’s
obligations to Bank under that certain Unconditional Guaranty dated April 22,
2005 and, to secure Borrower’s obligations to Bank, Guarantor has granted to
Bank a security interest in all of Guarantor’s intellectual property assets
under that certain Intellectual Property Security Agreement dated as of April
22, 2005. Certain other creditors of Borrower that had entered into
Subordination Agreements with Bank dated April 22, 2005 and September 15, 2005,
respectively, have converted various debentures and notes held by such
creditors into equity securities of Borrower.

 

B.            Borrower has requested that Bank
amend the Loan Agreement to increase the Maximum Credit Limit, increase the
amount available under the Borrowing Base, change the financial covenants, and
extend the Maturity Date, as more fully set forth herein.

 

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

 

AGREEMENT

 

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

 

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

 

1

 

2.             Amendments to Loan Agreement.

 

2.1          Schedule Section 1 (CREDIT LIMIT). What are now the first three
paragraphs of Section 1 of the Schedule to the Loan Agreement under the heading
“(Section 1.1): For Revolving Loans”
are amended entirely and replaced with the following:

 

An amount not to exceed the lesser of: 
(i) $8,000,000.00 at any
one time outstanding (the “Maximum Credit Limit”), or (ii) the “Borrowing Base”
which is the sum of:

 

(a) 80% (an “Advance Rate”)
of the amount of Borrower’s Eligible Accounts (as defined in Section 8 above in
this Agreement) owing from Account Debtors located in or having their principal
place of business in the United States or Canada (“Eligible Domestic Accounts”)
plus

 

(b) 80% (also an “Advance
Rate”) of Eligible Foreign Accounts (as defined below), but such margined
amount of Eligible Foreign Accounts included in the Borrowing Base may not
exceed $2,500,000.00, provided,
that additional amounts of Eligible Foreign Accounts exceeding such limit may
be included in the event of unusually large, foreign sales to established
customers on a case-by-case basis and Silicon, in its complete and sole
discretion, approves in writing,  plus

 

(c) 25% (also and “Advance
Rate”) of Eligible Inventory (as defined below), but such margined amount of
Eligible Inventory included in the Borrowing Base may not exceed $1,750,000.00, or, if less, 35% (also an “Advance Rate”) of the total
of Eligible Domestic Accounts and Eligible Foreign Accounts.

 

“Eligible Foreign Accounts” are Accounts owing by an Account Debtor
which is not located in or does not have its principal place of business in the
United States or Canada, but are otherwise Eligible Accounts (except that if
more than 25% of the Accounts owing from such an Account Debtor are outstanding
for a period longer than 90 days from invoice date (without regard to unapplied
credits) or are otherwise not Eligible Accounts, then all Accounts owing from
that Account Debtor will be deemed ineligible for borrowing).

 

“Eligible Inventory” means all Inventory
which Silicon, in its good faith business judgment, deems eligible for
borrowing. Without limiting the fact that the determination of which Inventory
is eligible for borrowing is a matter of Silicon’s good faith business
judgment, the following are the minimum requirements for Inventory to be
Eligible Inventory:  the Inventory must
(i) consist of finished goods or raw materials, in good, new and salable
condition, which are not perishable, returned, consigned, obsolete, otherwise
un-merchantable, damaged, or defective and are not comprised of demonstrative
or custom inventory, work in process, packaging or shipping materials or
supplies; (ii) meet all applicable governmental standards; (iii) have been
manufactured in

 

2

 

compliance with the Fair Labor Standards Act; (iv) conform in all
respects to the warranties and representations set forth in this Agreement; (v)
are not subject to any liens, charges, security interests, encumbrances or
adverse claims, except for Permitted Liens and the first priority security
interest granted or in favor of Silicon under this Agreement or any of the
other Loan Documents; (vi) are located at the locations identified by Borrower
in the Representations where it maintains Inventory (or any location permitted
under Section 3.3 above in this Agreement), and (vii) is otherwise acceptable
to Silicon in its good faith business judgment.

 

Silicon may, from time to time, modify any Advance Rate, in its good
faith business judgment, upon notice to the Borrower, based on changes in
collection experience with respect to Accounts or other issues or factors
relating to the Accounts, or other Collateral, and, in the event that Silicon
decreases any such Advance Rate by more than 5%, Borrower may prepay the
outstanding Loans and terminate this Agreement without payment of any early
termination fee. In connection with the addition of a margined amount of
Eligible Inventory as part of the Borrowing Base, an appraisal of Borrower’s
Inventory shall be prepared for Silicon within 60 days after such addition, at
Borrower’s expense, by an independent appraiser acceptable to Silicon. In
addition, Silicon may, in its sole discretion, reserve against Loans which
would otherwise be available hereunder such sums as Silicon shall determine in
its good faith business judgment.

 

2.2          Schedule Section 2  (INTEREST). The portion of Section 2 of the
Schedule to the Loan Agreement under the heading “Interest Rate (Section 1.2)” is amended entirely and replaced
with the following:

 

A rate equal to the “Prime Rate” in effect from time to time, plus
2.25% (the “Margin”) per annum, subject to adjustment as set forth below,
provided, however, that any Loans that rely upon or are based on any margined
amount of Eligible Inventory included in the Borrowing Base (the “Inventory
Loans”) shall bear interest at a rate equal to the Prime Rate in effect from
time to time, plus 2.50% (also a “Margin”) per annum. Interest shall be
calculated on the basis of a 360-day year for the actual number of days elapsed.
“Prime Rate” means the rate announced from time to time by Silicon as its “prime
rate;” it is a base rate upon which other rates charged by Silicon are based,
and it is not necessarily the best rate available at Silicon. The interest rate
applicable to the Obligations shall change on each date there is a change in
the Prime Rate.

 

If Borrower’s EBITDA (as defined below) for a fiscal quarter, on an
aggregate basis for the 3 months in each fiscal quarter, falls within the range
under the heading “Quarterly EBITDA” below, then the Margin shall be adjusted
to the percentage set forth under the heading “Margin” below, for the applicable
Loans, as of the end of each fiscal quarter, upon receipt of Borrower’s monthly
financial statement for the last month of such quarter, and such adjustment, if
any, shall take effect on the first day of the following quarter:

 

3

 

	
  Quarterly EBITDA

  	
   

  	
  Margin

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  < $0.00

  	
   

  	
  2.25% but
  2.50% for Inventory Loans

  	
   

  
	
  > $0.00 but  < $250,000

  	
   

  	
  2.00% but
  2.25% for Inventory Loans

  	
   

  
	
  > $250,000

  	
   

  	
  1.50% but
  1.75% for Inventory Loans

  	
   

  

 

For purposes of the foregoing, the following term shall have the
following meaning:

 

“EBITDA” means earnings before interest, taxes, depreciation and
amortization, and excluding any non-cash expenses, with all such terms being
determined in accordance with GAAP.

 

2.3          Schedule Section 3 (FEES (Section 1.4)). The
portion of Section 3 of the Schedule to the Loan Agreement under the heading “Collateral
Monitoring Fee” is amended entirely and replaced with the following:

 

$1,250.00, per
month, payable in arrears (prorated for any partial month at the beginning and
at termination of this Agreement).

 

2.4          Schedule Section 5 (FINANCIAL COVENANTS (Section 5.1)). Section
5 of the Schedule to the Loan Agreement is amended entirely and replaced with
the following:

 

Borrower
shall comply with the following covenants. Compliance shall be determined as of
the end of each month, except as otherwise specifically provided below:

 

Minimum Tangible Net
Worth. Borrower shall maintain a minimum Tangible Net
Worth of not less than $3,750,000.00.

 

Minimum Excess Availability.
Borrower shall maintain a minimum Excess Availability
of not less than $750,000.00.

 

Definitions. For
purposes of the foregoing financial covenants, the following term shall have
the following meaning:

 

“Tangible
Net Worth” means the sum of total assets minus General Intangibles minus total
liabilities plus Subordinated Debt.

 

“Excess Availability” means the sum of cash
on hand plus the amount remaining or available for Borrower to borrow under the
Borrowing Base (as calculated above in Section 1 of this Schedule, including
applicable terms and definitions) after deducting outstanding Loans and any
reserves.

 

4

 

2.5          Schedule Section 9 (MATURITY DATE (Section 6.1)). Section
9 of the Schedule to the Loan Agreement is amended entirely and replaced with
the following:        March 31, 2008.

 

3.             Limitation
of Amendment.

 

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

 

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

 

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

 

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

 

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

 

4.3          The organizational documents of Borrower
delivered to Bank on or before September 15, 2005 remain true, accurate and
complete and have not been amended, supplemented or restated and are and
continue to be in full force and effect;

 

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

 

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

 

5

 

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

 

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

 

5.             Prior Agreement. The Loan Documents
are hereby ratified and reaffirmed and shall remain in full force and effect. This
Amendment is not a novation and the terms and conditions of this Amendment
shall be in addition to and supplemental to all terms and conditions set forth
in the Loan Documents. In the event of any conflict or inconsistency between
this Amendment and the terms of such documents, the terms of this Amendment
shall be controlling, but such document shall not otherwise be affected or the
rights therein impaired.

 

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

 

7.             Effectiveness. This Amendment shall be
deemed effective upon (a) the due execution and delivery to Bank of this
Amendment by each party hereto, (b) Borrower’s payment to Bank of a Loan
Amendment fee in an amount equal to $29,375.00, (c) Bank’s receipt of
reaffirmations in form and substance satisfactory to Bank of (i) the
Unconditional Guaranty from the Guarantor, and (ii) the existing Subordination
Agreement from the Guarantor, (d) Bank’s receipt of an up-dated Perfection
Certificate from Borrower, and (e) Borrower’s payment to Bank of any and all
Bank expenses incurred in connection with this Amendment as contemplated in
Section 9.12 of the Loan Agreement and of any other billed but unpaid fees or
expenses owing to Bank.

 

8.             Governing
Law. This Amendment and the rights and obligations of the
parties hereto shall be governed by and construed in accordance with the laws
of the State of California.

 

10.          Miscellaneous. All of the provisions in
Section 9 of the Loan Agreement which are not already included in this
Amendment are incorporated in this Amendment by this reference as if fully set
forth herein, except that the references in the Loan Agreement to the term “this
Agreement” and words of similar import shall mean this Amendment.

 

6

 

11           Jury Trial Waiver. BORROWER AND BANK
EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING
OUT OF THIS AMENDMENT OR ANY OF THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED
HEREBY, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS
WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AMENDMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

 

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

 

 

	
  BANK

  	
   

  	
  BORROWER

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Silicon Valley Bank

  	
   

  	
  XPLORE TECHNOLOGIES

  CORPORATION OF AMERICA

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Regina Perkins

  	
   

  	
   

  	
  By:

  	
  /s/ Michael J. Rapisand

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Regina Perkins

  	
   

  	
   

  	
  Name:

  	
  Michael J. Rapisand

  	
   

  
	
  Title:

  	
  Relationship Manager

  	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  	
   

  
								

 

 

7

 

SILICON
VALLEY BANK

 

 

PRO FORMA INVOICE FOR LOAN CHARGES

 

 

	
  BORROWER:

  	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  
	
   

  	
   

  
	
  LOAN OFFICER:

  	
   

  
	
   

  	
   

  
	
  DATE:

  	
   

  
	
   

  	
   

  
	
   

  	
  Loan Fee

  	
  $

  	
   

  	
   

  
	
   

  	
  Documentation Fee

  	
  $

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TOTAL FEES DUE

  	
  $

  	
   

  	
   

  

 

 

{   }   A check for the total amount is attached.

 

{   }   Debit DDA #                           
for the total amount.

 

 

BORROWER:

XPLORE
TECHNOLOGIES CORPORATION OF AMERICA

 

 

	
   

  	
   

  	
   

  
	
  Authorized Signer

  	
  (Date)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Loan Officer Signature

  	
  (Date)

  	
   

  

 

8

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