Document:

Exhibit
10.1

 

Form of
Subscription Agreement

 

This
Subscription Agreement (this “Agreement”) is dated September 18,
2009, by and between the investor identified on the signature page hereto
(the “Investor”) and Northern Technologies International Corporation, a
Delaware corporation (the “Company”), whereby the parties agree as
follows:

 

1.             Subscription.

 

Investor
agrees to buy and the Company agrees to sell and issue to Investor such number
of shares (the “Shares”) of common stock, par value $0.02 per share (“Common
Stock”), set forth on the signature page hereto, for an aggregate
purchase price set forth on the signature page hereto (the “Purchase
Price”).

 

The
Shares have been registered under a Registration Statement on Form S-3,
Registration No. 333-153891, which registration statement (the “Registration
Statement”) has been declared effective by the Securities and Exchange
Commission, has remained effective since such date and is effective on the date
hereof.

 

ON
SEPTEMBER 23, 2009 (THE “CLOSING DATE”), THE INVESTOR SHALL REMIT BY
WIRE TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE
SHARES BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING ACCOUNT DESIGNATED BY
THE COMPANY:

 

BANK:                         National City
Bank Cleveland

23711 Chagrin Blvd

Beachwood OH 
44122

 

SWIFT CODE NATCUS33

ABA NUMBER

ACCOUNT NUMBER

 

Attention: 
Northern Technologies International Corporation Account

4201 Woodland Rd

Circle Pines MN 
55014

 

Such funds shall be
delivered unless the Placement Agency Agreement (the “Placement Agreement”)
between the Company and the placement agent engaged by the Company in
connection with the sale and issuance of the Shares (the “Placement Agent”)
is terminated pursuant to the terms thereof. 
The Company’s obligation to issue the Shares to the Investor will be
subject to (i) the receipt by the Company of the aggregate purchase price
for the Shares being purchased hereunder as set forth on the signature page, (ii) the
accuracy of the representations and warranties made by the Investor in this Agreement,
(iii) the Registration Statement remaining in effect and no stop order
proceedings with respect thereto being pending or threatened, and (iv) there
being no objections raised by the staff of the NASDAQ Stock Market to the
consummation of the sale without the approval of the Company’s
stockholders.  The Company proposes to
enter into substantially this same form of Agreement with certain other
investors (collectively with this Agreement, the “Transaction”) and the
Investor’s obligations are expressly not conditioned on the purchase by any or
all such other investors of the Shares that they have agreed to purchase from
the Company.  The Placement Agent shall
have no rights in or to any of the funds, except in respect of the Company’s
obligation to pay the Placement Agent’s fees and expenses.

 

 

NO
LATER THAN SEPTEMBER 21, 2009, THE INVESTOR SHALL DIRECT THE BROKER-DEALER AT
WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE MAINTAINED TO
SET UP A DEPOSIT/WITHDRAWAL AT CUSTODIAN (“DWAC”) INSTRUCTING THE
TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES ON THE
CLOSING DATE.

 

On
the Closing Date, assuming receipt by the Company of the Purchase Price for the
Shares being purchased by the Investor, the Company shall deliver to Investor
the Shares via the Depository Trust Company’s (“DTC”) Deposit or
Withdrawal at Custodian system via the DTC instructions set forth on the
signature page hereto, such Shares to be registered in such name or names
as designated by the Investor on the signature page hereto.  The
Shares shall be unlegended and free of any resale restrictions.

 

2.             Company Representations and Warranties.  The
Company represents and warrants that: (a) it has full right, power and
authority to enter into this Agreement and to perform all of its obligations
hereunder; (b) this Agreement has been duly authorized and executed by and
constitutes a valid and binding agreement of the Company enforceable in
accordance with its terms; (c) the execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby do not conflict
with or result in a breach of (i) the Company’s Certificate of
Incorporation or By-Laws, or (ii) any material agreement to which the
Company is a party or by which any of its property or assets is bound; (d) the
Shares have been duly authorized for sale and issuance, and when the Shares are
issued and delivered by the Company against payment therefor pursuant to this
Subscription, will be validly issued, fully paid and nonassessable; (e) the
Registration Statement, at the time it became effective, did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein not
misleading; (f) the prospectus contained in the Registration Statement, as
amended or supplemented, did not contain as of the effective date thereof, and
as of the date hereof does not contain, any untrue statement of a material fact
or omit to state a material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading; and (g) there are no preemptive rights or rights of first
refusal held by stockholders of the Company and applicable to the transactions contemplated
hereby.

 

3.             Investor Representations, Warranties and
Acknowledgments.  The Investor represents and warrants that: (a) it
has full right, power and authority to enter into this Agreement and to perform
all of its obligations hereunder; (b) this Agreement has been duly
authorized and executed by the Investor and constitutes a valid and binding
agreement of the Investor enforceable against the Investor in accordance with
its terms; (c) the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not conflict with or
result in a breach of (i) the Investor’s certificate of incorporation or
by-laws (or other governing documents), or (ii) any material agreement or
any law or regulation to which the Investor is a party or by which any of its
property or assets is bound; (d) the Investor hereby confirms that it has
had full access to and relied only upon the Disclosure Package (defined below),
including the Company’s periodic reports and other information incorporated by
reference therein, and was able to read, review, download and print such
materials. For purposes hereof, the term “Disclosure Package” means: (i) a
base prospectus dated January 16, 2009, including the information
incorporated by reference therein, (ii) the final prospectus supplement
related to the offering, including the information incorporated by reference
therein and (iii) the pricing information contained in this Agreement; (e) the
Investor is knowledgeable, sophisticated and experienced in making, and is
qualified to make decisions with respect to, investments in shares presenting
an investment decision like that involved in the purchase of the Shares,
including investments in securities issued by the Company and investments in
comparable companies, and has requested, received, reviewed and considered all
information it deemed relevant in making an informed decision to purchase the
Shares; (f) the Investor

 

 

has had no position, office or other material
relationship within the past three years with the Company or persons known to
it to be affiliates of the Company; (g) the Investor is not a Financial
Industry Regulatory Authority (FINRA) member or an Associated Person (as such
term is defined under the FINRA Membership and Registration Rules Section 1011)
as of the Closing, and (h) neither the Investor nor any group of Investors
(as identified in a public filing made with the Securities and Exchange
Commission) of which the Investor is a part in connection with this offering,
acquired, or obtained the right to acquire, 20% or more of the Common Stock (or
securities convertible into or exercisable for Common Stock) or the voting
power of the Company on a post-transaction basis.  The Investor further represents and warrants
that since the date on which the Placement Agent first contacted such Investor
about the offering of the Common Stock, the Investor has not engaged in any
transactions in the securities of the Company (including, without limitation,
any Short Sales involving the Company’s securities).  the Investor covenants that it will not
engage in any transactions in the securities of the Company (including Short
Sales) prior to the time that the transactions contemplated by this Agreement
are publicly disclosed.  The Investor
agrees that it will not use any of the Shares acquired pursuant to this
Agreement to cover any short position in the Common Stock if doing so would be
in violation of applicable securities laws. 
For purposes hereof, “Short Sales” include, without limitation, all “short
sales” as defined in Rule 200 promulgated under Regulation SHO under the
Exchange Act, whether or not against the box, and all types of direct and
indirect stock pledges, forward sales contracts, options, puts, calls, short
sales, swaps, “put equivalent positions” (as defined in Rule 16a-1(h) under
the Exchange Act) and similar arrangements (including on a total return basis),
and sales and other transactions through non-U.S. broker dealers or foreign
regulated brokers.

 

4.             Miscellaneous.

 

This
Agreement constitutes the entire understanding and agreement between the
parties with respect to its subject matter, and there are no agreements or
understandings with respect to the subject matter hereof which are not
contained in this Agreement.  This Agreement may be amended or modified
only in writing signed by the parties hereto.

 

This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become
effective when counterparts have been signed by each party and delivered to the
other parties hereto, it being understood that all parties need not sign the
same counterpart.  Execution may be made by delivery by facsimile or pdf
sent via electronic transmission.

 

The
provisions of this Agreement are severable and, in the event that any court or
officials of any regulatory agency of competent jurisdiction shall determine
that any one or more of the provisions or part of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision or part of a provision of this Agreement
and this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of such provision, had never been
contained herein, so that such provisions would be valid, legal and enforceable
to the maximum extent possible, so long as such construction does not
materially adversely effect the economic rights of either party hereto.

 

All
communications hereunder, except as may be otherwise specifically provided
herein, shall be in writing and shall be mailed, hand delivered, sent by a
recognized overnight courier service such as Federal Express, or sent via
facsimile and confirmed by letter, to the party to whom it is
addressed at the following
addresses or such other address as such party may advise the other in writing:

 

To the Company:  as
set forth on the signature page hereto.

 

 

To the Buyer:  as
set forth on the signature page hereto.

 

All notices hereunder
shall be effective upon receipt by the party to which it is addressed.

 

(e)   This Agreement shall be governed by and
interpreted in accordance with the internal laws of the State of New York for
contracts to be wholly performed in such state and without giving effect to the
principles thereof regarding the conflict of laws. Any legal action, suit
or proceeding arising out of or relating to this Agreement or the transactions
contemplated hereby shall only be instituted, heard and adjudicated (excluding
appeals) in a state or federal court located in New York, and each party hereto
knowingly, voluntarily and intentionally waives any objection which such party
may now or hereafter have to the laying of the venue of any such action, suit
or proceeding, and irrevocably submits to the exclusive personal jurisdiction
of any such court in any such action, suit or proceeding.  Service of process in connection with any
such action, suit or proceeding may be served on each party hereto anywhere in
the world by the same methods as are specified for the giving of notices under
this Agreement.

 

(f) 
This Agreement shall not be assigned by any party hereto, without the express
prior written consent of the Company or the Investor.

 

 

If the foregoing
correctly sets forth our agreement, please confirm this by signing and
returning to us the duplicate copy of this Agreement.

 

	
   

  	
   

  	
  NORTHERN
  TECHNOLOGIES INTERNATIONAL CORPORATION

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address for Notice:

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Northern Technologies
  International Corporation

  
	
   

  	
   

  	
  4201 Woodland Rd.

  
	
   

  	
   

  	
  Circle Pines, MN 55014

  
	
   

  	
   

  	
  Attention: Chief
  Executive Officer

  
	
   

  	
   

  	
  Facsimile: (763)
  225-6645

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Number
  of Shares:

  	
   

  	
   

  	
   

  
	
  Purchase
  Price Per Share:  $

  	
   

  	
   

  	
   

  
	
  Aggregate
  Purchase Price:  $

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  INVESTOR:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   Name:

  	
   

  	
   

  	
   

  
	
   Title:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address for Notice

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Facsimile:

  	
   

  	
   

  	
   

  
	
  Attention:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  DWAC Instructions:

  	
   

  	
   

  	
   

  
	
  Name
  of DTC Participant:

  	
   

  	
   

  	
   

  
	
  DTC
  Participant Number:

  	
   

  	
   

  	
   

  
	
  Account
  Number:

  	
   

  	
   

  	
   

  
						

 

 

NO
LATER THAN ONE (1) BUSINESS DAY AFTER THE EXECUTION OF THIS AGREEMENT BY
THE INVESTOR AND THE COMPANY, THE INVESTOR SHALL DIRECT THE BROKER-DEALER AT
WHICH THE ACCOUNT OR ACCOUNTS TO BE CREDITED WITH THE SHARES ARE MAINTAINED TO
SET UP A DEPOSIT/WITHDRAWAL AT CUSTODIAN (“DWAC”) INSTRUCTING THE
TRANSFER AGENT TO CREDIT SUCH ACCOUNT OR ACCOUNTS WITH THE SHARES ON THE
CLOSING DATE.

 

ON THE CLOSING DATE, THE INVESTOR SHALL REMIT BY WIRE
TRANSFER THE AMOUNT OF FUNDS EQUAL TO THE AGGREGATE PURCHASE PRICE FOR THE
SHARES BEING PURCHASED BY THE INVESTOR TO THE FOLLOWING ACCOUNT:

 

BANK:                         National City
Bank Cleveland

23711 Chagrin Blvd

Beachwood OH 
44122

 

SWIFT CODE NATCUS33

ABA NUMBER

ACCOUNT NUMBER

 

Attention: 
Northern Technologies International Corporation Account

4201 Woodland Rd

Circle Pines MN 
55014Exhibit 10.1

 

 

AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT

 

This AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (this “Agreement”)
dated as of the Effective Date is between SILICON VALLEY BANK,
a California corporation (“Bank”), with its principal place of business at 3003
Tasman Drive, Santa Clara, California 95054 (FAX (408) 654-1099) and XPLORE
TECHNOLOGIES CORPORATION OF AMERICA, a Delaware corporation (“Borrower”), with
its principal place of business at 14000 Summit Drive, Suite 900, Austin, Texas
78728 (FAX (512) 336-7791), amends and restates the terms of that certain Loan
and Security Agreement by and between Bank and Borrower dated as of September 15,
2005, as amended from time to time (the “Original Agreement”), and provides the
terms on which Bank shall lend to Borrower and Borrower shall repay Bank.   The parties agree as follows:

 

1              ACCOUNTING AND OTHER TERMS

 

Accounting
terms not defined in this Agreement shall be construed following GAAP.  Calculations and determinations must be made following
GAAP.  The term “financial statements”
includes the notes and schedules.  The
terms “including” and “includes” always mean “including (or includes) without
limitation,” in this or any Loan Document. 
Capitalized terms not otherwise defined in this Agreement shall have the
meanings set forth in Section 13. 
All other terms contained in this Agreement, unless otherwise indicated,
shall have the meanings provided by the Code, to the extent such terms are
defined therein.

 

2              LOAN AND TERMS OF PAYMENT

 

2.1          Promise to Pay.  Borrower
hereby unconditionally promises to pay Bank the unpaid principal amount of all
Advances hereunder with all interest, fees and finance charges due thereon as
and when due in accordance with this Agreement.

 

2.1.1       Financing of Accounts.

 

(a)           Availability.  Subject to
the terms of this Agreement, Borrower may request that Bank finance specific
Eligible Accounts.  Bank may, in its sole
discretion in each instance, finance such Eligible Accounts by extending credit
to Borrower in an amount equal to the result of the Advance Rate multiplied by
the face amount of the Eligible Account (the “Advance”).  Bank may, in its sole discretion, change the
percentage of the Advance Rate for a particular Eligible Account on a case by
case basis.  When Bank makes an Advance,
the Eligible Account becomes a “Financed Receivable.”  In addition, Borrower may request Non-Formula
Advances without regards to any specific Eligible Account in an amount not to
exceed the Non-Formula Amount and the Bank will provide such Non-Formula
Advances up to the Non-Formula Amount.

 

(b)           Maximum Advances.  The aggregate
face amount of all Financed Receivables plus the amount of Non-Formula Advances
outstanding at any time may not exceed the Facility Amount.  The aggregate amount of Non-Formula Advances
outstanding at any time may not exceed the Non-Formula Amount.

 

(c)           Borrowing Procedure.  Borrower will
deliver an Invoice Transmittal for each Eligible Account it offers or
Non-Formula Advance it requests.  Bank
may rely on information set forth in or provided with the Invoice Transmittal.

 

(d)           Credit Quality; Confirmations. 
Bank may, at its option, conduct a credit check of the Account Debtor
for each Account requested by Borrower for financing hereunder in order to
approve any such Account Debtor’s credit before agreeing to finance such
Account.  Bank may also verify directly
with the respective Account Debtors the validity, amount and other matters
relating to the Accounts (including confirmations of Borrower’s representations
in Section 5.3) by means of mail, telephone or otherwise, either in the
name of Borrower or Bank from time to time in its sole discretion.

 

1

 

(e)           Accounts Notification/Collection. 
Bank may notify any Person owing Borrower money of Bank’s security
interest in the funds and verify and/or collect the amount of the Account.

 

(f)            Maturity.  This
Agreement shall terminate and all Obligations outstanding hereunder shall be
immediately due and payable on the Maturity Date.

 

(g)           Bank’s Discretion. 
Notwithstanding anything to the contrary contained herein, this
Agreement may be terminated by Borrower or Bank at any time, and Bank is not
obligated to finance any Eligible Accounts. 
Bank and Borrower hereby acknowledge and agree that Bank’s agreement to
finance Eligible Accounts hereunder is discretionary in each instance.  Accordingly, there shall not be any recourse
to Bank, nor liability of Bank, on account of any delay in Bank’s making of,
and/or any decline by Bank to make, any loan or advance requested hereunder.

 

2.2          Collections, Finance Charges, Remittances and Fees. 
The Obligations shall be subject to the following fees and Finance
Charges.  Unpaid fees and Finance Charges
may, in Bank’s discretion, accrue interest and fees as described in Section 9.2
hereof.

 

2.2.1       Collections.  Collections
will be credited to the Financed Receivable Balance for such Financed
Receivable, but if there is an Event of Default, Bank may apply Collections to
the Obligations in any order it chooses during the continuance of such Event of
Default.  If Bank receives a payment for
both a Financed Receivable and a non-Financed Receivable, the funds will first
be applied to the Financed Receivable, then to any Non-Formula Advances, and,
if there is no Event of Default which is continuing, the excess will be
remitted to Borrower, subject to Section 2.2.7.

 

2.2.2       Facility Fee.  A fully
earned, non-refundable facility fee of Seventeen Thousand Five Hundred Dollars
($17,500) is due upon execution of this Agreement (the “Facility Fee”).

 

2.2.3       Finance Charges.  In computing
Finance Charges on the Obligations under this Agreement, all Collections
received by Bank shall be deemed applied by Bank on account of the Obligations
two (2) Business Days after receipt of the Collections.  Borrower will pay a finance charge (the “Finance
Charge”) on the Financed Receivable Balance which is equal to the Applicable
Rate divided by 360 multiplied by the number of days each such
Financed Receivable is outstanding multiplied by the outstanding
Financed Receivable Balance.  The Finance
Charge with respect to Financed Receivables is payable when the Advance made
based on such Financed Receivable is payable in accordance with Section 2.3
hereof.  Borrower will pay the Finance
Charge on the Non-Formula Advances which is equal to the Applicable Rate divided
by 360 multiplied by the number of days each such Non-Formula
Advance is outstanding multiplied by the outstanding amount of such
Non-Formula Advance.  During the
continuance of an Event of Default, the Applicable Rate will increase an
additional five percent (5.0%) per annum effective immediately upon the
occurrence of such Event of Default. In the event that the aggregate amount of
Finance Charges earned by Bank in any Reconciliation Period is less than the
Minimum Finance Charge, Borrower shall pay to Bank an additional Finance Charge
equal to (i) the Minimum Finance Charge minus (ii) the aggregate
amount of all Finance Charges earned by Bank in such Reconciliation
Period.   Such additional Finance Charge
shall be payable on the first day of the next Reconciliation Period.

 

2.2.4       Collateral Handling Fee.  Borrower will pay to Bank a
collateral handling fee equal to 0.45% per month of the Financed Receivable
Balance for each Financed Receivable outstanding based upon a 360 day year (the
“Collateral Handling Fee”), provided, however, for any Subject Month (as
of the first calendar day of such month), to the extent that Borrower
maintained a Quick Ratio of at least 0.50 to 1.0 at all times during the
applicable Testing Month, the Collateral Handling Fee shall be equal to 0.35%
per month of the Financed Receivable Balance for each Financed Receivable
outstanding based upon a 360 day year.  This fee is charged on a
daily basis which is equal to the Collateral Handling Fee divided by 30,
multiplied by the number of days each such Financed Receivable is outstanding,
multiplied by the outstanding Financed Receivable Balance.  The Collateral
Handling Fee is payable when the Advance made based on such Financed Receivable
is payable in accordance with Section 2.3 hereof.  In computing
Collateral Handling Fees under this Agreement, all Collections received by Bank
shall be deemed applied by Bank on account of Obligations two (2) Business
Days after receipt of the Collections. 
During the continuance of an Event of Default, the Collateral Handling
Fee will increase an additional 0.50% effective immediately upon such Event of
Default.

 

2

 

2.2.5       Accounting.  After each
Reconciliation Period, Bank will provide an accounting of the transactions for
that Reconciliation Period, including the amount of all Financed Receivables,
Non-Formula Advances, Collections, Adjustments, Finance Charges, Collateral
Handling Fee and the Facility Fee.  If
Borrower does not object to the accounting in writing within thirty (30) days
it shall be considered accurate absent manifest error.  All Finance Charges and other interest and
fees are calculated on the basis of a 360 day year and actual days elapsed.

 

2.2.6       Deductions.  Bank may
deduct fees, Finance Charges, Advances which become due pursuant to Section 2.3,
and other amounts due pursuant to this Agreement from any Advances made or
Collections received by Bank.

 

2.2.7       Lockbox; Account Collection Services.

 

(a)           Borrower shall direct each Account Debtor (and each
depository institution where proceeds of Accounts are on deposit) to remit
payments with respect to the Accounts to a lockbox account established with
Bank or to wire transfer payments to a cash collateral account that Bank
controls (collectively, the “Lockbox”).  It will be considered an immediate Event of
Default if the Lockbox is not set-up and operational on the Effective Date.

 

(b)           Provided no Event of Default exists and is continuing,
within three (3) days of receipt of such amounts by Bank, Bank will turn
over to Borrower the proceeds of the Accounts other than Collections with
respect to Financed Receivables and the amount of Collections in excess of the
amounts for which Bank has made an Advance to Borrower, less any amounts owing
from Borrower to Bank, such as the Finance Charge, the Facility Fee, payments
due to Bank, other fees and expenses, or otherwise; provided, however, Bank may
hold such excess amount with respect to Financed Receivables as a reserve until
the end of the applicable Reconciliation Period if Bank, in its discretion,
determines that other Financed Receivable(s) may no longer qualify as an
Eligible Account at any time prior to the end of the subject Reconciliation
Period.  This Section does not
impose any affirmative duty on Bank to perform any act other than as
specifically set forth herein.  All
Accounts and the proceeds thereof are Collateral and if an Event of Default occurs,
Bank may apply the proceeds of such Accounts to the Obligations.

 

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

 

2.3          Repayment of Obligations; Adjustments.

 

2.3.1       Repayment.  Borrower will
repay each Advance (other than the Non-Formula Advances) on the earliest of: (a) the
date on which payment is received of the Financed Receivable with respect to
which the Advance was made, (b) the date on which the Financed Receivable
is no longer an Eligible Account, (c) the date on which any Adjustment is
asserted to the Financed Receivable (but only to the extent of the Adjustment
if the Financed Receivable remains otherwise an Eligible Account), (d) the
date on which there is a breach of any warranty or representation set forth in Section 5.3,
or a breach of any covenant in this Agreement or (e) the Maturity Date (including
any early termination). Each payment will also include all accrued Finance
Charges and Collateral Handling Fees with respect to such Advance and all other
amounts then due and payable hereunder. 
Borrower will pay accrued but unpaid interest on each Non-Formula
Advance on the first day of each month and all principal and accrued interest
on the Non-Formula Advances shall be due and payable in its entirety on the
Maturity Date.  Borrower may repay and
reborrow the Non-Formula Advances at any time prior to the Maturity Date
without penalty or premium.

 

2.3.2       Repayment on Event of Default.  So long as
there is an Event of Default, Borrower will, if Bank demands (or, upon the
occurrence of an Event of Default under Section 8.5, immediately without
notice or demand from Bank) repay all of the Advances.  The demand may, at Bank’s option, include the
Advance for each Financed Receivable or Non-Formula Advances then outstanding
and all accrued Finance Charges, Collateral Handling Fee, attorneys’ and
professional fees, court costs and expenses, and any other Obligations.

 

3

 

2.3.3       Debit of Accounts.  Bank may debit
any of Borrower’s deposit accounts for payments or any amounts Borrower owes
Bank hereunder.  Bank shall promptly
notify Borrower when it debits Borrower’s accounts.  These debits shall not constitute a set-off.

 

2.3.4       Adjustments.  If, at any
time during the term of this Agreement, any Account Debtor asserts an
Adjustment, Borrower issues a credit memorandum, or any of the representations
and warranties in Section 5.3 or covenants in this Agreement are no longer
true in all material respects, Borrower will promptly advise Bank.

 

2.4          Power of Attorney. 
Borrower
irrevocably appoints Bank and its successors and assigns as attorney-in-fact
and authorizes Bank, regardless of whether there has been an Event of Default,
to: (a) sell, assign, transfer, pledge, compromise, or discharge all or
any part of the Financed Receivables; (b) demand, collect, sue, and give
releases to any Account Debtor for monies due and compromise, prosecute, or
defend any action, claim, case or proceeding about the Financed Receivables,
including filing a claim or voting a claim in any bankruptcy case in Bank’s or
Borrower’s name, as Bank chooses; (c) prepare, file and sign Borrower’s
name on any notice, claim, assignment, demand, draft, or notice of or
satisfaction of lien or mechanics’ lien or similar document; (d) notify
all Account Debtors to pay Bank directly; (e) receive, open, and dispose
of mail addressed to Borrower; (f) endorse Borrower’s name on checks or
other instruments (to the extent necessary to pay amounts owed pursuant to this
Agreement); and (g) execute on Borrower’s behalf any instruments,
documents, financing statements to perfect Bank’s interests in the Financed
Receivables and Collateral and do all acts and things necessary or expedient,
as determined solely and exclusively by Bank, to protect, preserve, and
otherwise enforce Bank’s rights and remedies under this Agreement, as directed
by Bank.

 

3              CONDITIONS OF LOANS

 

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

 

(a)           this Agreement duly executed by Borrower;

 

(b)           a certificate of the Secretary of Borrower with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of this Agreement and the other Loan Documents to which
it is a party;

 

(c)           an Amended and Restated Intellectual Property Security
Agreement duly executed by Borrower;

 

(d)           a Perfection Certificate duly executed by Borrower and
Guarantor;

 

(e)           an Amended and Restated Guaranty, Amended and Restated
Security Agreement and Amended and Restated Intellectual Property Security
Agreement duly executed by Guarantor;

 

(f)            a certificate of the Secretary of Guarantor with
respect to articles, bylaws, incumbency and resolutions authorizing the
execution and delivery of the other Loan Documents to which it is a party;

 

(g)           evidence satisfactory to Bank that the insurance
policies required by Section 6.4 hereof are in full force and effect,
together with appropriate evidence showing lender loss payable and/or
additional insured clauses or endorsements in favor of Bank;

 

(h)           payment of the fees and Bank Expenses then due and
payable;

 

(i)            Certificate of Foreign Qualification (if applicable);

 

(j)            Certificate of Good Standing/Legal Existence; and

 

4

 

(k)           such other documents, and completion of such other
matters, as Bank may reasonably deem necessary or appropriate.

 

3.2          Conditions Precedent to all Advances. 
Bank’s agreement to make each Advance, including the initial Advance, is
subject to the following:

 

(a)           receipt of the Invoice Transmittal;

 

(b)           Bank shall have (at its option) conducted the confirmations
and verifications as described in Section 2.1.1 (d) (not applicable
for Non-Formula Advances); and

 

(c)           each of the representations and warranties in Section 5
shall be true in all material respects on the date of the Invoice Transmittal
and on the effective date of each Advance and no Event of Default shall have
occurred and be continuing, or result from the Advance.  Each Advance is Borrower’s representation and
warranty on that date that the representations and warranties in Section 5
remain true in all material respects.

 

4              CREATION OF SECURITY
INTEREST

 

4.1          Grant of Security Interest. 
Borrower hereby grants Bank, to secure the payment and performance in
full of all of the Obligations, a continuing security interest in, and pledges
to Bank, the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof.  Borrower represents, warrants, and covenants
that the security interest granted herein shall be a first priority security
interest in the Collateral. If Borrower shall at any time, acquire a commercial
tort claim, Borrower shall promptly notify Bank in a writing signed by Borrower
of the general details thereof and grant to Bank in such writing a security
interest therein and in the proceeds thereof, all upon the terms of this
Agreement, with such writing to be in form and substance satisfactory to Bank.

 

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

 

4.2          Authorization to File Financing Statements. 
Borrower hereby authorizes Bank to file financing statements, without
notice to Borrower, with all appropriate jurisdictions to perfect or protect
Bank’s interest or rights hereunder, including a notice that any disposition of
the Collateral, by either Borrower or any other Person, shall be deemed to
violate the rights of Bank under the Code. 
Any such financing statements may indicate the Collateral as “all assets
of the Debtor” or words of similar effect, or as being of an equal or lesser
scope, or with greater detail, all in Bank’s discretion.

 

5              REPRESENTATIONS AND
WARRANTIES

 

Borrower
represents and warrants as follows:

 

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

 

5

 

years, changed its jurisdiction of formation,
organizational structure or type, or any organizational number assigned by its
jurisdiction; and (f) all other information set forth on the Perfection
Certificate pertaining to Borrower and each of its Subsidiaries is accurate and
complete in all material respects (it
being understood and agreed that Borrower may from time to time update certain
information in the Perfection Certificate after the Effective Date to the
extent permitted by one or more specific provisions in this Agreement).  If Borrower is not now a Registered
Organization but later becomes one, Borrower shall promptly notify Bank of such
occurrence and provide Bank with Borrower’s organizational identification
number.

 

The
execution, delivery and performance by Borrower of the Loan Documents to which
it is a party have been duly authorized, and do not (i) conflict with any
of Borrower’s organizational documents, (ii) contravene, conflict with,
constitute a default under or violate any material Requirement of Law, (iii) contravene,
conflict or violate any applicable order, writ, judgment, injunction, decree,
determination or award of any Governmental Authority by which Borrower or any
its Subsidiaries or any of their property or assets may be bound or affected, (iv) require
any action by, filing, registration, or qualification with, or Governmental
Approval from, any Governmental Authority (except such Governmental Approvals
which have already been obtained and are in full force and effect, or (v) constitute
an event of default under any material agreement by which Borrower is
bound.  Borrower is not in default under
any agreement to which it is a party or by which it is bound in which the
default could reasonably be expected to have a material adverse effect on
Borrower’s business.

 

5.2          Collateral.  Borrower has
good title, has rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free and clear of
any and all Liens except Permitted Liens.  
Borrower has no deposit accounts other than the deposit accounts with
Bank, the deposit accounts, if any, described in the Perfection Certificate delivered
to Bank in connection herewith, or of which Borrower has given Bank notice and
taken such actions as are necessary to give Bank a perfected security interest
therein. The Accounts are bona fide, existing obligations of the Account
Debtors.

 

The Collateral is
not in the possession of any third party bailee (such as a warehouse) except as
otherwise provided in the Perfection Certificate.  None of the components of the Collateral
shall be maintained at locations other than as provided in the Perfection
Certificate or as permitted pursuant to Section 7.2.  In the event that Borrower, after the date
hereof, intends to store or otherwise deliver any portion of the Collateral to
a bailee, then Borrower will first receive the written consent of Bank and such
bailee must execute and deliver a bailee agreement in form and substance
satisfactory to Bank in its sole discretion.

 

Borrower is the
sole owner of its intellectual property, except for non-exclusive licenses
granted to its customers in the ordinary course of business.  Each patent is valid and enforceable, and no
part of the intellectual property has been judged invalid or unenforceable, in
whole or in part, and to the best of Borrower’s knowledge, no claim has been
made that any part of the intellectual property violates the rights of any
third party except to the extent such claim could not reasonably be expected to
have a material adverse effect on Borrower’s business.  Except as noted on the Perfection
Certificate, Borrower is not a party to, nor is bound by, any material license
or other agreement with respect to which Borrower is the licensee (a) that
prohibits or otherwise restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other property, or (b) for
which a default under or termination of could interfere with the Bank’s right
to sell any Collateral.  Without prior
consent from Bank, Borrower shall not enter into, or become bound by, any such
license or agreement which is reasonably likely to have a material adverse
effect on Borrower’s business or financial condition.  Borrower shall take such steps as Bank
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for all such licenses or contract rights to be deemed “Collateral”
and for Bank to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such license or
agreement, whether now existing or entered into in the future.

 

5.3          Financed Receivables. 
Borrower represents and warrants for each Financed Receivable:

 

(a)           Such Financed Receivable is an Eligible Account;

 

(b)           Borrower is the owner of and has the legal right to
sell, transfer, assign and encumber such Financed Receivable;

 

6

 

(c)           The correct amount is on the Invoice Transmittal and
is not disputed;

 

(d)           Payment is not contingent on any obligation or
contract and Borrower has fulfilled all its obligations as of the Invoice
Transmittal date;

 

(e)           Such Financed Receivable is based on an actual sale
and delivery of goods and/or services rendered, is due to Borrower, is not past
due or in default, has not been previously sold, assigned, transferred, or
pledged and is free of any liens, security interests and encumbrances other
than Permitted Liens;

 

(f)            There are no defenses, offsets, counterclaims or
agreements for which the Account Debtor may claim any deduction or discount;

 

(g)           Borrower reasonably believes such Account Debtor is
not insolvent or subject to any Insolvency Proceedings;

 

(h)           Borrower has not filed or had filed against it
Insolvency Proceedings and does not anticipate any filing;

 

(i)            Bank has the right to endorse and/ or require Borrower
to endorse all payments received on Financed Receivables and all proceeds of
Collateral; and

 

(j)            No representation, warranty or other statement of
Borrower in any certificate or written statement given to Bank contains any
untrue statement of a material fact or omits to state a material fact necessary
to make the statement contained in the certificates or statement not
misleading.

 

5.4          Litigation.  There are no
actions or proceedings pending or, to the knowledge of Borrower’s Responsible
Officers, threatened in writing by or against Borrower or any Subsidiary in
which an adverse decision could reasonably be expected to cause a Material
Adverse Change.

 

5.5          No Material Deviation in Financial Statements. 
All consolidated financial statements for Borrower and any Subsidiaries
delivered to Bank fairly present in all material respects Borrower’s
consolidated financial condition and Borrower’s consolidated results of
operations.  There has not been any
material deterioration in Borrower’s consolidated financial condition since the
date of the most recent financial statements submitted to Bank.

 

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

 

5.7          Regulatory Compliance. 
Borrower is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act of 1940, as amended.  Borrower is not engaged as one of its
important activities in extending credit for margin stock (under Regulations X,
T and U of the Federal Reserve Board of Governors).  Neither Borrower nor any of its Subsidiaries
is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public
Utility Holding Company Act of 2005. 
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 of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all Government Authorities that are necessary to continue
their respective businesses as currently conducted.

 

5.8          Subsidiaries.  Borrower does
not own any stock, partnership interest or other equity securities except for
Permitted Investments.

 

7

 

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

 

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

 

6              AFFIRMATIVE COVENANTS

 

Borrower
shall do all of the following:

 

6.1          Government Compliance.

 

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

 

(b)           Obtain all of the Governmental Approvals necessary for
the performance by Borrower of its obligations under the Loan Documents to
which it is a party and the grant of a security interest to Bank in all of its
property.  Borrower shall promptly provide
copies of any such obtained Governmental Approvals to Bank.

 

6.2          Financial Statements, Reports, Certificates.

 

(a)           Deliver to Bank: 
(i) as soon as available, but no later than thirty (30) days  after the last day of each month, a company prepared consolidated
balance sheet and income statement covering Borrower’s consolidated operations
during the period certified by a Responsible Officer and in a form acceptable
to Bank (ii) 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 8-K filed with the Securities and Exchange Commission; (iii) a prompt
report of any legal actions pending or threatened against Borrower or any
Subsidiary that could reasonably be likely to result in damages or costs to
Borrower or any Subsidiary of One Hundred Thousand Dollars ($100,000.00) or
more; (iv) prompt notice of any material change in the composition of the
Intellectual Property Collateral, or the registration of any copyright,
including any subsequent ownership right of Borrower in or to any copyright,
patent or trademark not shown in the IP Agreement or knowledge of an event that
materially adversely affects the value of the Intellectual Property Collateral;
and (v) budgets, sales projections, operating plans or  other financial information reasonably
requested by Bank, including, as soon as available, but no later than the last
day of Borrower’s fiscal year, annual financial projections approved by
Borrower’s board of directors.

 

8

 

(b)           Within thirty (30) days after the last day of each
month, deliver to Bank with the monthly financial statements a Compliance
Certificate signed by a Responsible Officer in the form of Exhibit B.

 

(c)           Allow Bank to audit Borrower’s Collateral, including,
but not limited to, Borrower’s Accounts at Borrower’s expense, upon reasonable
notice to Borrower one (1) time per year, or more often if conditions
warrant.  Upon the occurrence and during
the continuance of an Event of Default, Bank may audit Borrower’s Collateral,
including, but not limited to, Borrower’s Accounts at Borrower’s expense and at
Bank’s sole and exclusive discretion and without notification and authorization
from Borrower.

 

(d)           Upon Bank’s request, provide a written report
respecting any Financed Receivable, if payment of any Financed Receivable does
not occur by its due date and include the reasons for the delay.

 

(e)           Provide Bank with, as soon as available, but no later
than twenty (20) days following each Reconciliation Period, an aged listing of
accounts receivable and accounts payable by invoice date, in form acceptable to
Bank.

 

(f)            Provide Bank with, as soon as available, but no later
than twenty (20) days following each Reconciliation Period where applicable, a
Deferred Revenue report, in form acceptable to Bank.

 

6.3          Taxes.  Borrower
shall make, and cause each Subsidiary to make, timely payment of all 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 such payments.

 

6.4          Insurance.  Keep its
business and the Collateral insured for risks and in amounts standard for
companies in Borrower’s industry and location, and as Bank may reasonably
request.  Insurance policies shall be in
a form, with companies, and in amounts that are reasonably satisfactory to
Bank.  All property policies shall have a
lender’s loss payable endorsement showing Bank as lender loss payee and waive
subrogation against Bank, and all liability policies shall show, or have
endorsements showing, Bank as an additional insured .All policies (or the loss
payable and additional insured endorsements) shall provide that the insurer
must give Bank at least twenty (20) days notice before canceling, amending, or
declining to renew its policy.  At Bank’s
request, Borrower shall deliver certified copies of policies and evidence of
all premium payments. Proceeds payable under any policy shall, at Bank’s
option, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as
required under this Section 6.4 or to pay any amount or furnish any
required proof of payment to third persons and Bank, Bank may make all or part
of such payment or obtain such insurance policies required in this Section 6.4,
and take any action under the policies Bank deems prudent.

 

6.5          Accounts.

 

(a)           To permit Bank to monitor Borrower’s financial
performance and condition, Borrower, Guarantor and all their Subsidiaries,
shall maintain their, primary depository and operating accounts and securities
accounts with Bank.

 

(b)           Borrower shall identify to Bank, in writing, any
deposit or securities account opened by Borrower with any institution other
than Bank.  In addition, for each such
account that Borrower or Guarantor at any time opens or maintains, Borrower
shall, at Bank’s request and option, pursuant to an agreement in form and
substance acceptable to Bank, cause the depository bank or securities
intermediary to agree that such account is the collateral of Bank pursuant to
the terms hereunder.  The provisions of
the previous sentence shall not apply to deposit accounts exclusively used for
payroll, payroll taxes and other employee wage and benefit payments to or for
the benefit of Borrower’s employees.

 

6.6          Protection and Registration of Intellectual
Property Rights.  Borrower shall:  (a) protect, defend and maintain the
validity and enforceability of its intellectual property; (b) promptly
advise Bank in writing of material infringements of its intellectual property;
and (c) not allow any intellectual property material to Borrower’s
business to be abandoned, forfeited or dedicated to the public without Bank’s
written consent.  If 

 

9

 

Borrower (i) obtains any patent, registered
trademark or servicemark, registered copyright, registered mask work, or any
pending application for any of the foregoing, whether as owner, licensee or
otherwise, or (ii) applies for any patent or the registration of any
trademark or servicemark, then Borrower shall immediately provide written
notice thereof to Bank and shall execute such intellectual property security
agreements and other documents and take such other actions as Bank shall
request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Bank in such property.  If Borrower decides to register any
copyrights or mask works in the United States Copyright Office, Borrower shall:
(x) provide Bank with at least fifteen (15) days prior written notice of
Borrower’s intent to register such copyrights or mask works together with a
copy of the application it intends to file with the United States Copyright
Office (excluding exhibits thereto); (y) execute an intellectual property
security agreement and such other documents and take such other actions as Bank
may request in its good faith business judgment to perfect and maintain a first
priority perfected security interest in favor of Bank in the copyrights or mask
works intended to be registered with the United States Copyright Office; and (z) record
such intellectual property security agreement with the United States Copyright
Office contemporaneously with filing the copyright or mask work application(s) with
the United States Copyright Office. 
Borrower shall promptly provide to Bank copies of all applications that
it files for patents or for the registration of trademarks, servicemarks,
copyrights or mask works, together with evidence of the recording of the
intellectual property security agreement necessary for Bank to perfect and
maintain a first priority perfected security interest in such property.

 

6.7          Litigation Cooperation. 
From the date hereof and continuing through the termination of this
Agreement, make available to Bank, without expense to Bank, Borrower and its
officers, employees and agents and Borrower’s books and records, to the extent
that Bank may deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Bank with respect to
any Collateral or relating to Borrower.

 

6.8          Further Assurances. 
Borrower shall 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
shall not do any of the following without Bank’s prior written consent.

 

7.1          Dispositions.  Convey, sell,
lease, transfer, assign, or otherwise dispose of (collectively a “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, except for Transfers (a) of Inventory in the ordinary course
of business; (b) of worn-out or obsolete Equipment; (c) in connection
with Permitted Liens and Permitted Investments and (d) of non-exclusive
licenses for the use of the property of Borrower or its Subsidiaries  in the ordinary course of business.

 

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 have a material change in its
ownership (other than by the sale of Borrower’s equity securities in a public
offering or to venture capital investors so long as Borrower identifies to Bank
the venture capital investors prior to the closing of the investment), or
management.  Borrower shall not, without
at least thirty (30) days prior written notice to Bank: (a) relocate its
chief executive office, or add any new offices or business locations, including
warehouses  (unless such new offices or
business locations contain less than Ten Thousand Dollars ($10,000.00) in
Borrower’s assets or property), or (b) change its jurisdiction of
organization, or (c) change its organizational structure or type, or (d) change
its legal name, or (e) change any organizational number (if any) assigned
by its jurisdiction of organization.

 

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.  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.

 

10

 

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

 

7.6          Distributions; Investments.  (a) 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 (b) pay any dividends or make any distribution or payment or redeem,
retire or purchase any capital stock other than dividends payable in common
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.  (a) Make
or permit any payment on any Subordinated Debt, except under the terms of the
subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
adversely affect the subordination thereof to Obligations owed to Bank.

 

7.9          Compliance.  Become an “investment
company” or a company controlled by an “investment company”, under the
Investment Company Act of 1940, as amended, or undertake as one of its
important activities extending credit to purchase or carry margin stock (as
defined in Regulation U of the Board of Governors of the Federal Reserve
System), 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, each as defined in ERISA, to occur; fail to comply with the
Federal Fair Labor Standards Act or violate any other law or regulation, if the
violation could reasonably be expected to have a material adverse effect on
Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or
permit any Subsidiary to withdraw from participation in, permit partial or
complete termination of, or permit the occurrence of any other event with
respect to, any present pension, profit sharing and deferred compensation plan
which could reasonably be expected to result in any liability of Borrower,
including any liability to the Pension Benefit Guaranty Corporation or its
successors or any other governmental agency.

 

8              EVENTS OF DEFAULT

 

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

 

8.1          Payment Default.  Borrower
fails to pay any of the Obligations when due;

 

8.2          Covenant Default. 
Borrower fails or neglects to perform any obligation in Section 6
or violates any covenant in Section 7 or fails or neglects to perform,
keep, or observe any other material term, provision, condition,  covenant or agreement contained in this
Agreement, any Loan Documents, or in any present or future agreement between
Borrower and Bank;

 

8.3          Material Adverse Change. 
A Material Adverse Change occurs;

 

8.4          Attachment; Levy; Restraint on Business.  (a) (i) The
service of process seeking to attach, by trustee or similar process, any funds
of Borrower or of any entity under control of Borrower (including a Subsidiary)
on deposit with Bank or any Bank Affiliate, or (ii) a notice of lien, levy,
or assessment is filed against any of Borrower’s assets by any government
agency, and the same under subclauses (i) and (ii) hereof are not,
within ten (10) days after the occurrence thereof, discharged or stayed
(whether through the posting of a bond or otherwise); provided, however, no
Credit Extensions shall be made during any ten (10) day cure period; and (b) (i) any
material 

 

11

 

portion of Borrower’s assets is attached, seized,
levied on, or comes into possession of a trustee or receiver, or (ii) any
court order enjoins, restrains, or prevents Borrower from conducting any part
of its business;

 

8.5          Insolvency.  (a) Borrower
is unable to pay its debts (including trade debts) as they become due or otherwise
becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an
Insolvency Proceeding is begun against Borrower and not dismissed or stayed
within thirty (30) days (but no Advances shall be made while of any of the
conditions described in clause (a) exist and/or until any Insolvency
Proceeding is dismissed);

 

8.6          Other Agreements. 
If there is a default in any agreement to which Borrower is a party with
a third party or parties resulting in a right by such third party or parties,
whether or not exercised, to accelerate the maturity of any Indebtedness in an
amount in excess of One Hundred Thousand Dollars ($100,000) or that could
result in a Material Adverse Change;

 

8.7          Judgments.  One or more
judgments, orders, or decrees for the payment of money in an amount,
individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000)
(not covered by independent third-party insurance as to which liability has
been accepted by such insurance carrier) shall be rendered against Borrower and
shall remain unsatisfied, unvacated, or unstayed for a period of ten (10) days
after the entry thereof (provided that no Advances will be made prior to the
satisfaction, vacation, or stay of such judgment, order, or decree);

 

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

 

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

 

8.10        Guaranty.  (a) Any guaranty of any Obligations
terminates or ceases for any reason to be in full force and effect; (b) any
Guarantor does not perform any obligation or covenant under any guaranty of the
Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5,
8.7, or 8.8. occurs with respect to any Guarantor, or (d) the liquidation,
winding up, or termination of existence of any Guarantor.

 

8.11        Governmental Approvals.  Any
Governmental Approval shall have been (a) revoked, rescinded, suspended,
modified in an adverse manner or not renewed in the ordinary course for a full
term or (b) subject to any decision by a Governmental Authority that
designates a hearing with respect to any applications for renewal of any of
such Governmental Approval or that could result in the Governmental Authority
taking any of the actions described in clause (a) above, and such decision
or such revocation, rescission, suspension, modification or non-renewal (i) has,
or could reasonably be expected to have, a Material Adverse Change, or (ii) adversely
affects the legal qualifications of Borrower or any of its Subsidiaries to hold
such Governmental Approval in any applicable jurisdiction and such revocation,
rescission, suspension, modification or non-renewal could reasonably be
expected to affect the status of or legal qualifications of Borrower or any of
its Subsidiaries to hold any Governmental Approval in any other jurisdiction.

 

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;

 

12

 

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

 

(d)           Settle or adjust disputes and claims directly with
Account Debtors for amounts, on terms and in any order that Bank considers
advisable and notify any Person owing Borrower money of Bank’s security
interest in such funds and verify the amount of such account.  Borrower shall 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;

 

(e)           Make any payments and do any acts it considers
necessary or reasonable to protect its security interest in the
Collateral.  Borrower shall assemble the
Collateral if Bank requests and make it available as Bank designates.  Bank may enter premises where the Collateral
is located, take and maintain possession of any part of the Collateral, and
pay, purchase, contest, or compromise any Lien which appears to be prior or
superior to its security interest and pay all expenses incurred.  Borrower grants Bank a license to enter and
occupy any of its premises, without charge, to exercise any of Bank’s rights or
remedies;

 

(f)            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;

 

(g)           Ship, reclaim, recover, store, finish, maintain,
repair, prepare for sale, advertise for sale, and sell the Collateral.  Bank is hereby granted a non-exclusive,
royalty-free license or other right to use, without charge, Borrower’s labels,
patents, copyrights, mask works, rights of use of any name, trade secrets,
trade names, trademarks, service marks, and advertising matter, or any similar
property as it pertains to the Collateral, in 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;

 

(h)           Place a “hold” on any account maintained with Bank
and/or deliver a notice of exclusive control, any entitlement order, or other
directions or instructions pursuant to any control agreement or similar
agreements providing control of any Collateral;

 

(i)            Demand and receive possession of Borrower’s Books; and

 

(j)            Exercise all rights and remedies available to Bank
under the Loan Documents or at law or equity, including all remedies provided
by the Code (including disposal of the Collateral pursuant to the terms
thereof).

 

9.2          Protective Payments. 
If Borrower fails to obtain insurance called for by Section 6.4 or
fails to pay any premium thereon or fails to pay any other amount which
Borrower is obligated to pay under this Agreement or by any other Loan
Document, Bank may obtain such insurance or make such payment, and all amounts
so paid by Bank are Bank Expenses and immediately due and payable, bearing
interest at the then highest applicable rate, and secured by the
Collateral.  Bank will make reasonable
effort to provide Borrower with notice of Bank obtaining such insurance at the
time it is obtained or within a reasonable time thereafter. No payments by Bank
are deemed an agreement to make similar payments in the future or Bank’s waiver
of any Event of Default.

 

9.3          Bank’s Liability for Collateral. 
So long as Bank complies with reasonable banking practices regarding the
safekeeping of Collateral in possession or under the control of Bank, Bank
shall not be liable or responsible for: (a) the safekeeping of the
Collateral; (b) any loss or damage to the Collateral; (c) any
diminution in the value of the Collateral; or (d) any act or default of
any carrier, warehouseman, bailee, or other Person.  Borrower bears all risk of loss, damage or
destruction of the Collateral.

 

9.4          Remedies Cumulative. 
Bank’s failure, at any time or times, to require strict performance by
Borrower of any provision of this Agreement or any other Loan Document shall
not waive, affect, or diminish any 

 

13

 

right of Bank thereafter to demand strict performance
and compliance herewith or therewith.  No
waiver hereunder shall be effective unless signed by Bank and then is only
effective for the specific instance and purpose for which it is given.  Bank’s rights and remedies under this
Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity. 
Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not
a waiver, election, or acquiescence.

 

9.5          Demand Waiver.  Borrower
waives demand, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees held by Bank on which Borrower is liable.

 

10           NOTICES.

 

All
notices, consents, requests, approvals, demands, or other communication by any
party to this Agreement or any other Loan Document must be in writing and shall
be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the
U.S. mail, first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by facsimile
transmission; (c) one (1) Business Day after deposit with a reputable
overnight courier with all charges prepaid; or (d) when delivered, if
hand-delivered by messenger, all of which shall be addressed to the party to be
notified and sent to the address or facsimile number provided at the beginning
of this Agreement.  Bank or Borrower may
change its address or facsimile number by giving the other party written notice
thereof in accordance with the terms of this Section 10.

 

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

 

California
law governs the Loan Documents without regard to principles of conflicts of
law.  Borrower and Bank each submit to
the exclusive jurisdiction of the State and Federal courts in Santa Clara
County, California; provided, however, that nothing in this Agreement shall be
deemed to operate to preclude Bank from bringing suit or taking other legal
action in any other jurisdiction to realize on the Collateral or any other
security for the Obligations, or to enforce a judgment or other court order in
favor of Bank.  Borrower expressly
submits and consents in advance to such jurisdiction in any action or suit
commenced in any such court, and Borrower hereby waives any objection that it
may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable
relief as is deemed appropriate by such court. 
Borrower hereby waives personal service of the summons, complaints, and
other process issued in such action or suit and agrees that service of such
summons, complaints, and other process may be made by registered or certified
mail addressed to Borrower at the address set forth in Section 10 of this
Agreement and that service so made shall be deemed completed upon the earlier
to occur of Borrower’s actual receipt thereof or three (3) days after
deposit in the U.S. mails, proper postage prepaid.

 

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

 

WITHOUT INTENDING IN ANY WAY TO LIMIT THE PARTIES’
AGREEMENT TO WAIVE THEIR RESPECTIVE RIGHT TO A TRIAL BY JURY, if the above
waiver of the right to a trial by jury is not enforceable, the parties hereto
agree that any and all disputes or controversies of any nature between them
arising at any time shall be decided by a reference to a private judge,
mutually selected by the parties (or, if they cannot agree, by the Presiding
Judge of the Santa Clara County, California Superior Court) appointed in
accordance with California Code of Civil Procedure Section 638 (or
pursuant to comparable provisions of federal law if the dispute falls within
the exclusive jurisdiction of the federal courts), sitting without a jury, in
Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court.  The
reference proceedings shall be conducted pursuant to and in accordance with the
provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive.  The private judge shall have
the power, among others, to grant provisional relief, including without limitation,
entering 

 

14

 

temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. 
All such proceedings shall be closed to the public and confidential and
all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party
desires to seek provisional relief, but a judge has not been appointed at that
point pursuant to the judicial reference procedures, then such party may apply
to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall
be conducted in the same manner as it would be before a court under the rules of
evidence applicable to judicial proceedings. 
The parties shall be entitled to discovery which shall be conducted in
the same manner as it would be before a court under the rules of discovery
applicable to judicial proceedings.  The
private judge shall oversee discovery and may enforce all discovery rules and
order applicable to judicial proceedings in the same manner as a trial court
judge.  The parties agree that the
selected or appointed private judge shall have the power to decide all issues
in the action or proceeding, whether of fact or of law, and shall report a
statement of decision thereon pursuant to the California Code of Civil
Procedure § 644(a).  Nothing in this
paragraph shall limit the right of any party at any time to exercise self-help
remedies, foreclose against collateral, or obtain provisional remedies.  The private judge shall also determine all
issues relating to the applicability, interpretation, and enforceability of
this paragraph.

 

12           GENERAL PROVISIONS

 

12.1        Successors and Assigns. 
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. 
Borrower may not assign this Agreement or any rights or obligations
under it without Bank’s prior written consent which may be granted or withheld
in Bank’s discretion.  Bank has the
right, 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, the Loan
Documents or any related agreement.

 

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

 

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

 

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

 

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

 

12.6        Correction of Loan Documents. 
Bank may correct patent errors and fill in any blanks in this Agreement
and the other Loan Documents consistent with the agreement of the parties.

 

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

 

15

 

representations, warranties, and negotiations between
the parties about the subject matter of this Agreement and the Loan Documents
merge into this Agreement and the Loan Documents.

 

12.8        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.

 

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

 

12.10      Confidentiality.  In handling
any confidential information, Bank shall exercise the same degree of care that
it exercises for its own proprietary information, but disclosure of information
may be made: (a) to Bank’s Subsidiaries or Affiliates; (b) to
prospective transferees or purchasers of any interest in the Credit Extensions
(provided, however, Bank shall use commercially reasonable efforts to obtain
such prospective transferee’s or purchaser’s agreement to the terms of this
provision); (c) as required by law, regulation, subpoena, or other order; (d) to
Bank’s regulators or as otherwise required in connection with Bank’s
examination or audit; (e) as Bank considers appropriate in exercising
remedies under the Loan Documents; and (f) to third-party service
providers of Bank so long as such service providers have executed a
confidentiality agreement with Bank with terms no less restrictive than those
contained herein.  Confidential
information does not include information that either: (i) is in the public
domain or in Bank’s possession when disclosed to Bank, or becomes part of the
public domain after disclosure to Bank; or (ii) is disclosed to Bank by a
third party, if Bank does not know that the third party is prohibited from
disclosing the information.

 

Bank may use confidential information for any purpose,
including, without limitation, for the development of client databases,
reporting purposes, and market analysis, so long as Bank does not disclose
Borrower’s identity or the identity of any person associated with Borrower
unless otherwise expressly permitted by this Agreement.  The provisions of the immediately preceding
sentence shall survive the termination of this Agreement.

 

12.11      Attorneys’ Fees, Costs and Expenses.   In any action
or proceeding between Borrower and Bank arising out of or relating to the Loan
Documents, the prevailing party shall be entitled to recover its reasonable
attorneys’ fees and other costs and expenses incurred, in addition to any other
relief to which it may be entitled.

 

12.12      Effect of Amendment and Restatement.  Except as otherwise set forth herein, this Agreement
is intended to and does completely amend and restate, without novation, the
Original Agreement.  All security
interests granted under the Original Agreement are hereby confirmed and
ratified and shall continue to secure all Obligations under this Agreement.

 

13           DEFINITIONS

 

13.1        Definitions.  In this
Agreement:

 

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

 

“Account
Debtor” is as
defined in the Code and shall include, without limitation, any person liable on
any Financed Receivable, such as, a guarantor of the Financed Receivable and
any issuer of a letter of credit or banker’s acceptance.

 

“Adjustments” are all discounts, allowances, returns, disputes,
counterclaims, offsets, defenses, rights of recoupment, rights of return,
warranty claims, or short payments, asserted by or on behalf of any Account
Debtor for any Financed Receivable.

 

16

 

“Advance” is defined in Section 2.1.1 and includes any
Advances made with respect to Financed Receivables and any Non-Formula
Advances.

 

“Advance
Rate”  means (i) eighty percent (80%) from the Effective
Date through September 30, 2009, (ii) seventy percent (70%) from October 1,
2009 through December 31, 2009 and (iii) sixty percent (60%) from January 1,
2010 through the Maturity Date, in all cases, net of any offsets related to
each specific Account Debtor.

 

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

 

“Applicable
Rate” is a per
annum rate equal to (i) with respect to Non-Formula Advances, the Prime
Rate and (ii) with respect to all other Advances the greater of (a) six
and one quarter percent (6.25%) or (b) the Prime Rate plus three percent
(3.00%), provided, however, for any
Subject Month (as of the first calendar day of such month), to the extent that
Borrower maintained a Quick Ratio of at least 0.50 to 1.0 at all times during
the applicable Testing Month, the Applicable Rate shall be a per annum rate
equal to the greater of (a) six and one quarter percent (6.25%) or (b) the
Prime Rate plus two and one half
percent (2.50%).

 

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

 

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

 

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

 

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

 

“Collateral” is any and all properties, rights and assets of
Borrower described on Exhibit A.

 

“Collateral
Handling Fee” is
defined in Section 2.2.4.

 

“Collections”
are all funds
received by Bank from or on behalf of an Account Debtor for Financed
Receivables.

 

“Compliance Certificate” is attached as Exhibit B.

 

“Contingent Obligation” is, for any Person, any direct or
indirect liability, contingent or not, of that Person for (a) any
indebtedness, lease, dividend, letter of credit or other obligation of another
such as an obligation directly or indirectly guaranteed, endorsed, co-made,
discounted or sold with recourse by that Person, or for which that Person is
directly or indirectly liable; (b) any obligations for undrawn letters of
credit for the account of that Person; and (c) all obligations from any
interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a
Person against fluctuation in interest 

 

17

 

rates, currency exchange rates or commodity prices;
but “Contingent Obligation” does not include endorsements in the ordinary
course of business.  The amount of a
Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

 

“Current Liabilities” are all obligations and liabilities of Borrower to
Bank, plus, without duplication, the aggregate amount of Borrower’s Total
Liabilities that mature within one (1) year other than Subordinated Debt.

 

“Deferred Revenue” is all amounts received or invoiced, as
appropriate, in advance of performance under contracts and not yet recognized
as revenue.

 

“Effective Date”
is the date Bank executes this Agreement as indicated on the signature page hereof.

 

“Eligible Accounts” are billed Accounts in the ordinary
course of Borrower’s business that meet all Borrower’s representations and
warranties in Section 5.3, have been, at the option of Bank, confirmed in
accordance with Section 2.1.1 (d), and are due and owing from Account
Debtors deemed creditworthy by Bank in its sole discretion.  Without limiting the fact that the
determination of which Accounts are eligible hereunder is a matter of Bank
discretion in each instance, Eligible Accounts shall not include the following
Accounts (which listing may be amended or changed in Bank’s discretion with
notice to Borrower):

 

(a)           Accounts that the Account Debtor has not
paid within ninety (90) days of invoice date regardless of invoice payment
period terms;

 

(b)           Accounts billed and payable outside of
the United States or any Canadian province other than Quebec, unless the Bank
has a first priority, perfected security interest or other enforceable Lien in
such Accounts;

 

(c)           Accounts owing from an Account Debtor to
the extent that Borrower is indebted or obligated in any manner to the Account
Debtor (as creditor, lessor, supplier or otherwise - sometimes called “contra”
accounts, accounts payable, customer deposits or credit accounts), with the
exception of customary credits, adjustments and/or discounts given to an Account
Debtor by Borrower in the ordinary course of its business;

 

(d)           Accounts for which the Account Debtor is
Borrower’s Affiliate, officer, employee, or agent;

 

(e)           Accounts owing from an Account Debtor
which is a United States government entity or any department, agency, or
instrumentality thereof unless Borrower has assigned its payment rights to Bank
and the assignment has been acknowledged under the Federal Assignment of Claims
Act of 1940, as amended;

 

(f)            Accounts for demonstration or promotional
equipment, or in which goods are consigned, or sold on a “sale guaranteed”, “sale
or return”, “sale on approval”, or other terms if Account Debtor’s payment may
be conditional;

 

(g)           Accounts owing from an Account Debtor
that has not been invoiced or based solely on a purchase order and/or where
goods or services have not yet been rendered to the Account Debtor (sometimes
called memo billings or pre-billings);

 

(h)           Accounts subject to contractual
arrangements between Borrower and an Account Debtor where payments shall be
scheduled or due according to completion or fulfillment requirements where the
Account Debtor has a right of offset for damages suffered as a result of
Borrower’s failure to perform in accordance with the contract (sometimes called
contracts accounts receivable, progress billings, milestone billings, or
fulfillment contracts);

 

(i)            Accounts owing from an Account Debtor the
amount of which may be subject to withholding based on the Account Debtor’s
satisfaction of Borrower’s complete performance (but only to the extent of the
amount withheld; sometimes called retainage billings);

 

18

 

(j)            Accounts subject to trust provisions,
subrogation rights of a bonding company, or a statutory trust;

 

(k)           Accounts owing from an Account Debtor
that has been invoiced for goods that have not been shipped to the Account
Debtor unless Bank, Borrower, and the Account Debtor have entered into an
agreement acceptable to Bank in its sole discretion wherein the Account Debtor
acknowledges that (i) it has title to and has ownership of the goods
wherever located, (ii) a bona fide sale of the goods has occurred, and (iii) it
owes payment for such goods in accordance with invoices from Borrower
(sometimes called “bill and hold” accounts);

 

(l)            Accounts for which the Account Debtor has
not been invoiced;

 

(m)          Accounts that represent non-trade
receivables or that are derived by means other than in the ordinary course of
Borrower’s business;

 

(n)           Accounts subject to chargebacks or others
payment deductions taken by an Account Debtor (but only to the extent the
chargeback is determined invalid and subsequently collected by Borrower);

 

(o)           Accounts owing from an Account Debtor
with respect to which Borrower has received Deferred Revenue (but only to the
extent of such Deferred Revenue);

 

(p)           Accounts in which the Account Debtor
disputes liability or makes any claim (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; and

 

(q)           Accounts for which Bank in its good faith
business judgment determines collection to be doubtful.

 

“ERISA” is the Employee Retirement Income Security Act of
1974, and its regulations.

 

“Events of Default” are set forth in Article 8.

 

“Facility
Amount” is Five
Million Dollars ($5,000,000).

 

“Facility Fee” is defined in Section 2.2.2.

 

“Finance Charges” is defined in Section 2.2.3.

 

“Financed
Receivables” are
all those Eligible Accounts, including their proceeds which Bank finances and
makes an Advance, as set forth in Section 2.1.1.  A Financed Receivable stops being a Financed
Receivable (but remains Collateral) when the Advance made for the Financed
Receivable has been fully paid.

 

“Financed Receivable Balance”  is
the total outstanding gross face amount, at any time, of any Financed
Receivable.

 

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

 

“General Intangibles” is all “general intangibles” as defined
in the Code in effect on the date hereof with such additions to such term as
may hereafter be made, and includes without limitation, all copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work, whether published or unpublished, any patents,
trademarks, service marks and, to the extent permitted under applicable law,
any applications therefor, whether registered or not, any trade secret rights,
including any rights to unpatented inventions, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security 

 

19

 

and other deposits, options to purchase or sell real
or personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

 

“Governmental Approval” is any consent, authorization,
approval, order, license, franchise, permit, certificate, accreditation,
registration, filing or notice, of, issued by, from or to, or other act by or
in respect of, any Governmental Authority.

 

“Governmental Authority” is any nation or government, any state
or other political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative functions of or
pertaining to government, any securities exchange and any self-regulatory
organization.

 

“Guarantor”
is any present or
future guarantor of the Obligations, including XPLORE TECHNOLOGIES CORP., a
Delaware corporation.

 

“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.

 

“Indemnified Person” is defined in Section 12.2.

 

“Insolvency Proceeding” is any proceeding by or against any
Person under the United States Bankruptcy Code, or any other bankruptcy or
insolvency law, including assignments for the benefit of creditors,
compositions, extensions generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief.

 

“Intellectual
Property Collateral” is defined in the IP Agreements.

 

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

 

“Investment” is any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.

 

“Invoice
Transmittal”
shows Eligible Accounts which Bank may finance and, for each such Account,
includes the Account Debtor’s, name, address, invoice amount, invoice date and
invoice number.

 

“IP
Agreements” are
those certain Amended and Restated Intellectual Property Security Agreements
executed and delivered by Borrower and Guarantor to Bank.

 

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

 

“Lien” is a claim, mortgage, deed of trust, levy, charge,
pledge, security interest or other encumbrance of any kind, whether voluntarily
incurred or arising by operation of law or otherwise against any property.

 

“Loan Documents” are, collectively, this Agreement, the
Perfection Certificate, the IP Agreements, any guaranty or security agreement
executed by Guarantor, any Subordination Agreement executed by holders of
Subordinated Debt, any note, or notes, guaranties or security agreements
executed by Borrower or any Guarantor, and any other present or future
agreement between Borrower or Guarantor and Bank in connection with this
Agreement, all as amended, restated, or otherwise modified.

 

20

 

“Lockbox”  is defined in Section 2.2.7.

 

“Material
Adverse Change” is:
(a) a material impairment in the perfection or priority of Bank’s security
interest in the Collateral or in the value of such Collateral; (b) a
material adverse change in the business, operations, or condition (financial or
otherwise) of Borrower; or (c) a material impairment of the prospect of
repayment of any portion of the Obligations.

 

“Maturity
Date” is February 5,
2010; provided however if the expiration date of the Supporting Letter of
Credit is extended to April 30, 2010 (or later) on or before December 31,
2009, the Maturity Date shall be extended until March 31, 2010.

 

“Minimum
Finance Charge” is
Four Thousand Dollars ($4,000).

 

“Non-Formula Advances” means Advances up to the Non-Formula Amount made
without regard to any specific Eligible Accounts.

 

“Non-Formula Amount” means an amount equal to the lesser of (i) One
Million Dollars ($1,000,000) or (ii) the face amount of the Supporting
Letter of Credit.

 

“Obligations”
are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses, and other amounts Borrower owes Bank now or later, whether under this
Agreement, the Loan Documents, or otherwise, including, without limitation, any
interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and the performance of Borrower’s
duties under the Loan Documents.

 

“Perfection Certificate” is a certain Perfection Certificate
completed and delivered by Borrower to Bank in connection with this Agreement.

 

“Permitted Indebtedness” is:

 

(a)           Borrower’s
indebtedness to Bank under this Agreement or the Loan Documents;

 

(b)           Subordinated
Debt;

 

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

 

(d)           Indebtedness
secured by Permitted Liens.

 

“Permitted Investments” are: (i)  marketable direct
obligations issued or unconditionally guaranteed by the United States or its
agency or any state maturing within 1 year from its acquisition, (ii) commercial
paper maturing no more than 1 year after its creation and having the highest
rating from either Standard & Poor’s Corporation or Moody’s Investors
Service, Inc., (iii) Bank’s certificates of deposit issued maturing
no more than 1 year after issue, and (iv) any other investments
administered through Bank.

 

“Permitted Liens” are:

 

(a)           Liens 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 securing no more
than One Hundred Thousand Dollars ($100,000) in the aggregate amount
outstanding  (i) on equipment
acquired or held by Borrower incurred for financing the 

 

21

 

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)           Leases or subleases and non-exclusive
licenses or sublicenses granted in the ordinary course of Borrower’s business, if
the leases, subleases, licenses and sublicenses permit granting Bank a security
interest;

 

(e)           Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by Liens described in (a) through
(d), 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; and

 

(f)            Liens securing Subordinated Debt.

 

“Person” is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or government agency.

 

“Prime Rate” is Bank’s most recently announced “prime rate,”
even if it is not Bank’s lowest rate.

 

“Quick
Assets” is, on
any date, Borrower’s unrestricted cash at Bank plus Eligible Accounts.

 

“Quick
Ratio” is the
ratio of (i) Quick Assets to (ii) Current Liabilities less the lesser
of (a) One Million Dollars ($1,000,000) or (b) the face amount of the
Supporting Letter of Credit.

 

“Reconciliation Day” is the last calendar day of each month.

 

“Reconciliation Period” is each calendar month.

 

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

 

“Requirement of Law”
is as to any Person, the organizational or governing documents of such Person,
and any law (statutory or common), treaty, rule or regulation or
determination of an arbitrator or a court or other Governmental Authority, in each
case applicable to or binding upon such Person or any of its property or to
which such Person or any of its property is subject.

 

“Responsible  Officer” is
each of the Chief Executive Officer, President, Chief Financial Officer and
Controller of Borrower.

 

“Subordinated Debt” is indebtedness incurred by Borrower
subordinated to all of Borrower’s now or hereafter indebtedness to Bank
(pursuant to a subordination, intercreditor, or other similar agreement in form
and substance satisfactory to Bank entered into between Bank and the other
creditor), on terms acceptable to Bank.

 

“Subject Month” is the month which is two (2) calendar
months after any Testing Month.

 

“Subsidiary” is, with respect to any Person, any Person of
which more than 50.0% of the voting stock or other equity interests (in the
case of Persons other than corporations) is owned or controlled directly or
indirectly by such Person or one or more of Affiliates of such Person.

 

“Supporting Letter
of Credit” means that certain irrevocable standby letter of credit
issued by the Bank of America on May 29, 2009, or a letter of credit
issued by another bank rated A2 or better by Moody’s Investors Service, Inc.,
for account of the Supporting Letter of Credit Applicants and naming Bank as
beneficiary, in the face amount of One Million Dollars ($1,000,000) (as
amended, supplemented, modified or extended from time to time).

 

22

 

“Supporting Letter of Credit Applicants”
means, collectively, Philip Sassower and Susan Sassower, individuals, as
applicants under the Supporting Letter of Credit.

 

“Testing Month” is any month with respect to
which Bank has tested Borrower’s Quick Ratio in order to determine Bank’s
method for calculating the Collateral Handling Fee in Section 2.2.4 or the
Applicable Rate.

 

“Total  Liabilities” is
on any day, obligations that should, under GAAP, be classified as liabilities
on Borrower’s consolidated balance sheet, including all Indebtedness.

 

[Signature page follows.]

 

23

 

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

 

	
  BORROWER:

  	
   

  
	
   

  	
   

  
	
  XPLORE TECHNOLOGIES
  CORPORATION OF AMERICA

  	
   

  
	
  By:

  	
  /s/ Michael J. Rapisand

  	
   

  
	
  Name: Michael J. Rapisand

  	
   

  
	
  Title: Chief Financial
  Officer & Corporate Secretary

  	
   

  
	
   

  	
   

  
	
  BANK:

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  
	
  By:

  	
  /s/Krista Hall

  	
   

  
	
  Name: Krista Hall

  	
   

  
	
  Title: Relationship
  Manager

  	
   

  
	
  Effective Date: September 15, 2009

  	
   

  

 

24

 

EXHIBIT A

 

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

 

All
goods, equipment, inventory, contract rights or rights to payment of money,
leases, license agreements, franchise agreements, general intangibles
(including payment intangibles) accounts (including health-care receivables),
documents, instruments (including any promissory notes), chattel paper (whether
tangible or electronic), cash, deposit accounts, fixtures, letters of credit
rights (whether or not the letter of credit is evidenced by a writing),
commercial tort claims, securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and any copyright rights, copyright applications,
copyright registrations and like protections in each work of authorship and
derivative work, whether published or unpublished, now owned or later acquired;
any patents, trademarks, service marks and applications therefor; trade styles,
trade names, any trade secret rights, including any rights to unpatented
inventions, know-how, operating manuals, license rights and agreements and
confidential information, now owned or hereafter acquired; or any claims for
damages by way of any past, present and future infringement of any of the
foregoing; and

 

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

 

 

EXHIBIT B

 

 

SPECIALTY FINANCE DIVISION

Compliance Certificate

 

I, an authorized officer of XPLORE TECHNOLOGIES CORPORATION OF AMERICA
(“Borrower”) certify under the Amended and Restated Loan and Security Agreement
(the “Agreement”) between Borrower and Silicon Valley Bank (“Bank”) as follows
(all capitalized terms used herein shall have the meaning set forth in the
Agreement):

 

Borrower represents and warrants for each Financed
Receivable:

 

Each Financed Receivable is an Eligible Account.

 

Borrower is the owner with legal right to sell, transfer, assign and
encumber such Financed Receivable;

 

The correct amount is on the Invoice Transmittal and is not disputed;

 

Payment is not contingent on any obligation or contract and Borrower
has fulfilled all its obligations as of the Invoice Transmittal date;

 

Each Financed Receivable is based on an actual sale and delivery of
goods and/or services rendered, is due to Borrower,  is not past due or in default, has not been
previously sold, assigned, transferred, or pledged and is free of any liens,
security interests and encumbrances other than Permitted Liens;

 

There are no defenses, offsets, counterclaims or agreements for which
the Account Debtor may claim any deduction or discount;

 

It reasonably believes no Account Debtor is insolvent or subject to any
Insolvency Proceedings;

 

It has not filed or had filed against it Insolvency Proceedings and
does not anticipate any filing;

 

Bank has the right to endorse and/ or require Borrower to endorse all
payments received on Financed Receivables and all proceeds of Collateral.

 

No representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statement contained in the certificates or statement not misleading.

 

Additionally, Borrower represents and warrants as
follows:

 

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.  The execution, delivery and performance of
the Loan Documents have been duly authorized, and do not conflict with Borrower’s
organizational documents, nor constitute an event of default under any material
agreement by which Borrower is bound. 
Borrower is not in default under any agreement to which or by which it
is bound in which the default could reasonably be expected to cause a Material
Adverse Change.

 

Borrower has good title to the Collateral, free of Liens except
Permitted Liens.  All inventory is in all
material respects of good and marketable quality, free from material defects.

 

1

 

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 X, 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 obtain or make such consents,
declarations, notices or filings would not reasonably be expected to cause a
Material Adverse Change.

 

All representations and warranties in the Agreement are true and
correct in all material respects on this date, and the Borrower represents that
there is no existing Event of Default.

 

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

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes No

  	
   

  
	
  A/R and A/P Agings

  	
   

  	
  Monthly within 20 days

  	
   

  	
  Yes No

  	
   

  
	
  Deferred Revenue Report (if applicable)

  	
   

  	
  Monthly within 20 days

  	
   

  	
  Yes No

  	
   

  
	
  Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes No

  	
   

  
	
  10-Q, 10-K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes No

  	
   

  
	
  Board approved financial projections

  	
   

  	
  Prior to FYE

  	
   

  	
  Yes No

  	
   

  

 

Quick Ratio Calculation

 

	
  A. Quick Assets

  	
   

  	
  $

  	
   

  	
   

  
	
  B  Current
  Liabilities

  	
   

  	
  $

  	
   

  	
   

  
	
  Quick Ratio (A divided by B less the lesser of (a)  $1,000,000 or
  (b) the face amount of the Supporting  Letter of
  Credit)

  	
   

  	
      to 1.0

  	
   

  

 

	
   

  	
   

  	
  Performance Pricing

  	
   

  	
  Applies

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Quick Ratio >
  0.50 to 1.0

  	
   

  	
  Greater of 6.25% or
  (b) Prime plus 2.50%

  	
   

  	
  Yes No

  	
   

  
	
  Quick Ratio < 0.50
  to 1.0

  	
   

  	
  Greater of 6.25% or
  (b) Prime plus 3.00%

  	
   

  	
  Yes No

  	
   

  

 

2

 

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

 

	
  XPLORE TECHNOLOGIES CORPORATION OF AMERICA

  	
   

  	
  AGENT USE ONLY

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Received by:

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
  Name:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Verified:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  AUTHORIZED SIGNER

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Compliance Status:

  	
  Yes No

  
									

 

3

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00163-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00163-of-00352.parquet"}]]