Document:

Exhibit 10.1

 

Execution
Version

 

MODIFICATION AGREEMENT

 

This Modification Agreement
(this “Agreement”), dated as of May 11, 2010, is entered into by
and among RCG Holdings LLC (solely for the purposes of Articles 3 through 9) (“RCG”),
C4S & Co., L.L.C. (solely for the purposes of Articles 4 through 9),
as managing member of RCG (“C4S”), Cowen Group, Inc. (solely for
the purposes of Articles 3, 5, 6, 7, 8 and 9) (“Cowen”), Ramius LLC
(solely for the purposes of Articles 1, 5, 6, 7, 8 and 9), a wholly owned subsidiary
of Cowen (“Ramius”), Ramius Alternative Solutions LLC (formerly known as
Ramius Fund of Funds Group LLC) (solely for the purposes of Articles 2, 5, 6,
7, 8 and 9), a wholly owned subsidiary of Cowen (“Ramius Alternative
Solutions” and, together with RCG, C4S, Cowen and Ramius, the “Ramius
Parties”), BA Alpine Holdings, Inc. (solely for the purposes of
Articles 4 through 9) (“BA Alpine”), Alpine Cayman Islands Limited
(solely for the purposes of Articles 1, 5, 6, 7, 8 and 9) (“Alpine Cayman”),
UniCredit Bank AG (formerly known as Bayerische Hypo- und Vereinsbank AG)
(solely for the purposes of Articles 2, 3, 5, 6, 7, 8 and 9) (“HVB AG”),
HVB Alternative Advisors LLC (solely for the purposes of Articles 3, 5, 6, 7, 8
and 9) (“HVB”) and CEAKSCH Verwaltungs G.m.b.H. (solely for the purposes
of Articles 1, 5, 6, 7, 8 and 9) (“CEAKSCH” and, together with BA
Alpine, Alpine Cayman, HVB AG and HVB, the “UniCredit Parties” and,
together with RCG, Cowen and Ramius, the “Parties”).

 

W I T N E S S E T H:

 

WHEREAS, Ramius (as
successor in interest to RCG) and Alpine Cayman are party to that certain
Amended and Restated Investment Management Agreement, dated as of June 3,
2003, as amended on June 3, 2009 (as amended, the “Investment
Management Agreement”);

 

WHEREAS, Ramius and Alpine
Cayman desire to further amend the Investment Management Agreement to make such
additional amendments as set forth herein;

 

WHEREAS, Ramius Alternative
Solutions and HVB AG are party to that certain Investment Reporting Agreement,
dated as of July 29, 2005, as amended on January 1, 2007 and on June 3,
2009 (as amended, the “Investment Reporting Agreement”), pursuant to
which a certain special purpose entity is currently invested in Ramius FOF
European Platform — S8 0 (the “Fund”), which is a sub-fund of Ramius FOF
European Platform (the “Umbrella Fund”);

 

WHEREAS, Ramius Alternative
Solutions and HVB AG desire to further amend the Investment Reporting Agreement
to make such additional amendments as set forth herein;

 

WHEREAS, Ramius Alternative
Solutions and HVB AG desire that the interests in the assets held, directly or
indirectly, by Ramius Event Driven FOF Ltd. be contributed to the Fund;

 

WHEREAS, RCG, HVB, HVB AG,
Cowen Holdings, Inc., a wholly owned subsidiary of Cowen, and Cowen are
party to that certain Asset Exchange Agreement, dated as of June 3, 2009,
as amended on July 9, 2009 (as amended, the “Asset Exchange Agreement”);

 

WHEREAS, RCG, HVB, HVB AG
and Cowen desire to further amend the Asset Exchange Agreement to make such additional
amendments as set forth herein;

 

 

WHEREAS, C4S and BA Alpine
are party to that certain Fourth Amended and Restated Limited Liability Company
Agreement of RCG, dated as of November 2, 2009 (the “RCG LLC Agreement”);

 

WHEREAS, C4S and BA Alpine
desire to consent to make certain amendments to the RCG LLC Agreement as
described herein; and

 

WHEREAS, the Parties seek to
make such other arrangements as contemplated herein.

 

NOW, THEREFORE, in
consideration of the foregoing premises and for other good and valuable
consideration, the sufficiency of which is hereby acknowledged, the Parties
hereby agree to the following:

 

ARTICLE ONE

AMENDMENTS TO THE INVESTMENT MANAGEMENT AGREEMENT

 

With
respect to Sections 1.01, 1.02, 1.03 and 1.04 below, Ramius, Alpine Cayman and
CEAKSCH hereby agree that the Investment Management Agreement shall be amended
as follows:

 

Section 1.01.                         Amendment to Section 5 of the Investment Management Agreement.  Section 5 of the Investment
Management Agreement is hereby amended by inserting the following additional
paragraph at end of such section:

 

“Notwithstanding any provision to the contrary
contained herein, Client shall have no obligation to pay Manager or any of its
Affiliates a fee (cash or otherwise), and no fee (cash or otherwise) shall be
paid to Manager or any of its Affiliates, by any investment vehicle for any
Management Fee Period ending after June 30, 2010 in respect of Client’s
direct or indirect interests in such vehicle; provided,
however, that Client shall not be relieved
of any existing obligation to pay, directly or indirectly, to any general
partner or managing member not wholly-owned by Manager and its Affiliates on a
quarterly basis any cash management fee payable pursuant to existing
arrangements with respect to any portion of the Account consisting of real
estate related investments (whether held directly or through RCG Overseas
Ltd.); provided, further,
that Manager shall, on a quarterly basis beginning on October 1, 2010, (x) rebate
to Client in cash, by wire transfer of immediately available funds, the portion
of any such cash management fees paid, directly or indirectly, by or with
respect to Client that is attributable or payable to Manager or Manager’s
Affiliates and (y) furnish to Client a schedule showing the calculation of
all cash management fees paid, and all rebate payments made, pursuant to this
provision.  For the avoidance of doubt,
Client is deemed to have an indirect obligation in respect of its pro rata
share (based upon its interest in such real estate related investments) of any
such cash management fee payable by the Manager or its Affiliates to a third
party other than Manager or an Affiliate of Manager.”

 

Section 1.02.                         Amendment to Section 6 of the Investment Management Agreement.  Section 6 of the Investment
Management Agreement is hereby deleted in its entirety and 

 

2

 

replaced
with the following as Section 6 thereof:

 

“Notwithstanding
any provision herein to the contrary, as used herein the term “Client” shall
mean, collectively, Alpine Cayman Islands Limited, CEAKSCH Verwaltungs G.m.b.H.
and each such entity’s successors and assigns.”

 

Section 1.03.                         Amendment to Sections 13(a)-(d) of the Investment Management
Agreement.  Sections
13(a)-(d) of the Investment Management Agreement are hereby deleted in
their entirety and replaced with the following as Sections 13(a)-(d),
and Section 13 is further amended by adding the following Sections (i)-(n) thereto:

 

“(a)  April 30 Distribution.  On April 30, 2010, Client received a
portion of its investment in the Account in an amount equal to $19,569,860.47.

 

(b)  Ramius Multi-Strategy.  Manager shall (i) liquidate or cause to
be liquidated for cash the portion of the assets of Ramius Multi-Strategy
Master Fund Ltd (“Ramius Multi-Strategy”), which are readily reducible
to cash (such assets, including, but not limited to, the assets set forth on Schedule
13(b)(1), the “Liquid Assets”), attributable to Client based on
Client’s proportionate interest in Ramius Multi-Strategy, as promptly as
reasonably practicable and (ii) cause the distribution in cash, by wire
transfer of immediately available funds, of the net proceeds of such
liquidation to Client in a redemption of interests in Ramius Multi-Strategy
held by Client.  Manager shall conduct
such liquidation in a manner reasonably designed to allow for distribution in
cash of such net proceeds to Client on a monthly basis beginning on July 30,
2010 until the entire portion of the Liquid Assets attributable to Client based
on Client’s proportionate interest in Ramius Multi-Strategy has been liquidated
and all such net proceeds have been distributed in cash to Client.  Manager shall complete the liquidation of the
entire portion of the Liquid Assets attributable to Client based on Client’s
proportionate interest in Ramius Multi-Strategy by no later than December 31,
2010, and shall complete the distribution in cash of the net proceeds of such
liquidation to Client by no later than January 31, 2011; provided, however, that,
with respect to the investments set forth on Schedule 13(b)(2) (“Schedule
13(b)(2) Assets”), Manager shall complete such liquidation by no later
than December 31, 2011, and shall complete the distribution in cash of the
net proceeds of such liquidation by no later than January 31, 2012.  For the avoidance of doubt, Client shall have
no obligation to pay Manager or any of its Affiliates a fee (cash or
otherwise), and no fee (cash or otherwise) shall be paid to Manager or any of
its Affiliates by any investment vehicle in respect of Client’s direct or
indirect interests in such vehicle, for any Management Fee Period ending after June 30,
2010 with respect to the portion of the Account invested in Ramius
Multi-Strategy.

 

If Manager elects not to complete the liquidation
and distribution of the Schedule 13(b)(2) Assets by December 31, 2010
and January 31, 2011, respectively, Manager shall pay to Client, by wire
transfer of immediately available funds, the Option Extension Payments in such
amounts and at such times as determined in accordance with Schedule A
hereto.

 

3

 

(c)  Lehman Brothers International.  Manager shall use its reasonable best
efforts, at Manager’s sole expense, (i) to obtain bids from third parties
(that Client may accept or reject in its sole discretion) to purchase, whether
in one transaction or a series of transactions, the interests in Ramius
Convertible Arbitrage Segregated Ltd., Ramius Credit Opportunities Segregated
Ltd., Ramius PB Segregated Ltd., Ramius Portside Segregated Ltd. and Primeo
Multi-Strategy Fund, Ltd. (collectively, the “LBIE SPVs”) held by Client
and (ii) to facilitate the closing of the sale(s) of such interests
on or prior to December 31, 2010; provided, however
that nothing contained herein shall obligate Manager to incur or pay any broker’s,
finder’s or similar fee with respect to such sale(s).  Manager shall consent to and approve, and
shall cause its Affiliates to consent to and approve, any offer to purchase all
or part of Client’s interests in the LBIE SPVs that Client deems acceptable,
regardless of whether such offer was obtained by Manager or any other
person.  For the avoidance of doubt,
Client shall have no obligation to pay Manager or any of its Affiliates a fee
(cash or otherwise), and no fee (cash or otherwise) shall be paid to Manager or
any of its Affiliates by any investment vehicle in respect of Client’s direct
or indirect interests in such vehicle, for any Management Fee Period ending
after June 30, 2010 with respect to Client’s interests in the LBIE SPVs.

 

(d)  Real Estate and Energy.  Manager shall use its reasonable best
efforts, at Manager’s sole expense, (i) to obtain bids from third parties
(that Client may accept or reject in its sole discretion) to purchase, whether
in one transaction or a series of transactions, the portion of the Account
consisting of direct investments in real estate related investments or energy
assets (including, without limitation, investments in oil and gas resources)
which are not Liquid Assets and are not held in RCG Overseas Ltd. (“Real
Estate and Energy Assets”) (subject to compliance with all applicable
transfer restrictions contained in the governing documents of any investment
vehicle where such investments are held) and (ii) to facilitate the
closing of the sale(s) of such portion of the Account on or prior to December 31,
2010; provided, however that nothing contained
herein shall obligate Manager to incur or pay any broker’s, finder’s or similar
fee with respect to such sale(s). 
Subject to compliance with applicable transfer restrictions contained in
the governing documents of the investment vehicle where such investment is
held, Manager shall consent to and approve, and shall cause its Affiliates to
consent to and approve, any offer to purchase a portion of the Account
consisting of Real Estate and Energy Assets, regardless of whether such offer
was obtained by Manager or any other person. 
For the avoidance of doubt, Client shall have no obligation to pay
Manager or any of its Affiliates a fee (cash or otherwise), and no fee (cash or
otherwise) shall be paid to Manager or any of its Affiliates by any investment
vehicle in respect of Client’s direct or indirect interests in such vehicle, in
relation to any Management Fee Period ending after June 30, 2010 with
respect to such portion of the Account; provided, however, that Client shall not be relieved of any existing
obligation to pay, directly or indirectly, to any general partner or managing
member not wholly-owned by Manager and its Affiliates on a quarterly basis any
cash management fee payable pursuant to existing arrangements with respect to
any portion of the Account consisting of 

 

4

 

real estate related investments (whether held
directly or through RCG Overseas Ltd.); provided, further, that Manager shall, on a quarterly basis beginning
on October 1, 2010, (x) rebate to Client in cash, by wire transfer of
immediately available funds, the portion of any such cash management fees paid,
directly or indirectly, by or with respect to Client that is attributable or
payable to Manager or Manager’s Affiliates and (y) furnish to Client a
schedule showing the calculation of all cash management fees paid, and all
rebate payments made, pursuant to this provision.  For the avoidance of doubt, Client is deemed
to have an indirect obligation in respect of its pro rata share (based upon its
interest in such real estate related investments) of any such cash management
fee payable by the Manager or its Affiliates to a third party other than
Manager or an Affiliate of Manager.”

 

“(i)  RCG Overseas.  To the extent that any of the assets held by
RCG Overseas Ltd. (“RCG Overseas”) relating to Client’s indirect
interests in RCG Overseas (held through Ramius Multi-Strategy) are reduced to
cash, Manager shall cause the distribution by RCG Overseas of the net proceeds
of such assets to Ramius Multi-Strategy and the distribution by Ramius
Multi-Strategy of such proceeds to Client, by wire transfer of immediately
available funds, within 30 days following the end of the month in which such
assets were reduced to cash.  Manager
shall use its reasonable best efforts, at Manager’s sole expense, (i) to
obtain bids from third parties (that Client may accept or reject in its sole
discretion) to purchase, whether in one transaction or a series of
transactions, the interests in RCG Overseas held by Ramius Multi-Strategy
attributable to Client and (ii) to facilitate the closing of the sale(s) of
such assets on or prior to December 31, 2010; provided,
however that nothing contained herein shall obligate Manager to
incur or pay any broker’s, finder’s or similar fee with respect to such
sale(s).  Manager shall consent to and
approve, and shall cause its Affiliates to consent to and approve, any offer to
purchase all or part of interests in RCG Overseas held by Ramius Multi-Strategy
attributable to Client that Client deems acceptable, regardless of whether such
offer was obtained by Manager or any other person.  For the avoidance of doubt, Client shall have
no obligation to pay Manager or any of its Affiliates a fee (cash or
otherwise), and no fee (cash or otherwise) shall be paid to Manager or any of
its Affiliates by any investment vehicle in respect of Client’s direct or
indirect interests in such vehicle, in relation to any Management Fee Period
ending after June 30, 2010 with respect to assets held by RCG Overseas
attributable to Client.  Manager shall
use its reasonable best efforts to liquidate or cause to be liquidated assets
held by RCG Overseas as soon as reasonably practicable taking into account the
liquidity constraints associated with such assets.  No investment may be made by RCG Overseas
after the date hereof other than (i) further investments in investments
held by RCG Overseas as of the date hereof, (ii) investments with respect
to which RCG Overseas has entered into a definitive investment agreement or
otherwise made a binding, written commitment prior to the date hereof or (iii) bona
fide hedging transactions in the ordinary course of business consistent with
past practice.

 

5

 

(j)  Ramius Enterprise.  To the extent that RCG Overseas and another
fund managed by Ramius or an Affiliate of Ramius (each an “Other Ramius Fund”),
including Ramius Enterprise LP and Ramius Enterprise Ltd., both hold an
interest in any asset (a “Jointly-Held Asset”), Manager will ensure that
(i) RCG Overseas’ interests in such asset will be disposed of on or before
the date upon which any Other Ramius Fund’s interests in such asset are
disposed of, (ii) any disposition of such asset will be on terms
(including, but not limited to, terms relating to the payment of fees and
expenses) that are no less favorable to RCG Overseas than to any Other Ramius
Fund and (iii) RCG Overseas will receive at least its pro rata share
(based upon its ownership interest in such asset) of the net proceeds of any
disposition of such asset on or before the date upon which any Other Ramius
Fund receives any portion of such proceeds. 
Manager shall furnish to Client on a quarterly basis beginning on June 30,
2010, a schedule setting forth all monetization events with respect to any
Jointly-Held Asset, which schedule shall include a breakdown of the ownership interests
in each such Jointly-Held Asset and the payments made each entity holding an
interest in such Jointly-Held Asset on account of the monetization events with
respect to such asset.

 

(k)  Other Assets.  Manager shall (i) liquidate for cash all
other portions of the Account consisting of assets which are readily reducible
to cash (such assets, including, but not limited, to the assets set forth on Schedule
13(k), “Other Liquid Assets”) as promptly as reasonably practicable
and (ii) cause the distribution of the net proceeds of such liquidation to
Client by wire transfer of immediately available funds.  Manager shall conduct such liquidation in a
manner reasonably designed to allow for distribution of such net proceeds to
Client on a monthly basis beginning on July 30, 2010 until all such Other
Liquid Assets have been liquidated and all such net proceeds have been
distributed in cash to Client. 
Distributions pursuant to this Section 13(k) shall be made in
cash by means of wire transfers of immediately available funds.  Manager shall complete such liquidation no
later than December 31, 2010, and shall complete the distribution of the
net proceeds of such liquidation to Client by no later than January 31,
2011.

 

(l)  Waiver of Restrictions.  To the extent necessary to give effect to
Manager’s liquidation and distribution obligations set forth in this Section 13,
Manager shall waive, or cause to be waived, any applicable gates, lock-ups,
suspensions, holdbacks, side pocket (or similar restrictions) or other trading,
valuation, withdrawal, redemption or distribution restrictions with respect to
any investment vehicle in which Client has a direct or indirect interest.  In the event that any of the foregoing
restrictions are enforced with respect to Client’s direct or indirect interest
in any investment vehicle, Manager will promptly notify Client of that fact.

 

(m)  Termination of Obligations.  Manager’s obligations to liquidate any assets
and obtain any third party bids contained in this Section 13 shall terminate
(i) with respect to any fund or special purpose vehicle, at such time as
Client no longer holds any interest in such fund or special purpose vehicle,
and (ii) with respect to 

 

6

 

a direct investment, at such time that Client no
longer holds such direct investment.

 

(n)  Concurrent Liquidations.  Client acknowledges that Manager may,
concurrently with effecting such liquidations on behalf Client, liquidate
similar assets for other advisory clients of Manager and such concurrent
liquidations may affect the net proceeds realized by Client hereunder.”

 

Section 1.04.                         Amendment to Section 13(e) of the Investment Management
Agreement.  The first
two sentences of Section 13(e) are hereby deleted in their
entirety.

 

ARTICLE TWO

AMENDMENTS TO THE INVESTMENT REPORTING AGREEMENT

 

With
respect to Sections 2.01 and 2.02 below, Ramius Alternative Solutions and HVB
AG hereby agree that the Investment Reporting Agreement shall be amended as
follows:

 

Section 2.01.                         Amendment to Sections 2(d)-(i) of the Investment Reporting
Agreement.  Sections
2(d)-(i) of the Investment Reporting Agreement are hereby deleted in
their entirety and replaced with the following Sections 2(d)-(h):

 

“(d) 
Subject to Section 2(g), the Investment Manager shall distribute by wire
transfer of immediately available funds, (i) a portion of the SPE
Investment equal to €85 million in cash, on or prior to May 25, 2010 and (ii) the
remaining portion of the SPE Investment consisting of remaining available cash
on or prior to July 30, 2010 (less any margin, settlement or third party
expenses).

 

(e) 
Subject to Section 2(g), commencing with the fiscal quarter ending June 30,
2010, the Investment Manager shall, within 30 days following the end of such
fiscal quarter and each subsequent fiscal quarter, distribute in cash, by wire
transfer of immediately available funds, all portions of the SPE Investment
which are received from underlying managers (less any margin, settlement, third
party expenses or early redemption fees) in any applicable fiscal quarter.

 

(f) 
With respect to any portion of the SPE Investment that is not readily reducible
to cash, the Investment Manager shall, at the election of HVB AG, (i) use
its reasonable best efforts, at Manager’s sole expense, (A) to obtain bids
from third parties (that HVB AG may accept or reject in its sole discretion) to
purchase, whether in one transaction or a series of transactions, such portion
of the SPE Investment and (B) to facilitate the closing of the sale(s) of
such portion of the SPE Investment on or prior to December 31, 2010 (provided, however that nothing contained
herein shall obligate Manager to incur or pay any broker’s, finder’s or similar
fee with respect to such sale(s)) or (ii) distribute such portion of the
SPE Investment in kind.  The Investment
Manager shall consent to and approve, and shall cause its affiliates to consent
to and approve, any offer to purchase all or part of the SPE Investment that
Client deems acceptable, regardless of whether such offer was obtained by the
Investment Manager or any other person.

 

7

 

(g) 
Notwithstanding any other provision in this Second Amendment or in the
Previously Amended Agreement, the redemption terms provided herein shall in all
cases be subject to the underlying hedge funds providing liquidity to the Fund,
including any holdbacks by such underlying hedge funds.  The Investment Manager shall make a properly
submitted request for redemption from each underlying hedge fund with respect
to every available redemption date for each such underlying hedge fund, provided, that, HVB AG shall
have the right to (i) specify the amount to be redeemed from any such
underlying fund and (ii) veto the submission of any such redemption
request (in which case the Investment Manager shall not submit the vetoed
redemption request).  Such redemption
requests shall be made in compliance with the terms and conditions described in
the Fund’s prospectus.  The Investment
Manager shall provide HVB AG with at least ten days written notice (a “Redemption
Notice”) before making any request for redemption as described above and
HVB AG shall provide the Investment Manager with written notice no later than
five days following receipt of a Redemption Notice by HVB AG specifying with
respect to each redemption request contained in the Redemption Notice (i) whether
such redemption request should be submitted and (ii) the amount to be
redeemed with respect to each approved redemption request.  Before making any distributions in kind to
any Person with respect to the Fund, the Investment Manager must obtain the
consent of such Person.

 

(h) 
In the event that any gates, lock-ups, suspensions, holdbacks, side pocket (or
similar) restrictions or other trading, valuation, withdrawal, redemption or
distribution restrictions are enforced with respect to any investment vehicle
in which the Fund has a direct or indirect interest, the Investment Manager
will promptly notify HVB AG of that fact. 
As of the date hereof, to the knowledge of the Investment Manager, no
investment vehicle in which the Fund has a direct or indirect interest, other
than as set forth on Schedule 2(h), is currently enforcing, or plans to
enforce, any gate, lock-up, suspension, holdback, side pocket (or similar)
restrictions or other trading, valuation, withdrawal, redemption or other
distribution restriction.”

 

Section 2.02.                         Amendment to Section 6(a) of the Investment Reporting
Agreement.  Section 6(a) of the Investment
Reporting Agreement is hereby amended by inserting the following additional
paragraph at end of such section:

 

“Notwithstanding
the foregoing, the Investment Manager shall have no right to a fee in respect
of any Management Fee Period ending after June 30, 2010 and no fee (cash
or otherwise) shall be paid to the Investment Manager or any of its affiliates
by any investment vehicle in which the Fund holds a direct or indirect
interest.”

 

Section 2.03.                         Amendment to Section 6(b) of the
Investment Reporting Agreement. Section 6(b) of
the Investment Reporting Agreement is hereby deleted in its
entirety and replaced with the following:

 

8

 

“(b) 
In respect to the Incentive Fee Period ending June 30, 2010, the
Investment Manager shall receive a cash incentive fee (the “Incentive Fee”),
equal to the product of (i) the applicable Incentive Fee Percentage,
multiplied by (ii) the applicable Adjusted Net Profits.  The Investment Manager shall have no right to
a fee in respect of any Incentive Fee Period ending after June 30, 2010.”

 

Section 2.04.                         Contribution of Assets from Ramius Event Driven FOF Ltd. to the Fund.  Ramius Alternative Solutions shall convey,
transfer and deliver, or shall cause its affiliates to convey, transfer and
deliver, to the Fund all interests in any assets held, directly or indirectly,
by Ramius Event Drive FOF Ltd., subject to the receipt by Ramius Alternative
Solutions of any consents (which Ramius Alternative Solutions shall use its
reasonable best efforts to obtain) from the underlying hedge fund managers
required to be obtained in connection with the transfer of any such assets.

 

ARTICLE THREE

AMENDMENT TO THE ASSET EXCHANGE AGREEMENT

 

RCG,
HVB, HVB AG and Cowen hereby agree that the Asset Exchange Agreement will be
amended as follows:

 

Section 3.01.                         Amendment to Sections 8.1(a) and (b) of the Asset Exchange
Agreement.  Pursuant to
Section 11.6 of the Asset Exchange Agreement, Sections 8.1(a) and
(b) of the Asset Exchange Agreement are hereby deleted in their
entirety and replaced with the following Sections 8.1(a) and (b):

 

“(a) 
[INTENTIONALLY OMITTED]

 

(b) 
[INTENTIONALLY OMITTED]”.

 

ARTICLE FOUR

RCG LLC AGREEMENT

 

C4S
and BA Alpine hereby agree that the RCG LLC Agreement shall be amended as
follows:

 

Section 4.01.                         Amendment to Sections 4.02(a), (c), (e) and (f) of the RCG LLC
Agreement.  Pursuant to
Section 8.01 of the RCG LLC Agreement, Section 4.02 of
the RCG LLC Agreement is hereby amended by deleting Sections 4.02(a) and
(c) in their entirety and replacing such sections with the
following Sections 4.02(a) and (c):

 

“(a) 
[INTENTIONALLY OMITTED]

 

(c) 
[INTENTIONALLY OMITTED]”.

 

Section 4.02.                         Amendment to Section 4.02(d) of the RCG LLC Agreement.  Pursuant
to Section 8.01 of the RCG LLC Agreement, Section 4.02
of the RCG LLC Agreement is hereby amended by inserting in Section 4.02(d) the
following text before the first sentence of such section:

 

9

 

“Notwithstanding
any provision to the contrary contained herein, any Series I Member (other
than the Managing Member) may withdraw any or all of its capital in RCG at any
time upon at least two business days prior written notice (a “Series I
Withdrawal Notice”) and the Managing Member shall cause the Company to make
the requested distribution in accordance with the provisions of this Section 4.02(d).  Each Series I Withdrawal Notice shall
specify whether the distribution shall be made in cash or in-kind.  If a cash distribution is requested, the Series I
Withdrawal Notice shall specify the instructions of the Series I Member
regarding the manner of sale, the counterparty (if not a public sale), the
underwriter or broker, if applicable, and any limitations on the sale of the
Shares of New Parent Class A Common Stock, and the Company shall use
commercially reasonably efforts to sell the shares of New Parent Class A
Common Stock in accordance with any such instructions contained in the Series I
Withdrawal Notice, except as otherwise required by applicable securities
laws.  If an in-kind distribution is
requested, the Series I Withdrawal Notice shall specify whether any of the
shares to be distributed should be delivered in the form of New Parent Class A
Common Stock or converted by the Company into shares of New Parent Class B
Common Stock prior to distribution; provided,
that a Series I Member shall not request an in-kind distribution of shares
of New Parent Class A Common Stock to the extent that such distribution
would result in such Series I Member and its affiliates beneficially
owning a number of outstanding shares of New Parent Common Stock that would
violate the BHC Act.”

 

Section 4.03.                         Amendment to Sections 4.02(e) and (f) of the RCG LLC Agreement.  Pursuant to Section 8.01 of the
RCG LLC Agreement, Section 4.02 of the RCG LLC Agreement is hereby
further amended by deleting Sections 4.02(e) and (f) in
their entirety and replacing such sections with the following Sections 4.02(e) and
(f):

 

“(e) 
[INTENTIONALLY OMITTED]

 

(f) 
[INTENTIONALLY OMITTED]”.

 

Section 4.04.                         Amendment to Section 5.01(a) of the RCG LLC Agreement.  Pursuant to Section 8.01 of the
RCG LLC Agreement, Section 5.01(a) of the RCG LLC Agreement is
hereby amended by inserting in Section 5.01(a) the following
text after the second word of the first sentence of such section:

 

“(other
than any Series I Member that is not the Managing Member)”.

 

Section 4.05.                         Amendment to Section 5.01(b) of the RCG LLC Agreement.  Pursuant to Section 8.01 of the
RCG LLC Agreement, Section 5.01(b) of the RCG LLC Agreement is
hereby amended by deleting Section 5.01(b) in its entirety and
replacing such section with the following Sections 5.01(b):

 

“(b) 
Notwithstanding any provision to the contrary herein, any Series I Member
(other than the Managing Member) may sell, assign, pledge, transfer or
otherwise dispose of any or all of such Series I Member’s interest in the
Company or the Series.”

 

10

 

ARTICLE FIVE

RELEASE

 

Section 5.01.                         Release of UniCredit Claims.  Effective as of the date hereof and provided
that no Ramius Party is in material breach of any of its material obligations
hereunder remaining uncured 10 business days following receipt by such Ramius
Party of written notice of such breach by a UniCredit Party, each of the
UniCredit Parties, for itself and its present and former shareholders, members,
employees, directors, officers, agents, attorneys, assigns, predecessors,
successors and affiliates each hereby releases, remises and forever discharges,
and by these presents does release and forever discharge, each of the Ramius
Parties and their present and former
shareholders, members, employees, directors, officers, agents, attorneys,
assigns, predecessors, successors and affiliates of and from any and all
actions, causes of action, suits, debts, accounts, bonds, bills, covenants,
contracts, controversies, agreements, liabilities, damages, costs, expenses,
demands, judgments, executions, variances, claims and other obligations of
whatever kind or nature, including of law, equity or otherwise, and whether in
contract, tort or otherwise (collectively, “Claims”), that any UniCredit
Party now has, ever had, or hereafter may have from the beginning of time
through the date hereof, or that may accrue after the date hereof, in each case
solely arising from, connected or related to, caused by or based on any facts,
conduct, acts, omissions, circumstances, activities, agreements, transactions,
events or occurrences known or unknown, of any type, that existed, occurred,
happened, arose or transpired on or before the date hereof arising under or
relating to the Investment Management Agreement, Investment Reporting Agreement
or Asset Exchange Agreement.  For the
avoidance of doubt, the releases set forth in this Section 5.01 shall not
include releases of any Claims to the extent such Claims arise from, or relate
to, (i) acts or omissions occurring after the date hereof and/or (ii) any
breach of this Agreement and the transactions contemplated hereby.

 

Section 5.02.                         Release of Ramius Claims.  Effective as of
the date hereof and provided that no UniCredit Party is in material breach of
any of its material obligations hereunder remaining uncured 10 business days
following receipt by such UniCredit Party of written notice of such breach by a
Ramius Party, each of the Ramius Parties, for itself and its present and former
shareholders, members, employees, directors, officers, agents, attorneys,
assigns, predecessors, successors and affiliates each hereby releases, remises
and forever discharges, and by these presents does release and forever
discharge, each of the UniCredit Parties  and
their present and former shareholders, members, employees, directors,
officers, agents, attorneys, assigns, predecessors, successors and affiliates
of and from any and all Claims, that any Ramius Party now has, ever had, or
hereafter may have from the beginning of time through the date hereof, or that
may accrue after the date hereof, in each case solely arising from, connected
or related to, caused by or based on any facts, conduct, acts, omissions,
circumstances, activities, agreements, transactions, events or occurrences
known or unknown, of any type, that existed, occurred, happened, arose or
transpired on or before the date hereof arising under or relating to the
Investment Management Agreement, Investment Reporting Agreement or Asset
Exchange Agreement.  For the avoidance of
doubt, the releases set forth in this Section 5.02 shall not include
releases of any Claims to the extent such Claims arise from, or relate to, (i) acts
or omissions occurring after the date hereof and/or (ii) any breach of
this Agreement and the transactions contemplated hereby.

 

11

 

ARTICLE SIX

PUBLIC STATEMENTS

 

Section 6.01.                         UniCredit Public Statements.  None of the UniCredit Parties shall issue or
cause the publication of any press release or other public announcement
(including in any filing with the SEC or any other regulatory or governmental
agency, including any stock exchange) with respect to, or otherwise make any
public statement concerning, the matters contemplated by this Agreement without
prior consultation with RCG and Cowen to the extent practicable under the
circumstances and using commercially reasonable efforts to accommodate any
reasonable requests of RCG or Cowen, as applicable, with respect to any such
disclosure; provided, that, any such consultation is not
required if prohibited by law.

 

Section 6.02.                         Ramius Public Statements.  None of the Ramius Parties shall issue or
cause the publication of any press release or other public announcement
(including in any filing with the SEC or any other regulatory or governmental
agency, including any stock exchange) with respect to, or otherwise make any
public statement concerning, the matters contemplated by this Agreement without
prior consultation with HVB AG to the extent practicable under the
circumstances and using commercially reasonable efforts to accommodate any reasonable
requests of HVB AG with respect to any such disclosure; provided, that,
any such consultation is not required if prohibited by law.

 

ARTICLE SEVEN

ADDITIONAL COVENANTS

 

Section 7.01.                         Expenses.  Cowen shall
reimburse the UniCredit Parties for all out-of-pocket legal fees incurred by
the UniCredit Parties since March 30, 2010 in connection with the matters
set forth herein.

 

Section 7.02.                         Superior Terms.  If any
other investor in any entity managed by any Ramius Party or any of their
affiliates in which a UniCredit Party or its affiliates has an interest,
including, without limitation, the Funds, the Umbrella Fund, Ramius
Multi-Strategy Fund Ltd., RCG Overseas Ltd. or any other funds or special
purpose vehicles, is entitled to any rights or terms with respect to such
interests in favor of such other investor that are more favorable in any manner
than the rights or terms of HVB AG or its affiliates with respect to such
interests, the applicable Ramius Party shall, or shall cause its affiliates, as
applicable, to, extend such rights or terms to HVB AG and its affiliates, as
applicable.

 

ARTICLE EIGHT

REPRESENTATIONS AND WARRANTIES

 

Section 8.01.                         Representations and Warranties of the Ramius Parties. Each of the Ramius Parties severally and not jointly represent and warrant
to each of the UniCredit Parties as of the date hereof, as follows:

 

(a)                                  Organization and Good Standing.  Such Ramius Party is duly
formed, validly existing and in good standing under the laws of the
jurisdictions of its formation, each with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.

 

12

 

(b)                                 Enforceability; Authority. This Agreement constitutes the legal, valid and binding
obligations of such Ramius Party, enforceable against such Ramius Party in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer or
similar laws affecting the enforcement of creditors’ rights generally and
general principles of equity (whether considered in a proceeding at law or in
equity).  Such Ramius Party has the
requisite right, power and authority to execute and deliver this Agreement to
the extent to which such Ramius Party is a party, and to perform its
obligations under this Agreement, and such action has been duly authorized by
all necessary corporate action.

 

(c)                                  No Conflict.
Neither the execution and delivery of this Agreement by such Ramius Party nor
the consummation or performance of any of this Agreement will, directly or
indirectly (with or without notice or lapse of time):

 

(i)                                     breach, violate or cause any failure to perform or comply with any
provision of the organizational documents of such Ramius Party; or

 

(ii)                                  breach, violate or cause any failure to perform or comply with any
provision of (x) any statutes, common laws, rules, ordinances,
regulations, codes, orders, judgments, injunctions, writs, decrees,
governmental guidelines or interpretations having the force of law, to which
such Ramius Party may be subject, or (y) any order, decision, injunction,
directive, judgment, decree, ruling, writ, assessment, award, decision,
stipulation or verdict to which such Ramius Party may be subject.

 

Section 8.02.                         Representations and Warranties of the UniCredit Parties.  Each of the
UniCredit Parties severally and not jointly represent and warrant to each of
the Ramius Parties as of the date hereof, as follows:

 

(a)                                  Organization and Good Standing.  Such UniCredit Party is duly
formed, validly existing and in good standing under the laws of the
jurisdictions of its formation, each with full corporate power and authority to
conduct its business as it is now being conducted and to own or use the
properties and assets that it purports to own or use.

 

(b)                                 Enforceability; Authority. This Agreement constitutes the legal, valid and binding
obligations of such UniCredit Party, enforceable against such UniCredit Party
in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer or
similar laws affecting the enforcement of creditors’ rights generally and
general principles of equity (whether considered in a proceeding at law or in
equity).  Such UniCredit Party has the
requisite right, power and authority to execute and deliver this Agreement to
the extent to which such UniCredit Party is a party, and to perform its
obligations under this Agreement, and such action has been duly authorized by
all necessary corporate action.

 

(c)                                  No Conflict.
Neither the execution and delivery of this Agreement by such UniCredit Party
nor the consummation or performance of any of this Agreement will, directly or
indirectly (with or without notice or lapse of time):

 

13

 

(i)                                     breach, violate or cause any failure to perform or comply with any
provision of the organizational documents of such UniCredit Party; or

 

(ii)                                  breach, violate or cause any failure to perform or comply with any
provision of (x) any statutes, common laws, rules, ordinances,
regulations, codes, orders, judgments, injunctions, writs, decrees,
governmental guidelines or interpretations having the force of law, to which
such UniCredit Party may be subject, or (y) any order, decision,
injunction, directive, judgment, decree, ruling, writ, assessment, award,
decision, stipulation or verdict to which such UniCredit Party may be subject.

 

ARTICLE NINE

MISCELLANEOUS

 

Section 9.01.                         Inconsistency and Governing Terms.  In case of any inconsistency with the terms
and conditions set forth in the Investment Management Agreement, Investment
Reporting Agreement, Asset Exchange Agreement, RCG LLC Agreement or any other
agreement between the Parties, as applicable, this Agreement will prevail.  Any other terms of such other agreements
shall remain in full force and effect.

 

Section 9.02.                         Capitalized Terms. Any capitalized terms used herein and not
defined shall have the meaning set forth in the relevant underlying agreement
unless indicated otherwise.

 

Section 9.03.                         Construction.  The headings of Articles and Sections in this
Agreement are provided for convenience only and will not affect its
construction or interpretation.

 

Section 9.04.                         Governing Law. This Amendment shall be governed by, and construed
in accordance with, the laws of the State of New York, without having regard to
the conflicts of law rules.

 

Section 9.05.                         Amendment. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.

 

Section 9.06.                         No Third-Party Beneficiary.  The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights upon any other person or entity except
that the intended beneficiary of distributions under the Investment Reporting
Agreement shall be an express beneficiary of the provisions of the Investment
Reporting Agreement, as amended herein.

 

[Signature
pages follow]

 

14

 

IN
WITNESS WHEREOF, the parties hereto have executed this Agreement, all as of the
day and year first above written.

 

	
   

  	
  RCG
  HOLDINGS LLC (solely for the purposes of Articles 3 through 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  C4S &
  Co., LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey M. Solomon

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey
  M. Solomon

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  C4S &
  CO., L.L.C. (solely for the purposes of Articles 4 through 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey M. Solomon

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey
  M. Solomon

  
	
   

  	
   

  	
  Title:

  	
  Managing
  Member

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  COWEN GROUP, INC. (solely for
  the purposes of Articles 3, 5, 6, 7, 8 and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey M. Solomon

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey
  M. Solomon

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Operating Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  RAMIUS
  LLC (solely for the purposes of Articles 1, 5, 6, 7, 8 and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeffrey M. Solomon

  
	
   

  	
   

  	
  Name:

  	
  Jeffrey
  M. Solomon

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  RAMIUS
  ALTERNATIVE SOLUTIONS LLC (solely for the purposes of Articles 2, 5, 6, 7, 8
  and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Thomas W. Strauss

  
	
   

  	
   

  	
  Name:

  	
  Thomas
  W. Strauss

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  BA
  ALPINE HOLDINGS, INC. (solely for the purposes of Articles 4 through 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicola Corsetti

  
	
   

  	
   

  	
  Name:

  	
  Nicola
  Corsetti

  
	
   

  	
   

  	
  Title:

  	
  Director
  and Vice-President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Josef Duregger

  
	
   

  	
   

  	
  Name:

  	
  Josef
  Duregger

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  ALPINE
  CAYMAN ISLANDS LIMITED (solely for the purposes of Articles 1, 5, 6, 7, 8 and
  9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Nicola Corsetti

  
	
   

  	
   

  	
  Name:

  	
  Nicola
  Corsetti

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Josef Duregger

  
	
   

  	
   

  	
  Name:

  	
  Josef
  Duregger

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  UNICREDIT
  BANK AG (solely for the purposes of Articles 2, 3, 5, 6, 7, 8 and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  G. Falger

  
	
   

  	
   

  	
  Name:

  	
  G.
  Falger

  
	
   

  	
   

  	
  Title:

  	
  GC and MD

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  M. Richard Cerick

  
	
   

  	
   

  	
  Name:

  	
  M.
  Richard Cerick

  
	
   

  	
   

  	
  Title:

  	
  Assistant
  GC and Director

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  HVB
  ALTERNATIVE ADVISORS LLC (solely for the purposes of Articles 3, 5, 6, 7, 8
  and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  G. Falger

  
	
   

  	
   

  	
  Name:

  	
  G.
  Falger

  
	
   

  	
   

  	
  Title:

  	
  Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  D. Valente

  
	
   

  	
   

  	
  Name:

  	
  D.
  Valente

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

[Signature
Page to Modification Agreement]

 

 

	
   

  	
  CEAKSCH VERWALTUNGS
  G.M.B.H. (solely for the purposes of Articles 1, 5, 6, 7, 8 and 9)

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Markus Schwimann

  
	
   

  	
   

  	
  Name:

  	
  Markus
  Schwimann

  
	
   

  	
   

  	
  Title:

  	
  Director

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Josef Duregger

  
	
   

  	
   

  	
  Name:

  	
  Josef Duregger

  
	
   

  	
   

  	
  Title:

  	
  Director

  

 

[Signature
Page to Modification Agreement]Exhibit 10.1

 

 

LOAN
AND SECURITY AGREEMENT

 

BETWEEN

 

NEUROMETRIX,
INC.

 

AND

 

COMERICA
BANK

 

DATED MARCH 5,
2010

 

 

 

This LOAN AND SECURITY AGREEMENT (“Agreement”) is
entered into as of March 5, 2010, by and between Comerica Bank, a Texas
banking association (“Bank”) and NEUROMETRIX, INC., a Delaware corporation (“Borrower”).

 

RECITALS

 

Borrower wishes to obtain credit from time to time
from Bank, and Bank desires to extend credit to Borrower.  This Agreement sets forth the terms on which
Bank will advance credit to Borrower, and Borrower will repay the amounts owing
to Bank.

 

AGREEMENT

 

The parties agree as follows:

 

1.            DEFINITIONS AND CONSTRUCTION.

 

1.1           Definitions.  As used in this Agreement, all capitalized
terms shall have the definitions set forth on Exhibit A.  Any term used in the Code and not defined
herein shall have the meaning given to the term in the Code.

 

1.2           Accounting Terms.  Any accounting term not specifically defined
on Exhibit A shall be construed in accordance with GAAP and all calculations
shall be made in accordance with GAAP. 
The term “financial statements” shall include the accompanying notes and
schedules.

 

2.            LOAN AND TERMS OF PAYMENT.

 

2.1          Credit Extensions.

 

(a)           Promise to Pay.  Borrower promises to pay to Bank, in lawful
money of the United States of America, the aggregate unpaid principal amount of
all Credit Extensions made by Bank to Borrower, together with interest on the
unpaid principal amount of such Credit Extensions at rates in accordance with
the terms hereof.

 

(b)           Advances Under Revolving Line.

 

(i)            Amount.  Subject to and upon the terms and conditions
of this Agreement (1) Borrower may request Advances in an aggregate
outstanding amount not to exceed the lesser of (A) the Revolving Line or (B) the
Borrowing Base, less any amounts outstanding under the Letter of Credit
Sublimit, and (2) amounts borrowed pursuant to this Section 2.1(b) may
be repaid and reborrowed at any time prior to the Revolving Maturity Date, at
which time all Advances under this Section 2.1(b) shall be
immediately due and payable.  Borrower
may prepay any Advances without penalty or premium.

 

(ii)           Form of Request.  Whenever Borrower desires an Advance,
Borrower will notify Bank by facsimile transmission or telephone no later than
3:00 p.m. Pacific time (1:00 p.m. Pacific time for wire transfers),
on the Business Day that the Advance is to be made.  Each such notification shall be promptly
confirmed by a Payment/Advance Form in substantially the form of Exhibit B.  Bank is authorized to make Advances under
this Agreement, based upon instructions received from a Responsible Officer or
a designee of a Responsible Officer, or without instructions if in Bank’s
discretion such Advances are necessary to meet Obligations which have become
due and remain unpaid.  Bank shall be
entitled to rely on any telephonic notice given by a person who Bank reasonably
believes to be a Responsible Officer or a designee thereof, and Borrower shall
indemnify and hold Bank harmless for any damages or loss suffered by Bank as a
result of such reliance.  Bank will
credit the amount of Advances made under this Section 2.1(b) to
Borrower’s deposit account.

 

(iii)          Letter of Credit Sublimit.
Subject to the availability under the Revolving Line, and in reliance on the
representations and warranties of Borrower set forth herein, at any time and
from time to time from the date hereof through the Business Day immediately
prior to the Revolving Maturity Date, Bank shall issue for the account of
Borrower such Letters of Credit as Borrower may request by delivering to Bank a
duly executed letter of credit application on Bank’s standard form; provided,
however, that the outstanding and undrawn amounts under all such Letters of
Credit (i) shall not at any time exceed the Letter of Credit Sublimit, and
(ii) shall be deemed to constitute Advances for 

 

 

the purpose of
calculating availability under the Revolving Line.  Any drawn but unreimbursed amounts under any
Letters of Credit shall be charged as Advances against the Revolving Line. 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 form
application and letter of credit agreement. 
Borrower will pay any standard issuance and other fees that Bank
notifies Borrower it will charge for issuing and processing Letters of Credit.

 

(iv)          Collateralization of Obligations
Extending Beyond Maturity.  If
Borrower has not secured to Bank’s reasonable satisfaction its obligations with
respect to any Letters of Credit or Credit Card Services by the Revolving
Maturity Date, then, effective as of such date, the balance in any deposit
accounts held by Bank and the certificates of deposit or time deposit accounts
issued by Bank in Borrower’s name (and any interest paid thereon or proceeds
thereof, including any amounts payable upon the maturity or liquidation of such
certificates or accounts), shall automatically secure such obligations to the
extent of the then continuing or outstanding and undrawn Letters of Credit and
Credit Card Services.  Borrower
authorizes Bank to hold such balances in pledge and to decline to honor any
drafts thereon or any requests by Borrower or any other Person to pay or
otherwise transfer any part of such balances for so long as the Letters of
Credit or Credit Card Services are outstanding or continue.

 

2.2          Overadvances.  If the aggregate amount of the outstanding
Advances plus the face amount of all Letters of Credit then issued and
unexpired exceeds the lesser of the Revolving Line or the Borrowing Base at any
time, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.

 

2.3          Interest Rates, Payments, and
Calculations.

 

(a)           Interest Rates.

 

(i)            Advances.  Except as set forth in Section 2.3(b),
the Advances shall bear interest, on the outstanding daily balance thereof, as
set forth in the Prime Referenced Rate Addendum to Loan & Security
Agreement attached as Exhibit C.

 

(b)           Late Fee; Default Rate.  Except if waived by Bank after explanation by
Borrower, if any payment is not made within 10 days after the date such payment
is due, Borrower shall pay to Bank a late fee equal to the lesser of (i) 2%
of the amount of such unpaid amount or (ii) the maximum amount permitted
to be charged under applicable law.  All
Obligations shall bear interest, from and after the occurrence and during the
continuance of an Event of Default, at a rate equal to 2 percentage points
above the interest rate applicable immediately prior to the occurrence of the
Event of Default.

 

(c)           Payments.  Interest hereunder shall be computed, and
shall be due and payable as and when provided in the Interest Rate
Addendum.  Bank shall, at its option,
charge such interest, all Bank Expenses, and all periodic payments against any
of Borrower’s deposit accounts or against the Revolving Line, in which case
those amounts shall thereafter accrue interest at the rate then applicable
hereunder.  Any interest not paid when
due shall be compounded by becoming a part of the Obligations, and such
interest shall thereafter accrue interest at the rate then applicable
hereunder.

 

2.4          Crediting Payments.  Prior to the occurrence of an Event of
Default, Bank shall credit a wire transfer of funds, check or other item of
payment to such deposit account or Obligation as Borrower specifies, except
that to the extent Borrower uses the Advances to purchase Collateral, Borrower’s
repayment of the Advances shall apply on a “first-in-first-out” basis so that
the portion of the Advances used to purchase a particular item of Collateral
shall be paid in the chronological order the Borrower purchased the
Collateral.  After the occurrence and
during the continuance of an Event of Default, Bank shall have the right, in
its sole discretion, to immediately apply any wire transfer of funds, check, or
other item of payment Bank may receive to conditionally reduce Obligations, but
such applications of funds shall not be considered a payment on account unless
such payment is of immediately available federal funds or unless and until such
check or other item of payment is honored when presented for payment.  Notwithstanding anything to the contrary
contained herein, any wire transfer or payment received by Bank after 12:00
noon Pacific time shall be deemed to have been received by Bank as of the
opening of business on the immediately following Business Day.  Whenever any payment 

 

2

 

to Bank under the Loan
Documents would otherwise be due (except by reason of acceleration) on a date
that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.

 

2.5          Bank Expenses.  On the Closing Date, Borrower shall pay to
Bank all Bank Expenses incurred through the Closing Date, and, after the
Closing Date, all Bank Expenses, as and when they become due.

 

2.6          Term.  This Agreement shall become effective on the
Closing Date and, subject to Section 13.7, shall continue in full force
and effect for so long as any Obligations remain outstanding or Bank has any
obligation to make Credit Extensions under this Agreement.  Notwithstanding the foregoing, Bank shall
have the right to terminate its obligation to make Credit Extensions under this
Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default.

 

3.            CONDITIONS OF LOANS.

 

3.1          Conditions Precedent to Initial
Credit Extension.  The obligation of
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:

 

(a)           this Agreement;

 

(b)           an officer’s certificate of Borrower
with respect to incumbency and resolutions authorizing the execution and
delivery of this Agreement;

 

(c)           a financing statement (Form UCC-1);

 

(d)           agreement to provide insurance;

 

(e)           payment of the fees and Bank Expenses
then due specified in Section 2.5;

 

(f)            current SOS Reports indicating that
except for Permitted Liens, there are no other security interests or Liens of
record in the Collateral;

 

(g)           Reserved;

 

(h)           current financial statements,
including audited statements for Borrower’s most recently ended fiscal year,
together with an unqualified opinion, company prepared consolidated balance
sheets and income statements for the most recently ended month in accordance
with Section 6.2, and such other updated financial information as Bank may
reasonably request;

 

(i)            current Compliance Certificate in
accordance with Section 6.2;

 

(j)            Reserved;

 

(k)           Control Agreement for each banking
and/or investment account with a Person other than Bank, except as otherwise
provided by subsection (i) of the definition of Permitted Investment;

 

(l)            evidence satisfactory to Bank that
Borrower complies with Section 6.6 hereof; and

 

3

 

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

 

3.2          Conditions Precedent to all Credit
Extensions.  The obligation of Bank
to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:

 

(a)           timely receipt by Bank of the
Payment/Advance Form as provided in Section 2.1; and

 

(b)           the representations and warranties
contained in Section 5 shall be true and correct in all material respects
on and as of the date of such Payment/Advance Form and on the effective
date of each Credit Extension as though made at and as of each such date, and
no Event of Default shall have occurred and be continuing, or would exist after
giving effect to such Credit Extension (provided, however, that those
representations and warranties expressly referring to another date shall be
true, correct and complete in all material respects as of such date).  The making of each Credit Extension shall be
deemed to be a representation and warranty by Borrower on the date of such
Credit Extension as to the accuracy of the facts referred to in this Section 3.2.

 

4.            CREATION OF SECURITY INTEREST.

 

4.1          Grant of Security Interest.  Borrower grants and pledges to Bank a
continuing security interest in the Collateral to secure prompt repayment of
any and all Obligations and to secure prompt performance by Borrower of each of
its covenants and duties under the Loan Documents.  Except for Permitted Liens such security
interest constitutes a valid, first priority security interest in the presently
existing Collateral, and will constitute a valid, first priority security
interest in later-acquired Collateral. 
Notwithstanding any termination, Bank’s Lien on the Collateral shall
remain in effect for so long as any Obligations (other than in inchoate
indemnification obligations) are outstanding.

 

4.2          Perfection of Security Interest.
 Borrower authorizes Bank to file at any
time financing statements, continuation statements, and amendments thereto that
(i) either specifically describe the Collateral or describe the Collateral
as the Collateral pledged hereunder, and (ii) contain any other
information required by the Code for the sufficiency of filing office
acceptance of any financing statement, continuation statement, or amendment,
including whether Borrower is an organization, the type of organization and any
organizational identification number issued to Borrower, if applicable.  Any such financing statements may be filed by
Bank at any time in any jurisdiction whether or not Revised Article 9 of
the Code is then in effect in that jurisdiction.  Borrower shall from time to time endorse and
deliver to Bank, at the request of Bank, all Negotiable Collateral and other
documents that Bank may reasonably request, in form reasonably satisfactory to
Bank, to perfect and continue perfected Bank’s security interests in the
Collateral and in order to fully consummate all of the transactions
contemplated under the Loan Documents. 
Borrower shall have possession of all material portions Collateral,
except where expressly otherwise provided in this Agreement or where Bank
chooses to perfect its security interest by possession in addition to the
filing of a financing statement.  Where
Collateral having a value in excess of $250,000 is in possession of a third
party bailee, Borrower shall take such steps as Bank reasonably requests for
Bank to (i) obtain an acknowledgment, in form and substance satisfactory
to Bank, of the bailee that the bailee holds such Collateral for the benefit of
Bank, (ii) obtain “control” of any Collateral consisting of investment
property, deposit accounts, letter-of-credit rights or electronic chattel paper
(as such items and the term “control” are defined in Revised Article 9 of
the Code) by causing the securities intermediary or depositary institution or
issuing bank to execute a control agreement in form and substance satisfactory
to Bank.  Borrower will not create any
chattel paper without placing a legend on the chattel paper acceptable to Bank
indicating that Bank has a security interest in the chattel paper.  Borrower from time to time may deposit with
Bank specific cash collateral to secure specific Obligations; Borrower
authorizes Bank to hold such specific balances in pledge and to decline to
honor any drafts thereon or any request by Borrower or any other Person to pay
or otherwise transfer any part of such balances for so long as the specific
Obligations are outstanding.

 

4.3          Right to Inspect.  Bank (through any of its officers, employees,
or agents) shall have the right, upon reasonable prior notice, from time to
time during Borrower’s usual business hours but no more than twice a year
(unless an Event of Default has occurred and is continuing), to inspect
Borrower’s Books and to make copies thereof and to check, test, and appraise
the Collateral in order to verify Borrower’s financial condition or the amount,
condition of, or 

 

4

 

any other matter relating
to, the Collateral; and the Borrower shall pay for the Lender’s reasonable
out-of-pocket expenses relating to such Collateral examinations; provided,
that, so long as no Event of Default has occurred and is continuing, the
cost of each such examination does not exceed $3,000.

 

5.            REPRESENTATIONS AND WARRANTIES.

 

Borrower represents and warrants as follows:

 

5.1          Due Organization and Qualification.  Borrower is a corporation duly existing under
the laws of the state in which it is incorporated and qualified and licensed to
do business in any state in which the conduct of its business or its ownership
of property requires that it be so qualified, except where the failure to do so
would not reasonably be expected to cause a Material Adverse Effect.

 

5.2          Due Authorization; No Conflict.  The execution, delivery, and performance of
the Loan Documents are within Borrower’s powers, have been duly authorized, and
are not in conflict with nor constitute a breach of any provision contained in
Borrower’s Articles of Incorporation or Bylaws, nor will they constitute an
event of default under any material agreement by which Borrower is bound.  Borrower is not in default under any agreement
by which it is bound, except to the extent such default would not reasonably be
expected to cause a Material Adverse Effect.

 

5.3          Collateral.  Borrower has rights in or the power to
transfer the Collateral, and its title to the Collateral is free and clear of
Liens, adverse claims, and restrictions on transfer or pledge except for
Permitted Liens. The Eligible Accounts are bona fide existing obligations.  The property or services giving rise to such
Eligible Accounts has been delivered or rendered to the account debtor or its
agent for immediate shipment to and unconditional acceptance by the account
debtor.  Borrower has not received notice
of actual or imminent Insolvency Proceeding of any account debtor whose accounts
are included in any Borrowing Base Certificate as an Eligible Account.  All Inventory is in all material respects of
good and merchantable quality, free from all material defects, except for
Inventory for which adequate reserves have been made.  Except as set forth in the Schedule, none of the
Collateral is maintained or invested with a Person other than Bank or Bank’s
Affiliates.

 

5.4          Intellectual Property Collateral.  Borrower is the sole owner of the
Intellectual Property, except for licenses granted by Borrower to its customers
in the ordinary course of business.  To
the best of Borrower’s knowledge, each of the Copyrights, Trademarks and
Patents is valid and enforceable, and no material part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and no
claim has been made to Borrower that any part of the Intellectual Property
violates the rights of any third party except to the extent such claim would
not reasonably be expected to cause a Material Adverse Effect.  Except as set forth in the Schedule, Borrower’s
rights as a licensee of intellectual property do not give rise to more than 5%
of its gross revenue in any given month, including without limitation revenue
derived from the sale, licensing, rendering or disposition of any product or
service.

 

5.5          Name; Location of Chief Executive
Office.  Except as otherwise provided
in the Schedule, Borrower has not done business under any name other than that
specified on the signature page hereof, and its exact legal name is as set
forth in the first paragraph of this Agreement. 
The chief executive office of Borrower is located in the Chief Executive
Office State at the address indicated in Section 10 hereof.

 

5.6          Litigation.  As of the date hereof, there are no actions
or proceedings pending by or against Borrower or any Subsidiary before any
court or administrative agency in which a likely adverse decision would
reasonably be expected to have a Material Adverse Effect.

 

5.7          No Material Adverse Change in
Financial Statements.  All
consolidated financial statements related to Borrower and any Subsidiary that
are delivered by Borrower to Bank fairly present in all material respects
Borrower’s consolidated financial condition as of the date thereof and Borrower’s
consolidated results of operations for the period then ended.  There has not been a material adverse change
in the consolidated financial condition of Borrower since the date of the most
recent of such financial statements submitted to Bank. Any financial
projections delivered pursuant 

 

5

 

hereto have been or will
be prepared in good faith based upon reasonable assumptions at the time they
were made, it being understood that such projections are subject to significant
uncertainties and contingencies, beyond the Borrower’s control.

 

5.8          Solvency, Payment of Debts.  Borrower is able to pay its debts (including
trade debts) as they mature; the fair saleable value of Borrower’s assets
(including goodwill minus disposition costs) exceeds the fair value of its
liabilities; and Borrower is not left with unreasonably small capital after the
transactions contemplated by this Agreement.

 

5.9          Compliance with Laws and
Regulations.  Borrower has met the
minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA.  No event has
occurred resulting from Borrower’s failure to comply with ERISA that is
reasonably likely to result in Borrower’s incurring any liability that could
have a Material Adverse Effect.  Borrower
is not an “investment company” or a company “controlled” by an “investment
company” within the meaning of the Investment Company Act of 1940.  Borrower is not engaged principally, or as
one of the important activities, in the business of extending credit for the
purpose of purchasing or carrying margin stock (within the meaning of
Regulations T and U of the Board of Governors of the Federal Reserve
System).  Borrower has complied in all
material respects with all the provisions of the Federal Fair Labor Standards
Act.  Borrower is in compliance with all
environmental laws, regulations and ordinances except where the failure to
comply is not reasonably likely to have a Material Adverse Effect.  Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, the violation of which could
reasonably be expected to have a Material Adverse Effect.  Borrower has filed or caused to be filed all
tax returns required to be filed, and has paid, or has made adequate provision
for the payment of, all taxes reflected therein except those being contested in
good faith with adequate reserves under GAAP or where the failure to file such
returns or pay such taxes would not reasonably be expected to have a Material
Adverse Effect.

 

5.10        Subsidiaries.  Borrower does not have any Subsidiaries as of
the date of this Agreement and does not own any stock, partnership interest or
other equity securities of any Person, except for Permitted Investments.

 

5.11         Government Consents.  Borrower has obtained all consents, approvals
and authorizations of, made all declarations or filings with, and given all
notices to, all governmental authorities that are necessary for the continued
operation of Borrower’s business as currently conducted, except where the
failure to do so would not reasonably be expected to cause a Material Adverse
Effect.

 

5.12        Inbound Licenses.  Except as set forth in the Schedule, Borrower
is not a party to, nor is bound by, any license or other agreement that
prohibits or otherwise restricts Borrower from granting a security interest in
Borrower’s interest in such license or agreement or any other property.

 

5.13        Full Disclosure.  No representation, warranty or other
statement made by Borrower in any certificate or written statement furnished to
Bank taken together with all such certificates and written statements furnished
to Bank contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained in such
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 to be viewed as facts and that actual results
during the period or periods covered by any such projections and forecasts may differ
from the projected or forecasted results.

 

6.            AFFIRMATIVE COVENANTS.

 

Borrower covenants that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to
make a Credit Extension hereunder, Borrower shall do all of the following:

 

6.1           Good Standing and Government
Compliance.  Borrower shall maintain
its corporate existence and good standing in the Borrower State, shall maintain
qualification and good standing in each other jurisdiction in which the failure
to so qualify could have a Material Adverse Effect, and shall furnish to Bank
the organizational identification number issued to Borrower by the authorities
of the state in which Borrower is organized, if applicable.  Borrower shall meet the minimum funding
requirements of ERISA with respect to any employee benefit plans subject to
ERISA.  Borrower shall comply in all
material respects with all applicable Environmental Laws, and maintain all
material permits, 

 

6

 

licenses and approvals
required thereunder where the failure to do so could have a Material Adverse
Effect.  Borrower shall comply with all
statutes, laws, ordinances and government rules and regulations to which
it is subject, and shall maintain in force all licenses, approvals and
agreements, the loss of which or failure to comply with which would reasonably
be expected to have a Material Adverse Effect.

 

6.2          Financial Statements, Reports,
Certificates.  Borrower shall deliver
to Bank:  (i) as soon as available,
but in any event within 45 days after the end of each fiscal quarter, a company
prepared consolidated balance sheet and income statement covering Borrower’s
operations during such period, in a form reasonably acceptable to Bank and
certified by a Responsible Officer; (ii) as soon as available, but in any
event within 90 days after the end of Borrower’s fiscal year, audited
consolidated financial statements of Borrower prepared in accordance with GAAP,
consistently applied, together with an opinion which is unqualified or
otherwise consented to in writing by Bank on such financial statements of an
independent certified public accounting firm reasonably acceptable to Bank; (iii) if
applicable, copies of all statements, reports and notices sent or made
available generally by Borrower to its security holders and all reports on
Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (iv) promptly
upon receipt of notice thereof, a report of any legal actions pending or
threatened in writing against Borrower that could result in damages or costs to
Borrower of $500,000 or more; (v) promptly upon receipt, each management
letter prepared by Borrower’s independent certified public accounting firm
regarding Borrower’s management control systems; (vi) such budgets, sales
projections, operating plans or other financial information generally prepared
by Borrower in the ordinary course of business as Bank may reasonably request
from time to time; and (vii) within 60 days of the last day of each fiscal
year, a budget for Borrower’s next fiscal year, in the form approved with
Borrower’s Board of Directors.

 

(a)           Within 30 days after the last day of
each quarter when no Advances are outstanding, and within 30 days after the end
of each month when any Advances are outstanding, Borrower shall deliver to Bank
a Borrowing Base Certificate signed by a Responsible Officer in substantially
the form of Exhibit E hereto, together with aged listings by
invoice date of accounts receivable and accounts payable.

 

(b)           Within 45 days after the last day of
each fiscal quarter, Borrower shall deliver to Bank with the quarterly
financial statements a Compliance Certificate certified as of the last day of
the applicable fiscal quarter and signed by a Responsible Officer in substantially
the form of Exhibit F hereto.

 

(c)           As soon as possible and in any event
within 3 Business Days after becoming aware of the occurrence or existence of
an Event of Default hereunder, a written statement of a Responsible Officer
setting forth details of the Event of Default, and the action which Borrower
has taken or proposes to take with respect thereto.

 

(d)           Bank shall have a right from time to
time hereafter to audit Borrower’s Accounts and appraise Collateral at Borrower’s
expense in accordance with Section 4.3 hereof, provided that such audits
will be conducted no more often than every 6 months unless an Event of Default
has occurred and is continuing.

 

Borrower may deliver to Bank
on an electronic basis any certificates, reports or information required
pursuant to this Section 6.2, and Bank shall be entitled to rely on the
information contained in the electronic files, provided that Bank in good faith
believes that the files were delivered by a Responsible Officer.  If Borrower delivers this information
electronically, it shall also deliver to Bank by U.S. Mail, reputable overnight
courier service, hand delivery, facsimile or .pdf file within 5 Business Days
of submission of the unsigned electronic copy the certification of financial
statements, the Borrowing Base Certificate and the Compliance Certificate, each
bearing the physical signature of the Responsible Officer.

 

6.3          Inventory; Returns.  Borrower shall keep Inventory in good and
merchantable condition, free from all material defects except for Inventory for
which adequate reserves have been made. 
Returns and allowances, if any, as between Borrower and its account
debtors shall be on the same basis and in accordance with the usual customary
practices of Borrower, as they exist on the Closing Date or as the Borrower
determines in its business judgment is in the best interest of the
Borrower.  Borrower shall promptly notify
Bank of all returns and recoveries and of all disputes and claims involving more
than $500,000.

 

7

 

6.4          Taxes.  Borrower shall make due and timely payment or
deposit of all material federal, state, and local taxes, assessments, or
contributions required of it by law, including, but not limited to, those laws
concerning income taxes, F.I.C.A., F.U.T.A. and state disability, and will
execute and deliver to Bank, on demand, proof satisfactory to Bank indicating
that Borrower has made such payments or deposits and any appropriate
certificates attesting to the payment or deposit thereof; provided that
Borrower need not make any payment if the amount or validity of such payment is
contested in good faith by appropriate proceedings and is reserved against (to
the extent required by GAAP) by Borrower.

 

6.5          Insurance.

 

(a)           Borrower, at its expense, shall keep
the Collateral insured against loss or damage by fire, theft, explosion,
sprinklers, and all other hazards and risks, and in such amounts, as ordinarily
insured against by other owners in similar businesses conducted in the locations
where Borrower’s business is conducted on the date hereof.  Borrower shall also maintain liability and
other insurance in amounts and of a type that are customary to businesses
similar to Borrower’s.

 

(b)           All such policies of insurance shall
be in such form, with such companies, and in such amounts as reasonably
satisfactory to Bank.  All policies of
property insurance shall contain a lender’s loss payable endorsement, in a form
satisfactory to Bank, showing Bank as an additional loss payee, and all liability
insurance policies shall show Bank as an additional insured and specify that
the insurer must give at least 20 days notice to Bank before canceling its
policy for any reason.  Upon Bank’s
request, Borrower shall deliver to Bank certified copies of the policies of
insurance and evidence of all premium payments. 
If no Event of Default has occurred and is continuing, proceeds payable
under any casualty policy will, at Borrower’s option, be payable to Borrower to
replace the property subject to the claim, provided that any such replacement
property shall be deemed Collateral in which Bank has been granted a first
priority security interest.  If an Event
of Default has occurred and is continuing, all proceeds payable under any such
policy allocable to Collateral shall, at Bank’s option, be payable to Bank to
be applied on account of the Obligations.

 

6.6          Primary Depository.  Borrower shall: (a) at all times
maintain Eligible Cash Balances in an amount not less than the lower of: (i) Ten
Million Dollars ($10,000,000), (ii) the amount of Cash then held by
Borrower, and (b) in the event any part of Borrower’s Cash (other than
Permitted Investments) is held by a Person other than Bank, cause such Person
to execute and deliver to Bank a Control Agreement with respect thereto.

 

6.7          Financial Covenants. Borrower
shall at all times maintain:

 

(a)           A Tangible Net Worth of not less than
Fifteen Million Dollars ($15,000,000).

 

6.8          Intellectual
Property Rights.  Borrower shall (i) protect, defend and maintain
the validity and enforceability of its material trade secrets, trademarks,
patents and copyrights, (ii) promptly advise Bank in writing of material
infringements of which Borrower becomes aware, and (iii) not allow any
trademarks, patents or copyrights that are material to the Borrower’s business
to be abandoned, forfeited or dedicated to the public without the written
consent of Bank, which shall not be unreasonably withheld.

 

6.9          Consent of Inbound Licensors.  Prior to entering into or becoming bound by
any material license or agreement in which the Borrower is the licensee,
Borrower shall: (i) provide written notice to Bank of the material terms
of such license or agreement with a description of its likely impact on
Borrower’s business or financial condition; and (ii) in good faith use
commercially reasonable efforts to obtain the consent of, or waiver by, any
person whose consent or waiver is necessary for Borrower’s interest in such
licenses or contract rights to be deemed Collateral and for Bank to have a
security interest in it that might otherwise be restricted by the terms of the
applicable license or agreement, whether now existing or entered into in the
future, provided, however, that the failure to obtain any such consent or
waiver shall not constitute a default under this Agreement.

 

6.10        Further Assurances.  At any time and from time to time Borrower
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Bank to effect the purposes of this
Agreement.

 

8

 

7.            NEGATIVE COVENANTS.

 

Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until the outstanding Obligations are
paid in full or for so long as Bank may have any commitment to make any Credit
Extensions, Borrower will not do any of the following without Bank’s prior
written consent, which shall not be unreasonably withheld:

 

7.1          Dispositions.  Convey, sell, lease, license, transfer or
otherwise dispose of (collectively, to “Transfer”), all or any part of its
business or property other than Permitted Transfers, or maintain Cash in
accounts opened at a financial institution unless a Control Agreement with
respect thereto is first executed and delivered to Bank, except as otherwise
provided by subsection (i) of the definition of Permitted Investment;

 

7.2          Change in Name, Location, Executive
Office, or Executive Management; Change in Business; Change in Fiscal Year;
Change in Control.  Change its name
or the Borrower State or relocate its chief executive office without 30 days
prior written notification to Bank; replace its chief executive officer or
chief financial officer without 30 days prior written notification to Bank;
engage in any business other than or reasonably related or incidental to the
businesses currently engaged in by Borrower; change its fiscal year end; have a
Change in Control.

 

7.3          Mergers or Acquisitions.  Merge or consolidate with or into any other
business organization, or acquire all or substantially all of the capital stock
or property of another Person except where (i) such transactions do not
exceed $500,000 during any fiscal year, (ii) no Event of Default has
occurred, is continuing or would exist after giving effect to such
transactions, (iii) such transactions do not result in a Change in
Control, and (iv) Borrower is the surviving entity.

 

7.4          Indebtedness.  Create, incur, assume, guarantee or be or
remain liable with respect to any Indebtedness other than Permitted
Indebtedness.

 

7.5          Encumbrances.  Create, incur, assume or allow any Lien with
respect to any Collateral, or assign or otherwise convey any right to receive
income, including the sale of any Accounts, except for Permitted Liens, or
covenant to any other Person that Borrower in the future will refrain from
creating, incurring, assuming or allowing any Lien with respect to any of the
Collateral.

 

7.6           Distributions.  Pay any dividends or make any other
distribution or payment on account of or in redemption, retirement or purchase
of any capital stock, except that Borrower may (i) repurchase the stock of
former employees pursuant to stock repurchase agreements as long as an Event of
Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase, and (ii) repurchase the stock of former
employees pursuant to stock repurchase agreements by the cancellation of
indebtedness owed by such former employees to Borrower regardless of whether an
Event of Default exists.

 

7.7          Investments.  Directly or indirectly acquire or own, or
make any Investment in or to any Person other than Permitted Investments, or
maintain or invest any of its property with a Person other than Bank or Bank’s
Affiliates unless such Person has entered into a Control Agreement with Bank,
in form and substance satisfactory to Bank.

 

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          Inventory and Equipment.  Store any Inventory or Equipment with a value
that exceeds $250,000 with a bailee, warehouseman, or similar third party
unless the third party has been notified of Bank’s security interest and Bank (a) has
received an acknowledgment from the third party that it is holding or will hold
the Inventory or Equipment for Bank’s benefit or (b) is in possession of
the warehouse receipt, where negotiable, covering such Inventory or
Equipment.  Except for Inventory sold in
the ordinary course of business and except for such other locations as Bank may
approve in writing, Borrower shall keep the Inventory and Equipment with a
value that exceeds $250,000  only at the
location set 

 

9

 

forth in Section 10
and such other locations of which Borrower gives Bank prior written notice and as
to which Bank files a financing statement where needed to perfect its security
interest.

 

7.10        No Investment Company; Margin
Regulation.  Become or be controlled
by an “investment company,” within the meaning of the Investment Company Act of
1940, or become principally engaged in, or undertake as one of its important
activities, the business of extending credit for the purpose of purchasing or
carrying margin stock, or use the proceeds of any Credit Extension for such
purpose.

 

7.11        Double Negative Pledge.  With respect to Intellectual Property,
Borrower shall not enter into, or suffer to exist, any agreement, license or
restriction that prohibits, or would have the effect of preventing, or be
violated by, a grant by Borrower to Bank of a first priority security interest
in and lien upon Intellectual Property.

 

8.            EVENTS OF DEFAULT.

 

Any one or more of the following events shall
constitute an Event of Default by Borrower under this Agreement:

 

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

 

8.2          Covenant Default.

 

(a)           If Borrower: (i) fails to
perform any obligation under Sections 6.2(d), 6.4, 6.5, 6.8 and 6.9 of this
Agreement; (ii) fails to perform any obligation under any other Section under
Article 6 of this Agreement if such failure remains uncured for more than
15 days after the date of such failure; (iii) violates any of the
covenants contained in Sections 7.1, 7.2, 7.3, 7.4, 7.6, 7.9, 7.10 and 7.11 of
this Agreement; and (iv) violates any of the covenants contained in any
other Section under Article 7 of this Agreement if such violation
remains uncured for more than 15 days after the date of such violation; or

 

(b)           If Borrower fails or neglects to
perform or observe any other material term, provision, condition, covenant
contained in this Agreement, in any of the Loan Documents, or in any other
present or future agreement between Borrower and Bank and as to any default
under such other term, provision, condition or covenant that can be cured, has
failed to cure such default within 15 days after Borrower receives notice
thereof or any officer of Borrower becomes aware thereof; provided, however,
that if the default cannot by its nature be cured within the 15 day period or
cannot after diligent attempts by Borrower be cured within such 15 day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional reasonable period (which shall not in any case exceed
30 days) to attempt to cure such default, and within such reasonable time
period the failure to have cured such default shall not be deemed an Event of
Default but no Credit Extensions will be made;

 

8.3          Material Adverse Change.  If there occurs a material adverse change in
Borrower’s business or financial condition, or if there is a material
impairment in the prospect of repayment of any portion of the Obligations or a
material impairment in the perfection, value or priority of Bank’s security
interests in a material portion of the Collateral;

 

8.4          Attachment.  If any material portion of Borrower’s assets
is attached, seized, subjected to a writ or distress warrant, or is levied
upon, or comes into the possession of any trustee, receiver or person acting in
a similar capacity and such attachment, seizure, writ or distress warrant or
levy has not been removed, discharged or rescinded within 15 days, or if
Borrower is enjoined, restrained, or in any way prevented by court order from
continuing to conduct all or any material part of its business affairs, or if a
judgment or other claim becomes a lien or encumbrance upon any material portion
of Borrower’s assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower’s assets by the United States
Government, or any department, agency, or instrumentality thereof, or by any
state, county, municipal, or governmental agency, and the same is not paid
within ten Business Days after Borrower receives notice thereof, provided that
none of the foregoing shall constitute an Event of Default where such action or
event is stayed or an adequate bond has been posted pending a good faith
contest by Borrower (provided that no Credit Extensions will be made during
such cure period);

 

10

 

8.5          Insolvency.  If Borrower becomes insolvent, or if an
Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding
is commenced against Borrower and is not dismissed or stayed within 30 days
(provided that no Credit Extensions will be made prior to the dismissal of such
Insolvency Proceeding);

 

8.6          Other Agreements.  If there is a default or other failure to
perform in any agreement to which Borrower is a party with a third party or
parties resulting in a right by such third party or parties, whether or not
exercised, to accelerate the maturity of any Indebtedness in an amount in
excess of $500,000 or that could have a Material Adverse Effect;

 

8.7          Judgments.  If a judgment or judgments for the payment of
money in an amount, individually or in the aggregate, in excess of $500,000
shall be rendered against Borrower and shall remain unsatisfied and unstayed
for a period of 15 days (provided that no Credit Extensions will be made prior
to the satisfaction or stay of the judgment); or

 

8.8          Misrepresentations.  If any material misrepresentation or material
misstatement exists now or hereafter in any warranty or representation set
forth herein or in any certificate delivered to Bank by any Responsible Officer
pursuant to this Agreement or to induce Bank to enter into this Agreement or
any other Loan Document.

 

9.            BANK’S RIGHTS AND REMEDIES.

 

9.1          Rights and Remedies.  Upon the occurrence and during the
continuance of an Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following, all of
which are authorized by Borrower:

 

(a)           Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable (provided that upon the occurrence of an Event of
Default described in Section 8.6, all Obligations shall become immediately
due and payable without any action by Bank);

 

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

 

(c)           Cease advancing money or extending
credit to or for the benefit of Borrower under this Agreement or under any
other agreement between Borrower and Bank;

 

(d)           Settle or adjust disputes and claims
directly with account debtors for amounts, upon terms and in whatever order
that Bank reasonably considers advisable;

 

(e)           Make such payments and do such acts
as Bank considers necessary or reasonable to protect its security interest in
the Collateral.  Borrower agrees to
assemble the Collateral if Bank so requires, and to make the Collateral
available to Bank as Bank may designate. 
Borrower authorizes Bank to enter the premises where the Collateral is
located, to take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance, charge, or lien
which in Bank’s determination appears to be prior or superior to its security
interest and to pay all expenses incurred in connection therewith.  With respect to any of Borrower’s owned
premises, Borrower hereby grants Bank a license to enter into possession of
such premises and to occupy the same, without charge, in order to exercise any
of Bank’s rights or remedies provided herein, at law, in equity, or otherwise;

 

(f)            Set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, and (ii) indebtedness
at any time owing to or for the credit or the account of Borrower held by Bank;

 

(g)           Ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell (in
the manner provided for herein) the Collateral. 
Bank is hereby granted a non-exclusive, revocable license or other
right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, Borrower’s labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and advertising
matter, or any property of

 

11

 

a similar nature, 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 9.1, Borrower’s rights under all licenses and
all franchise agreements shall inure to Bank’s benefit;

 

(h)           Sell the Collateral at either a
public or private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such places
(including Borrower’s premises) as Bank determines is commercially reasonable,
and apply any proceeds to the Obligations in whatever manner or order Bank
deems appropriate.  Bank may sell the
Collateral without giving any warranties as to the Collateral.  Bank may specifically disclaim any warranties
of title or the like.  This procedure
will not be considered adversely to affect the commercial reasonableness of any
sale of the Collateral.  If Bank sells
any of the Collateral upon credit, Borrower will be credited only with payments
actually made by the purchaser, received by Bank, and applied to the
indebtedness of the purchaser.  If the
purchaser fails to pay for the Collateral, Bank may resell the Collateral and
Borrower shall be credited with the proceeds of the sale;

 

(i)            Bank may credit bid and purchase at
any public sale;

 

(j)            Apply for the appointment of a
receiver, trustee, liquidator or conservator of the Collateral, without notice
and without regard to the adequacy of the security for the Obligations and
without regard to the solvency of Borrower, any guarantor or any other Person
liable for any of the Obligations; and

 

(k)           Any deficiency that exists after
disposition of the Collateral as provided above will be paid immediately by
Borrower.

 

Bank
may comply with any applicable state or federal law requirements in connection
with a disposition of the Collateral and compliance will not be considered
adversely to affect the commercial reasonableness of any sale of the
Collateral.

 

9.2           Power of Attorney.  Effective only upon the occurrence and during
the continuance of an Event of Default, Borrower hereby irrevocably appoints
Bank (and any of Bank’s designated officers, or employees) as Borrower’s true
and lawful attorney to:  (a) send
requests for verification of Accounts or notify account debtors of Bank’s
security interest in the Accounts; (b) endorse Borrower’s name on any
checks or other forms of payment or security that may come into Bank’s
possession; (c) sign Borrower’s name on any invoice or bill of lading
relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) dispose of any Collateral; (e) make, settle, and adjust
all claims under and decisions with respect to Borrower’s policies of
insurance; (f) settle and adjust disputes and claims respecting the
accounts directly with account debtors, for amounts and upon terms which Bank
determines to be reasonable; and (g) to file, in its sole discretion, one
or more financing or continuation statements and amendments thereto, relative
to any of the Collateral without the signature of Borrower where permitted by
law; provided Bank may exercise such power of attorney to sign the name of
Borrower on any of the documents described in clause (g) above, regardless
of whether an Event of Default has occurred. 
The appointment of Bank as Borrower’s attorney in fact, and each and
every one of Bank’s rights and powers, being coupled with an interest, is
irrevocable until all of the Obligations (except inchoate indemnification
obligations) have been fully repaid and performed and Bank’s obligation to
provide advances hereunder is terminated.

 

9.3           Accounts Collection.  At any time after the occurrence and during
the continuation of an Event of Default, Bank may notify any Person owing funds
to Borrower of Bank’s security interest in such funds and verify the amount of
such Account.  Borrower shall collect all
amounts owing to Borrower for Bank, receive in trust all payments as Bank’s
trustee, and immediately deliver such payments to Bank in their original form
as received from the account debtor, with proper endorsements for deposit.

 

9.4           Bank Expenses.  If Borrower fails to pay any amounts or
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the
following after reasonable notice to Borrower: 
(a) make payment of the same or any part thereof; (b) set up
such reserves under the Revolving Line as Bank deems necessary to protect Bank
from the exposure created by such failure; or (c) obtain and maintain
insurance policies of the type discussed in Section 6.5 of this Agreement,
and take any action with respect to 

 

12

 

such policies as Bank
deems prudent.  Any amounts so paid or
deposited by Bank shall constitute Bank Expenses, shall be immediately due and
payable, and shall bear interest at the then applicable rate hereinabove provided,
and shall be secured by the Collateral. 
Any payments made by Bank shall not constitute an agreement by Bank to
make similar payments in the future or a waiver by Bank of any Event of Default
under this Agreement.

 

9.5           Bank’s Liability for Collateral.  Bank has no obligation to clean up or
otherwise prepare the Collateral for sale. 
All risk of loss, damage or destruction of the Collateral shall be borne
by Borrower.

 

9.6           No Obligation to Pursue Others.  Bank has no obligation to attempt to satisfy
the Obligations by collecting them from any other person liable for them and
Bank may release, modify or waive any collateral provided by any other Person
to secure any of the Obligations, all without affecting Bank’s rights against
Borrower.  Borrower waives any right it
may have to require Bank to pursue any other Person for any of the Obligations.

 

9.7           Remedies Cumulative.  Bank’s rights and remedies under this
Agreement, the Loan Documents, and all other agreements shall be
cumulative.  Bank shall have all other
rights and remedies not inconsistent herewith as provided under the Code, by
law, or in equity.  No exercise by Bank
of one right or remedy shall be deemed an election, and no waiver by Bank of
any Event of Default on Borrower’s part shall be deemed a continuing
waiver.  No delay by Bank shall
constitute a waiver, election, or acquiescence by it.  No waiver by Bank shall be effective unless
made in a written document signed on behalf of Bank and then shall be effective
only in the specific instance and for the specific purpose for which it was
given.  Borrower expressly agrees that
this Section 9.7 may not be waived or modified by Bank by course of
performance, conduct, estoppel or otherwise.

 

9.8           Demand; Protest.  Except as otherwise provided in this
Agreement, Borrower waives demand, protest, notice of protest, notice of
default or dishonor, notice of payment and nonpayment and any other notices
relating to the Obligations.

 

10.           NOTICES.

 

Unless otherwise provided in this Agreement, all
notices or demands by any party relating to this Agreement or any other
agreement entered into in connection herewith shall be in writing and (except
for financial statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or sent by a
recognized overnight delivery service, certified mail, postage prepaid, return
receipt requested, or by telefacsimile to Borrower or to Bank, as the case may
be, at its addresses set forth below:

 

	
  If to Borrower:

  	
  NeuroMetrix, Inc.

  
	
   

  	
  62 4th Avenue

  
	
   

  	
  Waltham, MA 02451

  
	
   

  	
  Attn:

  
	
   

  	
  FAX:
  (        )

  
	
   

  	
   

  
	
  with a copy to:

  	
  Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

  
	
   

  	
  One Financial Center

  
	
   

  	
  Boston, MA 02111

  
	
   

  	
  Attn: Megan N. Gates, Esquire

  FAX: (617) 542-2241

  
	
   

  	
   

  
	
  If to Bank:

  	
  Comerica Bank

  
	
   

  	
  2321 Rosecrans Ave.,
  Suite 5000

  
	
   

  	
  El Segundo, CA 90245

  
	
   

  	
  Attn: Manager

  
	
   

  	
  FAX: (310) 297-2290

  

 

13

 

	
  with a copy to:

  	
  Comerica Bank

  
	
   

  	
  1000 Winter Street,
  Suite 3600

  
	
   

  	
  Waltham, MA 02451

  
	
   

  	
  Attn: James Demoy, Vice
  President

  
	
   

  	
  FAX: (781) 487-5177

  

 

The parties hereto may
change the address at which they are to receive notices hereunder, by notice in writing in the foregoing
manner given to the other.

 

11.           CHOICE OF LAW AND VENUE; JURY
TRIAL WAIVER.

 

This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of California, without regard
to principles of conflicts of law.  Each
of Borrower and Bank hereby submits to the exclusive jurisdiction of the state
and Federal courts located in the County of Santa Clara, State of
California.  BANK AND BORROWER EACH
ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT
IT MAY BE WAIVED.  EACH OF THEM,
AFTER CONSULTING OR HAVING HAD THE OPPORTUNITY TO CONSULT, WITH COUNSEL OF THEIR
CHOICE, KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT ANY OF THEM MAY HAVE
TO A TRIAL BY JURY IN ANY LITIGATION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY RELATED INSTRUMENT OR LOAN DOCUMENT OR ANY OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR ANY COURSE OF CONDUCT, DEALING, STATEMENTS
(WHETHER ORAL OR WRITTEN), OR ACTION OF ANY OF THEM.  THESE PROVISIONS SHALL NOT BE DEEMED TO HAVE
BEEN MODIFIED IN ANY RESPECT OR RELINQUISHED BY BANK OR BORROWER, EXCEPT BY A
WRITTEN INSTRUMENT EXECUTED BY EACH OF THEM.

 

12.           REFERENCE PROVISION.

 

This Reference Provision will be applicable so long
as, under applicable law and precedent, a pre-dispute Jury Trial Waiver
provision similar to that contained in the Loan Documents (as defined below) is
invalid or unenforceable.  Delay in
requesting appointment of a referee pending review of any such decision, or
participation in litigation pending review, will not be deemed a waiver of this
Reference Provision.

 

12.1         Mechanics.

 

(a)           Other than (i) nonjudicial
foreclosure of security interests in real or personal property,  (ii) the appointment of a receiver or (iii) the
exercise of other provisional remedies (any of which may be initiated pursuant
to applicable law), any controversy, dispute or claim (each, a “Claim”) between
the parties arising out of or relating to this Agreement or any other document,
instrument or agreement between the Bank and the undersigned (collectively in
this Section, the “Loan Documents”), will be resolved by a reference proceeding
in California in accordance with the provisions of Section 638 et seq. of the California Code of Civil Procedure (“CCP”),
or their successor sections, which shall constitute the exclusive remedy for
the resolution of any Claim, including whether the Claim is subject to the
reference proceeding.  Except as
otherwise provided in the Loan Documents, venue for the reference proceeding
will be in the Superior Court or Federal District Court in the County or District
where venue is otherwise appropriate under applicable law (the “Court”).

 

(b)           The referee shall be a retired Judge
or Justice selected by mutual written agreement of the parties.  If the parties do not agree, the referee
shall be selected by the Presiding Judge of the Court (or his or her representative).  A request for appointment of a referee may be
heard on an ex parte or expedited basis, and the
parties agree that irreparable harm would result if ex parte
relief is not granted.  The referee shall
be appointed to sit with all the powers provided by law.  Each party shall have one peremptory
challenge pursuant to CCP §170.6. 
Pending appointment of the referee, the Court has power to issue
temporary or provisional remedies.

 

14

 

(c)           The parties agree that time is of the
essence in conducting the reference proceedings.  Accordingly, the referee shall be requested
to (a) set the matter for a status and trial-setting conference within
fifteen (15) days after the date of selection of the referee, (b) if
practicable, try all issues of law or fact within ninety (90) days after the
date of the conference and (c) report a statement of decision within
twenty (20) days after the matter has been submitted for decision.  Any decision rendered by the referee will be
final, binding and conclusive, and judgment shall be entered pursuant to CCP
§644.

 

(d)           The referee will have power to expand
or limit the amount and duration of discovery.  
The referee may set or extend discovery deadlines or cutoffs for good
cause, including a party’s failure to provide requested discovery for any
reason whatsoever.  Unless otherwise
ordered, no party shall be entitled to “priority” in conducting discovery,
depositions may be taken by either party upon seven (7) days written notice,
and all other discovery shall be responded to within fifteen (15) days after
service.  All disputes relating to
discovery which cannot be resolved by the parties shall be submitted to the
referee whose decision shall be final and binding.

 

12.2         Procedures.  Except as expressly set forth in this
Agreement, the referee shall determine the manner in which the reference
proceeding is conducted including the time and place of hearings, the order of
presentation of evidence, and all other questions that arise with respect to
the course of the reference proceeding. 
All proceedings and hearings conducted before the referee, except for
trial, shall be conducted without a court reporter, except that when any party
so requests, a court reporter will be used at any hearing conducted before the
referee, and the referee will be provided a courtesy copy of the
transcript.  The party making such a
request shall have the obligation to arrange for and pay the court reporter.  Subject to the referee’s power to award costs
to the prevailing party, the parties will equally share the cost of the referee
and the court reporter at trial.

 

12.3         Application of Law. The referee
shall be required to determine all issues in accordance with existing case law
and the statutory laws of the State of California.  The rules of evidence applicable to
proceedings at law in the State of California will be applicable to the
reference proceeding.  The referee shall
be empowered to enter equitable as well as legal relief, provide all temporary
or provisional remedies, enter equitable orders that will be binding on the
parties and rule on any motion which would be authorized in a trial,
including without limitation motions for summary judgment or summary
adjudication .  The referee shall issue a
decision at the close of the reference proceeding which disposes of all claims
of the parties that are the subject of the reference.  The referee’s decision shall be entered by
the Court as a judgment or an order in the same manner as if the action had
been tried by the Court.  The parties
reserve the right to appeal from the final judgment or order or from any
appealable decision or order entered by the referee.  The parties reserve the right to findings of
fact, conclusions of laws, a written statement of decision, and the right to
move for a new trial or a different judgment, which new trial, if granted, is
also to be a reference proceeding under this provision.

 

12.4         Repeal. If the enabling
legislation which provides for appointment of a referee is repealed (and no
successor statute is enacted), any dispute between the parties that would
otherwise be determined by reference procedure will be resolved and determined
by arbitration.  The arbitration will be
conducted by a retired judge or Justice, in accordance with the California
Arbitration Act §1280 through §1294.2 of the CCP as amended from time to
time.  The limitations with respect to
discovery set forth above shall apply to any such arbitration proceeding.

 

12.5         THE PARTIES RECOGNIZE AND AGREE THAT
ALL DISPUTES RESOLVED UNDER THIS REFERENCE PROVISION WILL BE DECIDED BY A
REFEREE AND NOT BY A JURY, AND THAT THEY ARE IN EFFECT WAIVING THEIR RIGHT TO
TRIAL BY JURY IN AGREEING TO THIS REFERENCE PROVISION.  AFTER CONSULTING (OR HAVING HAD THE
OPPORTUNITY TO CONSULT) WITH COUNSEL OF THEIR OWN CHOICE, EACH PARTY KNOWINGLY
AND VOLUNTARILY AND FOR THEIR MUTUAL BENEFIT AGREES THAT THIS REFERENCE
PROVISION WILL APPLY TO ANY DISPUTE BETWEEN THEM WHICH ARISES OUT OF OR IS
RELATED TO THIS AGREEMENT OR THE LOAN DOCUMENTS.

 

13.           GENERAL PROVISIONS.

 

13.1         Successors and Assigns.  This Agreement shall bind and inure to the
benefit of the respective successors and permitted assigns of each of the
parties and shall bind all persons who become bound as a debtor to this
Agreement; 

 

15

 

provided, however, that
neither this Agreement nor any rights hereunder may be assigned by Borrower
without Bank’s prior written consent, which consent may be granted or withheld
in Bank’s sole discretion.  Bank shall
have the right without the consent of or notice to Borrower to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights and benefits hereunder.

 

13.2         Indemnification.  Borrower shall defend, indemnify and hold
harmless Bank and its officers, employees, and agents against:  (a) all obligations, demands, claims,
and liabilities claimed or asserted by any other party in connection with the
transactions contemplated by this Agreement; and (b) all losses or Bank
Expenses in any way suffered, incurred, or paid by Bank, its officers,
employees and agents as a result of or in any way arising out of, following, or
consequential to transactions between Bank and Borrower whether under this
Agreement, or otherwise (including without limitation reasonable attorneys fees
and expenses), except for losses caused by Bank’s gross negligence or willful
misconduct.

 

13.3         [Reserved]

 

13.4         Severability of Provisions.  Each provision of this Agreement shall be
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.

 

13.5         Amendments in Writing, Integration.
All amendments to or terminations of this Agreement or the other Loan Documents
must be in writing.  All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement
and the other Loan Documents, if any, are merged into this Agreement and the
Loan Documents.

 

13.6         Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.

 

13.7         Survival.  All covenants, representations and warranties
made in this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding or Bank has any obligation to make any Credit
Extension to Borrower.  The obligations
of Borrower to indemnify Bank with respect to the expenses, damages, losses,
costs and liabilities described in Section 13.2 shall survive until all
applicable statute of limitations periods with respect to actions that may be
brought against Bank have run.

 

13.8         Confidentiality.  In handling any confidential information,
Bank and all employees and agents of Bank shall exercise the same degree of
care that Bank exercises with respect to its own proprietary information of the
same types to maintain the confidentiality of any non-public information
thereby received or received pursuant to this Agreement except that disclosure
of such information may be made (i) to the subsidiaries or Affiliates of
Bank in connection with their present or prospective business relations with
Borrower, (ii) to prospective transferees or purchasers of any interest in
the Loans, provided that they have entered into a comparable confidentiality
agreement in favor of Borrower and have delivered a copy to Borrower, (iii) as
required by law, regulations, rule or order, subpoena, judicial order or
similar order, (iv) as may be required in connection with the examination,
audit or similar investigation of Bank and (v) as Bank may determine in
connection with the enforcement of any remedies hereunder.  Confidential information hereunder shall not
include information that either:  (a) is
in the public domain or in the knowledge or possession of Bank when disclosed
to Bank, or becomes part of the public domain after disclosure to Bank through
no fault of Bank; or (b) is disclosed to Bank by a third party, provided
Bank does not have knowledge that such third party is prohibited from
disclosing such information.

 

(remainder of page left blank intentionally —
signature page follows)

 

16

 

IN WITNESS WHEREOF, the parties hereto have caused
this Loan and Security Agreement to be executed as of the date first above
written.

 

	
   

  	
  NEUROMETRIX,
  INC. 

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Thomas T. Higgins

  
	
   

  	
  Name: 

  	
  Thomas T. Higgins  

  
	
   

  	
  Title:

  	
  CFO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMERICA BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James Demoy

  
	
   

  	
  Name:

  	
  James Demoy

  
	
   

  	
  Title:

  	
  Vice President

  

 

17

 

EXHIBIT A

 

DEFINITIONS

 

“Accounts” means all presently existing and hereafter
arising accounts, contract rights, payment intangibles and all other forms of
obligations owing to Borrower arising out of the sale or lease of goods
(including, without limitation, the licensing of software and other technology)
or the rendering of services by Borrower and any and all credit insurance,
guaranties, and other security therefor, as well as all merchandise returned to
or reclaimed by Borrower and Borrower’s Books relating to any of the foregoing.

 

“Advance” or “Advances” means a cash advance or cash
advances under the Revolving Line.

 

“Affiliate” means, with respect to any Person, any
Person that owns or controls directly or indirectly such Person, any Person
that controls or is controlled by or is under common control with such Person,
and each of such Person’s senior executive officers, directors, and partners.

 

“Applicable Margin” means one-half of one percent
(.50%)

 

“Bank Expenses” means all reasonable costs or expenses
(including reasonable attorneys’ fees and expenses) incurred in connection with
the preparation, negotiation, administration, and enforcement of the Loan
Documents;  reasonable Collateral audit
fees; and Bank’s reasonable attorneys’ fees and expenses incurred in amending,
enforcing or defending the Loan Documents (including fees and expenses of
appeal), incurred before, during and after an Insolvency Proceeding, whether or
not suit is brought.

 

“Borrower State” means Delaware, the state under whose
laws Borrower is organized.

 

“Borrower’s Books” means all of Borrower’s books and
records including:  ledgers; records
concerning Borrower’s assets or liabilities, the Collateral, business
operations or financial condition; and all computer programs, or tape files,
and the equipment, containing such information.

 

“Borrowing Base” means, as of any date, an amount
equal to the sum of: (i) the Eligible Cash Balances, and (ii) 80% of
Eligible Accounts, as determined by Bank with reference to the most recent
Borrowing Base Certificate delivered by Borrower.

 

“Business Day” means any day that is not a Saturday,
Sunday, or other day on which banks in the State of California are authorized
or required to close.

 

“Cash” means unrestricted cash and cash equivalents.

 

“Change in Control” shall mean a transaction in which
any “person” or “group” (within the meaning of Section 13(d) and
14(d)(2) of the Securities Exchange Act of 1934) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Securities Exchange Act of
1934), directly or indirectly, of a sufficient number of shares of all classes
of stock then outstanding of Borrower ordinarily entitled to vote in the
election of directors, empowering such “person” or “group” to elect a majority
of the Board of Directors of Borrower, who did not have such power before such
transaction.

 

“Chief Executive Office State” means Massachusetts,
where Borrower’s chief executive office is located.

 

“Closing Date” means the date of this Agreement.

 

“Code” means the California Uniform Commercial Code as
amended or supplemented from time to time.

 

“Collateral” means the property described on Exhibit G
attached hereto, except to the extent any such property (i) is
nonassignable by its terms without the consent of the licensor thereof or
another party (but only to the extent such prohibition on transfer is
enforceable under applicable law, including, without limitation, Sections 9406
and 9408 of the 

 

18

 

Code), or (ii) the
granting of a security interest therein is contrary to applicable law, provided
that upon the cessation of any such restriction or prohibition, such property
shall automatically become part of the Collateral.

 

“Contingent Obligation” means, as applied to any
Person, any direct or indirect liability, contingent or otherwise, of that
Person with respect to (i) any indebtedness, lease, dividend, letter of
credit or other obligation of another, including, without limitation, any such
obligation directly or indirectly guaranteed, endorsed, co-made or discounted
or sold with recourse by that Person, or in respect of which that Person is
otherwise directly or indirectly liable; (ii) any obligations with respect
to undrawn letters of credit, corporate credit cards or merchant services issued
for the account of that Person; and (iii) all obligations arising under
any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term “Contingent
Obligation” shall not include endorsements for collection or deposit in the
ordinary course of business.  The amount
of any Contingent Obligation shall be deemed to be an amount equal to the
stated or determined amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
reasonably anticipated liability in respect thereof as determined by such
Person in good faith; provided, however, that such amount shall not in any
event exceed the maximum amount of the obligations under the guarantee or other
support arrangement.

 

“Control Agreement” means an account control agreement
with respect to a deposit, investment or other account maintenance by Borrower
with a Person other than Bank, in form and content satisfactory to Bank.

 

“Copyrights” means 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, now or
hereafter existing, created, acquired or held.

 

“Credit Card Services” means Borrower’s obligations to
Bank with respect for corporate credit cards and e-commerce or merchant account
services.

 

“Credit Extension” means each Advance, or any other
extension of credit by Bank to or for the benefit of Borrower hereunder.

 

“Eligible Accounts” means
those Accounts that arise in the ordinary course of Borrower’s business that
comply with all of Borrower’s representations and warranties to Bank set forth
in Section 5.3; provided, that Bank may change the standards of
eligibility by giving Borrower 30 days prior written notice.  Unless otherwise agreed to by Bank, Eligible
Accounts shall not include the following:

 

(a)           Accounts that the account debtor has
failed to pay in full within 90 days of invoice date;

 

(b)           Credit balances over 90 days;

 

(c)           Accounts with respect to an account
debtor, 25% of whose Accounts the account debtor has failed to pay within 90
days of invoice date;

 

(d)           Accounts with respect to an account
debtor, including Subsidiaries and Affiliates, whose total obligations to
Borrower exceed 25% of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank;

 

(e)           Accounts with respect to which the
account debtor does not have its principal place of business in the United
States, except for Eligible Foreign Accounts;

 

(f)            Accounts with respect to which the
account debtor is the United States or any department, agency, or
instrumentality of the United States, except for Accounts of the United States
if the payee has assigned its payment rights to Bank and the assignment has
been acknowledged under the Assignment of Claims Act of 1940 (31 U.S.C. 3727);

 

19

 

(g)           Accounts with respect to which
Borrower is liable to the account debtor for goods sold or services rendered by
the account debtor to Borrower, but only to the extent of any amounts owing to
the account debtor against amounts owed to Borrower;

 

(h)           Accounts with respect to which goods
are placed on consignment, guaranteed sale, sale or return, sale on approval,
bill and hold, demo or promotional, or other terms by reason of which the
payment by the account debtor may be conditional;

 

(i)            Accounts with respect to which the
account debtor is an officer, employee, agent or Affiliate of Borrower;

 

(j)            Accounts that have not yet been
billed to the account debtor or that relate to deposits (such as good faith
deposits) or other property of the account debtor held by Borrower for the
performance of services or delivery of goods which Borrower has not yet
performed or delivered;

 

(k)           Accounts with respect to which the
account debtor disputes liability or makes any claim with respect thereto as to
which Bank believes, in its reasonable discretion, that there may be a basis for
dispute (but only to the extent of the amount subject to such dispute or
claim), or is subject to any Insolvency Proceeding, or goes out of business;

 

(l)            Accounts the collection of which
Bank reasonably determines after inquiry and consultation with Borrower to be
doubtful; and

 

(m)          Retentions and hold-backs.

 

“Eligible Cash Balances” shall mean, as of any date,
the sum of: (i) the dollar amount of Borrower’s collected balances on
deposit in its accounts with Bank, plus (ii) the market value of readily
marketable securities at the time in Borrower’s account with Comerica
Securities to the extent there is at the time a Control Agreement in place with
respect to such Accounts, minus (iii) the principal balance of Advances
outstanding.

 

“Eligible Foreign Accounts” means Accounts with
respect to which the account debtor does not have its principal place of
business in the United States and that are (i) supported by one or more
letters of credit in an amount and of a tenor, and issued by a financial
institution, acceptable to Bank in its reasonable judgment, (ii) insured
by the Export Import Bank of the United States, (iii) generated by an
account debtor with its principal place of business in Canada, provided that
the Bank has perfected its security interest in the appropriate Canadian
province, or (iv) approved by Bank on a case-by-case basis.  All Eligible Foreign Accounts must be
calculated in U.S. Dollars.

 

“Environmental Laws” means all laws, rules,
regulations, orders and the like issued by any federal state, local foreign or
other governmental or quasi-governmental authority or any agency pertaining to
the environment or to any hazardous materials or wastes, toxic substances,
flammable, explosive or radioactive materials, asbestos or other similar materials.

 

“Equipment” means all present and future machinery,
equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and
attachments in which Borrower has any interest.

 

“ERISA” means the Employee
Retirement Income Security Act of 1974, as amended, and the regulations
thereunder.

 

“Event of Default” has the
meaning assigned in Article 8.

 

“GAAP” means generally
accepted accounting principles, consistently applied, as in effect from time to
time.

 

“Indebtedness” means (a) all
indebtedness for borrowed money or the deferred purchase price of property or
services, including without limitation reimbursement and other obligations with
respect to surety bonds and letters of 

 

20

 

credit,
(b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations, (d) all Contingent
Obligations, and (e) all obligations arising with respect to Credit Card
Services, if any.

 

“Insolvency Proceeding”
means any proceeding commenced by or against any Person or entity under any
provision of the United States Bankruptcy Code, as amended, or under any other
bankruptcy or insolvency law, including assignments for the benefit of
creditors, formal or informal moratoria, compositions, extension 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)           Copyrights, Trademarks and Patents;

 

(b)           All licenses or other rights to use
any of the Copyrights, Patents or Trademarks, and all license fees and
royalties arising from such use to the extent permitted by such license or
rights; and

 

(c)           All amendments, renewals and
extensions of any of the Copyrights, Trademarks or Patents.

 

“Inventory” means all
present and future inventory in which Borrower has any interest.

 

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

 

“IRC” means the Internal
Revenue Code of 1986, as amended, and the regulations thereunder.

 

“Letter of Credit” means a
commercial or standby letter of credit or similar undertaking issued by Bank at
Borrower’s request in accordance with Section 2.1(b)(iii).

 

“Letter of Credit Sublimit”
means a sublimit for Letters of Credit under the Revolving Line not to exceed
$750,000.

 

“Lien” means any mortgage,
lien, deed of trust, charge, pledge, security interest or other encumbrance.

 

“Loan Documents” means,
collectively, this Agreement, any note or notes executed by Borrower, and any
other document, instrument or agreement entered into in connection with this
Agreement, all as amended or extended from time to time.

 

“Material Adverse Effect”
means a material adverse effect on (i) the business operations, condition
(financial or otherwise) or prospects of Borrower and its Subsidiaries taken as
a whole, (ii) the ability of Borrower to repay the Obligations or
otherwise perform its obligations under the Loan Documents, or (iii) Borrower’s
interest in, or the value, perfection or priority of Bank’s security interest
in the Collateral.

 

“Negotiable Collateral”
means all of Borrower’s present and future letters of credit of which it is a
beneficiary, drafts, instruments (including promissory notes), securities,
documents of title, and chattel paper, and Borrower’s Books relating to any of
the foregoing.

 

“Obligations” means all
debt, principal, interest, Bank Expenses and other amounts owed to Bank by
Borrower pursuant to this Agreement or any other Loan Document, whether
absolute or contingent, due or to become due, now existing or hereafter
arising, including any interest that accrues after the commencement of an
Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.

 

“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.

 

21

 

“Permitted Indebtedness”
means:

 

(a)                                  Indebtedness of
Borrower in favor of Bank arising under this Agreement or any other Loan
Document;

 

(b)                                 Indebtedness
existing on the Closing Date and disclosed in the Schedule;

 

(c)                                  Indebtedness
not to exceed $500,000 in the aggregate in any fiscal year of Borrower secured
by a lien described in clause (c) of the defined term “Permitted Liens,”
provided such Indebtedness does not exceed the lesser of the cost or fair
market value of the equipment financed with such Indebtedness;

 

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

 

(e)                                  Extensions,
refinancings and renewals of any items of Permitted Indebtedness, provided that
the principal amount is not increased or the terms modified to impose more
burdensome terms upon Borrower or its Subsidiary, as the case may be.

 

“Permitted Investment”
means:

 

(a)                                  Investments
existing on the Closing Date disclosed in the Schedule;

 

(b)                                 (i) Marketable
direct obligations issued or unconditionally guaranteed by the United States of
America or any agency or any State thereof maturing within one year from the
date of acquisition thereof, (ii) commercial paper maturing no more than
one year from the date of creation thereof and currently having rating of at
least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s
Investors Service, (iii) Bank’s certificates of deposit maturing no more
than one year from the date of investment therein, (iv) Bank’s money
market accounts, and (v) any other Investments consistent with Borrower’s
investment policy which Borrower delivered to Bank on or before the Closing
Date;

 

(c)                                  Repurchases of
stock from former employees or directors of Borrower under the terms of
applicable repurchase agreements (i) in an aggregate amount not to exceed
$500,000 in any fiscal year, provided that no Event of Default has occurred, is
continuing or would exist after giving effect to the repurchases, or (ii) in
any amount where the consideration for the repurchase is the cancellation of
indebtedness owed by such former employees to Borrower regardless of whether an
Event of Default exists;

 

(d)                                 Investments
accepted in connection with Permitted Transfers;

 

(e)                                  Investments not
to exceed $500,000 in the aggregate in any fiscal year 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 pursuant to
employee stock purchase plan agreements approved by Borrower’s Board of
Directors;

 

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

 

(g)                                 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 subparagraph (h) shall not apply to
Investments of Borrower;

 

(h)                                 Joint ventures
or strategic alliances in the ordinary course of Borrower’s business consisting
of the licensing of technology, the development of technology or the providing
of technical support, provided that any cash Investments by Borrower do not
exceed $500,000 in the aggregate in any fiscal year; and

 

22

 

(i)                                     Investments
made in the ordinary course of Borrower’s business, which shall include without
limitation the opening and funding by Borrower of deposit, securities and other
banking and/ or investment accounts with a Person other than Bank, which do not
exceed $1,000,000 in the aggregate or $250,000 per account.

 

“Permitted Liens” means the
following:

 

(a)                                  Any Liens
existing on the Closing Date and disclosed in the Schedule (excluding Liens to
be satisfied with the proceeds of the Advances) or arising under this Agreement
or the other Loan Documents;

 

(b)                                 Liens for
taxes, fees, assessments or other governmental charges or levies, either not
delinquent or being contested in good faith by appropriate proceedings and for
which Borrower maintains adequate reserves, provided the same have no priority
over any of Bank’s security interests;

 

(c)                                  Liens not to
exceed $500,000 in the aggregate in any fiscal year (i) upon or in any
Equipment (other than Equipment financed by an Equipment Advance) acquired or
held by Borrower or any of its Subsidiaries to secure the purchase price of
such Equipment or indebtedness incurred solely for the purpose of financing the
acquisition or lease of such Equipment, or (ii) existing on such Equipment
at the time of its acquisition, provided that the Lien is confined solely to
the property so acquired and improvements thereon, and the proceeds of such
Equipment;

 

(d)                                 Liens incurred
in connection with the extension, renewal or refinancing of the indebtedness
secured by Liens of the type described in clauses (a) through (e) above,
provided that any extension, renewal or replacement Lien shall be limited to
the property encumbered by the existing Lien and the principal amount of the
indebtedness being extended, renewed or refinanced does not increase;

 

(e)                                  Liens arising
from judgments, decrees or attachments in circumstances not constituting an
Event of Default under Sections 8.5 or 8.9;

 

(f)                                    Liens in favor
of other financial institutions arising in connection with Borrower’s deposit
accounts held at such institutions to secure standard fees for deposit services
charged by, but not financing made available by such institutions, provided
that Bank has a perfected security interest in the amounts held in such deposit
accounts;

 

(g)                                 Right reserved
to or vested in any municipality or governmental or other public authority by
the terms of any lease, license, franchise, grant or permit, or by any
statutory provision, to terminate the same or to require annual or other
periodic payments as a condition to the continuance thereof;

 

(h)                                 A security
interest in cash or governmental obligations deposited in the ordinary course
of business in connection with contracts, bids, tenders or to secure worker’s
compensation, unemployment insurance, surety or appeal bonds, costs of litigation
when required by law, public and statutory obligations, liens or claims
incidental to current construction, mechanics’, warehousemen’s, carriers’ and
other similar liens arising by operation of law in the ordinary course of
business and which are not registered or enforceable against any property of
the Borrower;

 

(i)                                     Security given
in the ordinary course of business to a public utility or any municipality or
governmental or other public authority when required by such utility or
municipality or governmental or other authority in connection with the
operations of the Borrower;

 

(j)                                     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 the Borrower’s business, if the leases, subleases, licenses and
sublicenses do not prohibit granting Bank a security interest; and

 

23

 

(k)                                  Licenses or
sublicenses of intellectual property granted to third parties in the ordinary
course of business, provided such licenses or sublicenses do not result in a
legal transfer of title of the licensed property.

 

“Permitted Transfer” means
the conveyance, sale, lease, transfer or disposition by Borrower or any
Subsidiary of:

 

(a)                                  Inventory in
the ordinary course of business;

 

(b)                                 licenses and
similar arrangements for the use of the property of Borrower or its
Subsidiaries in the ordinary course of business;

 

(c)                                  worn-out or
obsolete Equipment not financed with the proceeds of Equipment Advances; or

 

(d)                                 other assets of
Borrower or its Subsidiaries that do not in the aggregate exceed $250,000
during any fiscal year.

 

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

 

“Prime Rate” means the
variable rate of interest, per annum, most recently announced by Bank, as its “prime
rate,” whether or not such announced rate is the lowest rate available from
Bank.

 

“Responsible Officer” means
each of the Chief Executive Officer, the Chief Operating Officer, the Chief
Financial Officer and the Controller of Borrower.

 

“Revolving Line” means a
Credit Extension of up to $7,500,000 (inclusive of any amounts outstanding
under the Letter of Credit Sublimit).

 

“Revolving Maturity Date”
means March 4, 2011.

 

“Schedule” means the
schedule of exceptions in the form of Exhibit D attached hereto and
approved by Bank, if any.

 

“SOS Reports” means the
official reports from the Secretaries of State of the Chief Executive Office
State and the Borrower State and other applicable federal, state or local
government offices identifying all current security interests filed in the
Collateral and Liens of record as of the date of such report.

 

“Subsidiary” means any
corporation, partnership or limited liability company or joint venture in which
(i) any general partnership interest or (ii) more than 50% of the
stock, limited liability company interest or joint venture of which by the
terms thereof ordinary voting power to elect the Board of Directors, managers
or trustees of the entity, at the time as of which any determination is being
made, is owned by Borrower, either directly or through an Affiliate.

 

“Tangible Net Worth” means
at any date as of which the amount thereof shall be determined, the sum of the
capital stock, partnership interest or limited liability company interest of
Borrower and its Subsidiaries minus intangible assets, determined in accordance
with GAAP.

 

“Trademarks” means any
trademark and service mark 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.

 

24

 

EXHIBIT B

 

TECHNOLOGY & LIFE SCIENCES DIVISION

LOAN ANALYSIS

LOAN ADVANCE/PAYDOWN REQUEST FORM

DEADLINE
FOR SAME DAY PROCESSING IS 3:00* P.M, P.S.T.

DEADLINE
FOR EQUIPMENT ADVANCES IS 3:00 P.M., P.S.T.**

DEADLINE
FOR WIRE TRANSFERS IS 1.30 P.M, P.S.T.

 

*At month end and the day before a holiday, the cut off time
is 1:30 P.M., P.S.T.

**Subject to 3 day advance notice.

 

	
  TO:
  Loan Analysis

  	
  DATE:

  	
   

  	
   

  	
  TIME:

  	
   

  
	
  FAX
  #: (650) 846-6840

  	
   

  	
   

  

 

	
  FROM:

  	
  NeuroMetrix, Inc.

  	
   

  	
  TELEPHONE REQUEST (For Bank
  Use Only):

  
	
   

  	
  Borrower’s
  Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  The
  following person is authorized to request the loan payment transfer/loan
  advance on the designated account and is known to me.

  
	
  FROM:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signer’s Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  FROM:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Signature (Borrower)

  	
   

  	
   

  	
  Authorized
  Requester & Phone #

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PHONE
  #:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Received by (Bank) &
  Phone #

  
	
  FROM
  ACCOUNT#:

  	
   

  	
   

  	
   

  	
   

  
	
  (please
  include Note number, if applicable)

  	
   

  	
   

  
	
  TO
  ACCOUNT #: 

  	
   

  	
   

  	
   

  	
  Authorized Signature (Bank)

  
	
  (please
  include Note number, if applicable)

  	
   

  

 

	
  REQUESTED TRANSACTION TYPE

  	
   

  	
  REQUESTED DOLLAR AMOUNT

  	
   

  	
  For Bank Use Only

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PRINCIPAL
  INCREASE* (ADVANCE) 

  	
   

  	
  $

  	
   

  	
  Date Rec’d:

  
	
  PRINCIPAL
  PAYMENT (ONLY) 

  	
   

  	
  $

  	
   

  	
  Time:

  
	
   

  	
   

  	
   

  	
   

  	
  Comp. Status:  

  	
  o YES

  	
  o NO

  
	
  OTHER
  INSTRUCTIONS: 

  	
   

  	
   

  	
   

  	
  Status Date:

  
	
   

  	
   

  	
  Time:

  
	
   

  	
   

  	
  Approval:

  
	
   

  	
   

  	
   

  

 

All
representations and warranties of Borrower stated in the Loan Agreement are
true, correct and complete in all material respects as of the date of the
telephone request for and advance confirmed by this Borrowing Certificate,
including without limitation the representation that Borrower has paid for and
owns the equipment financed by the Bank; provided, however, that those
representations and warranties the date expressly referring to another date
shall be true, correct and complete in all material respects as of such date.

 

*IS THERE A WIRE REQUEST TIED TO
THIS LOAN ADVANCE? (PLEASE CIRCLE ONE)  o YES o NO

If
YES, the Outgoing Wire Transfer Instructions must be completed below.

 

	
  OUTGOING
  WIRE TRANSFER INSTRUCTIONS 

  	
  Fed Reference Number 

  	
  Bank Transfer Number

  
	
   

  
	
   

  
	
  The items marked with an asterisk (*) are required to be
  completed.

  
	
   

  
	
  *Beneficiary Name

  	
   

  
	
  *Beneficiary Account Number

  	
   

  
	
  *Beneficiary Address

  	
   

  
	
  Currency Type 

  	
  US
  DOLLARS ONLY

  
	
  *ABA Routing Number (9
  Digits)

  	
   

  
	
  *Receiving Institution Name

  	
   

  
	
  *Receiving Institution
  Address

  	
   

  
	
  *Wire Amount 

  	
  $

  
				

 

25

 

EXHIBIT C

 

PRIME REFERENCED RATE ADDENDUM TO

LOAN AND SECURITY AGREEMENT

 

This Prime Referenced Rate
Addendum to Loan and Security Agreement (this “Addendum”) is entered into as of
March 5, 2010, by and between Comerica Bank (“Bank”) and NeuroMetrix, Inc.
(“Borrower”).  This Addendum supplements
the terms of the Loan and Security Agreement dated as of  March 5, 2010 (as the same may be
amended, modified, supplemented, extended or restated from time to time,
collectively, the “Agreement”).

 

1.                                       Definitions.  As used in this Addendum, the following terms
shall have the following meanings. 
Initially capitalized terms used and not defined in this Addendum shall
have the meanings ascribed thereto in the Agreement.

 

a.                                       “Applicable Margin” means one-half of one
percent (0.50%) per annum.

 

b.                                      “Business Day” means any day, other than a
Saturday, Sunday or any other day designated as a holiday under Federal or
applicable State statute or regulation, on which Bank is open for all or
substantially all of its domestic and international business (including
dealings in foreign exchange) in San Jose, California, and, in respect of
notices and determinations relating to the Daily Adjusting LIBOR Rate, also a
day on which dealings in dollar deposits are also carried on in the London
interbank market and on which banks are open for business in London, England.

 

c.                                       “Daily Adjusting LIBOR Rate” means, for any
day, a per annum interest rate which is equal to the quotient of the following:

 

(1)                                  for any day, the
per annum rate of interest determined on the basis of the rate for deposits in
United States Dollars for a period equal to one (1) month appearing on Page BBAM
of the Bloomberg Financial Markets Information Service as of 8:00 a.m.
(California time) (or as soon thereafter as practical) on such day, or if such
day is not a Business Day, on the immediately preceding Business Day.  In the event that such rate does not appear
on Page BBAM of the Bloomberg Financial Markets Information Service (or
otherwise on such Service) on any day, the “Daily Adjusting LIBOR Rate” for
such day shall be determined by reference to such other publicly available
service for displaying eurodollar rates as may be reasonably selected by Bank,
or in the absence of such other service, the “Daily Adjusting LIBOR Rate” for
such day shall, instead, be determined based upon the average of the rates at
which Bank is offered dollar deposits at or about 8:00 a.m. (California
time) (or as soon thereafter as practical), on such day, or if such day is not
a Business Day, on the immediately preceding Business Day, in the interbank
eurodollar market in an amount comparable to the outstanding principal amount
of the Obligations and for a period equal to one (1) month;

 

divided by

 

(2)                                  1.00 minus the
maximum rate (expressed as a decimal) on such day at which Bank is required to
maintain reserves on “Euro-currency Liabilities” as defined in and pursuant to
Regulation D of the Board of Governors of the Federal Reserve System or, if
such regulation or definition is modified, and as long as Bank is required to
maintain reserves against a category of liabilities which includes eurodollar
deposits or includes a category of assets which includes eurodollar loans, the
rate at which such reserves are required to be maintained on such category.

 

d.                                      “LIBOR Lending Office” means Bank’s office
located in the Cayman Islands, British West Indies, or such other branch of
Bank, domestic or foreign, as it may hereafter designate as its LIBOR Lending
Office by notice to Borrower.

 

e.                                       “Prime Rate” means the per annum interest
rate established by Bank as its prime rate for its borrowers, as such rate may
vary from time to time, which rate is not necessarily the lowest rate on loans
made by Bank at any such 

 

26

 

time.

 

f.                                         “Prime Referenced Rate” means, for any day, a
per annum interest rate which is equal to the Prime Rate in effect on such day,
but in no event and at no time shall the Prime Referenced Rate be less than the
sum of the Daily Adjusting LIBOR Rate for such day plus two and one-half
percent (2.50%) per annum. If, at any time, Bank determines that it is unable
to determine or ascertain the Daily Adjusting LIBOR Rate for any day, the Prime
Referenced Rate for each such day shall be the Prime Rate in effect at such
time, but not less than two and one-half percent (2.50%) per annum.

 

2.                                       Interest Rate.  Subject to the terms and conditions of this
Addendum, the Obligations under the Agreement shall bear interest at the Prime
Referenced Rate plus the Applicable Margin.

 

3.                                       Payment of
Interest.  Accrued and
unpaid interest on the unpaid balance of the Obligations outstanding under the
Agreement shall be payable monthly, in arrears, on the first day of each month,
until maturity (whether as stated herein, by acceleration, or otherwise).  In the event that any payment under this
Addendum becomes due and payable on any day which is not a Business Day, the
due date thereof shall be extended to the next succeeding Business Day, and, to
the extent applicable, interest shall continue to accrue and be payable thereon
during such extension at the rates set forth in this Addendum.  Interest accruing hereunder shall be computed
on the basis of a year of 360 days, and shall be assessed for the actual number
of days elapsed, and in such computation, effect shall be given to any change
in the applicable interest rate as a result of any change in the Prime
Referenced Rate on the date of each such change.

 

4.                                       Bank’s Records.  The amount and date of each advance under the
Agreement, its applicable interest rate, and the amount and date of any
repayment shall be noted on Bank’s records, which records shall be conclusive
evidence thereof, absent manifest error; provided, however, any
failure by Bank to make any such notation, or any error in any such notation,
shall not relieve Borrower of its obligations to repay Bank all amounts payable
by Borrower to Bank under or pursuant to this Addendum and the Agreement, when
due in accordance with the terms hereof.

 

5.                                       Default
Interest Rate.  From and
after the occurrence of any Event of Default, and so long as any such Event of
Default remains unremedied or uncured thereafter, the Obligations outstanding
under the Agreement shall bear interest at a per annum rate of five percent
(2%) above the otherwise applicable interest rate hereunder, which interest
shall be payable upon demand.  In
addition to the foregoing, a late payment charge equal to five percent (2%) of
each late payment hereunder may be charged on any payment not received by Bank
within ten (10) calendar days after the payment due date therefor, but
acceptance of payment of any such charge shall not constitute a waiver of any
Event of Default under the Agreement.  In
no event shall the interest payable under this Addendum and the Agreement at
any time exceed the maximum rate permitted by law.

 

6.                                       Prepayment.  Borrower may prepay all or part of the
outstanding balance of any Obligations at any time without premium or
penalty.  Any prepayment hereunder shall
also be accompanied by the payment of all accrued and unpaid interest on the
amount so prepaid.  Borrower hereby
acknowledges and agrees that the foregoing shall not, in any way whatsoever,
limit, restrict, or otherwise affect Bank’s right to make demand for payment of
all or any part of the Obligations under the Agreement due on a demand basis in
Bank’s sole and absolute discretion.

 

7.                                       Regulatory
Developments or Other Circumstances Relating to the Daily Adjusting LIBOR Rate.

 

a.                                       If the adoption after the date hereof, or any
change after the date hereof in, any applicable law, rule or regulation
(whether domestic or foreign) of any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by Bank with any request or directive (whether or not having the
force of law) made by any such authority, central bank or comparable agency
after the date hereof: (a) shall subject Bank to any tax, duty or other
charge with respect to this Addendum or any Obligations under the Agreement, or
shall change the basis of taxation of payments to Bank of the principal of or
interest under this Addendum or any other amounts due under this Addendum in
respect thereof (except for changes in the rate of tax on the overall net
income of Bank or its LIBOR Lending Office imposed by the jurisdiction in which
Bank’s principal executive office or LIBOR Lending Office is located); or (b) shall
impose, modify or deem applicable any reserve (including, without limitation,
any imposed by the 

 

27

 

Board of Governors of the Federal Reserve System), special deposit or
similar requirement against assets of, deposits with or for the account of, or
credit extended by Bank, or shall impose on Bank or the foreign exchange and
interbank markets any other condition affecting this Addendum or the
Obligations hereunder; and the result of any of the foregoing is to increase
the cost to Bank of maintaining any part of the Obligations hereunder or to
reduce the amount of any sum received or receivable by Bank under this Addendum
by an amount deemed by the Bank to be material, then Borrower shall pay to
Bank, within fifteen (15) days of Borrower=s receipt of written notice from Bank demanding
such compensation, such additional amount or amounts as will compensate Bank
for such increased cost or reduction.  A
certificate of Bank, prepared in good faith and in reasonable detail by Bank
and submitted by Bank to Borrower, setting forth the basis for determining such
additional amount or amounts necessary to compensate Bank shall be conclusive
and binding for all purposes, absent manifest error.

 

b.                                      In the event that any applicable law, treaty,
rule or regulation (whether domestic or foreign) now or hereafter in
effect and whether or not presently applicable to Bank, or any interpretation
or administration thereof by any governmental authority charged with the
interpretation or administration thereof, or compliance by Bank with any
guideline, request or directive of any such authority (whether or not having
the force of law), including any risk-based capital guidelines, affects or
would affect the amount of capital required or expected to be maintained by
Bank (or any corporation controlling Bank), and Bank determines that the amount
of such capital is increased by or based upon the existence of any obligations
of Bank hereunder or the maintaining of any Obligations hereunder, and such
increase has the effect of reducing the rate of return on Bank’s (or such
controlling corporation’s) capital as a consequence of such obligations or the
maintaining of such Obligations hereunder to a level below that which Bank (or
such controlling corporation) could have achieved but for such circumstances
(taking into consideration its policies with respect to capital adequacy), then
Borrower shall pay to Bank, within fifteen (15) days of Borrower’s receipt of
written notice from Bank demanding such compensation, additional amounts as are
sufficient to compensate Bank (or such controlling corporation) for any
increase in the amount of capital and reduced rate of return which Bank
reasonably determines to be allocable to the existence of any obligations of
the Bank hereunder or to maintaining any Obligations hereunder.  A certificate of Bank as to the amount of
such compensation, prepared in good faith and in reasonable detail by the Bank
and submitted by Bank to the undersigned, shall be conclusive and binding for
all purposes absent manifest error.

 

8.                                       Legal Effect.  Except as specifically modified hereby, all
of the terms and conditions of the Agreement remain in full force and effect.

 

9.                                       Conflicts.  As to the matters specifically the subject of
this Addendum, in the event of any conflict between this Addendum and the
Agreement, the terms of this Addendum shall control.

 

IN WITNESS WHEREOF, the
parties have agreed to the foregoing as of the date first set forth above.

 

	
  COMERICA BANK

  	
   

  	
  NEUROMETRIX, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  

 

28

 

EXHIBIT D

 

SCHEDULE OF EXCEPTIONS

 

Permitted Indebtedness  (Exhibit A)

 

Permitted Investments  (Exhibit A)

 

Permitted Liens  (Exhibit A)

 

	
  Reference

  	
   

  	
  Description

  
	
  Section 5.4

  	
   

  	
  Cambridge
  Heart License Agreement

  
	
   

  	
   

  	
  A non-exclusive,
  worldwide, royalty-free license agreement to the technology in order to make,
  have made, use, lease, sell and import Electrode Gel for use with our
  licensed products.

  

 

Prior Names  (Section 5.5)

 

Litigation  (Section 5.6)

 

Inbound Licenses  (Section 5.12)

 

29

 

EXHIBIT E

 

BORROWING
BASE CERTIFICATE

 

	
  Borrower: NeuroMetrix, Inc.                                                  
  Lender: Comerica Bank 

  	
   

  	
   

  
	
  Commitment
  Amount: $7,500,000

  	
   

  	
   

  

 

	
  ACCOUNTS
  RECEIVABLE

  	
   

  	
   

  
	
  1.

  	
  Accounts Receivable Book Value as of

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Additions (please explain on reverse)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  TOTAL ACCOUNTS RECEIVABLE

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  ACCOUNTS
  RECEIVABLE DEDUCTIONS (without duplication)

  	
   

  	
   

  
	
  4.

  	
  Amounts over 90 days due

  	
  $

  	
   

  
	
  5.

  	
  Balance of 25% over 90 day accounts

  	
  $

  	
   

  
	
  6.

  	
  Concentration Limits

  	
   

  	
   

  
	
  7.

  	
  Foreign Accounts (other than Eligible Foreign
  Accounts)

  	
  $

  	
   

  
	
  8.

  	
  Governmental Accounts

  	
  $

  	
   

  
	
  9.

  	
  Contra Accounts

  	
  $

  	
   

  
	
  10.

  	
  Demo Accounts

  	
  $

  	
   

  
	
  11.

  	
  Intercompany/Employee Accounts

  	
  $

  	
   

  
	
  12.

  	
  Other (please explain on reverse)

  	
  $

  	
   

  
	
  13.

  	
  TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Eligible Accounts (#3 minus #13)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  LOAN VALUE OF ACCOUNTS (80% of #14)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  CASH
  BALANCES

  	
   

  	
   

  
	
  16.

  	
  Collected balances on deposit in accounts with Bank

  	
  $

  	
   

  
	
  17.     
  Market value of readily marketable securities in Comerica Securities account
  while Control Agreement covers such Accounts

  	
  $

  	
   

  
	
  18.

  	
  TOTAL CASH BALANCES

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  CASH
  BALANCES DEDUCTIONS

  	
   

  	
   

  
	
  19.

  	
  Principal balance of
  Advances outstanding

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  Eligible Cash Balances (#18 minus #19)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  TOTAL LOAN VALUE
  OF ACCOUNTS AND CASH BALANCES (#15 plus #20)

  	
   

  	
  $

  
	
   

  	
   

  	
   

  	
   

  
	
  BALANCES

  	
   

  	
   

  
	
  22.

  	
  Maximum Loan Amount

  	
   

  	
  $

  	
  7,500,000

  
	
  23.

  	
  Total Funds Available [Lesser of #22 or #21]

  	
   

  	
  $

  
	
  24.     
  Present balance owing on Revolving Line (minus outstanding under Letter of
  Credit Sublimit)

  	
   

  	
  $

  
	
  25.

  	
  Outstanding under Sublimits (e.g., Letters of
  Credit)

  	
   

  	
  $

  
	
  26.

  	
  RESERVE POSITION (#23 minus #24 and #25)

  	
   

  	
  $

  

 

30

 

The
undersigned represents and warrants that the foregoing is true, complete and
correct, and that the information reflected in this Borrowing Base Certificate
complies with the representations and warranties set forth in the Loan and
Security Agreement
dated as of March 5, 2010 between the
undersigned and Comerica Bank.

 

 

	
  Dated on

  	
   

  	
   

  	
  NEUROMETRIX,
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  

 

31

 

EXHIBIT F

 

COMPLIANCE
CERTIFICATE

 

	
  Borrower:
  NEUROMETRIX, INC.

  	
   

  	
  Compliance Date:
                                  ,
  201   

  

 

This Covenant
Compliance Certificate is given in compliance with the Loan and Security
Agreement dated as of March 5, 2010 made between Borrower and Comerica
Bank (“Agreement”).  Capitalized terms
used but not defined herein have the meanings given them under the
Agreement.  Borrower represents and
warrants that the information provided herein is true, complete and correct.

 

Borrower certifies
to Comerica Bank as follows as of the Compliance Date:

 

A.                                   Tangible Net Worth.  On the Compliance Date, Borrower’s Tangible
Net Worth was
$                                
(and is required under the Agreement to be not less than $15,000,000 at the
Compliance Date).

 

B.                                     Default.  No Default or
Event of Default under any of the Loan Documents existed on the Compliance Date or exists
as of the date of this Certificate.  [If a Default or Event of Default has occurred, attach a detailed
explanation and Borrower’s plan and schedule for correction or remedy.]

 

C.                                     Financial Statements. 
This Certificate accompanies Borrower’s financial statements dated as of
the Compliance Date, which have been prepared in compliance with the
requirements of the Agreement.  The
undersigned certifies that (1) the financial statements are accurate and
complete, (2) the undersigned has personally reviewed the
Agreement, and (3) this Certificate is based on an examination in detail
sufficient to assure that it is accurate.

 

	
  Dated:                       ,
  201   

  	
  NEUROMETRIX, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

32

 

EXHIBIT G

 

COLLATERAL DESCRIPTION ATTACHMENT TO LOAN AND
SECURITY AGREEMENT

 

	
  DEBTOR

  	
  NEUROMETRIX,
  INC.

  
	
   

  	
   

  
	
  SECURED PARTY:

  	
  COMERICA BANK

  

 

All personal property of
NeuroMetrix, Inc. (herein referred to as “Borrower” or “Debtor”) whether
presently existing or hereafter created or acquired, and wherever located,
including, but not limited to:

 

(a)                                  all accounts (including
health-care-insurance receivables), chattel paper (including tangible and
electronic chattel paper), deposit accounts, documents (including negotiable
documents), equipment (including all accessions and additions thereto), general
intangibles (including payment intangibles and software; but not including
intellectual property), goods (including fixtures), instruments (including
promissory notes), inventory (including all goods held for sale or lease or to
be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities entitlements),
letter of credit rights, money, and all of Debtor’s books and records with
respect to any of the foregoing, and the computers and equipment containing
said books and records; and

 

(b)                                 any and all cash proceeds and/or noncash
proceeds of any of the foregoing, including, without limitation, insurance
proceeds, and all supporting obligations and the security therefor or for any
right to payment.  All terms above have
the meanings given to them in the California Uniform Commercial Code, as
amended or supplemented from time to time, including revised Division 9 of the
Uniform Commercial Code-Secured Transactions, added by Stats. 1999, c.991 (S.B.
45), Section 35, operative July 1, 2001.

 

Notwithstanding the foregoing, the Collateral shall
not include any copyrights, patents, trademarks, servicemarks and applications
therefor, now owned or hereafter acquired, or any claims for damages by way of
any past, present and future infringement of any of the foregoing
(collectively, the “Intellectual Property”); provided, however, that the
Collateral shall include all accounts and general intangibles that consist of
rights to payment and proceeds from the sale, licensing or disposition of all
or any part, or rights in, the foregoing (the “Rights to Payment”).  Notwithstanding the foregoing, if a judicial
authority (including a U.S. Bankruptcy Court) holds that a security interest in
the underlying Intellectual Property is necessary to have a security interest
in the Rights to Payment, then the Collateral shall automatically, and
effective as of March 5, 2010, include the Intellectual Property to the
extent necessary to permit perfection of Bank’s security interest in the Rights
to Payment.

 

33

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