Document:

Loan and Security Agreement

 Exhibit 10.5 
  
  
 LOAN AND SECURITY AGREEMENT 

 
 by and between 
  
 TiVo Inc., as Borrower 
  
 and 
  
 Silicon Valley Bank, as Lender 
  
 July 17, 2003 
  

 TABLE OF CONTENTS 
  

	 	 	 	  	 	  	PAGE

	1.	 	DEFINITIONS; ACCOUNTING AND OTHER TERMS	  	1
			
	2.	 	LOAN AND TERMS OF PAYMENT	  	1
				
	 	 	2.1	  	Promise to Pay	  	1
				
	 	 	2.2	  	Overadvances	  	2
				
	 	 	2.3	  	Interest Rate, Payments	  	2
				
	 	 	2.4	  	Optional Prepayment and Termination	  	2
				
	 	 	2.5	  	Fees	  	2
			
	3.	 	CONDITIONS OF LOANS	  	3
				
	 	 	3.1	  	Conditions Precedent to Initial Advance	  	3
				
	 	 	3.2	  	Conditions Precedent to all Advances	  	4
				
	 	 	3.3	  	Covenant to Deliver	  	4
			
	4.	 	CREATION AND TERMINATION OF SECURITY INTEREST	  	4
				
	 	 	4.1	  	Grant of Security Interest	  	4
				
	 	 	4.2	  	Interest; Payment of Interest on Pledged CD	  	5
				
	 	 	4.3	  	Authorization to File; Delivery of Additional Documentation	  	5
				
	 	 	4.4	  	Termination of Security Interest	  	5
				
	 	 	4.5	  	Return of Pledged CD	  	5
			
	5.	 	REPRESENTATIONS AND WARRANTIES	  	6
				
	 	 	5.1	  	Due Organization; Organizational Structure; Authorization	  	6
				
	 	 	5.2	  	Collateral	  	6
				
	 	 	5.3	  	Litigation	  	6
				
	 	 	5.4	  	No Material Adverse Change in Financial Statements	  	6
				
	 	 	5.5	  	Solvency	  	7
				
	 	 	5.6	  	Regulatory Compliance	  	7
				
	 	 	5.8	  	Full Disclosure	  	7
			
	6.	 	AFFIRMATIVE COVENANTS	  	7
				
	 	 	6.1	  	Government Compliance	  	8
				
	 	 	6.2	  	Financial Statements, Reports, Certificates	  	8
				
	 	 	6.3	  	Inventory; Returns	  	9
				
	 	 	6.4	  	Taxes	  	9
				
	 	 	6.5	  	Insurance	  	9

  

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 TABLE OF CONTENTS 
 (CONTINUED) 
  

	 	 	 	  	 	  	PAGE

	 	 	6.6	  	Financial Covenant	  	9
				
	 	 	6.7	  	Pledged CD(s)	  	9
				
	 	 	6.8	  	Bank Accounts	  	9
				
	 	 	6.9	  	Notices of Default	  	9
				
	 	 	6.10	  	Use of Proceeds	  	19
				
	 	 	6.11	  	Further Assurances	  	10
			
	7.	 	NEGATIVE COVENANTS	  	10
				
	 	 	7.1	  	Dispositions	  	10
				
	 	 	7.2	  	Changes in Control, Business, Incorporation, Locations	  	10
				
	 	 	7.3	  	Mergers or Acquisitions	  	10
				
	 	 	7.4	  	Indebtedness	  	10
				
	 	 	7.5	  	Encumbrance	  	11
				
	 	 	7.6	  	Distributions; Investments	  	11
				
	 	 	7.7	  	Transactions with Affiliates	  	11
				
	 	 	7.8	  	Subordinated Debt	  	11
				
	 	 	7.9	  	Compliance	  	11
			
	8.	 	EVENTS OF DEFAULT	  	11
				
	 	 	8.1	  	Payment Default	  	12
				
	 	 	8.2	  	Covenant Default	  	12
				
	 	 	8.3	  	Material Adverse Change	  	12
				
	 	 	8.4	  	Attachment	  	12
				
	 	 	8.5	  	Insolvency	  	12
				
	 	 	8.6	  	Other Agreements	  	13
				
	 	 	8.7	  	Judgments	  	13
				
	 	 	8.8	  	Misrepresentations	  	13
				
	 	 	8.9	  	Guaranty	  	13
			
	9.	 	BANK’S RIGHTS AND REMEDIES	  	13
				
	 	 	9.1	  	Rights and Remedies	  	13
				
	 	 	9.2	  	Power of Attorney	  	14
				
	 	 	9.3	  	Accounts Collection	  	14

  

 ii 

 TABLE OF CONTENTS 
 (CONTINUED) 
  

	 	 	 	  	 	  	PAGE

	 	 	9.4	  	Bank Expenses	  	15
				
	 	 	9.5	  	Bank’s Liability for Collateral	  	15
				
	 	 	9.6	  	Remedies Cumulative	  	15
				
	 	 	9.7	  	Demand Waiver	  	15
			
	10.	 	NOTICES	  	15
			
	11.	 	CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER	  	16
			
	12.	 	GENERAL PROVISIONS	  	16
				
	 	 	12.1	  	Successors and Assigns	  	16
				
	 	 	12.2	  	Indemnification	  	16
				
	 	 	12.3	  	Time of Essence	  	16
				
	 	 	12.4	  	Severability of Provision	  	16
				
	 	 	12.5	  	Amendments in Writing; Integration	  	16
				
	 	 	12.6	  	Counterparts	  	17
				
	 	 	12.7	  	Survival	  	17
				
	 	 	12.8	  	Confidentiality	  	17
				
	 	 	12.9	  	Attorneys’ Fees, Costs and Expenses	  	17
			
	13.	 	DEFINITIONS	  	18

  
  

 iii 

 LOAN AND SECURITY AGREEMENT 
  
 THIS LOAN AND SECURITY AGREEMENT (this “Agreement”), dated as of July 17, 2003, is by and
between SILICON VALLEY BANK (“Bank”), whose address is 3003 Tasman Drive, Santa Clara, California, 95054, and TIVO INC., a Delaware corporation (“Borrower”), whose address is 2160 Gold
Street, P.O. Box 2160, Alviso, California, 95002, and provides the terms on which Bank will lend to Borrower and Borrower will repay Bank. The parties hereto agree as follows: 
  
 1.    DEFINITIONS; ACCOUNTING AND OTHER TERMS 
  
 Capitalized terms used herein shall have the meanings given to such terms in Section 13 of this Agreement. Accounting terms
not defined in this Agreement will be construed following GAAP. Calculations and determinations must be made following GAAP. The term “financial statements” includes the notes and schedules thereto. The terms “including” and
“includes” always mean “including (or includes) without limitation,” in this or any Loan Document. 
  
 2.     LOAN AND TERMS OF PAYMENT 
  
 2.1    Promise to Pay. 
  
 Borrower promises to pay Bank the unpaid principal amount of all Advances and interest on the unpaid principal amount of the Advances. 
  
 2.1.1    Advances. 
  
 (a) Bank will make Advances not exceeding the lesser
of the Committed Revolving Line and the Borrowing Base. Amounts borrowed under this Section may be repaid (without penalty) and reborrowed during the term of this Agreement 
  
 (b) To obtain an Advance, Borrower must notify Bank by facsimile or telephone. Bank shall credit
Advances to Borrower’s deposit account, account number                      (the “Designated Deposit Account”) on
(i) the Business Day that notice is received at or before 12:00 noon Pacific Time or (ii) the Business Day immediately following the Business Day that notice is received after 12:00 noon Pacific time. Borrower must promptly confirm the notification
by delivering to Bank the Loan Payment/Advance Request Form attached as Exhibit B (the “Payment/Advance Form”). Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her
designee or without instructions if the Advances are necessary to meet Obligations which have become due. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Borrower will indemnify Bank
for any loss Bank suffers due to such reliance. 
  
 (c) The Committed Revolving Line shall terminate on the Maturity Date, and all Advances are immediately due and payable on the Maturity Date. 
  

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 (d) Bank’s obligation to lend the undisbursed portion of the Committed
Revolving Line will terminate if, in Bank’s sole discretion, there has been a Material Adverse Change. 
  
 2.2    Overadvances. 
  
 If Borrower’s Obligations under Section2.1.1 exceed the lesser of either (a) the Committed Revolving Line or (b) the Borrowing Base,
Borrower must pay Bank the excess within one (1) Business Day of Bank’s notice to Borrower of such excess. 
  
 2.3    Interest Rate, Payments. 
  
 (a) Interest Rate. Advances accrue interest on the outstanding principal balance thereof at a per annum rate equal to the
greater of (i) three-quarters of one percentage point (.75%) above the Prime Rate and (ii) 5.00%. After an Event of Default has occurred and is continuing, Obligations shall accrue interest at a rate per annum equal to three percent (3%) above the
rate effective immediately before the Event of Default. The interest rate increases or decreases when the Prime Rate changes. Interest is computed on a 360-day year for the actual number of days elapsed. 
  
 (b) Payments. Interest due on the Advances is
payable on the last calendar day of each month. Bank shall debit any of Borrower’s deposit accounts, including the Designated Deposit Account, for principal and interest payments owing or any amounts Borrower owes Bank. Except when an Event of
Default has occurred and is continuing, Bank will notify Borrower prior to debiting Borrower’s accounts. These debits are not a set-off. Payments received after 12:00 noon Pacific Time are considered received at the opening of business on the
next Business Day. 
  
 2.4    Optional Prepayment and Termination. Borrower may, without penalty, at any time or from time to time, upon irrevocable written notice to Bank delivered to Bank not later than 12:00 Pacific
time at least three (3) Business Days before such prepayment and termination (a “Prepayment Notice”), prepay the aggregate amount of the Advances, together with accrued and unpaid interest thereon. Such Prepayment Notice
shall specify the date such prepayment is to be made (which date shall be the date of termination of this Agreement). If a Prepayment Notice is given by Borrower, Borrower shall make such prepayment, and such prepayment shall be due and payable on
the date specified therein, together with accrued interest to such date. At Borrower’s option, Borrower may as part of the Prepayment Notice, notify Bank that Borrower wishes to terminate this Agreement, in which case, upon Bank’s receipt
of payment in full of the Obligations pursuant to a Prepayment Notice, this Agreement shall terminate. 
  
 2.5    Fees. 
  
 Borrower will pay: 
  
 (a) Loan Fee. A fully earned, non-refundable loan fee in the amount of Thirty Thousand Dollars ($30,000) is due on or before
the Closing Date (the “Loan Fee”). The “good faith deposit” in the amount of Ten Thousand Dollars ($10,000) paid by Borrower 
  

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 pursuant to the proposal letter dated January 13, 2003, sent by Bank to Borrower shall be credited to the
payment of the Loan Fee. 
  
 (b) Bank
Expenses. All Bank Expenses (including reasonable attorneys’ fees and expenses) incurred through and after the date of this Agreement are payable within ten (10) Business Days after receipt of a detailed statement clearly identifying and
itemizing the Bank Expenses. As of the Closing Date, Bank Expenses are estimated to be $20,000; provided, however, Borrower understands and acknowledges that such amount is only an estimate and is not binding upon Bank. 
  
 3.    CONDITIONS OF LOANS 
  
 3.1    Conditions Precedent to Initial Advance.

  
 Bank’s obligation to make the initial Advance is
subject to the condition precedent that the following have been satisfied, all in form and substance satisfactory to Bank: 
  
 (a) Borrower shall have executed and delivered the Borrower Profile attached hereto as Exhibit E; 
  
 (b) Borrower shall have executed and delivered the
Loan Documents; 
  
 (c) Bank shall have
completed an audit of Borrower’s Collateral; 
  
 (d) Borrower shall have delivered the Operating Documents and a good standing certificate of Borrower certified by the Secretary of State of the State of Delaware and a certificate of foreign qualification of Borrower certified by
the Secretary of State of the State of California, each dated not earlier than ten (10) days prior to the Closing Date; 
  
 (e) Borrower shall have delivered the Corporate Borrowing Resolutions; 
  
 (f) Borrower shall have delivered an executed Control
Agreement by and among Borrower, Bank, and Smith Barney; 
  
 (g) Borrower shall have paid all costs and fees, including the Loan Fee and Bank Expenses, then due; 
  
 (h) Borrower shall have provided the Pledged CD(s) whose aggregate Value shall be equal to or greater than the Minimum Collateral
Value; and 
  
 (i) Borrower shall have
delivered to Bank, in addition to the documents required in Section 3.2, all documents, certificates, and other assurances that Bank or its counsel may reasonably request. 
  

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 3.2    Conditions Precedent to all Advances. 
  
 Bank’s obligation to make each Advance, including the initial Advance,
is subject to the following: 
  
 (a)
timely receipt of any Payment/Advance Form; 
  
 (b) the representations and warranties in Section 5 must be materially true on the date of the Payment/Advance Form and on the effective date of each Advance and no Event of Default may have occurred and be continuing, or
result from such Advance. Each Advance is Borrower’s representation and warranty on that date that the representations and warranties of Section 5 remain true; and 
  
 (c) no condition or circumstance exists such that a Material Adverse Change is reasonably likely to
occur. 
  
 3.3    Covenant to Deliver.

  
 Borrower agrees (not as a condition but as a covenant) to
deliver to Bank each item required to be delivered to Bank under this Agreement as a condition to an Advance. Borrower expressly agrees that the extension of an Advance prior to the receipt by Bank of any such item shall not constitute a waiver by
Bank of Borrower’s obligation to deliver such item, and any such extension in the absence of a required item shall be in Bank’s sole discretion. 
  
 4.    CREATION AND TERMINATION OF SECURITY INTEREST 
  

4.1    Grant of Security Interest. 
  

(a) Borrower grants Bank a continuing security interest in all presently existing and later acquired Collateral to secure all
Obligations and performance of each of Borrower’s duties under the Loan Documents. Any security interest will be a first priority security interest in the Collateral. Bank may, in its sole reasonable discretion, place a “hold” on any
deposit account pledged as Collateral. If this Agreement is terminated, Bank’s lien and security interest in the Collateral will continue until Borrower fully satisfies the Obligations, at which time such security interest shall immediately and
irrevocably terminate. 
  
 (b) Borrower
hereby assigns, pledges, hypothecates, charges, mortgages, delivers, and transfers to Bank, and hereby grants to Bank, a continuing first priority security interest in and against all right, title and interest of the following, whether now or
hereafter existing or acquired by Borrower, any Pledged CD issued from time to time and general intangibles arising therefrom or relating thereto (however, “general intangibles” as used in this clause shall not include any Intellectual
Property of Borrower); and all documents, instruments and agreements evidencing the same; and all extensions, renewals, modifications and replacements of the foregoing; and any interest or other amounts payable in connection therewith; 

 
 (i) All proceeds of the foregoing (including
whatever is receivable or received when any Pledged CD or proceeds is invested, sold, collected, exchanged, 
  

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 returned, substituted or otherwise disposed of, whether such disposition is voluntary or involuntary,
including rights to payment and return premiums and insurance proceeds under insurance with respect to any Pledged CD, and all rights to payment with respect to any cause of action affecting or relating to the Pledged CD); and 
  
 (ii)    All renewals,
replacements and substitutions of items of any Pledged CD. 
  
 The
pledge, assignment and grant of a security interest made by Borrower hereunder is for security of the Obligations only; the parties to this Agreement do not intend that Borrower’s delivery of any Pledged CD to Bank as herein provided will
constitute an advance payment of any Obligations or liquidated damages, nor do the parties intend that any Pledged CD increase the dollar amount of the Obligations. If this Agreement is terminated, Bank’s lien and security interest in the
Pledged CD will continue until Borrower fully satisfies the Obligations, at which time such security interest shall immediately and irrevocably terminate. 
  
 4.2    Interest; Payment of Interest on Pledged CD. 
  
 (a) Each Pledged CD shall bear interest at the Pledged CD Rate. Borrower shall specify the initial
Interest Period applicable to the Pledged CDs in connection with the notice of delivery of Pledged CD in the form of Schedule A attached hereto. Thereafter, Borrower shall notify Bank not less than five (5) Business Days prior to the end of each
Interest Period of the duration of the subsequent Interest Period with respect to such Pledged CD. 
  
 (b) Provided (i) that the aggregate Value of the Pledged CDs is greater than the Minimum Collateral Value, and (ii) no Event
of Default has occurred and is continuing, once monthly on the last Business Day of each month, Bank shall remit to Borrower the accrued interest on any Pledged CD with an Interest Period ending on such day or, at Borrower’s option, such
accrued interest may be deposited into the Designated Deposit Account and included in the Value of the Pledged CD that may be purchased on such day. 
  
 4.3    Authorization to File; Delivery of Additional Documentation. Borrower authorizes Bank to file financing
statements without notice to Borrower, with all appropriate jurisdictions, as Bank deems appropriate, in order to perfect or protect Bank’s security interest in the Collateral. Borrower shall execute and deliver to Bank, at the request of Bank,
all documents that Bank may reasonably request, in form satisfactory to Bank, to perfect and continue perfected Bank’s security interest in the Collateral and in order to fully consummate all of the transactions contemplated under the Loan
Documents. 
  
 4.4    Termination of
Security Interest. Upon the payment in full of all amounts due under this Agreement and of all other Obligations, Bank shall, at the cost and expense of Borrower, promptly execute and deliver to Borrower all such documents and instruments that
shall be necessary to evidence termination of this Agreement and the security interest created hereunder, including any UCC3 financing statement amendments terminating any UCC1 financing statements filed by Bank pursuant to Section 4.2
hereof. 
  
 4.5    Return of Pledged
CD. If any proceeds of any Pledged CD remain after all Obligations have been paid in full, within three (3) Business Days thereafter, Bank shall deliver 
  

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 such proceeds, including any outstanding Pledged CD, to Borrower or other Persons entitled thereto by law. 
  
 5.    REPRESENTATIONS AND WARRANTIES 
  
 Subject to such exceptions as may be set forth in the schedule of exceptions
attached hereto, Borrower represents and warrants as follows: 
  
 5.1    Due Organization; Organizational Structure; Authorization. 
  
 Borrower and each Subsidiary is duly existing and in good standing in its state of formation and qualified and licensed to do business in, and in good
standing in, any state in which the conduct of its business or its ownership of property requires that it be qualified, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 
  
 Borrower has not changed its state of formation or organizational structure
or type or any organizational number assigned by its jurisdiction of formation. 
  
 The execution, delivery and performance of the Loan Documents have been duly authorized, and do not conflict with Borrower’s formation documents, nor constitute an event of default under any material agreement by
which Borrower is bound. Borrower is not in default under any agreement to which or by which it is bound in which the default could reasonably be expected to cause a Material Adverse Change. 
  
 5.2    Collateral. 
  
 Borrower has good title to the Collateral and its Intellectual Property,
free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and the service or property has been performed or delivered to the account debtor or its agent for immediate shipment to and unconditional acceptance by the
account debtor. The Collateral is not in the possession of any third party bailee (such as at a warehouse). Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account or an
Eligible Foreign Account and Related Party Receivable in any Borrowing Base Certificate. All Inventory is in all material respects of good and marketable quality, free from material defects. 
  
 5.3    Litigation. 
  
 Except as shown in the Schedule, there are no actions or proceedings pending
or, to the knowledge of Borrower’s Responsible Officers, threatened by or against Borrower or any Subsidiary in which a likely adverse decision could reasonably be expected to cause a Material Adverse Change. 
  
 5.4    No Material Adverse Change in Financial
Statements. 
  
 All consolidated financial statements for
Borrower, and any Subsidiary, delivered to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations. There has not been any material deterioration in

  

 6 

 Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to
Bank. 
  
 5.5    Solvency. 

 
 Borrower is Solvent. 
  
 5.6    Regulatory Compliance. 
  
 Borrower is not an “investment company” or a company
“controlled” by an “investment company” under the Investment Company Act. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations T and U of the Federal Reserve Board of
Governors). Borrower has complied in all material respects with the Federal Fair Labor Standards Act. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to cause a Material Adverse Change.
None of Borrower’s or any Subsidiary’s properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. Borrower and each Subsidiary has timely filed all required tax returns and paid, or made adequate provision to pay, all material taxes, except those being contested in good faith with adequate reserves under
GAAP. Borrower and each Subsidiary has obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all government authorities that are necessary to continue its business as currently
conducted, except where the failure to do so could not reasonably be expected to cause a Material Adverse Change. 
  
 5.7    Subsidiaries. 
  
 Borrower does not own any stock, partnership interest or other equity securities except for Permitted Investments. 
  
 5.8    Full Disclosure. 
  
 No written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank (taken together with all such written certificates and written statements to Bank) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements
contained in the certificates or statements not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual results
during the period or periods covered by such projections and forecasts may differ from the projected and forecasted results). 
  
 6.    AFFIRMATIVE COVENANTS 
  
 Borrower will do all of the following for so long as Bank has an obligation to lend, or there are outstanding Obligations: 
  

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

 
 6.2    Financial Statements, Reports, Certificates.

  
 (a) Borrower will deliver to Bank:
(i) as soon as available, but no later than thirty (30) days after the last day of each month, a company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations during the period certified by a
Responsible Officer and in a form acceptable to Bank; (ii) within five (5) days of filing with the SEC, Borrower’s Report on Form 10-Q containing consolidated financial statements prepared under GAAP, consistently applied, subject to year-end
audit adjustments; (iii) within five (5) days of filing with the SEC, Borrower’s Report on Form 10-K containing audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm reasonably acceptable to Bank; (iv) a prompt report of the institution of, or in Borrower’s reasonable judgment, non-frivolous threat of, any litigation against Borrower
or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $250,000 or more; and (v) budgets, sales projections, operating plans or other financial information Bank reasonably requests. 
  
 (b) Within twenty (20) days after the last day of
each month and concurrently with the delivery of a Payment/Advance Form when obtaining an Advance, Borrower will deliver to Bank a Borrowing Base Certificate, with aged listings of accounts receivable and accounts payable. 
  
 (c) Within twenty (20) days after the last day of
each month and concurrently with the delivery of a Payment/Advance Form when obtaining an Advance, Borrower will deliver to Bank a schedule containing a description Borrower’s Deferred Revenue, on a consolidated basis, in form and substance
acceptable to Bank. 
  
 (d) Within thirty
(30) days after the last day of each month, Borrower will deliver to Bank, together with the monthly financial statements required above, a Compliance Certificate. 
  
 (e) Borrower will allow Bank to audit Borrower’s Collateral at Borrower’s expense, and such
audit will be satisfactory to Bank. Such audits will be conducted no more often than once each calendar year on Borrower’s premises during Borrower’s regular business hours unless an Event of Default shall have occurred. Except when an
Event of Default has occurred and is continuing, Borrower’s expense for each audit conducted pursuant to this Agreement shall not exceed $10,000, and Bank shall be solely responsible for all audit-related expenses that exceed such amount.

  

 8 

 6.3    Inventory; Returns. 
  
 Borrower will use its customary practices to keep all Inventory in good and
marketable condition, free from material defects. Returns and allowances between Borrower and its account debtors will follow Borrower’s customary practices as they exist at execution of this Agreement. Borrower must notify Bank of all returns,
recoveries, disputes and claims, that involve more than $50,000 within thirty (30) days of the last day of the month in which such returns, recoveries, disputes, and claims arise. 
  
 6.4    Taxes. 
  
 Borrower will make, and cause each Subsidiary to make, timely payment of all material federal, state, and local taxes or
assessments (other than taxes and assessments which Borrower is contesting in good faith, with adequate reserves maintained in accordance with GAAP) and will deliver to Bank, on demand, appropriate certificates attesting to the payment. 

 
 6.5    Insurance. 
  
 Borrower will keep its business and the Collateral insured for risks and in
amounts standard for Borrower’s industry, and as Bank may reasonably request. Insurance policies will be in a form, with companies, and in amounts that are satisfactory to Bank in Bank’s reasonable discretion. All property policies will
have a lender’s loss payable endorsement showing Bank as an additional loss payee and all liability policies will show the Bank as an additional insured and provide that the insurer must give Bank at least ten (10) days notice before canceling
its policy. At Bank’s request, Borrower will deliver certified copies of policies and evidence of all premium payments. Proceeds payable under any policy will, at Bank’s option, be payable to Bank on account of the Obligations. 

 
 6.6    Financial Covenant. 
  
 Borrower will maintain, as of the last day of each month, a ratio of (a)
Quick Assets to (b) the difference of (i) Current Liabilities minus (ii) that portion of Deferred Revenue which matures within one (1) year of the relevant calculation date, of at least 1.10 to 1.00. 
  
 6.7    Pledged CD(s). 
  
 Borrower will maintain the Value of the Pledged CD(s) in an amount equal to
or greater than the Minimum Collateral Value. 
  
 6.8    Bank Accounts. 
  
 Borrower will maintain its primary depositary, operating, and investment accounts with Bank. 
  
 6.9    Notices of Default. 
  
 Borrower shall provide written notice to Bank of any notice of default under the Indenture that Borrower receives within three (3) Business Days after
Borrower’s receipt thereof. 
  

 9 

 6.10    Use of Proceeds. 
  
 Borrower shall use the Advances only for its general working capital
requirements. 
  
 6.11    Further
Assurances. 
  
 Borrower will execute any further instruments
and take further action as Bank reasonably requests to perfect or continue Bank’s security interest in the Collateral or to effect the purposes of this Agreement. 
  
 7.    NEGATIVE COVENANTS 
  
 Borrower will not do any of the following without Bank’s prior written consent (or without providing notice where such
notice is expressly provided for) for so long as Bank has an obligation to lend or there are any outstanding Obligations: 
  
 7.1    Dispositions. 
  
 Convey, sell, lease, transfer or otherwise dispose of (collectively “Transfer”), or permit any of its Subsidiaries to Transfer,
all or any part of its business or property, except for Transfers of (a) Inventory in the ordinary course of business; (b) licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in the ordinary course of
business; or (c) worn-out or obsolete Equipment. Borrower may license its Intellectual Property in a manner consistent with Borrower’s ordinary course of business without notice to, or consent from, Bank. 
  
 7.2    Changes in Control, Business, Incorporation,
Locations. 
  
 Permit or suffer any Change in Control or
engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto. Borrower will not, without at least thirty (30) days prior written notice to the Bank, (a) change its state of incorporation (including
reincorporation), (b) change its organizational number or name. Borrower will not add any new offices or business locations (including warehouses) in which Borrower maintains or stores over $500,000 in Collateral without providing Bank written
notice thereof within ten (10) days after adding such new office or business location (including any warehouse). 
  
 7.3    Mergers or Acquisitions. 
  
 Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or acquire, or permit any of its Subsidiaries to
acquire, all or substantially all of the capital stock or property of another Person, except that a Subsidiary may merge or consolidate into another Subsidiary or Borrower. 
  
 7.4    Indebtedness. 
  
 Create, incur, assume, or be liable for any Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness. 
  

 10 

 7.5    Encumbrance. 
  
 Create, incur, or allow any Lien (except for Permitted Liens) on any of its
property (including its Intellectual Property), or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so, or permit any Collateral not to be subject to the first priority
security interest granted hereunder. Borrower may license its Intellectual Property in a manner consistent with Borrower’s ordinary course of business without notice to, or consent from, Bank. 
  
 7.6    Distributions; Investments. 
  
 Directly or indirectly acquire or own any Person, or make any Investment in
any Person, other than Permitted Investments, or permit any of its Subsidiaries to do so, or pay any dividends or make any distribution or payment or redeem, retire or purchase any capital stock. 
  
 7.7    Transactions with Affiliates. 

 
 Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower except for transactions that are in the ordinary course of Borrower’s business, upon fair and reasonable terms that are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person. 
  
 7.8    Subordinated Debt. 
  
 Make or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt and as would not otherwise result in an Event of Default hereunder, or amend any provision in any document relating to the Subordinated
Debt without Bank’s prior written consent. 
  
 7.9    Compliance. 
  
 Become
an “investment company” or a company controlled by an “investment company,” under the Investment Company Act of 1940 or undertake as one of its important activities extending credit to purchase or carry margin stock, or use the
proceeds of any Advance for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate
any other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business or operations or would reasonably be expected to cause a Material Adverse Change, or permit any of its
Subsidiaries to do so. 
  
 8.    EVENTS OF DEFAULT

  
 Any one of the following is an Event of Default:

  

 11 

 8.1    Payment Default. 
  
 If Borrower fails to pay any of the Obligations within five (5) days after
their due date. During the additional period the failure to cure the default is not an Event of Default (but no Advance will be made during the cure period); 
  
 8.2    Covenant Default. 
  
 If Borrower does not perform any obligation in Section 6 or violates any covenant in Section 7; or 
  
 If Borrower does not perform or observe any other material term, condition or
covenant in this Agreement, any Loan Documents, or in any agreement between Borrower and Bank and (a) as to any default under a term, condition or covenant that can be cured, has not cured the default within ten (10) days after it occurs, or (b) if
the default (i) cannot be cured within ten (10) days or (ii) cannot be cured after Borrower’s attempts within ten (10) day period, and the default under clause (a) or (b) may be cured within a reasonable time, then Borrower has an additional
period (of not more than thirty (30) days) to attempt to cure the default; provided, however, that a default under another agreement between Borrower and Bank will not cause a default under this Section 8.2 if Borrower has pledged unencumbered and
restricted cash or other assets to Bank as security for such other agreements which, in the Bank’s good faith business judgment, will protect the Bank from loss resulting from any such default. During the additional time periods set forth
above, the failure to cure the default is not an Event of Default (but no Advances will be made during the cure period); 
  
 8.3    Material Adverse Change. 
  
 If there (a) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower, or (b) is a material
impairment of the prospect of repayment of any portion of the Obligations, or (c) is a material impairment of the value or priority of Bank’s security interests in the Collateral; 
  
 8.4    Attachment. 
  
 If any material portion of Borrower’s assets is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10) days, or if Borrower is enjoined, restrained, or prevented by court order from conducting a material part of its business or if a judgment or other claim becomes a Lien on a
material portion of Borrower’s assets, or if a notice of lien, levy, or assessment is filed against any of Borrower’s assets by any government agency and not paid within ten (10) days after Borrower receives notice. These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower (but no Advances will be made during the cure period); 
  
 8.5    Insolvency. 
  
 If Borrower fails to be Solvent or if Borrower begins an Insolvency Proceeding on its own behalf (i.e., not against a third-party) or an Insolvency
Proceeding is begun against 
  

 12 

 Borrower and not dismissed or stayed within thirty (30) days (but no Advances will be made before any Insolvency
Proceeding is dismissed); 
  
 8.6    Other
Agreements. 
  
 If there is a default in (a) the Indenture or
(b) any agreement between Borrower and a third party that gives the third party the right to accelerate any Indebtedness exceeding $100,000 or that could cause a Material Adverse Change; 
  
 8.7    Judgments. 
  
 If a money judgment(s) in the aggregate of at least $250,000 is rendered against Borrower and is unsatisfied and unstayed
for ten (10) days after the date the judgment is rendered; provided, however, if the date such judgment is required to be paid pursuant to the terms of the judgment is later than ten (10) days after the date judgment is rendered, then no Event of
Default shall be deemed to have occurred unless the judgment remains unsatisfied and unstayed as of the required payment date (but no Advances will be made before the judgment is stayed or satisfied); 
  
 8.8    Misrepresentations. 
  
 If Borrower or any Person acting for Borrower makes any material
misrepresentation or material misstatement now or later in any warranty or representation in this Agreement or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document; or 
  
 8.9    Guaranty. 
  
 Any guaranty of any Obligations ceases for any reason to be in full force or
any Guarantor does not perform any obligation under any guaranty of the Obligations, or any material misrepresentation or material misstatement exists now or later in any warranty or representation in any guaranty of the Obligations or in any
certificate delivered to Bank in connection with the guaranty, or any circumstance described in Sections 8.4, 8.5 or 8.7 occurs to any Guarantor. 
  
 9.    BANK’S RIGHTS AND REMEDIES 
  
 9.1    Rights and Remedies. 
  
 When an Event of Default occurs and continues Bank may, without notice or demand, do any or all of the following:

  
 (a) Declare all Obligations
immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank); 
  
 (b) Stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank; 
  

 13 

 (c) Settle or adjust disputes and claims directly with account debtors for
amounts, on terms and in any order that Bank considers advisable; 
  
 (d) Make any payments and do any acts it considers necessary or reasonable to protect its security interest in the Collateral. Borrower will assemble the Collateral if Bank requires and make it available as
Bank designates. Bank may enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest
and pay all expenses incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies; 
  
 (e) Apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount
held by Bank owing to or for the credit or the account of Borrower; 
  
 (f) Ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell the Collateral. Bank is granted a non-exclusive, royalty-free license or other right to use, without
charge, Borrower’s labels, Patents, Copyrights, Mask Works, rights of use of any name, trade secrets, trade names, Trademarks, service marks, and advertising matter, or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in connection with Bank’s exercise of its rights under this Section, Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit; and

  
 (g) Dispose of the Collateral
according to the Code; provided, however, that Bank agrees that it will not endeavor to dispose of Equipment that is Collateral until at least three (3) Business Days after an Event of Default occurs unless, in its good faith business judgment, the
value of such Equipment could be impaired by the Bank’s failing to endeavor to dispose of such Equipment during that period. 
  
 9.2     Power of Attorney. 
  
 Effective only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (a) endorse Borrower’s
name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or bill of lading for any Account or drafts against account debtors, (c) make, settle, and adjust all claims under Borrower’s insurance
policies; (d) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and (e) transfer the Collateral into the name of Bank or a third party as the Code permits.
Bank may exercise the power of attorney to sign Borrower’s name on any documents necessary to perfect or continue the perfection of any security interest regardless of whether an Event of Default has occurred. Bank’s appointment as
Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and Bank’s obligation to provide Advances terminates. 

 
 9.3    Accounts Collection. 
  
 When an Event of Default occurs and only for so long as it continues, Bank
may notify any Person owing Borrower money of Bank’s security interest in the funds and verify the 
  

 14 

 amount of the Account. Borrower must collect all payments in trust for Bank and, if requested by Bank, immediately
deliver the payments to Bank in the form received from the account debtor, with proper endorsements for deposit. 
  
 9.4    Bank Expenses. 
  
 If Borrower fails to pay any amount or furnish any required proof of payment to third persons, Bank may make all or part of the payment or obtain
insurance policies required in Section 6.5, and take any action under the policies Bank deems prudent. Any amounts paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then applicable rate and secured by the
Collateral. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default. 
  
 9.5    Bank’s Liability for Collateral. 
  
 If Bank complies with reasonable banking practices and the Code, Bank is not liable for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any diminution in the value of the Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other person. Borrower bears all risk of loss, damage or destruction of the
Collateral. 
  
 9.6    Remedies Cumulative.

  
 Bank’s rights and remedies under this Agreement, the
Loan Documents, and all other agreements are cumulative. Bank has all rights and remedies provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election, and Bank’s waiver of any Event of Default
is not a continuing waiver. Bank’s delay is not a waiver, election, or acquiescence. No waiver is effective unless signed by Bank and then is only effective for the specific instance and purpose for which it was given. 
  
 9.7    Demand Waiver. 
  
 Borrower waives demand, notice of default or dishonor, notice of payment and
nonpayment, notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments, chattel paper, and guarantees held by Bank on which Borrower is liable. 
  
 10.    NOTICES 
  
 All notices or demands by any party about this Agreement or any other
related agreement must be in writing and be personally delivered or sent by an overnight delivery service, by certified mail, postage prepaid, return receipt requested, or by facsimile to the addresses set forth at the beginning of this Agreement. A
party may change its notice address by giving the other party written notice. 
  

 15 

 11.    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER 
  
 California law governs the Loan Documents without regard to principles of
conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Santa Clara County, California. 
  
 BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION,
INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL. 
  
 12.    GENERAL PROVISIONS 
  
 12.1    Successors and Assigns. 
  
 This Agreement binds and is for the benefit of the successors and permitted
assigns of each party. Borrower may not assign this Agreement or any rights under it without Bank’s prior written consent which may be granted or withheld in Bank’s discretion. Bank has the right, without the consent of or notice to
Borrower, to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights and benefits under this Agreement. 
  
 12.2    Indemnification. 
  
 Borrower will indemnify, defend and hold harmless Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or Bank Expenses incurred, or paid by Bank from, following, or consequential to transactions
between Bank and Borrower in connection with the Loan Documents (including reasonable attorneys’ fees and expenses), except with respect to (a) and (b) above, for losses caused by Bank’s gross negligence or willful misconduct. 

 
 12.3    Time of Essence. 
  
 Time is of the essence for the performance of all obligations in this
Agreement. 
  
 12.4    Severability of
Provision. 
  
 Each provision of this Agreement is severable
from every other provision in determining the enforceability of any provision. 
  
 12.5    Amendments in Writing; Integration. 
  
 All amendments to this Agreement must be in writing and signed by Borrower and Bank. This Agreement represents the entire agreement about the Advances
made hereunder (the “Subject Matter”), and supersedes prior negotiations or agreements regarding the Subject 
  

 16 

 Matter. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the
Subject Matter merge into this Agreement and the Loan Documents. The existing letter of credit issued by Bank in favor of Borrower in the amount of $476,700, the merchant services arrangements between Bank and Borrower in the amount of $3,500,000,
and the business credit card facilities currently maintained by Borrower with Bank remain in full force and effect and are not amended, modified, or superceded except as may be otherwise provided hereunder. 
  
 12.6    Counterparts. 
  
 This Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when executed and delivered, are an original, and all taken together, constitute one Agreement. 
  
 12.7    Survival. 
  
 All covenants, representations and warranties made in this Agreement continue in full force while any Obligations remain outstanding. The obligations of
Borrower in Section 12.2 to indemnify Bank will survive until all statutes of limitations for actions that may be brought against Bank have run. 
  
 12.8    Confidentiality. 
  
 In handling any confidential information, Bank will exercise the same degree of care that it exercises for its own proprietary information, but disclosure
of information may be made (a) to Bank’s subsidiaries or affiliates in connection with their business with Borrower, (b) to prospective transferees or purchasers of any interest in the loans (provided, however, Bank shall use commercially
reasonable efforts in obtaining such prospective transferee or purchasers agreement of the terms of this provision), (c) as required by law, regulation, subpoena, or other order, (d) as required in connection with Bank’s examination or audit
and (e) as Bank considers appropriate exercising remedies under this Agreement. Confidential information does not include information that either: (x) is in the public domain or in Bank’s possession when disclosed to Bank, or becomes part of
the public domain after disclosure to Bank; or (y) is disclosed to Bank by a third party, if Bank does not know that the third party is prohibited from disclosing the information. 
  
 12.9    Attorneys’ Fees, Costs and Expenses. 
  
 In any action or proceeding between Borrower and Bank arising out of the
Loan Documents, the prevailing party may be entitled to recover its reasonable attorneys’ fees and other reasonable costs and expenses incurred, in addition to any other relief to which it may be entitled. 
  

 17 

 13.    DEFINITIONS 
  
 In this Agreement: 
  
 13.1    “Accounts” are all existing and later arising accounts, contract rights, and other obligations
owed Borrower in connection with its sale or lease of goods (including licensing software and other technology) or provision of services, all credit insurance, guaranties, other security and all merchandise returned or reclaimed by Borrower and
Borrower’s Books relating to any of the foregoing. 
  
 13.2    “Advance” or “Advances” is a loan advance (or advances) under the Committed Revolving Line. 
  
 13.3    “Affiliate” shall mean, with respect to any Person: (a) each
other Person that, directly or indirectly, owns or controls, whether beneficially, or as a trustee, guardian or other fiduciary, five percent (5%) or more of the Stock having ordinary voting power for the election of directors of such Person; (b)
each other Person that controls, is controlled by or is under common control with such Person or any Affiliate of such Person; or (c) each of such Person’s officers, directors, joint venturers and partners. For the purpose of this definition,
“control” of a Person shall mean the possession, directly or indirectly, of the power to direct or cause the direction of its management or policies, whether through the ownership of voting securities, by contract or otherwise. 

 
 13.4    “Bank Expenses”
are all audit fees and expenses and reasonable costs and expenses (including reasonable attorneys’ fees and expenses) for preparing, negotiating, administering, defending and enforcing the Loan Documents (including appeals or Insolvency
Proceedings). 
  
 13.5    “Borrower’s Books” are all Borrower’s financial books and records including ledgers, records regarding Borrower’s assets or liabilities, the Collateral, business
operations or financial condition and all computer programs or discs or any equipment containing such information. 
  
 13.6    “Borrowing Base” is the sum of (a) 80% of (i) the Eligible Domestic Accounts plus (ii)
Eligible Foreign Accounts plus (iii) Related Party Accounts, in each case as determined by Bank from Borrower’s most recent Borrowing Base Certificate (provided that Bank may lower the percentage of the Borrowing Base after performing an
audit of Borrower’s Collateral), plus (b) 100% of the value of the Pledged CD not to exceed $2,000,000. 
  
 13.7    “Borrowing Base Certificate” is a Borrowing Base Certificate signed by a Responsible
Officer in substantially the same form of Exhibit C attached hereto. 
  
 13.8    “Business Day” is any day that is not a Saturday, Sunday or a day on which the Bank is closed. 
  
 13.9    “Cash Equivalents” means (a) marketable direct obligations issued
or unconditionally guaranteed by the United States or any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper 
  

 18 

 maturing no more than one (1) year after its creation and having the highest rating from either Standard &
Poor’s Corporation or Moody’s Investors Service, Inc., and (c) Bank’s or Salomon Smith Barney’s certificates of deposit issued maturing no more than one (1) year after issue. 
  
 13.10    “Change in
Control” means any change, whether by a single transaction or a series of transactions, in the Person or Persons who control sufficient voting rights accorded to the owners of Borrower’s stock (directly or indirectly, whether by
stock ownership, contract, or otherwise) to direct the management of Borrower; provided, however, this provision shall not be violated by any sale of the stock (and related voting rights) of Borrower by Borrower through the New York Stock Exchange,
the American Stock Exchange, NASDAQ or other public securities markets in which stocks of companies are regularly traded in the United States. 
  
 13.11    “Closing Date” is the date of this Agreement. 
  
 13.12    “Code” is the
Uniform Commercial Code in effect in any applicable jurisdiction. 
  
 13.13    “Collateral” is the property described on Exhibit A. 
  
 13.14    “Committed Revolving Line” is an Advance or Advances of up to the aggregate principal amount
of $6,000,000 at any time. 
  
 13.15    “Compliance Certificate” is a Compliance Certificate signed by a Responsible Officer in substantially the same form of Exhibit D attached hereto. 
  
 13.16    “Contingent
Obligation” is, for any Person, any direct or indirect liability, contingent or not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation directly or indirectly
guaranteed, endorsed, co-made, discounted or sold with recourse by that Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from
any interest rate, currency or commodity swap agreement, interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but
“Contingent Obligation” does not include endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation
is made or, if not determinable, the maximum reasonably anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under the guarantee or other support arrangement. 

 
 13.17    “Control
Agreement” is an account control agreement, in form and substance satisfactory to Bank, executed and delivered by Borrower, Bank, and all applicable depositary institutions, with respect to Borrower’s deposit or operating accounts,
or applicable securities intermediaries, with respect to Borrower’s securities accounts. 
  
 13.18    “Corporate Borrowing Resolutions” means those resolutions of Borrower’s Board of Directors executed and delivered by Borrower to Bank in accordance with
Section 3.1(e) approving the Loan Documents and the transactions contemplated thereby, together with a certificate of incumbency signed by Borrower’s Secretary or a Responsible Officer. 
  

 19 

 13.19    “Copyrights” are all copyright rights,
applications or registrations and like protections in each work or authorship or derivative work, whether published or not (whether or not it is a trade secret) now or later existing, created, acquired or held. 
  
 13.20    “Current
Liabilities” are the aggregate amount of Borrower’s Total Liabilities which mature within one (1) year. 
  
 13.21    “Deferred Revenue” is all amounts received in advance of performance and not yet recognized as
revenue. 
  
 13.22    “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, whether maintained with Bank or other institutions. 
  
 13.23    “Dollars”,
“dollars” and “$” shall mean lawful money of the United States of America. 
  
 13.24    “Eligible Domestic Accounts” are Accounts in the ordinary course of Borrower’s business
that meet all Borrower’s representations and warranties in Section 5, and which contain selling terms and conditions acceptable to Bank; provided, that Bank may change eligibility standards by giving Borrower notice thereof. Unless Bank
agrees otherwise in writing, Eligible Domestic Accounts will not include: 
  
 (a) Accounts against which Bank does not have a perfected, first priority security interest; 
  
 (b) Accounts that the account debtor has not paid within 90 days of invoice date; 
  
 (c) Accounts for an account debtor, 35% or more of
whose Accounts have not been paid within 90 days of invoice date; 
  
 (d) Accounts with credit balances over 90 days from invoice date; 
  
 (e) Accounts for an account debtor, including Affiliates, whose total obligations to Borrower exceed 40% of all Accounts, for the
amounts that exceed that percentage, unless the Bank approves otherwise in writing; 
  
 (f) Accounts for which the account debtor does not have its principal place of business in the United States except for Eligible
Foreign Accounts and Related Party Accounts; 
  
 (g) Accounts for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality and against which Bank’s security interest has not been perfected under the Assignment of
Claims Act; 
  

 20 

 (h) Accounts for which Borrower owes the account debtor, but only up to the amount
owed (sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts); 
  
 (i) Accounts for demonstration or promotional equipment, or in which goods are consigned, sales guaranteed, sale or return, sale on
approval, bill and hold, or other terms if account debtor’s payment may be conditional; 
  
 (j) Accounts for which the account debtor is Borrower’s Affiliate, officer, employee, or agent; 
  
 (k) Accounts in which the account debtor disputes
liability or makes any claim and Bank believes there may be a basis for dispute (but only up to the disputed or claimed amount), or if the Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;

  
 (l) Accounts for which Bank determines
collection to be doubtful, or the Account holder to be an unacceptable business risk; or 
  
 (m) The amount received on behalf of any Account constituting Deferred Revenue. 
  
 13.25    “Eligible Foreign
Accounts” are Accounts in the ordinary course of Borrower’s business, the account debtors of which do not have their principal place of business in the United States, but only to the extent that such foreign Accounts meet all of
Borrower’s representations and warranties in Section 5, contain selling terms and conditions acceptable to Bank in its sole discretion, and the account debtor is Sony, Toshiba, Pioneer, and Philips. 
  
 Notwithstanding the foregoing, Bank may change eligibility standards by
giving Borrower notice thereof, and the allowance of other Eligible Foreign Accounts shall be approved by Bank in its sole discretion on a case-by-case basis. 
  
 13.26    “Equipment” is all present and future machinery, equipment,
tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. 
  
 13.27    “ERISA” is the Employment Retirement Income Security Act of 1974, and its regulations.

  
 13.28    “GAAP” is generally accepted accounting principles. 
  
 13.29    “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 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 
  

 21 

 damage, and business interruption insurance), payments of insurance and rights to payment of any kind. 
  
 13.30    “Guarantor” is
any present or future guarantor of the Obligations. 
  
 13.31    “Indebtedness” is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and other obligations for surety bonds and letters of
credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations. 
  
 13.32    “Indenture” means that certain Indenture from Borrower, as issuer, to The Bank of New York, as
trustee, dated as of August 28, 2001. 
  
 13.33    “Insolvency Proceeding” are proceedings by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other relief. 
  
 13.34    “Intellectual Property” is: 
  
 (a) Copyrights, Trademarks, Patents, and Mask Works including amendments, renewals, extensions, and
all licenses or other rights to use and all license fees and royalties from the use; 
  
 (b) Any trade secrets and any intellectual property rights in computer software and computer software products now or later
existing, created, acquired or held; and 
  
 (c) All design rights which may be available to Borrower now or later created, acquired or held. 
  
 13.35    “Interest Determination Date” shall mean the date of delivery of a Pledged CD and the date of
the commencement of each Interest Period. 
  
 13.36    “Interest Period” shall mean the period commencing initially on the date of delivery of a Pledged CD and thereafter on the date immediately following the end of any such initial
period or subsequent period, and ending on the last Business Day of the month ending approximately 7, 30, 60, 90, 180, 270 or 360 days thereafter. 
  
 13.37    “Inventory” is present and future inventory in which Borrower has any interest, including
merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products intended for sale or lease or to be furnished under a contract of service, of every kind and description now or later owned by or in
the custody or possession, actual or constructive, of Borrower, including inventory temporarily out of its custody or possession or in transit and including returns on any accounts or other proceeds (including insurance proceeds) from the sale or
disposition of any of the foregoing and any documents of title. 
  

 22 

 13.38    “Investment” is any beneficial ownership of
(including stock, partnership interest or other securities) any Person, or any loan, advance or capital contribution to any Person. 
  
 13.39    “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, wherever located, and all other securities of every kind, whether certificated or uncertificated. 
  
 13.40    “Lien” is a mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance. 
  
 13.41    “Loan Documents” are, collectively, this Agreement, including the Borrower Profile, the Negative Pledge Agreement, any note, or notes or guaranties executed by Borrower or
Guarantor in connection with this Agreement, any account control agreements in connection with this Agreement, and any other present or future agreement between Borrower or for the benefit of Bank in connection with this Agreement, all as amended,
extended or restated. 
  
 13.42    “Mask Works” are all mask works or similar rights available for the protection of semiconductor chips, now owned or later acquired. 
  
 13.43    “Material Adverse
Change” is described in Section 8.3. 
  
 13.44    “Maturity Date” is June 30, 2004. 
  
 13.45    “Minimum Collateral Value” means an aggregate principal amount equal to $2,000,000.

  
 13.46    “Negative
Pledge Agreement” means that certain Negative Pledge Agreement executed by and between Borrower and Bank dated July 17, 2003. 
  
 13.47    “Obligations” are debts, principal, interest, Bank Expenses and other amounts Borrower owes
Bank now or later, pursuant to the Loan Documents, including cash management services under this Agreement, if any, letters of credit under this Agreement, if any, foreign exchange contracts under this Agreement, if any, and including interest
accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank. 
  
 13.48    “Operating Documents” shall mean the Borrower’s certificate of incorporation, as
currently filed with and certified by the Secretary of State of the State of Delaware, and its bylaws in current form, each with all current modifications and amendments thereto. 
  
 13.49    “Other Property” means (a) 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”, “documents”, “instruments”, “promissory
notes”, “chattel paper”, “letters of credit”, “letter-of-credit rights”, “fixtures”, “farm products” and “money”; and (b) all other goods and personal property of every kind, tangible
and intangible, whether or not governed by the Code. Notwithstanding anything in this Agreement to the contrary, “Other Property” specifically excludes Intellectual Property. 
  

 23 

 13.50    “Patents” are patents, patent applications
and like protections, including improvements, divisions, continuations, renewals, reissues, extensions and continuations-in-part of the same. 
  
 13.51    “Permitted Indebtedness” is: 
  
 (a) Borrower’s Indebtedness to Bank under this Agreement or any other Loan Document; 

 
 (b) Indebtedness existing on the Closing Date and
shown on the Schedule; 
  
 (c)
Subordinated Debt; 
  
 (d)
Indebtedness to trade creditors incurred in the ordinary course of business; and 
  
 (e) Indebtedness secured by Permitted Liens. 
  
 13.52    “Permitted Investments” are: 
  
 (a) Investments shown on the Schedule and existing on
the Closing Date; and 
  
 (b) (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., and (iii) Bank’s certificates of deposit issued maturing no more than 1 year after issue. 
  
 13.53    “Permitted Liens”
are: 
  
 (a) Liens existing on the Closing
Date and shown on the Schedule or arising under this Agreement or other Loan Documents; 
  
 (b) Liens for taxes, fees, assessments or other government charges or levies, either not delinquent or being contested in good
faith and for which Borrower maintains adequate reserves on its Books, if they have no priority over any of Bank’s security interests; 
  
 (c) Purchase money Liens (i) on Equipment acquired or held by Borrower or its Subsidiaries incurred for financing the acquisition
of the Equipment, or (ii) existing on equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of the equipment and the cost of such Equipment does not exceed $250,00 in the aggregate per year; 

 
 (d) All present and future licenses or sublicenses
granted in the ordinary course of Borrower’s business and any interest or title of a licensor under any license or sublicense; 
  

 24 

 (e) Leases or subleases granted in the ordinary course of Borrower’s
business, including in connection with Borrower’s leased premises or leased property; 
  
 (f) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in (a) through (c), but
any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase. 
  
 13.54    “Person” is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company association, trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency. 
  
 13.55    “Pledged CD”
shall mean any and all certificates of deposit issued to Borrower by Bank. 
  
 13.56    “Pledged CD Rate” shall mean, for any Interest Determination Date, Bank’s prevailing commercial rate in effect on such day. 
  
 13.57    “Prime Rate” is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest rate. 
  
 13.58    “Quick Assets” is, on any date, the Borrower’s cash and Cash Equivalents at Bank and
Smith Barney plus net accounts receivable. 
  
 13.59    “Related Party Accounts” means Accounts in the ordinary course of Borrower’s business, containing selling terms and conditions acceptable to Bank in its sole discretion, and
where the account debtor is DIRECTV, AOL, NBC, Discovery, and Hughes Network Systems. 
  
 Notwithstanding the foregoing, Bank may change eligibility standards by giving Borrower notice thereof, and the allowance of other Related Party Accounts shall be approved by Bank in its sole discretion on a
case-by-case basis. 
  
 13.60    “Responsible Officer” is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Controller of Borrower. 
  
 13.61    “Schedule” is the
disclosure schedule attached hereto and incorporated by reference herein. 
  
 13.62    “Solvent” means, with respect to Borrower, that as of the date of determination (a) the fair salable value of Borrower’s assets (including goodwill
minus disposition costs) exceeds the fair value of its liabilities (such liabilities not to include Deferred Revenue for purposes of determining solvency); (b) Borrower is not left with less than $1,000,000 in capital; and (c) Borrower is able to
pay its debts (including trade debts) as they mature. 
  
 13.63    “Stock” shall mean all certificated and uncertificated shares, options, warrants, membership interests, general or limited partnership interests, participation or
other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or 
  

 25 

 equivalent entity whether voting or nonvoting, including common stock, preferred stock, or any other “equity
security” (as such term is defined in Rule 3a11-1 of the General Rules and Regulations promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934). 
  
 13.64    “Subordinated
Debt” is debt incurred by Borrower subordinated to Borrower’s indebtedness owed to Bank and which is reflected in a written agreement in a manner and form acceptable to Bank and approved by Bank in writing. 
  
 13.65    “Subsidiary” is
for any Person, or any other business entity of which more than 50% of the voting stock or other equity interests is owned or controlled, directly or indirectly, by the Person or one or more Subsidiaries of the Person or a combination thereof.

  
 13.66    “Total
Liabilities” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet, including all Indebtedness (including Indebtedness evidenced by this Agreement) but excluding
(a) the existing letter of credit issued by Bank in favor of Borrower in the amount of $476,700, (b) merchant services arrangements between Bank and Borrower in the amount of $3,500,000, (c) direct deposit payroll, and (d) existing business credit
card facilities maintained by Borrower with Bank. 
  
 13.67    “Trademarks” are trademark and servicemark rights, registered or not, applications to register and registrations and like protections, and the entire goodwill of the business of
Assignor connected with the trademarks. 
  
 13.68    “Value” shall mean with respect to any Pledged CD on any date, a dollar value at the face amount thereof. 
  
 [The signature page follows.] 
  

 

 26 

 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed and
delivered by its duly authorized officer on the date first set forth above. 
  

	
	 BORROWER:
  
 TIVO INC.

		
	By:	 	 /s/    MICHAEL RAMSAY

	
	Printed Name: Michael Ramsay
	
	 Title: Chairman and Chief Executive Officer
  

	
	 BANK:
  
 SILICON VALLEY BANK

		
	By:	 	 /s/    JIM HORI

	
	Printed Name: Jim Hori
	
	Title: Senior Vice President

  
  

 EXHIBIT A 
  
 “Collateral” means of all of Borrower’s right, title and interest in and to the following
whether owned now or hereafter acquired or arising, and wherever located: all Accounts; all Inventory; all Equipment; all Deposit Accounts; all General Intangibles (excluding Intellectual Property); all Pledged CDs; all Investment Property; all
Other Property; and any and all claims, rights and interests in any of the foregoing, and all guaranties and security for any of the foregoing, 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, all of the foregoing, and all Borrower’s Books relating to any of the foregoing. 
  
 Notwithstanding the foregoing, although the Collateral shall not be deemed to
include any Intellectual Property, the Collateral shall include the proceeds of all the Intellectual Property that are (a) accounts, (i.e. accounts receivable) of Borrower, or (b) general intangibles consisting of rights to payment, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest in such accounts and general intangibles of Borrower that are proceeds of the Intellectual
Property, then the Collateral shall automatically, and effective as of the Closing Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security interest in such accounts and general intangibles of
Borrower that are proceeds of the Intellectual Property. 
  
 Borrower and Bank are parties to a Negative Pledge Agreement, whereby Borrower, in connection with Bank’s loan or loans to Borrower, has agreed, among other things, not to sell, transfer, assign, mortgage, pledge, lease, grant a
security interest in, or encumber any of its Intellectual Property. 
  

 A-1<PAGE>

                                                                   Exhibit 10.11

                               James M. Lindstrom
                              Employment Agreement

     This Employment Agreement (this "Agreement"), is made and entered into as
of July 8, 2003 (the "Effective Date") by and between Kankakee Bancorp, Inc., a
Delaware corporation (the "Employer"), and James M. Lindstrom (the "Executive").

                                    Recitals

     A.    The Employer wishes to engage the Executive as the Senior Vice
President and Chief Financial Officer of the Employer and the Senior Vice
President and Chief Financial Officer of KFS Bank, a wholly-owned subsidiary of
the Employer (the "Bank").

     B.    The Employer and the Executive have made commitments to each other on
a variety of important issues concerning Executive's employment, including the
performance that will be expected of Executive, the compensation the Executive
will be paid, how long and under what circumstances Executive will remain
employed and the financial details relating to any decision that either the
Employer or the Executive might ever make to terminate this Agreement.

     C.    The Employer recognizes that circumstances may arise in which a
change of control of the Employer through acquisition or otherwise may occur
thereby causing uncertainty of employment without regard to the competence or
past contributions of the Executive which uncertainty may result in the loss of
valuable services of the Executive and the Employer and the Executive wish to
provide reasonable security to the Executive against changes in the employment
relationship in the event of any such change of control.

     NOW, THEREFORE, in consideration of the premises and of the covenants and
agreements hereinafter contained, it is covenanted and agreed by and between the
parties hereto as follows:

                                   Agreements

     Section 1.   Term With Automatic Renewal Provisions. The term of this
Agreement and the Executive's employment hereunder shall commence as of the
Effective Date and shall be for a continuous and self-renewing two (2) year
"evergreen" term (calculated on a day to day basis), unless sooner terminated at
any time by either party, with or without Cause, such termination to be
effective as of thirty (30) days after written notice to that effect is
delivered to the other party.

     Section 2.   Position and Duties. The Employer hereby employs the Executive
as the Senior Vice President and Chief Financial Officer of the Employer or in
such other senior executive capacity or capacities as shall be mutually agreed
between the Employer and the Executive. As Senior Vice President and Chief
Financial Officer of Employer, Executive shall also serve as Senior Vice
President and Chief Financial Officer of its subsidiary, the Bank. During the
period of the Executive's employment hereunder, the Executive shall devote his
best efforts and full business time, energy, skills and attention to the
business and affairs of the Employer, the Bank, and the other direct and
indirect subsidiaries of the Employer (together with

<PAGE>

the Bank, the "Subsidiaries" or "Subsidiary"). The Executive's duties and
authority shall consist of and include all duties and authority customarily
performed and held by persons holding equivalent positions with business
organizations similar in nature and size to the Employer, as such duties and
authority are reasonably defined, modified and delegated from time to time by
the President and Chief Executive Officer of the Employer to whom the Executive
shall report during the term of this Agreement (the "Board"). The Executive
shall have the powers necessary to perform the duties assigned to him and shall
be provided such supporting services, staff, secretarial and other assistance,
office space and accoutrements as shall be reasonably necessary and appropriate
in the light of such assigned duties.

     Section 3.  Compensation. As compensation for the services to be provided
by the Executive hereunder, the Executive shall receive the following
compensation, expense reimbursement and other benefits:

         (a)     Base Compensation. The Executive shall receive an aggregate
annual minimum Base Salary of one hundred and seventy-five thousand dollars
($175,000) payable in installments in accordance with the regular payroll
schedule of the Bank ("Base Salary"). Such Base Salary shall be subject to
review annually commencing in 2004 and shall be maintained or increased during
the term of this Agreement in accordance with the Employer's established
management compensation policies and plans.

         (b)     Performance Bonus. The Executive shall be eligible to receive
an annual performance bonus, payable within sixty (60) days after the end of the
fiscal year of the Employer, in an amount not to exceed fifty percent (50%) of
the Executive's Base Salary for the applicable year. The amount, if any, shall
be determined by the Board, or the appropriate committee thereof, and shall
generally be based on a combination of organization-wide and individual
performance criteria.

         (c)     Stock Option Grant. At the Effective Date, the Board, or the
appropriate committee thereof, shall grant the Executive an option to purchase
seven thousand five hundred (7,500) shares of common stock of the Employer (the
"Stock Option") pursuant to the terms of the Kankakee Bancorp, Inc. 2003 Stock
Incentive Plan (the "Stock Incentive Plan"). The Stock Option shall (i) have an
exercise price per share equal to the Fair Market Value (as defined in the Stock
Incentive Plan) of the shares on the date of grant; (ii) have a term of ten (10)
years; (iii) be an "Incentive Stock Option" (as defined in the Stock Incentive
Plan), and (iv) vest twenty percent (20%) on each anniversary of the date of
grant (fully vested on the fifth anniversary of the Effective Date).

         (d)     Relocation Expenses. The Employer agrees to reimburse the
Executive for moving expenses of up to five thousand dollars ($5,000) related to
the Executive's relocation from Colorado to the greater Chicago, Illinois, area.

         (e)     Reimbursement of Expenses. The Executive shall be reimbursed,
upon submission of appropriate vouchers and supporting documentation, for all
travel, entertainment and other out-of-pocket expenses reasonably and
necessarily incurred by the Executive in the performance of his duties hereunder
and shall be entitled to attend seminars, conferences and

                                        2

<PAGE>

meetings relating to the business of the Employer consistent with the Employer's
or the Bank's established policies in that regard.

         (f)     Other Benefits. The Executive shall be entitled to all benefits
specifically established for him and, when and to the extent he is eligible
therefor, to participate in all plans and benefits generally accorded to senior
executives of the Employer and the Bank, including, but not limited to, pension,
profit-sharing, supplemental retirement, incentive compensation, bonus,
disability income, group life medical and hospitalization insurance, and similar
or comparable plans, and also to perquisites extended to similarly situated
senior executives, provided, however, that such plans, benefits and perquisites
shall be no less than those made available to all other employees of the
Employer and the Bank.

         (g)     Withholding. The Employer shall be entitled to withhold from
amounts payable to the Executive hereunder, any federal, state or local
withholding or other taxes which it is from time to time required to withhold.
The Employer shall be entitled to rely upon the opinion of its legal counsel
with regard to any question concerning the amount or requirement of any such
withholding.

     Section 4.  Confidentiality and Loyalty. The Executive acknowledges that
during the course of his employment he may produce and have access to material,
records, data, trade secrets and information not generally available to the
public regarding the Employer and its Subsidiaries (collectively, "Confidential
Information"). Accordingly, during and subsequent to termination of this
Agreement, the Executive shall hold in confidence and not directly or indirectly
disclose, use, copy or make lists of any such Confidential Information, except
to the extent that such information is or thereafter becomes lawfully available
from public sources, or such disclosure is authorized in writing by the
Employer, required by a law or any competent administrative agency or judicial
authority, or otherwise as reasonably necessary or appropriate in connection
with the performance by the Executive of his duties hereunder. All records,
files, documents and other materials or copies thereof relating to the business
of the Employer and its Subsidiaries which the Executive shall prepare or use,
shall be and remain the sole property of the Employer, shall not be removed from
the premises of the Employer or its Subsidiaries, as the case may be, without
the written consent of the Employer's Chairman of the Board, except as
reasonably necessary or appropriate in connection with the performance by the
Executive of his duties hereunder, and shall be promptly returned to the
Employer upon termination of the Executive's employment hereunder. The Executive
agrees to abide by the reasonable policies of the Employer, as in effect from
time to time, respecting avoidance of interests conflicting with those of the
Employer and its Subsidiaries.

     Section 5.  Termination.

         (a)     Termination Without Cause. Either the Employer or the Executive
may terminate this Agreement and the Executive's employment hereunder for any
reason by delivering written notice of termination to the other party no less
than thirty (30) days before the effective date of termination, which date will
be specified in the notice of termination.

         (b)     Voluntary Termination by Executive. If the Executive
voluntarily terminates his employment under this Agreement other than pursuant
to Section 5(d)

                                        3

<PAGE>

(Constructive Discharge) or Section 5(h) (Termination Upon Change of Control),
then the Employer shall only be required to pay the Executive such Base Salary
as shall have accrued through the effective date of such termination plus the
amount of any expense reimbursements for expenses incurred prior to the
effective date of such termination, provided that Executive shall have submitted
all reimbursement requests within ten (10) business days of the effective date
of such termination. After payment of the foregoing, neither the Employer nor
any of its Subsidiaries shall have any further obligations to the Executive.

         (c)     Premature Termination.

                 (i)   In the event of the termination of this Agreement by the
Employer prior to the last day of the then current term for any reason other
than a termination in accordance with the provisions of Section 5(e)
(Termination for Cause), then notwithstanding any mitigation of damages by the
Executive, the Employer shall pay the Executive a sum equal to two (2) times the
amount of the Executive's then-current annual Base Salary. In addition, the
Employer shall reimburse the Executive for continued coverage (COBRA
continuation coverage) for the Executive and the Executive's dependents (if
applicable) under the health insurance programs maintained by the Employer
during the period of the Executive's COBRA eligibility; provided, however, that
the continued payment of these amounts by the Employer shall not offset or
diminish any compensation or benefits accrued as of the date of termination.

                 (ii)  Payment to the Executive will be made on a monthly basis
over the twenty-four (24) month period immediately following the Executive's
termination of employment. At the election of the Employer, payments may be made
in a lump sum. Payment of the amounts due under Section 5(c)(i) shall not be
reduced in the event the Executive obtains other employment following the
termination of employment by the Employer.

                 (iii) If the Employer is not in compliance with its minimum
capital requirements or if the payments required under subsection (i) above
would cause the Employer's capital to be reduced below its minimum capital
requirements, such payments shall be deferred until such time as the Employer is
in capital compliance.

         (d)     Constructive Discharge. If at any time during the term of this
Agreement, except in instances where Employer has valid grounds to terminate
Executive's employment pursuant to Section 5(e) (Termination for Cause), the
Executive is Constructively Discharged (as hereinafter defined), then the
Executive shall have the right, by written notice given to the Employer not
later than ninety (90) days after such Constructive Discharge, to terminate his
services hereunder, effective as of thirty (30) days after the date of such
notice, and the Executive shall have no rights or obligations under this
Agreement other than as provided in this Section 5(d), Section 4
(Confidentiality and Loyalty) and Section 6 (Non-Competition Covenant). In such
event, the Executive shall be entitled to a lump sum payment in an amount equal
to the aggregate cash payments due to the Executive under Section 5(c)(i) and
reimbursement of COBRA premiums as if such termination of his employment were
pursuant to Section 5(c) (Premature Termination).

For purposes of this Agreement, the Executive shall be "Constructively
Discharged" upon the occurrence of any one of the following events:

                                       4

<PAGE>

                  (i)   The Executive is removed from the positions with the
Employer set forth in Section 2 (Position and Duties);

                  (ii)  There is a substantial diminution in the Executive's
responsibilities as the Company's Chief Financial Officer to which the Executive
has not consented, provided that such diminution shall constitute a Constructive
Discharge only if the Executive submits a written statement to the Chairman of
the Board in which the Executive specifies the reasons that constitute such
diminution and the written statement is provided to the Chairman of the Board
within thirty (30) days of the action or actions alleged to constitute
substantial diminution; or

                  (iii) The Employer changes the primary employment location of
the Executive without the Executive's consent to a place that is more than fifty
(50) miles from the main office of the Employer; or

                  (iv)  The Employer otherwise commits a material breach of its
obligations under this Agreement.

           (e)    Termination for Cause. This Agreement may be terminated for
Cause as hereinafter defined. "Cause" shall mean: (i) the Executive's death;
(ii) the Executive's Permanent Disability, which shall mean the Executive's
inability, as a result of physical or mental incapacity, substantially to
perform his duties hereunder for a period of six (6) consecutive months; (iii) a
material violation by the Executive of any applicable material law or regulation
respecting the business of the Employer; (iv) the Executive being found guilty
of a felony or an act of dishonesty in connection with the performance of his
duties as an officer of the Employer, or which disqualifies the Executive from
serving as an officer or director of the Employer or any one of its
Subsidiaries; (v) the willful or negligent failure of the Executive to perform
his duties hereunder in any material respect; (vi) the Executive engages in one
or more violations of Employer's policies or procedures or directives of the
Board and that have a material financial adverse effect on the Employer or any
one of its Subsidiaries; or (vii) the Executive is removed or suspended from
banking pursuant to Section 8(e) of the Federal Deposit Insurance Act, as
amended (the "FDIA"), or any other applicable state or federal law. The
Executive shall be entitled to at least thirty (30) days' prior written notice
of the Employer's intention to terminate his employment for any cause (except
the Executive's death) specifying the grounds for such termination and shall be
provided a reasonable opportunity to present to the Board his position regarding
any dispute relating to the existence of such cause. In the event of a dispute
regarding the Executive's Permanent Disability, each of the Executive and the
Employer shall choose a physician who together will choose a third physician to
make a final determination thereof. Upon a termination of the Executive's
employment with the Employer for Cause, the Executive shall be entitled to
receive from the Employer only such payments as are due and owing to the
Executive as of the effective date of such termination. If the Executive's
employment is terminated for Cause pursuant to this Section, then the Employer
shall only be required to pay the Executive such Base Salary as shall have
accrued through the effective date of such termination and neither the Employer
nor any of its Subsidiaries shall have any further obligations to the Executive.

           (f)    Payments Upon Death. In the event payments are due and owing
under this Agreement at the death of the Executive, payment shall be made to
such beneficiary as the

                                        5

<PAGE>

Executive may designate in writing, or failing such designation, to the executor
of his estate, in full settlement and satisfaction of all claims and demands on
behalf of the Executive.

           (g)    Payments Prior to Permanent Disability. The Executive shall be
entitled to the compensation and benefits provided for under this Agreement for
any period during the term of this Agreement and prior to the establishment of
the Executive's Permanent Disability during which the Executive is unable to
work due to a physical or mental infirmity. Notwithstanding anything contained
in this Agreement to the contrary, until the date specified in a notice of
termination relating to the Executive's Permanent Disability, the Executive
shall be entitled to return to his positions with the Employer as set forth in
this Agreement in which event no Permanent Disability of the Executive will be
deemed to have occurred.

           (h)    Termination Upon Change of Control.

                  (i)   In the event of a Change of Control (as defined below)
of the Employer and the termination of the Executive's employment under either A
or B below, subject to Section 5(h)(iii) below, the Executive shall be entitled
to receive in lieu of any other payments provided for in this Agreement a lump
sum payment equal to three (3) times the amount of the Executive's then current
Base Salary. In addition, the Employer shall reimburse the Executive for
continued coverage (COBRA continuation coverage) for the Executive and the
Executive's dependents (if applicable) under the health insurance programs
maintained by the Employer during the period of the Executive's COBRA
eligibility; provided, however, that the continued payment of these amounts by
the Employer shall not offset or diminish any compensation or benefits accrued
as of the date of termination. Either of the following shall constitute
termination of the Executive's employment within the meaning of this Section
5(h):

                        A. The Executive voluntarily terminates his employment
within the one (1) year period immediately following the Change of Control.

                        B. The Executive's employment is terminated by the
Employer or its successor within the one (1) year period immediately following
the Change of Control.

                  (ii)  For purposes of this Section, the term "Change of
Control" shall mean the following:

                        A. The consummation of the acquisition by any person (as
such term is defined in Section 13(d) or 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")) of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the 1934 Act) of fifty percent (50%) or more of
the combined voting power of the then outstanding voting securities of the
Employer; or

                        B. Consummation of: (1) a merger or consolidation to
which the Employer is a party if the stockholders immediately before such merger
or consolidation do not, as a result of such merger or consolidation, own,
directly or indirectly, more than sixty-seven percent (67%) of the combined
voting power of the then outstanding voting securities of the entity resulting
from such merger or consolidation in substantially the same proportion as their
ownership of the combined voting power of the Employer's voting securities
outstanding

                                       6

<PAGE>

immediately before such merger or consolidation; or (2) a complete liquidation
or dissolution or an agreement for the sale or other disposition of all or
substantially all of the assets of the Employer or the Bank.

Notwithstanding the foregoing, a Change of Control shall not be deemed to occur
solely because fifty percent (50%) or more of the combined voting power of the
Employer's then outstanding securities is acquired by: (1) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
for employees of the entity; or (2) any corporation which, immediately prior to
such acquisition, is owned directly or indirectly by the stockholders in the
same proportion as their ownership of stock immediately prior to such
acquisition.

                  (iii) It is the intention of the Employer and the Executive
that no portion of any payment under this Agreement, or payments to or for the
benefit of the Executive under any other agreement or plan, be deemed to be an
"Excess Parachute Payment" as defined in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), or its successors. It is agreed that the
present value of and payments to or for the benefit of the Executive in the
nature of compensation, receipt of which is contingent on the Change of Control
of the Employer, and to which Section 280G of the Code applies (in the aggregate
"Total Payments") shall not exceed an amount equal to one dollar ($1.00) less
than the maximum amount which the Employer may pay without loss of deduction
under Section 280G(a) of the Code. Present value for purposes of this Agreement
shall be calculated in accordance with Section 280G(d)(4) of the Code. Within
ninety (90) days following the earlier of (A) the giving of the notice of
termination or (B) the giving of notice by the Employer to the Executive of its
belief that there is a payment or benefit due the Executive which will result in
an excess parachute payment as defined in Section 280G of the Code, the
Executive and the Employer, at the Employer's expense, shall obtain the opinion
of such legal counsel and certified public accountants as the Executive may
choose (notwithstanding the fact that such persons have acted or may also be
acting as the legal counsel or certified public accountants for the Employer),
which opinions need not be unqualified, which sets forth (I) the amount of the
Base Period Income of the Executive, (II) the present value of Total Payments
and (III) the amount and present value of any excess parachute payments. In the
event that such opinions determine that there would be an excess parachute
payment, the payment hereunder or any other payment determined by such counsel
to be includable in Total Payments shall be modified, reduced or eliminated as
specified by the Executive in writing delivered to the Employer within sixty
(60) days of the Executive's receipt of such opinions or, if the Executive fails
to so notify the Employer, then as the Employer shall reasonably determine, so
that under the bases of calculation set forth in such opinions there will be no
excess parachute payment. The provisions of this subparagraph, including the
calculations, notices and opinions provided for herein shall be based upon the
conclusive presumption that (y) the compensation and benefits provided for in
Section 3 hereof and (z) any other compensation earned by the Executive pursuant
to the Employer's compensation programs which would have been paid in any event,
are reasonable compensation for services rendered, even though the timing of
such payment is triggered by the Change of Control; provided, however, that in
the event such legal counsel so requests in connection with the opinion required
by this subparagraph, the Executive and the Employer shall obtain, at the
Employer's expense, and the legal counsel may rely on in providing the opinion,
the advice of a firm of recognized executive compensation consultants as to the
reasonableness of any item of compensation to be received by the Executive. In
the event that the provisions of

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Sections 280G and 4999 of the Code are repealed without succession, this
subparagraph shall be of no further force or effect.

             (i)  Regulatory Suspension and Termination.

                  (i)   If the Executive is suspended from office and/or
temporarily prohibited from participating in the conduct of the Employer's
affairs by a notice served under Section 8(e)(3) (12 U.S.C. (S) 1818(e)(3)) or
8(g) (12 U.S.C. (S) 1818(g)) of the FDIA, the Employer's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings. If the charges in the notice are dismissed, the
Employer may in its discretion (A) pay the Executive all or part of the
compensation withheld while their contract obligations were suspended and (B)
reinstate (in whole or in part) any of the obligations which were suspended.

                  (ii)  If the Executive is removed and/or permanently
prohibited from participating in the conduct of the Employer's affairs by an
order issued under Section 8(e) (12 U.S.C. (S) 1818(e)) or 8(g) (12 U.S.C. (S)
1818(g)) of the FDIA, all obligations of the Employer under this contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

                  (iii) If the Employer is in default as defined in Section 3(x)
(12 U.S.C. (S) 1813(x)(1)) of the FDIA, all obligations of the Employer under
this contract shall terminate as of the date of default, but this paragraph
shall not affect any vested rights of the contracting parties.

                  (iv)  All obligations of the Employer under this contract
shall be terminated, except to the extent determined that continuation of the
contract is necessary for the continued operation of the institution by the
Federal Deposit Insurance Corporation (the "FDIC"), at the time the FDIC enters
into an agreement to provide assistance to or on behalf of the Employer under
the authority contained in Section 13(c) (12 U.S.C. (S) 1823(c)) of the FDIA, or
when the Employer is determined by the FDIC to be in an unsafe or unsound
condition. Any rights of the parties that have already vested, however, shall
not be affected by such action.

       Section 6. Non-Competition Covenant.

             (a)  Restrictive Covenant. The Employer and the Executive have
jointly reviewed the customer lists and operations of the Employer and its
Subsidiaries and have agreed that the primary service area of the Employer's and
its Subsidiaries' lending and deposit taking functions in which the Employer and
its Subsidiaries have and will actively participate extends separately to each
area which encompasses the counties in which the Employer and its Subsidiaries
have an office or branch and the area within twenty-five (25) miles of the
border of each such county (the "Restrictive Area"). Therefore, as an essential
ingredient of and in consideration of this Agreement and the payment of the
amounts described in Section 3, the Executive hereby agrees that, except with
the express prior written consent of the Employer, for a period of one (1) year
after the termination of the Executive's employment with the Employer (the
"Restrictive Period"):

                                        8

<PAGE>

                  (i)   The Executive will not, directly or indirectly, engage
or invest in, own, manage, operate, finance, control, or participate in the
ownership, management, operation or control of, be employed by, associated with,
or in any manner connected with, lend the Executive's name or any similar name
to, lend the Executive's credit to, or render services or advice to, any person,
firm, partnership, corporation or trust which owns or operates, a bank, savings
and loan association, credit union or similar financial institution (a
"Financial Institution") within the Restrictive Area; provided however, that the
ownership by the Executive of shares of the capital stock which are listed on a
securities exchange or quoted on the National Association of Securities Dealers
Automated Quotation System which do not represent more than five percent (5%) of
the outstanding capital stock of any Financial Institution, shall not violate
any terms of this Agreement.

                  (ii)  The Executive will not, directly or indirectly, either
for himself, or any other Financial Institution: (A) induce or attempt to induce
any employee of the Employer or its Subsidiaries to leave the employ of the
Employer or its Subsidiaries; (B) in any way interfere with the relationship
between Employer or its Subsidiaries and any employee of Employer or its
Subsidiaries; (C) employ, or otherwise engage as an employee, independent
contractor or otherwise, any employee of Employer or its Subsidiaries; or (D)
induce or attempt to induce any customer, supplier, licensee, or business
relation of Employer or its Subsidiaries to cease doing business with the
Employer or its Subsidiaries or in any way interfere with the relationship
between any customer, supplier, licensee or business relation of Employer or its
Subsidiaries.

                  (iii) The Executive will not, directly or indirectly, either
for himself, or any other Financial Institution, solicit the business of any
person or entity known to the Executive to be a customer of the Employer or its
Subsidiaries, whether or not such Executive had personal contact with such
person or entity, with respect to products or activities which compete in whole
or in part with the products or activities of the Employer or its Subsidiaries.

                  (iv)  The Executive will not, directly or indirectly, serve as
the agent, broker or representative of, or otherwise assist, any person or
entity in obtaining services or products from any Financial Institution within
the Restrictive Area.

                  (v)   The Executive expressly agrees that the covenants
contained in this Section 6(a) are reasonable with respect to their duration,
geographical area, and scope.

             (b)  Violation of Restrictive Covenant. If the Executive violates
the restrictions contained in Section 6(a) and the Employer brings legal action
for injunctive or other relief, the Employer shall not, as a result of the time
involved in obtaining such relief, be deprived of the benefit of the full period
of the Restrictive Period. Accordingly, the Restrictive Period shall be deemed
to have the duration specified in Section 6(a) computed from the date the relief
is granted but reduced by the time between the period when the Restrictive
Period began to run and the date of the first violation of the restrictions
contained in Section 6(a) by the Executive. In the event that a successor
assumes and agrees to perform this Agreement, the restrictions contained in
Section 6(a) shall continue to apply only to the primary service area of the
Employer as it existed immediately before such assumption and shall not apply to
any of the successor's other offices.

                                        9

<PAGE>

             (c)    Remedies for Breach of Restrictive Covenant. The Executive
acknowledges that the restrictions contained in Sections 4 and 6(a) of this
Agreement are reasonable and necessary for the protection of the legitimate
business interests of the Employer, that any violation of these restrictions
would cause substantial injury to the Employer and such interests, that the
Employer would not have entered into this Agreement with the Executive without
receiving the additional consideration offered by the Executive in binding
himself to these restrictions and that such restrictions were a material
inducement to the Employer to enter into this Agreement. In the event of any
violation or threatened violation of these restrictions, the Employer, in
addition to and not in limitation of, any other rights, remedies or damages
available to the Employer under this Agreement or otherwise at law or in equity,
shall be entitled to preliminary and permanent injunctive relief to prevent or
restrain any such violation by the Executive and any and all persons directly or
indirectly acting for or with him, as the case may be.

       Section 7.   Intercorporate Transfers. If the Executive shall be
voluntarily transferred to a Subsidiary of the Employer, such transfer shall not
be deemed to terminate or modify this Agreement and the employing corporation to
which the Executive shall have been transferred shall, for all purposes of this
Agreement, be construed as standing in the same place and stead as the Employer
as of the date of such transfer, provided however, that this Section 7 shall not
modify Employer's obligations under Section 2, 3 and 5 hereof.

       Section 8.   Interest in Assets. Neither the Executive nor his estate
shall acquire hereunder any rights in funds or assets of the Employer, otherwise
than by and through the actual payment of amounts payable hereunder; nor shall
the Executive or his estate have any power to transfer, assign, anticipate,
hypothecate or otherwise encumber in advance any of said payments; nor shall any
of such payments be subject to seizure for the payment of any debt, judgment,
alimony, separate maintenance or be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise of the Executive.

       Section 9.   Indemnification. The Employer shall provide the Executive
(including his heirs, personal representatives, executors and administrators)
for the term of this Agreement with coverage under a standard directors' and
officers' liability insurance policy at its expense.

       Section 10.  General Provisions.

             (a)    Successors; Assignment. This Agreement shall be binding upon
and inure to the benefit of the Executive, his heirs, legatees and personal
representatives, the Employer and its successors and assigns, and any successor
or assign of the Employer shall be deemed the "Employer" hereunder. The Employer
shall require any successor to all or substantially all of the business and/or
assets of the Employer, whether directly or indirectly, by purchase, merger,
consolidation, acquisition of stock, or otherwise, by an agreement in form and
substance satisfactory to the Executive, expressly to assume and agree to
perform this Agreement in the same manner and to the same extent as the Employer
would be required to perform if no such succession had taken place.

                                       10

<PAGE>

             (b)   Entire Agreement; Modifications. This Agreement constitutes
the entire agreement between the parties respecting the subject matter hereof,
and supersedes all prior negotiations, undertakings, agreements and arrangements
with respect thereto, whether written or oral. Except as otherwise explicitly
provided herein, this Agreement may not be amended or modified except by written
agreement signed by the Executive and the Employer.

             (c)   Survival. The provisions of Sections 4 and 6 and the payment
obligations of Section 5 shall survive the expiration or termination of this
Agreement, in each case for the period set forth in such section.

             (d)   Enforcement and Governing Law. The provisions of this
Agreement shall be regarded as divisible and separate; if any of said provisions
should be declared invalid or unenforceable by a court of competent
jurisdiction, the validity and enforceability of the remaining provisions shall
not be affected thereby. This Agreement shall be construed and the legal
relations of the parties hereto shall be determined in accordance with the laws
of the State of Illinois without reference to the law regarding conflicts of
law.

             (e)   Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three arbitrators sitting in a location selected by
the Executive within twenty-five (25) miles from the location of the main office
of the Employer, in accordance with the employment rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of his right to be paid
through the date of termination during the pendency of any dispute or
controversy arising under or in connection with this Agreement.

             (f)   Legal Fees. All reasonable legal fees paid or incurred by the
Executive pursuant to any dispute or question of interpretation relating to this
Agreement shall be paid or reimbursed by the Employer if the Executive is
successful on the merits pursuant to a legal judgment, arbitration or
settlement.

             (g)   Waiver. No waiver by either party at any time of any breach
by the other party of, or compliance with, any condition or provision of this
Agreement to be performed by the other party, shall be deemed a waiver of any
similar or dissimilar provisions or conditions at the same time or any prior or
subsequent time.

             (h)   Notices. Notices pursuant to this Agreement shall be in
writing and shall be deemed given when received; and, if mailed, shall be mailed
by United States registered or certified mail, return receipt requested, postage
prepaid; and if to the Employer, addressed to the principal headquarters of the
Employer, attention: Chairman of the Board; or, if to the Executive, to the
address set forth below the Executive's signature on this Agreement, or to such
other address as the party to be notified shall have given to the other.

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

                                       11

<PAGE>

KANKAKEE BANCORP, INC.                         JAMES M. LINDSTROM

By:  /s/ Carol Hoekstra                         /s/ James Lindstrom
   -------------------------------             -------------------------------
   Its: Executive Vice President               Address:

                                       12

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