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Exhibit 10.1  

 
 

RAINING DATA CORPORATION F/K/A OMNIS TECHNOLOGY CORPORATION
  AMENDMENT TO PROMISSORY NOTE    
  

This
AMENDMENT TO PROMISSORY NOTE is entered into as of this 16th day of September 2002, by and between Raining Data Corporation, f/k/a Omnis Technology Corporation, a Delaware corporation (the
"Company") and The Philip and Debra Barrett Charitable Remainder Trust (the "Holder"). 

RECITALS  

        WHEREAS, the Company issued to the Holder a Promissory Note, dated September 28, 2000 (the "Note"), bearing
interest at a rate of ten percent (10%) per annum on the Principal accrued and paid quarterly; 

        WHEREAS,
the Company and Holder desire to amend the Maturity Date of the Note to provide that the Principal on the Note shall be due on April 2, 2003; and 

        NOW,
THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows: 

        1.    Definitions.    Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the
Note. 

        2.    Amendments.    The Note is hereby amended as follows: 

        Section 1
of the Note ("Principal and Interest") is hereby amended and restated in its entirety to read as follows: 

        "Raining
Data Corporation F/K/A Omnis Technology Corporation, a Delaware corporation (the "Company"), for value received, hereby promises to pay to The Philip and Debra Barrett
Charitable Remainder Trust (the "Holder") the amount of two-hundred and fifty thousand dollars ($250,000) ("Principal") plus accrued interest in lawful money of the United States or as
otherwise hereinafter set forth. 

        This
Promissory Note shall bear interest at the rate of Ten Percent (10%) per annum from the date of issuance of this Note. Accrued interest shall be paid in quarterly installments on
each March 31, June 30, September 30 and December 31 beginning December 31, 2000. All Principal and accrued interest under this Note shall be due and payable in full
on April 2, 2003 (the "Maturity Date") unless there is an Event of Default (as defined in Section 2 hereof) in which case such payment shall be accelerated. This Note is not secured by
any assets or securities of the Company. 

        Upon
payment in full of the Principal hereof and accrued interest hereunder, this Note shall be cancelled and shall be surrendered to the Company. 

        The
Principal and interest on this Note shall be payable to the Holder hereof at such address as the Holder shall from time to time designate by written notice to the Company. 

        3.    No Changes.    All other terms, conditions and representations in the Note shall remain unaltered by this
Amendment. 

        4.    Governing Law.    This Amendment and all actions arising out of or in connection with this Amendment or the Note
shall be governed by and construed in accordance with the laws of the State of California, without regard to the conflicts of law provisions of the State of California, or of any other state. 

        5.    Counterparts.    This Amendment may be executed in any number of counterparts, each of which shall be an
original, but all of which together shall be deemed to constitute one instrument. 

	COMPANY:	 	 	 	 
	RAINING DATA CORPORATION,
 a Delaware corporation	 	 	 	 
	

By:	
 	

/s/  BRIAN C. BEZDEK      
 Brian C. Bezdek

Vice President, Finance	
 	

 	
 	

 
	

 	
 	

 	
 	
HOLDER:
	

 	
 	

 	
 	

THE PHILIP AND DEBRA BARRETT CHARITABLE REMAINDER TRUST
	

 	
 	

 	
 	
By:	
 	

/s/  PHILIP D. BARRETT      
/s/  DEBRA J. BARRETT      

	

 	
 	

 	
 	

Name:	
 	

Philip D. Barrett and Debra J. Barrett

	

 	
 	

 	
 	

Title:	
 	

Trustees

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EXHIBIT 10.1  

LOAN AND SECURITY AGREEMENT  

 by and between  

 WITNESS SYSTEMS, INC.,  

 as Borrower  

 and  

 SILICON VALLEY BANK,  

 as Bank  

 APRIL 3, 2002  

 
 

LOAN AND SECURITY AGREEMENT    
  

        THIS LOAN AND SECURITY AGREEMENT dated April 3, 2002, between SILICON VALLEY BANK ("Bank"), whose address
is 3003 Tasman Drive, Santa Clara, California 95054 and having a loan production office at 3343 Peachtree Road, NE, Suite 312, Atlanta, Georgia 30326 and WITNESS SYSTEMS, INC., a corporation
organized and in good standing in the State of Delaware ("Borrower"), whose address is 300 Colonial Center Parkway, Roswell, Georgia, 30076 provides the terms on which Bank will lend to Borrower and
Borrower will repay Bank. The parties agree as follows: 

1    ACCOUNTING AND OTHER TERMS    

        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 attached 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 Credit Extensions and interest on the unpaid principal amount of the Credit Extensions. 

        2.1.1    Revolving Advances.    

        (a)  Bank
will make Advances not exceeding (i) the lesser of (A) the Committed Revolving Line or (B) the Borrowing Base, minus (ii) the amount of
all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) and minus the Cash Management Sublimit. Amounts borrowed under this Section may be repaid and reborrowed during
the term of this Agreement. All advances shall be evidenced by the Revolving Promissory Note to be executed and delivered by Borrower to Bank on the Closing Date and shall be repaid in accordance with
the terms of the Revolving Promissory Note. 

        (b)  To
obtain an Advance, Borrower must notify Bank by facsimile or telephone by 3:00 p.m. Eastern time on the Business Day the Advance is to be made. Borrower must
promptly confirm the notification by delivering to Bank the Payment/Advance Form attached as Exhibit B (the "Payment/Advance
Form"). Bank will credit Advances to Borrower's deposit account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without
instructions if the Advances are necessary to meet Obligations which have become due. For purposes of this Section 2.1.1(b), Bank may rely on any telephone notice given by a person whom Bank
reasonably 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 terminates on the Revolving Maturity Date, when all Advances are immediately payable. 

        (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
in the general affairs, management, results of operation, condition (financial or otherwise) or the prospect of repayment of the Obligations, or there has been any material adverse deviation by
Borrower from the most recent business plan of Borrower presented to and accepted by Bank prior to the execution of this Agreement. 

        2.1.2    Cash Management Services.    

        Borrower
may use up to Two Hundred Thousand Dollars ($200,000) for Bank's Cash Management Services, which may include merchant services, direct deposit of payroll, business credit card,
and check cashing services identified in various cash management services agreements related to such services (the "Cash Management Services"). Such aggregate amounts utilized under the Cash
Management Services Sublimit will at all times reduce the amount otherwise available to be borrowed under the Committed Revolving Line. Any amounts Bank pays on behalf of Borrower or any amounts that
are not paid by 

Borrower for any Cash Management Services will be treated as Advances under the Committed Revolving Line and will accrue interest at the rate for Advances. 

        2.1.3    Letters of Credit Sublimit.    

        Bank
will issue or have issued Letters of Credit for Borrower's account not exceeding (i) the lesser of the Committed Revolving Line or the Borrowing Base, minus (ii) the
outstanding principal balance of the Advances and the Cash Management Sublimit; however, the face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) may not
at any time exceed Five Million Dollars ($5,000,000). Each Letter of Credit will have an expiry date of no later than one hundred eighty (180) days after the Revolving Maturity Date, but
Borrower's obligations to reimburse Bank under the Letters of Credit will be secured by cash on terms acceptable to Bank at any time after the occurrence of any Event of Default or after the Revolving
Maturity Date if the term of this Agreement is not extended by Bank. Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Prior
to or simultaneously with the opening of each
Letter of Credit, Borrower shall pay to Bank, a letter of credit fee (each a "Letter of Credit Fee" and collectively the "Letter of Credit Fees") in an amount equal to three quarters of one percent
(.75%) per annum of the face amount of the Letter of Credit. Such Letter of Credit Fees shall be paid in advance upon the issuance of the Letter of Credit and upon each anniversary thereof, if any. In
addition, Borrower shall pay to Bank any and all additional issuance, negotiation, processing, transfer or other fees to the extent and as and when required by Bank. 

2.2    Overadvances.    

        If
Borrower's Obligations under Sections 2.1.1 and 2.1.2 exceed the lesser of either (i) the Committed Revolving Line or (ii) the Borrowing Base, Borrower shall upon notice
from Bank, immediately pay such excess or secure such excess with a pledge of cash maintained at Bank. 

2.3    Interest Rate, Payments.    

        (a)    Interest Rate.    Advances accrue interest on the outstanding principal balance in accordance with the
Revolving Promissory Note. After an Event of Default, Obligations accrue interest at five percent (5%) 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 Committed Revolving Line is payable on the fifteenth (15th) day
of each month. Bank may debit any of Borrower's deposit accounts including Account Number                        for principal and
interest payments owing or any amounts Borrower owes Bank. Bank will
promptly notify Borrower when it debits Borrower's accounts. These debits are not a set-off. Payments received after 12:00 noon Eastern time are considered received at the opening of
business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment is due the next Business Day and additional fees or interest accrue. 

2.4    Fees.    

        Borrower
will pay: 

        (a)    Facility Fee.    A fully earned, nonrefundable fee in the amount of Fifteen Thousand Dollars ($15,000), half of
which shall be due and payable on the Closing Date and the balance of which ($7,500) shall be due and payable at the time of issuance of the next Letter of Credit requested after the Closing Date, or
the first Advance requested under this Agreement. 

        (b)    Bank Expenses.    All Bank Expenses (including reasonable attorneys' fees in connection with negotiation and
preparation of the Loan Documents (not to exceed $5,000)) and reasonable expenses) incurred through and after the date of this Agreement, are payable when due. 

3    CONDITIONS OF LOANS    

3.1    Conditions Precedent to Initial Credit Extension.    

        Bank's
obligation to make the initial Credit Extension is subject to the condition precedent that it receive the agreements, documents and fees it requires and further, the first Advance
(but not the issuance of any Letters of Credit) is further subject to Bank's receipt of a satisfactory audit of the Borrower's Books and Records. 

3.2    Conditions Precedent to all Credit Extensions.    

        Bank's
obligations to make each Credit Extension, including the initial Credit Extension, is subject to the following: 

        (a)  timely
receipt of any Payment/Advance Form; and 

        (b)  the
representations and warranties in Section 5 must be true on the date of the Payment/Advance Form and on the effective date of each Credit Extension and no
Event of Default may have occurred and be continuing, or result from the Credit Extension. Each Credit Extension is Borrower's representation and warranty on that date that the representations and
warranties of Section 5 remain true. 

4    CREATION OF SECURITY INTEREST    

4.1    Grant of Security Interest.    

        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. Except for Permitted Liens, any security interest will be a first priority security interest in the Collateral. Bank upon the occurrence of any Event of Default, may place a "hold"
on any deposit account of Borrower maintained with Bank; provided, however, such "hold" shall be limited to the current amount of Obligations (including the face amount of undrawn Letters of Credit),
which are not otherwise collateralized to the Bank's satisfaction), and any balances in excess of such Obligations shall be available for Borrower's use. If this Agreement is terminated, Bank's lien
and security interest in the Collateral will continue until Borrower fully satisfies its Obligations. 

5    REPRESENTATIONS AND WARRANTIES    

        Borrower
represents and warrants as follows: 

5.1    Due Organization and Authorization.    

        Borrower
is duly existing and in good standing in the state of Delaware and qualified and is 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's exact legal name
is as set forth on the first page of this Agreement. 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, except where such default could not reasonably be expected to cause a Material Adverse Change. Borrower is
not in default under any agreement to 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, free of Liens except Permitted Liens. The Accounts are bona fide, existing obligations, and except for Accounts attributable to certain
installation and training services and annual maintenance support for which no performance is required for the Account to be fully earned and which are documented on Borrower's standard contract
forms, copies of which have been delivered to Bank, 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. To the 

knowledge of any of Borrower's Responsible Officer's, Borrower has no notice of any actual or imminent Insolvency Proceeding of any account debtor whose accounts are an Eligible Account 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 Borrower's consolidated financial condition since the date of the most recent consolidated financial
statements submitted to Bank. 

5.5    Solvency.    

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

5.6    Regulatory Compliance.    

        Borrower
is not an "investment company" or a company "controlled" by an "investment company" under the Investment Company Act. 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. Bank
agrees 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 make any Credit Extension hereunder, or there are outstanding Obligations: 

6.1    Government Compliance.    

        Borrower
will maintain its legal existence and good standing as a Registered Organization in only the State of Delaware and maintain qualification in each jurisdiction in which the
failure to so qualify would reasonably be expected to cause a material adverse effect on Borrower's business or operations. 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 forty five (45) days after the last day of each calendar quarter, 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 in its
reasonable discretion; (ii) as soon as available, but no later than ninety (90) days after the last day of Borrower's fiscal year, audited consolidated financial statements prepared
under GAAP, consistently applied, together with an unqualified opinion on the financial statements from a "Big 5" Accounting Firm; (iii) within five (5) days of filing, copies of all
statements, reports and notices made available to Borrower's security holders or to any holders of Subordinated Debt and all reports on Form 10-K, 10-Q and 8K filed with
the SEC; (iv) a prompt report of any legal actions pending or threatened against Borrower or any Subsidiary that could result in damages or costs to Borrower or any Subsidiary of $100,000 or
more; and (v) budgets, sales projections, operating plans or other financial information Bank reasonably requests. 

        (b)  At
any time that any Advances are outstanding under the Committed Revolving Line, within thirty (30) days after the last day of each month, Borrower will deliver
to Bank a Borrowing Base Certificate signed by a Responsible Officer in the form of Exhibit C, with aged listings of accounts receivable. 

        (c)  At
any time that Borrower's Quick Ratio (as hereinafter defined) falls below 2.0 to 1.0, within thirty (30) days after the last day of each month, Borrower will
deliver to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in the form of Exhibit D. 

        (d)  Allow
Bank to audit that portion of the Borrower's Collateral related to Accounts at Borrower's expense within sixty (60) days of the Closing Date and at such
additional times as Bank may reasonably request. Such audits shall be at Borrower's expense and will be conducted no more often than every twelve (12) months unless an Event of Default has
occurred and is continuing. 

6.3    Inventory; Returns.    

        Borrower
will keep all Inventory in good and marketable condition, free from material defects. Returns, concessions and allowances between Borrower and its account debtors will follow
Borrower's customary practices as they exist at execution of this Agreement. Borrower must promptly notify Bank of any returns, concessions, recoveries, disputes and claims, that involve more than
$100,000. 

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 twenty (20) 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    Primary Accounts.    

        Borrower
will maintain its primary banking relationship with Bank, which relationship shall include Borrower maintaining account balances in any accounts at or through the Bank
representing at least 50% of all domestic account balances of the Borrower at any financial institution. Borrower agrees on a good faith basis to comply with this requirement within a reasonable time
after closing. Bank agrees that this requirement is contingent upon Bank's performance being in accordance with usual and customary commercial practices and Bank offering to Borrower its best terms
offered to depositors on cash balances and other deposits. 

6.7    Financial Covenants.    

        Borrower
will maintain on a consolidated basis (unless noted otherwise) as of the last day of each fiscal quarter: 

        (i)    Quick Ratio.    A ratio of Quick Assets to Current Liabilities, less Deferred
Maintenance Revenue of at least 1.50 to 1.0; provided, however, at any time that the Quick Ratio is less than 2.0 to 1.0 than this covenant will be tested on a monthly basis. 

        (ii)    Consolidated Tangible Net Worth.    A Consolidated Tangible Net Worth of at least the
sum of (a) $50,000,000, plus (b) seventy five percent of net income (without subtracting any losses) earned in each fiscal quarter from and after the Closing Date, plus (c) fifty
percent (50%) of the net cash proceeds from any equity issued from and after the Closing Date by Borrower, calculated after subtracting any cash consideration received from such issuance which is used
to finance an acquisition. 

6.8    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, for so long as Bank has an obligation to make any Credit Extension hereunder 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 material part of its business or property,
except for Transfers (i) of Inventory in the ordinary course of business; (ii) of non-exclusive licenses and similar arrangements for the use of the property of Borrower or
its Subsidiaries in the ordinary course of business; or (iii) of worn-out or obsolete Equipment. 

7.2    Changes in Business, Ownership, Management or Business Locations.    

        Engage
in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower or reasonably related thereto, or if the CEO of the
Borrower is no longer actively involved in the daily management of the Borrower, or engage in a merger or other business combination with another Person, unless Borrower is the surviving entity, and
Borrower remains in compliance with the Loan Documents after giving effect to such merger or business combination. Borrower will not, without at least thirty (30) days prior written notice,
change its state of 

formation, relocate its chief executive office or add any new offices or business locations in which more than fifteen percent (15%) of Borrower's total number of employees would be located. 

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 where (i) no Event of Default has occurred and is continuing or would result from such action during the term of this Agreement and
(ii) such transaction would not cause Borrower to be in violation of the financial covenants set forth in Section 6.7 of this Agreement. A Subsidiary may merge or consolidate into
another Subsidiary or into Borrower. 

7.4    Indebtedness.    

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

7.5    Encumbrance.    

        Create,
incur, or allow any Lien on any of its property, or assign or convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries to do so,
except for Permitted Liens, or permit any Collateral not to be subject to the first priority security interest granted here, subject to Permitted Liens. 

7.6    Distributions; Investments.    

        Other
than Permitted Investment and as permitted pursuant to Section 7.3, directly or indirectly acquire or own any Person, or make any Investment in any Person, or permit any of
its Subsidiaries to do so. Pay any cash dividends or make any distribution or payment to the holders of Borrower's equity securities, other than stock dividends as permitted under Borrower's
certificate of incorporation or redeem, retire or repurchase any of Borrower's capital stock. 

7.7    Transactions with Affiliates.    

        Except
as set forth in Schedule 7.7 to this Agreement 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 nonaffiliated Person. 

7.8    Subordinated Debt.    

        Make
or permit any payment on any Subordinated Debt, except under the terms of the Subordinated Debt, 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 Credit Extension for that purpose; fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair Labor Standards Act or violate any other law or regulation, if the violation could reasonably be expected to have a
material adverse effect on Borrower's business or 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: 

8.1    Payment Default.    

        If
Borrower fails to pay any of the Obligations when due; 

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 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 if the default cannot be cured within ten (10) days or cannot be cured after Borrower's attempts within ten (10) day period,
and the default 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. During the additional time, the
failure to cure the default is not an Event of Default (but no Credit Extensions will be made during the cure period); 

8.3    Material Adverse Change.    

        If
there (i) occurs a material adverse change in the business, operations, or condition (financial or otherwise) of the Borrower, or (ii) is a material impairment of the
prospect of repayment of any portion of the Obligations or (iii) is a material impairment of the value or priority of Bank's security interests in the Collateral (each of (i), (ii) or
(iii) being called a "Material Adverse Change"). 

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 Credit Extensions will be made during the cure period); 

8.5    Insolvency.    

        If
Borrower becomes insolvent or if Borrower begins an Insolvency Proceeding or an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within 30 days (but
no Credit Extensions will be made before any Insolvency Proceeding is dismissed); 

8.6    Other Agreements.    

        If
there is a default in 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 $100,000 is rendered against Borrower and is unsatisfied and unstayed for 10 days (but no Credit Extensions 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    Subsidiaries.    

        Any
circumstance described in Sections 8.3, 8.4, 8.5 or 8.7 occurs to any Subsidiary of Borrower. 

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; 

        (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 Bank or its Affiliate 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. If an Event of Default occurs and while it
continues, Bank is granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower's labels, Patents, Copyrights, 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. 

9.2    Power of Attorney.    

        Effective
only when an Event of Default occurs and continues, Borrower irrevocably appoints Bank as its lawful attorney to: (i) endorse Borrower's name on any checks or other
forms of payment or security; (ii) sign Borrower's name on any invoice or bill of lading for any Account or drafts against account debtors, (iii) make, settle, and adjust all claims
under Borrower's insurance policies; (iv) settle and adjust disputes and claims about the Accounts directly with account debtors, for amounts and on terms Bank determines reasonable; and
(v) 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 Credit Extensions terminates. 

9.3    Accounts Collection.    

        When
an Event of Default occurs and continues, Bank may notify any Person owing Borrower money of Bank's security interest in the funds and verify the 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, it 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. Except as otherwise provided in this
Section 9.5, 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 telefacsimile to the addresses set forth below. 

	If to Borrower:	 	Witness Systems

300 Colonial Center Parkway

Roswell, Georgia 30076

Attn: Mr. Jon Ezrine, Chief Financial Officer

Telephone: (770) 754-8704

Telecopier: (770) 754-1889
	

With a copy to:	
 	

Morris, Manning & Martin, LLP

3343 Peachtree Road, NE

1600 Atlanta Financial Center

Atlanta, Georgia 30326

Attn: Jeff Schulte, Esq.

Telephone: (404) 504-7655

Telecopier (404) 365-9532
	

If to Bank:	
 	

Silicon Valley Bank

3343 Peachtree Road, NE, Suite 312

Atlanta, Georgia 30326

Attn: Alan P. Spurgin, SVP

Telephone: (404) 760-3688

Telecopier: (404) 261-2202
	

With a copy to:	
 	

Troutman Sanders LLP

1660 International Drive, Suite 600

McLean, Virginia 22102

Attn: Richard M. Pollak, Esq.

Telephone: (703) 734-4354

Telecopier: (703) 734-4340

A
party may change its notice address by giving the other party written notice. 

11    CHOICE OF LAW, VENUE AND JURY TRIAL WAIVER    

        Georgia
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
the State of Georgia provided, however, that if for any reason the Bank can not avail itself of the courts of the State of Georgia, the Borrower and Bank each submit to the 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 participations in all or
any part of, or any interest in, Bank's obligations, rights and benefits under this Agreement. 

12.2    Indemnification.    

        Except
for losses caused by Bank's gross negligence or willful misconduct, 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 (including reasonable attorneys fees and expenses). 

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 this subject matter, and supersedes prior
negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations between the parties about the subject matter of this Agreement merge into this Agreement
and the Loan Documents. 

12.6    Counterparts.    

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

12.7    Survival.    

        All
covenants, representations and warranties made in this Agreement continue in full force 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
(i) to Bank's subsidiaries or affiliates in connection with their business with Borrower, (ii) to prospective transferees or purchasers of any interest in the loans (provided, however,
Bank shall use commercially reasonable efforts in obtaining such prospective transferee or purchasers, agreement of the terms of this 

provision), (iii) as required by law, regulation, subpoena, or other order, (iv) as required in connection with Bank's examination or audit and (v) as Bank considers appropriate
exercising remedies under this Agreement. Confidential information does not include information that either: (a) 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 (b) 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 will 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. 

13    DEFINITIONS    

13.1    Definitions.    

        In
this Agreement: 

        "34 Act" means the Securities Act of 1934, as amended. 

        "Accounts" has the meaning set forth in the Code and includes 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. 

        "Advance" or "Advances" is a loan advance (or advances) under the Committed Revolving
Line. 

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

        "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). First Class air travel shall not be deemed a reasonable cost or
expense. 

        "Big 5 Accounting Firm" means any of Anderson, Price Waterhouse Coopers, Ernst & Young, Deloitte & Touche, KPMG and each of
their respective successors and assigns. 

        "Borrower's Books" are all Borrower's 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 the information. 

        "Borrowing Base" is the sum of eighty percent (80%) of Eligible Accounts, plus seventy percent (70%) of Eligible Foreign Accounts, all as
determined by Bank from Borrower's most recent Borrowing Base Certificate; provided, however, that with thirty (30) days prior written notice to
Borrower, Bank may lower the percentage of the Borrowing Base after performing an audit of Borrower's Collateral. In addition, at all times that Borrower's Quick Ratio is equal to or greater than 2.0
to 1.0, Eligible Foreign Accounts may constitute up to forty percent (40%) of the Borrowing Base. If at any time Borrower's Quick Ratio falls below 2.0 to 1.0, only those foreign accounts
pre-approved by Bank may be included in the Borrowing Base. 

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

        "Closing Date" is the date of this Agreement. 

        "Code" is the Uniform Commercial Code, in effect in the State of Georgia, as in effect from time to time. 

        "Collateral" is the property described on Exhibit A.

        "Committed Revolving Line" is Advances of up to Seven Million Five Hundred Thousand Dollars ($7,500,000). 

        "Contingent Obligation" is, for any Person, any direct or indirect liability, contingent or not, of that Person for (i) 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; (ii) any obligations for undrawn letters of credit for the account of that Person; and (iii) 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. 

        "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. 

        "Credit Extension" is each Advance, Letter of Credit or any other extension of credit by Bank for Borrower's benefit. 

        "Current Liabilities" are the aggregate amount of Borrower's Total Liabilities which mature within one (1) year. 

        "Deferred Maintenance Revenue" is all amounts invoiced in advance of performance under maintenance contracts and not yet recognized as
revenue. 

        "Eligible Accounts" are Accounts in the ordinary course of Borrower's business that meet all Borrower's representations and warranties in
Section 5; but Bank may change eligibility standards by giving Borrower thirty (30) days prior written notice. Unless Bank agrees otherwise in writing, Eligible Accounts will not
include: 

        (a)  Accounts
that the account debtor has not paid within 90 days of invoice date; 

        (b)  Accounts
for an account debtor, 50% or more of whose Accounts have not been paid within 90 days of invoice date; 

        (c)  Credit
balances over 90 days from invoice date; 

        (d)  Accounts
for an account debtor, including Affiliates, whose total obligations to Borrower exceed 25% of all Accounts, for the amounts that exceed that percentage, unless
the Bank approves in writing; 

        (e)  Accounts
for which the account debtor does not have its principal place of business in the United States (other than Eligible Foreign Accounts); 

        (f)    Accounts
for which the account debtor is a federal, state or local government entity or any department, agency, or instrumentality; 

        (g)  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); 

        (h)  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; 

        (i)    Accounts
for which the account debtor is Borrower's Affiliate, officer, employee, or agent; 

        (j)    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; 

        (k)  Accounts
for which Bank reasonably determines collection to be doubtful. 

        "Eligible Foreign Accounts" are Accounts for which the account debtor does not have its principal place of business in the United States
but are: (i) covered by credit insurance satisfactory to Bank, less any deductible; or (ii) supported by letter(s) of credit acceptable to Bank; or (iii) that Bank approves in
writing. 

        "Equipment" has the meaning set forth in the Code and includes is all present and future machinery, equipment, tenant improvements,
furniture, fixtures, vehicles, tools, parts and attachments in which Borrower has any interest. 

        "ERISA" is the Employment Retirement Income Security Act of 1974, and its regulations. 

        "GAAP" is generally accepted accounting principles. 

        "Indebtedness" is (a) indebtedness for borrowed money or the deferred price of property or services, such as reimbursement and
other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations and
(d) Contingent Obligations. 

        "Insolvency Proceeding" 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. 

        "Intellectual Property" is: 

        (a)  Copyrights,
Trademarks and Patents 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; 

        (c)  All
design rights which may be available to Borrower now or later created, acquired or held; 

        (d)  Any
claims for damages (past, present or future) for infringement of any of the rights above, with the right, but not the obligation, to sue and collect damages for use
or infringement of the intellectual property rights above; 

        All
Proceeds and products of the foregoing, including all insurance, indemnity or warranty payments. 

        "Inventory" has the meaning set forth in the Code and includes 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 from the sale or disposition of any of the foregoing and any documents of title. 

        "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. 

        "Letter-of-credit right" means a right to payment or performance under a letter of credit, whether or not the
beneficiary has demanded or is at the time entitled to demand payment or performance. 

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

        "Loan Documents" are, collectively, this Agreement, the Revolving Promissory Note, any note, or notes or guaranties executed by Borrower
and any other present or future agreement between Borrower and/or for the benefit of Bank in connection with this Agreement, all as amended, extended or restated. 

        "Material Adverse Change" has the meaning set forth in Section 8.3. 

        "Obligations" are debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, including cash management
services, letters of credit and foreign exchange contracts, if any and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to
Bank. 

        "Patents" are patents, patent applications and like protections, including improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same. 

        "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. 

        "Permitted Investments" are: 

        (a)  Investments
shown on the Schedule and existing on the Closing Date (including, but not limited to, Borrower's Subsidiaries); 

        (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; and 

        (c)  Investments
in accordance with the Witness Systems, Inc. Investment Policy, attached as a schedule hereto, as the same may be modified from time to time with the
approval of the Bank. 

        "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; 

        (d)  Licenses
or sublicenses granted in the ordinary course of Borrower's business and any interest or title of a licensor or under any license or sublicense, if the licenses
and sublicenses permit granting Bank a security interest; 

        (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. 

        "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. 

        "Proceeds" has the meaning described in the Code as in effect from time to time. 

        "Prime Rate" is Bank's most recently announced "prime rate," even if it is not Bank's lowest rate. 

        "Quick Assets" is, on any date, the Borrower's consolidated, unrestricted cash, cash equivalents (including, without limitation all
investments classified as current on Borrower's current balance sheet), plus billed accounts receivable (less any allowance for doubtful accounts) or unbilled accounts receivable which in accordance
with GAAP should be classified as accounts receivable, plus any deductions for Deferred Maintenance Revenues, all as determined according to GAAP. 

        "Registered Organization" means an organization organized solely under the law of a single state or the United States and as to which the
state or the United States must maintain a public record showing the organization to have been organized. 

        "Responsible Officer" is each of the Chief Executive Officer, the President, the Chief Financial Officer and the Corporate Controller of
Borrower. 

        "Revolving Maturity Date" is April 2, 2003. 

        "Revolving Promissory Note" means that certain Revolving Promissory Note of even date herewith in the maximum principal amount of Seven
Million Five Hundred Thousand Dollars ($7,500,000) from Borrower in favor of Bank, together with all renewals, amendments, modifications and substitutions, therefor. 

        "Schedule" is any attached schedule of exceptions. 

        "SEC" means the Securities and Exchange Commission of the United States. 

        "Subordinated Debt" is debt incurred by Borrower or its Subsidiary 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. 

        "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 Affiliates of the Person. 

        "Supporting Obligation" means a Letter-of-credit right, secondary obligation or obligation of a secondary obligor
or that supports the payment or performance of an account, chattel paper, a document, a general intangible, an instrument or investment property. 

        "Tangible Net Worth" is, on any date, the consolidated total assets, plus Subordinated Debt,  minus, (i) any amounts attributable to (a) goodwill,
(b) intangible items such as unamortized debt discount and expense, Patents,
trade and service marks and names, Copyrights and research and development expenses except prepaid expenses, and (c) reserves not already deducted from assets,  and (ii) Total Liabilities.

        "Total Liabilities" is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower's consolidated balance
sheet, including all Indebtedness, and current portion Subordinated Debt allowed to be paid, but excluding all other Subordinated Debt. 

        "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 Borrower connected with the trademarks. 

[Signatures are on the following Page]

	BORROWER:	 	 
	

WITNESS SYSTEMS, INC.	
 	

 
	

By:	
 	

 	
 	

 
	 	 	
 Name:

Title:	 	 
	

BANK:	
 	

 
	

SILICON VALLEY BANK	
 	

 
	

By:	
 	

 	
 	

 
	 	 	
 Name:

Title:

	 	 

 
 

Schedule 7.7    
  

        The Borrower has loaned David Gould, the Borrower's President and Chief Executive Officer, $1,478,832.37 pursuant to a full recourse three year Promissory Note.
The Borrower has loaned David Gould, the Borrower's President and Chief Executive Officer, $1,478,832.387 pursuant to a full recourse three year self liquidating Promissory Note, dated
March 15, 2002, bearing interest at 325 basis points in excess of the federal funds rate (as adjusted from time to time), with accrued interest and 1/3 of the principal amount
payable each February 1, commencing February 1, 2003. In addition to being full recourse, the note is secured by shares of Borrower's Common Stock owned by Mr. Gould and pledged
to Borrower, with Collateral maintenance provisions to keep the collateral value at a minimum amount equal to 150% of the principal amount outstanding from time to time. 

 
 

EXHIBIT A    
  

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

        All
goods and equipment now owned or hereafter acquired, including, without limitation, all machinery, fixtures, vehicles (including motor vehicles and trailers), and any interest in any
of the foregoing, and all attachments, accessories, accessions, replacements, substitutions, additions, and improvements to any of the foregoing, wherever located; 

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

        All
contract rights and general intangibles now owned or hereafter acquired, including, without limitation, goodwill, trademarks, servicemarks, trade styles, trade names, patents, patent
applications, leases, license agreements, franchise agreements, blueprints, drawings, purchase orders, customer lists, route lists, infringements, claims, computer programs, computer discs, computer
tapes, literature, reports, catalogs, design rights, income tax refunds, payments of insurance and rights to payment of any kind; 

        All
now existing and hereafter arising accounts, contract rights, royalties, license rights and all other forms of obligations owing to Borrower arising out of the sale or lease of
goods, the licensing of technology or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower; 

        All
Letter-Of-Credit Rights (whether or not the letter of credit is evidenced by a writing); 

        All
documents, cash, deposit accounts, securities, securities entitlements, securities accounts, investment property, financial assets, letters of credit, certificates of deposit,
instruments and chattel paper now owned or hereafter acquired and Borrower's Books relating to the foregoing; 

        All
Supporting Obligations and all Borrower's Books relating to the foregoing and any and all claims, rights and interests in any of the above and all substitutions for, additions and
accessions to and Proceeds thereof. 

Borrower
and Bank are parties to that certain 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 or enter into any agreement, document, instrument or other arrangement (except with or in
favor of the Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower from selling, transferring, assigning, mortgaging, pledging, leasing, granting a
security interest in, or encumbering any of its Intellectual Property, without Bank's prior written consent. 

 
 

EXHIBIT B    
  

	LOAN PAYMENT/ADVANCE REQUEST FORM
 DEADLINE FOR SAME DAY PROCESSING IS 3:00 E.S.T.
	Fax To:	 	617-969-5965	 	Date:	 
	 	 	 	 	 	

	

	

o	

Loan Payment:	

 	

 	

 	

 	
 	

 
	 	 	
	  Client Name (Borrower)	 	 	 	 
	
 	

From Account #	

 	

 	

To Account #	

 	
 	

 
	 	 	
(Deposit Account #)	 	 	
(Loan Account #)	 	 
	

 	

Principal $	

 	

and/or Interest $	

 	

 	
 	

 
	 	 	
	 	
	 	 
	

 	
All Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of the date:

	
 	
 	

Authorized Signature:	

 	
 	

Phone Number:	

 
	 	 	 	
	 	 	

	

	o  LOAN ADVANCE:
	 	Complete Outgoing Wire Request section below if all or a portion of the funds from this loan advance are for an outgoing wire.
	
 	

From Account #	

 	

 	

 	

To Account #	

 	
 	

 
	 	 	
(Loan Account #)	 	 	
(Deposit Account #)	 	 
	

 	

Amount of Advance $	

 	

 	

 	

 	
 	

 
	 	 	 	
	 	 	 	 	 
	

 	
All Borrower's representations and warranties in the Loan and Security Agreement are true, correct and complete in all material respects to on the date of the telephone transfer request for and advance, but those
representations and warranties expressly referring to another date shall be true, correct and complete in all material respects as of the date:

	
 	
 	

Authorized Signature:	

 	
 	

Phone Number:	

 
	 	 	 	
	 	 	

	

	

 	
 	
OUTGOING WIRE REQUEST
	 	 	Complete only if all or a portion of funds from the loan advance above are to be wired.
	Deadline for same day processing is 12:00 p.m., E.S.T.
	

 	
 	

Beneficiary Name:	

 	
 	

 	

Amount of Wire: $	

 
	 	 	 	
	 	

	

 	
 	

Beneficiary Bank:	

 	
 	

 	

Account Number:	

 
	 	 	 	
	 	

	 	 	City and Sate:	 	 	 	 	 
	 	 	 	
	 	 

	

 	
 	

Beneficiary Bank Transit (ABA) #:	

 	
 	

Beneficiary Bank Code (Swift, Sort, Chip, etc.):
 (For International Wire Only)	

 
	 	 	 	
	 	 	

	 	 	Intermediary Bank:	 	 	 	Transit (ABA) #:	 	 
	 	 	 	 	
	 	 	 	

	

 	
 	

For Further Credit to:	
 	

 	
 	

 	
 	

 
	 	 	 	 	

	

 	
 	

Special Instruction:	
 	

 	
 	

 	
 	

 
	 	 	 	 	

	 	 	By signing below, I (we) acknowledge and agree that my (our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreements(s) covering funds transfer
service(s), which agreements(s) were previously received and executed by me (us).

	

 	
 	

Authorized Signature:	

 	

2nd Signature (If Required):	

 
	 	 	 	
	 	 	

	

 	
 	

Print Name/Title:	

 	

Print Name/Title:	

 	

 
	 	 	 	
	 	

	

 	
 	

Telephone #	

 	

Telephone #	

 	

 
	 	 	 	
	 	

	

EXHIBIT C

BORROWING BASE CERTIFICATE  

	

	Borrower:    Witness Systems, Inc.	 	Bank:	 	Silicon Valley Bank

3003 Tasman Drive

Santa Clara, CA 95054
	

Commitment Amount: $7,500,000	
 	

 	
 	

 
	

	

ACCOUNTS RECEIVABLE	
 	

 	
 	

 
	1.	 	Accounts Receivable Book Value as of         	 	 	 	$                
	2.	 	Additions (please explain on reverse)	 	 	 	$                
	3.	 	TOTAL ACCOUNTS RECEIVABLE	 	 	 	$                
	

ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)	
 	

 	
 	

 
	4.	 	Amounts over 90 days due	 	$                	 	 
	5.	 	Balance of 50% over 90 day accounts	 	$                	 	 
	6.	 	Credit balances over 90 days	 	$                	 	 
	7.	 	Concentration Limits	 	$                	 	 
	8.	 	Governmental Accounts	 	$                	 	 
	9.	 	Contra Accounts	 	$                	 	 
	10.	 	Promotion or Demo Accounts	 	$                	 	 
	11.	 	Intercompany/Employee Accounts	 	$                	 	 
	12.	 	Other (please explain on reverse)	 	$                	 	 
	13.	 	TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS	 	 	 	$                
	14.	 	Eligible Accounts (#3 minus #13)	 	 	 	$                
	15.	 	LOAN VALUE OF ACCOUNTS (80% of #14)	 	 	 	 
	16.	 	TOTAL ELIGIBLE FOREIGN ACCOUNTS	 	 	 	$                
	17.	 	LOAN VALUE OF FOREIGN ACCOUNTS (70% OF 16)	 	 	 	$                
	

BALANCES	
 	

 	
 	

 
	18.	 	Maximum Loan Amount	 	$7,500,000	 	 
	19.	 	Total Funds Available [Lesser of #18 or # 15 + 17]	 	 	 	$                
	20.	 	Present balance owing on Line of Credit	 	$                	 	 
	21.	 	Outstanding under Sublimits (LC)	 	$                	 	 
	22.	 	RESERVE POSITION (#19 minus #20 and #21)	 	$                	 	 

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

	 	 	 	 	BANK USE ONLY
	COMMENTS:	 	 	 	 
	 	 	 	 	Rec'd By:	 	 
	 	 	 	 	 	 	
 Auth. Signer
	

 	
 	

 	
 	

Date:	
 	

 
	 	 	 	 	 	 	

	
By:	
 	

 	
 	
Verified:	
 	

 
	 	 	
Authorized Signer	 	 	 	
Auth. Signer
	

 	
 	

 	
 	

 	
 	

Date:

EXHIBIT D

COMPLIANCE CERTIFICATE  

	TO:	 	SILICON VALLEY BANK

3003 Tasman Drive

Santa Clara, CA 95054
	

FROM:	
 	

Witness Systems, Inc.

        The
undersigned authorized officer of Witness Systems, Inc. ("Borrower") certifies that under the terms and conditions of the Loan and Security Agreement between Borrower and Bank
(the "Agreement"), (i) Borrower is in complete compliance for the period ending
                                 with all required covenants except as
noted below and (ii) all representations and warranties in the Agreement are true and correct in all material respects on this date. Attached are the required documents supporting the
certification. The Officer certifies that these are prepared in accordance with Generally Accepted Accounting Principles (GAAP) consistently applied from one period to the next except as explained in
an accompanying letter or footnotes. The Officer acknowledges that no borrowings may be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this certificate is delivered. 

Please indicate compliance status by circling Yes/No under "Complies" column.  

	Reporting Covenant
 
	 	Required
	 	Complies

	Quarterly financial statements + CC	 	Quarterly within 45 days

(if QR below 2 to 1)	 	Yes No
	Annual (Audited)	 	FYE within 90 days	 	Yes No
	10-K & 10Q	 	Within 5 days of filing	 	Yes No
	A/R Agings	 	Monthly within 30 days

(if Advances outstanding)	 	Yes No
	A/R Audit	 	Annual	 	Yes No
	Borrowing Base Certificate	 	Monthly within 30 days

(if Advances outstanding)	 	Yes No

	
Financial Covenant
	
 	

Required
	
 	

Actual
	
 	

Complies

	Maintain on a quarterly Basis:	 	 	 	 	 	 	 
	 	Minimum Quick Ratio	 	1.5:1.00	 	 	         :1.00	 	Yes No
	 	Minimum Tangible Net Worth	 	$50,000,000, Plus 75% of Net Income, Plus 50% of Net Cash Equity	 	$	            	 	 
	 	 	Yes No	 	 	 	 	 	 	 
	Maintain on a monthly basis when QR is less than 2.0:1.00	 	 	 	 	 	 	 
	 	Minimum Quick Ratio	 	1.5:1.00	 	 	         :1.00	 	Yes No
	Have there been updates to Borrower's intellectual property, if appropriate?	 	Yes / No

	Comments Regarding Exceptions:    See Attached.	 	BANK USE ONLY
	

 	
 	

Received by:	
 	

 
	 	 	 	 	
AUTHORIZED SIGNER
	Sincerely,	 	 	 	 
	

 	
 	

Date:	
 	

 
	 	 	 	 	

	
	 	 	 	 
	 	 	Verified:	 	 
	 	 	 	 	
AUTHORIZED SIGNER
	
SIGNATURE	 	 	 	 
	 	 	Date:	 	 
	 	 	 	 	

	
TITLE	 	 	 	 
	 	 	Compliance Status:                Yes    No
	

DATE	
 	

 	
 	

 

Schedule to Loan and Security Agreement 

The
exact correct corporate name of Borrower is (attach a copy of the formation documents, e.g., articles, partnership agreement): Witness Systems, Inc. 

Borrower's
State of formation: Delaware 

Borrower
has operated under only the following other names (if none, so state): None 

All
other address at which the Borrower does business are as follows (attach additional sheets if necessary and include all warehouse addresses): See Attached Sheet 

Borrower
has deposit accounts and/or investment accounts located only at the following institutions: 

Account
Numbers: 

Liens
existing on the Closing Date and disclosed to and accepted by Bank in writing: 

Investments
existing on the Closing Date and disclosed to and accepted by Bank in writing: 

See
Attached Chase and Lehman Statements as of 11/30/01 

Subordinated Debt: 

Indebtedness
on the Closing Date and disclosed to and consented to by Bank in writing: 

None

The
following is a list of the Borrower's copyrights (including copyrights of software) which are registered with the United States Copyright Office. (Please include name of the copyright and
registration number and attach a copy of the registration): 

The
following is a list of all software which the Borrower sells, distributes or licenses to others, which is not registered with the United States
Copyright Office. (Please include versions which are not registered: 

The
following is a list of all of the Borrower's patents which are registered with the United States Patent Office. (Please include name of the patent and registration number and attach a copy of the
registration.): 

The
following is a list of all of the Borrower's patents which are pending with the United States Patent Office. (Please include name of the patent and a copy of the application.): 

The
following is a list of all of the Borrower's registered trademarks. (Please include name of the trademark and a copy of the registration.): 

Borrower
is not subject to litigation which would have a material adverse effect on the Borrower's financial condition, except the following (attach additional comments, if needed): 

Tax
ID Number: 23-2518693 

Delaware
Organizational
Number:                                        
         

QuickLinks

LOAN AND SECURITY AGREEMENT

Schedule 7.7

EXHIBIT A

EXHIBIT B

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