Document:

Exhibit 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 between SILICON VALLEY BANK, a California corporation with a loan
production office located at One Newton Executive Park, Suite 200, 2221
Washington Street, Newton, Massachusetts 
02462 (“Bank”), and NETWORK ENGINES, INC., a Delaware
corporation with offices at 25 Dan Road, Canton, Massachusetts 02021 (“Borrower”), provides the terms on which Bank shall lend to
Borrower and Borrower shall repay Bank. 
This Agreement amends and restates in its entirety that certain Loan and
Security Agreement, dated as of October 11, 2007, by and between Borrower,
Alliance Systems Inc. (“Alliance”), and
Bank, as amended by that certain First Loan Modification Agreement dated as of August 1,
2008, between Borrower, Alliance, and 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.  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 meaning 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 outstanding
principal amount of all Credit Extensions and accrued and unpaid interest
thereon as and when due in accordance with this Agreement.

 

2.1.1                     Revolving Advances.

 

(a)                                  Availability. 
Subject to the terms and conditions of this Agreement and to deduction
of Reserves, Bank shall make Advances not exceeding the Availability Amount.  Amounts
borrowed under the Revolving Line may be repaid, and prior to the Revolving
Line Maturity Date, reborrowed, subject to the applicable terms and conditions
precedent herein.

 

(b)                                 Termination; Repayment. 
The Revolving Line terminates on the Revolving Line Maturity Date, when
the principal amount of all Advances, the unpaid interest thereon, and all
other Obligations relating to the Revolving Line shall be immediately due and
payable.

 

2.1.2                     Letters of Credit Sublimit.

 

As part of the Revolving Line and subject to deduction
of Reserves, Bank shall issue or have issued Letters of Credit denominated in
Dollars or a Foreign Currency for Borrower’s account.  The aggregate Dollar Equivalent amount
utilized for the issuance of Letters of Credit shall at all times reduce the
amount otherwise available for Advances under the Revolving Line.  The aggregate Dollar Equivalent of the face
amount of outstanding Letters of Credit (including drawn but unreimbursed
Letters of Credit and any Letter of Credit Reserve) may not exceed the lesser
of (A) Ten Million Dollars ($10,000,000.00), minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the FX Reduction
Amount, or (B) the lesser of the Revolving Line or the Borrowing Base,
minus (i) the sum of all outstanding principal amounts of any Advances
(including any amounts used for Cash Management Services), and minus (ii) the
FX Reduction Amount.

 

(a)                                  If, on the Revolving Line Maturity Date (or
the effective date of any termination of this Agreement), there are any
outstanding Letters of Credit, then on such date Borrower shall provide to Bank
cash collateral in an amount equal to one hundred five percent (105%) of the
Dollar Equivalent of the face amount of all such Letters of Credit plus all
interest, fees, and costs due or to become due in connection therewith (as
estimated by Bank in its good faith business judgment), to secure all of the
Obligations relating to such Letters of Credit. 
All Letters of Credit shall be in form and substance acceptable to Bank
in its sole discretion and shall be subject to the terms and conditions of Bank’s
standard Application and Letter of Credit Agreement (the “Letter of Credit Application”).  Borrower agrees to execute any further documentation
in connection with the Letters of Credit as Bank may reasonably request.  Borrower
further agrees to be bound by the regulations and interpretations of the issuer
of any Letters of Credit guarantied by Bank and opened for Borrower’s account
or by Bank’s interpretations of any Letter of Credit issued by Bank for
Borrower’s account, and Borrower understands and agrees that Bank shall not be
liable for any error, negligence, or mistake, whether of omission or
commission, in following Borrower’s 

 

 

instructions
or those contained in the Letters of Credit or any modifications, amendments,
or supplements thereto, except for Bank’s gross negligence or willful
misconduct.

 

(b)                                 The obligation of Borrower to immediately
reimburse Bank for drawings made under Letters of Credit shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, such Letters of Credit, and the Letter of
Credit Application.

 

(c)                                  Borrower may request that Bank issue a
Letter of Credit payable in a Foreign Currency. 
If a demand for payment is made under any such Letter of Credit, Bank
shall treat such demand as an Advance to Borrower of the Dollar Equivalent of
the amount thereof (plus reasonable fees and charges in connection therewith
such as wire, cable, SWIFT or similar charges).

 

(d)                                 To guard against fluctuations in currency
exchange rates, upon the issuance of any Letter of Credit payable in a Foreign
Currency, Bank shall create a reserve (the “Letter of
Credit Reserve”) under the Revolving Line in an amount equal to ten
percent (10%) of the face amount of such Letter of Credit.  The amount of the Letter of Credit Reserve
may be adjusted by Bank from time to time to account for fluctuations in the
exchange rate.  The availability of funds
under the Revolving Line shall be reduced by the amount of such Letter of
Credit Reserve for as long as such Letter of Credit remains outstanding.

 

2.1.3                     Foreign Exchange Sublimit. 
As part of the Revolving Line and subject to the deduction of Reserves,
Borrower may enter into foreign exchange contracts with Bank under which
Borrower commits to purchase from or sell to Bank a specific amount of Foreign
Currency (each, a “FX Forward Contract”)
on a specified date (the “Settlement Date”).  FX Forward Contracts shall have a Settlement
Date of at least one (1) FX Business Day after the contract date and shall
be subject to a reserve of ten percent (10%) of each outstanding FX Forward
Contract.  The aggregate amount of FX
Forward Contracts at any one time may not exceed ten (10) times the lesser
of (A) Ten Million Dollars ($10,000,000.00), minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the Dollar
Equivalent of the face amount of any outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), or (B) the
lesser of the Revolving Line or the Borrowing Base, minus (i) the sum of
all outstanding principal amounts of any Advances (including any amounts used
for Cash Management Services), and minus (ii) the Dollar Equivalent of the
face amount of any outstanding Letters of Credit (including drawn but
unreimbursed Letters of Credit and any Letter of Credit Reserve).  The amount otherwise available for Credit
Extensions under the Revolving Line shall be reduced by an amount equal to ten
percent (10%) of each outstanding FX Forward Contract (the “FX Reduction Amount”). 
Any amounts needed to fully reimburse Bank for any amounts not paid by
Borrower in connection with FX Forward Contracts will be treated as Advances
under the Revolving Line and will accrue interest at the interest rate
applicable to Advances.

 

2.1.4                     Cash Management Services
Sublimit.  Borrower may use the Revolving Line for Bank’s
cash management services, which may include merchant services, direct deposit
of payroll, business credit card, and check cashing services identified in Bank’s
various cash management services agreements (collectively, the “Cash Management Services”), in an aggregate amount not to
exceed the lesser of (A) Ten Million Dollars ($10,000,000.00), minus (i) the
Dollar Equivalent of the face amount of any outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), and minus (ii) the FX Reduction Amount, or (B) the lesser
of the Revolving Line or the Borrowing Base, minus (i) the sum of all
outstanding principal amounts of any Advances, minus (ii) the Dollar
Equivalent of the face amount of any outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), and
minus (iii) the FX Reduction Amount. 
Any amounts Bank pays on behalf of Borrower for any Cash Management
Services will be treated as Advances under the Revolving Line and will accrue
interest at the interest rate applicable to Advances.

 

2.2                               Overadvances.  If, at any time, the sum of (a) the outstanding
principal amount of any Advances (including any amounts used for Cash
Management Services); plus (b) the face amount of any outstanding Letters
of Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve); plus (c) the FX Reduction Amount exceeds the lesser of
either the Revolving Line or the Borrowing Base (such excess amount being an “Overadvance”), Borrower shall immediately pay to Bank in
cash such Overadvance.  Without limiting
Borrower’s obligation to repay Bank any amount of the Overadvance, Borrower
agrees to pay Bank interest on the outstanding amount of any Overadvance, on
demand, at the Default Rate.

 

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2.3                               Payment of Interest on the Credit
Extensions.

 

(a)                                  Interest Rate. 
Subject to Section 2.3(b), the principal amount outstanding under
the Revolving Line shall accrue interest at a floating per annum rate equal to
one half of one percent (0.50%) above the Prime Rate, which interest shall be
payable monthly, in arrears, in accordance with Section 2.3(f) below.

 

(b)                                 Default Rate.   Immediately upon the occurrence and during the
continuance of an Event of Default, Obligations shall bear interest at a rate
per annum which is four percentage points (4.0%) above the rate that is
otherwise applicable thereto (the “Default Rate”)
unless Bank otherwise elects from time to time in its sole discretion to impose
a smaller increase.  Fees and expenses
which are required to be paid by Borrower pursuant to the Loan Documents
(including, without limitation, Bank Expenses) but are not paid when due shall
bear interest until paid at a rate equal to the highest rate applicable to the
Obligations.  Payment or acceptance of
the increased interest rate provided in this Section 2.3(b) is not a
permitted alternative to timely payment and shall not constitute a waiver of
any Event of Default or otherwise prejudice or limit any rights or remedies of
Bank.

 

(c)                                  Adjustment to Interest Rate. 
Changes to the interest rate of any Credit Extension based on changes to
the Prime Rate shall be effective on the effective date of any change to the
Prime Rate and to the extent of any such change.

 

(d)                                 Computation; 360-Day Year. 
In computing interest, the date of the making of any Credit Extension
shall be included and the date of payment shall be excluded; provided, however,
that if any Credit Extension is repaid on the same day on which it is made,
such day shall be included in computing interest on such Credit Extension.  Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.

 

(e)                                  Debit of Accounts. 
Bank may debit any of Borrower’s deposit accounts, including the
Designated Deposit Account, for principal and interest payments or any other
amounts Borrower owes Bank when due. 
These debits shall not constitute a set-off.

 

(f)                                    Interest Payment Date. 
Unless otherwise provided, interest is payable monthly on the last
calendar day of each month.

 

(g)                                 Payment; Interest Computation; Float
Charge.  In computing interest on the Obligations, all
Payments received after 12:00 p.m. Eastern time on any day shall be deemed
received on the next Business Day.  In
addition, Bank shall be entitled to charge Borrower a “float” charge in an
amount equal to three (3) Business Days interest, at the interest rate
applicable to the Advances, on all Payments received by Bank. Said float charge
is not included in interest for purposes of computing minimum monthly interest
(if any) under this Agreement.  The float
charge for each month shall be payable on the last day of the month.  Bank shall not, however, be required to
credit Borrower’s account for the amount of any item of payment which is
unsatisfactory to Bank in its good faith business judgment, and Bank may charge
Borrower’s Designated Deposit Account for the amount of any item of payment
which is returned to Bank unpaid.

 

2.4                               Fees. 
Borrower shall pay to Bank:

 

(a)                                  Commitment Fee. 
A fully earned, non refundable commitment fee equal to $22,726.03, on
the Effective Date;

 

(b)                                 Anniversary Fee. 
A fully-earned, non-refundable anniversary fee equal to Thirty Thousand
Dollars ($30,000.00) shall be earned as of the Effective Date, and shall be due
and payable on the earlier of (i) the date that is one (1) year from
the Effective Date, (ii) the occurrence of an Event of Default, or (iii) the
early termination of this Agreement;

 

(c)                                  Termination Fee.  Pursuant
to and subject to the terms of Section 12.1, a termination fee;

 

(d)                                 Letter of Credit Fee. 
Bank’s customary fees and expenses for the issuance or renewal of
Letters of Credit, upon the issuance of such Letter of Credit, each anniversary
of the issuance during the term of such Letter of Credit, and upon the renewal
of such Letter of Credit by Bank;

 

(e)                                  Unused Revolving Line Facility Fee. 
A fee (the “Unused Revolving Line
Facility Fee”), payable monthly, in arrears, on a calendar year
basis, in an amount equal to 0.30% per annum of the average unused portion of
the Revolving Line during such month, as determined by Bank.  The unused portion of the 

 

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Revolving Line,
for the purposes of this calculation, shall include average amounts reserved
for products provided in connection with Cash Management Services and FX
Forward Contracts during such month. 
Borrower shall not be entitled to any credit, rebate or repayment of any
Unused Revolving Line Facility Fee previously earned by Bank pursuant to this Section notwithstanding
any termination of the Agreement or the suspension or termination of Bank’s
obligation to make loans and advances hereunder, including during any
Streamline Period; and

 

(f)                                    Bank Expenses. 
All Bank Expenses (including reasonable attorneys’ fees and expenses for
documentation and negotiation of this Agreement) incurred through and after the
Effective Date, when due.

 

2.5                               Payments; Application of
Payments.

 

(a)                                  All payments (including prepayments) to
be made by Borrower under any Loan Document shall be made in immediately
available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m.
Eastern time on the date when due. 
Payments of principal and/or interest received after 12:00 p.m.
Eastern time are considered received at the opening of business on the next
Business Day.  When a payment is due on a
day that is not a Business Day, the payment shall be due the next Business Day,
and additional fees or interest, as applicable, shall continue to accrue until
paid.

 

(b)                                 Bank shall apply the whole or any part of
collected funds against the Revolving Line or credit such collected funds to a
depository account of Borrower with Bank (or an account maintained by an
Affiliate of Bank), the order and method of such application to be in the sole
discretion of Bank.  Borrower shall have
no right to specify the order or the accounts to which Bank shall allocate or
apply any payments required to be made by Borrower to Bank or otherwise received
by Bank under this Agreement when any such allocation or application is not
specified elsewhere in this Agreement.

 

2.6                               Withholding.  Payments received by Bank from Borrower
hereunder will be made free and clear of any withholding taxes.  Specifically, however, if at any time any
Governmental Authority, applicable law, regulation or international agreement
requires Borrower to make any such withholding or deduction from any such
payment or other sum payment hereunder to Bank, Borrower hereby covenants and
agrees that the amount due from Borrower with respect to such payment or other
sum payable hereunder will be increased to the extent necessary to ensure that,
after the making of such required withholding or deduction, Bank receives a net
sum equal to the sum which it would have received had no withholding or
deduction been required and Borrower shall pay the full amount withheld or
deducted to the relevant Governmental Authority.  Borrower will, upon request, furnish Bank
with proof satisfactory to Bank indicating that Borrower has made such
withholding payment provided, however, that Borrower need not make any
withholding payment if the amount or validity of such withholding payment is
contested in good faith by appropriate and timely proceedings and as to which
payment in full is bonded or reserved against by Borrower.  The agreements and obligations of Borrower
contained in this Section 2.6 shall survive the termination of this
Agreement.

 

3                                         CONDITIONS OF LOANS

 

3.1                               Conditions Precedent to Initial
Credit Extension.  Bank’s obligation to make the initial Credit
Extension is subject to the condition precedent that 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)                                  duly executed original signatures to the
Loan Documents;

 

(b)                                 duly executed original signatures to the
Control Agreement(s);

 

(c)                                  Borrower’s Operating Documents and a good
standing certificate of Borrower certified by the Secretary of State of the
State of Delaware as of a date no earlier than thirty (30) days prior to the
Effective Date;

 

(d)                                 Secretary’s Certificates attesting to the
duly executed Borrowing Resolutions for Borrower;

 

(e)                                  certified copies, dated as of a recent
date, of financing statement searches, as Bank shall request, accompanied by
written evidence (including any UCC termination statements) that the Liens
indicated in 

 

4

 

any such financing
statements either constitute Permitted Liens or have been or, in connection
with the initial Credit Extension will be terminated or released;

 

(f)                                    a landlord’s consent in favor of Bank for
each of Borrower’s leased locations by the respective landlord thereof,
together with the duly executed original signatures thereto;

 

(g)                                 a bailee’s/warehouseman’s waiver executed
by each bailee, if any, of Borrower as required by Bank, in favor of Bank;

 

(h)                                 a legal opinion of Borrower’s counsel, in
form and substance acceptable to Bank, in its reasonable discretion, dated as
of the Effective Date, together with the duly executed original signature
thereto;

 

(i)                                     the duly executed original signatures to
the Guaranty, together with Secretary’s Certificates attesting to the duly
executed Borrowing Resolutions for Guarantor;

 

(j)                                     a legal opinion of Guarantor’s counsel,
in form and substance acceptable to Bank, in its reasonable discretion, dated
as of the Effective Date, together with the duly executed original signature
thereto;

 

(k)                                  evidence satisfactory to Bank that the
insurance policies required by Section 6.7 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;

 

(l)                                     the completion of the Initial Audit with
results satisfactory to Bank in its sole and absolute discretion; and

 

(m)                               payment of the fees and Bank Expenses
then due as specified in Section 2.4 hereof.

 

3.2                               Conditions Precedent to all
Credit Extensions.  Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following
conditions precedent:

 

(a)                                  except as otherwise provided in Section 3.4,
timely receipt of an executed Transaction Report;

 

(b)                                 the representations and warranties in
this Agreement shall be true, accurate, and complete in all material respects
on the date of the Transaction Report and on the Funding Date of each Credit
Extension; provided, however, that such materiality qualifier shall not be
applicable to any representations and warranties that already are qualified or
modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, and no
Default or Event of Default shall have occurred and be continuing or result
from the Credit Extension.  Each Credit
Extension is Borrower’s representation and warranty on that date that the
representations and warranties in this Agreement remain true, accurate, and
complete in all material respects; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that already
are qualified or modified by materiality in the text thereof; and provided,
further that those representations and warranties expressly referring to a
specific date shall be true, accurate and complete in all material respects as
of such date; and

 

(c)                                  in Bank’s sole discretion, there has not
been any material impairment in the general affairs, management, results of
operation, financial condition or the prospect of repayment of the Obligations,
or any material adverse deviation by Borrower from the most recent business
plan of Borrower presented to and accepted by Bank.

 

3.3                               Covenant to Deliver. 
Borrower agrees to deliver to Bank each item required to be delivered to
Bank under this Agreement as a condition precedent to any Credit
Extension.  Borrower expressly agrees
that a Credit Extension made prior to the receipt by Bank of any such item
shall not constitute a waiver by Bank of Borrower’s obligation to deliver such
item, and the making of any Credit Extension in the absence of a required item
shall be in Bank’s sole discretion.

 

3.4                               Procedures for Borrowing. 
Subject to the prior satisfaction of all other applicable conditions to
the making of an Advance set forth in this Agreement, to obtain an Advance
(other than Advances under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank
(which notice shall be irrevocable) by electronic mail, facsimile, or 

 

5

 

telephone by 12:00 p.m.
Eastern time on the Funding Date of the Advance.  Together with any such electronic or
facsimile notification, Borrower shall deliver to Bank by electronic mail or
facsimile a completed Transaction Report executed by a Responsible Officer or
his or her designee.  Bank may rely on
any telephone notice given by a person whom Bank reasonably believes is a
Responsible Officer or designee.  Bank
shall credit Advances to the Designated Deposit Account.  Bank may make Advances under this Agreement
based on instructions from a Responsible Officer or his or her designee or
without instructions if the Advances are necessary to meet Obligations which
have become due.

 

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.

 

4.2                               Priority of Security Interest. 
Borrower represents, warrants, and covenants that the security interest
granted herein is and shall at all times continue to be a first priority
perfected security interest in the Collateral (subject only to Permitted Liens
that may have superior priority to Bank’s Lien under this Agreement).  If Borrower shall acquire a commercial tort
claim with a value in excess of One Hundred Thousand Dollars ($100,000.00),
Borrower shall promptly notify Bank in a writing signed by Borrower of the
general details thereof and, upon request of Bank, 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
reasonably 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 Credit Extensions 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.

 

4.3                               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.  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; Authorization;
Power and Authority.  Borrower and each of its Subsidiaries are
duly existing and in good standing as Registered Organizations in their
respective jurisdictions of formation and each is qualified and licensed to do
business and each is in good standing in any jurisdiction in which the conduct
of each 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
have a material adverse effect on Borrower’s business.  In connection with this Agreement, Borrower
has delivered to Bank completed certificates each signed by Borrower, each
entitled “Perfection Certificate” (the “Perfection Certificate”).  Borrower represents and warrants to Bank
that, as of the date hereof: (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) except as set forth in the Perfection Certificate,
Borrower (and each of its predecessors) has not, in the past five (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 (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.

 

6

 

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 of 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
would reasonably be expected to have a material adverse effect on Borrower’s
business.

 

5.2                               Collateral.

 

(a)                                  Borrower has good title to, 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.

 

(b)                                 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 a written acknowledgment from such
bailee in form and substance reasonably satisfactory to Bank in its sole
discretion.

 

(c)                                  All Inventory is in all material respects
of good and marketable quality, free from material defects.

 

(d)                                 Borrower is the sole owner of the
Intellectual Property which it owns or purports to own except for (a) non-exclusive
licenses granted to its customers in the ordinary course of business, (b) over-the-counter
software that is commercially available to the public, and (c) material
Intellectual Property licensed to Borrower and noted on the Perfection
Certificate.  Each Patent which it owns
or purports to own and which is material to Borrower’s business is valid and
enforceable, and no part of the Intellectual Property which Borrower owns or
purports to own and which is material to Borrower’s business has been judged
invalid or unenforceable, in whole or in part. 
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 would not have a material adverse effect on Borrower’s
business.

 

(e)                                  Except as noted on the Perfection
Certificate, Borrower is not a party to, nor is it bound by, any Restricted
License, other than (i) licenses or agreements for software that Borrower
incorporates into products for distribution to its customers, (ii) software
licensed for internal use by Borrower and (iii) shrink-wrap, freeware and
open source software licenses (collectively “Excluded
Licenses”).

 

5.3                               Accounts Receivable. 
For any Eligible Account in any Borrowing Base Certificate, all
statements made and all unpaid balances appearing in all invoices, instruments
and other documents evidencing such Eligible Accounts are and shall be true and
correct and all such invoices, instruments and other documents, and all of
Borrower’s Books are genuine and in all material respects what they purport to
be.  Whether or not an Event of Default
has occurred and is continuing, Bank may notify any Account Debtor owing
Borrower money of Bank’s security interest in such funds and verify the amount
of such Eligible Account.  All sales and
other transactions underlying or giving rise to each Eligible Account shall
comply in all material respects with all applicable laws and governmental rules and
regulations.  Borrower has no knowledge
of any actual Insolvency Proceeding of any Account Debtor whose accounts are
Eligible Accounts in any Borrowing Base Certificate.  To the best of Borrower’s knowledge, all
signatures and endorsements on all documents, instruments, and agreements
relating to all Eligible Accounts are genuine, and all such documents,
instruments and agreements are legally enforceable in accordance with their
terms.

 

7

 

5.4                               Litigation. 
There are no actions or proceedings pending or, to the knowledge of the
Responsible Officers, threatened in writing by or against Borrower or any of
its Subsidiaries which would be reasonably likely to result in damages owed by
Borrower or any of its Subsidiaries in excess of, individually or in the
aggregate, Two Hundred Fifty Thousand Dollars ($250,000.00).

 

5.5                               Financial Condition. 
All consolidated financial statements for Borrower and any of its
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. 
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).  Borrower has complied in all material
respects with the Federal Fair Labor Standards Act.  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 not violated any laws, ordinances or rules, the violation
of which could reasonably be expected to have a material adverse effect on its
business.  None of Borrower’s or any of
its Subsidiaries’ 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;
Investments.  Borrower does not own any stock, partnership
interest or other equity securities except for Permitted Investments.

 

5.9                               Tax Returns and
Payments; Pension Contributions.  Borrower has timely
filed all required tax returns and reports (or extensions thereof), and
Borrower has timely paid all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower except for taxes,
assessments, deposits and contributions of up to Seventy-Five Thousand Dollars
($75,000.00) in the aggregate.  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 would
reasonably be expected to 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 would 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                        Use of Proceeds. 
Borrower shall use the proceeds of the Credit Extensions solely as
working capital and to fund its general business requirements and not for
personal, family, household or agricultural purposes.

 

5.11                        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 the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).

 

8

 

5.12                        Definition of “Knowledge.” 
For purposes of the Loan Documents, whenever a representation or
warranty is made to Borrower’s knowledge or awareness, to the “best of”
Borrower’s knowledge, or with a similar qualification, knowledge or awareness
means the actual knowledge, after reasonable investigation, of the Responsible
Officers.

 

5.13                        Designated Senior
Indebtedness.  The Loan Documents and all of the Obligations
shall be deemed “Designated Senior Indebtedness” or a similar concept thereof
for purposes of any Indebtedness of the Borrower.

 

6                                         AFFIRMATIVE COVENANTS

 

Borrower shall do all of
the following:

 

6.1                               Government Compliance. 
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, the noncompliance with which could have a material adverse
effect on Borrower’s business.

 

6.2                               Financial Statements, Reports,
Certificates.

 

(a)                                  Borrower shall provide Bank with the
following:

 

(i) (A) bi-weekly,
and (B) upon each request for a Credit Extension, a Transaction Report;

 

(ii) within fifteen
(15) days after the end of each month, (A) monthly accounts receivable
agings, aged by invoice date, (B) monthly accounts payable agings, aged by
invoice date, and outstanding or held check registers, if any, (C) monthly
reconciliations of accounts receivable agings (aged by invoice date),
transaction reports, deferred revenue report and general ledger, and (D) monthly
inventory sell through reports;

 

(iii) as soon as
available, and in any event within thirty (30) days after the end of each
month, monthly unaudited consolidated and consolidating financial statements;

 

(iv) within thirty
(30) days after the end of each month, a monthly Compliance Certificate signed
by a Responsible Officer, certifying that as of the end of such month, Borrower
was in full compliance with all of the terms and conditions of this Agreement,
and setting forth calculations showing compliance with the financial covenants
set forth in this Agreement and such other information as Bank shall reasonably
request, including, without limitation, a statement that at the end of such
month there were no held checks;

 

(v) within
forty-five (45) days after the end of each fiscal year of Borrower, (A) annual
operating budgets (including income statements, balance sheets and cash flow
statements, by month) for the current fiscal year of Borrower, and (B) annual
financial projections for the current fiscal year of Borrower (on a quarterly
basis) as approved by Borrower’s board of directors, together with any related
business forecasts used in the preparation of such annual financial
projections, each in a form acceptable to Bank;

 

(vi) as soon as
available, and in any event within one hundred twenty (120) days following the
end of Borrower’s fiscal year, annual consolidated and consolidating financial
statements certified by, and with an unqualified opinion of, independent
certified public accountants acceptable to Bank;

 

(vii)  within five (5) days
of delivery, copies of all statements, reports and notices made available to
Borrower’s security holders or to any holders of Subordinated Debt;

 

(viii) a prompt
report of any legal actions pending or threatened in writing against Borrower
or any of its Subsidiaries that would reasonably be expected to result in
damages or costs to Borrower or any of its Subsidiaries of, individually or in
the aggregate, of Two Hundred Fifty Thousand Dollars ($250,000.00) or more; and

 

9

 

(ix) other financial
information reasonably requested by Bank.

 

Notwithstanding the foregoing, during a Streamline
Period or when no Obligations are outstanding, provided no Event of Default has
occurred and is continuing, Borrower shall be required to provide Bank with a
Transaction Report (a) within fifteen (15) days after the last day of each
calendar month, and (b) upon each request for a Credit Extension.

 

(b)                                 In the event that Borrower is or becomes
subject to the reporting requirements under the Securities Exchange Act of
1934, as amended, within five (5) days after filing, Borrower shall
provide to Bank all reports on Form 10-K, 10-Q and 8-K filed with the SEC
or a link thereto on Borrower’s or another website on the Internet.

 

(c)                                  Within five (5) days after filing,
Borrower shall provide to Bank all other reports or filings with the SEC or
another Governmental Authority.

 

(d)                                 Borrower shall provide prompt written
notice to Bank of (i) any material change in the composition of the
intellectual property, (ii) the registration of any copyright (including
any subsequent ownership right of Borrower in or to any copyright), patent or
trademark not previously disclosed to Bank, or (iii) Borrower’s knowledge
of an event that materially adversely affects the value of the intellectual
property.

 

6.3                               Accounts Receivable.

 

(a)                                  Schedules and Documents Relating to
Accounts.  Borrower shall deliver to Bank transaction
reports and schedules of collections, as provided in Section 6.2, on Bank’s
standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and other rights in all
of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a
specific Account affect or limit Bank’s Lien and other rights therein.  If requested by Bank, Borrower shall furnish
Bank with copies (or, at Bank’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts.  In addition, Borrower shall deliver to Bank,
on its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary endorsements,
and copies of all credit memos.

 

(b)                                 Disputes.  Borrower
shall promptly notify Bank of all disputes or claims relating to Accounts.  Borrower may forgive (completely or
partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good
faith, in a commercially reasonable manner, in the ordinary course of business,
in arm’s-length transactions, and reports the same to Bank in the regular
reports provided to Bank; (ii) no Default or Event of Default has occurred
and is continuing; and (iii) after taking into account all such discounts,
settlements and forgiveness, the total outstanding Credit Extensions will not
exceed the amount available under the lesser of (1) the Revolving Line,
and (2) the Borrowing Base.

 

(c)                                  Collection of Accounts. 
Borrower shall have the right to collect all Accounts, unless and until
a Default or an Event of Default has occurred and is continuing.  All payments on, and proceeds of, Accounts
shall be deposited directly by the applicable Account Debtor into a lockbox
account, or such other “blocked account” as Bank may specify, pursuant to a
blocked account agreement in form and substance satisfactory to Bank in its
sole discretion.  Whether or not an Event
of Default has occurred and is continuing, Borrower shall hold all payments on,
and proceeds of, Accounts in trust for Bank, and Borrower shall promptly
deliver all such payments and proceeds to Bank in their original form, duly
endorsed, to be applied to the Obligations pursuant to the terms of Section 9.4
hereof, provided, however, that during a Streamline Period, provided no Event
of Default has occurred and is continuing, such payments and proceeds shall be
transferred by Bank to an account of Borrower maintained at Bank.

 

(d)                                 Returns.  Provided no
Event of Default has occurred and is continuing, if any Account Debtor returns
any Inventory to Borrower in excess of Two Hundred Fifty Thousand Dollars
($250,000.00) in the aggregate, Borrower shall promptly (i) determine the
reason for such return, (ii) issue a credit memorandum to the Account
Debtor in the appropriate amount, and (iii) provide a copy of such credit
memorandum to Bank, upon request from Bank. 
In the event any attempted return occurs after the occurrence and during
the continuance of any 

 

10

 

Event of Default,
Borrower shall hold the returned Inventory in trust for Bank,
and immediately notify Bank of the return of the Inventory.

 

(e)                                  Verification.  Bank may, from
time to time, verify directly with the respective Account Debtors the validity,
amount and other matters relating to the Accounts, either in the name of
Borrower or Bank or such other name as Bank may choose.

 

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

 

6.4                               Remittance of Proceeds. 
Except as otherwise provided in Section 6.3(c), deliver, in kind,
all proceeds arising from the disposition of any Collateral to Bank in the
original form in which received by Borrower not later than the following
Business Day after receipt by Borrower, to be applied to the Obligations
pursuant to the terms of Section 9.4 hereof; provided that, if no Default
or Event of Default has occurred and is continuing, Borrower shall not be
obligated to remit to Bank the proceeds of the sale of worn out or obsolete
Equipment disposed of by Borrower in good faith in an arm’s length transaction
for an aggregate purchase price of Twenty Five Thousand Dollars ($25,000.00) or less (for all such transactions
in any fiscal year).  Borrower agrees
that it will not commingle proceeds of Collateral with any of Borrower’s other
funds or property, but will hold such proceeds separate and apart from such
other funds and property and in an express trust for Bank.  Nothing in this Section limits the
restrictions on disposition of Collateral set forth elsewhere in this
Agreement.

 

6.5                               Taxes; Pensions; Withholding. 
Timely file, and require each of its Subsidiaries to timely file, all
required tax returns and reports and timely pay, and require each of its
Subsidiaries to timely pay, all foreign, federal, state and local taxes,
assessments, deposits and contributions owed by Borrower and each of its
Subsidiaries, except for deferred payment of any taxes contested or otherwise permitted
pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on
demand, appropriate certificates attesting to such payments, and pay all
amounts necessary to fund all present pension, profit sharing and deferred
compensation plans in accordance with their terms.

 

6.6                               Access to Collateral; Books and
Records.  At reasonable times, on five (5) Business
Day’s notice (provided no notice is required if an Event of Default has
occurred and is continuing), Bank, or its agents, shall have the right, on a
semi-annual basis (or more frequently after the occurrence of an Event of
Default), to inspect the Collateral and the right to audit and copy Borrower’s
Books.  The foregoing inspections and
audits shall be at Borrower’s expense, and the charge therefor shall be $850
per person per day (or such higher amount as shall represent Bank’s
then-current standard charge for the same), plus reasonable out-of-pocket
expenses.  In the event Borrower and Bank
schedule an audit more than ten (10) days in advance, and Borrower cancels
or seeks to reschedule the audit with less than ten (10) days written
notice to Bank, then (without limiting any of Bank’s rights or remedies),
Borrower shall pay Bank a fee of One Thousand Dollars ($1,000.00) plus any
out-of-pocket expenses incurred by Bank to compensate Bank for the anticipated
costs and expenses of the cancellation or rescheduling.

 

6.7                               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 the sole lender
loss payee and waive subrogation against Bank and shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. 
All liability policies shall show, or have endorsements showing, Bank as
an additional insured, and all such policies (or the loss payable and
additional insured endorsements) shall provide that the insurer shall 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.  Notwithstanding the
foregoing, (a) so long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to One Hundred Thousand Dollars ($100,000.00) with respect
to any loss, but not exceeding Two Hundred Fifty Thousand Dollars ($250,000.00)
in the aggregate for all losses under all casualty policies in any one (1) year,
toward the replacement or repair of destroyed or damaged 

 

11

 

property; provided
that any such replaced or repaired property (i) shall be of equal or like
value as the replaced or repaired Collateral and (ii) shall be deemed
Collateral in which Bank has been granted a first priority security interest,
and (b) after the occurrence and during the continuance of an Event of
Default, all proceeds payable under such casualty policy shall, at the option
of Bank, be payable to Bank on account of the Obligations.  If Borrower fails to obtain insurance as
required under this Section 6.7 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 6.7
and take any action under the policies Bank deems prudent.

 

6.8                               Operating Accounts.

 

(a)                                  Maintain its and its Subsidiaries’
primary operating accounts with Bank and Bank’s affiliates.  In addition, (i) Borrower shall maintain
its cash or securities in excess of that amount used for Borrower’s current
operations with Bank and Bank’s affiliates, and (ii) each of Borrower’s
Subsidiaries shall maintain its cash or securities in excess of that amount
used for such Subsidiary’s current operations with Bank and Bank’s affiliates. Notwithstanding
the foregoing, Borrower and its Subsidiaries may maintain bank accounts at
financial institutions outside of the U.S. provided that the aggregate amount
of funds deposited in such accounts at any time does not exceed Five Hundred
Thousand Dollars ($500,000.00) (the “Permitted Bank Accounts”).

 

(b)                                 Provide Bank five (5) days prior-
written notice before establishing any Collateral Account at or with any bank
or financial institution other than Bank or Bank’s Affiliates.  For each Collateral Account that Borrower at
any time maintains, Borrower shall cause the applicable bank or financial
institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate
instrument with respect to such Collateral Account to perfect Bank’s Lien in
such Collateral Account in accordance with the terms hereunder which Control
Agreement may not be terminated without the prior written consent of Bank.  The provisions of the previous sentence shall
not apply to: (i) deposit accounts exclusively used for payroll, payroll taxes
and other employee wage and benefit payments to or for the benefit of Borrower’s
employees and identified to Bank by Borrower as such, and (ii) the Permitted Bank
Accounts.

 

6.9                               Financial Covenants.  Borrower shall maintain at all times, unless otherwise
noted, on a consolidated basis with
respect to Borrower and its Subsidiaries:

 

(a)                                  Adjusted Quick Ratio. 
To be tested as of the last day of each calendar month, an Adjusted
Quick Ratio of at least 1.20 to 1.0.

 

(b)                                 Operating Cash Flow. 
Operating Cash Flow of at least (i) ($2,000,000.00) as of December 31,
2009, (ii) ($5,000,000.00) as of each of March 31, 2010 and June 30,
2010, (iii) ($4,000,000.00) as of September 30, 2010, (iv) ($3,000,000.00)
as of December 31, 2010, and (v) as of the last day of each calendar
quarter thereafter, the amount that is $1,000,000.00 greater than the required
Operating Cash Flow as of the last day of the immediately preceding calendar
quarter.

 

6.10                        Protection of Intellectual
Property Rights.

 

(a)                                  (i) Use commercially reasonable
efforts to protect, defend and maintain the validity and enforceability of its
Intellectual Property; (ii) promptly advise Bank in writing of material
infringements of its Intellectual Property; and (iii) not allow any
Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent.

 

(b)                                 Provide written notice to Bank within ten
(10) days of entering or becoming bound by any Restricted License (other
than over-the-counter software that is commercially available to the
public).  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 (i) any Restricted License 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
Restricted License, whether now existing or entered into in the future, and (ii) Bank
to have the ability in the event of a liquidation of any Collateral to dispose
of such Collateral in accordance with Bank’s rights and remedies under this
Agreement and the other Loan Documents.

 

6.11                        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, 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.

 

6.12                        Creation/Acquisition of
Subsidiaries.  Notwithstanding and without limiting the
negative covenant contained in Section 7.3 hereof, in the event Borrower
or any Subsidiary creates or acquires any 

 

12

 

Subsidiary,
Borrower and such Subsidiary shall promptly notify Bank of the creation or
acquisition of such new Subsidiary and, at Bank’s request, in its sole
discretion, take all such action as may be reasonably required by Bank to cause
each such Subsidiary to, in Bank’s sole discretion, become a co-Borrower or
Guarantor under the Loan Documents and grant a continuing pledge and security
interest in and to the assets of such Subsidiary (substantially as described on
Exhibit A hereto); and Borrower shall grant and pledge to Bank a perfected
security interest in the stock, units or other evidence of ownership of each
Subsidiary.

 

6.13                        Further Assurances. 
Execute any further instruments and take further action as Bank
reasonably requests to perfect or continue Bank’s Lien 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, “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, excessive 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, Management,
Ownership or Business Locations.  (a) Engage
in or permit any of its Subsidiaries, if any, to engage in any business other
than the businesses currently engaged in by Borrower and such Subsidiary, as
applicable, or reasonably related thereto; (b) liquidate or dissolve; or (c) (i) have
a change in management such that any Key Person resigns, is terminated, or is
no longer actively involved in the management of the Borrower in his/her
position held as of the Effective Date, and a replacement reasonably
satisfactory to Bank for such Key Person is not made within ninety (90) days
after departure from Borrower; or (ii) enter into any transaction or
series of related transactions in which the stockholders of Borrower who were
not stockholders immediately prior to the first such transaction own more than
forty percent (40%) of the voting stock of Borrower immediately after giving
effect to such transaction or related series of such transactions (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 transaction and provides to Bank a
description of the material terms of the transaction).

 

Borrower shall not, without at least thirty (30) days
prior written notice to Bank: (1) add any new offices or business
locations, including warehouses (unless such new offices or business locations
contain less than One Hundred Thousand Dollars ($100,000.00) in Borrower’s
assets or property) or deliver any portion of the Collateral valued,
individually or in the aggregate, in excess of Ten Thousand Dollars
($10,000.00) to a bailee at a location other than to a bailee and at a location
already disclosed in the Perfection Certificate, (2) change its
jurisdiction of organization, (3) change its organizational structure or
type, (4) change its legal name, or (5) change any organizational
number (if any) assigned by its jurisdiction of organization.  If Borrower intends to deliver any portion of
the Collateral valued, individually or in the aggregate, in excess of Ten
Thousand Dollars ($10,000.00) to a bailee, and Bank and such bailee are not already
parties to a bailee agreement governing both the Collateral and the location to
which Borrower intends to deliver the Collateral, then Borrower will first
receive the written consent of Bank, and such bailee shall execute and deliver
a bailee agreement in form and substance satisfactory to Bank in its sole
discretion.

 

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.

 

7.5                               Encumbrance. 
Create, incur, allow, or suffer 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,
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, 

 

13

 

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 Liens”
herein.

 

7.6                               Maintenance of Collateral
Accounts.  Maintain any Collateral Account except
pursuant to the terms of Section 6.8(b) hereof.

 

7.7                               Distributions; Investments.  (a) Pay
any dividends or make any distribution or payment or redeem, retire or purchase
any capital stock, except Permitted Distributions; or (b) directly or
indirectly make any Investment (including, without limitation, any additional
Investment in any Subsidiary) other than Permitted Investments, or permit any
of its Subsidiaries to do so.

 

7.8                               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.

 

7.9                               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.

 

7.10                        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 Credit Extension for that purpose;
fail to meet the minimum funding requirements of ERISA, permit a Reportable
Event or non-exempt Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation or failure to comply would 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 (a) make any payment of principal or interest on
any Credit Extension on its due date, or (b) pay any other Obligations
within three (3) Business Days after such Obligations are due and payable
(which three (3) Business Day cure period shall not apply to payments due
on the Revolving Line Maturity Date). 
During the cure period, the failure to make or pay any payment specified
under clause (a) or (b) hereunder is not an Event of Default (but no
Credit Extension will be made during the cure period);

 

8.2                               Covenant Default.

 

(a)                                  Borrower fails or neglects to perform any
obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7, 6.8, or 6.9, or violates any
covenant in Section 7; or

 

(b)                                 Borrower fails or neglects to perform,
keep, or observe any other term, provision, condition, covenant or agreement
contained in this Agreement or any Loan Documents, and as to any default (other
than those specified in this Section 8) under such other term, provision,
condition, covenant or agreement that can be cured, has failed to cure the
default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10) day
period or cannot after diligent attempts by Borrower be cured within such ten (10) day
period, and such default is likely to be cured within a reasonable time, then
Borrower shall have an additional period (which shall not in any case exceed
thirty (30) days) to attempt to cure such default, and within such reasonable
time period the failure to cure the default shall not be deemed an Event of
Default (but 

 

14

 

no Credit
Extensions shall be made during such cure period).  Cure periods provided under this section
shall not apply, among other things, to financial covenants or any other
covenants set forth in clause (a) above;

 

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 the control of Borrower (including a Subsidiary) on deposit or
otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of
lien or levy for a judgment or claim in excess of One Hundred Thousand Dollars
($100,000.00) 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; or

 

(b)                                 (i) any material 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 material 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 Credit Extensions 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. 
There is, under any agreement to which Borrower or any Guarantor is a
party with a third party or parties, (a) any default resulting in a right
by such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in an amount individually or in the aggregate in
excess of Two Hundred Thousand Dollars ($200,000.00); or (b) any default
by Borrower or Guarantor , the result of which could have a material adverse
effect on Borrower’s or any Guarantor’s business;

 

8.7                               Judgments. 
One or more final judgments, orders, or decrees for the payment of money
in an amount, individually or in the aggregate, of at least Fifty Thousand
Dollars ($50,000.00) (not covered by independent third-party insurance as to
which liability has been accepted by such insurance carrier) shall be rendered
against Borrower and the same are not, within ten (10) days after the
entry thereof, discharged or execution thereof stayed or bonded pending appeal,
or such judgments are not discharged prior to the expiration of any such stay
(provided that no Credit Extensions will be made prior to the discharge, stay,
or bonding 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 any 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. 
Any document, instrument, or agreement evidencing any Subordinated Debt
shall for any reason be revoked or invalidated or otherwise cease to be in full
force and effect, any Person shall be in breach thereof (and all notice and
grace periods shall have expired) or contest in any manner the validity or
enforceability thereof or deny that it has any further liability or obligation
thereunder, or the Obligations shall for any reason be subordinated or shall
not have the priority contemplated by this 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 death,
liquidation, winding up, or termination of existence of any Guarantor; or (e) (i) a
material impairment in the perfection or priority of Bank’s Lien in the
collateral provided by Guarantor or in the value of such collateral or (ii) a
material adverse change in the general affairs, management, results of
operation, condition (financial or otherwise) or the prospect of repayment of
the Obligations occurs with respect to any Guarantor; or

 

15

 

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. 
While an Event of Default occurs and continues Bank may, without notice
or demand, do any or all of the following:

 

(a)                                  declare all Obligations immediately due
and payable (but if an Event of Default described in Section 8.5 occurs,
all Obligations are immediately due and payable without any action by Bank);

 

(b)                                 stop advancing money or extending credit
for Borrower’s benefit under this Agreement or under any other agreement
between Borrower and Bank;

 

(c)                                  demand that Borrower (i) deposit cash
with Bank in an amount equal to 105% of the Dollar Equivalent of the aggregate
face amount of all Letters of Credit remaining undrawn plus all interest, fees,
and costs due or to become due in connection therewith (as estimated by Bank in
its good faith business judgment), to secure all of the Obligations relating to
such Letters of Credit, 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; provided, however, if an Event of Default described in Section 8.5
occurs, the obligation of Borrower to cash collateralize all Letters of Credit
remaining undrawn shall automatically become effective without any action by
Bank;

 

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

 

(e)                                  make any payments and do any acts it
considers necessary or reasonable to protect the Collateral and/or 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.  Subject to the rights of
third parties to the extent that such third parties’ rights are senior to Bank’s
rights, 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, 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)                                 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

 

16

 

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

 

9.2                               Power of Attorney. 
Borrower hereby irrevocably appoints Bank as its lawful attorney-in-fact,
exercisable upon the occurrence and during the continuance of an Event of
Default, to:  (a) endorse Borrower’s
name on any checks or other forms of payment or security; (b) sign
Borrower’s name on any invoice or bill of lading for any Account or drafts
against Account Debtors; (c) settle and adjust disputes and claims about
the Accounts directly with Account Debtors, for amounts and on terms Bank
determines reasonable; (d) make, settle, and adjust all claims under
Borrower’s insurance policies; (e) pay, contest or settle any Lien,
charge, encumbrance, security interest, and adverse claim in or to the
Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the
name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of Bank’s security interest in the Collateral regardless
of whether an Event of Default has occurred until all Obligations have been
satisfied in full and Bank is under no further obligation to make Credit
Extensions hereunder.  Bank’s foregoing
appointment as Borrower’s attorney in fact, and all of Bank’s rights and
powers, coupled with an interest, are irrevocable until all Obligations have
been fully repaid and performed and Bank’s obligation to provide Credit
Extensions terminates.

 

9.3                               Protective Payments. 
If Borrower fails to obtain the insurance called for by Section 6.7
or fails to pay any premium thereon or fails to pay any other amount which
Borrower is obligated to pay under this Agreement or 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 rate applicable to the Obligations, and secured by the
Collateral.  Bank will make reasonable
efforts 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.

 

9.4                               Application of Payments and
Proceeds.  Unless an Event of Default has occurred and is
continuing, Bank may apply any funds in its possession, whether from Borrower
account balances, payments, or proceeds realized as the result of any
collection of Accounts or other disposition of the Collateral, first, to Bank
Expenses, including without limitation, the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Bank in the exercise
of its rights under this Agreement; second, to the interest due upon any of the
Obligations; and third, to the principal of the Obligations and any applicable
fees and other charges, in such order as Bank shall determine in its sole
discretion.  Any surplus shall be paid to
Borrower or other Persons legally entitled thereto; Borrower shall remain
liable to Bank for any deficiency.  If an
Event of Default has occurred and is continuing, Bank may apply any funds in
its possession, whether from Borrower account balances, payments, proceeds
realized as the result of any collection of Accounts or other disposition of
the Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion.  Any
surplus shall be paid to Borrower or to other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency.  If Bank, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Bank shall have the
option, exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Bank of cash therefor.

 

9.5                               Bank’s Liability for Collateral.  So
long as Bank complies with reasonable banking practices regarding the
safekeeping of the Collateral in the 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.

 

9.6                               No Waiver; 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 right of Bank thereafter to demand strict
performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless
signed by the party granting the waiver 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 shall not
preclude Bank from exercising any other remedy under this Agreement or other
remedy available at law or in equity, and Bank’s waiver of any Event of 

 

17

 

Default is not a
continuing waiver.  Bank’s delay in
exercising any remedy is not a waiver, election, or acquiescence.

 

9.7                               Demand Waiver. 
Borrower waives demand, notice of default (unless required hereunder or
in the Loan Documents) 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.

 

9.8                               Release of Alliance.  Bank hereby releases Alliance from the
Obligations.  Borrower hereby consents to
Bank’s release of Alliance from the Obligations and hereby agrees to pay and
perform when due all present and future obligations and liabilities of Alliance
under, based upon, or arising out of this Agreement, the Loan Documents and any
instruments and agreements relating thereto.

 

10                                  NOTICES

 

All notices, consents, requests, approvals, demands,
or other communication (collectively, “Communication”),
other than Advance requests made pursuant to Section 3.4, by any party to
this Agreement or any other Loan Document must be in writing and be delivered
or sent by facsimile at the addresses or facsimile numbers listed below.  Bank or Borrower may change its notice
address by giving the other party written notice thereof.  Each such Communication 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,
registered or certified mail, return receipt requested, with proper postage
prepaid; (b) upon transmission, when sent by facsimile transmission (with
such facsimile promptly confirmed by delivery of a copy by personal delivery or
United States mail as otherwise provided in this Section 10); (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 indicated below. 
Advance requests made pursuant to Section 3.4 must be in writing
and may be in the form of electronic mail, delivered to Bank by Borrower at the
e-mail address of Bank provided below and shall be deemed to have been validly
served, given, or delivered when sent (with such electronic mail promptly
confirmed by delivery of a copy by personal delivery or United States mail as
otherwise provided in this Section 10). 
Bank or Borrower may change its address, facsimile number, or electronic
mail address by giving the other party written notice thereof in accordance
with the terms of this Section 10.

 

	
   

  	
  If to Borrower:

  	
  Network
  Engines, Inc.

  
	
   

  	
   

  	
  25 Dan Road

  
	
   

  	
   

  	
  Canton, MA 02021

  
	
   

  	
   

  	
  Attn:  Vice President of Finance

  
	
   

  	
   

  	
  Fax: (781) 770-2000

  
	
   

  	
   

  	
  Email: 
  Jim.Herlihy@networkengines.com

  
	
   

  	
   

  	
   

  
	
   

  	
  If to Bank:

  	
  Silicon Valley Bank

  
	
   

  	
   

  	
  One Newton Executive
  Park, Suite 200

  
	
   

  	
   

  	
  2221 Washington Street

  
	
   

  	
   

  	
  Newton, Massachusetts  02462

  
	
   

  	
   

  	
  Attn:  Mr. Ryan Ravenscroft

  
	
   

  	
   

  	
  Fax:  (617) 527- 0177

  
	
   

  	
   

  	
  Email:  rravenscroft@svb.com

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
  Riemer &
  Braunstein LLP

  
	
   

  	
   

  	
  Three Center Plaza

  
	
   

  	
   

  	
  Boston, Massachusetts
  02108

  
	
   

  	
   

  	
  Attn:  Charles W. Stavros, Esquire

  
	
   

  	
   

  	
  Fax: (617) 880-3456

  
	
   

  	
   

  	
  Email:
  cstavros@riemerlaw.com

  

 

18

 

11           CHOICE OF LAW, VENUE, AND
JURY TRIAL WAIVER

 

Massachusetts 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 Massachusetts; 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.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH HEREINABOVE, BANK SHALL
SPECIFICALLY HAVE THE RIGHT TO BRING ANY ACTION OR PROCEEDING AGAINST BORROWER
OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION WHICH BANK DEEMS
NECESSARY OR APPROPRIATE IN ORDER TO REALIZE ON THE COLLATERAL OR TO OTHERWISE
ENFORCE BANK’S RIGHTS AGAINST BORROWER OR ITS PROPERTY.

 

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.

 

12           GENERAL PROVISIONS

 

12.1        Termination Prior to Maturity
Date.  This Agreement may be terminated prior to the
Revolving Line Maturity Date by Borrower, effective three (3) Business
Days after written notice of termination is given to Bank or if Bank’s
obligation to fund Credit Extensions terminates pursuant to the terms of Section 2.1.1(b).  Notwithstanding any such termination, Bank’s
lien and security interest in the Collateral shall continue until Borrower
fully satisfies its Obligations.  If such
termination is at Borrower’s election or at Bank’s election due to the occurrence
and continuance of an Event of Default, and such termination occurs prior to
the one (1) year anniversary of the Effective Date, Borrower shall pay to
Bank, in addition to the payment of any other expenses or fees then-owing, a
termination fee in an amount equal to Seventy-Five Thousand Dollars
($75,000.00) provided that no termination fee shall be charged if the credit
facility hereunder is replaced with a new facility from another division of
Silicon Valley Bank.  Upon payment in
full of the Obligations and at such time as Bank’s obligation to make Credit
Extensions has terminated, Bank shall release its liens and security interests
in the Collateral and all rights therein shall revert to Borrower.

 

12.2        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, assign,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other
Loan Documents.

 

12.3        Indemnification. 
Borrower agrees to indemnify, defend and hold Bank and its directors,
officers, 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”)
claimed or asserted by any other party in connection with the transactions
contemplated by the Loan Documents; and (b) all losses or expenses
(including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising
from transactions between Bank and Borrower (including reasonable attorneys’
fees and expenses), except for Claims and/or losses and/or Bank Expenses
directly caused by such Indemnified Person’s gross negligence or willful
misconduct.

 

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

 

19

 

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

 

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

 

12.7        Amendments in Writing; Waiver;
Integration.  No purported amendment or modification of any
Loan Document, or waiver, discharge or termination of any obligation under any
Loan Document, shall be enforceable or admissible unless, and only to the
extent, expressly set forth in a writing signed by the party against which
enforcement or admission is sought. 
Without limiting the generality of the foregoing, no oral promise or
statement, nor any action, inaction, delay, failure to require performance or
course of conduct shall operate as, or evidence, an amendment, supplement or
waiver or have any other effect on any Loan Document.  Any waiver granted shall be limited to the
specific circumstance expressly described in it, and shall not apply to any
subsequent or other circumstance, whether similar or dissimilar, or give rise
to, or evidence, any obligation or commitment to grant any further waiver.  The Loan Documents represent the entire
agreement about this subject matter and supersede prior negotiations or
agreements.  All prior agreements,
understandings, representations, warranties, and negotiations between the
parties about the subject matter of the Loan Documents merge into 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, is 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 paid in full and 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 any 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 is 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 the development of databases,
reporting purposes, and market analysis so long as such confidential
information is aggregated and anonymized prior to distribution unless otherwise
expressly permitted by Borrower.  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, Bank 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      Right of Set Off. 
Borrower hereby grants to Bank, a lien, security interest and right of
set off 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.

 

20

 

12.13      Electronic Execution of
Documents.  The words “execution,” “signed,” “signature”
and words of like import in any Loan Document shall be deemed to include
electronic signatures or the keeping of records in electronic form, each of
which shall be of the same legal effect, validity and enforceability as a
manually executed signature or the use of a paper-based recordkeeping systems,
as the case may be, to the extent and as provided for in any applicable law,
including, without limitation, any state law based on the Uniform Electronic
Transactions Act.

 

12.14      Captions. 
The headings used in this Agreement are for convenience only and shall
not affect the interpretation of this Agreement.

 

12.15      Construction of Agreement.  The parties mutually acknowledge that they and
their attorneys have participated in the preparation and negotiation of this
Agreement.  In cases of uncertainty this
Agreement shall be construed without regard to which of the parties caused the
uncertainty to exist.

 

12.16      Relationship. 
The relationship of the parties to this Agreement is determined solely
by the provisions of this Agreement.  The
parties do not intend to create any agency, partnership, joint venture, trust,
fiduciary or other relationship with duties or incidents different from those
of parties to an arm’s-length contract.

 

12.17      Third Parties. 
Nothing in this Agreement, whether express or implied, is intended to: (a) confer
any benefits, rights or remedies under or by reason of this Agreement on any
persons other than the express parties to it and their respective permitted
successors and assigns; (b) relieve or discharge the obligation or
liability of any person not an express party to this Agreement; or (c) give
any person not an express party to this Agreement any right of subrogation or
action against any party to this Agreement.

 

13           DEFINITIONS

 

13.1        Definitions. 
As used in the Loan Documents, the word “shall” is mandatory, the word “may”
is permissive, the word “or” is not exclusive, the words “includes” and “including”
are not limiting, the singular includes the plural, and numbers denoting
amounts that are set off in brackets are negative.  As used in this Agreement, the following
capitalized terms have the following meanings:

 

“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 any “account debtor” as defined in the Code with such additions to such term
as may hereafter be made.

 

“Adjusted Quick Ratio” is the ratio of (a) Quick Assets to (b) (i) Current
Liabilities minus (ii) Deferred Revenue.

 

“Advance” or “Advances” means an advance (or advances) under the Revolving
Line.

 

“Affiliate” is,
with respect to any Person, each other 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.

 

“Agreement” is
defined in the preamble hereof.

 

“Alliance” is
defined in the preamble.

 

“Availability Amount”
is (a) the lesser of (i) the Revolving Line or (ii) the amount
available under the Borrowing Base minus (b) the Dollar Equivalent amount
of all outstanding Letters of Credit (including drawn but unreimbursed Letters
of Credit plus an amount equal to the Letter of Credit Reserve), minus (c) the
FX Reduction Amount, minus (d) any amounts used for Cash Management
Services, and minus (e) the outstanding principal balance of any Advances.

 

“Bank” is
defined in the preamble hereof.

 

21

 

“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 or any Guarantor.

 

“Borrower” is
defined in the preamble hereof.

 

“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.

 

“Borrowing Base”
is eighty percent (80%) of Eligible Accounts, as determined by Bank from
Borrower’s most recent Borrowing Base Certificate, provided, however, that Bank
may decrease the foregoing percentage in its good faith business judgment based
on events, conditions, contingencies, or risks which, as determined by Bank,
may adversely affect the Collateral.

 

“Borrowing Base Certificate”
is that certain certificate included within each Transaction Report.

 

“Borrowing Resolutions”
are, with respect to any Person, those resolutions adopted by such Person’s
Board of Directors or other appropriate body and delivered by such Person to
Bank approving the Loan Documents to which such Person is a party and the
transactions contemplated thereby, together with a certificate executed by its
secretary on behalf of such Person certifying that (a) such Person has the
authority to execute, deliver, and perform its obligations under each of the
Loan Documents to which it is a party, (b) that attached as Exhibit A
to such certificate is a true, correct, and complete copy of the resolutions
then in full force and effect authorizing and ratifying the execution,
delivery, and performance by such Person of the Loan Documents to which it is a
party, (c) the name(s) of the Person(s) authorized to execute
the Loan Documents on behalf of such Person, together with a sample of the true
signature(s) of such Person(s), and (d) that Bank may conclusively
rely on such certificate unless and until such Person shall have delivered to
Bank a further certificate canceling or amending such prior certificate.

 

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

 

“Capital
Expenditures” means, with respect to any Person for any period, the
sum of (a) the aggregate of all expenditures by such Person and its
Subsidiaries during such period that are capital expenditures as determined in
accordance with GAAP, whether such expenditures are paid in cash or financed, plus
(b) to the extent not covered by clause (a), the aggregate of all
expenditures by such Person and its Subsidiaries during such period to acquire
by purchase or otherwise the business or capitalized assets or the capital
stock of any other Person.

 

“Cash Equivalents”
means (a) marketable direct obligations issued or unconditionally
guaranteed by the United States or any agency or any State thereof having
maturities of not more than one (1) year from the date of acquisition; (b) commercial
paper maturing no more than one (1) year after its creation and having the
highest rating from either Standard & Poor’s Ratings Group or Moody’s
Investors Service, Inc., (c) Bank’s certificates of deposit issued
maturing no more than one (1) year after issue; and (d) money market
funds at least ninety-five percent (95%) of the assets of which constitute Cash
Equivalents of the kinds described in clauses (a) through (c) of this
definition.

 

“Cash Management Services”
is defined in Section 2.1.4.

 

“Claims” is
defined in Section 12.3.

 

“Code” is the
Uniform Commercial Code, as the same may, from time to time, be enacted and in
effect in the Commonwealth of Massachusetts; 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 Commonwealth of Massachusetts,
the term “Code” shall mean the Uniform Commercial Code as enacted and in effect
in such other jurisdiction solely for purposes of the provisions thereof
relating to such attachment, perfection, priority, or remedies and for purposes
of definitions relating to such provisions.

 

22

 

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

 

“Collateral Account”
is any Deposit Account, Securities Account, or Commodity Account.

 

“Commodity Account”
is any “commodity account” as defined in the Code with such additions to such
term as may hereafter be made.

 

“Communication”
is defined in Section 10.

 

“Compliance Certificate”
is that certain certificate in the form attached hereto 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, in each case directly or
indirectly guaranteed, endorsed, co made, discounted or sold with recourse by
that Person, or for which that Person is directly or indirectly liable; (b) any
obligations for undrawn letters of credit for the account of that Person; and (c) all
obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement designated
to protect a Person against fluctuation in interest rates, currency exchange
rates or commodity prices; but “Contingent Obligation” does not include
endorsements in the ordinary course of business.  The amount of a Contingent Obligation is the
stated or determined amount of the primary obligation for which the Contingent
Obligation is made or, if not determinable, the maximum reasonably anticipated
liability for it determined by the Person in good faith; but the amount may not
exceed the maximum of the obligations under any guarantee or other support
arrangement.

 

“Control Agreement”
is any control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or
commodity intermediary at which Borrower maintains a Securities Account or a
Commodity Account, Borrower, and Bank pursuant to which Bank obtains control
(within the meaning of the Code) over such Deposit Account, Securities Account,
or Commodity Account.

 

“Copyrights” are
any and all copyright rights, copyright applications, copyright registrations
and like protections in each work or authorship and derivative work thereof,
whether published or unpublished and whether or not the same also constitutes a
trade secret.

 

“Credit Extension”
is any Advance, Letter of Credit, FX Forward Contract, amount utilized for Cash
Management Services or any other extension of credit by Bank for Borrower’s
benefit.

 

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

 

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

 

“Default Rate”
is defined in Section 2.3(b).

 

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

 

“Deposit Account”
is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.

 

“Designated Deposit Account”
is Borrower’s deposit account, account number
                          ,
maintained with Bank.

 

“Dollars,” “dollars” or use of the sign “$” means only lawful money of
the United States and not any other currency, regardless of whether that
currency uses the “$” sign to denote its currency or may be readily converted
into lawful money of the United States.

 

23

 

“Dollar Equivalent”
is, at any time, (a) with respect to any amount denominated in Dollars,
such amount, and (b) with respect to any amount denominated in a Foreign
Currency, the equivalent amount therefor in Dollars as determined by Bank at
such time on the basis of the then-prevailing rate of exchange in San
Francisco, California, for sales of the Foreign Currency for transfer to the
country issuing such Foreign Currency.

 

“EBITDA”
shall mean (a) Net Income, plus (b) Interest Expense, plus (c) to
the extent deducted in the calculation of Net Income, depreciation expense and
amortization expense, plus (d) income tax expense, plus (e) to the
extent deducted in the calculation of Net Income, non-stock compensation and
other one-time non-cash expenses approved by Bank in writing on a case-by-case
basis.

 

“Effective Date”
is February 5, 2010.

 

“Eligible Accounts”
are Accounts which arise in the ordinary course of Borrower’s business that
meet all Borrower’s representations and warranties in Section 5.3.  Bank reserves the right at any time and from
time to time after the Effective Date upon notice to Borrower, to adjust any of
the criteria set forth below and to establish new criteria in its good faith
business judgment.  Without limiting the
fact that the determination of which Accounts are eligible for borrowing is a
matter of Bank’s good faith judgment, the following (“Minimum
Eligibility Requirements”) are the minimum requirements for an
Account to be an Eligible Account. 
Unless Bank agrees otherwise in writing, Eligible Accounts shall not
include:

 

(a)           Accounts for which the Account Debtor has
not been invoiced or where goods or services have not yet been rendered to the
Account Debtor (sometimes called memo billings or pre-billings);

 

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

 

(c)           Accounts owing from an Account Debtor,
fifty percent (50%) or more of whose Accounts have not been paid within ninety
(90) days of invoice date;

 

(d)           Accounts billed and/or payable outside
the United States;

 

(e)           Accounts with credit balances over ninety
(90) days from invoice date;

 

(f)            Accounts owing from an Account Debtor,
including Affiliates, whose total obligations to Borrower exceed twenty-five
percent (25%) of all Accounts, (provided that such percentage shall be forty
percent (40%) for Accounts for which the Account Debtor is EMC Corporation) for
the amounts that exceed that percentage, unless Bank approves in writing;

 

(g)           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);

 

(h)           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);

 

(i)            Accounts owing from an Account Debtor
which does not have its principal place of business in the United States except
for Eligible Foreign Accounts;

 

(j)            Accounts owing from the United States or
any department, agency, or instrumentality thereof except for Accounts of the
United States if 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;

 

(k)           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;

 

24

 

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

 

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

 

(o)           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;

 

(p)           Accounts owing from an Account Debtor
with respect to which Borrower has received Deferred Revenue (but only to the
extent of such Deferred Revenue), except for such Accounts approved in writing
by Bank, provided no Event of Default has occurred or is continuing;

 

(q)           Accounts subject to chargebacks or other
payment deductions taken by an Account Debtor;

 

(r)            Accounts for which Bank in its good faith
business judgment determines collection to be doubtful; and

 

(s)           other Accounts Bank deems ineligible in
the exercise of its good faith business judgment.

 

“Eligible Foreign Accounts”
are Accounts for which the Account Debtor does not have its principal place of
business in the United States but are otherwise Eligible Accounts that are (a) supported
by letter(s) of credit acceptable to Bank; or (b) that Bank approves
in writing.

 

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

 

“Excluded Licenses”
is defined in Section 5.2.

 

“Event of Default”
is defined in Section 8.

 

“Foreign Currency”
means lawful money of a country other than the United States.

 

“Funding Date”
is any date on which a Credit Extension is made to or for the account of
Borrower which shall be a Business Day.

 

“FX Business Day”
is any day when (a) Bank’s Foreign Exchange Department is conducting its
normal business and (b) the Foreign Currency being purchased or sold by
Borrower is available to Bank from the entity from which Bank shall buy or sell
such Foreign Currency.

 

“FX Forward Contract”
is defined in Section 2.1.3.

 

“FX Reduction Amount”
is defined in Section 2.1.3.

 

“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 Intellectual Property, claims, income and other tax
refunds, security and other deposits, payment intangibles, contract rights,
options to purchase or sell real or personal property, rights in all litigation
presently or hereafter pending (whether in 

 

25

 

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.

 

“Included  Indebtedness” is (a) indebtedness for
borrowed money, (b) obligations evidenced by notes, bonds, debentures or
similar instruments, and (c) capital lease obligations.

 

“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.

 

“Initial Audit”
is Bank’s inspection of Borrower’s Accounts, the Collateral, and Borrower’s
Books.

 

“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”
means all of Borrower’s right, title, and interest in and to the following:

 

(a)           its Copyrights, Trademarks and Patents;

 

(b)           any and all trade secrets and trade
secret rights, including, without limitation, any rights to unpatented
inventions, know-how, operating manuals;

 

(c)           any and all source code;

 

(d)           any and all design rights which may be
available to a Borrower;

 

(e)           any and all claims for damages by way of
past, present and future infringement of any of the foregoing, with the right,
but not the obligation, to sue for and collect such damages for said use or
infringement of the Intellectual Property rights identified above; and

 

(f)            all amendments, renewals and extensions
of any of the Copyrights, Trademarks or Patents.

 

“Interest Expense”
means for any fiscal period, interest expense (whether cash or non-cash)
determined in accordance with GAAP for the relevant period ending on such date,
including, in any event, interest expense with respect to any Credit Extension
and other Indebtedness of Borrower and its Subsidiaries, if any, including,
without limitation or duplication, all commissions, discounts, or related
amortization and other fees and charges with respect to letters of credit and
bankers’ acceptance financing and the net costs associated with interest rate
swap, cap, and similar arrangements, and the interest portion of any deferred
payment obligation (including leases of all types).

 

26

 

“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 interest in any Person (including stock, partnership
interest or other securities), and any loan, advance or capital contribution to
any Person.

 

“Key Person”
is any of Borrower’s Chief Executive Officer, Chief Operating Officer, or Chief
Financial Officer, who are as of the Effective Date, Gregory A. Shortell and
Douglas G. Bryant, respectively.

 

“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 as set forth in Section 2.1.2.

 

“Letter of Credit
Application” is defined in Section 2.1.2(a).

 

“Letter of Credit Reserve”
has the meaning set forth in Section 2.1.2(d).

 

“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, any note, or
notes or guaranties executed by Borrower or any Guarantor, and any other
present or future agreement between Borrower any Guarantor and/or for the benefit
of Bank in connection with this Agreement, all as amended, restated, or
otherwise modified.

 

“Material Adverse Change”
is (a) a material impairment in the perfection or priority of Bank’s Lien
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; (c) a material impairment of the prospect of
repayment of any portion of the Obligations or (d) Bank determines, based
upon information available to it and in its reasonable judgment, that there is
a reasonable likelihood that Borrower shall fail to comply with one or more of
the financial covenants in Section 6 during the next succeeding financial
reporting period.

 

“Minimum Eligibility
Requirements” is defined in the defined term “Eligible Accounts”.

 

“Net Income”
means, as calculated on a consolidated basis for Borrower and its Subsidiaries,
if any, for any period as at any date of determination, the net profit (or
loss), after provision for taxes, of Borrower and its Subsidiaries for such
period taken as a single accounting period.

 

“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, all
obligations relating to letters of credit (including reimbursement obligations
for drawn and undrawn letters of credit), cash management services, and foreign
exchange contracts, if any, and including interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned
to Bank, and to perform Borrower’s duties under the Loan Documents.

 

“Operating Cash Flow”
is, for the immediately preceding twelve (12) month period as of any date of
determination, (a) Borrower’s consolidated EBITDA, minus (b) Capital
Expenditures, minus (c) Borrower’s cash taxes.

 

“Operating Documents”
are, for any Person, such Person’s formation documents, as certified with the
Secretary of State of such Person’s state of formation on a date that is no
earlier than 30 days prior to the Effective Date, and, (a) if such Person
is a corporation, its bylaws in current form, (b) if such Person is a
limited liability company, its limited liability company agreement (or similar
agreement), and (c) if such Person is a partnership, its partnership
agreement (or similar agreement), each of the foregoing with all current
amendments or modifications thereto.

 

27

 

“Overadvance” is
defined in Section 2.2.

 

“Patents” means
all patents, patent applications and like protections including without
limitation improvements, divisions, continuations, renewals, reissues,
extensions and continuations-in-part of the same.

 

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

 

“Perfection Certificate”
is defined in Section 5.1.

 

“Permitted Bank Accounts”
is defined in Section 6.8 (a).

 

“Permitted Distributions”
means:

 

(a)           purchases of capital stock from former
employees, consultants and directors pursuant to repurchase agreements or other
similar agreements in an aggregate amount not to exceed Two Hundred Thousand
Dollars ($200,000.00) in any fiscal year provided that at the time of such
purchase no Default or Event of Default has occurred and is continuing;

 

(b)           distributions or dividends consisting
solely of Borrower’s capital stock;

 

(c)           purchases of fractional shares of capital
stock arising out of stock dividends, splits or combinations or business
combinations; and

 

(d)           the settlement or performance of such
Person’s obligations under any equity derivative transaction, option contract
or similar transaction or combination of transactions.

 

“Permitted Indebtedness”
is:

 

(a)           Borrower’s Indebtedness to Bank under
this Agreement and the other Loan Documents;

 

(b)           Indebtedness existing on the Effective
Date and shown on the Perfection Certificate;

 

(c)           Subordinated Debt, if any;

 

(d)           unsecured Indebtedness to trade creditors
incurred in the ordinary course of business;

 

(e)           Indebtedness secured by Permitted Liens;

 

(f)            Indebtedness
under any FX Forward Contract or Letter of Credit;

 

(g)           Indebtedness
to Bank incurred in connection with Cash Management Services;

 

(h)           Indebtedness,
if any, arising under any “swap agreement,” as such term is defined in Section 101
of the Bankruptcy Code;

 

(i)            Indebtedness
incurred as a result of endorsing negotiable instruments received in the
ordinary course of business;

 

(j)            Indebtedness
solely among Borrower and any Subsidiary that is a Guarantor which has granted
Bank a first priority security interest in its assets;

 

(k)           Other
Indebtedness in an amount not exceeding One Hundred Thousand Dollars
($100,000.00) in the aggregate outstanding at any time; and

 

(l)            extensions, refinancings, modifications,
amendments and restatements of any items of Permitted Indebtedness (a) through
(k) above, provided that the principal amount thereof is not increased or
the terms thereof are not modified to impose more burdensome terms upon
Borrower or its Subsidiary, as the case may be.

 

28

 

“Permitted Investments”
are:

 

(a)           Investments
shown on the Perfection Certificate and existing on the Effective Date;

 

(b)           Cash
Equivalents;

 

(c)           Investments
consisting of the endorsement of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of Borrower’s
business;

 

(d)           Investments
consisting of (i) travel advances and employee relocation loans and other
employee loans and advances in the ordinary course of business, and (ii) loans
to employees, officers or directors relating to the purchase of equity
securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower’s Board of Directors;

 

(e)           Investments
(including debt obligations) received in connection with the bankruptcy or
reorganization of customers or suppliers and in settlement of delinquent
obligations of, and other disputes with, customers or suppliers arising in the
ordinary course of business;

 

(f)            Investments
consisting of notes receivable of, or prepaid royalties and other credit
extensions, to customers and suppliers who are not Affiliates, in the ordinary
course of business; provided that this paragraph (f) shall not apply to
Investments of Borrower in any Subsidiary;

 

(g)           Investments to the
extent they constitute Permitted Indebtedness;

 

(i)            any Permitted
Distribution; and

 

(j)            Other Investments in an amount not
exceeding One Hundred Thousand Dollars ($100,000.00) in the aggregate
outstanding at any time.

 

“Permitted Liens”
are:

 

(a)           Liens
existing on the Effective Date and shown on the Perfection Certificate or
arising under this Agreement and the other Loan Documents;

 

(b)           Liens
for taxes, fees, assessments or other government charges or levies, either (i) not
due and payable or (ii) being contested in good faith and for which
Borrower maintains adequate reserves on its Books, that no notice of any such
Lien has been filed or recorded under the Internal Revenue Code of 1986, as
amended, and the Treasury Regulations adopted thereunder;

 

(c)           purchase
money Liens (i) on Equipment acquired or held by Borrower incurred for
financing the acquisition of the Equipment securing no more than Fifty Thousand
Dollars ($50,000.00) in the aggregate amount outstanding, or (ii) existing
on Equipment when acquired, if the Lien is confined to the property and
improvements and the proceeds of the Equipment;

 

(d)           statutory
Liens securing claims or demands of materialmen, mechanics, carriers,
warehousemen, landlords and other Persons imposed without action of such parties,
provided, they have no priority over any of Bank’s Liens, such Liens attach
only to Inventory and the aggregate amount of the Indebtedness secured by such
Liens does not at any time exceed Fifty Thousand Dollars ($50,000.00) and is
not delinquent or is being contested in good faith by appropriate proceedings;

 

(e)           Liens
to secure payment of workers’ compensation, employment insurance, old-age
pensions, social security and other like obligations incurred in the ordinary
course of business, provided, they have no priority over any of Bank’s Liens
and the aggregate amount of the Indebtedness secured by such Liens does not at
any time exceed One Hundred Thousand Dollars ($100,000.00);

 

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

 

29

 

(g)           leases
or subleases of real property granted in the ordinary course of business, and
leases, subleases, non-exclusive licenses or sublicenses of property (other
than real property or Intellectual Property) granted in the ordinary course of
Borrower’s business, if the leases, subleases, licenses and sublicenses do not
prohibit granting Bank a security interest;

 

(h)           non-exclusive
licenses of Intellectual Property granted to third parties in the ordinary
course of business;

 

(i)            Liens
arising from judgments, decrees or attachments in circumstances not
constituting an Event of Default under Section 8.4 or 8.7;

 

(j)            Liens
securing Subordinated Debt provided that Bank has consented to such Lien in
writing;

 

(k)           Liens
securing Letters of Credit; and

 

(l)            security
deposits for the benefit of landlords in the ordinary course of business, in an
amount not to exceed One Hundred Thousand Dollars ($100,000.00).

 

“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
the greater of: (a) Bank’s most recently announced “prime rate,” even if
it is not Bank’s lowest rate, and (b) four percent (4.0%).

 

“Quick Assets”
is, on any date, Borrower’s consolidated unrestricted cash maintained with Bank
plus net billed accounts receivable, determined according to GAAP.

 

“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.

 

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

 

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

 

“Restricted License”
is 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.

 

“Revolving Line”
is an Advance or Advances in an amount equal to Ten Million Dollars
($10,000,000).

 

30

 

“Revolving Line Maturity
Date” is February 4, 2012.

 

“SEC” shall mean
the Securities and Exchange Commission, any successor thereto, and any
analogous Governmental Authority

 

“Securities Account”
is any “securities account” as defined in the Code with such additions to such
term as may hereafter be made.

 

“Streamline Period”
is, on and after the Effective Date, the period (i) beginning on the first
(1st) day of each calendar month immediately
following a calendar month in which Borrower has maintained, for thirty (30)
consecutive days during such calendar month, a sum of: (i) unrestricted
and unencumbered cash at Bank, plus (ii) the Availability Amount of
greater than Ten Million Dollars ($10,000,000.00), as determined by Bank, in
its sole discretion (the “Streamline
Availability”); and (ii) ending on the earlier to occur of (A) the
occurrence of a Default or an Event of Default; and (B) the first day
thereafter in which Borrower fails to maintain the Streamline Availability, as
determined by Bank, in its sole discretion. 
Borrower shall give Bank prior written notice of Borrower’s intention to
enter into any such Streamline Period.

 

“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.

 

“Subsidiary” is,
as to any Person, a corporation, partnership, limited liability company or
other entity of which shares of stock or other ownership interests having
ordinary voting power (other than stock or such other ownership interests
having such power only by reason of the happening of a contingency) to elect a
majority of the board of directors or other managers of such corporation,
partnership or other entity are at the time owned, or the management of which
is otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. 
Unless the context otherwise requires, each reference to a Subsidiary
herein shall be a reference to a Subsidiary of Borrower.

 

“Total Liabilities”
is on any day, obligations that should, under GAAP, be classified as
liabilities on Borrower’s consolidated balance sheet, including all
Indebtedness, and current portion of Subordinated Debt permitted by Bank to be
paid by Borrower, but excluding all other Subordinated Debt.

 

“Trademarks”
means any trademark and servicemark rights, whether registered or not,
applications to register and registrations of the same and like protections,
and the entire goodwill of the business of Borrower connected with and
symbolized by such trademarks.

 

“Transaction Report”
is the Bank’s standard reporting package for, without limitation, reporting
sales, collections, credit memos and other collateral adjustments, provided by
Bank to Borrower.

 

“Transfer” is
defined in Section 7.1.

 

“Unused Revolving Line
Facility Fee” is defined in Section 2.4(e).

 

[Signature page follows.]

 

31

 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the Effective Date.

 

BORROWER:

 

NETWORK ENGINES, INC.

 

	
  By

  	
  /s/ Douglas G. Bryant

  	
   

  
	
  Name:

  	
  Douglas G. Bryant

  	
   

  
	
  Title:

  	
  CFO 

  	
   

  
	
   

  	
   

  
	
  BANK:

  	
   

  
	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  

 

[Signature page to Loan
and Security Agreement]

 

 

EXHIBIT A

 

COLLATERAL DESCRIPTION

 

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

 

All goods, Accounts
(including health-care receivables), Equipment, Inventory, contract rights or
rights to payment of money, leases, license agreements, franchise agreements,
General Intangibles (except as provided below), commercial tort claims,
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),
securities, and all other investment property, supporting obligations, and
financial assets, whether now owned or hereafter acquired, wherever located;
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.

 

Notwithstanding the
foregoing, the Collateral does not include any Intellectual Property; provided,
however, the Collateral shall include all Accounts and all proceeds of
Intellectual Property.  If a judicial
authority (including a U.S. Bankruptcy Court) would hold that a security
interest in the underlying Intellectual Property is necessary to have a
security interest in such Accounts and such property that are proceeds of
Intellectual Property, then the Collateral shall automatically, and effective
as of the Effective Date, include the Intellectual Property to the extent
necessary to permit perfection of Bank’s security interest in such Accounts and
such other property of Borrower that are proceeds of the Intellectual Property.

 

Pursuant to the terms of
a certain negative pledge arrangement with Bank, Borrower has agreed not to
encumber any of its Intellectual Property without Bank’s prior written consent.

 

1

 

EXHIBIT B

 

COMPLIANCE
CERTIFICATE

 

	
  TO:

  	
  SILICON VALLEY BANK

  	
  Date:

  	
   

  
	
  FROM:

  	
  NETWORK ENGINES, INC.

  	
   

  	
   

  

 

The undersigned authorized officer of NETWORK ENGINES,
INC. (“Borrower”) certifies that under the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the “Agreement”), (1) Borrower
is in complete compliance for the period ending
                              
with all required covenants except as noted below, (2) there are no Events
of Default, (3) all representations and warranties in the Agreement are
true and correct in all material respects on this date except as noted below;
provided, however, that such materiality qualifier shall not be applicable to
any representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4) Borrower,
and each of its Subsidiaries, has timely filed all required tax returns and
reports, and Borrower has timely paid all foreign, federal, state and local
taxes, assessments, deposits and contributions owed by Borrower except as
otherwise permitted pursuant to the terms of Section 5.9 of the Agreement,
and (5) no Liens have been levied or claims made against Borrower or any
of its Subsidiaries, if any, relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank.  Attached are the required documents
supporting the certification.  The
undersigned certifies that these are prepared in accordance with GAAP
consistently applied from one period to the next except as explained in an accompanying
letter or footnotes.  The undersigned
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

 

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

 

	
  Reporting
  Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly consolidated
  plus consolidating financial statements with Compliance Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes o 
  No o

  
	
  Annual consolidated
  plus consolidating financial statement (CPA Audited)

  	
   

  	
  FYE within120 days

  	
   

  	
  Yes o 
  No o

  
	
  10-Q, 10-K and 8-K and
  other public filings

  	
   

  	
  Within 5 days after
  filing with SEC

  	
   

  	
  Yes o 
  No o

  
	
  A/R & A/P
  Agings, Deferred Revenue reports and Inventory Sell-Through Reports

  	
   

  	
  Monthly within 15 days

  	
   

  	
  Yes o 
  No o

  
	
  Transaction Reports

  	
   

  	
  As set forth in
  Section 6.2 of the Agreement

  	
   

  	
  Yes o 
  No o

  
	
  Budgets and Projections

  	
   

  	
  45 days after FYE

  	
   

  	
  Yes o 
  No o

  

 

The following
Intellectual Property was registered after the Effective Date (if no
registrations, state “None”)

                                                                 

 

	
  Financial
  Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Adjusted Quick Ratio
  (to be tested on the last day of each calendar month)

  	
   

  	
  1.20:1.0

  	
   

  	
        :1.0

  	
   

  	
  Yes o 
  No o

  
	
  Operating Cash Flow (as
  of the last day of each calendar quarter)

  	
   

  	
  $           *

  	
   

  	
  $           

  	
   

  	
  Yes o 
  No o

  

 

*As set forth in Section 6.9(b) of
the Agreement.

 

1

 

The following financial
covenant analyses and information set forth in Schedule 1 attached hereto are
true and accurate as of the date of this Certificate.

 

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

 

 

 

	
  Network Engines, Inc.

  	
   

  	
  BANK USE ONLY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Received by:

  	
   

  
	
  By:

  	
   

  	
   

  	
  AUTHORIZED SIGNER 

  
	
  Name:

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified:

  	
   

  
	
   

  	
   

  	
  AUTHORIZED
  SIGNER 

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status:

  	
  Yes o 
  No o

  
						

 

2

 

Schedule 1 to Compliance Certificate

 

Financial Covenants of Borrower

 

	
  Dated:

  	
   

  	
   

  

 

In the event of a
conflict between this Schedule and the Agreement, the terms of the Agreement
shall control.

 

I.              Adjusted  Quick Ratio (Section 6.9(a))

 

	
  Required:

  	
  1.20:1.00

  
	
  Actual:

  	
         :1.00

  

 

	
  A.

  	
  Aggregate value of the
  unrestricted cash of Borrower and its Subsidiaries at Bank

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
  Aggregate value of the
  net billed accounts receivable of Borrower and its Subsidiaries

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
  Quick Assets (the sum
  of lines A through B)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
  Aggregate value of
  Obligations to Bank plus (a) indebtedness for borrowed money,
  (b) obligations evidenced by notes, bonds, debentures or similar
  instruments, and (c) capital lease obligations

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
  Aggregate value of
  liabilities of Borrower and its Subsidiaries (including all Indebtedness)
  that matures within one (1) year and current portion of Subordinated
  Debt permitted by Bank to be paid by Borrower

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
  Current Liabilities
  (the sum of lines D and E)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  G

  	
  Deferred Revenue

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  H

  	
  Line F minus line G

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
  Adjusted Quick Ratio
  (line C divided by line H)

  	
   

  	
   

  

 

Is line I equal to or
greater than 1.20:1:00?

 

	
  o 
  No, not in compliance

  	
   

  	
  o 
  Yes, in compliance

  

 

II.            Operating Cash Flow (Section 6.9(b))

 

Required:               Operating Cash Flow of at least (i) ($2,000,000.00)
as of December 31, 2009, (ii) ($5,000,000.00) as of each of March 31,
2010 and June 30, 2010, (iii) ($4,000,000.00) as of September 30,
2010, (iv) ($3,000,000.00) as of December 31, 2010, and (v) as
of the last day of each calendar quarter thereafter, the amount that is
$1,000,000.00 greater than the required Operating Cash Flow as of the last day
of the immediately preceding calendar quarter

 

	
  Actual:

  	
  $

  

 

	
  A.

  	
  Net Income (as defined
  in the Agreement) for prior 12 month period

  	
   

  	
  $

  

 

3

 

	
  B.

  	
  Interest Expense (as
  defined in the Agreement) for prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
  Depreciation expense
  and amortization expense for prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
  Income tax expense for
  prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
  non-stock compensation
  and other one-time non-cash expenses approved by Bank in writing on a
  case-by-case basis for prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
  EBITDA (the sum of
  lines A through E)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
  Capital Expenditures
  (as defined in the Agreement) for prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  H.

  	
  Borrower’s cash taxes
  for prior 12 month period

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  I.

  	
  Operating Cash Flow
  (line F minus line G minus line H)

  	
   

  	
  $

  

 

Is Line I greater than or
equal to the applicable amount above?

 

	
  o  
  No, not in compliance

  	
   

  	
  o  
  Yes, in compliance

  

 

4Exhibit 10.1

 

AMENDMENT NO. 3

TO

AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT

 

AMENDMENT NO. 3 (this “Amendment”), dated as of December 23,
2009, by and among K-SEA OPERATING PARTNERSHIP L.P. (“Borrower”), the several
financial institutions party hereto (the “Lenders”),
KEYBANK NATIONAL ASSOCIATION, as Administrative Agent for
the Lenders (in such capacity, the “Administrative
Agent”) and as collateral trustee for the Lenders, BANK OF AMERICA, N.A. (successor to LaSalle Bank,
National Association) and CITIBANK, N.A., as
Co-Syndication Agents, and CITIZENS
BANK OF PENNSYLVANIA and HSBC BANK
USA, NATIONAL ASSOCIATION, as Co-Documentation Agents.

 

RECITALS

 

A.            Borrower, the
Lenders, the Co-Syndication Agents, the Co-Documentation Agents and the
Administrative Agent are parties to an Amended and Restated Loan and Security
Agreement, dated as of August 14, 2007 (as heretofore amended and
supplemented, and as it may be further amended, restated, supplemented or
otherwise modified from time to time, the “Loan Agreement”). Unless otherwise defined herein, all capitalized terms used herein or
in the Acknowledgement and Consent annexed hereto shall have the meanings
ascribed to them in the Loan Agreement.

 

B.            Borrower has
requested that the Administrative Agent and the Lenders amend the Loan
Agreement in certain respects.

 

C.            The
Administrative Agent has advised Borrower that the Lenders party hereto are
willing to agree to its requests to amend the Loan Agreement on the terms and
subject to the conditions set forth in this Amendment.

 

Accordingly,
in consideration of the foregoing, the parties hereto hereby agree as follows:

 

1.             CHANGE IN TRANCHE A COMMITMENTS.

 

(a)             Tranche A Commitments.  From and after the Amendment No. 3
Effective Date, the Tranche A Commitment of each Tranche A Lender shall be the
amount set forth opposite such Tranche A Lender’s name on Schedule 2.01 to the
Loan Agreement (as amended hereby and attached hereto as Exhibit A)  under the
caption “Tranche A Commitment” as such amount may be reduced pursuant to the
terms of the Loan Agreement, and such amount (if changed) shall supersede and
be deemed to amend the amount of such Tranche A Lender’s Tranche A Commitment
as set forth on Schedule 2.01 to the Loan Agreement as in effect immediately
prior to the Amendment No. 3 Effective Date.

 

(b)             Adjustment of Outstanding Loans.  If any Tranche A Loans are outstanding under
the Loan Agreement on the Amendment No. 3 Effective Date, the Tranche A
Lenders shall on the Amendment No. 3 Effective Date, at the direction of
the Administrative Agent, make appropriate adjustments among themselves in
order to insure that the amount (and type) of the Tranche A Loans outstanding
to Borrower from each Tranche A

 

 

Lender
under the Loan Agreement (as of the Amendment No. 3 Effective Date) are
proportionate to the aggregate amount of all of the Tranche A Commitments,
after giving effect to the decrease in the Tranche A Maximum Amount and
decrease in the amount of the Tranche A Commitments of each of the Tranche A
Lenders. Borrower agrees and consents to the terms of this Section 1(b).

 

(c)           To the extent that, after
giving effect to the decrease in the Tranche A  Maximum Amount and decrease
in the amount of the Tranche A Commitments of each of the Tranche A Lenders,
the sum of the Tranche A Credit Exposures exceeds the Total Tranche A
Commitments, Borrower shall, on the Amendment No. 3 Effective Date, prepay
the Tranche A Loans in an amount sufficient to eliminate such excess.

 

2.             AMENDMENTS TO LOAN AGREEMENT.

 

(a)           Additional
Definitions.  Section 1.01 of the Loan Agreement is
hereby  amended by adding the following new definitions in the appropriate
alphabetical order:

 

“Amendment No. 3” means
Amendment No. 3 to Amended and Restated Loan and Security Agreement, dated
as of December 23, 2009, among Borrower, the Lenders party thereto and the
Administrative Agent.

 

“Amendment No. 3 Effective Date”  means as of December 23, 2009.

 

“Debt Instrument” means any
bond, note, debenture, loan agreement, indenture, guaranty, trust agreement,
mortgage or other instrument or agreement in connection with the borrowing of
money or the deferred purchase price of a fixed asset to which Borrower or any
of its Subsidiaries is a party or by which it is bound, or by which any of its
properties or assets may be affected evidencing any Material Indebtedness.

 

“Liquidity” means, as of
any date of determination, the sum of (a) unrestricted cash of Borrower
determined on a consolidated basis as of such date plus (b)(i) the lesser
of (A) the Tranche A Maximum Amount as of such date and (B) the
Orderly Liquidation Value of the Pool Vessels as of such date divided by 1.333
minus (ii) the aggregate Tranche A Credit Exposure of all of the Lenders
as of such date.

 

“Maximum Distribution Amount”  means an amount equal to $0.45 per outstanding
unit of Capital Stock of K-Sea, which amount shall be adjusted for (a) any
subdivision of the outstanding units of Capital Stock into a larger number of
units and (b) any combination of the outstanding units of Capital Stock
into a smaller number of units, in each case at the time of such event, by
multiplying such amount by a fraction (i) the numerator of which shall be
the total number of outstanding units immediately prior to such event and (ii) the
denominator of which shall be the total number of outstanding units immediately
after such event.

 

“Orderly Liquidation Value”   means, with respect to any Pool
Vessel,  the net proceeds anticipated at a sale other than a forced sale upon
foreclosure,

 

2

 

as
reasonably determined by the Administrative Agent or by independent appraisers
appointed by the Administrative Agent at the expense of Borrower.

 

“Test Quarter” has the meaning set forth
in Section 7.11 hereof. 

 

(b)           Amendments
to Definitions.

 

(i)            Applicable
Margin. Section 1.01 of the Loan Agreement is  hereby amended
by deleting the definition of “Applicable
Margin” in its entirety and substituting the following
therefor:

 

“Applicable Margin” means, at all
times during the applicable periods set forth below: (a) with respect to
Base Rate Loans, during each period set forth below, the percentage set forth
below under the heading “Base Rate Margin” with respect to
such period, (b) with respect to LIBOR Loans, during each period set forth
below, the percentage set forth below under the heading “LIBOR Margin” with respect to such period and (c) with
respect to the Commitment Fees, during each period set forth below, the
percentage set forth below under the heading “Commitment
Fee Margin” with respect to such period:

 

	
  Period

  	
   

  	
  Applicable Margin

  	
   

  
	
  When the Total

  Funded Debt to

  EBITDA Ratio

  is greater than

  or equal to

  	
   

  	
  And less

  than

  	
   

  	
  Base Rate

  Margin

  	
   

  	
  LIBOR

  Margin

  	
   

  	
  Commitment

  Fee Margin

  	
   

  
	
  4.50:1.00

  	
   

  	
   

  	
   

  	
  3.750

  	
  %

  	
  4.750

  	
  %

  	
  0.625

  	
  %

  
	
  3.50:1.00

  	
   

  	
  4.50:1.00

  	
   

  	
  3.250

  	
  %

  	
  4.250

  	
  %

  	
  0.500

  	
  %

  
	
  2.50:1.00

  	
   

  	
  3.50:1.00

  	
   

  	
  2.750

  	
  %

  	
  3.750

  	
  %

  	
  0.450

  	
  %

  
	
  1.50:1.00

  	
   

  	
  2.50:1.00

  	
   

  	
  2.250

  	
  %

  	
  3.250

  	
  %

  	
  0.375

  	
  %

  
	
   

  	
   

  	
  1.50:1.00

  	
   

  	
  1.750

  	
  %

  	
  2.750

  	
  %

  	
  0.375

  	
  %

  

 

Changes
in the Applicable Margin resulting from a change in the Total Funded Debt to
EBITDA Ratio shall be based upon the certificate most recently delivered under Section 6.01(b) and
shall become effective on the first day of the month immediately succeeding the
date such certificate is required to be delivered to the Administrative Agent
pursuant to Section 6.01(b). Notwithstanding anything to the contrary in
this definition, (i) during the period commencing on the Amendment No. 3
Effective Date and ending on the date that the certificate to be delivered
under Section 6.01(b) for the fiscal quarter ending December 31,
2009 is delivered to the Administrative Agent, the Applicable Margin shall be
determined based on a Total Funded Debt to EBITDA Ratio of greater than or
equal to 3.50:1.00 and less than 4.50:1.00 and (ii) if Borrower shall fail
to deliver to the Administrative Agent such a

 

3

 

certificate
on or prior to any date required by Section 6.01(b), the Total Funded Debt
to EBITDA Ratio shall be deemed to be greater than 4.50:1.00 from and including
such date to the first day of the month immediately succeeding the date of
delivery to the Administrative Agent of such certificate.

 

(ii)             Asset
Coverage Ratio. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Asset
Coverage Ratio” in its entirety and substituting the following
therefor:

 

“Asset Coverage Ratio” means, as of
any date of determination, the ratio of the Orderly Liquidation Value of all
Pool Vessels that are part of the Collateral divided by the aggregate Revolving
Credit Exposure of all Lenders.

 

(iii)            Base
Rate. Section 1.01 of the Loan Agreement is hereby amended by deleting
the definition of “Base Rate”
in its entirety and substituting the following therefor:

 

“Base Rate” means, for any
day, a rate per annum equal to the greatest of (a) the Prime Rate, (b) one-half
of one percent (0.50%) in excess of the Federal Funds Effective Rate and (c) one
percent (1.00%) in excess of the Adjusted LIBOR Rate on such day for an
interest period of one month. Any change in the Base Rate due to a change in
the Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBOR Rate
shall be effective from and including the effective date of such change in the
Prime Rate, the Federal Funds Effective Rate or the Adjusted LIBOR Rate,
respectively.

 

(iv)            Borrowing
Base. Section 1.01 of the Loan Agreement is hereby amended by deleting
the definition of “Borrowing Base”
in its entirety and substituting the following therefor:

 

“Borrowing Base” means 75% of
the Orderly Liquidation Value of the Pool Vessels.

 

(v)             EBITDA.
Section 1.01 of the Loan Agreement is hereby amended by deleting
the definition of “EBITDA”
in its entirety and substituting the following therefor:

 

“EBITDA” means, with respect to any
fiscal period of K-Sea and its consolidated Affiliates, including, without
limitation, Borrower and each Guarantor, on a consolidated basis, the sum of:

 

(1)             the net income (or net loss)
of Borrower (determined in accordance with GAAP) for such fiscal period,
without giving effect to any extraordinary pre-tax gains or losses; plus:

 

(2)             to the extent that any of
the items referred to in any of clauses (i) through (viii) below were
deducted in calculating such net income:

 

4

 

(i)            Interest Expense of Borrower
for such fiscal period;

 

(ii)           Federal, state, local and
foreign income tax expenses of Borrower for such fiscal period;

 

(iii)          the amount of all
depreciation and amortization for such fiscal period;

 

(iv)          non-cash stock compensation incurred
during such fiscal period;

 

(v)           non-cash goodwill impairment
charges incurred during such fiscal period;

 

(vi)          other non-cash expenses
incurred during such fiscal period that are acceptable to the Administrative
Agent;

 

(vii)         non-recurring losses in an
aggregate amount not to exceed $1,300,000 incurred during the fiscal quarter
ending December 31, 2009 in connection with the purchase of real property
located at 150 South Main Street, Norfolk, Virginia; and

 

(viii)        losses from the sale,
exchange or other disposition of assets incurred during such period; minus

 

(3)           to the extent that any of
the items described in clauses (i)  or (ii) below were
added in calculating such net income:

 

(i)            gains from sales, exchanges
and other dispositions of assets not in the ordinary course of business; and

 

(ii)           non-cash gains.

 

(vi)          Material
Indebtedness.     The definition
of “Material  Indebtedness” set forth in Section 1.01 of the Loan Agreement is hereby amended
by deleting the reference to “$100,000.00” in clause (i) thereof and
substituting “$1,000,000.00” therefor.

 

(vii)         Proposed
Increased Commitment. Section 1.01 of the Loan Agreement is
hereby amended by deleting the definition of “Proposed
Increased Commitment” in its entirety.

 

(viii)        Qualified
Pool Vessels. Section 1.01 of the Loan Agreement is hereby
amended by deleting the proviso to the definition of “Qualified Pool Vessels” in its entirety.

 

5

 

(ix)           Tranche
A Commitment. Section 1.01 of the Loan Agreement is hereby
amended by deleting clause (b) of the definition of “Tranche A Commitment” in its
entirety and substituting “[intentionally omitted]” therefor.

 

(x)            Tranche
A Maturity Date. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Tranche
A Maturity Date” in its entirety and substituting the following
therefor:

 

“Tranche A Maturity Date” means July 1,
2012.

 

(xi)           Tranche
A Maximum Amount. Section 1.01 of the Loan Agreement is hereby
amended by deleting the definition of “Tranche
A Maximum Amount” in its entirety and substituting the following
therefor:

 

“Tranche A Maximum Amount”  means, with respect to the Tranche A Facility,
One Hundred Seventy-five Million Dollars ($175,000,000.00), as such amount may
be decreased in the aggregate in accordance with Section 2.06.

 

(c)             Prepayment of Loans.   Section 2.08
of the Loan Agreement is hereby amended by deleting the phrase “Fair Market
Value” each time it appears therein and substituting “Orderly Liquidation
Value” therefor.

 

(d)             Prepayments Generally.  Section 2.13(b) of the Loan
Agreement is hereby amended by (i) deleting the phrase “Fair Market Value”
each time it appears therein and substituting “Orderly Liquidation Value”
therefor and (ii) deleting the ratio “1.25:1.00” each time it appears
therein and substituting “1.333:1.00” therefor.

 

(e)             Increase of Commitments.   Section 2.17 of the Loan Agreement is
hereby deleted in its entirety and “[Intentionally Omitted.]” is substituted
therefor.

 

(f)              Substitution of Pool Vessel.  Section 3.02 of the Loan Agreement is
hereby amended by (i) deleting the phrase “Fair Market Value” each time it
appears therein and substituting “Orderly Liquidation Value” therefor and (ii) deleting
the ratio “1.25 to 1.00” each time it appears therein and substituting “1.333
to 1.00” therefor.

 

(g)             Fair Market Value.  Section 3.03 of the Loan Agreement is
hereby amended by: (i) deleting the caption thereof in its entirety and
substituting “Orderly Liquidation Value”
therefor; (ii) deleting the phrase “aggregate Fair Market Value” each time
it appears therein and substituting “aggregate Orderly Liquidation Value”
therefor; (iii) deleting the phrase “a Fair Market Value” each time it
appears therein and substituting “an Orderly Liquidation Value” therefor and (iv) deleting
the ratio “1.25 to 1.00” each time it appears therein and substituting “1.333
to 1.00” therefor.

 

(h)             Each Loan and Letter of Credit.  Section 5.02 of the Loan Agreement is
hereby amended by adding a new clause (e) thereto to read in its entirety
as follows:

 

(e)     The Administrative Agent shall have received a certificate of a  Financial
Officer, dated as of the date of such Loan or such issuance or renewal

 

6

 

of
such Letter of Credit and in form reasonably satisfactory to the Administrative
Agent, setting forth Liquidity as of such date.

 

(i)            Financial Information and Other Information.  Section 6.01 of the Loan
Agreement is hereby amended by adding a new Section 6.01(e) hereto to
read in its entirety as follows:

 

(e)      Concurrently with any delivery of Financial Statements under
clause (a)(i) above, Borrower shall deliver to Lenders a certificate of a
Financial Officer setting forth a reasonably detailed calculation of Liquidity
as of the last day of the fiscal quarter to which such Financial Statements
relate.

 

(j)            Fixed Charge Coverage Ratio. Section 7.01
of the Loan Agreement is hereby deleted in its entirety and the following is
substituted therefor:

 

Section 7.01 
 Fixed Charge Coverage Ratio.

 

Borrower shall not permit the Fixed Charge Coverage
Ratio as of the end of any fiscal quarter occurring during any period set forth
below to be less than the ratio set forth below with respect to such period:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  Amendment
  No. 3 Effective Date to and including March 30, 2010

  	
   

  	
  1.85 to 1.00

  	
   

  
	
  March 31,
  2010 and thereafter

  	
   

  	
  1.50 to 1.00

  	
   

  

 

(k)           Total Funded Debt to EBITDA Ratio.  Section 7.03 of the Loan Agreement is
hereby deleted in its entirety and the following is substituted therefor:

 

Section 7.03   Total
Funded Debt to EBITDA Ratio.

 

Borrower shall not permit the Total Funded Debt to
EBITDA Ratio at any time during each period set forth below to be greater than
the ratio set forth below with respect to such period:

 

	
  Period

  	
   

  	
  Ratio

  	
   

  
	
  Amendment
  No. 3 Effective Date to and including March 30, 2010

  	
   

  	
  4.50 to 1.00

  	
   

  
	
  March 31,
  2010 to and including September 29, 2010

  	
   

  	
  5.00 to 1.00

  	
   

  
	
  September 30,
  2010 and thereafter

  	
   

  	
  4.50 to 1.00

  	
   

  

 

7

 

(l)           Asset
Coverage Ratio.   Section 7.04 of the Loan Agreement is
hereby deleted in its entirety and the following is substituted therefor:

 

Section 7.04   Asset
Coverage Ratio.

 

Borrower shall not permit the Asset Coverage Ratio
as of the last day of each fiscal quarter to be less than 1.333 to 1.00.

 

(m)          Transactions with Affiliates.   Section 7.09 of the Loan Agreement is
hereby amended by deleting the proviso to the first sentence thereof in its
entirety and substituting the following therefor:

 

provided that the foregoing provisions of this Section 7.09
shall not prohibit any such Person from declaring or paying any lawful
Distributions which conform to the provisions of Section 7.11 hereof.

 

(n)           Limitations on Advances and Distributions.   Section 7.11 of the Loan
Agreement is hereby deleted in its entirety and the following is substituted
therefor:

 

Section 7.11   Limitations on Advances and Distributions.

 

(a)          Borrower shall not, and will
not permit any of the Subsidiaries to, declare or make, or agree to pay for or
make, directly or indirectly, any Distribution, provided that Borrower
and the Subsidiaries may make each of the following: (i) dividends by the
Borrower payable solely in Capital Stock of the Borrower; (ii) dividends
and distributions by any Subsidiary of Borrower payable to Borrower or any
other Subsidiary of Borrower; and (iii) Distributions by Borrower for any
purpose; provided that (A) each of such
Distributions may not be paid more than once in respect of any fiscal quarter
period (each such period for purposes herein, a “Test
Quarter”), (B) such Distributions paid in respect of any
Test Quarter shall not exceed the Maximum Distribution Amount, (C) no such
Distributions may be paid with respect to a Test Quarter until such time as the
financial statements required to be delivered pursuant to clause (i) of Section 6.01(a) in
respect of such Test Quarter have been delivered to the Administrative Agent in
accordance with clause (i) of Section 6.01(a) and the
certificate of the Borrower required to be delivered pursuant to Section 6.01(e) in
respect of such Test Quarter has been delivered pursuant to Section 6.01(e),
(D) at the time of the declaration of any such Distribution, both before
and after giving effect thereto, (I) no Default shall have occurred and be
continuing or result from any such declaration and (II) Liquidity shall be
not less than $17,500,000 and (E) at the time of the payment of any such
Distribution, both before and after giving effect to the payment thereof, (I) no
Default shall have occurred and be continuing or result from any such payment
and (II) Liquidity shall be not less than $17,500,000.

 

(b)         Borrower shall not make any
loans or advances to any Affiliate or related Persons of Borrower, except
K-Sea, any Excluded Subsidiary and any Subsidiary Guarantor; provided that, (i) except
for the loan described in clause (ii) of this proviso, the aggregate
outstanding amount of all such loans and advances to the Excluded Subsidiaries
shall not exceed $2,000,000 at any

 

8

 

one
time and (ii) Borrower may make a loan to K-Sea Canada Corp. in a
principal amount not to exceed $13,100,000.

 

(o)           Limitations on Other Indebtedness.  Section 7.12 of the Loan Agreement is
hereby deleted in its entirety and the following is substituted therefor:

 

Section 7.12   Limitations on Other Indebtedness.

 

From and after the Amendment No. 3 Effective
Date, Borrower shall not, and will not permit any Subsidiary to enter into any
vessel operating lease agreement or permit to exist any obligations of a
character described in clause (i) of the definition of “Indebtedness” other than (a) vessel
operating lease agreements existing prior to the Amendment No. 3 Effective
Date and (b) vessel operating lease agreements entered into after the
Amendment No. 3 Effective Date in the ordinary course of business having a
term of one (1) year or less.

 

(p)           Capital Expenditures.  Section 7.17 of the Loan Agreement is
hereby deleted in its entirety and the following is substituted therefor:

 

Section 7.17   Capital Expenditures.

 

Borrower shall not make or become obligated to make,
and shall not permit any of its Subsidiaries to make or become obligated to
make, Capital Expenditures (other than Maintenance CAPEX) in respect of the
fiscal year ending June 30, 2010 and any subsequent fiscal year in excess
of $15,000,000; provided that, until such time as the Fixed Charge
Coverage Ratio as of the last day of a fiscal quarter of Borrower occurring
after the Amendment No. 3 Effective Date for the four fiscal quarters
ending on such day shall be greater than 2.00 to 1.00, Borrower shall not make
or become obligated to make, and shall not permit any of its Subsidiaries to
make or become obligated to make, Capital Expenditures the proceeds of which shall
be used for the acquisition or construction of vessels, other than construction
of vessels for which Borrower or a Subsidiary became obligated prior to the
Amendment No. 3 Effective Date; and provided, further,
that from and after such time as the Fixed Charge Coverage Ratio as of the last
day of a fiscal quarter of Borrower occurring after the Amendment No. 3
Effective Date for the four fiscal quarters ending on such day shall be greater
than 2.00 to 1.00, Borrower shall not make or become obligated to make, and
shall not permit any of its Subsidiaries to make or become obligated to make,
Capital Expenditures the proceeds of which shall be used for the acquisition or
construction of vessels (other than construction of vessels for which Borrower
or a Subsidiary became obligated prior to the Amendment No. 3 Effective
Date) in respect of any fiscal year in excess of $50,000,000.

 

9

 

(q)                                      Prepayments of Indebtedness.  Section 7.18 of the Loan Agreement is
hereby deleted in its entirety and the following is substituted therefor:

 

Section 7.18   Prepayments and Repayments of Indebtedness.

 

Borrower shall not, and shall not permit any Subsidiary
to, (i) prepay or obligate itself to prepay any Indebtedness or (ii) amend
or otherwise modify the terms of any Indebtedness the effect of which is to
increase the principal amount of any periodic payment thereon or decrease the
period in which such payments are to be made, except (x) Indebtedness
under the Loan Documents and (y) refinancing on terms equal or more
favorable to Borrower of Indebtedness existing on the Amendment No. 3
Effective Date.

 

(r)                                         Debt Instruments.  Article VII of the Loan Agreement is
hereby amended by adding a new Section 7.19 to read in its entirety as
follows:

 

Section 7.19 
 Debt Instruments.

 

In the event that Borrower enters into, after the
Amendment No. 3 Effective Date, any Debt Instrument, or amends or modifies
after the Amendment No. 3 Effective Date any Debt Instrument, and such
Debt Instrument contains any material covenant, restriction or event of default
(other than pricing) that is more favorable to the other party or parties
thereto, or the holder thereof, than those contained in this Agreement or the
other Loan Documents, (i) Borrower shall notify the Administrative Agent
of such event, (ii) each such covenant, restriction or event of default
shall be deemed to be incorporated herein, and (iii) Borrower shall promptly
after the request of the Administrative Agent, enter into an amendment to this
Agreement (or other Loan Document), in form and substance reasonably
satisfactory to the Administrative Agent and the Required Lenders, that
incorporates such more favorable covenants, restrictions or events of default.

 

(s)                                       DBL 106.  On the date of delivery of that certain
100,000 barrel tank barge, being Bollinger Marine Fabricators, L.L.C.’s Hull No. 537
currently under construction pursuant to that certain Vessel Construction
Contract dated December 27, 2007 between Bollinger Marine Fabricators,
L.L.C. and Borrower, as buyer (such tank barge, hereinafter referred to as the
“DBL 106”), Borrower shall cause K-Sea LLC to document the DBL 106 in its sole
ownership under the laws of the United States and, within five (5) Business
Days of the date of delivery, and in any event no later than May 31, 2010:

 

(i)                                     grant a first
preferred ship mortgage thereon, subject to no liens, mortgages, claims, debts,
charges or encumbrances;

 

(ii)                                  deliver to the
Administrative Agent the following, in form and substance satisfactory to the
Administrative Agent, and in sufficient copies:

 

A.           Supplement and Amendment to
the K-Sea LLC Mortgage, which shall cover the DBL 106 and such Supplement and
Amendment to the K-Sea LLC Mortgage shall have been duly filed for recording
with the United States Coast Guard, and such Supplement and

 

10

 

Amendment
to the K-Sea LLC Mortgage shall constitute a preferred ship mortgage on the DBL
106;

 

B.             proper UCC-1 financing
statements or UCC-3 financing statement amendments under the Uniform Commercial
Code for all jurisdictions that the Administrative Agent may deem necessary or
desirable in order to perfect and protect the first and only priority Liens and
security interests created under the Loan Agreement, the K-Sea LLC Mortgage and
the other Loan Documents, covering the DBL 106;

 

C.             evidence of the completion
of all other recordings and filings of or with respect to the Lien created by
the Loan Agreement, the K-Sea LLC Mortgage and the other Loan Documents that
the Administrative Agent may deem necessary or desirable in order to perfect
and protect the Liens created by such Loan Documents covering the DBL 106;

 

D.            an assignment covering the
earnings and requisition compensation, if any, of the DBL 106, in form and
substance satisfactory to the Administrative Agent, duly executed by K-Sea LLC
and, in connection therewith, K-Sea LLC shall have executed and delivered to
the Administrative Agent notices of assignment and authorizations to collect
insurance claims and to collect general average contributions, in such form and
in such number of counterparts as may be reasonably requested by the
Administrative Agent;

 

E.              an assignment covering the
insurances of the DBL 106, in form and substance satisfactory to the
Administrative Agent, duly executed by K-Sea LLC;

 

F.              copies of cover notes and
certificates of entry evidencing the insurance covered by the DBL 106;

 

G.             authorizations to inspect
class records of the DBL 106 by K-Sea LLC, in such form and such number of
counterparts as may be reasonably requested by the Administrative Agent, duly
executed by K-Sea LLC;

 

H.            a true and complete copy of
either (1) a certificate of ownership and encumbrance issued by the United
States Coast Guard or (2) an abstract of title issued by the United States
Coast Guard, in either case, showing K-Sea LLC to be the sole owner of the DBL
106 free and clear of all Liens of record except the K-Sea LLC Mortgage;

 

I.                 to the extent it is required
to be maintained in class in order to operate in the service in which it is
operating, the original current confirmation certificate of American Bureau of
Shipping for the DBL 106, confirming that the DBL 106 is in such class without
material recommendation, together with an American Bureau of Shipping SafeNet
database printout, certified by an officer of Borrower as true and correct;

 

11

 

J.                a copy of the current
certificate of inspection issued by the United States Coast Guard for the DBL
106, if available, and reflecting no outstanding recommendations; and

 

K.            (1) written advice from
B&P International Insurance Brokerage LLC, insurance brokers, of the placement
of the insurances covering the DBL 106; (2) written confirmation from such
brokers, that they have received no notice of the assignment (except from the
Administrative Agent) of the insurances or any claim covering the DBL 106; (3) an
opinion of such brokers to the effect that such insurance complies with the
applicable provisions of the Loan Agreement and of the K-Sea LLC Mortgage,
where applicable; and (4) an agreement by such brokers, in form and
substance satisfactory to the Administrative Agent, whereunder the insurances
of the DBL 106, and claims thereunder, will not be affected by nonpayment of
premiums on any other insurances.

 

From
and after the date of delivery of the foregoing Loan Documents, the DBL 106
shall be deemed to be a Pool Vessel.

 

(t)                                    General. All references
to “this Agreement” in the Loan Agreement  and to “the Loan Agreement”
in the other Loan Documents shall be deemed to refer to the Loan Agreement as
amended hereby.

 

3.                                       CONDITIONS
TO EFFECTIVENESS.  This Amendment shall be effective  upon the
satisfaction of each of the following conditions:

 

(a)                                       The
Administrative Agent (or its counsel) shall have received from Borrower, each
Guarantor and the Required Lenders either (i) a counterpart of this
Amendment signed on behalf of such party or (ii) written evidence
satisfactory to the Administrative Agent (which may include telecopy
transmission of a signed signature page of this Amendment) that such party
has signed a counterpart of this Amendment.

 

(b)                                      The Lenders
shall be reasonably satisfied that no material adverse change in the business,
assets, operations, properties, condition (financial or otherwise), liabilities
(including contingent liabilities) or material agreements of K-Sea and its
consolidated Affiliates taken as a whole and its Subsidiaries has occurred
since June 30, 2009.

 

(c)                                       There shall be
no injunction, writ, preliminary restraining order or other order of any nature
issued by any Governmental Authority in any respect affecting the transactions
provided for in this Amendment and no action or proceeding by or before any
Governmental Authority shall have been commenced and be pending or, to the
knowledge of Borrower, threatened, seeking to prevent or delay the transactions
contemplated by this Amendment or challenging any other terms and provisions
hereof or thereof or seeking any damages in connection herewith or therewith.

 

(d)                                      The
representations and warranties contained in the Loan Agreement shall be true
and correct in all material respects, except to the extent such representations
and warranties relate to an earlier date and, after giving effect to the
amendments set forth in Section 2 hereof, no Default or Event of Default
shall exist.

 

12

 

(e)                                       The
Administrative Agent shall have received (i) for the account of each
Lender that has executed this Amendment, payable on the Amendment No. 3
Effective Date, a fee equal to the product of 0.50% multiplied by such Lender’s
Tranche A Commitment and (ii) all other amounts due and payable on or
prior to the Amendment No. 3 Effective Date, including, to the extent
invoiced, reimbursement or payment of all out-of-pocket expenses required to be
reimbursed or paid by Borrower hereunder.

 

(f)                                         All legal
matters with respect to and all legal documents (including, but not limited to,
the Loan Documents) executed in connection with the transactions contemplated
by this Amendment shall be satisfactory to counsel for the Administrative
Agent.

 

(g)                                      Borrower shall
have paid the reasonable fees and disbursements of counsel to the
Administrative Agent and the Lenders in connection with this Amendment.

 

The
Administrative Agent shall notify Borrower and the Lenders of the Amendment No. 3
Effective Date, and such notice shall be conclusive and binding.

 

4.                                       REPRESENTATIONS
AND WARRANTIES.  Borrower hereby represents  and warrants to
the Administrative Agent and the Lenders that:

 

(a)                                       The
representations and warranties set forth in the Loan Documents are true and
correct in all material respects as of the date hereof and with the same effect
as though made on and as of the date hereof, except to the extent such
representations and warranties relate to an earlier date.

 

(b)                                      No Default or
Event of Default and no event or condition which, with the giving of notice or
lapse of time or both, would constitute such a Default or Event of Default, now
exists or would exist after giving effect to this Amendment.

 

(c)                                  (i) The
execution, delivery and performance by Borrower of this Amendment is within its
organizational powers and have been duly authorized by all necessary action
(corporate or otherwise) on the part of Borrower, (ii) this Amendment is
the legal, valid and binding obligation of Borrower, enforceable against
Borrower in accordance with its terms, and (iii) neither this Amendment
nor the execution, delivery and performance by Borrower hereof: (A) contravenes
the terms of Borrower’s organization documents,  (B) conflicts with or
results in any breach or contravention of, or the creation of any Lien under,
any document evidencing any contractual obligation to which Borrower is a party
or any order, injunction, writ or decree to which Borrower or its property is
subject, or  (C) violates any requirement of law.

 

5.                                       EFFECT;
NO WAIVER.

 

(a)                                  Borrower hereby
(i) reaffirms and admits the validity and enforceability  of the Loan
Documents and all of its obligations thereunder and (ii) agrees and admits
that it has no existing defenses to or offsets against any such obligation.
Except as specifically set forth herein, the Loan Agreement and the other Loan
Documents shall remain in full force and effect in accordance with their terms
and are hereby ratified and confirmed. The execution, delivery and
effectiveness of this Amendment shall not operate as a waiver of any existing
or future Default or Event of Default, whether known or unknown or any right,
power or remedy

 

13

 

of
the Administrative Agent or the Lenders under the Loan Agreement, nor
constitute a waiver of any provision of the Loan Agreement, except as
specifically set forth herein.

 

(b)                                 Borrower hereby
(i) reaffirms all of its agreements and obligations  under the Loan
Documents, (ii) reaffirms that all Obligations of Borrower under or in
connection with the Loan Agreement as amended hereby are “Obligations” as that term
is defined in the Loan Documents and (iii) reaffirms that all such
Obligations continue to be secured by the Loan Documents, which remain in full
force and effect and are hereby ratified and confirmed.

 

6.                                  RELEASE.  AS MATERIAL CONSIDERATION
FOR THE EXECUTION OF THIS AMENDMENT BY THE ADMINISTRATIVE AGENT AND LENDERS
PARTY HERETO AND FOR OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED, BORROWER, BY ITS EXECUTION OF
THIS AMENDMENT, AND THE GUARANTORS, BY THEIR EXECUTION OF THE ACKNOWLEDGMENT
AND CONSENT, FOR THEMSELVES AND ON BEHALF OF THEIR RESPECTIVE DIRECTORS,
OFFICERS, MEMBERS, EMPLOYEES, REPRESENTATIVES, SUCCESSORS AND ASSIGNS
(COLLECTIVELY, THE “RELEASORS”), HEREBY
WAIVE, RELEASE, REMISE, ACQUIT AND DISCHARGE THE ADMINISTRATIVE AGENT AND THE
LENDERS AND EACH AND ANY OF THEIR RESPECTIVE PARENTS, AFFILIATES, DIRECTORS,
OFFICERS, LENDERS, EMPLOYEES, REPRESENTATIVES, SHAREHOLDERS, ATTORNEYS,
ACCOUNTANTS, CONSULTANTS, ADVISORS, SUCCESSORS, AND ASSIGNS (COLLECTIVELY, THE “RELEASEES”) OF AND
FROM ANY AND ALL CONTROVERSIES, DAMAGES, COSTS, LOSSES, CAUSES OF ACTION,
SUITS, JUDGMENTS, CLAIMS, RECOUPMENTS, COUNTERCLAIMS OR DEMANDS, OF EVERY TYPE,
KIND, NATURE, DESCRIPTION OR CHARACTER, WHETHER NOW EXISTING OR THAT COULD,
MIGHT, OR MAY BE CLAIMED TO EXIST, OF WHATEVER KIND OR NAME, WHETHER KNOWN
OR UNKNOWN, LIQUIDATED OR UNLIQUIDATED, FIXED OR CONTINGENT, FORESEEABLE OR
UNFORESEEABLE, EACH AS THOUGH FULLY SET FORTH HEREIN AT LENGTH, IN LAW OR
EQUITY, WHICH ANY OF THE RELEASORS PREVIOUSLY HAD FROM THE BEGINNING OF THE
WORLD OR NOW HAVE AGAINST ANY OF THE RELEASEES THROUGH THE DATE HEREOF, RELATED
TO OR CONNECTED WITH THE LOAN DOCUMENTS, THIS AMENDMENT, OR THE TRANSACTIONS
CONTEMPLATED BY ANY OF THE FOREGOING.

 

7.                                       MISCELLANEOUS.

 

(a)                                       Borrower shall
pay the Administrative Agent upon demand for all reasonable expenses, including
reasonable attorneys’ fees and expenses of the Administrative Agent, incurred
by the Administrative Agent in connection with the preparation, negotiation and
execution of this Amendment.

 

(b)                                      THIS AMENDMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AS
OPPOSED TO THE CONFLICTS OF LAW PROVISIONS, BUT INCLUDING SECTIONS 5-1401 AND 5-1402
OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) AND DECISIONS OF THE
STATE OF NEW YORK.

 

14

 

(c)                                  This Amendment
shall be binding upon Borrower, the Administrative Agent and the Lenders and
their respective successors and assigns, and shall inure to the benefit of
Borrower, the Administrative Agent and the Lenders and the respective
successors and assigns of the Administrative Agent and the Lenders.

 

(d)                                 This Amendment
may be executed in any number of counterparts and by different parties hereto
in separate counterparts, each of which when so executed and delivered shall be
deemed to be an original and all of which taken together shall constitute one
and the same instrument.

 

[Signature pages follow.]

 

15

 

AS
EVIDENCE of the agreement by the parties hereto to the terms and conditions
herein contained, each such party has caused this Amendment to be executed on
its behalf.

 

 

	
   

  	
  K-SEA OPERATING PARTNERSHIP L.P., as Borrower

  
	
   

  	
   

  
	
   

  	
  By: K-Sea OLP GP, LLC, its
  general partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  

 

 

K-SEA
OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  KEYBANK
  NATIONAL ASSOCIATION, for itself as Lender, and as Administrative
  Agent and as Collateral Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph Markey

  
	
   

  	
  Name:

  	
  Joseph Markey

  
	
   

  	
  Title:

  	
  MD

  

 

 

K-SEA
OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  BANK OF AMERICA, N.A. (successor
  to LaSalle Bank National Association), as Co-Syndication Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carlos Morales

  
	
   

  	
  Name:

  	
  Carlos Morales

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

K-SEA OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  CITIBANK, N.A., as
  Co-Syndication Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles J. Margiotti
  III

  
	
   

  	
  Name:

  	
  Charles J. Margiotti III

  
	
   

  	
  Title:

  	
  Vice President

  

 

 

K-SEA OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  CITIZENS
  BANK OF PENNSYLVANIA, as Co-Documentation Agent and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Devon Starks

  
	
   

  	
  Name:

  	
  Devon Starks

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

 

K-SEA OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  HSBC BANK
  USA, NATIONAL ASSOCIATION, as Co-Documentation Agent
  and Lender

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Brendan L. Walsh

  
	
   

  	
  Name:

  	
  Brendan L. Walsh

  
	
   

  	
  Title:

  	
  Senior Relationship
  Manager

  

 

 

K-SEA OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

	
   

  	
  WACHOVIA
  BANK, NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Craig DeSousa

  
	
   

  	
  Name:

  	
  Craig DeSousa

  
	
   

  	
  Title:

  	
  Senior Vice President

  

 

 

K-SEA OPERATING PARTNERSHIP AMENDMENT NO. 3 SIGNATURE PAGE

 

 

ACKNOWLEDGEMENT AND CONSENT

 

Each
of the undersigned Guarantors hereby (1) consents to the execution and
delivery by Borrower of the foregoing Amendment No. 3; (2) agrees
that the definition of “Obligations” (and any other term
referring to the indebtedness, liabilities and obligations of Borrower to the
Administrative Agent or any of the Lenders) in the Parent Guaranty or its
Subsidiary Guaranty, as the case may be, and the other Loan Documents shall
include the Indebtedness of Borrower under the foregoing Amendment No. 3; (3) agrees
that the definition of “Loan Agreement” in the Parent
Guaranty or its Subsidiary Guaranty, as the case may be, and the other Loan
Documents to which it is a party is hereby amended to mean the Loan Agreement
as amended by the foregoing Amendment No. 3; (4) reaffirms its
continuing liability under the Parent Guaranty or its Subsidiary Guaranty, as
the case may be (as modified hereby); (5) reaffirms all of its agreements
and obligations under the Loan Documents to which it is a party; (6) reaffirms
that all Obligations of Borrower under or in connection with the Loan Agreement
as amended by the foregoing Amendment No. 3 are “Obligations” as that term
is defined in the Parent Guaranty or its Subsidiary Guaranty, as the case may
be; (7) reaffirms that all such Obligations continue to be secured by the
Loan Documents to which it is a party, which remain in full force and effect
and are hereby ratified and confirmed; and (8) confirms and agrees that it
is a Guarantor and that the Parent Guaranty or its Subsidiary Guaranty, as the
case may be, and the other Loan Documents to which it is a party are, and shall
continue to be, in full force and effect in accordance with their respective
terms.

 

	
   

  	
  K-SEA
  TRANSPORTATION PARTNERS L.P.

  
	
   

  	
   

  
	
   

  	
  By: K-Sea General Partner
  L.P., its general partner

  
	
   

  	
   

  
	
   

  	
  By:
   

  	
  K-Sea General Partner GP
  LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  K-SEA TRANSPORTATION LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
					

 

 

	
   

  	
  SMITH MARITIME LLC

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
	
   

  	
   

  
	
   

  	
  K-SEA HAWAII INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Terrence P. Gill

  
	
   

  	
  Name:

  	
  Terrence P. Gill

  
	
   

  	
  Title:

  	
  Chief Financial Officer

  
				

 

 

K-Sea
Amendment No. 3 Acknowledgement and Consent Signature Page

 

 

EXHIBIT
A

TO

AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT

 

SCHEDULE
2.01

 

Amendment
No. 3 Effective Date Commitments

 

	
  Lender

  	
   

  	
  Tranche A Commitment

  	
   

  	
  Tranche B Commitment

  	
   

  
	
  KeyBank National Association

  	
   

  	
  $

  	
  35,437,500.00

  	
   

  	
  -0-

  	
   

  
	
  Bank of America, N.A.

  	
   

  	
  $

  	
  33,687,500.00

  	
   

  	
  -0-

  	
   

  
	
  Citibank, N.A.

  	
   

  	
  $

  	
  33,687,500.00

  	
   

  	
  -0-

  	
   

  
	
  Citizens Bank of Pennsylvania

  	
   

  	
  $

  	
  24,937,500.00

  	
   

  	
  -0-

  	
   

  
	
  HSBC Bank USA, National Association

  	
   

  	
  $

  	
  24,937,500.00

  	
   

  	
  -0-

  	
   

  
	
  Wachovia Bank, National Association

  	
   

  	
  $

  	
  22,312,500.00

  	
   

  	
  -0-

  	
   

  
	
  Aggregate
  Commitments

  	
   

  	
  $

  	
  175,000,000.00

  	
   

  	
  -0-

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